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

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TAXAP/1482/2007HC GujaratGJHC24041347200723 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, the Court noted that the amount involved in the present case was small, and the revenue effect was less than Rs. 1 lakh. Citing CBDT Instructions No. 1979 dated 27th March, 2000 and 02 of 2005, the Court held 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 finding was given on the merits of the disallowance of interest or the applicability of Section 36(1)(iii) and Section 106 of the Indian Evidence Act. Liberty was granted to revive the appeal in case of difficulty.

What were the facts?

The Commissioner of Income Tax-I (appellant-revenue) filed an appeal challenging an order dated 29.09.2006 passed by the Income-tax Appellate Tribunal (ITAT), Ahmedabad Bench. The ITAT's order pertained to ITA No. 210/Ahd/2001 for the assessment year 1996-97. The appeal was admitted by the High Court on 14.12.2007, and a substantial question of law was framed. The dispute involves the deletion of a disallowance of interest amounting to Rs. 4,43,433/-, out of a claimed Rs. 16,47,197/-. This disallowance was made on account of the assessee allegedly diverting borrowed funds to sister concerns without business expediency and without discharging the onus under 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.4,43,433/- out of the claim of Rs. 16,47,197/-, 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? Assessee's Contention: Not recorded in the judgment. Revenue's Contention: The revenue contended that the Tribunal was wrong in confirming the CIT(A)'s deletion of interest disallowance. The diversion of borrowed funds to sister concerns was allegedly without business expediency, and 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.

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/1482/2007 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 1482 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 MR BS SOPARKAR, ADVOCATE 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/1482/2007 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. 210/Ahd/2001 for the assessment year 1996-97. 2. While admitting this appeal on 14.12.2007, 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.4,43,433/- out of the claim of Rs. 16,47,197/-, 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/1482/2007 JUDGMENT (K.S.JHAVERI, J.) (K.J.THAKER, J) divya Page 3 of 3

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