D.b. Income Tax Appeal v. Amarjothi Granites (India) Pvt. Ltd., Udaipur

IN THE HIGH COURT OF JUDICATURE FOR RAJASTHAN ATJODHPUR : J U D G M E N T : D.B. INCOME TAX APPEAL NO.79/2012Commissioner of Income Tax, UdaipurVs. Amarjothi Granites (India) Pvt. Ltd., Udaipur. Date of Judgment :: 23[rd] August, 2013 PRESENT HON'BLE MR. JUSTICE NARENDRA KUMAR JAINHON'BLE MR. JUSTICE ARUN BHANSALI Mr. K.K. Bissa, for the appellant. ---- BY THE COURT: This appeal under Section 260A of the Income Tax Act,1961 ['the Act'] has been preferred by the Revenue aggrievedagainst order dated 30.03.2012 passed by the Income TaxAppellate Tribunal, Jodhpur Bench, Jodhpur ['the Tribunal'],whereby, the appeal preferred by the Department against orderdated 22.02.2010 passed by the Commissioner of Income Tax(Appeals), Jodhpur ['CIT (A)'] was dismissed. The facts in brief are that the return of income for theassessment year 2007-08 was filed by the assessee on31.10.2007 declaring total income of Rs.75,59,309/- and theassessment was completed under Section 143(3) of the Act on21.12.2009 at a total income of Rs.1,60,04,266/- by makingaddition/disallowances of Rs.84,44,957/- on various issues. The appeal preferred by the assessee before the CIT(A)was partly allowed and the plea raised by the assessee regardingreducing the carry forward long term capital loss fromRs.50,91,592/- to Rs.11,42,535/-, addition of Rs.65,000/- madeon account of notional interest on advance given to J.K. Cementand disallowing expenses of Rs.38,29,125/- under Section 40(a)(ia) of the Act was accepted. On appeal, the Tribunal vide its order dated 30.03.2012upheld the findings of CIT(A) on all the three issues anddismissed the appeal filed by the Department. It is submitted by learned counsel for the appellant thatthe findings recorded by the Tribunal are ex facie contrary to thefacts and law and the same have not been examined objectivelyby the Tribunal. The CIT(A) while elaborately dealing with the issues raisedby the assessee, inter alia, recorded its finding on the issuesraised as under:- -(A)Reduction of carryforward long term capital-loss: “In my opinion, the action of the A.O. in reducingthe determined and assessed long capital gain lossto the extent of Rs.11,54,535 cannot be heldjustified because there is no dispute that such losshas been determined and accepted by thedepartment in the relevant assessment year i.e. inasstt. year 2005-06 and 2006-07 and the appellantis entitled to carry forward and set off such lossagainst the capital gain if earned in the subsequentyear. In the case of the appellant the year in whichthe appellant sought for set off such loss is theassessment year under appeal. If the A.O. was ofthe opinion that the capital loss has beendetermined in excess wrongly, then he should havetaken action to determine the correct loss in therelevant year where such loss has been claimedand determined and he should not have reducedsuch loss in the year under appeal where the appellant has claimed only set off the assessed anddetermined loss in the previous assessment years.Therefore, in my view, the A.O. has acted uponbeyond his authority by reducing the assessed anddetermined loss which was allowed to be carriedforward and set off. Therefore the action of theA.O. is held to be against the provisions law andthe appellant is entitled to set off the long termcapital gain loss as determined in the asstt. yearson account of sale of land as referred in this order.Thus, this ground of appeal is decided in favour ofthe appellant.” (B)Addition on account of notional interest on-advance given to J.K. Cement: appellant has claimed only set off the assessed anddetermined loss in the previous assessment years.Therefore, in my view, the A.O. has acted uponbeyond his authority by reducing the assessed anddetermined loss which was allowed to be carriedforward and set off. Therefore the action of theA.O. is held to be against the provisions law andthe appellant is entitled to set off the long termcapital gain loss as determined in the asstt. yearson account of sale of land as referred in this order.Thus, this ground of appeal is decided in favour ofthe appellant.” (B)Addition on account of notional interest on-advance given to J.K. Cement: “On going through the same, it is seen that as thedate of advance i.e. on 15.01.2007, there wasfunds available with the appellant at Rs.34,93,866/-and out of this, the appellant has advanced thesum to M/s. J.K. Cement. The said loan wasreceived back on 30.06.2007. Admittedly the A.O.has not brought any evidence to suggest that theappellant has advanced the amount of theborrowed funds. In absence of such evidence, it isnot possible to sustain the disallowance.” (C) Disallowance of expenses under Section 40 -(a)(ia): “In my opinion the submissions of the learned A/R.are acceptable for the following reasons: As regards payment of Rs.26,94,427 toward oceanfreight paid to Indian agents of non residentshipping companies is covered by circular No.723dated 19.9.1995 and therefore provisions of section194C cannot be made applicable. The finding ofthe A.O. that the payment made to Indian agent ofnon resident shipping companies are not clearlyidentified is incorrect in view of cross verification ofevery payment with bill of lading numberssubmitted before me at the time of hearing theappeal which include the copy of such bill referredby the A.O. in his assessment order. As regards payment of Railway freight ofRs.216873 to container corporation of India, it maybe mentioned that the payment of railway freight isexcluded from the provisions of section 194C andtherefore, the disallowance made is apparentlyagainst the provisions of law. In respect of payment of Rs.202479, itconsists individual payments below 20,000.Therefore provisions of section 194C is notapplicable. As regards the disallowance of Rs.715346, itis seen from the details filed that T.D.S. hasalready made and paid as per provisions of the Act.In view of above discussions, the disallowance of Rs.3829125 made under Section 40(a)(ia) cannot be sustained and the same istherefore deleted.” The findings as recorded above by the CIT(A) were upheldby the Tribunal by its impugned order. On the three issuesraised, the Tribunal came to the conclusion that there was nojurisdiction of the Assessing Officer ('AO') to examine theallowability of the loss determined in earlier years, there is nodirect nexus of the borrowed fund and the interest free loan andthe payments made were on account of reimbursement of theexpenses, to which, provisions of Section 194C of the Act werenot applicable, whereas, Board Circular No.723 dated29.09.2005 was squarely applicable respectively. It was submitted by learned counsel for the appellant thatthe long term capital loss, which was allowed to be carry forwardby the AO while completing the assessment for the assessmentyears 2005-06 and 2006-07 were on account of non-applicationof mind and, therefore, it was open for the AO to deal with thesame while framing the assessment order for the assessmentyear 2007-08. We are afraid such a submission on part of the Departmentcannot be countenanced, which is ex facie against settledposition of law. Having scrutinized the detailed and exhaustive findingsrecorded by the CIT(A) and the order passed by the Tribunalupholding the said findings, which findings are essentiallyfindings of fact, we are of the firm opinion that the impugned It was submitted by learned counsel for the appellant thatthe long term capital loss, which was allowed to be carry forwardby the AO while completing the assessment for the assessmentyears 2005-06 and 2006-07 were on account of non-applicationof mind and, therefore, it was open for the AO to deal with thesame while framing the assessment order for the assessmentyear 2007-08. We are afraid such a submission on part of the Departmentcannot be countenanced, which is ex facie against settledposition of law. Having scrutinized the detailed and exhaustive findingsrecorded by the CIT(A) and the order passed by the Tribunalupholding the said findings, which findings are essentiallyfindings of fact, we are of the firm opinion that the impugned order does not call for any interference on part of this Court andno substantial question of law arises for consideration by thisCourt. Consequently, there is no substance in the appeal and the same is, therefore, dismissed. No costs. (ARUN BHANSALI),J. (NARENDRA KUMAR JAIN),J.