COMMISSIONER OF INCOME TAX,COCHIN vs. HARRISONS MALAYALAM LTD., WELLINGDON

ITA/1151/2009HC KeralaKLHC01025912200903 September 2018Author: HONOURABLE MR.JUSTICE K.VINOD CHANDRAN,HONOURABLE MR. JUSTICE ASHOK MENON22 pages
AI SummaryPartly Allowed

What were the facts?

These appeals by the Commissioner of Income Tax (Revenue) challenge orders of the Income Tax Appellate Tribunal (ITAT) concerning assessment years ranging from 1995-96 to 2004-05, involving assessee Harrisons Malayalam Ltd. The appeals address various disallowances made by the Assessing Officer (AO) and subsequently decided by the ITAT. Notably, the Revenue initially contested the disallowance of licence fee paid to RPG Enterprises Ltd. for multiple assessment years, but later withdrew its challenge on this issue. Another significant issue pertains to the disallowance of employees' contribution to provident fund under Section 43B for specific assessment years. The appeals also deal with the disallowance of premium paid on redemption of debentures and bad debts written off relating to the Bio-tech Division, as well as disallowance of replanting expenses and contribution paid to the Tea Traders' Association.

What did the High Court hold?

The High Court decided on several issues. Firstly, regarding the disallowance of licence fee paid to RPG Enterprises Ltd., the Revenue stated it was not pressing the issue, and thus the Tribunal's order was confirmed. Secondly, concerning the disallowance of employees' contribution to provident fund under Section 43B, the Court answered the question in favour of the Revenue, setting aside the Tribunal's order and restoring the disallowance made by the AO, relying on its own judgment in Popular Vehicles and Services Pvt.Ltd. Thirdly, on the premium paid on redemption of debentures, the Court upheld the Tribunal's decision in favour of the assessee, allowing the deduction as expenditure under Section 37. The Court reasoned that while the Supreme Court in Madras Industrial Investment Corporation Ltd. held for proportionate deduction, in this case, the entire premium was paid in the subject assessment year for commercial expediency to save interest, making it a revenue expenditure. Fourthly, regarding Section 14A, the Court held in favour of the assessee, upholding the Tribunal's order, based on the understanding that Rule 8D was applicable from assessment year 2007-08 onwards. Fifthly, concerning replanting expenses, the Court answered the question against the Revenue and in favour of the assessee, upholding the Tribunal's order, citing CIT v. Essar Teleholdings Ltd. Finally, on the contribution paid to the Tea Traders' Association, the Court answered against the assessee and in favour of the Revenue, setting aside the Tribunal's order and upholding the disallowance, finding no commercial expediency for the contribution.

What were the issues?

1. Whether the disallowance of licence fee paid to RPG Enterprises Ltd. for assessment years 1995-96 to 1999-2000 and 2001-02 to 2003-04 is to be upheld? (Question of law). The Revenue stated it was not pressing this issue. The Assessee's contention is not recorded. 2. Whether the disallowance of employees' contribution to provident fund under Section 43B for assessment years 2001-02, 2002-03, and 2004-05 is justified? (Question of law). The Revenue argued that the disallowance is correct, relying on the High Court judgment in Popular Vehicles and Services Pvt.Ltd. v. The Commissioner of Income Tax, Ernakulam. The Assessee's contention is not recorded. 3. Whether the entire premium paid on redemption of debentures can be treated as allowable expenditure in assessment year 1998-99 under Section 37 of the Income Tax Act? (Question of mixed law and fact). The Assessee contended that the premium paid was an allowable expenditure under Section 37, as it was incurred for business expediency to save high interest, and even if deferred, was paid in full in the subject year. The Revenue relied on Madras Industries Investment Corporation Ltd. v. C.I.T. to disallow the claim. 4. Whether the disallowance of bad-debts written off relating to the Bio-tech Division for assessment year 1998-99 is to be upheld? (Question of law). The Assessee claimed the bad debts were genuine business losses. The Revenue's contention is not recorded. 5. Whether the disallowance of expenditure under Section 14A for assessment years 2007-08 onwards is to be upheld? (Question of law). The Assessee contended that Rule 8D was not applicable for the assessment years in question, citing the explanatory memorandum to the Finance Bill, 2006 and CBDT circular dated 28.12.2006. The Revenue's contention is not recorded. 6. Whether the disallowance of replanting expenses for assessment years 2002-03 to 2004-05 is to be upheld? (Question of law). The Assessee contended that the disallowance was incorrect. The Revenue's contention is not recorded. 7. Whether the disallowance of contribution paid to Tea Traders' Association under Section 37 for assessment year 1999-2000 is justified? (Question of mixed law and fact). The Assessee argued the contribution was made out of commercial expediency. The Revenue argued there was no commercial expediency. The Assessee relied on Sree Venkita Satyanarayana Rice Mill Contractors Company v. Commissioner of Income Tax.

Which sections of the Income-tax Act were involved?

Section 43B,Section 37,Section 14A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE ASHOK MENON MONDAY ,THE 03RD DAY OF SEPTEMBER 2018 / 12TH BHADRA, 1940 ITA.No. 1151 of 2009 AGAINST THE ORDER/JUDGMENT IN ITA 64/2007 of I.T.A.TRIBUNAL,COCHIN BENCH DATED 24-09-2007 ASSESSMENT YEAR 2003-04 APPELLANT/S: COMMISSIONER OF INCOME TAX, COCHIN. BY ADVS. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH SC FOR INCOME TAX RESPONDENT/S: HARRISONS MALAYALAM LTD. WILLINGDON ISLAND, COCHIN-682 003. BY ADVS. SRI.E.K.NANDAKUMAR (SR.) SRI.K.JOHN MATHAI SRI.P.BENNY THOMAS SRI.P.GOPINATH THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 03.09.2018, ALONG WITH ITA Nos.703/2009, 716/2009, 873/2009, 879/2009, 922/2009, 1060/2009,1084/2009, 88/2013 & 112/2013, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

I.T A Nos.88 of 2013 and connected cases :2 :: I.T.A Nos.88/2013, 703/2009,716/2009, 873/2009, 879/2009, 922/2009, 1060/2009, 1084/2009, 1151/2009 & 112/2013 JUDGMENT Vinod Chandran, J. These appeals have been posted together since many of the questions raised are common in certain appeals, but however, there are other independent questions arising in

The order continues below.

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