THE COMMISSIONER OF IT vs. M/S PB TRACTORS LTD

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ITA/638/2005HC Punjab & HaryanaPHHC01078472200521 January 2009Author: MR.JUSTICE J.S. KHEHAR,MR. JUSTICE NAWAB SINGH3 pages
AI SummaryRemanded

What did the High Court hold?

For the first issue concerning interest on interest-free loans, both parties agreed that the deduction under Section 36(1)(iii) should be determined in consonance with the Apex Court's judgment in S.A. Builders Ltd. vs. Commissioner of Income-Tax. Since this was not done by the lower authorities, the High Court set aside the orders of the Assessing Officer and Appellate Authorities. The matter was remanded to the ITAT to re-adjudicate the issue based on the parameters laid down in S.A. Builders Ltd.'s case, allowing parties to lead evidence. For the second issue regarding the calculation of deduction under Section 80HCC, the High Court noted that this proposition of law had been adjudicated by the Court in CIT vs. Vardhman Polytex Ltd., where the issue was decided against the Revenue and in favour of the assessee. Therefore, the second issue raised by the Revenue was declined.

What were the facts?

The appeal was filed by the Commissioner of Income Tax (CIT), Patiala, against the order of the Income Tax Appellate Tribunal (ITAT) concerning assessment year not specified. The dispute involved the deletion of an addition made on account of interest on interest-free loans advanced by the assessee, Punjab Tractors Ltd., Ropar, to its sister concern, M/s. Swaraj Mazda Ltd. The second issue concerned the inclusion of excise duty and sales tax in the 'total turnover' for calculating deduction under Section 80HCC of the Income Tax Act, 1961. The High Court was considering two questions of law raised by the appellant.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in deleting the addition made on account of interest on interest-free loans advanced by the assessee to its sister concern, M/s. Swaraj Mazda Ltd.? (Question of law) 2. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in holding that for the purpose of calculation of deduction u/s 80HCC of the Income Tax Act, 1961, excise duty and sales tax should not be included in the ‘total turnover’? (Question of law) Assessee's arguments: Not explicitly recorded for either issue. Revenue's arguments: The Revenue contended that the addition on account of interest on interest-free loans was justified. For the second issue, the Revenue argued for the inclusion of excise duty and sales tax in the total turnover for Section 80HCC deduction. The Revenue relied on the Assessing Officer's and Appellate Authorities' actions for the first issue and its own legal position for the second.

Which sections of the Income-tax Act were involved?

Section 36(1)(iii),Section 80HCC

AI-generated summary — verify with the full judgment below

In the High Court of Punjab and Haryana, Chandigarh.

Date of Decision: 21.01.2009 The CIT, Patiala.

....Appellant. Versus Punjab Tractors Ltd., Ropar. ....Respondents.

Coram:- Hon'ble Mr.Justice J.S. Khehar Hon'ble Mr. Justice Nawab Singh Present: Mr. Urvashi Dhugga, Advocate for the appellant. Mr. Pankaj Jain, Advocate for the respondent.

... J.S. Khehar, J. (Oral). According to the learned counsel for the appellant, two questions of law arise for consideration at the hands of this Court: -- “Whether on the facts and in the circumstances of the case, the ITAT was right in law in deleting the addition made on account of interest on interest-free loans advanced by the assessee – company to its sister concern, M/s. Swaraj Mazda Ltd.? Whether on the facts and in the circumstances of the case, the ITAT was right in law in holding that for the purpose of calculation of deduction u/s 80HCC of the Income Tax Act, 1961, excise duty and sales tax should not be included in the ‘total turnover’ ?” Income-Tax (Appeals) and another (2007) 288 ITR 1, so as to determine the commercial expediency of the assessee, in extending interest free loan. Since the needful had not been done by the Assessing Officer, as also, the Appellate Authorities, learned counsel for the parties are agreed that the orders passed by the Assessing Officer as well as the Appellate Authorities be set aside. Learned counsel for the parties are also agreed that the adjudication of the present controversy be remanded back to the Income Tax Appellate Tribunal, Chandigarh, requiring it to re-adjudicate the issue whether the respondent - assessee is entitled to deduction under Section 36 (1)(iii) of the Income Tax Act, 1961, on the interest component in respect of capital borrowed, based on the parameters laid down in S.A.Builders Ltd.'s case (supra), and while doing so, to grant liberty to the rival parties to lead evidence, if they so desire. Accepting the submissions advanced by learned counsel for the parties, the matter is remanded to the Income Tax Appellate Tribunal, Chandigarh. The parties are directed to appear before the Income Tax Appellate Tribunal, Chandigarh on 16.2.2009. In the aforesaid circumstances, the impugned orders are set aside to the limited extent of determination of deduction claimed by the respondent-assessee under Section 36(1)(iii) of the Income Tax Act, 1961. sk.

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