Ita/526/2007 Of The Commissioner Of Income Tax v. M/S Rewdale Precision Tools (P) Ltd

IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 2[nd]DAY OF JANUARY 2014 PRESENT THE HON‘'BLE MR. JUSTICE DILIP B BHOSALE AND| THE HON‘'BLE MR. JUSTICE B MANOHAR ITA.No.526/2007 c/w ITA.No.525/2007| IN ITA.No.526/200/ BETWEEN 1.THE COMMISSIONER OF INCOME TAX. CENTRAL CIRCLE, C.R.BUILDING QUEENS ROAD, BANGALORE 2.THE DEPUTY COMMISSIONER OF INCOME TAX (OSD)SPECIAL RANGE (6), BANGALORESPECIAL RANGE (6), BANGALORE .., APPELLANTS (BY SRI INDRAKUMAR, SR. ADV.,) AND M/S REWDALE PRECISION TOOLS (P) LTDNO.36, SAMPANGI TANK ROADBANGALORE | .. RESPONDENT (BY SRI A SHANKAR, ADV., AND SRI M LAVA, ADV.,). THIS I.T.A. FILED U/S.260-A OF I.T.ACT 1961 ARISING|OUT OF ORDER DATED 26-12-2006 PASSED IN [TA NO.44/BANG/2005 FOR THE ASSESSMENT YEAR 1992-1993,|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 ORDERS PASSED|BY THE ITAT, BANGALORE IN ITA NO. 44/BANG/2005 DATED)26-17-7006 AND CONFIRM THE ORDER OF THE APPELLATE|COMMISSIONER CONFIRMING THE ORDER PASSED BY THE DY., COMMISSIONER OF INCOME TAX(OSD), SPECIAL RANGE-6,|BANGALORE, IN THE INTEREST OF JUSTICE AND EQUITY. IN ITA.No.525/2007 BETWEEN 1.THE COMMISSIONER OF INCOME TAX.CENTRAL CIRCLE, C.R.BUILDINGCENTRAL CIRCLE, C.R.BUILDING QUEENS ROAD, BANGALORE 2.THE DEPUTY COMMISSIONER OF INCOME TAX (OSD)SPECIAL RANGE (6), BANGALORE.., APPELLANTSSPECIAL RANGE (6), BANGALORE.., APPELLANTS (BY SRI INDRAKUMAR, SR. ADV., FOR SRI K V ARAVIND, ADV.,). AND M/S REWDALE PRECISION TOOLS (P) LTDNO.36, SAMPANGI TANK ROADBANGALORE |.., RESPONDENT (BY SRI A SHANKAR, ADV., AND SRI M LAVA, ADV.,). THIS ITA FILED U/S.260-A OF I.T.ACT, 1961 ARISING|OUT OF ORDER DATED 26-127-200/ PASSED IN [TA NO.45/BANG/2005 FOR THE ASSESSMENT YEAR 1993-94, 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. 45/BANG/2005 DATED 26-1727-27007 AND CONFIRM THE ORDER OF THE APPELLATCOMMISSIONER CONFIRMING THE ORDER PASSED BY THE|DEPUTY COMMISSIONER OF INCOME TAX(QOSD), SPECIALRANGE-6, 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 two appeals are directed against the common orderdated 26-12-2006 passed by the Income Tax Appellate Tribunal,Bangalore Bench “A” (for short “the Tribunal”) in ITA Nos.44 and.45/BANG/2005, pertaining to the assessment years 1992-93)and 1993-94, whereby the appeals filed by the respondent-assessee were allowed in part and the Tribunal directed tne|Assessing Officer to allow netting of interest and grant set off of|interest earned towards interest paid. 2. This Court is informed that the Assessing Officer, in|view of the order dated 26-12-2006, passed the order dated 19-11-2007 granting benefit of netting of interest to the extent of Rs.19,52,040|for|the.assessmentYd1997-93and. Rs.14,40,945/- for the assessment year 1993-94. There does|not appear to be any dispute that the Commissioner of Income.Tax could not invoke the powers under Section 263 of tne|Income Tax Act 1960 (for short “I.T. Act”) to examine legality of|the order dated 19.1.2007 in view of pendency of these appeals. |In other words, the order passed by the Assessing Officer dated19-11-2007 was subject to the result of the present appeals. 2. This Court is informed that the Assessing Officer, in|view of the order dated 26-12-2006, passed the order dated 19-11-2007 granting benefit of netting of interest to the extent of Rs.19,52,040|for|the.assessmentYd1997-93and. Rs.14,40,945/- for the assessment year 1993-94. There does|not appear to be any dispute that the Commissioner of Income.Tax could not invoke the powers under Section 263 of tne|Income Tax Act 1960 (for short “I.T. Act”) to examine legality of|the order dated 19.1.2007 in view of pendency of these appeals. |In other words, the order passed by the Assessing Officer dated19-11-2007 was subject to the result of the present appeals. 3. The Tribunal wnile dealing witn the appeal against theorder of the Commissioner of Income Tax Appeals-III Bangalore dated 2/7-10-2004, considered two grounds of challenge.|Firstly, whether the assessee’s claim made under Section 10-B|of the IT Act can be allowed, and secondly, whether the|assessee was entitled for netting of interest. The present.appeals are directed against the findings recorded by the.Tribunal on the second ground of challenge. The Tribunal while|considering the second ground of challenge in paragraph 5.1 of)the order observed thus: 5.1. However, aiternative ground raised py tne}learned counsel which is in respect of netting of interest. It is the case of assessee that the deposits were made due to the compulsion for|procuring import licence and letter of credit. For|this purpose, the assessee had to borrow amount|from the bank on interest. Subsequently, these|amounts were deposited in the bank wnhicn earnedinterest. Tnis being the fact, we are inclined to|accept that the authorities below should have}granted set off of interest earned towards interest|paid. 4. The learned counsel appearing for the revenue!submitted that the Tribunal committed grave error of law in|directing the Assessing officer to allow netting of interest and|grant set off of interest earned towards interest paid without.verifying whether the deposits made by the assessee were|made due to compulsion for procuring import licence and letter.of credit and tnat the assessee nad borrowed tne amount fromtne bank on interest. He submitted that this ground of challenge|was not raised by the assessee before the Assessing Officer. He)submitted that it was wrong on the part of the Tribunal to|assume _ that the case, as reflected in paragraph 5.1 of.the impugned order, was true and correct. In other words, | ne submitted the assessee did not place any material on recordto show that the fixed deposits were made due to compulsion.for procuring import licence and letter of credit and for tnat|purpose the assesee had borrowed the said amount from the|bank on interest. 5. On the other hand, Mr.Shankar, learned counsel fortne assessee submitted that the revenue did not raise any|dispute in respect of the assessee’s case, as reflected in.paragraph 5.1 of the impugned order, before the Tribunal. He.submitted that the assessee, in any case, was entitled for.seeking netting of interest by setting off of interest earned.towards interest paid. He then submitted that the assessee hadmade fixed deposits for procuring import licence and letter of)credit and for that purpose he had borrowed the amount from|the very same bank on interest. In view thereof, he submitted |that the assessee was entitled for allowing netting of interest.and the assessing officer while passing the order dated |19-11-2007 has rightly granted the relief, though not in respect|of entire amount but In respect of the amount mentioned above. |He fairly stated that though the order dated 19-11-2007 was. not cnallenged at that stage, the assessee will not nave any|objection for allowing the Commissioner to invoke his powers,under Section 263 and examine the legality and correctness of the order passed by the Assessing Officer. not cnallenged at that stage, the assessee will not nave any|objection for allowing the Commissioner to invoke his powers,under Section 263 and examine the legality and correctness of the order passed by the Assessing Officer. 6. We nave perused the order dated 19-11-2007 passedby the Assessing Officer in both these appeals pertaining to.assessment years 1992-93 and 1993-94 and we find that tne|case of the assessee has been accepted by the Assessing Officer|to the extent of Rs.19,52,040/- and Rs.14,40,940/- though the.claim was in respect of Rs.26,21,951 and Rs.15,38,900/-,|respectively. It is the case of the assessee that the Assessing|Officer vide order dated 19-11-2007, taking into consideration|the interest earned towards interest paid, has passed an order|giving effect to the order passed by the Tribunal dated |26-12-2006. In other words, it was submitted on behalf of |assessee that the Assessing Officer while dealing with the issue.whether the assessee is entitled for netting of interest by setting off of interest earned towards interest paid, examined the case.of the assessee as to whether he is entitled for netting of)interest and if yes, to what extent. In this view of the matter,| learnedcounsel]fortherevenue|submitted tnat|theCommissioner may be allowed to exercise his powers’ under|Section 263 of the IT Act to examine the order passed by the|Assessing Officer dated 19-11-2007 and to find out whether.allowing of netting of interest by setting off of interest earned.towards interest paid was permissible and, if yes, to whatextent. It is in this view of the matter, we are satisfied that the|following order shall meet the ends ofjustice : The jurisidictional Commissioner of Income Tax_ shallexamine the case/record if he deems fit and proper and in.exercise of his revisional powers under Section 263 of the I.T.Act, issue appropriate directions within 16 weeks from tne|date of receipt of this order. It is open to the Commissioner|to examine whnetner on tne facts and in the circumstances|of the case and in law, the Assessing Officer was justified |in allowing netting of interest. In other words, the Commissioner|shall examine whether the assessee is entitled for setting-off of interest earned towards interest paid. It isneedless to observe that if the case of the assessee, as refiected in paragraph 5.1 in the impugned order, is neld to be|proved, the assessee shall be entitled for netting of interest. The appeals are accordingly disposed of in terms of this| order. la Sd/-JUDGE| Sd/-.JUDGE|