Commissioner Of Income Tax, Kota v. M/S. Mangalam Cement Ltd., Aditya Nagar, Morak, Kota

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 733 / 2008 Commissioner of Income Tax, Kota. ----Appellant Versus M/s. Mangalam Cement Ltd., Aditya Nagar, Morak, Kota. ----Respondent _____________________________________________________ For Appellant(s) : Ms. Parinitoo Jain For Respondent(s) : Mr. Sanjay Jhanwar _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE VINIT KUMAR MATHURJudgment Per Hon’ble Jhaveri J. 04/01/2017 1. By way of of this appeal, the appellant has challengedthe judgment and order of the Tribunal whereby the Tribunal hasdismissed the appeal of the revenue. 2.This court while admitting the appeal on 08.12.2008 has framed the following substantial questions of law: “1.Whetheronthefactsandcircumstances of the case, the learned ITATcommitted serious illegality and error ofjudgment in holding that the interest paidon the borrowings utilized for setting up anew unit of cement plant constitutedrevenue expenditure ignoring the fact andthat the plant had not yet commencedproduction? 2.Whether the findings of the Tribunalare perverse in upholding the order of theCIT(A)byallowinginterestof Rs.13,16,39,997 u/s 36 (1)(iii), specificallywhen the interest was paid on borrowedcapital to set up a new unit and alsocapitalized in the books of accounts? 3.Whether the findings of the Tribunalare perverse in upholding the order of theCIT(A)byallowinginterestofRs.10,72,55,713/- under section 369(1)(iii),specifically when the interest was paid onborrowed capital to set up a new unit andalso capitalized in the books of accounts?” 3.The facts of the case are that the assessee company isengaged in the business of manufacturing of cement. The taxaudit report alongwith form No.3-CA and 3-CD has been furnishedalongwith the return of income. During the course of examinationof accounts, following facts have emerged. As per the Tax AuditReport, the guest house expenses have been worked out atRs.3,64,336/- which includes depreciation of Rs.1,11,281/- onbuilding, plant & machinery and furniture used in the guestHouses. Further as per note given in annexure-E to the TAR,expenditure on repairs of building and other assets has been madeto the premises at Delhi, which is used as guest house and 1/3rdof the rent of the premises at Jaipur used at Guest HouseRs.22,080/- have not been included in the details of maintenanceof accommodation in the nature of guest house. The assessee, inthe computation of income furnished alongwith the return ofincome has added the guest house expenses u/s 37(4) only atRs.2,53,055/-. On this question, it was stated by the assesseethat the repairs and rent of the guest house properties are notcovered under section 37(4) in view of the decision of the Bombay High Court in the case of CIT vs. Chase Bright Steel Ltd. 177 ITR128 and also the judgment of ITAT in assessee’s own case. TheITAT Jaipur in RA No.8-9/JP/96 dated 24.02.1997 has rejected thereference application of the Department filed for Assessment year1990-91 and 1992-93 on this issue relying on the decision of thejurisdictional High Court in the case of M/s. Mangal Chand Tubes(P) Ltd. 208 ITR 729. On the basis of above, the assesseesubmitted that no disallowances should be made on this account.The contention of the assessee has been examined and in the lightof the decision cited supra, no further additions on account ofdepreciation, rent and repairs of the guest house are called for u/s37(4). In the tax audit report in form No.3-CD, the auditors havepointed out that a sum of Rs.28,423/- is in excess of the limit laiddown under rule 6B, but the assessee has not included the samein the total income on the ground that the presents/gifts were notin the nature of advertisement in view of the decision of the ITATfor Asst. year 1986-87 in assessee’s own case. The contention ofthe assessee is not acceptable as the decision of the ITAT on thisissue has been the disallowance of Rs.28,423/- is made underRule 6B. During the course of assessment proceedings, theassessee furnished the details of Rs.2,81,988/- which weredisallowed in the Asst. year 1996-97 on the ground that theexpenditure had been crystilised in the financial year 1996-97relevant to asst. year 1997-98. The assessee argued that thisexpenditure should be allowed in this asst. year/ Perusal of therecords reveals that the contention of the assessee is acceptable and accordingly the amount of Rs.2,81,988/- is allowed in thisyear (as appearing in schedule No.15). During the year relevantto asst. year 1997-98, the assessee has claimed expenditure ofRs.2,82,693/- (Revised to Rs.3,41,240/-). On examination, it wasnoticed that the expenditure was booked by the assessee duringthe financial year 1997-98 relevant to asst. year 1998-99. Sincethe assessee failed to prove that the expenditure was allowableduring the financial year 1996-97 relevant to asst. year 1997-98and the liability had actually crystilised during the period relelvantto assessment year 1998-99. The same can not be allowed andaccordingly the claim of Rs.3,41,240/- is disallowed. Theassessee has claimed deduction of Rs.2,04,16,092/- u/s. 43B inrespect of interest paid to public financial institutions for thefinancial year 1993-94 out of the disallowed amount of deferredinterest of Rs.14,31,47,894/- in the asst. year 1994-95. Theinterest relates to the borrowings obtained in respect of the newunit M/s. Neer-Shree Cement. It was contended by the assesseethat such payment for the new unit in respect of the existingbusiness was allowable deduction. This legal issue is pendingbefore the ITAT and considering the past history of the case,interest payment of Rs.2,04,16,092/- is disallowed u/s 43B. 4.The questions in this appeal are covered by thedecision of this Court in the case of Commissioner of Income tax,Jaipur Vs. M/s Manglam Cement Ltd. decided on 04.10.2016 alongwith two other appeals, which reads as under: “1.By way of this appeal, thedepartment has challenged the order of theTribunal whereby the Tribunal has dismissedthe appeal of the Department and confirmedthe order of the CIT (Appeals). 2.This Court has framed followingquestions of law in Tax Appeal No.80/2002.“Whether in the facts and circumstances of thecase and in law, the learned ITAT was justifiedin holding that the expenditure amounting toRs.2,20,435/- spent on gifts and presentationsdid not constitute expenditure by way ofadvertisement and thereby do not attractingthe limitation contained in Rule-6B of theIncome Tax Rules, 1962? “1.By way of this appeal, thedepartment has challenged the order of theTribunal whereby the Tribunal has dismissedthe appeal of the Department and confirmedthe order of the CIT (Appeals). 2.This Court has framed followingquestions of law in Tax Appeal No.80/2002.“Whether in the facts and circumstances of thecase and in law, the learned ITAT was justifiedin holding that the expenditure amounting toRs.2,20,435/- spent on gifts and presentationsdid not constitute expenditure by way ofadvertisement and thereby do not attractingthe limitation contained in Rule-6B of theIncome Tax Rules, 1962? Whether on the facts and circumstances of thecase, the learned ITAT committed seriousillegality and error of judgment in holding thatthe interest paid on the borrowings utilised forsetting up a new unit of cement plantconstituted revenue expenditure ignoring thefact that the plant had not yet commencedproduction?” 3.In other two appeals, the questionno.2 above is the only question. 4.The first issue is covered by thedecision of this Court in the case ofCommissioner of Income Tax Vs. M/sMangalam Cement Ltd., Kota- D.B. IncomeTax Reference No.10/1999 decided on17.10.2002, where the issue was answeredagainst the assessee and in favour of thedepartment. 5.In that view of the matter, the firstissue will be governed by the decision of thisCourt in D.B. Income Tax ReferenceNo.10/1999. Therefore, the issue no.1 isanswered in favour of the Department againstthe assessee. 5.1On second issue, as relied upon bythe Tribunal in para 8, the decision of TataChemicals Ltd. Vs. DCIT as confirmed by theBombay High Court in Commissioner ofIncome Tax Vs. Tata Chemicals Ltd. 256 ITR395, against which SLP was dismissed, hasheld in para 8 as under: “As far as question (a) is concerned, it is not indispute that this question was not raisedbefore the Tribunal. Mr. Desai submittedbefore us that under S.260A(6)(a), it is permissible for the High Court to determineany issue which is not determined by theTribunal. Gthe careful reading of section willshow that the High Court can decide only thatquestion which was raised but not determinedby the Tribunal. Therefore, it is necessary thatthe question sought to be raised ought to havebeen raised before the Tribunal and then if ithas not determined it, one can say that it hasnot been determined by the Tribunal and,therefore, the High Court should look into it. Inthe present case, we do not find that this issuehad been raised before the Tribunal. It is alsonot the case of the Revenue that the issue orquestion was raised but not decided by theTribunal. In the circumstances, we do notpropose to dwell on this question.” 6.In that view of the matter, the issueno.2 in Appeal no.80/2002 and the onlyquestion in Appeal No.69/2005 and 319/2005requires to be answered in favour of theassessee and against the Department. 7.All the three appeals standdisposed of accordingly. 5.Therefore, the issues are answered in favour of the assessee and against the department. 6.The appeal stands disposed of. (VINIT KUMAR MATHUR)J. (K.S. JHAVERI)J. bblm