C.I.T.UDAIPUR vs. M/S AMARJOTHI GRANITES INDIA PVT.LTD.

Date of Judgment :: 23rd August, 2013 PRESENT HON'BLE MR. JUSTICE NARENDRA KUMAR JAIN HON'BLE MR. JUSTICE ARUN BHANSALI Mr. K.K. Bissa, for the appellant. ---- BY THE COURT: This appeal under Section 260A of the Income Tax Act, 1961 ['the Act'] has been preferred by the Revenue aggrieved against order dated 30.03.2012 passed by the Income Tax Appellate Tribunal, Jodhpur Bench, Jodhpur ['the Tribunal'], whereby, the appeal preferred by the Department against order dated 22.02.2010 passed by the Commissioner of Income Tax (Appeals), Jodhpur ['CIT (A)'] was dismissed. The facts in brief are that the return of income for the assessment year 2007-08 was filed by the assessee on 31.10.2007 declaring total income of Rs.75,59,309/- and the assessment was completed under Section 143(3) of the Act on 21.12.2009 at a total income of Rs.1,60,04,266/- by making addition/disallowances of Rs.84,44,957/- on various issues.

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The appeal preferred by the assessee before the CIT(A) was partly allowed and the plea raised by the assessee regarding reducing the carry forward long term capital loss from Rs.50,91,592/- to Rs.11,42,535/-, addition of Rs.65,000/- made on account of notional interest on advance given to J.K. Cement and disallowing expenses of Rs.38,29,125/- under Section 40(a) (ia) of the Act was accepted. On appeal, the Tribunal vide its order dated 30.03.2012 upheld the findings of CIT(A) on all the three issues and dismissed the appeal filed by the Department. It is submitted by learned counsel for the appellant that the findings recorded by the Tribunal are ex facie contrary to the facts and law and the same have not been examined objectively by the Tribunal. The CIT(A) while elaborately dealing with the issues raised by the assessee, inter alia, recorded its finding on the issues raised as under:- (A) Reduction of carry-forward long term capital loss:- “In my opinion, the action of the A.O. in reducing the determined and assessed long capital gain loss to the extent of Rs.11,54,535 cannot be held justified because there is no dispute that such loss has been determined and accepted by the department in the relevant assessment year i.e. in asstt. year 2005-06 and 2006-07 and the appellant is entitled to carry forward and set off such loss against the capital gain if earned in the subsequent year. In the case of the appellant the year in which the appellant sought for set off such loss is the assessment year under appeal. If the A.O. was of the opinion that the capital loss has been determined in excess wrongly, then he should have taken action to determine the correct loss in the relevant year where such loss has been claimed and determined and he should not have reduced such loss in the year under appeal where the 3 appellant has claimed only set off the assessed and determined loss in the previous assessment years. Therefore, in my view, the A.O. has acted upon beyond his authority by reducing the assessed and determined loss which was allowed to be carried forward and set off. Therefore the action of the A.O. is held to be against the provisions law and the appellant is entitled to set off the long term capital gain loss as determined in the asstt. years on account of sale of land as referred in this order. Thus, this ground of appeal is decided in favour of the appellant.” (B) Addition on account of notional interest on advance given to J.K. Cement:- “On going through the same, it is seen that as the date of advance i.e. on 15.01.2007, there was funds available with the appellant at Rs.34,93,866/- and out of this, the appellant has advanced the sum to M/s. J.K. Cement. The said loan was received back on 30.06.2007. Admittedly the A.O. has not brought any evidence to suggest that the appellant has advanced the amount of the borrowed funds. In absence of such evidence, it is not possible to sustain the disallowance.” (C) Disallowance of expenses under Section 40 (a)(ia):- “In my opinion the submissions of the learned A/R. are acceptable for the following reasons:

As regards payment of Rs.26,94,427 toward ocean freight paid to Indian agents of non resident shipping companies is covered by circular No.723 dated 19.9.1995 and therefore provisions of section 194C cannot be made applicable. The finding of the A.O. that the payment made to Indian agent of non resident shipping companies are not clearly identified is incorrect in view of cross verification of every payment with bill of lading numbers submitted before me at the time of hearing the appeal which include the copy of such bill referred by the A.O. in his assessment order.

As regards payment of Railway freight of Rs.216873 to container corporation of India, it may be mentioned that the payment of railway freight is excluded from the provisions of section 194C and therefore, the disallowance made is apparently against the provisions of law. In respect of payment of Rs.202479, it consists individual payments below 20,000.

Therefore provisions of section 194C is not applicable.

As regards the disallowance of Rs.715346, it is seen from the details filed that T.D.S. has already made and paid as per provisions of the Act. In view of above discussions, the 4 disallowance of Rs.3829125 made under Section 40 (a)(ia) cannot be sustained and the same is therefore deleted.” The findings as recorded above by the CIT(A) were upheld by the Tribunal by its impugned order. On the three issues raised, the Tribunal came to the conclusion that there was no jurisdiction of the Assessing Officer ('AO') to examine the allowability of the loss determined in earlier years, there is no direct nexus of the borrowed fund and the interest free loan and the payments made were on account of reimbursement of the expenses, to which, provisions of Section 194C of the Act were not applicable, whereas, Board Circular No.723 dated 29.09.2005 was squarely applicable respectively. It was submitted by learned counsel for the appellant that the long term capital loss, which was allowed to be carry forward by the AO while completing the assessment for the assessment years 2005-06 and 2006-07 were on account of non-application of mind and, therefore, it was open for the AO to deal with the same while framing the assessment order for the assessment year 2007-08. We are afraid such a submission on part of the Department cannot be countenanced, which is ex facie against settled position of law. Having scrutinized the detailed and exhaustive findings recorded by the CIT(A) and the order passed by the Tribunal upholding the said findings, which findings are essentially findings of fact, we are of the firm opinion that the impugned

5 order does not call for any interference on part of this Court and no substantial question of law arises for consideration by this Court. Consequently, there is no substance in the appeal and the same is, therefore, dismissed. No costs. (ARUN BHANSALI),J. (NARENDRA KUMAR JAIN),J. A.K. Chouhan 47