Commissioner Of Income-Tax-I, Ludhiana v. M/S. Punjab Wool Combers Ltd., Ludhiana

ITA No. 7 of 2004 -1- IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH. ITA No. 7 of 2004Date of Decision: 9.9.2010 Commissioner of Income-Tax-I, Ludhiana Versus M/s. Punjab Wool Combers Ltd., Ludhiana ...Appellant ...Respondent CORAM:HON’BLE MR. JUSTICE ADARSH KUMAR GOELHON’BLE MR. JUSTICE AJAY KUMAR MITTAL --- PRESENT: Mr. Rajesh Katoch, Advocatefor the appellant-Revenue --- AJAY KUMAR MITTAL, J. This appeal under Section 260A of the Income-tax Act,1961 (for short “the Act’”) has been filed by the Revenue against theorder dated 14.1.2003, passed by the Income Tax Appellate Tribunal,Chandigarh Bench ‘A’, Chandigarh (in short “the Tribunal”) in Income-tax Appeal No. 1058/CHANDI/96, in respect of assessment year 1993-94. In brief the facts of the case are that the assessee-respondent filed return of income for the assessment year 1993-94declaring net income at Rs. 2,70,87,060/-. The return was processedunder Section 143(1)(a) on 25.8.1994. The assessing officer made assessment under Section 143(3) of the Act on total income of Rs.2,83,16,390/-, vide order dated 7.3.1996, Annexure A-1, by disallowingthe following: i-Disallowance of Rs. 2,00,000/- out of interest paid. ii-Disallowance on premium on redemption of debenture. iii-Disallowance of Rs. 10873/- on a/c of telephone expensesprovided at the residence of the Director.provided at the residence of the Director. iv-Disallowance u/s 80-I at Rs.6,88,017/- v-While computing the deduction u/s 80HHC the AO includedCST & ST in the total turnover amounting to Rs.19,32,295/-. This resulted reduction of deduction u/s80HHC.CST & ST in the total turnover amounting to Rs.19,32,295/-. This resulted reduction of deduction u/s80HHC. The order of the assessing officer aforesaid was confirmedby the Commissioner of Income-tax (Appeals) (Central), Ludhiana {inshort “CIT(A)”} vide order dated 24.7.1996 (Annexure A-II). Theassessee carried appeal before the Tribunal. The Tribunal vide orderdated 14.1.2003, Annexure A-III disposed of the appeal. The Tribunaldeleted the addition of Rs. Two lacs on account of disallowance ofinterest in the absence of there being any finding recorded by theassessing officer in that behalf besides the addition of Rs. 10873/- onaccount of telephone expenses; confirmed the finding of the CIT(A) thatthe assessee should only be allowed deduction in respect of premiumpayable on redemption of debenture on proportionate basis. TheTribunal directed the assessing officer to adjust profits to the extent of .0261% as was allowed by the Tribunal in the assessment year 1992-93.It was further directed that in case the difference was more than . 0261% the relief to the assessee under Section 80-I should be reducedby the difference in excess of 0.0261%. The Tribunal further directedthat the item like CST and ST etc. were not to be included in the totalturnover while giving deduction under Section 80HHC and also directedthe assessing officer to re-compute the deduction u/s 80HHC of the Act. This is how the Revenue has preferred this appealchallenging the order of the Tribunal on the grounds enumerated in thegrounds of appeal and pleading that the following substantial questionsof law arise in this appeal for determination by this Court: i-Whether on the facts and the circumstances of the case,the Hon’ble Income-tax Appellate Tribunal was justified inreversing the order of the Commissioner of Income-tax(Appeals) in which CIT(A) upheld the action of theAssessing Officer regarding disallowance of interest of Rs.2 lacs?the Hon’ble Income-tax Appellate Tribunal was justified inreversing the order of the Commissioner of Income-tax(Appeals) in which CIT(A) upheld the action of theAssessing Officer regarding disallowance of interest of Rs.2 lacs? This is how the Revenue has preferred this appealchallenging the order of the Tribunal on the grounds enumerated in thegrounds of appeal and pleading that the following substantial questionsof law arise in this appeal for determination by this Court: i-Whether on the facts and the circumstances of the case,the Hon’ble Income-tax Appellate Tribunal was justified inreversing the order of the Commissioner of Income-tax(Appeals) in which CIT(A) upheld the action of theAssessing Officer regarding disallowance of interest of Rs.2 lacs?the Hon’ble Income-tax Appellate Tribunal was justified inreversing the order of the Commissioner of Income-tax(Appeals) in which CIT(A) upheld the action of theAssessing Officer regarding disallowance of interest of Rs.2 lacs? ii-Whether on the facts and the circumstances of the case,the Hon’ble Income Tax Appellate Tribunal was justified indirecting the Assessing Officer to allow relief/proportionatededuction of premium payable on redemption ofdebenture?the Hon’ble Income Tax Appellate Tribunal was justified indirecting the Assessing Officer to allow relief/proportionatededuction of premium payable on redemption ofdebenture? iii-Whether on the facts and the circumstances of the case,the Hon’ble Income Tax Appellate Tribunal was not justifiedin restricting the deduction u/s 80-I from Rs. 6,88,017/- toNil claimed by the assessee in the light of the provisions ofsub-sections 8 and 9 of Section 80-I? iv-Whether on the facts and the circumstances of the case, the Hon’ble Income-tax Appellate Tribunal was not justifiedin directing the A.O. that item like CST and ST are not tobe included in the total turn-over while giving deduction u/s80HHC? We have heard learned counsel for the appellant-Revenueand have gone through the record. Reg. Question (i) The Tribunal recorded the following finding while allowingthe claim of the assessee:- “2.1We have heard the rival submissions andperused the material on record. We find force in thesubmissions of the assessee. The case of theassessee is duly covered by the decision ofKarnataka High Court in the case of CIT v. SridevEnterprises reported in 59 Taxman 439 in which theHon'ble High Court has held that no addition hasbeen made in the earlier years. The opening balancecould not be considered in the year in question forthe purpose of computation of disallowance. Thefacts of the assessee are duly covered by theaforesaid decision because in the earlier years whenthe money was advanced by the assessee, the AOdid not make any disallowance and no finding hasbeen recorded by the AO that the money soadvanced by the assessee to these parties was fornon-business purposes. In the absence of findings by the AO for the a.y. in which the money wasadvanced, we feel that no disallowance can be madeduring the year and accordingly we allow this groundof appeal of the assessee. Thus first ground ofappeal filed by the assessee is allowed.” Finding has not been shown to be erroneous or perverse inany manner. Hence, the question is not a substantial question of law.Reg. Question (ii) The Tribunal relied upon decision of the Apex Court inMadras Industrial Investment Corporation Ltd. v. Commissioner ofIncome Tax, (1997) 225 ITR 802 (SC) holding that proportionatededuction of premium payable on redemption of debentures isadmissible during the year. Nothing could be shown that this judgmentis not applicable to the facts of the present case. Accordingly, it is heldthat this is also not a substantial question of law. Reg. Question (iii) Finding has not been shown to be erroneous or perverse inany manner. Hence, the question is not a substantial question of law.Reg. Question (ii) The Tribunal relied upon decision of the Apex Court inMadras Industrial Investment Corporation Ltd. v. Commissioner ofIncome Tax, (1997) 225 ITR 802 (SC) holding that proportionatededuction of premium payable on redemption of debentures isadmissible during the year. Nothing could be shown that this judgmentis not applicable to the facts of the present case. Accordingly, it is heldthat this is also not a substantial question of law. Reg. Question (iii) The Tribunal while adjudicating the issue regardingdisallowance in terms of provisions of Section 80I(8) and (9) had reliedupon its earlier decision in the case of the assessee relating toassessment year 1990-91 and 1992-93. In ITR No. 168 of 1996 relatingto assessment year 1990-91, similar question has been answeredagainst the revenue. In view thereof, question No.(iii) proposed by therevenue is answered against the revenue. Reg. Question (iv) Learned counsel for the revenue very fairly accepted thatthe aforesaid question stands concluded against the revenue by ITA No. 7 of 2004 judgment of Division Bench of this Court reported in Commissioner ofIncome Tax v. Avery Cycle Industries Ltd., (2008) 298 ITR 239(P&H), wherein it has been held that for computation of specialdeduction under Section 80HHC of the Act, Sales Tax and CentralSales Tax are to be excluded from total turnover. Accordingly, the proposed question (iv) is also answered against the revenue. Consequently, the appeal is dismissed. (AJAY KUMAR MITTAL) JUDGE September 09, 2010rkmalik/gbs (ADARSH KUMAR GOEL) JUDGE