India (P) Limited v. Commissioner Of Income Tax

IN THE HIGH COURT OF KARNATAKA AT BANGALORE. DATED THIS THE 4[th]DAY OF FEBURARY 2014 PRESENT THE HON‘'BLE MR. JUSTICE DILIP B BHOSALE AND| THE HON‘'BLE MR. JUSTICE B MANOHAR ITA.NO.504/2007 C/W ITA.NO.502/200/7 BETWEEN 1.THE COMMISSIONER OF INCOME TAX. C R BUILDING, QUEENS ROAD BANGALORE 2.THE ASSISTANT COMMISSIONER OF INCOME TAXCIRCLE 12(3), CR BUILDING, QUEENS ROADBANGALORE | .., COMMON APPELLANTS (BY SRI K V ARAVIND, ADV.,). AND M/S TELCO CONSTRUCTION EQUIPMENT CO. LTD|NO.45, JUBILEE BUILDING, MUSEUM ROAD.BANGALORE |.., COMMON RESPONDENT| (BY SRI S PARTHASARATHI, ADV.,) THIS ITA.NO.504/2007 FILED U/S.260-A OF I.T.ACT,|1961 ARISING OUT OF ORDER DATED 18-01-200/7 PASSED INITA NO. 561/BANG/2005 FOR THE ASSESSMENT YEAR 2001-02, PRAYING THAT THIS HON BLE COURT MAY BE PLEASED TO:I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED)THEREIN, I]. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY|THE ITAT, BANGALORE IN ITA NO. 561/BANG/2005 DATED 18-01-2007 AND CONFIRM THE ORDER PASSED BY THE ASST.|COMMISSIONER & INCOME TAX, CIRCLE-12(3), BANGALORE, INTHE INTEREST OF JUSTICE AND EQUITY. THIS I.T.A. NO.502/2007 FILED U/S.260-A OF I.T.ACT1961 ARISING OUT OF ORDER DATED 18-01-200/7 PASSED INITA NO. 2/76/BANG/2005 FOR THE ASSESSMENT YEAR 20002001, PRAYING THAT THIS HON'BLE COURT MAY BE PLEASED|TO:. I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATEDTHEREIN, I]. ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED|BY THE ITAT, BANGALORE IN ITA NO. 276/BANG/2005 DATED)18-01-2007 AND CONFIRM THE ORDER PASSED BY THE|ASST.COMMISSIONER.OF.INCOME.TAX,|CIRCLE-12(3),BANGALORE, IN THE INTEREST OF JUSTICE AND EQUITY. THESE ITA’s COMING ON FOR HEARING, THIS’ DAY, | DILIP B. BHOSALE J.DELIVERED THE FOLLOWING: | PC: Tnese income tax appeals are directed against theCommon order dated 18[tn]January 2007 passed by Income|Tax Appellate Tribunal, Bangalore Bench “B” (for short) Bthe Tribunal“) in ITA Nos.276 & 561/Bang/2005 for the| assessment years 2000-01 and 2001-02, whereby, the.Tribunal dismissed the appeals filed by tne revenue. The)appeals before the Tribunal were preferred against two.separate orders passed by Commissioner of Income Tax)(Appeals)-III, Bangalore (for short “Appellate Authority)dated /[th]December 2004 and £ [st]February 2005,respectively in ITA Nos.37/C-12(3)/CIT(A)III/O03-04 andLIANo.23/AC12(3)/CIT(A)III/04-05,inWNICNCWO|separate assessment orders passed by the Assessing|Officer (for short “Assessing Officer") dated 23-7-2003 and2/-2-2004 were called in question. | 2. In the memorandum of appeals, they have raised|the following substantial questions of law: 1.Whether the Tribunal was correct Innolding that a provision made by the assesseein respect of mediclaim of Rs.72,11,380/- is an.allowable.deductionduring|tnecurrentassessmentYCdl|despitetheassessmentofficer nolding tnat sucn payments will be.made only on the claim being made under the policy which may nNappen in any one or tnesucceeding assessment years. 2.Whnetner tne Tribunal was correct Inholding that the provision made for warrantyexpenses is an allowable deduction even.tnougn the assessing officer had held that theSame will De expended by the assessee only on.the happening of an event like a claim being:madeDYtneassessee's|customers|and.therefore the same is a contingent liability. 3.Whnetner the tribunal was correct Inholding that the provision made for doubtfuldepts cannot be added back for computingMAT income as held by the assessing officertnat these debts is a charge to the profitswhich get reduced and consequently is an.unascertained liability.” 3. Insofar as first two questions are concerned,learned counsel appearing for the parties state that in view|of the judgment of the Supreme Court inRotork Controls India (P) Limited vs. Commissioner of Income Tax. (2009) 314 ITR 62,the matter deserves remand witn asdirection to the Tribunal to consider these two questions|afresh in the light of the said judgment. | 3.Whnetner the tribunal was correct Inholding that the provision made for doubtfuldepts cannot be added back for computingMAT income as held by the assessing officertnat these debts is a charge to the profitswhich get reduced and consequently is an.unascertained liability.” 3. Insofar as first two questions are concerned,learned counsel appearing for the parties state that in view|of the judgment of the Supreme Court inRotork Controls India (P) Limited vs. Commissioner of Income Tax. (2009) 314 ITR 62,the matter deserves remand witn asdirection to the Tribunal to consider these two questions|afresh in the light of the said judgment. | 4. We have perused the judgment of the Supreme|Court in!Rotork Controls India Ltd (supra)and we are)Satisfied that these two questions deserve to be considered by the Tribunal afresh in the light of the judgment. | 5. Insofar as the third question is concerned, learnedcounsel for the revenue submitted that Section 115JA has/been amended vide Finance Act, 2009 with effect from1-4-1998 and the amendment may nave some bearing onthe decision of the third question also. Learned Counsel|forthe.respondent-assesseeqdoesnotdisputethe.statement made by the learned counsel for the revenue.and he also agreed for remanding the matter for decidingthe third question aiso to the Tribunal in the light of the)amendment. In the circumstances, we pass the following: ORDER Tne order passed by the Tribunal dated 18[th]January2007 in ITA No.2/76 and 561/2005 for the assessmentyears 2000-01 and 2001-02 is set-aside insofar as thesethree questions are concerned. Rest of the order passed bythe Tribunal shall remain unaltered. The Tribunal shall|consider all the three questions afresh and decide them onmerits and in accordance with law, as expeditiously as_possible and preferably within a period of six months from.the date of receipt of this order. All contentions of parties.are Kept open. With these observations, the appeals are disposed of. Sd/-. JUDGE| Sd/-JUDGE|