Commissioner of Income Tax-III vs. Sigma Constructions

1 IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 9TH DAY OF NOVEMBER 2020 PRESENT THE HON’BLE MR. JUSTICE ALOK ARADHE AND THE HON’BLE MR. JUSTICE H.T.NARENDRA PRASAD I.T.A. NO.502 OF 2013 BETWEEN: 1. COMMISSIONER OF INCOME TAX

C.R. BUILDING, QUEENS ROAD

BANGALORE-01. 2. ASSISTANT COMMISSIONER OF INCOME TAX

CIRCLE-2(3), ROOM No.555

ADYAKAR BHAVAN

M.K. ROAD, MUMBAI-20.

... APPELLANTS (BY SRI. JEEVAN J. NEERALGI, & SRI. E.I. SANMATHI, ADVS.,) AND: M/S. SHAW WALLACE DISTILLERIES LTD., BANK OF BARODA BUILDING WALLCHAND HIRACHAND MARG BALLARD ESTATE, MUMBAI-400018. ... RESPONDENT (BY SRI. SURYANARAYANA T, ADV.) - - - THIS I.T.A. IS FILED UNDER SECTION 260-A OF I.T.ACT, 1961, ARISING OUT OF ORDER DATED 17-05-2013

2 PASSED IN ITA NO.5656/MUM/06, FOR THE ASSESSMENT YEAR 2003-04, PRAYING TO: I. DECIDE THE FOREGOING QUESTIONS OF LAW AND/OR SUCH OTHER QUESTIONS OF LAW AS MAY BE FORMULATED BY THE HON'BLE COURT AS DEEMED FIT. II. SET ASIDE THE APPELLATE ORDER DATED 17-05-2013 PASSED BY THE ITAT, ‘A’ BENCH, BANGALORE, AS SOUGHT FOR, IN THE RESPONDENT-ASSESSEE'S CASE, IN APPEAL PROCEEDINGS NO.ITA NO.5656/MUM/06 FOR ASSESSMENT YEAR 2003-04. THIS I.T.A. COMING ON FOR HEARING, THIS DAY, ALOK ARADHE J., DELIVERED THE FOLLOWING: JUDGMENT Mr.Jeevan J.Neeralagi, learned counsel with Mr.E.I.Sanmathi, learned counsel for the revenue. Mr.T.Suryanarayana, learned counsel for the assessee. 2. This appeal under Section 260-A of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’, for short) has been preferred by the revenue. The subject matter of the appeal pertains to the Assessment Year 2003-04. The appeal was admitted by a Bench of this

3 Court vide order dated 21.09.2015 to consider the following substantial questions of law: 1. Whether, on the facts and circumstances of the case, the Tribunal is right in law in holding that assessee is entitled for allowance of Rs.2,28,95,853/- being TDS payment made on behalf of sales promoters eventhough the assessee had not substantiated its claim as required under the provisions of the IT Act. 2. Whether, on the facts and circumstances of the case, the Tribunal is right in law in holding that assessee is eligible for deduction of the claim of provision of expenditure/liability to an extent of Rs.1,37,06,961/- in respect of Excise Transport Fee eventhough the same was not claimed in original return and assessing authority has not made any addition in this regard or otherwise whether the Tribunal is right in law in not remitting back the matter back to assessing authority to consider the issue as same was not adjudicated earlier.

4 3. By judgment passed today in ITA No.501/2013 in the case of the assessee for Assessment Year 2002- 03, we have answered the second substantial question of law framed in this appeal which is similar to the second substantial question of law involved in the aforesaid appeal. Therefore, for the reasons assigned by us in the judgment passed today in ITA No.501/2013, the second substantial question of law is answered against the revenue and in favour of the assessee. 4. Learned counsel for the revenue, with regard to the first substantial question of law, submitted that TDS payment made by the assessee on behalf of the sales promoters was not claimed in the original return and the assessing authority has not made any addition in this regard and therefore, the tribunal ought to have remitted the matter to the assessing authority to consider the issue as the same was not adjudicated earlier. It is also urged that assessee has failed to show that such amounts charged to customers were paid by

5 them at the time of raising the bids and such tax if at all to be recovered from the customers, does not have the character of income in terms of Section 36(1)(vii) of the Act and the expenditure relating to prior period could not be claimed in the guise of bad debts. In support of aforesaid submission, reliance has been placed on the decision of the Supreme Court in 'GOETZE INDIA LTD. Vs. CIT' 284 ITR 323. 5. On the other hand, learned counsel for the assessee has invited our attention to paragraphs 6.3 to 6.3.5 of the order passed by the Tribunal and has submitted that Tribunal has found that the assessee had made TDS payments on behalf of its sales promoters with whom assessee had direct business transaction and the loss incurred was during the course of business and the debts were treated as irrecoverable and the same were charged to its profit and loss account. It is submitted that the Tribunal has rightly place reliance on the decision of Supreme Court in 'T.R.F. LTD. Vs.

6 COMMISSIONER OF INCOME-TAX' (2010) 190 TAXMAN 391 (SC). 6. We have considered the submissions made on both sides and have perused the record. Since we have already referred to the facts in the judgment passed today in ITA 501/2013, therefore, for the sake of brevity we refrain from referring to facts again. In paragraph 6.3.3 of the order, the Tribunal has recorded a finding that the Commissioner of Income Tax (Appeals) has not doubted the genuineness of the claim of the assessee with regard to disallowance of Rs.2,28,95,853/- being TDS payment made on behalf of sale promoters. In paragraph 6.3.5, it has also been noticed by the Tribunal that the Commissioner of Income Tax (Appeals) had dealt with the claim of the assessee on merits and has negated the same. The Tribunal has further held that the assessee had made TDS payments on behalf of sales promoters with whom the assessee had direct business transaction and therefore, the loss had incurred during

7 the course of the business. The assessee realized that despite its efforts, it is unable to retreat the TDS payments made on behalf of its sales promoters. The debt was written off as irrecoverable in the accounts of the assessee. Therefore, the Tribunal has rightly placed reliance on the decision of the Supreme Court in TRF LTD. supra. The aforesaid finding could not be demonstrated to be perverse. In the fact situation of the case, there was no need to remit the matter as the claim of the assessee was dealt with by the Commissioner of Income Tax (Appeals) on merits. The finding in this regard is based on the decision rendered by the Supreme Court. For the aforementioned reasons, the first substantial question of law is answered against the revenue and in favour of the assessee.

8 In view of preceding analysis, we do not find any merit in the appeal. In the result, the appeal is dismissed. Sd/- JUDGE Sd/- JUDGE RV