THE COMMISSIONER OF INCOME TAX, PANAJI. vs. VELINGKAR BROTHERS.
What did the High Court hold?
The High Court held that the appeal was admitted only on the substantial question of law concerning the expenditure incurred by the assessee for the construction of the Usgao bridge. The Court noted that this issue was concluded against the Revenue and in favour of the Assessee by a previous judgment dated 9th July, 2019, in Tax Appeal No.4 of 2018. In that judgment, the Division Bench had held that the contribution towards the bridge facilitated the business, enabling it to be carried on more efficiently or profitably, without affecting the Assessee's fixed capital, thus clearly being on revenue account. Furthermore, the Assessee pointed out that the tax effect was approximately Rs.15,00,000/-, and the latest CBDT Circular (8th August, 2019) stipulated that appeals with a tax effect less than rupees one crore would not be pursued by the Department. Consequently, the appeal was dismissed.
What were the facts?
The Commissioner of Income Tax (Appellant) filed an appeal under Section 260-A of the Income Tax Act, 1961, challenging an order dated 30/05/2014 passed by the Income Tax Appellate Tribunal (ITAT), Panaji Bench, in ITA No.18/PNJ/2014. The relevant Assessment Year was 2008-2009. The appeal initially raised three substantial questions of law concerning the deletion of additions on account of under-pricing of sales to a sister concern entitled for 10B exemption, deletion of afforestation expenses treated as capital in nature, and the treatment of expenditure incurred by the assessee for the construction of the Usgao bridge as revenue expenditure. The High Court admitted the appeal only on the third question of law.
What were the issues?
1. Whether the ITAT was right in deleting the addition of Rs.4.95 Crores on account of under-pricing of sales to a sister concern entitled for 10B exemption? The Revenue conceded this issue was covered against it by the High Court's judgment in THE COMMISSIONER OF INCOME TAX, PATTO, PANAJI-GOA VS. RAMACANTA V. MINERALS. 2. Whether the ITAT was right in deleting the Afforestation Expenses which are capital in nature? The Revenue conceded this issue was covered against it by the High Court's judgment in DEPUTY COMMISSIONER OF INCOME TAX VS. TIMBLO PVT. LTD., THROUGH MD, which relied on THE COMMISSIONER OF INCOME TAX VS. DR. PRAFULLA R. HEDE AND ANOTHER. 3. Whether the ITAT was right in treating the expenditure incurred by the assessee by way of contribution towards construction of Usgao bridge as Revenue expenditure ignoring the decision of the Allahabad High Court in case of RAZA BULAND SUGAR Co. LTD Vs. CIT reported in 122 ITR 817? The Assessee argued that the expenditure facilitated business operations and did not touch fixed capital, thus being revenue in nature. The Revenue argued it was capital in nature, citing the Allahabad High Court judgment.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cause title — parties, addresses and appearances
Oral Judgment ( Per M. S. Sonak, J) Heard Ms. Linhares, learned counsel for the Appellant and Mr. Singbal, learned counsel for the Respondent.
On 21st August, 2015, we made the following order in this appeal :- “This appeal under Section 260-A of the Income Tax Act, 1961 challenges the order dated 30/05/2014 passed by the Income Tax Appellate Tribunal, Panaji Bench in ITA No.18/PNJ/2014. The relevant Assessment Year is 2008- 2009. The appeal raises the following substantial questions
2 TXA55-15dt.17.10.2019 of law : (A) Whether the ITAT was right in deleting the addition of Rs.4.95 Crores on account of under-pricing of sales to sister concern which is entitled for 10B exemption ? As far as this question is concerned, the learned Counsel for the Revenue fairly states that the question is covered against the Revenue as per the judgment dated 27/03/2015 in Tax Appeal No.17/2015 (THE COMMISSIONER OF INCOME TAX, PATTO, PANAJI-GOA VS. RAMACANTA V. MINERALS). (B) Whether the ITAT was right in deleting the Afforestation Expenses which are capital in nature ? As far as this question also is concerned, the learned Counsel for the Revenue fairly states that the question is covered against the Revenue as per the judgment dated 05/11/2012 in Tax Appeal No.66/12 (DEPUTY Bench has relied upon the judgment dated 06/02/2012 in Tax Appeal No.15/2012 (THE COMMISSIONER OF question of law : (C)Whether the ITAT was right in treating the expenditure 122 ITR 817 ?
To be heard along with Tax Appeal No.24/2014.”
3 TXA55-15dt.17.10.2019
From the aforesaid, it is evident that this appeal was admitted only on the aforementioned substantial question of law at (C) above.
The learned counsel for the parties now say that the aforesaid issue stands concluded against the Revenue and in favour of the Assessee in the judgment and order dated 9th July, 2019 in Tax Appeal No.4 of 2018. 5. In the aforesaid judgment and order dated 9th July, 2019, in the precise context of the substantial question of law framed at the time of admission of this appeal, the Division Bench of this Court, at paragraph 7, observed thus :- “7. As rightly held by the ITAT, in the present case, the contribution made by the Assessee towards the construction of the new bridge facilitated the business of the Assessee, enabling its being carried on more efficiently or more profitably and yet, at the same time, the fixed capital of the Assessee was left untouched. In the premises, the expenditure was clearly on revenue account and not on capital account, though it resulted into an advantage of enduring nature for the Assessee.”
Besides, Mr. Singbal points out that in so far as the aforesaid substantial question of law is concerned, the tax effect will be hardly Rs.15,00,000/-. The latest Circular issued by the CBDT on 8th August, 2019 provides that the Department will not pursue the appeals where
4 TXA55-15dt.17.10.2019 the tax effect is less than rupees one crore.
For the aforesaid reasons, we dismiss this appeal. There shall be no order as to costs. NUTAN D. SARDESSAI, J. M. S. SONAK, J. at*
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