Ita/287/2010 Of The Commissioner Of Income Tax v. Apollo Tyres Ltd

IN THE HIGH COURT OF KERALA AT ERNAKULAMPRESENT THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON & THE HONOURABLE MR.JUSTICE N.ANIL KUMAR FRIDAY, THE 22ND DAY OF FEBRUARY 2019/3RD PHALGUNA, 1940 ITA.No. 287 of 2010 AGAINST THE ORDER/JUDGMENT IN ITA 26/Coch/2004 ofI.T.A.TRIBUNAL,COCHIN BENCH DATED 25-02-2010 APPELLANT/S: THE COMMISSIONER OF INCOME TAX,COCHIN. BY ADVS.SRI.JOSE JOSEPH, SC, FOR INCOME TAXSRI.CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENTSRI.K.M.V.PANDALAI, INCOME TAX DEPARTMENT RESPONDENT/S: M/S.APOLLO TYRES LTD,6TH FLOOR, CHERUPUSHPAM BUILDINGS,SHANMUGHAM ROAD, KOCHI-31. BY ADVS.SRI.BINU MATHEWSRI.B.J.JOHN PRAKASHSRI.JOSEPH KODIANTHARA (SR.)SRI.MATHEWS K.UTHUPPACHANSRI.TERRY V.JAMESSRI.TOM THOMAS (KAKKUZHIYIL)SRI.V.ABRAHAM MARKOSSRI.JOSEPH MARKOS(SR) THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 22.02.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: I.T.A.No.287/2010 ..2.. JUDGMENT P.R.Ramachandra Menon, J. This is an appeal preferred by the Revenue. Challenge is against Annexure-C order passed by the Income Tax AppellateTribunal in respect of the assessment year 2000-2001. 2.Heard Sri.Christopher Abraham, the learnedStanding Counsel for the appellant and Sri.Joseph Markos, thelearnedSeniorCounselappearingfortherespondent/assessee. 3.The sequence of events shows that the assesseewho is engaged in the manufacture and sale of automotivetyres and tubes filed their return on 30.11.2000, followed by arevised return; ultimately leading to the assessment finalizedunder Section 143(3) of the Income Tax Act vide Annexure-Aorder passed by the Assessing Officer on 14.3.2003. Since thiswas detrimental to the rights and interests of the assessee, itwas taken up in appeal. The appeal was finalized by theCommissioner, Income Tax (Appeals) as per Annexure-B orderdated 21.10.2003, whereby some benefits came to be granted while some reliefs were declined. This made the assessee tofile a further appeal before the Tribunal and after hearing boththe sides, the Tribunal interdicted the order passed by theAppellate Authority and granted some reliefs vide Annexure-Corder, which is under challenge as mentioned above. 4.The present appeal is still to be admitted, but forordering 'notice on admission' on 28.9.2010. The appellant has suggested two questions as involving substantial questions oflaw, which are to the following effect:- “1.Whether, on the facts and in thecircumstances of the case are not thedisallowance of payments made to clubs andSec.40A(9) contribution made to Apollo TyreEmployees Welfare Fund Trust by theAssessing Officer in accordance with law andthe Tribunal is justified in interfering with thesame? 2.Whether, on the facts and in thecircumstances of the case and in the light ofthe cogent reasons given by the CIT(A) theTribunal is right in law in restricting thedisallowance of interest and other expensesunder section 14A of the IT Act to 0.5% of thetotal interest and expenditure?” 5.It is pointed out that the present appeal has been preferred by the Revenue, as the benefit granted by theTribunal is obviously by placing reliance on the earlier course pursued under similar circumstance in respect of the previousassessment years; which are under challenge at the instanceof the Revenue and that the said appeals are still pending.With regard to the 'first question', there are two limbs; viz.,disallowance of 'club expenses' and disallowance ofcontribution made to the Employees' Welfare Trust. 5.It is pointed out that the present appeal has been preferred by the Revenue, as the benefit granted by theTribunal is obviously by placing reliance on the earlier course pursued under similar circumstance in respect of the previousassessment years; which are under challenge at the instanceof the Revenue and that the said appeals are still pending.With regard to the 'first question', there are two limbs; viz.,disallowance of 'club expenses' and disallowance ofcontribution made to the Employees' Welfare Trust. 6.With regard to the payment of amounts under thehead 'club expenses' the factual position discussed by theTribunal in paragraph 11.1 of Annexure-C discloses that theassessee had paid a sum of Rs.8,43,483/- to various clubs ofwhich Rs.6,63,748/- was by way of subscription fee, while theremaining Rs.1,79,735/- was for club services and facilities.As a matter of fact, the assessee claims the entire expenses asdeduction under Section 37(1) of the Act. According to theAssessing Officer, the expenses other than the membership feewere mainly food expenses and therefore they were in thenature of 'personal expenses' which is not admissible underSection 37(1) of the Act. It was accordingly, it was disallowedto the requisite extent, after verifying the facts and figures, which was upheld by the Commissioner (Appeals). However,the Tribunal in paragraph 11.3 of Annexure-C order held thatthe issue was already considered by the Tribunal in respect ofthe earlier assessment years and it was decided in favour ofthe assessee and since there was no change in facts andcircumstances, the course pursued in respect of the previousassessment years (1996-97 and 1997-98) was decided to befollowed. Accordingly, the issue came to be answered in favourof the assessee, virtually sustaining the act of the assessee inclaiming the entire expenses as deduction under Section 37(1)of the Act. 7.It is true that the expenditure incurred by theassessee for procuring the 'club membership' was a matterconsidered in the previous assessment years and the benefitgiven was sought to be restricted only in respect of suchamount and the remaining part spent for availing the facilitieswas held as taxable. In the instant case, the total amountclaimed by the assessee (Rs.8,43,483/-) included theexpenses for food and such other facilities (about Rs.1.6 lakhs as assessed by the Assessing Officer) and hence it wasdisallowed by the Assessing Officer. The said finding on fact,which was upheld by the Commissioner (Appeals), ought notto have been altered by the Tribunal, holding that the issuewas already found in favour of the assessee. The order passedby the Assessing Officer and affirmed by the Commissioner,disallowing a sum of Rs.1.6 lakhs under the head ‘clubexpenses’ is liable to be sustained. It is ordered accordingly. 8.With regard to the contribution made by theassessee to the Employees' Welfare Fund Trust, the standof the assessee is that it was only to facilitate transportation ofthe employees as per the service conditions and neveramounts to any diversion of funds as alleged by the Revenue.Similar question with reference to Section 40A(9) in respect ofthe previous assessment years has already been considered bythis Court in I.T.A.No.60/2010 and answered in favour of theassessee. This being the position, similar course will follow inthe present case as well and there is no question of law to beconsidered. ..7.. 9.With regard to the second question, the pointstands already considered by this Court in another caseI.T.A.No.16/2013 (arising from I.T.A.No.257/2010 of theIncome Tax Appellate Tribunal, Cochin Bench). The said issuewas considered and answered by the Bench, vide judgmentdated 17.9.2018 (paragraph 17) as extracted below:- ..7.. 9.With regard to the second question, the pointstands already considered by this Court in another caseI.T.A.No.16/2013 (arising from I.T.A.No.257/2010 of theIncome Tax Appellate Tribunal, Cochin Bench). The said issuewas considered and answered by the Bench, vide judgmentdated 17.9.2018 (paragraph 17) as extracted below:- “17. The next question raised is whetherthe Tribunal was correct in having confirmedthe order of the CIT (Appeals) deleting theaddition made by the AO invoking theprovisions of Sections 37 and 14A of the ITAct, being re-plantation expenses. The AOfound that the expenditure was dis-allowableunder Section 14A of the Act. In this context,the decision of the Hon'ble Supreme Court inCommissioner of Income Tax v. EssarTeleholdings Ltd. [(2018) 401 ITR 445], whichheld that the applicability of Section 14A canonly be from the assessment year 2007-08 hasto be noticed. We, hence, answer the questionin favour of the assessee and against theRevenue, upholding the order of the Tribunal. From the above, it is quite evident that the mandate of Section14A can be valid and effective only from the assessment year2007-2008, in view of the law declared in categorical terms bythe Apex Court in Commissioner of Income Tax Vs. EssarTeleholdings Ltd.[(2018) 401 ITR 445]. It was placing I.T.A.No.287/2010 ..8.. reliance on the said decision that the issue involved inI.T.A.No.16/2013 was considered and decided by this Court asper judgment dated 17.9.2018. In the said circumstance, thesecond question raised by the appellant also does not survive;the same having already been answered in favour of theassessee. This Court finds that no question remains to beconsidered as involving any substantial question of law. 10.In the above circumstances, we allow the appeal 'inpart'. It is open for the Department to pursue further steps bypassing a revised assessment order and realize the tax, to theextent as mentioned above, under question No.1, from theassessee. Sd/- P.R.RAMACHANDRA MENON, JUDGE Sd/- N.ANIL KUMAR, JUDGE skj I.T.A.No.287/2010 APPENDIX PETITIONER'S/S EXHIBITS: ANNEXURE A COPY OF ASSESSMENT ORDER U/S 143(3) DATED 14.3.2003 FOR THE ASST. YEAR 2000-2001. ANNEXURE B COPY OF ORDER DATED 21.10.2003 OF THE COMMISSIONER OF INCOME TAX (APPEALS). ANNEXURE C COPY OF THE COMMON ORDER DATED 25.2.2010 OF THE INCOME TAX APPELLATE TRIBUNAL,COCHIN BENCH IN ITA NO.26/COCH/2004.