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: 1 : IN THE HIGH COURT OF KARNATAKA, DHARWAD BENCH DATED THIS THE 18TH DAY OF JULY, 2017 PRESENT THE HON’BLE MR.JUSTICE A.S.BOPANNA AND THE HON’BLE DR.JUSTICE H.B. PRABHAKARA SASTRY INCOME TAX APPEAL No.100047/2016 BETWEEN:
THE PRINCIPAL COMMISSIONER OF INCOME TAX, KALABURAGI.
THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, BALLARI.
…APPELLANTS
(BY SRI.Y.V.RAVIRAJ, ADV.)
A N D :
SRI. SATISH RAJAPUR, PROP:RAJAPUR MINERALS, III FLOOR, RAJAPUR INN, BELLARI ROAD, J.P NAGAR, HOSAPETE, PAN:AEZPR 1636Q.
…RESPONDENT
(BY SRI.S.PARTHASARATHI, SRI V.K.GURUNATHAN AND SRI H.R.KAMBIYAVAR, ADV.)
: 2 :
THIS APPEAL IS FILED UNDER SECTION 260A OF THE INCOME-TAX ACT, 1961, PRAYING TO FORMULATE THE SUBSTANTIAL QUESTION OF LAW STATED ABOVE AND ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE INCOME TAX APPELLATE TRIBUNAL, C-BENCH BENGALURU, IN ITA NO.425/BANG/2014, DTD:24.09.2015 AND CONFIRM THE ORDER OF THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE -1, BALLARI, IN THE INTEREST OF JUSTICE AND EQUITY AND ETC.,
THIS APPEAL COMING ON FOR ADMISSION, THIS DAY, A.S.BOPANNA J., DELIVERED THE FOLLOWING:
JUDGMENT
The appellants are before this Court assailing the order dated 24.09.2015 passed by the Income Tax Appellate Tribunal, Bengaluru (hereinafter referred to as the ‘the Tribunal’).
In the instant facts, the issue that arises for consideration is with regard to the expenditure that had been claimed by the assessee for the assessment year 2008-2009 and in that light as to whether the Assessing Officer was justified in disallowing the claim and in that
: 3 : regard whether the Tribunal was ultimately justified in reversing the same and allowing the expenditure as claimed by the respondent-assessee. In that view, the substantial question of law which arises for consideration herein is as to: “Whether the interpretation as assigned by the Tribunal to the provision contained in Section 40 (a) (ia) of the Income Tax Act to include only the amounts payable on the last date of the financial year is in accordance with law or not?”
Heard the learned counsel for the parties and perused the appeal papers.
Though the orders passed by the Assessing Authority, the first Appellate Authority and the Tribunal are elaborate and lengthy, keeping in view the short question that arises for consideration in this appeal, the entire details need not be adverted to. What arises for consideration in the instant appeal is only with regard to
: 4 : the respondent-assessee claiming the interest/financial charges paid to the three companies namely M/s. SREI Infrastructure Finance Ltd., Sundaram Finance Ltd., and Tata Motor Finance Limited., in all amounting to Rs.1,04,09,238/- as expenditure. The Assessing Officer while taking note of such claim of expenditure made by the assessee has also taken into consideration the fact that such amount was claimed as expenditure without deducting the tax on the said amount at source before payment.
It is in that light, the Assessing Officer keeping in view the provision contained in Section 40 (a) (ia) of the Act and on holding that the tax had not been deducted at source on the amount payable had disallowed the expenditure. The first Appellate Authority had also confirmed the same. It is against such conclusion, the respondent-assessee was before the Tribunal assailing the said assessment orders. The
: 5 : Tribunal however arriving at the conclusion that such consideration would arise only in respect of the amount which is payable and not in respect of the amount which has already been paid and in that regard on taking note of its earlier decisions which had relied on the decision of the Allahabad High Court had allowed the appeal filed by the respondent-assessee and had ordered that the expenditure as claimed by the respondent-assessee is allowed. It is in that view, the appellant-Revenue is before this Court in this appeal.
In so far as the contentions which had been urged as to whether the provision would apply in respect of the amount which is only payable or as to whether it would also attract the deduction to be made towards the amount paid, the issue had arisen for consideration before Hon’ble Supreme Court in the case of M/s.Palam Gas Service Vs. Commissioner of Income Tax in Civil Appeal No.5512/2017. In the said decision, the Hon’ble
: 6 : Supreme Court while taking into consideration the provision contained in Section 40 (a) (ia) of the Act has arrived at the conclusion that the same would not stand limited to the amount payable but in respect of the amount which is also paid and in that view has upheld the decision taken by the Punjab and Haryana High Court as also the Madras High Courts while holding that the view taken by the Allahabad High Court is not in accordance with law.
In the said circumstance, it is necessary to take note of the decision of the Hon’ble Supreme Court in the case of Hindustan Coco Cola Beverage (P) Ltd., Vs. Commissioner of Income Tax [(2007) 293 ITR 0226]. What was considered therein was that even though the tax had not been deducted at source, the recipient of the amount would have to pay tax on such amount received from the assessee and to that extent if material/evidence is available before the Assessing Officer to indicate that
: 7 : tax has already been paid by the recipient of income, in such event the expenditure as claimed could be permitted. Therefore, this would indicate that in a situation of the present nature, if the said decision rendered by the Hon’ble Supreme Court is kept in view, a factual assessment would be required and the mere interpretation of the provision to either allow or disallow would not apply since in any event what is to be pointed out is that even in respect of the amount that has been paid, the recipient of the amount has paid the tax on the said amount. Therefore, if such analysis is required to be made by the Assesssing Officer, the view as taken by the Tribunal presently would not be justified.
In that background, it would be appropriate to set aside the order passed by the Tribunal as well as the first Appellate Authority and remit the matter to the Assessing Officer to take note of this aspect, verify the documents to be produced by the respondent-assessee
: 8 : and in that light arrive at a conclusion as to whether the recipient of the amount has paid the tax and if so, the expenditure as claimed by the respondent could be permitted. While doing so, the Assessing Officer shall keep in view the decisions referred to supra and also the decision in the case of Commissioner of Income Tax Vs. Ansal Land Mark Township (P) Ltd., rendered in ITA Nos.160/2015 and 161/2015 dated 26.08.2015 by the High Court of Delhi and reported in [(2015) 377 ITR 0635 (Delhi)].
In that view, the substantial question of law as raised herein is answered in favour of the appellant- revenue, the order rendered by the Tribunal dated 24.09.2015 is set aside, the matter stands remitted to the Assessing Officer to reconsider the matter limited to the aspect relating to the expenditure as claimed, which is the subject matter in this appeal. In that regard, liberty is reserved to the respondent-assessee to file the
: 9 : necessary additional documents, if any, before the Assessing Officer. In terms of the above, the instant appeal stands allowed in part.
Sd/- JUDGE
Sd/- JUDGE
Jm/-