THE PR. COMMISSIONER OF INCOME TAX-3, LUDHIANA vs. MALWA INDUSTRIES LIMITED

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ITA/348/2018HC Punjab & HaryanaPHHC01119208201808 May 2019Author: MR. JUSTICE AJAY KUMAR MITTAL,MRS. JUSTICE MANJARI NEHRU KAUL3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that both substantial questions of law were covered by previous judgments of the same court. For question (i), the court referred to its decision in ITA No. 209 of 2015 (The Principal Commissioner of Income Tax-3, Ludhiana v. M/s Malwa Industries Ltd., Ludhiana) decided on 26.8.2015, where the revenue's appeal was dismissed. For question (ii), the court referred to its decision in ITA No. 186 of 2013 (Commissioner of Income Tax, Jalandhar-I, Jalandhar v. M/s Max India Limited) decided on 6.9.2016, where the revenue's appeal was also dismissed. Based on these precedents, the High Court dismissed the present appeals filed by the revenue.

What were the facts?

The assessee, Malwa Industries Limited, engaged in manufacturing denim fabrics and garments, filed its return for Assessment Year 2011-12 declaring a total loss. The Assessing Officer completed the assessment under Section 143(3), making several disallowances, including bank charges of ₹25,24,786/- and ₹2,86,58,780/- under Section 14A read with Rule 8D. The assessee appealed to the CIT(A), which partly allowed the appeal, deleting the disallowances for bank charges and a portion of the Section 14A disallowance (₹2,84,91,705/-). The revenue appealed to the Income Tax Appellate Tribunal (ITAT) against the deletion of bank charges and the remaining Section 14A disallowance. The ITAT dismissed the revenue's appeal. The revenue then filed the present appeal before the High Court.

What were the issues?

The High Court had to decide two substantial questions of law: 1. Whether the ITAT erred in law by deleting the disallowance of bank charges amounting to ₹25,24,786/- paid for processing a working capital loan, under Section 37(1) of the Income Tax Act, 1961. 2. Whether the ITAT erred in law by deleting the disallowance of ₹2,84,91,705/- made under Section 14A of the Income Tax Act, 1961, read with Rule 8D of the Income Tax Rules. Contentions: Assessee: Not recorded in the judgment. Revenue: Argued that the ITAT erred in deleting the disallowances on bank charges and under Section 14A. The revenue relied on the fact that the ITAT's decision was under challenge.

Which sections of the Income-tax Act were involved?

Section 37(1),Section 14A,Section 143(3),Section 36(1)(iii),Section 260A

AI-generated summary — verify with the full judgment below

ITA-348-2018 -1- IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA-348-2018 (O&M) Date of Decision: 8.5.2019 The Principal Commissioner of Income Tax-3, Ludhiana ....Appellant. Versus Malwa Industries Limited, Ludhiana ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL. HON'BLE MRS. JUSTICE MANJARI NEHRU KAUL. PRESENT: Mr. Rajesh Katoch, Sr. Standing Counsel with Ms. Pridhi Jaswinder Sandhu, Jr. Standing Counsel for the appellant. AJAY KUMAR MITTAL, J.

1.

This order shall dispose of a bunch of two appeals bearing ITA Nos.348 and 349 of 2018 as according to learned counsel for the appellant, identical issues are involved therein. For brevity, the facts are being extracted from ITA-348-2018. 2. ITA-348-2018 has been preferred by the revenue under Section 260A of the Income Tax Act, 1961 (in short “the Act”) against the order dated 21.12.2017 (Annexure-3) passed by the Income Tax Appellate Tribunal, Chandigarh Bench 'B', Chandigarh (hereinafter referred to as “the Tribunal”) in ITA No. 429/CHD/2017, for the assessment year 2011-12, claiming the following substantial questions of law:- (i) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT erred in law in deleting the disallowance of bank charges of ` 25,24,786/- paid for processing of the working capital loan? GURBACHAN SINGH 2019.05.13 11:02 I attest to the accuracy and integrity of this document

ITA-348-2018 -2- (ii) Whether on the facts and in the circumstances of the case, the Hon'ble ITAT erred in law in deleting the disallowance of ` 2,84,91,705/- made u/s 14A of the Income Tax Act, 1961 read with Rule 8D of the Income Tax Rules?

3.

A few essential facts in ITA-348-2018 as narrated therein may be noticed. The assessee was engaged in the business of manufacturing of Denim Fabrics, Denim Garments and trading in textiles goods. It filed its return for the assessment year 2011-12 on 28.9.2011 declaring total loss of ` 27,00,69,713/-. The assessment was completed under Section 143(3) of the Act by the Assessing Officer vide order dated 13.3.2014 (Annexure-1) by making the following disallowances:- I. Interest of ` 17,28,206/- on interest free advances to the subsidiary company; II. Bank charges of ` 25,24,786/- under Section 37(1) of the Act; III. Interest of ` 4,61,160/- on investment in Capital Work in Progress under Section 36(1)(iii) of the Act; IV. ` 1,85,200/- on account of Wealth Tax debited to P&L Account; V. ` 4,04,091/- on account of capitalization of building repair expenses; and VI. ` 2,86,58,780/- under Section 14A of the Act read with Rule 8D of the Income Tax Rules.

4.

Feeling aggrieved by the order, Annexure-1, the assessee filed an appeal before the Commissioner of Income Tax (Appeals) [for brevity GURBACHAN SINGH 2019.05.13 11:02 I attest to the accuracy and integrity of this document

ITA-348-2018 -3- “the CIT(A)”]. The CIT(A) vide order dated 30.12.2016 (Annexure-2) partly allowed the appeal and deleted the disallowances mentioned at Sr. Nos. I, II and VI (out of disallowance of ` 2,86,58,780/- under Section 14A of the Act, deleted the disallowance of ` 2,84,91,705/-) and upheld the disallowances mentioned at Sr. Nos. III, IV and V. The revenue filed an appeal before the Tribunal challenging the disallowances mentioned at Sr. Nos. II and VI. The Tribunal vide order dated 21.12.2017 (Annexure-3) dismissed the appeal. Hence, the present appeal by the revenue.

5.

We have heard learned counsel for the revenue.

6.

It was not disputed by the learned counsel for the revenue that question No. (i) is covered by the judgment of this Court in ITA No. 209 of 2015 (The Principal Commissioner of Income Tax-3, Ludhiana v. M/s Malwa Industries Ltd., Ludhiana) decided on 26.8.2015 whereas question No. (ii) is covered by the decision of this Court in ITA No. 186 of 2013 (Commissioner of Income Tax, Jalandhar-I, Jalandhar v. M/s Max India Limited) decided on 6.9.2016, wherein both the appeals filed by the revenue were dismissed.

7.

Accordingly, the present appeals are also dismissed.

(AJAY KUMAR MITTAL) JUDGE May 8, 2019 (MANJARI NEHRU KAUL) gbs JUDGE Whether Speaking/Reasoned Yes/No Whether Reportable Yes/No GURBACHAN SINGH 2019.05.13 11:02 I attest to the accuracy and integrity of this document

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