Itta/280/2013 Of M/S. Gati Ltd v. The Addl. Commissioner Income Tax

HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTAAND HON’BLE SRI JUSTICE K.C. BHANUI.T.T.A.No.280 of 2013 Date: 23-07-2013 Between: M/s. Gati Ltd.,Secunderabad. … Appellant And 1.The Additional Commissioner of Income-tax,Range-2, Hyderabad.Range-2, Hyderabad. … Respondent HON’BLE THE CHIEF JUSTICE SRI KALYAN JYOTI SENGUPTAAND HON’BLE SRI JUSTICE K.C. BHANU I.T.T.A.No.280 of 2013 JUDGMENT:(Per Hon’ble the Chief Justice Sri Kalyan Jyoti Sengupta) This appeal is preferred against the judgment and order passedby the learned Tribunal in I.T.A.No.749/H/2012, dated 12-01-2013, inrelation to the assessment year 2007-08 and is sought to be admittedon the following substantial questions of law: i)Whether on the facts and in the circumstances ofthe case, the Commissioner of Income Tax is justifiedin exercising the jurisdiction u/s 263 of the I.T. Act inrespect of disallowance of gratuity aggregating to Rs.1,32,95,577/- and disallowance of issue expensesaggregating to Rs.2,64,26,757/- for issuing foreigncurrency convertible bonds. ii) Whether on the facts and in the circumstances ofthe case, the Income Tax Appellate Tribunal is justifiedin upholding the power of the Commissioner of IncomeTax to exercise revisionary jurisdiction u/s 263 of theI.T. Act in respect of disallowance of gratuityaggregating to Rs.1,32,95,577/- and disallowance ofissue of expenses aggregating to Rs.2,64,26,757/- forissuing foreign currency convertible bonds, when thesaid two items were enquired into by the AssessingOfficer, questionnaire was issued calling forinformation, the information supplied was perused andalso making an endorsement in the order sheet aboutthe discussion of these two items before making theassessment. iii)Whether on the facts and in the circumstances of thecase, the issue relating to the disallowance of issueexpenses aggregating to Rs.2,64,26,757/- can be saidto be a matter on which there could be two views anddebatable and as such cannot be a subject matter ofrevision u/s 263 of the I.T. Act. iv)Whether on the facts and in the circumstances of thecase, on the issue relating to the disallowance ofgratuity aggregating to Rs.1,32,95,577/- is it open tothe Commissioner of Income tax to exerciserevisionary jurisdiction u/s 263 of the I.T Act based onsuspicion, doubts and presumptions. v) Whether on the facts and in the circumstances ofthe case, the Income tax Appellate Tribunal is justifiedin remitting the above two issues viz., disallowance ofgratuity aggregating to Rs.1,32,95,577 anddisallowance of issue expenses aggregating toRs.2,64,26,757/- for issuing foreign currencyconvertible bonds to the Assessing Officer for enquiryafresh as directed by the Income tax AppellateTribunal in its impugned order. 2. We have heard the learned counsel for the appellant andperused the impugned judgment and order of the learned Tribunal. 3. It appears that the assessee challenged the order of theCommissioner of Income Tax, who made the order for re-assessment, in exercise of the revisional powers under Section 263of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’). It wascontended that the Commissioner of Income Tax ought not to haveexercised the jurisdiction under Section 263 of the Act. According tothe learned counsel for the appellant, the preconditions for exercise ofthe jurisdiction under Section 263 of the Act in this matter have notbeen fulfilled. Therefore, he urges that the appeal should be admittedon the aforesaid questions of law. 4. The learned Tribunal, on perusal of the record, came to afact finding that the Assessing Officer did not pass any speaking orderin relation to any issues agitated and raised before him. It has beenfurther found by the learned Tribunal that the impugned order ofassessment passed by the Assessing Officer initially was on total non-application of mind. In view of the aforesaid fact finding, we hold thatpassing a 4. The learned Tribunal, on perusal of the record, came to afact finding that the Assessing Officer did not pass any speaking orderin relation to any issues agitated and raised before him. It has beenfurther found by the learned Tribunal that the impugned order ofassessment passed by the Assessing Officer initially was on total non-application of mind. In view of the aforesaid fact finding, we hold thatpassing a non-speaking order and further without application of mind areprejudicial to the interest of the party. According to us, had there beenany proper application of mind, the opinion of the Assessing Officerwould have been otherwise and he would have taken different view. Therefore, the Assessing Officer, by not applying his mind, actedprejudicial to the interest of the Revenue. We are unable to accept thecontention of the learned counsel for the appellant that thepreconditions for exercise of the jurisdiction under Section 263 of theAct have not been fulfilled in this case. 5. Now coming to the merits of the case, it appears that three issues are involved in this matter. The first issue relates to theassessment of difference in foreign exchange of Rs.15,46,428/- asincome from other sources. It appears that, while deciding the aboveissue, the learned Tribunal has followed the decision of theVisakhapatnam Bench in case of Dredging Corporation of India Ltd. inI.T.A.Nos.6 to 8/Vizag/2011, dated 25-07-2011, as the issue wassquarely covered by the above judgment. Learned Tribunal thereafterheld that the amount of Rs.15,46,428/-, being the gain on account offoreign exchange fluctuation, is related to the activity of operatingqualifying ships and therefore, it has to be taxed under the TonnageTax Scheme as provided under Chapter XIIG of the Act. Accordingly,the order of the Commissioner of Income Tax was reversed on thisissue. 6. So far as the second issue is concerned, the same relatesto the directions for disallowance of gratuity of Rs.1,32,95,577/-. Thelearned Tribunal, on fact, found as follows: “It is seen from the certificate of the actuary which is at page117 of the paper-book, that the assessee has gratuity liabilityof Rs.2,47,52,069/- as on 31.3.2007. It is the claim of the assessee that over and above theamount of Rs.90,23,315 debited to the Profit & Loss Accountof the relevant previous year, the assessee has paid furtheramount of Rs.1,32,95,577/- towards the gratuity liability, bydirectly debiting the General Reserve Account, withoutaffecting the Profit & Loss Account.” It was further found, on fact, as follows: “An examination of the aforesaid bank account which is atpages 20 and 21 of the written submissions, it appears thatamounts of Rs.1 crore and Rs.32,95,577/- have beendeposited into the aforesaid Gratuity Fund Account in March,2007 and October, 2007 respectively.” After coming to the above fact findings, the learned Tribunalpassed the impugned order in the manner as follows: “We, therefore, direct the Assessing Officer to verify the bankaccount, and examine the matter in the light of such otherevidence as may be called for by the Assessing Officer, orproduced by the assessee in support of its claim of havingmade the payments in question within the period specified inS. 43B, and accordingly determine the issue of allowability ofthe claim of the assessee.” 7. The learned Tribunal, therefore, modified the order of theCommissioner of Income Tax to the above extent, and directed theAssessing Officer to decide the issue. We do not find any infirmity orillegality in remanding the matter in the manner as above. 8. So far as the third issue is concerned, the same relates todisallowance of expenses of Rs.2,64,26,757/- for issuing ForeignCurrency Convertible Bonds (FCCB). It appears that the learnedTribunal has also remanded the matter on this issue. We just quotethe relevant portion of the judgment and order of the learned Tribunalas follows: 7. The learned Tribunal, therefore, modified the order of theCommissioner of Income Tax to the above extent, and directed theAssessing Officer to decide the issue. We do not find any infirmity orillegality in remanding the matter in the manner as above. 8. So far as the third issue is concerned, the same relates todisallowance of expenses of Rs.2,64,26,757/- for issuing ForeignCurrency Convertible Bonds (FCCB). It appears that the learnedTribunal has also remanded the matter on this issue. We just quotethe relevant portion of the judgment and order of the learned Tribunalas follows: “In this view of the matter, we modify the directions of theCommissioner of Income-tax and direct the Assessing Officerto examine the issue of allowability or otherwise of theexpenses incurred by the assessee in connection with theissue of FCCBs, keeping in view the ratio of the variousdecisions on this aspect, in accordance with law and aftergiving reasonable opportunity of hearing to the assessee.” 9. On this issue also, we do not find any illegality or infirmity inthe judgment and order of the learned Tribunal. We hold that there is no element of law involved in this matter. 10. Accordingly, the appeal is dismissed. There will be noorder as to costs. Miscellaneous Petitions pending, if any, shall stand closed. _________________ K.J. SENGUPTA, CJ Date: 23-07-2013YCR _________________ K.C. BHANU, J