HRY. ST. COOP. HOUSING FED. LTD. vs. C I T AND ORS.

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ITA/285/2008HC Punjab & HaryanaPHHC01080260200830 January 2017Author: MR. JUSTICE RAMENDRA JAIN,MR. JUSTICE AJAY KUMAR MITTAL3 pages
AI SummaryRemanded

What did the High Court hold?

The High Court addressed the substantial questions of law. Questions (i) and (vi) were deemed general and not arising for consideration. Question (ii) was not pressed by the assessee. Question (iii) was decided against the assessee, citing the Supreme Court's judgment in Totgars Co-operative Sale Society Ltd. v. ITO and a previous decision of the High Court. Questions (iv) and (v), which were overlapping and concerned the deduction of interest expenses under Section 57 when income is assessed under Section 56, were the focus of the final decision. The Court noted that the assessee initially claimed the income as business income, thus not making a claim under Section 57. However, if the revenue authorities treated the income as 'income from other sources' under Section 56, the assessee would be entitled to claim deductions under Section 57 for expenses incurred in earning that income. Therefore, in the interest of justice, the Court remitted the issue concerning the claim for deduction under Section 57 back to the Assessing Officer to decide afresh after providing an opportunity of hearing to the assessee. The impugned order was modified to this extent.

What were the facts?

The assessee, The Haryana State Coop. Housing Federation Ltd., filed an appeal before the High Court of Punjab and Haryana under Section 260A of the Income Tax Act, 1961. The appeal challenged an order dated September 27, 2007, passed by the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench 'A', for the assessment year 2003-04. The dispute primarily concerns the deductibility of expenses, specifically interest paid on borrowed funds, when income is assessed under Section 56 (income from other sources) rather than as business income. The ITAT had held against the assessee on certain claims for deduction under Section 80P(2)(a)(i) and Section 57.

What were the issues?

The High Court had to decide several substantial questions of law. The primary issues revolved around the legality and sustainability of the ITAT's order. Specifically, the court considered: 1. Whether the ITAT was correct in holding that the appellant was not entitled to a deduction of ₹1,48,64,914/- under Section 80P(2)(a)(i) against business income assessed at ₹1,60,74,331/-, and not entitled to the deduction envisaged under that provision. 2. Whether the ITAT correctly interpreted Section 80P(2)(a)(i) in a manner consistent with pronouncements of the Supreme Court of India. 3. Whether the ITAT erred in holding that the appellant was not entitled to a deduction of expenses on account of interest paid on borrowed funds under Section 57, especially when the income was assessed under Section 56 as income from other sources. The assessee argued that the ITAT's order was not legally sustainable, particularly concerning the denial of deductions under Sections 80P and 57. The revenue's contentions are not explicitly detailed in the provided text, but their position was against the assessee's claims for deductions. The assessee relied on a decision of the High Court in a similar case (Punjab State Cooperative Federation of Housing Societies Ltd.) where the matter was remitted.

Which sections of the Income-tax Act were involved?

Section 260A,Section 80P(2)(a)(i),Section 57,Section 56

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Decided on : 30.01.2017 The Haryana State Coop. Housing Federation Ltd. . . . Appellant Versus Commissioner of Income Tax, Panchkula and another . . . Respondents CORAM: HON'BLE MR. JUSTICE AJAY KUMAR MITTAL HON'BLE MR. JUSTICE RAMENDRA JAIN PRESENT: Mr. M.R. Sharma, Advocate for the appellant. Mr. Yogesh Putney, Advocate for the respondents. **** AJAY KUMAR MITTAL, J. (Oral) The assessee has approached this Court under Section 260A of the Income Tax Act, 1961 (in short 'the Act'), against the order dated 27th September, 2007, passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'A', Chndigarh (hereinafter referred to as 'the Tribunal'), in Income Tax Appeal No. 918/Chandi/2006, for the assessment year 2003- 04, claiming the following substantial questions of law:- “i) Whether in the facts and circumstances of the case the orders (Annexure P-1), (Annexure P-2) and (Annexure P-3) are legally sustainable ? ii) Whether in the facts and circumstances of the case, the learned Income Tax Appellate Tribunal is right in law in holding that the appellant is not entitle to deduction up to `1,48,64,914/- u/s 80P (2)(a)(i) as against the business income assessed at `1,60,74,331/- and not entitled to deduction as envisaged under the said provision the Income Tax Act, 1961 ? iii) Whether the Tribunal is correct in law in interpreting Jawala Ram 2017.02.17 12:49 I attest to the accuracy and authenticity of this document Chandigarh - 2 - the provision of Section 80P (2) (a) (i) which is not in accordance with the law laid down by various judicial pronouncement of the Hon'ble Court of India ? iv) Whether in the facts and circumstances of the case the ITAT has grossly erred in holding that the appellant is not entitle to deduction of expenses on account of interest paid on the borrowed funds u/s 57 more so when the income has been assessed under the provision of section 56 as income from other sources ? v) Whether in the facts and circumstances of the case the ITAT order holding appellant not entitle to deduction u/s 80P (2) (a) (i) and also not entitle to deduction of expenses u/s 57 out of the interest income which has been assessed as income from other sources is legally sustainable, the same being based on mere presumptions and surmises ? vi) Whether in the facts and circumstances of the case the order of the ITAT is legally sustainable in law ?”

2.

At the very outset, learned counsel for the appellant stated that questions No. (i) & (vi) are general in nature and thus would not arise from the order of the Tribunal for consideration. As regards, question No.(ii), learned counsel for the appellant very candidly submitted that the same is not pressed and thus may be disposed of as such. So far as question No.(iii) is concerned, it is covered against the appellant by the judgment in Totgars Co-operative Sale Society Ltd. V. ITO, [2010] 322 ITR 283 (SC) and Income Tax-II, Chandigarh and another, decided on 07

th December,

2016.

Accordingly, the aforesaid question of law is decided against the appellant. As per the admission order dated November 03, 2008, the appeal was admitted for consideration of question No. (iv) in para 22 of the appeal. Jawala Ram 2017.02.17 12:49 I attest to the accuracy and authenticity of this document Chandigarh - 3 - It was submitted by the learned counsel for the appellant that questions No.(iv) & (v) are overlapping and the same relate to the deduction of expenses on account of interest paid on the borrowed funds under Section 57 of the Act, especially, when the income of the assessee had been assessed as income from other sources under Section 56 of the Act.

3.

Reliance was placed upon the decision of this Court rendered in Punjab State Cooperative Federation of Housing Societies Ltd.'s (supra), wherein, on the similar issue, the matter had been remitted back.

4.

In the present case, the appellant had claimed the income to be business income and therefore, no claim for deduction under Section 57 of the Act was made. Once the income of the assessee is treated as income from other sources by the revenue authorities, the assessee would be entitled to claim deduction under Section 57 of the Act in respect of expenses incurred for earning that income. Thus, it would be in the interest of justice that the matter is remitted back to the Assessing Officer to decide the claim of the assessee for deduction under Section 57 of the Act. Accordingly, the issue under question No.(iv) is sent back to the Assessing Officer, who shall decide the same afresh, in accordance with law, after affording an opportunity of hearing to the appellant.

4.

In view of the above, the impugned order is modified to that extent and the appeal is disposed of accordingly. (AJAY KUMAR MITTAL) JUDGE (RAMENDRA JAIN) January 30, 2017 JUDGE J.Ram

Whether speaking/reasoned: Yes/No Whether Reportable: Yes/No Jawala Ram 2017.02.17 12:49 I attest to the accuracy and authenticity of this document Chandigarh

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