PRINCIPAL COMMISSIONER OF INCOME TAX-4, vs. SAL CARE P. LTD.

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TAXAP/215/2018HC GujaratGJHC24011199201827 March 2018Bench: HONOURABLE MR. JUSTICE AKIL KURESHI,HONOURABLE MR. JUSTICE B.N. KARIA2 pages

AI SummaryDismissed

What did the High Court hold?

The High Court dismissed the Revenue's appeal. The Tribunal's decision was based on its own prior order concerning the same assessee for an earlier assessment year. The Court noted that the Revenue had filed an appeal against that earlier ITAT judgment but had consciously chosen not to agitate the issue of whether the expenditure was capital or revenue. Given this, the Court found it would not be open for the Revenue to pursue the same issue in the present year without any special reason or distinguishing feature. Therefore, for the sake of consistency, the Revenue's appeal was dismissed. The operative direction was the dismissal of the Tax Appeal.

What were the facts?

The Revenue is in appeal against an order of the Income Tax Appellate Tribunal (ITAT) dated September 5, 2017. The appeal concerns expenditure claimed by the assessee, Sal Care P. Ltd., for operation and management rights charges and reimbursement of expenses. The Assessing Officer had treated this expenditure as capital in nature and disallowed its deduction. The CIT (Appeals) and the ITAT had both ruled in favour of the assessee. The ITAT's decision was based on its own prior ruling for an earlier assessment year concerning the same assessee. The Revenue had not agitated this specific issue in its appeal against the earlier ITAT order, indicating a conscious decision not to pursue it.

What were the issues?

1. Whether the Appellate Tribunal is correct in law and on facts in treating the expenditure claimed on account of operation and management rights charges and reimbursement of expenses as revenue expenditure? (Question of law and fact, concerning the nature of expenditure). Assessee's Contention: The judgment does not record specific contentions made by the assessee. However, the fact that the assessee claimed the expenditure as revenue and succeeded before the lower authorities implies their argument was in favour of its revenue nature. Revenue's Contention: The Revenue contended that the expenditure was capital in nature and therefore not deductible. Their argument is implicitly based on the Assessing Officer's initial disallowance. The Revenue's counsel submitted that while they had filed a Tax Appeal against the ITAT's earlier order for a previous assessment year, this specific issue was not agitated in that appeal.

AI-generated summary — verify with the full judgment below

C/TAXAP/215/2018 ORDER IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 215 of 2018 ========================================================== PRINCIPAL COMMISSIONER OF INCOME TAX-4, Versus SAL CARE P. LTD. ========================================================== Appearance: MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 ========================================================== CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MR.JUSTICE B.N. KARIA

Date : 27/03/2018

ORAL ORDER (PER : HONOURABLE MR.JUSTICE AKIL KURESHI) 1. Revenue is in appeal against the judgement of the Income Tax Appellate Tribunal dated 05.09.2017 raising following question for our consideration: “Whether the Appellate Tribunal is correct in law and on facts in treating the expenditure claimed on account of operation and management rights charges and reimbursement of expenses as revenue expenditure?” 2. The assessee incurred certain expenditure for operation and management rights charges and reimbursement of expenses and claimed the same as revenue expenditure. The Assessing Officer, like in the previous year, treated the same as capital expenditure and disallowed the deduction. CIT (Appeals) as Page 1 of 2

C/TAXAP/215/2018 ORDER well as the Tribunal ruled in favour of the assessee. Thereupon, the present appeal has been filed. 3. The Tribunal has proceeded on the basis of its own order in case of this very assessee for the earlier assessment year. We had, therefore, inquired with the counsel for the Revenue whether the Revenue has carried such an issue in further appeal and if so, for what reason. Counsel submitted that the Tribunal has filed Tax Appeal against such earlier judgement of the Tribunal, however, this issue has not been agitated in such appeal. This would mean that the Revenue has consciously not persuaded this issue in case of the assessee in earlier assessment years. For the sake of consistency, it would not be open for the Revenue to do so in the present year without there being any special reason or distinguishing feature. Tax Appeal is dismissed. (AKIL KURESHI, J) (B.N. KARIA, J) JYOTI V. JANI Page 2 of 2

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