the commissioner of income-tax-aurangabad vs. SAMARTH S.S.K. LTD

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ITXA/276/2007HC Bombay17 September 2007Bench: HON'BLE SHRI JUSTICE F.I. REBELLO, HON'BLE SHRI JUSTICE J.P. DEVADHAR2 pages
AI SummaryAllowed

What did the High Court hold?

The High Court, by consent of both the counsel, answered both questions of law against the revenue and in favour of the assessee. This decision was based on a prior judgment of the same court in the case of Commissioner of Income Tax V/s. Samarth Sahakari Sakhar Karkhana Ltd. in Income Tax Appeal No. 273 of 2007, decided on September 17, 2007. Consequently, all reframed questions were answered in favour of the assessee and against the revenue. The appeal was disposed of accordingly, with no order as to costs. The specific reasoning for each issue from the cited judgment is not detailed in this order, but the outcome is a clear affirmation of the Tribunal's findings.

What were the facts?

The Commissioner of Income-tax (the Revenue) filed an appeal under Section 260A of the Income Tax Act, 1961, against an order of the Income Tax Appellate Tribunal (ITAT) dated January 13, 2006. The appeal pertains to the assessment year 2001-02 and concerns disallowances made by the Revenue. The assessee is Samarth Sahakari Sakhar Karkhana Ltd. The appeal was admitted on two reframed questions of law. Both parties consented to the appeal being decided based on a previous judgment of the same High Court in a related matter.

What were the issues?

1. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that advances paid to harvesting and transporting contractors were in the nature of business interest of the assessee society, thereby deleting the disallowance of the interest part, even though such advance was not made in the normal course of business, without any specific contractual obligation, and out of borrowings on which the assessee was paying huge interest to financial institutions, thus constituting a diversion of borrowed funds for non-business purposes? 2. Whether, on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that Bakshish payment made by the assessee to harvesting and transport contractor's labourers was out of commercial expediency, whereas such payments are purely voluntary, based on the sweet will of the assessee society, and being over and above the agreed price of contracts, do not form part of business expenditure? Assessee's Contentions: Not recorded. Revenue's Contentions: The Tribunal erred in deleting the disallowance of interest on advances paid to contractors, arguing these were not in the normal course of business, lacked contractual obligation, and represented a diversion of borrowed funds for non-business purposes. The Revenue also contended that Bakshish payments were voluntary and not part of business expenditure.

Which sections of the Income-tax Act were involved?

Section 260A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORDINARY ORDINARY ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.276 OF 2007 INCOME TAX APPEAL NO.276 OF 2007 INCOME TAX APPEAL NO.276 OF 2007 The Commissioner of Income-tax Aayakar Bhavan, Near Holi Cross High School, Cantonment,Aurangabad. ..Appellant. V/s. Samarth Sahakari Sakhar Karkhana Ltd. Wadigodri, Tal.Ambad, Dist. Jalna. ..Respondent. Mr.B.M.Chatterjee with Mrs.P.P.Bhosale for appellant. Mr.S.N.Inamdar with A.K.Jasani for respondent. CORAM : F.I.REBELLO CORAM : F.I.REBELLO CORAM : F.I.REBELLO AND AND AND J.P.DEVADHAR, JJ. J.P.DEVADHAR, JJ. J.P.DEVADHAR, JJ. DATED : 17TH SEPTEMBER, 2007. DATED : 17TH SEPTEMBER, 2007. DATED : 17TH SEPTEMBER, 2007.

ORAL JUDGMENT (PER J.P.DEVADHAR, J.) ORAL JUDGMENT (PER J.P.DEVADHAR, J.) ORAL JUDGMENT (PER J.P.DEVADHAR, J.) 1. This appeal is filed by Commissioner of Income Tax under section 260 A of the Income Tax Act, 1961 against the order of the ITAT dated 13/1/2006 relating to the assessment year 2001-02. 2. By consent, the appeal is admitted on the following reframed questions of law:- 1. Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that advances paid to harvesting and transporting contractors was in the nature of business interest of the assessee society and thereby deleting the disallowance of interest part, even though such advance was not made in the normal course of business and was made without any specific contractual obligation and out of borrowings on which assessee is giving CNR No : HCBM020045932007 Uploaded on - 21/08/2020 Downloaded on - 28/10/2026 06:02:29

-= : 2 : =- huge interest to financial institutions. Thus, it was nothing but a diversion of borrowed funds for non business purpose ? 2. Whether on the facts and in the circumstances of the case and in law, the Tribunal was justified in holding that Bakshish payment made by the assessee to harvesting and transport contractor’s labourers was out of commercial expediency, whereas such payments are purely voluntary, based on sweet will of assessee society and being over and above the agreed price of contracts, do not form the part of business expenditure ? 3. Counsel on both the sides agree that both the questions are answered against the revenue and in favour of the assessee by the decision of this Court in the case of Commissioner of Income Tax V/s. Samarth Sahakari Sakhar Karkhana Ltd. in Income Tax Appeal No. 273 of 2007 decided on 17th September, 2007. Accordingly, all the questions are answered in favour of the assessee and against the revenue. 4. Appeal disposed of accordingly with no order as to costs. (F.I.REBELLO, J.) (F.I.REBELLO, J.) (F.I.REBELLO, J.) (J.P.DEVADHAR, J.) (J.P.DEVADHAR, J.) (J.P.DEVADHAR, J.)

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