THE COMMISSIONER OF INCOME TAX vs. M/S SOUTH INDIA CORPORATION LTD.
What did the High Court hold?
The High Court dismissed the appeal without deciding the substantial questions of law. The Court noted that the appeal was filed in 2009 and had not yet been admitted, nor was there any interim order staying the Tribunal's order. The Tribunal's order was a remand to the Appellate Authority for fresh consideration. The Court observed that the further course of action depended on the order passed or to be passed by the Appellate Authority. If the Appellate Authority ruled in favor of the Revenue, the Revenue would have no grievance. If it ruled against the Revenue, the Revenue would need to challenge that specific order, not the remand order. Therefore, the High Court found that the subject matter did not require independent consideration at that stage. The substantial questions of law were left open.
What were the facts?
The Income Tax Department (Revenue) is appealing an order of the Income Tax Appellate Tribunal (Tribunal) concerning the respondent company, M/s South India Corporation Ltd. The assessment year in question is 1997-1998. The Assessing Officer disallowed a claim of Rs. 14,36,000, representing the fee paid to the Registrar of Companies for enhancement of share capital, disallowing it as a deductible expense and also denying depreciation on it as an intangible asset. The Commissioner of Income Tax (Appeals) upheld this disallowance. The Tribunal, by order dated March 18, 2004, remanded the matter to the Appellate Authority for fresh consideration, relying on a previous order concerning the prior year. This remand order is the subject of the present appeal before the High Court.
What were the issues?
The High Court was asked to decide the following substantial questions of law: 1. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding that depreciation is automatic on a capital expenditure. 2. Whether, on the fact and in the circumstances of the case, the assessee is entitled to depreciation on the capital expenditure. Contentions: Assessee: Not recorded in the judgment. Revenue: The Revenue, represented by its Standing Counsel, argued the appeal. The judgment notes that the Revenue conceded that the earlier order (Annexure C) was not challenged due to the meager quantum involved, but this did not bar them from challenging the current order (Annexure D).
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
JUDGMENT P.R. Ramachandra Menon,J. The challenge in the appeal preferred by the Income Tax Department, raising substantial question of law in terms of Section 260A of the Income Tax Act, 1961, is mainly whether depreciation is allowable on the capital expenditure of fee paid to the Registrar of Companies for enhancement of the share capital.
The sequence of events shows that the assessment was completed in respect of the respondent company under Section 143(3) of the Act for the assessment year 1997-1998 determining the total income as Rs.11,82,32,550/- as against the declared income of Rs.11,52,82,220/-. When the assessment was completed by the assessing officer, the claim for deduction of a sum of Rs.14,36,000/-, which denotes the fee paid to the Registrar of Companies for enhancement of the share capital was disallowed, as per Annexure A order, also on the ground that it is not related to any asset and hence the assessee is not entitled to claim depreciation on an intangible asset. The matter was taken up in appeal, but interference was declined and the appeal was dismissed as per Annexure B order. This was subjected to challenge before the Income Tax Appellate Tribunal and after hearing both the sides, Annexure D order was passed by the Tribunal on 18.3.2004 placing reliance on a similar order passed by the Tribunal in respect of the previous year as disclosed from Annexure C. As per the said order, the Tribunal remanded the matter to the Appellate Authority for fresh consideration, which, in turn, is under challenge before this Court raising the substantial questions of law in the following terms:
Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding that the depreciation is automatic on a capital expenditure.
Whether, on the fact and in the circumstances of the case, the assessee is entitled to depreciation on the capital expenditure.
Heard Mr.Jose Joseph, the learned Standing Counsel for the appellant at length.
Obviously, the matter was filed before this Court in the year 2009; but the same stands still to be admitted, nor is there any interim order staying Annexure D order passed by the Tribunal. As per Annexure D order, the matter has been remanded to be considered afresh by the Appellate Authority in the light of the observations made therein. Whether the proceedings have been finalised by the Appellate Authority is not known. Any how, since it was only a remand and further since there was no interim stay, the further course of action depends upon the order passed (or to be passed) by the Appellate Authority. If the Appellate Authority has passed any order in favour of the revenue, there cannot be any further grievance for the appellant and it is for the assessee to have it taken up by filing appropriate proceedings. On the other hand, if it is decided against the Revenue, it is for the Revenue to challenge the said order and not Annexure D.
The learned Standing Counsel concedes that the earlier order, Annexure C, was not subjected to challenge because of the meagre quantum involved and hence that cannot be a bar with regard to their right to challenge Annexure D order. As mentioned already, since the further course of action can only be with reference to the order passed/to be passed by the Appellate Authority (pursuant to the order of remand), this Court is of the view that the subject matter involved in the present appeal does not require any independent consideration. Accordingly the appeal is dismissed without prejudice to the rights and liberties of the parties concerned to proceed with further steps, in accordance with law. The substantial questions of law raised before this Court are left open. P.R. RAMACHANDRA MENON Judge N. ANIL KUMAR Judge okb //// P.A. to Judge
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