Central-2, Mumbai v. Layer Exports Private Limited

VISHALSUBHASHPAREKAR Digitally signedby VISHALSUBHASHPAREKARDate: 2022.02.2510:24:42 +0530 IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.80 OF 2018 Pr. Commissioner of Income Tax, Central-2, Mumbai ...Appellant vs. Layer Exports Private Limited ...Respondent Mr. Sham Walve, for the AppellantMr. P.C. Tripathi a/w. Mr. Sashi Tulsiyan, for the Respondent. CORAM :K.R. SHRIRAM &N. J. JAMADAR, JJ. DATE : FEBRUARY 23, 2022 P.C.: 1.The Revenue has preferred this Appeal being aggrieved by thejudgment and order of the Income Tax Appellate Tribunal “A”Bench, Mumbai in Income Tax Appeal Nos. 3019, 3020, 3021, 2985and 2986/Mum/2011 (A.Ys.:2004-05, 2005-06, 2008-09, 2006-07 and 2007-08) and Income Tax Appeal Nos. 1097 and 5613/Mum/2013 (A.Y. 2009-10 and 2010-11). 2.The Revenue has proposed the following substantial question of law. “Whether on the facts and in the circumstances ofthe case and in law, the Hon’ble Tribunal was right indeleting the addition made by the AO of Rs.7,86,65,205/- without appreciating the fact that the commercial expediency was not proved with respect tocompensation and interest paid to the Videocon Groupby the assessee, as per the provisions of sec.37(1) ofthe I.T.Act, 1961 ? 3.The Respondent/Assessee is engaged in the business ofconstruction of buildings. In the assessment proceeding undersection 153A of the Income Tax Act, 1961 (the Act) consequent to asearch under section 132 of the Act, it was found that the assesseehad paid a sum of Rs. 6,50,00,00,000/- towards compensation andRs. 1,36,65,205/- towards the interest to Videocon Group persuantto the consent terms executed in the suit before this Court, dated 8[th]December, 2005. The Assessing Officer disallowed the expensesunder section 37(1) of the Act on the ground that those expenseswere not made wholly and exclusively for the purpose of businessand had nothing to do with commercial expediency. In an Appealpreferred by the assessee, the Commissioner(A) directed theAssessing Officer to allow the said expenses under section 37(1) ofthe Act, but towards work in progress account as the assessee wasfollowing the project completion method of accounting. By theimpugned order the Tribunal allowed the Appeal of the assessee anddismissed the Appeal preferred by the Revenue. It was, inter alia,observed that there was no justification to frame assessment undersection 153A of the Act as no new material had surfaced as regards the compensation and interest expenses. Being further aggrievedthe Revenue is in appeal. 4.We have heard Mr. Walve, the learned counsel for theAppellant. 5.From the perusal of the observations in paragraph Nos. 54 to58 of the impugned order it becomes clear that the Tribunal hasproperly appreciated the issue as to the allowability of the expensesincurred towards the compensation and interest pursuant to thesettlement of the dispute between the assessee and Videocon Group.The Tribunal did not find any infirmity in the finding of theCommissioner (A) that the compensation and interest was paid forthe purpose of resolving a genuine dispute and the said decision wasdriven by commercial expediency. In the backdrop of concurrentfindings of fact as regards the payment of compensation andinterest towards settlement of a genuine dispute, we do not find anyjustifiable reason to entertain the Appeal. In addition, the view ofthe Tribunal that there was no new material to frame assessmentunder section 153A of the Act as regards the allowability ofexpenses towards compensation and interest appears will merited. 6.For the foregoing reasons, in our view, in the facts andcircumstance of the case, the proposed question of law (extractedabove), does not warrant consideration. Resultantly, the Appealdoes not deserve to be admitted. 7. The Appeal thus stand dismissed. (N. J. JAMADAR, J.) 6.For the foregoing reasons, in our view, in the facts andcircumstance of the case, the proposed question of law (extractedabove), does not warrant consideration. Resultantly, the Appealdoes not deserve to be admitted. 7. The Appeal thus stand dismissed. (N. J. JAMADAR, J.) (K. R. SHRIRAM, J.)