THE PRINCIPAL COMMISSIONER OF INCOME TAX-2 vs. M/S KUNJ INFRASTRUCTURE PVT. LTD.

TAXAP/213/2020HC GujaratGJHC24038114202021 September 2020Author: HONOURABLE MR. JUSTICE R.M.CHHAYA,HONOURABLE MR. JUSTICE ILESH J. VORA4 pages
AI SummaryDismissed

What were the facts?

The assessee, M/s Kunj Infrastructure Pvt. Ltd., engaged in construction, filed its return for Assessment Year 2010-11 declaring 'Nil' income. The original assessment under Section 143(3) determined a total loss of Rs. 68,02,400/-. The Revenue, under Section 147, reopened the assessment and determined a total loss of Rs. 63,67,400/-, disallowing Rs. 4,35,000/- under Section 40A(3) for cash payments made as legal expenses to M/s. C.C. Gandhi & Co. The CIT(A) deleted this disallowance, finding the payment covered by the amended provisions of Section 40A(3) and Rule 6DD. The Tribunal partly allowed the assessee's appeal on grounds of interest and penalty initiation, but the Revenue preferred this appeal to the High Court against the deletion of the Section 40A(3) disallowance.

What did the High Court hold?

The High Court held that the Tribunal had not erred in law and on facts in confirming the decision of the CIT(A) to delete the disallowance of Rs. 4,35,000/- made under Section 40A(3) of the Act. The Court found that both the CIT(A) and the Tribunal had correctly deleted the disallowance made by the Assessing Officer. The Court noted that all three substantial questions of law raised by the Revenue pertained to the cash payment made to the learned Solicitor. Having considered the concurrent findings of the lower authorities, the High Court found no reason to interfere. The questions of law were decided against the Revenue and in favour of the assessee. The appeal was dismissed. The operative direction was that the appeal is dismissed.

What were the issues?

1. Whether the Appellate Tribunal has erred in law and on facts in confirming the decision of the CIT(A) deleting the disallowance of Rs. 4,35,000/- made under Section 40A(3) of the Act? 2. Whether the Appellate Tribunal has erred in law and on facts in holding that the payments were covered by Rule 6DD(b) although the payments were made by the assessee to M/s. C.C. Gandhi & Co. and not to the Government? 3. Whether the Appellate Tribunal has erred in law and on facts by referring to the written submission of the assessee which relies on Rule 6DD(j) although Rule 6DD(j) was deleted w.e.f. 01.12.1995? Assessee's Contentions: The assessee argued that the cash payment for legal expenses to M/s. C.C. Gandhi & Co. was permissible under the relevant provisions of Section 40A(3) and Rule 6DD. The CIT(A) and Tribunal accepted this. The specific grounds raised by the Revenue in its appeal relate to the applicability of Rule 6DD(b) and the reliance on a deleted Rule 6DD(j). Revenue's Contentions: The Revenue contended that the disallowance under Section 40A(3) was justified as the payment was made in cash and did not fall under the exceptions provided in Rule 6DD, particularly questioning the applicability of Rule 6DD(b) as the payment was not to the Government, and the reliance on the deleted Rule 6DD(j).

Which sections of the Income-tax Act were involved?

Section 260-A,Section 40A(3),Section 143(3),Section 147,Section 271(1)(c)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
C/TAXAP/213/2020 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 213 of 2020 ========================================================== THE PRINCIPAL COMMISSIONER OF INCOME TAX-2 Versus M/S KUNJ INFRASTRUCTURE PVT. LTD. ========================================================== Appearance: MRS MAUNA M BHATT(174) for the Appellant(s) No. 1 for the Opponent(s) No. 1 ========================================================== CORAM: HONOURABLE MR. JUSTICE R.M.CHHAYA and HONOURABLE MR. JUSTICE ILESH J. VORA Date : 21/09/2020

ORAL ORDER (PER : HONOURABLE MR. JUSTICE R.M.CHHAYA)

1.

Heard Mr. Manish Bhatt, learned Senior Counsel assisted by Mrs. Mauna M. Bhatt, learned counsel for the Appellant – Revenue through Video Conferencing.

2.

By this appeal under section 260-a of the income tax act, 1961 (hereinafter referred to as “the act” for short), the appellant has challenged the impugned judgment and order dated 04.12.2019 passed by the learned tribunal in ITA No. 2891/AHD/2016 and order passed by CIT(A) – Ahmedabad dated 22.08.2016 for assessment year 2010-11. 3. It

The order continues below.

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