SWARAJ ENGINES LIMITED vs. COMMISSIONER OF INCOME TAX, CHANDIGARH

PDF · subscribers
ITA/625/2008HC Punjab & HaryanaPHHC01080634200812 December 2008Bench: MR. JUSTICE ADARSH KUMAR GOEL,MR. JUSTICE L.N. MITTAL1 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the appeal was not maintainable. Regarding the first issue, the court found no error in the Tribunal's view that the scope of rectification under Section 254(2) is confined to correcting errors apparent on the face of the record. Since the point of netting of interest was not even raised in the grounds of appeal before the Tribunal, the Tribunal was not expected to deal with it in its main judgment. Therefore, the subsequent application for rectification was correctly dismissed. Regarding the second and third issues, the court stated that it was not concerned with the consideration of the question on merits in an appeal arising out of a rectification application that was beyond the scope of rectification jurisdiction. Consequently, the judgment relied upon by the assessee, CIT v. Bharat Rasayan Limited, had no application. The appeal was dismissed.

What were the facts?

The assessee, Swaraj Engines Limited, filed an appeal under Section 260A of the Income Tax Act, 1961, against an order of the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench. The appeal pertained to Assessment Year 1997-98. The assessee had claimed deduction under Section 80-I on interest income. This claim was disallowed by the Assessing Officer and CIT(Appeals). The ITAT, in its order dated 24.7.2006, upheld the disallowance, relying on CIT v. Sterling Foods. The assessee's appeal against this order was dismissed by the High Court on 18.9.2007. Subsequently, the assessee filed an application under Section 254(2) seeking rectification to allow netting of interest income. The ITAT dismissed this application, finding no error apparent on the face of the record.

What were the issues?

1. Whether, under Section 254(1) of the Income Tax Act, 1961, it is permissible for the Tribunal to assign reasoning to an appeal in a subsequent order passed under Section 254(2)? 2. Whether, under Section 80-I of the Income Tax Act, 1961, the Tribunal was justified in not allowing the claim on interest income received on deposits as it was not eligible for deduction? 3. If the answer to the second question is in favour of the revenue, whether the net amount of interest after reducing expenditure, or the gross amount of interest, is not eligible for claim under Section 80-I? Assessee's contentions: The assessee argued that the point regarding netting of interest was raised in written submissions, even if not explicitly in the grounds of appeal. The assessee relied on CIT v. Bharat Rasayan Limited (2008) 172 Taxman – Tax Reports 338 regarding netting of interest. Revenue's contentions: The revenue contended that the application under Section 254(2) was not maintainable as there was no error apparent on the face of the record. The ITAT's main judgment had already held that the interest income was not eligible for deduction under Section 80-I. The High Court noted that the assessee's counsel could not show that the point regarding netting of interest was raised in the grounds of appeal before the Tribunal.

Which sections of the Income-tax Act were involved?

Section 260A,Section 254(1),Section 254(2),Section 80-I

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

ITA No.625 of 2008

Date of decision: 12.12.2008

Swaraj Engines Limited

-----Appellant

Vs.

Commissioner of Income Tax, Chandigarh

--Respondent

CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOEL

HON'BLE MR JUSTICE L.N.MITTAL

Present: Mr. Pankaj Jain, Advocate for the appellant.

Adarsh Kumar Goel,J.

1.

This appeal has been preferred by the assessee under section 260A of the Income Tax Act, 1961 (in short, ‘the Act’) against the order of Tribunal, Chandigarh Bench in M.A. No.254/Chandi/2006 (In ITA No.346/Chd/2003) dated 11.1.2008 for the assessment year 1997-98, proposing to raise following substantial questions of law:-

“a) Whether on the true and correct interpretation of provisions of section 254(1) is it permissible to the Tribunal to assign the reasoning to the appeal in a subsequent order passed under section 254(2)?

b. Whether on the true and correct interpretation of provisions of section 80-I, the Tribunal was justified in not allowing the claim on the interest income received on deposits being not eligible for deduction?

c. If the answer to second question is in favour of the respondent department whether it is the net amount of interest after reducing the expenditure which is not eligible for claim under section 80-I or the gross amount of interest as taken by the respondent department?”

2.

The assessee made a claim for deduction under section 80-I of the Act, which relates to income from specified business. The income in respect of which deduction was sought, was interest income and not income derived from specified business. The claim of the assessee was, thus, disallowed by the Assessing Officer as well as by the CIT(Appeals). In appeal before the Tribunal, five grounds of appeal were raised, which have been reproduced in the order of the Tribunal. In its order dated 24.7.2006, the Tribunal, after referring to judgment of the Hon’ble Supreme Court in CIT v. Sterling Foods, 237 ITR 579, held that claim of the assessee was not covered by section 80-I of the Act. Appeal against the said order was dismissed by this Court on 18.9.2007 (Annexure A-5). The assessee filed an application under section 254(2) of the Act for allowing netting of interest by treating interest income as income from other sources instead of income from business. The Tribunal dismissed the said application on the ground that there was no error apparent on the face of record in its main judgment and, thus, application was not maintainable.

3.

We have heard learned counsel for the assessee.

4.

Learned counsel for the assessee has not been able to show that in the grounds of appeal raised before the Tribunal, which was subject matter of consideration in the main judgment, this point had been raised. He only submits that this point was raised in the written submissions.

5.

In view of above, we do not find any error in the view taken by the Tribunal. Scope of rectification is confined to correction of an error on the face of record. If a point was not even raised in the grounds of appeal, the Tribunal was not expected to deal with the same.

6.

Learned counsel for the assessee relies on judgment of Delhi High Court in CIT v. Bharat Rasayan Limited, (2008) 172 Taxman – Tax Reports 338, on the question of netting of interest.

7.

We are not concerned with the consideration of the question on merits in appeal arising out of an application for rectification when the application was beyond the scope of rectification jurisdiction. Thus, judgment has no application.

8.

The appeal is dismissed.

(Adarsh Kumar Goel)

Judge

December 12, 2008 (L.N.Mittal)

‘gs’ Judge

More judgments on Section 80-I

All 142 judgments and leading authorities on Section 80-I →

Recent GST High Court judgments

Search GST case law →