D.b. Income Tax Appeal v. M/S Banswara Fabrics Ltd

D.B. INCOME TAX APPEAL NO.71/2006(CIT, Jodhpur Vs. M/s Banswara Fabrics Ltd.) Date of order : 4.8.2006 HON'BLE MR. JUSTICE RAJESH BALIAHON'BLE MR. JUSTICE GOPAL KRISHAN VYAS Mr. K.K. Bissa, for the appellant.Mr. Sanjay Johri, for the respondent. By the very same order under appeal, theTribunal has decided three appeals filed by theassessee. Three appeals have been filed by theassessee relating to the assessment years 1986-87,1987-88 and 1988-89, which have been decided in favourof the assessee. Aggrieved by the said order, therevenue has preferred three appeals one of which beingDB Income Tax Appeal No.56/2003, related to theassessment year 1987-88. In all the three appealsincluding the present one, following four question oflaw were were stated to be substantial questions oflaw arising for consideration against the judgment ofthe Tribunal dated 28.8.2002 : “1. Whether on the factsand in the circumstances of thecase, the Tribunal is justified indeleting the addition on account ofinterest chargeable on the debitbalances of (i) M/s. Jai MangalInvestment and Trading Co. and (ii)M/s. Banswara Textile Mills Ltd. onthe ground that the debit balanceswere trade debts, ignoring the factthat both the companies are ownedby the same group of persons and non charging of interest is not dueto their poor financial positionbut in fact it is waiver ofinterest income in favour of thesister concerns which is proved bythe categorical findings given bythe assessing officer in hisorder?” “2. Whether on the factsand in the circumstances of thecase, the Tribunal is justified inignoring the fact that the assesseehas been claiming interest paymentsto its creditors on accrual basiswhereas the accounting of intereston its debts, is claimed to be on'receipt basis' which is notpermitted under the I.T. Act?” “3. Whether on the factsand in the circumstances of thecase, the ITAT is justified indeletingtheadditionondisallowance made on account ofviolation of provisions of Section40A(3) of the Act treating thesepayments covered by the exceptionalor unavoidable circumstances underRule 6DD(j) of Income Tax Rule,1962 when the assessee had beenmaking transactions through backfor other purposes?” “4. Whether on the factsand in the circumstances of thecase the ITAT is justified inignoring the fact that the wholepayments made by the assesseeduring the previous year to M/s.Banswara Textile Mills were inviolation of Section 40A(3) of theI.T. Act and the exceptionsprovided in Rule 6DD (j) cannot beavailable through out the year andinterpretation of the Rule in sucha manner cannot be the intention ofthe legislature.” It is contended by the learned counsel forthe respondents that in DB Income Tax AppealNo.56/2003, the very same questions have been sought to be raised as substantial questions of law by therevenue in respect of assessment year 1987-88 whereasthis appeal relates to assessment year 1986-87. “4. Whether on the factsand in the circumstances of thecase the ITAT is justified inignoring the fact that the wholepayments made by the assesseeduring the previous year to M/s.Banswara Textile Mills were inviolation of Section 40A(3) of theI.T. Act and the exceptionsprovided in Rule 6DD (j) cannot beavailable through out the year andinterpretation of the Rule in sucha manner cannot be the intention ofthe legislature.” It is contended by the learned counsel forthe respondents that in DB Income Tax AppealNo.56/2003, the very same questions have been sought to be raised as substantial questions of law by therevenue in respect of assessment year 1987-88 whereasthis appeal relates to assessment year 1986-87. This Court by detailed judgment in CIT Vs.Banswara Fabrics Ltd., reported in 2004 (267) ITR 398held that question No.1 cannot be said to be asubstantial question of law as it depends purely onfinding of fact reached by the Tribunal and in view ofof the conclusion to question No.1, question No.2becomes of academic importance and need not to bedealt with in detail. About question No.3 and 4,the Tribunal found after considering their rivalcontentions noticing the fact that the assesseecompany as well as M/s. Banswara Textile Mills wererunning in losses and have become sick companies andon the basis of these finding there was apparentexistence of circumstances which had direct nexus withthe financial difficulty that could be caused to thepayee in case payment in cash was not received by itand would have also put the assessee into jeopardybecause of its dependency on work done through BTM.These findings were held to be findings of fact andnot vitiated on any ground and accordingly, thequestion Nos. 3 and 4 cannot be held to be substantialquestions of law arising for consideration. The factsof the present appeal are identical with the appealarising out of the assessment year 1987-88. arun It has also been brought to our notice thatanother appeal relating to assessment year 1985-86raising the same issues has also been dismissed byorder dated 12.12.2005 passed in DB Income Tax AppealNo.116/2005 which related to question Nos. 3 and 4only. In view of the aforesaid circumstances aboutwhich there is no dispute that the appeal against thevery same order of the Tribunal relating to assessmentyear 1987-88 has also been dismissed by this Court,this appeal also must fail for the same reasons.Accordingly, we do so. (GOPAL KRISHAN VYAS), J. (RAJESH BALIA), J.