PR. COMMISSIONER OF INCOME TAX, DELHI-7 vs. M/S PUSHPANJALI FINCON PVT. LTD.

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ITA/518/2022HC DelhiDLHC01003606202020 March 2024Bench: HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV,HON'BLE MR. JUSTICE YASHWANT VARMA2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the issue of interest expenditure under Section 36(1)(iii) of the Income Tax Act, 1961, was not raised or urged before the Income Tax Appellate Tribunal. Consequently, the Court found no ground to entertain the appeal. The appeal was dismissed on this procedural basis, without delving into the merits of the disallowance or the assessee's business activities. The Court's reasoning was that an issue not presented to the lower appellate authority cannot be adjudicated upon by the High Court in appeal. No specific finding was made on the merits of the disallowance or the interpretation of Section 36(1)(iii).

What were the facts?

The appeal was filed by the Pr. Commissioner of Income Tax, Delhi-7 against an order of the Income Tax Appellate Tribunal (ITAT). The ITAT's order dated December 8, 2022, had found that proposed questions A, B, and C were covered by a previous High Court decision in Cheminvest Ltd. v. CIT. The only remaining question for consideration was question D, which concerned a disallowance of Rs. 25.30 crores as interest expenditure under Section 36(1)(iii) of the Income Tax Act, 1961. However, the High Court noted that this specific issue of interest expenditure under Section 36(1)(iii) had not been raised or urged before the ITAT.

What were the issues?

1. Whether on the facts and in the circumstances of the case, the Ld. ITAT erred in law in holding that no disallowance of Rs. 25.30 crores being the interest expenditure can be made u/s 36(1)(iii) of the Income Tax Act, 1961 since the interest expenditure and interest income were directly linked to the business of the assessee, without appreciating that as per the Memorandum of Association of the Company, its business activity relates to consultancy in financial matters and not to earn income from investments made, and that the assessee itself has shown its interest receipt as 'other income' in its computation of income? Assessee's Contention: Not recorded. Revenue's Contention: The revenue argued that the ITAT erred in allowing the interest expenditure as it was not linked to the business of the assessee, whose Memorandum of Association restricted its business to financial consultancy and not investment income. The revenue also pointed out that the assessee itself had classified interest receipts as 'other income'.

Which sections of the Income-tax Act were involved?

Section 36(1)(iii)

AI-generated summary — verify with the full judgment below

$~29 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 518/2022

PR. COMMISSIONER OF INCOME TAX, DELHI-7 ..... Appellant

Through: Mr. Sanjeev Menon, Jr.SC for

Mr. Zoheb Hossain, Adv.

versus

M/S PUSHPANJALI FINCON PVT. LTD. ..... Respondent

Through: Mr. Gautam Jain and Mr.

Manish Yadav, Advs.

CORAM:

HON'BLE MR. JUSTICE YASHWANT VARMA

HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV

O R D E R %

20.03.2024

1.

From the order dated 08 December 2022, we note that proposed questions A, B and C were found to be covered by the decision of this Court in Cheminvest Ltd. v. CIT [(2015) SCC OnLine Del 11713]. The only question which stood over was question D which reads as follows: “D. Whether on the facts and in the circumstances of the case, the Ld. ITAT erred in law in holding that no disallowance of Rs. 25.30 crores being the interest expenditure can be made u/s 36(l)(iii) of the Income Tax Act, 1961 since the interest expenditure and interest income were directly linked to the business of the assessee, without appreciating that as per the Memorandum of Association of the Company, its business activity relates to consultancy in financial matted and not to earn income from investments made, and that the assessee itself has shown its interest receipt as :other income: in its computation of income ?”

2.

However and undisputedly, the issue of interest expenditure This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 27/03/2024 at 11:43:24

under Section 36 (1) (iii) of the Income Tax Act,1961 does not appear to have been either raised or urged before the Income Tax Appellate Tribunal. 3. In that view of the matter, we find no ground to entertain the appeal. It shall stand dismissed.

YASHWANT VARMA, J.

PURUSHAINDRA KUMAR KAURAV, J. MARCH 20, 2024/p

This is a digitally signed order. The authenticity of the order can be re-verified from Delhi High Court Order Portal by scanning the QR code shown above. The Order is downloaded from the DHC Server on 27/03/2024 at 11:43:24

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