COMMISSIONER OF INCOME TAX-III vs. M/S PRABHUDAS KISHORDAS TOBACCO PRODUCTS PVT LTD

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TAXAP/979/2011HC GujaratGJHC24025540201105 September 2012Author: HONOURABLE MR. JUSTICE VIJAY MANOHAR SAHAI,HONOURABLE MR. JUSTICE N.V.ANJARIA3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the appeal with respect to the disallowance under Section 40A(2)(b) was not required to be adjudicated as it was already decided by this Court in the assessee's own case, where the department's appeal was dismissed. The Court also noted that this Bench had previously decided the same issue against the Revenue. Therefore, as regards question no. 2, the appeal fails. Regarding the disallowance under Section 14A, the High Court found no infirmity in the order of the Tribunal. The Tribunal had remanded the issue to the CIT(A) for fresh adjudication, requiring the CIT(A) to consider the decision of the Punjab & Haryana High Court in Hero Cycle Ltd. (2010) 323 ITR 518, after giving an opportunity of hearing to both sides. The Court found no reason for interference and concluded that the question was neither a question of law nor a substantial question of law, rendering the appeal devoid of merit. Accordingly, the appeal was dismissed.

What were the facts?

The Revenue has filed this appeal against the order dated 21.01.2011 of the Income Tax Appellate Tribunal (ITAT), Ahmedabad Bench 'C', for Assessment Year 2006-2007. The appeal challenges the ITAT's decision to set aside the CIT(A)'s order and delete disallowances made under Section 14A and Section 40A(2)(b) of the Income Tax Act. The disallowance under Section 14A was related to interest expenditure of Rs. 28,83,761/- incurred for earning dividend income of Rs. 1.92 crores, which was exempt under Section 10(34). The CIT(A) had deleted this addition based on a previous year's decision. The disallowance under Section 40A(2)(b) was Rs. 2,57,97,996. The Revenue's appeal was heard by the Gujarat High Court.

What were the issues?

1. Whether the Appellate Tribunal is right in setting aside the order of CIT(A) and deleting the disallowance made under Section 14A of the Income Tax Act? 2. Whether the Appellate Tribunal is right in deleting the disallowance of Rs. 2,57,97,996 made under Section 40A(2)(b) of the Income Tax Act? Assessee's Contentions: Not recorded in the judgment. Revenue's Contentions: The Revenue argued that the ITAT was right in setting aside the CIT(A)'s order and deleting the disallowance under Section 14A. Regarding the disallowance under Section 40A(2)(b), the Revenue submitted that this issue was covered by this Court's decision dated 18.01.2002 in Tax Appeal No. 2488 of 2010, which was in the assessee's own case and had dismissed the department's appeal. The Revenue also noted that this Bench had decided the same question against the Revenue in Tax Appeal No. 522/2010.

Which sections of the Income-tax Act were involved?

Section 14A,Section 40A(2)(b),Section 10(34)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
TAXAP/979/2011 1/3 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 979 of 2011 For Approval and Signature: HONOURABLE MR.JUSTICE V. M. SAHAI HONOURABLE MR.JUSTICE N.V. ANJARIA ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= COMMISSIONER OF INCOME TAX-III - Appellant(s) Versus M/S PRABHUDAS KISHORDAS TOBACCO PRODUCTS PVT LTD – Opponent(s) ========================================================= Appearance : MS PAURAMI B SHETH for Appellant(s) : 1, None for Opponent(s) : 1, ========================================================= CORAM : HONOURABLE MR.JUSTICE V. M. SAHAI and HONOURABLE MR.JUSTICE N.V. ANJARIA TAXAP/979/2011 2/3

JUDGMENT Date : 05/09/2012 ORAL JUDGMENT (Per : HONOURABLE MR.JUSTICE N.V. ANJARIA) The present appeal by the Revenue arises out of order dated 21.01.2011 of the Income Tax Appellate Tribunal, Ahmedabad Bench ‘C’, passed in ITA No. 188 of 2009 for the Assessment Years 2006-2007.

1.

1 Following question is raised by the appellant proposing it to be a substantial question of law. [A] Whether the Appellate Tribunal is right in setting aside the order of CIT(A) and deleting the disallowance made u/s 14A of the I.T. Act?” [B] Whether the Appellate Tribunal is right in deleting the disallowance of Rs. 2,57,97,996 made u/s 40A (2)(b) of the I.T. Act?”

2.

We heard learned advocate for the appellant Ms. Paurami B. Sheth.

2.

1 Learned advocate for the appellant fairly submitted at the threshold of hearing that so far as question no. 2 is concerned, the same is covered by the decision of this Court dated 18.1.2002 in Tax Appeal No. 2488 of 2010, which was in assesse's case itself. The said appeal filed by the department was dismissed.

2.

3 In view of the above, question no.2 is not required to be gone into as the same having been already decided. It is pertinent to mention that this Bench decided the very question against the Revenue vide its decision dated 17/02/2011 in tax appeal no. 522/2010. Thus, as regards question no.2, the appeal fails.

3.

Now, turning to the first question which relates to disallowance

TAXAP/979/2011 3/3 JUDGMENT under Section 14A of the Income Tax Act 1961 (hereinafter referred to as 'the act' for sake of brevity) which came to be deleted by the Tribunal by setting aside the order of the Commissioner of Income Tax (Appeals).

3.

1 The facts in the background are that the assessing officer had disallowed interest expenditure of Rs. 28,83,761/- while considering the return of income of the assessee for the assessment year 2006-2007. The said disallowance was for the reason that the dividend interest earned from investment of shares of Rs. 1.92 crores was exempted under section 10(34) of the Act and as per provisions of section 14A the expenditure incurred for earning tax free income was not an allowable deduction. The CIT(A) deleted addition on the basis of decision in the previous year.

3.

2 In the impugned order, as far as the said aspect is concerned the Tribunal has only remanded the issue to the CIT(A) for fresh adjudication requiring the CIT(A) to consider decision of Punjab & Haryana High Court in Hero Cycle Ltd. (2010) 323 ITR 518. 4. We do not find any infirmity in the order of the Tribunal on the aforesaid issue. As the issue is restored to the CIT(A) for considering it afresh after giving opportunity of hearing to both the sides. In light of the foregoing discussion, no interference is called. Neither the question is a question of law, much less a substantial question of law rendering the appeal devoid of merit.

5.

Accordingly, the appeal is dismissed. [V.M.SAHAI, J] [N.V.ANJARIA, J.] cmjoshi

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