Gas Service v. Commissioner Of Income Tax-1Ncivilappeal

- 1]: IN THE HIGH COURT OF KARNATAKA,DHARWAD BENCH DATED THIS THE 18 DAY OF JULY, 2017 PRESENT THE HON’BLE MR.JUSTICE A.S.BOPANNA AND THE HON’BLE DR.JUSTICE H.B. PRAABHAKARA SASTRY INCOME TAX APPEAL No. 100047 /20 BETWEEN 1.THE PRINCIPAL COMMISSIONBROF INCOME TAX,|KALABURAGI.. «|THER DEPUTY COMMISSIONEROF INCOME TAX,CIRCLE-1, BALLARI... APPELLANTS (BY SRI.Y.V.RAVIRAJ, ADV.) AND: ORI. SATISH RAJAPUR,|PROP: RAJAPUR MINERALS,II] FLOOR, RAJAPUR INN,BELLARI ROAD, J.P NAGAR,HOSAPE TE,PAN: AEZPR 163600. _. RESPONDENT (BY SRI.S.PARTHASARATHI, |SRI V.K.GURUNATHAN AND.SRI H.R.KAMBIYAVAR, ADV.) THIS APPEKAL IS FILED UNDER SECTION 2B6O0A OF TINCOME-TAX|ACT,1961,PRAYINGTO|HORMULATETHESUBSTANTIAL QUESTION OF LAW STATED ABOVE AND ALLOW|THR APPBAL AND SHIT ASIDE THR ORDBRS PASSEBD BY THINCOME TAX APPELLATE TRIBUNAL, C-BENCH BENGALURU, IN|ITA NO.425/BANG/2014, DTD:24.09.2015 AND CONFIRM THE|ORDER OF THE DEPUTY COMMISSIONER OF INCOME TAX,|CIRCLE -1, BALLARI, IN THE INTEREST OF JUSTICE AND EQUITY|AND ETIC., THIS APPEAL COMING ON FOR ADMISSION, THIS DAY,|A.S.BOPANNA J..DELIVERED THE FOLLOWING: JUDGMENT| The appellants are before this Court assailing the|order dated 24.09.2015 passed by the Income TaxAppellate Tribunal, Bengaluru (hereinafter referred to asthe the Tribunal’). | 2.In the instant facts, the issue that arises for|consideration is with regard to the expenditure that had|been claimed by the assessee for the assessment year|2008-2009 and in that light as to whether the Assessing|Officer was justified in disallowing the claim and in that| ° 3: regard whether the Tribunal was ultimately justified inreversing the same and allowing the expenditure asclaimed by the respondent-assessee. In that view, thesubstantial question of law which arises for considerationherein is as to: “Whether the interpretation as assignedby the Tribunal to the provision contained in|section 40 (a) (ia) of the Income Tax Act to|include only the amounts payable on the last|date of the financial year is in accordance with|law or not?”| 3.Heard the learned counsel for the parties andperused the appeal papers. 4Though the orders passed by the AssessingAuthority, the first Appellate Authority and the Tribunalare elaborate and lengthy, keeping in view the shortquestion that arises for consideration in this appeal, theentire details need not be adverted to. What arises forconsideration in the instant appeal is only with regard to the respondent-assessee claiming the interest/financialcharges paid to the three companies namely M/s. SREIInfrastructure Finance Ltd., Sundaram Finance Ltd.,and Tata Motor Finance Limited., in all amounting toRs.1,04,09,238/- as expenditure. The Assessing Officerwhile taking note of such claim of expenditure made bythe assessee has also taken into consideration the factthat such amount was claimed as expenditure withoutdeducting the tax on the said amount at source beforepayment. 5.It is in that lhght, the Assessing Officerkeeping in view the provision contained in Section 40 (a)(ia) of the Act and on holding that the tax had not beendeducted at source on the amount payable haddisallowed the expenditure. The first Appellate Authorityhad also confirmed the same. It is against suchconclusion, the respondent-assessee was before theTribunal assailing the said assessment orders. The Tribunal however arriving at the conclusion that suchconsideration would arise only in respect of the amount|which is payable and not in respect of the amount whichhas already been paid and in that regard on taking noteof its earlier decisions which had relied on the decision otthe Allahabad High Court had allowed the appeal filed by the respondent-assessee and had ordered that the|expenditure as claimed by the respondent-assessee is allowed. It is in that view, the appellant-Revenue is |before this Court in this appeal. Tribunal however arriving at the conclusion that suchconsideration would arise only in respect of the amount|which is payable and not in respect of the amount whichhas already been paid and in that regard on taking noteof its earlier decisions which had relied on the decision otthe Allahabad High Court had allowed the appeal filed by the respondent-assessee and had ordered that the|expenditure as claimed by the respondent-assessee is allowed. It is in that view, the appellant-Revenue is |before this Court in this appeal. 6.In so far as the contentions which had been|urged as to whether the provision would apply in respect|of the amount which is only payable or as to whetherit |would also attract the deduction to be made towards theamount paid, the issue had arisen for consideration|before Hon’ble Supreme Court in the case ofM/s.Palam Gas Service Vs. Commissioner of Income Tax-1n|CivilAppeal No.5512/2017. In the said decision, the Hon’ble Supreme Court while taking into consideration theprovision contained in Section 40 (a) (ia) of the Act hasarrived at the conclusion that the same would not standlimited to the amount payable but in respect of theamount which is also paid and in that view has upheldthe decision taken by the Punjab and Haryana HighCourt as also the Madras High Courts while holding thatthe view taken by the Allahabad High Court is not inaccordance with law. T.In the said circumstance, it is necessary totake note of the decision of the Hon’ble Supreme Court inthe case ofHindustan Coco Cola Beverage (P) Ltd., Vs.Commissioner of Income Tax |[(2007) 293 ITR 0226What was considered therein was that even though thetax had not been deducted at source, the recipient of theamount would have to pay tax on such amount receivedfrom the assessee and to that extent if material/evidenceis available before the Assessing Officer to indicate that tax has already been paid by the recipient of income, insuch event the expenditure as claimed could bepermitted. Therefore, this would indicate that in asituation of the present nature, if the said decisionrendered by the Hon’ble Supreme Court is Kept in view, afactual assessment would be required and the mereinterpretation of the provision to either allow or disallowwould not apply since in any event what is to be pointedout is that even in respect of the amount that has beenpaid, the recipient of the amount has paid the tax on thesaid amount. Therefore, if such analysis is required tobe made by the Assesssing Officer, the view as taken bythe Tribunal presently would not be justified. 8.In that background, it would be appropriate|to set aside the order passed by the Tribunal as well asthe first Appellate Authority and remit the matter to theAssessing Officer to take note of this aspect, verily the|documents to be produced by the respondent-assessee| and in that light arrive at a conclusion as to whether therecipient of the amount has paid the tax and if so, theexpenditure as claimed by the respondent could bepermitted. While doing so, the Assessing Officer shallkeep in view the decisions referred to supra and also thedecision in the case ot|Commiuisstioner ofIncome Tax Vs Ansal Land Mark Township (P) Ltd., rendered in|ITA|Nos.160/2015 and 161/2015dated 26.08.2015 by the|High Court of Delhi and reported in(2015) 377 ITR0635 (Dethi)] QOIn that view, the substantial question of lawas raised herein is answered in favour of the appellant-revenue, the order rendered by the Tribunal dated24.09.2015 is set aside, the matter stands remitted tothe Assessing Officer to reconsider the matter limited tothe aspect relating to the expenditure as claimed, whichis the subject matter in this appeal. In that regard,liberty is reserved to the respondent-assessee to file the ��-��� 40?06617>�1==:5:�413�=�?;@0456��:9�14>��809�70�5/0� �66066:4<��99:?07���� �4�507@6��9�5/0�18�F0��5/0�:465145�122013�6514=6� 133�D0=�:4�2175�� �@�%�� ��������������������