PRINCIPAL COMMISSIONER OF INCOME TAX 3 vs. P G FOILS LTD

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TAXAP/260/2018HC GujaratGJHC24019038201802 April 2018Author: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no question of law arises from the ITAT's order. The Court relied on its own previous decision in the case of Principal Commissioner of Income Tax-3 v. Nirma Credit and Capital Pvt. Ltd. (Tax Appeal No. 409 of 2017), where a similar view was taken. In that precedent, the Court had accepted that the addition under Section 14A should be computed on the net interest expenditure, not the gross. Therefore, the High Court found no error in the ITAT's confirmation of the CIT(A)'s deletion of the addition. The appeal filed by the Revenue was dismissed.

What were the facts?

The Revenue, represented by the Principal Commissioner of Income Tax, filed an appeal against an order of the Income Tax Appellate Tribunal (ITAT) dated September 13, 2017. The ITAT had upheld the decision of the Commissioner of Income Tax (Appeals) [CIT(A)] to delete an addition of Rs. 30,58,752. This addition was made by the Assessing Officer (AO) under Section 14A read with Rule 8D of the Income Tax Act, 1961. The CIT(A), while accepting the applicability of Section 14A, held that the addition should be calculated on the net interest expenditure rather than the gross interest expenditure. The ITAT confirmed this view.

What were the issues?

1. Whether the Appellate Tribunal was right in law and on facts in upholding the decision of the CIT(A) and thereby deleting the addition of Rs. 30,58,752 under Section 14A read with Rule 8D of the Act? Assessee's Contentions: The judgment does not record any specific contentions made by the assessee (P G Foils Ltd) before the High Court. However, the underlying reasoning of the CIT(A) and the ITAT, which the High Court is considering, was that the addition under Section 14A should be computed on the net interest expenditure, not the gross. Revenue's Contentions: The Revenue contended that the ITAT was incorrect in upholding the deletion of the addition made by the AO under Section 14A read with Rule 8D. The Revenue likely argued for the applicability of the AO's calculation, which presumably considered gross interest expenditure.

Which sections of the Income-tax Act were involved?

Section 14A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
C/TAXAP/260/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 260 of 2018 ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX 3 Versus P G FOILS LTD ========================================================== Appearance: MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA Date : 02/04/2018

ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI)

1.

Revenue is in appeal against the judgment of the Income   Tax   Appellate   Tribunal   dated   13.09.2017 raising following question for our consideration: “Whether the Appellate Tribunal was right in law and on facts in upholding the decision of the CIT(A) and thereby deleting the addition of Rs.30,58,752/­ u/s.14A r.w. rule 8D of the Act?”

2.

Commissioner of Income Tax (Appeals) deleted the addition   of   Rs.30.58   lakhs   which   was   made   by   the Assessing Officer, under section 14A of the Income Tax Act, 1961. Commissioner of Income Tax (Appeals) though accepted that section 14A would be applicable, held that it would only be the net of the interest C/TAXAP/260/2018 ORDER expenditure and not the gross which would be added. Tribunal confirmed this view.  This Court in case of Principal Commissioner of Income Tax­3 v. Nirma Credit and Capital Pvt. Ltd. passed in Tax Appeal No.409 of 2017 has taken a similar view.

3.

No   question   of   law   arises.  Tax   Appeal   is dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) ANKIT SHAH

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