SMT. NEELAM AJIT PHATARPEKAR vs. THE COMMISSIONER OF INCOME TAX

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TXA/26/2013HC BombayHCBM05002733201323 April 2015Author: HON'BLE SHRI JUSTICE M. S. SANKLECHA,F. M. REIS5 pages
AI SummaryPartly Allowed

What did the High Court hold?

The High Court noted that the assessee did not press substantial question of law number 4. Regarding the remaining substantial questions of law concerning the disallowance under Section 40(a)(i), the Court observed that the assessee's counsel argued that the ITAT had confirmed the disallowance based on a High Court decision which was no longer good law in light of the Supreme Court's judgment in GE Technology Centre (P) Ltd. v. C.I.T. The assessee further pointed out that the ITAT had not considered their written submissions on this aspect. The revenue's counsel conceded that these contentions were raised before the ITAT and were not considered. The Court also noted that a previous judgment in Tax Appeal No. 30/2015, dealing with similar circumstances, had remanded the matter to the ITAT. Following the reasoning in that judgment, the High Court quashed and set aside the ITAT's order dated 14/8/2013 and remanded the matter to the ITAT to decide the issue of disallowance of expenditure under Section 40(a)(i) afresh, after hearing the parties in light of the observations made. All contentions regarding this issue were left open. The appeals were partly allowed.

What were the facts?

These appeals by Shri Ajit Phatarpekar and Smt. Neelam Ajit Phatarpekar concern Assessment Year 2009-2010. The appeals challenge an order of the Income Tax Appellate Tribunal (ITAT). The primary dispute involves the disallowance of Rs. 61,91,043/- under Section 40(a)(i) of the Income Tax Act, 1961, related to payments made to a purchaser of iron ore for delays in loading. A secondary disallowance of Rs. 50,000/- under Section 14A read with Rule 8D was also challenged. The ITAT had confirmed the disallowance under Section 40(a)(i) relying on a High Court decision, without considering the assessee's submissions that this decision was superseded by a Supreme Court judgment. The assessee also argued that the ITAT failed to consider their written submissions regarding the applicability of Section 40(a)(i) to reimbursements to ship owners.

What were the issues?

1. Whether the learned Tribunal was justified in confirming the disallowance of Rs. 61,91,043/- under Section 40(a)(i) of the Act, being sums paid to the purchaser of iron ore for delay in loading? 2. Whether, on a true and proper construction of Section 9(1)(i)(b) read with Section 195 of the Act, the learned Tribunal was justified in confirming the disallowance under Section 40(a)(i)? 3. Whether the provisions of Section 40(a)(i) are applicable to reimbursements by the appellant of part of the sum payable by the purchaser of iron ore to the ship owner? 4. Whether the learned Tribunal was justified in upholding the disallowance of Rs. 50,000/- under Section 14A read with Rule 8D without considering the appellant's submissions? Assessee's contentions: The assessee argued that the ITAT's reliance on CIT v. Orient Goa Co. P. Ltd. was incorrect as it was no longer good law following the Supreme Court's decision in GE Technology Centre (P) Ltd. v. C.I.T. The assessee contended that the ITAT had not considered their written submissions on these points. The assessee also stated they did not press substantial question of law number 4. Revenue's contentions: The revenue did not dispute that the assessee's contentions were raised before the ITAT and that the ITAT had not considered them. The revenue also agreed that the present case was similar to a previous Tax Appeal No. 30/2015.

Which sections of the Income-tax Act were involved?

Section 40(a)(i),Section 9(1)(i)(b),Section 195,Section 14A

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, ITAT

(I)

The appeals are partly allowed. (II)

The impugned order dated 14/8/2013 passed in Appeal ITA No.15/PNJ/2013 with Cross Objection No.16/2013 and in Appeal ITA No. 16/PNJ/2013 with Cross Objection No.17/2013, is partly quashed and set aside. (III)

The Appeals ITA No.15/PNJ/2013 with Cross Objection No.16/2013 and ITA No. 16/PNJ/2013 with Cross Objection No.17/2013 are restored to the file of the Tribunal. (IV)

The Tribunal is directed to only decide in respect of the above substantial questions of law with regard to Section 40 (a)(i) of the Act in respect of demurrage afresh, after hearing the parties in the light of the observations made herein above, in accordance with law. All contentions in that regard are left open.

Appeals stand disposed of accordingly, with no order as to costs. M. S. SANKLECHA, J. F. M. REIS, J.

Ap/-

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