C I T vs. M/S AVON CYCLES LTD.

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ITA/443/2007HC Punjab & HaryanaPHHC01073148200702 May 2016Author: MR. JUSTICE RAMENDRA JAIN,MR. JUSTICE JITENDRA CHAUHAN2 pages
AI SummaryWithdrawn

What did the High Court hold?

The appeal was dismissed as not pressed. The revenue's counsel submitted that in view of CBDT circulars No. 21/2015 dated 10.12.2015 and No. 279/Misc/M-142/2007-ITJ (Part) dated 8.3.2016, and as the tax effect was less than Rs. 20 lacs, they did not wish to press the appeal. The revenue prayed for liberty to file an application for revival of the appeal if something survived therein. The High Court dismissed the appeal as not pressed with the liberty granted. It was clarified that the withdrawal of the appeal by the revenue would not be taken as an affirmation of the Tribunal's order on merits, and the legal issues were left open to be adjudicated in an appropriate case. No specific findings were given on the merits of the three substantial questions of law.

What were the facts?

The appeal was filed by the Commissioner of Income Tax, Ludhiana-II against an order dated 29.12.2006 passed by the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench. The appeal pertains to the assessment year 1998-99 and concerns the disallowance of interest on interest-free loans, addition for expenditure on distribution of silver articles and suit lengths, and the treatment of interest received from customers on delayed payments for computing deduction under Section 80HHC. The revenue sought to challenge the ITAT's decision on these three substantial questions of law.

What were the issues?

The Tribunal was asked to decide three substantial questions of law: 1. Whether the ITAT was legally justified in setting aside the issue regarding disallowance of interest made by the Assessing Officer on account of interest-free loan advanced to Sh. Hans Raj Pahwa and their relatives, utilized for non-business purpose, in disregard of the decisions of the Punjab and Haryana High Court in M/s Abhishek Industries (286 ITR-1)? 2. Whether the ITAT was justified in deleting the addition of Rs. 4,26,762/- made by the Assessing Officer on account of expenditure incurred on distribution of silver articles and suit lengths etc. amongst domestic and foreign dealers, despite the assessee failing to prove the expenditure was for business purposes? 3. Whether the ITAT was justified in setting aside the issue relating to fresh adjudication of the issue of interest (net) received from customers on delayed payment by directing the AO to exclude 90% of such interest (net) from profit for computing deduction u/s 80 HHC, whereas the jurisdictional High Court in Rani Paliwal's case (268/ITR/220) held that gross interest is to be deducted? The revenue contended that the ITAT's orders on these issues were not legally sound. The assessee's arguments are not recorded in the provided text.

Which sections of the Income-tax Act were involved?

Section 260A,Section 80HHC

AI-generated summary — verify with the full judgment below

-1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH Date of Decision: 02.05.2016 Commissioner of Income Tax, Ludhiana-II .......Appellant Versus M/s Avon Cycles Ltd. ......Respondent CORAM: HON'BLE MR. JUSTICE RAJESH BINDAL HON'BLE MR. JUSTICE HARINDER SINGH SIDHU Present: Mr. Zora Singh Klar, Advocate for the appellant. Mr. Alok Mittal, Advocate for the respondent. RAJESH BINDAL,J. This appeal has been filed under Section 260 A of the Income Tax Act, 1961 (for short 'the Act'), against the order dated 29.12.2006 passed by the Income Tax Appellate Tribunal, Chandigarh Bench (A), Chandigarh, in ITA No.784/Chandi/2001, for the assessment year 1998-99, raising the following substantial question of law: (i) Whether on the facts and in law, the ITAT was legally justified in setting aside the issue regarding disallowance of interest made by the Assessing Officer on account of interest free loan advanced to Sh. Hans Raj Pahwa and their relatives, utilized for non-business purpose in complete disregard of the decisions of Hon'ble Punjab and Haryana High Court in the case of M/s Abhishek Industries 286 ITR-1.? (ii) Whether on the facts and in law, the ITAT was REEMA SAINI 2016.05.03 11:16 I attest to the accuracy and authenticity of this document High Court, Chandigarh -2- justified in deleting the addition made by Assessing Officer of Rs.4,26,762/- on account of expenditure incurred on distribution of silver articles and suit lengths etc amongst the domestic and foreign dealers despite the fact that the assessee failed to prove the expenditure was for the purpose of business? (iii) Whether on the facts and in law, the ITAT was justified to set aside the issue relating to fresh adjudication of the issue of interest (net) received from customers on delayed payment by directing the AO to excluded 90% of such interest (net) from profit for computing deduction u/s 80 HHC, whereas the Hon'ble juri ictional High Court of Punjab and Haryana has already observed in the case of Rani Paliwal's case (268/ITR/220) that it is gross interest which is to be deducted from profits of business while computing deduction u/s 80 HHC? Learned counsel for the appellant-revenue submitted that in view of circular No.21/2015 dated 10.12.2015 read with circular No.279/Misc/M-142/2007-ITJ (Part) dated 8.3.2016, issued by Central Board of Direct Taxes, he does not wish to press the present appeal, as the tax effect involved is less than ` 20 lacs. However, he prays that liberty be granted to the revenue to file an application for revival of the appeal in case something survives therein. Dismissed as not pressed with liberty as prayed for. It is however, clarified that withdrawal of the appeal by the revenue shall not be taken as affirmation of order of the Tribunal on merits. The legal issue as claimed by the revenue is left open to be adjudicated in an appropriate case. (RAJESH BINDAL)

JUDGE (HARINDER SINGH SIDHU) 02.05.2016/reema JUDGE REEMA SAINI 2016.05.03 11:16 I attest to the accuracy and authenticity of this document High Court, Chandigarh

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