COMMISSIONER OF INCOME TAX vs. HINDUSTAN ZINC LTD

ITA/76/2002HC RajasthanRJHC01027036200221 November 2007Author: N P GUPTA,MUNISHWAR NATH BHANDARI4 pages
AI SummaryRemanded

What were the facts?

The Revenue filed an appeal before the High Court against an order of the Income Tax Appellate Tribunal (ITAT) dated October 30, 2001. The appeal concerned a deduction of Rs. 4,13,37,165/- claimed by the assessee, Hindustan Zinc Ltd., under Section 35AB of the Income Tax Act, which had been disallowed by the Assessing Officer and confirmed by the CIT(A). The ITAT, in its impugned order, directed the Assessing Officer to allow this deduction. The dispute arose from conflicting findings within the ITAT's own order regarding the accrual and payment of fees for technical services provided by M/s DML to the assessee.

What did the High Court hold?

The High Court found that the ITAT had recorded irreconcilably contrary findings in paragraphs 15 and 18 of its judgment. Paragraph 15 suggested that the liability for technical service fees had accrued as per the agreement, implying it was payable. Conversely, paragraph 18 stated that the fees were never payable by the assessee to M/s DML outside India. Due to these conflicting findings, the High Court deemed it appropriate to set aside the impugned judgment. The matter was remitted back to the ITAT to consider the case afresh after hearing both parties and to arrive at a categorical conclusion based on the record and in accordance with the law. The High Court did not decide on the merits of the entitlement to deduction under Section 35AB or disentitlement under Section 40(a).

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the ITAT was justified in law in directing the assessing officer to allow the deduction of Rs. 4,13,37,165/- disallowed under Section 40(a) of the Income-tax Act out of the assessee's claim under Section 35AB, ignoring the material on record? Assessee's Contention: The assessee argued that the deduction was rightly granted based on the ITAT's finding in paragraph 18 of its order, which stated the fees were never payable by the assessee to M/s DML outside India. The assessee further contended that the amount was paid to the Government of India, and subsequent actions were not the assessee's concern. The payment to DML was made from a grant by the UK Government, making the ITAT's finding in paragraph 18 valid. Revenue's Contention: The Revenue argued that the ITAT's finding in paragraph 15, which held that the liability for technical service fees had actually accrued as per the agreement, was contradictory to the finding in paragraph 18. The Revenue contended that the amount was payable by the assessee to M/s DML outside India, and therefore, deduction could not be allowed under Section 40(a).

Which sections of the Income-tax Act were involved?

Section 40(a),Section 35AB,Section 260A,Section 9(1)(vii)

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances
1 IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN AT JODHPUR -------------------------------------------------------- INCOME TAX APPEAL No. 76 of 2002 COMMISSIONER OF INCOME TAX V/S HINDUSTAN ZINC LTD Mr. KK BISSA, for the appellant / petitioner Mr. ANJAY KOTHARI, for the respondent Date of Order : 21.11.2007 HON'BLE SHRI N P GUPTA,J. HON'BLE SHRI MUNISHWAR NATH BHANDARI,J.

ORDER -----

This appeal has been filed by the Revenue against the judgment of the Income Tax Appellate Tribunal dt. 30.10.2001 under Section 260A of the Income Tax Act. This appeal was admitted on 29.1.2003 by framing the following substantial question of law:- “Whether on the fact and in the circumstances of the case the ITAT was justified in law in directing the assessing officer to allow the deduction of Rs. 4,13,37,165/- disallowed by him u/s 40(a) of the Income-tax Act and confirmed by the CIT(A) out of the claim of the assessee U/s 35 AB amounting to Rs. 8,10,37,633/- ignoring the facts and material bro

The order continues below.

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