Itat/174/2021 Ia No.ga/2/2021 Principal Commissioner Of Income Tax-1, Kolkata v. M/S. The Peerless General Finance & Investment Co. Ltd

IN THE HIGH COURT AT CALCUTTASPECIAL JURISDICTION (INCOME TAX)ORIGINAL SIDE ITAT/174/2021IA No.GA/2/2021PRINCIPAL COMMISSIONER OF INCOME TAX-1, KOLKATAVS.M/S. THE PEERLESS GENERAL FINANCE & INVESTMENT CO. LTD. BEFORE : THE HON’BLE JUSTICE T.S. SIVAGNANAM AndTHE HON’BLE JUSTICE SUPRATIM BHATTACHARYADate : 12[th] September, 2022 Appearance :Mr. Soumen Bhattacharjee, Adv.….for appellant Mr. Abhijit Chatterjee, Sr. Adv.Mr. Gopal Ram Sharma, Adv.…for respondent The Court : This appeal by the revenue filed under Section 260A of theIncome Tax Act, 1961 (the Act, for brevity) is directed against the order dated22[nd] July, 2020, passed by the Income Tax Appellate Tribunal, Kolkata Bench,`D Virtual Court’, Kolkata (Tribunal) in ITA No. 1486/Kol/2019, for theassessment year 2014-15. The revenue has raised the following substantial questions of law forconsideration :- A.Whether the Learned Tribunal has committed substantial error in law inconfirming the decision of Learned Commissioner of Income Tax (Appeals)in allowing Long Term Capital Loss of Rs. 1,09,80,30,873/- on transfer ofGovernment Securities after applying cost inflation Index on sale ofGovernment Securities and holding he Government Securities are not bondand debentures for the purpose of 3[rd] proviso to Section 48 of the Act (4[th]Proviso after amendment) which is petently wrong and latently irregular ?confirming the decision of Learned Commissioner of Income Tax (Appeals)in allowing Long Term Capital Loss of Rs. 1,09,80,30,873/- on transfer ofGovernment Securities after applying cost inflation Index on sale ofGovernment Securities and holding he Government Securities are not bondand debentures for the purpose of 3[rd] proviso to Section 48 of the Act (4[th]Proviso after amendment) which is petently wrong and latently irregular ? B.Whether the Learned Tribunal has committed substantial error in law inconfirming the decision of Learned CIT(A) for allowing set off of broughtforward long term capital loss of Rs. 2,79,36,337/- against the short termgain computed on depreciable assets under Section 50 of the Income TaxAct, 1961 thereby misread and misinterpreted the said provision of lawand so the direction of Tribunal is perverse ?confirming the decision of Learned CIT(A) for allowing set off of broughtforward long term capital loss of Rs. 2,79,36,337/- against the short termgain computed on depreciable assets under Section 50 of the Income TaxAct, 1961 thereby misread and misinterpreted the said provision of lawand so the direction of Tribunal is perverse ? C.Whether the Learned Tribunal has committed substantial error in law inconfirming the decision of Ld. CIT(A) for deleting the addition of Rs.67,56,925/- under Section 14A of the Income Tax Act, 1961 asproportionate interest of Rs. 67,56,925/- was computed under Rule 8D(ii)of the Income Tax Rules ?confirming the decision of Ld. CIT(A) for deleting the addition of Rs.67,56,925/- under Section 14A of the Income Tax Act, 1961 asproportionate interest of Rs. 67,56,925/- was computed under Rule 8D(ii)of the Income Tax Rules ? D.Whether the Learned Tribunal has committed substantial error in law inconfirming the decision of CIT(A) for deleting the addition ofRs.8,93,88,975/- was computed under Rule 8D(iii) of the Income TaxRules ?confirming the decision of CIT(A) for deleting the addition ofRs.8,93,88,975/- was computed under Rule 8D(iii) of the Income TaxRules ? D.Whether the Learned Tribunal has committed substantial error in law inconfirming the decision of CIT(A) for deleting the addition ofRs.8,93,88,975/- was computed under Rule 8D(iii) of the Income TaxRules ?confirming the decision of CIT(A) for deleting the addition ofRs.8,93,88,975/- was computed under Rule 8D(iii) of the Income TaxRules ? E.Whether the Learned Tribunal has committed substantial error in law inconfirming the decision of CIT(A) for deleting the addition of expenses ofadvertisement/publicity, repair, maintenance of Rs. 10,19,816/- underSection 40(a)(ia) of the Income Tax Act and accepting the fresh evidence ofexpenses without remanding the case to the Assessing officer whichviolates rules 46A of I.T. Rules 1962 ?confirming the decision of CIT(A) for deleting the addition of expenses ofadvertisement/publicity, repair, maintenance of Rs. 10,19,816/- underSection 40(a)(ia) of the Income Tax Act and accepting the fresh evidence ofexpenses without remanding the case to the Assessing officer whichviolates rules 46A of I.T. Rules 1962 ? F.Whether the Learned Tribunal has committed substantial error in law inconfirming the decision of Learned CIT(A) for allowing the Education Cessas expenditure under Section 37(1) of the Income Tax Act, 1961, which isnot in accordance with law and as such present because it is a part ofIncome Tax ?confirming the decision of Learned CIT(A) for allowing the Education Cessas expenditure under Section 37(1) of the Income Tax Act, 1961, which isnot in accordance with law and as such present because it is a part ofIncome Tax ? We have heard Mr. Soumen Bhattacharjee, learned standing Counselappearing for the appellant/revenue and Mr. Abhijit Chatterjee, learned SeniorCounsel, assisted by Mr. Gopal Ram Sharma, learned Advocate for therespondent/assessee. So far as the substantial question of law no. (A) is concerned, the learnedTribunal had followed the assessee’s own case for the assessment year 2010-11and dismissed the appeal of the revenue. As against the said order of the learnedTribunal, the revenue had filed ITAT 77 of 2021 before this Court, which wasdismissed by order dated 10[th] December, 2021. Though the application forcondonation of delay filed by the revenue was dismissed as sufficient cause was not shown for condonation of the delay, the appeal stood rejected. Therefore, theorder passed in the assessee’s own case for the assessment year 2010-11 standsaffirmed. Accordingly, the substantial question of law no.(A) is answered againstthe revenue. The question of law nos.(C) to (F) were raised by the revenue before thisCourt in the assessee’s own case in ITAT 164 of 2021 and by judgment dated11[th] April, 2022 the questions were answered against the revenue. The operativepart of the judgment reads as follows :- “We have heard Mr. Soumen Bhattacharjee, learned StandingCounsel appearing for the appellant/revenue and Mr. Abhijit Chatterjee,learned Senior Counsel appearing for the respondent/assessee. On perusal of the order passed by the Tribunal, we find that theTribunal has taken note of the fact that the Assessing Officer had notrecorded satisfaction before invoking Rule 8D of the Income Tax Rules. Thisappears to have been the position for the assessment year 2013-14 also.Therefore, the order passed by the Commissioner of Income Tax (Appeals)-1,Kolkata [CIT(A)] was confirmed. We find no grounds to interfere with thefinding recorded by the Tribunal. With regard to the second issue, namely, deleting the addition madeon account of sale of rights in property and carrying forward of loss to thefuture years, the Tribunal followed the decision of the Hon’ble SupremeCourt in the case of Radhasoami Satsang vs. CIT (1992) 193 ITR 321 (SC).We find that there is no ground to interfere with the said finding. On perusal of the order passed by the Tribunal, we find that theTribunal has taken note of the fact that the Assessing Officer had notrecorded satisfaction before invoking Rule 8D of the Income Tax Rules. Thisappears to have been the position for the assessment year 2013-14 also.Therefore, the order passed by the Commissioner of Income Tax (Appeals)-1,Kolkata [CIT(A)] was confirmed. We find no grounds to interfere with thefinding recorded by the Tribunal. With regard to the second issue, namely, deleting the addition madeon account of sale of rights in property and carrying forward of loss to thefuture years, the Tribunal followed the decision of the Hon’ble SupremeCourt in the case of Radhasoami Satsang vs. CIT (1992) 193 ITR 321 (SC).We find that there is no ground to interfere with the said finding. With regard to the third issue regarding allowance or deduction ofeducation cess under Section 37(1), the Tribunal has remanded the matterfor consideration to the Assessing Officer after partly accepting the standtaken by the assessee. This finding also does not call for any interference. For the above reasons, the appeal filed by the revenue is dismissed.Substantial questions of law are answered against the revenue. With the dismissal of the appeal, the application for stay being IANo.GA/2/2021 also stands dismissed.” This leads us to only substantial question of law no.(B). The learnedTribunal followed the decision of the Hon’ble Supreme Court in Commissioner ofIncome Tax, Panji vs. V.S. Dempo Company Ltd., (2016) 74 taxmann.com 15(SC),wherein it was held that the assessee therein is entitled to exemption underSection 54E in respect of capital gains arising out of transfer of capital asset onwhich depreciation has been allowed. The decision of the Supreme Court ofBombay in Commissioner of Income-tax vs. ACE Builders (P.) Ltd., (2005) 144Taxman 855 (Bombay) stood affirmed by the decision in V.S. Dempo CompanyLtd. (supra). Further, the decision of the High Court of Bombay in Commissionerof Income-tax vs. Parrys (Eastern) (P.) Ltd., (2016) 66 taxmann.com 330 (Bombay)is also in favour of the assessee wherein it was held that where deemed short-term capital gain arose on account of sale of depreciable assets that was held fora period to which long-term capital gain would apply, the said gain would be setoff against brought forward long-term capital loss and unabsorbed depreciation. Thus, the learned Tribunal rightly rejected the case of the revenue. Accordingly, the substantial question of law no.(B) is answered against therevenue. In the result, the appeal is dismissed and the substantial questions of laware answered against the revenue. The application also stands dismissed. (T.S. SIVAGNANAM, J.) (SUPRATIM BHATTACHARYA, J.)