Dystar India Pvt. Ltd v. The Commissioner Of Income Tax

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 1133 OF 2012 Dystar India Pvt. Ltd...Appellantversus The Commissioner of Income Tax ..Respondent -------- Mr. Jitendra Jain with Mr. Jas Sanghvi i/b PDS & Associates for the Appellant. Mr. Tejveer Singh for the Respondent. ............. CORAM : J.P. DEVADHAR &M.S.SANKLECHA, JJ. DATE : 24[th] January, 2013 P.C. : In this appeal by the Appellant-assessee, the following questions of law have been proposed for our consideration. (a)Whether the Tribunal finding that payment of Rs.2.20 crores to Colour Chem Ltd. (CCL) on account of short notice pay for termination of Toll Manufacturing Agreement, is not a business expenditure is perverse, contradictory and contrary to the materials on record? (b)Whether the Tribunal erred in holding that payment of Rs.2.20 crores to CCL, on account of short notice pay for termination of Toll Manufacturing Agreement, is not business expenditure allowable under Section 37(1) of the Act? (c)Whether the Tribunal was justified in not adjudicating the alternative ground raised by the Appellant that in the event the payment made to CCL, on account of short notice pay for termination of Toll Manufacturing Agreement, be treated as capital expenditure as admittedbytherevenueand consequently depreciation be allowed on the same? and (d)Whether on a true and proper construction of section 144C of the Act, the DRP had jurisdiction in opining that short notice pay for termination of toll is neither a revenue expenditure nor a capital expenditure although the Assessing Officer in the draft order under Section 144C(1) held it to be a capital expenditure? 2The Counsel for appellant-assessee at the very outset points out that the Tribunal in the impugned order dated 01.06.2012 has proceeded on inconsistent recording of fact which has led to miscarriage of justice. The Counsel for the appellant-assessee invites our attention to paragraph 5 of the impugned order, wherein the Tribunal records as one of the undisputed facts for the consideration of appeal before it was that the appellant-assessee had terminated its toll manufacturing agreement with M/s. Colour Chem Ltd w.e.f. 24.03.2006. While, at paragraph 10.2 of its order, the Tribunal records that had the toll manufacturing agreement with M/s. Colour Chem Limited been terminated by the appellant then the situation would have been totally different. Thus, it appears that there is inherent contradiction on the facts recorded, which certainly makes the conclusion prima facie suspect. 3Mr. Tejveer Singh, Counsel for the revenue does not dispute that there is inconsistency in paragraph 5 and paragraph 10.2 of the impugned order. However, he states that the appellant-assessee has filed a Miscellaneous application for rectification before the Tribunal and the same is pending. In the above circumstances, it is his submission that the appeal should not be entertained at this stage. 4We find that the Miscellaneous application for rectification is pending with the Tribunal since 03.08.2012 and has not yet been disposed of. In view of the fact that admittedly there are mutually contradictory recording of fact by the Tribunal, we deem it proper that the impugned order dated 01.06.2012 be set aside and the Tribunal is directed to hear the matter afresh on merits and pass a fresh order. The Tribunal is requested to decide the appeal at its earliest convenience. 5The appeal is disposed of accordingly, with no order as to costs. (M.S. SANKLECHA, J.) (J.P.DEVADHAR, J.)