THE COMMISSIONER OF INCOME TAX- I, vs. MANUBHAI HIRALAL & CO.

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TAXAP/1475/2007HC GujaratGJHC24041340200723 December 2014Bench: HONOURABLE MR. JUSTICE KS JHAVERI,HONOURABLE MR. JUSTICE K.J.THAKER3 pages
AI SummaryDismissed

What did the High Court hold?

The High Court did not decide the substantial question of law on merits. Instead, it observed that the amount involved in the present case was small, with a revenue effect of less than Rs. 1 lakh. Citing CBDT Instruction No. 1979 dated 27th March, 2000 and 02 of 2005, the Court opined that the revenue ought not to have filed an appeal where the total revenue effect was less than Rs. 1 lakh. Consequently, the appeal was not entertained and was dismissed on the ground of the smallness of the amount. The questions were answered in favour of the assessee and against the revenue. No specific issue was left undecided, as the appeal was dismissed on a preliminary ground.

What were the facts?

The appellant, Commissioner of Income Tax-I, challenged an order dated 29.09.2006 passed by the Income-tax Appellate Tribunal (ITAT), Ahmedabad Bench, in ITA No. 209/Ahd/2001 for the assessment year 1997-98. The ITAT had confirmed an order of the CIT(A) which deleted a disallowance of interest amounting to Rs. 3,87,598/- out of a total claim of Rs. 7,42,094/-. The disallowance pertained to the diversion of borrowed funds by the assessee, Manubhai Hiralal & Co., to sister concerns without apparent business expediency. The revenue argued that the assessee failed to discharge the onus placed by Section 36(1)(iii) of the Income-tax Act read with Section 106 of the Indian Evidence Act.

What were the issues?

1. Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in confirming the order of the CIT(A) whereby he deleted the disallowance of interest to the tune of Rs. 3,87,598/- out of the claim of Rs. 7,42,094/-, on account of diversion by the assessee of borrowed funds to sister concerns without any business expediency and without discharging the onus placed by section 36(1)(iii) of the Income-tax Act r.w.s. 106 of the Indian Evidence Act? (Question of law). Assessee's contentions: Not recorded in the judgment. Revenue's contentions: The revenue contended that the Tribunal erred in confirming the deletion of interest disallowance. They argued that the assessee had diverted borrowed funds to sister concerns without business expediency and had failed to discharge the onus placed upon it under Section 36(1)(iii) of the Income-tax Act, 1961, read with Section 106 of the Indian Evidence Act, 1872.

Which sections of the Income-tax Act were involved?

Section 36(1)(iii),Section 106

AI-generated summary — verify with the full judgment below

O/TAXAP/1475/2007 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 1475 of 2007

FOR APPROVAL AND SIGNATURE:

HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER ================================================================ 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 ? ================================================================ THE COMMISSIONER OF INCOME TAX- I,....Appellant(s) Versus MANUBHAI HIRALAL & CO.....Opponent(s) ================================================================ Appearance: MR KM PARIKH, ADVOCATE for the Appellant(s) No. 1 RULE SERVED for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER

Date : 23/12/2014

Page 1 of 3

O/TAXAP/1475/2007 JUDGMENT ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) 1. By way of this appeal, the appellant-revenue has challenged the order dated 29.09.2006 passed by the Income-tax Appellate Tribunal, Ahmedabad Bench in ITA No. 209/Ahd/2001 for the assessment year 1997-98. 2. While admitting this appeal on 17.01.2008, this Court has framed the following substantial question of law: Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in confirming the order of the CIT(A) whereby he deleted the disallowance of interest to the tune of Rs. 3,87,598/- out of the claim of Rs. 7,42,094/-, on account of diversion by the assessee of borrowed funds to sister concerns without any business expediency and without discharging the onus placed by section 36(1)(iii) of the Income-tax Act r.w.s. 106 of the Indian Evidence Act? 3. In our view, the amount involved in the present case is a small one and the revenue effect is less than Rs. 1 lakh, and therefore, as per CDBT Instruction No. 1979 dated 27th March, 2000 and 02 of 2005, the revenue ought not to have come in appeal where the total revenue effect is less than Rs. 1 lakh, and therefore, this appeal is not entertained. The questions are answered in favour of the assessee and against the revenue. This appeal is dismissed on the ground of smallness of amount. Liberty to revive in case of difficulty. Page 2 of 3

O/TAXAP/1475/2007 JUDGMENT (K.S.JHAVERI, J.) (K.J.THAKER, J) divya Page 3 of 3

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