THE PR COMMISSIONER OF INCOME TAX CENTRAL LUDHIANA vs. M/S MBD PRINTOGRAPHICS PVT LTD JALANDHAR

PDF · subscribers
ITA/94/2017HC Punjab & HaryanaPHHC01117837201708 August 2017Author: MR. JUSTICE SURINDER GUPTA,MR. JUSTICE ARUN MONGA5 pages
AI SummaryRemanded

What did the High Court hold?

The High Court noted that questions (i) and (ii), relating to the deletion of the addition of ₹1,22,51,965 on account of disallowance of interest expenditure, were concluded by this Court's earlier decision dated 17.4.2017 in ITA No.163 of 2017, which was decided against the revenue. Therefore, questions (i) and (ii) were decided against the revenue. For question (iii), concerning the disallowance of deduction under Section 80-IC, the Court referred to its decision dated 17.5.2017 in ITA No. 15 of 2017, where the matter was remanded to the Tribunal for fresh adjudication after affording an opportunity of hearing to the parties. Consequently, the High Court remanded the matter to the Tribunal for fresh adjudication on Question No. (iii) after providing an opportunity of hearing to both parties. The appeal was disposed of accordingly.

What were the facts?

The assessee, M/s MBD Printographics Pvt. Ltd., engaged in publication and printing, filed its return for AY 2010-11. During assessment, it was noted that the assessee had investments of ₹23,23,31,000 in sister concerns without earning interest, while simultaneously incurring interest expenses on loans for working capital. The Assessing Officer (AO) disallowed interest expenditure of ₹1,22,51,965 and also disallowed deduction under Section 80-IC for job work done outside Himachal Pradesh and for trading receipts from unused papers. The CIT(A) upheld the disallowance of interest but allowed the Section 80-IC deduction. The Tribunal allowed the assessee's appeal, deleting the interest disallowance, and dismissed the revenue's appeal. The revenue appealed to the High Court.

What were the issues?

1. Whether the Tribunal erred in deleting the addition of ₹1,22,51,965 on account of disallowance of interest expenditure, despite the CIT(A)'s finding that the assessee did not demonstrate any business purpose for investments in sister concerns? (Question of law) 2. Whether the Tribunal erred in deleting the addition of ₹1,22,51,965 on account of disallowance of interest expenditure without appreciating that funds raised on interest for working capital were needed to offset interest-free investments in sister concerns that served no business purpose? (Question of law) 3. Whether the Tribunal erred in upholding the deletion of disallowance of deduction under Section 80-IC of the Act, concerning job work outside the specified area and trading receipts from unused papers, by following its prior decisions for earlier assessment years where revenue's appeals were pending? (Question of law) Assessee's contentions: Not recorded. Revenue's contentions: The revenue argued that the Tribunal erred in deleting the interest expenditure disallowance, as the assessee failed to prove the business purpose of its investments in sister concerns and that the interest-bearing funds were used to cover shortfalls caused by these interest-free investments. Regarding Section 80-IC, the revenue contended that the Tribunal should not have followed its prior decisions for earlier assessment years when its appeals were still pending before the High Court.

Which sections of the Income-tax Act were involved?

Section 260A,Section 143(2),Section 142(1),Section 80-IC

AI-generated summary — verify with the full judgment below

ITA-94-2017 (O&M) -1- IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA-94-2017 (O&M) Date of Decision: 8.8.2017 The Principal Commissioner of Income Tax (Central), Ludhiana ....Appellant. Versus M/s MBD Printographics Pvt. Ltd., Jalandhar ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. HON'BLE MR. JUSTICE AMIT RAWAL. PRESENT: Mr. Rajesh Katoch, Senior Standing Counsel for the appellant. Mr. Pankaj Jain, Senior Advocate with Mr. Sachin Bhardwaj, Advocate for the respondent. AJAY KUMAR MITTAL, J.

1.

This appeal has been filed by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 13.6.2016 (Annexure A-III) passed by the Income Tax Appellate Tribunal, Amritsar Bench, Amritsar (hereinafter referred to as “the Tribunal”) in ITA No. 534(Asr)/2014 for the assessment year 2010-11, claiming the following substantial questions of law:- (i) Whether on the facts and in the circumstances of the case, the Hon'ble Income Tax Appellate Tribunal, Amritsar Bench, Amritsar has erred in deleting the addition of ` 1,22,51,965/- on account Gurbachan Singh 2017.09.13 14:47 integrity of this document

ITA-94-2017 (O&M) -2- of disallowance of interest expenditure, ignoring the specific finding of the CIT(A) that the assessee had not even attempted to show that the investments in sister concerns served any business purpose? (ii) Whether on the facts and in the circumstances of the case, the Hon'ble Income Tax Appellate Tribunal, Amritsar Bench, Amritsar has erred in deleting the addition of ` 1,22,51,965/- on account of disallowance of interest expenditure without appreciating the finding of the CIT(A) that funds raised on interest for working capital requirements had to be raised to make up for the shortfall caused by interest free investments in sister concerns which did not serve any business purpose for the assessee company? (iii) Whether on the facts and in the circumstances of the case, the Hon'ble Income Tax Appellate Tribunal, Amritsar Bench, Amritsar has erred in upholding the order of the CIT(A) in deleting the disallowance of deduction u/s 80-IC of the Income Tax Act, 1961 made by the AO on the job work got done outside the specified area, i.e. Himachal Pradesh and on the trading receipt from sale of unused papers, following its decisions in the case of the assessee for the assessment years 2005-06 to Gurbachan Singh 2017.09.13 14:47 integrity of this document

ITA-94-2017 (O&M) -3- 2009-10, against which the appeals filed by the revenue are still pending adjudication in ITA Nos. 117 to 122 of 2013 before this Hon'ble Court?

2.

Put shortly, the relevant facts necessary for adjudication of the instant appeal as discernible from the record are that the assessee is engaged in the business activity of publication and printing. The assessee e-filed its return of income on 29.9.2010 declaring the total income at ` 6,06,45,948/-. The case was selected for scrutiny under CASS and notice dated 2.9.2011 under Section 143(2) of the Act was issued. Subsequently, statutory notice dated 22.11.2012 under Section 142(1) of the Act along with questionnaire was issued to the assessee. During the course of assessment proceedings, it was, inter alia, noticed that an amount of ` 23,23,31,000/- was standing as investments in various related sister concerns but the assessee had not received any interest or return on account of such investments. It was further noticed that after making advances, the assessee itself had applied for interest linked loans and was bearing the interest burden. It was also observed that if the assessee had excess surplus funds then there was no need to take interest bearing loans. The Assessing Officer vide assessment order dated 28.3.2013 (Annexure A-I) disallowed the interest expenditure of ` 1,22,51,965/- and added the same to the income of the assessee. The claim of the assessee under Section 80-IC of the Act on the job work got done outside the specified area, i.e., Himachal Pradesh and on the trading receipt from sale of unused papers was also not accepted. Feeling aggrieved, the assessee filed an appeal before the Commissioner of Income Tax (Appeals)- I [for brevity “the CIT(A)”]. The CIT(A) vide order dated 8.7.2014 (Annexure A-II) confirmed the disallowance of interest expenditure made Gurbachan Singh 2017.09.13 14:47 integrity of this document

ITA-94-2017 (O&M) -4- by the Assessing Officer whereas the claim made under Section 80-IC of the Act was held to be allowable and by adjustment made by the Assessing Officer while disallowing part of deduction was held to be not sustainable and partly allowed the appeal. Against the order, Annexure A-II, the assessee and the revenue filed separate appeals before the Tribunal, who vide order dated 13.6.2016 (Annexure A-III) allowed the appeal filed by the assessee and deleted the addition on account of disallowance of interest expenditure. However, the appeal of the revenue was dismissed. Hence, the present appeal by the revenue.

3.

We have heard learned counsel for the parties.

4.

Learned counsel for the parties were ad-idem that question Nos. (i) and (ii) relating to deletion of addition of ` 1,22,51,965/- on account of disallowance of interest expenditure stands concluded by the decision dated 17.4.2017 passed by this Court in ITA No.163 of 2017 [The Pr. Commissioner of Income Tax (Central), Ludhiana v. Shri Satish Bala Malhotra, Legal Heir of Shri Ashok Kumar Malhotra, Prop. M/s Modern Publishers, MBD House, Railway Road, Jalandhar] whereby the questions have been decided against the revenue. Accordingly, question Nos. (i) and (ii) are decided against the revenue.

5.

Further, question No. (iii) relating to disallowance of deduction under Section 80-IC of the Act, vide decision dated 17.5.2017 passed by this Court in ITA No. 15 of 2017 [The Pr. Commissioner of Income Tax (Central), Ludhiana v. M/s MBD Printographics Pvt. Ltd.], the matter had been remanded to the Tribunal for fresh adjudication after affording an opportunity of hearing to the parties.

6.

In view of the above, the matter is remanded to the Tribunal for Gurbachan Singh 2017.09.13 14:47 integrity of this document

ITA-94-2017 (O&M) -5- fresh adjudication on Question No. (iii) after affording an opportunity of hearing to the parties.

7.

The appeal stands disposed of accordingly. (AJAY KUMAR MITTAL) JUDGE August 8, 2017 (AMIT RAWAL) gbs JUDGE Whether Speaking/Reasoned Yes Whether Reportable Yes Gurbachan Singh 2017.09.13 14:47 integrity of this document

More judgments on Section 142(1)

All 17,244 judgments and leading authorities on Section 142(1) →

Recent GST High Court judgments

Search GST case law →