Ita/401/2008 Of The Commissioner Of Income Tax v. M/S Jai Bharath Mills Pvt Ltd

IN THB HIGH COURT OF KARNATAKA AT BANGALOREDATED THIS THE 20[th]DAY OF JUNE 2014 PRESENT THR HON BLE MR. JUSTICE N. KUMAR. AND THR HON’BLE MR. JUSTICK B MANOHAR. ITA No.401 OF 2008 BETWEEN; 1.The Commissioner of Income-Tax,C.R.Building, Queens Road,Attavara, Bangalore. 2.tThe Income Tax Officer,Ward-2, Udupi._ APPKRLLANTS (By Sri Jeevan J. Neeralgi, Advocate) AND: M/s.Jai Bharath Mills(Pvt) LimitedRegd. Office, Syndicate House,Manipal-576 104RBSPONDENT (By Sri 8S. Parthasarathi, Advocate) -0-0-0-0-O0- This ITA is filed under Section 260-A of I.T. Act,|1961 arising out of Order dated 24.10.2007 passed inITA.No.587/BNG/2006, for the Assessment Year 2001-O2 praying to formulate the substantial questions of lawstated therein and to allow the appeal and set aside the orderpassedbytheITAT,Bangalore|1n ITANo.587/BNG/2006_dated24.10.2007|confirmtheorders of the Assessing Officer. This appeal coming on for hearing this day,N.,KUMAR, J.delivered the following:- JUDGMENT The revenue has preferred this appeal against|the order passed by the Tribunal, which aiter settingaside the order passed by the Assessing Authority aswell as the Appellate Authority has granted relief tothe assessee. 2.The assessee entered into an agreement.with MRAC Limited for purchase of book debtsamounting to Rs.199,84,241/- vide agreement dated28.9.1999. For the purpose of purchasing bookdebtsthe assessee borrowed a sum ot Rs? crores fromM/s.ShakthiFinanceLimited.ASUTTot|Rs.32,94,24/7/- was paid as interest towards thatborrowed amount. The assessee sustained losses.There was no tax liability also. On the contrary, they claimed deductions. The grievance of the revenue iswhen the assessee was running under losses thereWa ShonecessityOT|business expediencyforpurchasing book debts from borrowing money fromohakthi Finance. Therefore, according to theassessing authority as well as the appellate authorityit was a sham transaction. However, the Tribunalwas olf the view that the borrowing of Rs. Two crores 1snot1ndispute.PurchaseotpookdebDtsotRs.1,99,384,241./70 is not in dispute. Payment ofinterest of Rs.32,94,243/- on the borrowed amount is_not in dispute and when the assessee has not made.any profit and there is no hability to pay tax it heldthat the transaction 1s genuine and the claim of theaSSES SCCforallowinginterestexpenditure1 |connection with the business of the assessee is_allowable as the revenue expenditure.3.The assessment year is 2001-02. Now 13. years have elapsed. The assessee is not carrying on any business. 8 years is the period prescribed forcarrying forward of losses to set off against the profitsearned. Now that nearly 11 years have elapsed, theassessee is not entitled to claim the said benefit. _ 4Under the circumstances, without goinginto the merits, we are of the view that as no taxliability is involved and as assessee cannot claim anybenefit in future, the appeal is rejected. Sd/-. JUDGE. Sd/-. JUDGE.