Ita/132/2012 Of The Commissioner Of Income Tax v. The State Farming Corporation Of Kerala Ltd

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE MR.JUSTICE ANTONY DOMINIC & THE HONOURABLE MR. JUSTICE SHAJI P.CHALY THURSDAY, THE 28TH DAY OF MAY 2015/7TH JYAISHTA, 1937 ITA.No. 132 of 2012 () ----------------------- AGAINST THE ORDER OF THE ITAT, COCHIN BENCH IN ITA 100/COCH/2010 DATED 27.12.2011 APPELLANT(S)/RESPONDENT: -------------------------------------------- THE COMMISSIONER OF INCOME TAX THIRUVANANTHAPURAM. BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES) SRI.JOSE JOSEPH, SC, FOR INCOME TAX RESPONDENT(S)/APPELLANT: -------------------------------------------- THE STATE FARMING CORPORATION OF KERALA LTD FARM HOUSE, VETTITHITTA P.O., ALIMUKKU PUNALUR-689 696. R BY ADV. SRI.K.ANAND (SR.) R BY ADV. SMT.LATHA KRISHNAN THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 28-05-2015,ALONG WITH ITA. 17/2013, THE COURT ON THE SAME DAY DELIVERED THEFOLLOWING: APPELLANT'S EXHIBITS: ANNEXURE A: TRUE COPY OF THE ORDER OF THE ASSESSING OFFICER U/S.143(3)DATED 22.12.2006. ANNEXURE B: TRUE COPY OF THE ORDER OF THE ASSESSING OFFICER U/S143(3)DATED 20.3.2009. ANNEXURE C: TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS) DATED 4.11.2009. ANNEXURE D: TRUE COPY OF THE ORDER OF THE APPELLATE TRIBUNAL DATED27.12.2011. ANNEXURE E: A TRUE COPY OF THE ANNEXURE TO AUDITORS' REPORT FOR THEYEAR ENDED 31.3.2004. /True copy/ PS to Judge ANTONY DOMINIC & SHAJI P. CHALY, JJ.-----------------------------------I.T.A.Nos.132 of 2012 & 17 of 2013 ----------------------------------- Dated this the 28[th] day of May, 2015JUDGMENT Antony Dominic, J. 1. These appeals are filed by the Revenue impugning theorders passed by the Income Tax Appellate Tribunal,Cochin Bench, allowing ITA.123/Coch/2011 filed by therespondent, a State of Kerala undertaking. orders passed by the Income Tax Appellate Tribunal,Cochin Bench, allowing ITA.123/Coch/2011 filed by therespondent, a State of Kerala undertaking. 2.The short issue involved is that in compliance withthe orders issued by the Government of Kerala, therespondent company has advanced certain unsecuredloans to yet another Government of Kerala undertakingby name M/s.Trivandrum Rubber Works Ltd., without anyobligation for interest. Finding that the respondentis following mercantile system of accounting, theAssessing Officer took 10% of the amount advanced asinterest and treating that as income, brought it totax. The assessment was confirmed by the AppellateCommissioner but was reversed by the Tribunal. It isin this background these appeals are filed by theRevenue. ITA.132/12 & 17/13 3.As we have already stated, the fact that therespondent has advanced amounts to M/s.TrivandrumRubber Works Ltd., a Government of Keralaundertaking, without any provision for interest andthat in fact no amount was received towards interestare admitted. However, it is only on the basis thatthe respondent is following mercantile system ofaccounting that the Assessing Officer has estimatedthe interest and brought it to tax. As rightlyobserved by the Tribunal, the levy of tax is onreceipt of income and such a levy cannot be made onany notional income. The view taken by the Tribunal,in our view, does not suffer from any illegalityjustifying interference in appeal. Appeals fail. They are accordingly dismissed. Sd/- ANTONY DOMINIC, Judge. Sd/- SHAJI P. CHALY, Judge. kkb. /True copy/ PS to Judge