THE COMMISSIONER OF INCOME-TAX vs. THE KERALA MINERAL & METALS LTD.,KOLLAM

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ITA/116/2008HC KeralaKLHC01027021200824 February 2009Bench: HONOURABLE MR.JUSTICE K.SURENDRA MOHAN,HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR3 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal held that there was no scope for remanding the matter concerning gratuity payments after nearly 10 years, especially since the respondent is a Government of Kerala undertaking and its audited accounts were accepted. The Tribunal also held that there was no scope for interfering with its order regarding interest on the advance made to another government company, as communication between the respondent and the Government clearly indicated that the loan advanced was interest-free. Consequently, the appeal filed by the Commissioner of Income Tax was dismissed.

What were the facts?

This appeal concerns the Commissioner of Income Tax (CIT) challenging an order of the Income Tax Appellate Tribunal (ITAT). The ITAT had set aside the CIT's order passed under Section 263. The CIT had initiated proceedings based on a mistaken assumption that over Rs. 1 crore related to unpaid gratuity. The assessee, Kerala Minerals and Metals Limited, demonstrated that Rs. 6.32 crores was paid to an approved gratuity fund. The CIT's order was remanded for verification of a direct payment of Rs. 18,76,068. The ITAT vacated this remand, finding that audited accounts established actual payments. The appeal also concerns interest on an advance made by the assessee to another government company at the government's request, which the Tribunal found to be an interest-free advance based on correspondence.

What were the issues?

1. Whether the Tribunal was justified in vacating the Commissioner's order of remand for verification of direct payment of Rs. 18,76,068 towards gratuity, when the Commissioner had initiated proceedings under Section 263 on the mistaken assumption that a substantial amount related to unpaid gratuity. Assessee's Contention: Not recorded. Revenue's Contention: The Tribunal should have remanded the matter to the Assessing Officer after upholding the Commissioner's order. 2. Whether the Tribunal erred in holding that no interest was exigible on the amount advanced by the respondent to another Government Company at the request of the Government, based on correspondence indicating an interest-free advance. Assessee's Contention: Not recorded. Revenue's Contention: Not recorded.

Which sections of the Income-tax Act were involved?

Section 263

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE K.SURENDRA MOHAN TUESDAY, THE 24TH FEBRUARY 2009 / 5TH PHALGUNA 1930 ITA.No. 116 of 2008() --------------------- ITA.248/COCH/2003 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPELLANT/RESPONDENT ------------------------------ THE COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM. BY ADV. SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.GEORGE K. GEORGE, SC FOR IT RESPONDENT(S): APPELLANT ------------------------ THE KERALA MINERAL AND METALS LIMITED, KOLLAM.

THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 24/02/2009, THE COURT ON 24/02/2009 DELIVERED THE FOLLOWING:

C.N.RAMACHANDRAN NAIR & K.SURENDRA MOHAN, JJ. .................................................................... I.T. Appeal No.116 of 2008 .................................................................... Dated this the 24th day of February, 2009. JUDGMENT Ramachandran Nair, J. Even though assessee has not entered appearance after service of notice, we have heard Senior Standing counsel appearing for the appellant. On going through the order of the Commissioner and the Tribunal, we notice that Commissioner initiated proceedings under Section 263 on a mistaken assumption that substantial amount of over Rs.1 crore pertains to claim of gratuity not paid by the assessee. However, in the course of hearing proceedings under Section 263, assessee substantiated that Rs.6.32 crores was paid to the approved gratuity fund during the previous year. However, the matter was remanded for verifying direct payment of Rs.18,76,068/-. This order is vacated by the Tribunal saying that audited accounts establish actual payments. Even though Standing Counsel submitted that Tribunal should have remanded the matter to the Assessing Officer after upholding the order of the Commissioner, we do not think there is any

2 scope for remanding the matter now nearly after 10 years of the relevant year because respondent is a Government of Kerala undertaking, the audited accounts of which were accepted by the Tribunal. 2. The next question pertains to proposal for assessment of interest on the amount advanced by respondent to another Government Company at the request of the Government. The Tribunal has relied on communication between respondent and the Government which shows that loan advanced was interest-free advance. Therefore, there is no scope for interfering with the order of the Tribunal on this issue also. The appeal consequently fails and is dismissed. C.N.RAMACHANDRAN NAIR Judge K.SURENDRA MOHAN Judge pms

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