Itxa2229.11 v. Deputy Commissioner Of Income Tax & Anr., Reported In (2009) 308 Itr 417 (Bom.), In Support Of This Question

bsb IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 2229 OF 2011 The Commissioner of Income Tax-1, Mumbaiv/sM/s.Weizmann Ltd. … Appellant … Respondent Mr.P.C. Chhotaray for the appellant. Mr.U.D. Mistry i/by Mr.A.K. Jasani for the respondent. CORAM: S.C. DHARMADHIKARI & G.S. KULKARNI, JJ. DATED : 15TH APRIL, 2014 P. C. : 1This appeal challenges the order of the Income Tax Appellate Tribunal dated 7[th] March, 2011 passed in Income Tax Appeal Nos.4161/Mum/2008 and 4603/Mum/2008 for the assessment year 2004-2005. 2It is alleged that the assessee, the respondent before us, is engaged in the business of manufacture and export of textiles, financial services like lease, financing, money lending, etc. 3It is contended that the Assessing Officer noted that the respondent company claimed that the expenditure incurred on account of payment of lease rental of Rs.23,31,963/- to a sister company in respect of one 250 K.W. Windmill be taken into consideration and the deduction be allowed. 4The Assessing officer noted that the said asset was purchased in the assessment year 1997-1998. It was sold back to the manufacturer in assessment year 1998-1999. The manufacturer sold it to the sister company of the respondent from whom the respondent took back the windmill on lease. Thus, the entire transaction is sham and bogus and, therefore, the claim was disallowed rightly. Further the assessee company borrowed money and which was treated as unsecured loan carrying interest at 15% per annum and also advanced certain loans carrying 14% to 15% interest per annum. The extent of interest was disallowed on the ground that borrowing at higher rate of interest have been diverted as interest bearing advances at lower rate. Mr.Chhotaray, therefore, submits that all the three questions and which are framed are substantial questions of law and, therefore, the appeal be admitted. 5It is then contended that even the third question with regard to the loan taken from ING Vysya Bank is a substantial question of law because of the view taken by the Assessing Officer that Section 41(1) would apply to this reduction of loan liability. That should be accordingly brought to tax. The argument is that, the assessee's contention that Section 41 will have no applicability, has been erroneously accepted. Mr.Chhotaray relied on the judgment of the Division Bench of this Court in the case of Solid Containers Ltd. v/s Deputy Commissioner of Income Tax & anr., reported in (2009) 308 ITR 417 (Bom.), in support of this question. 6After having heard the learned counsel appearing for both sides and perusing the order of the Income Tax Appellate Tribunal which decides two appeals, one by the revenue and the other by the assessee, we find that, insofar as the first question is concerned, the Tribunal has noted the rival contentions. It has also found that the disallowance of interest expenditure was not justified. The Commissioner of Income Tax (Appeals) has rightly allowed the claim of the assessee. The finding of fact is that there is no dispute that the assessee had sufficient interest free funds available. Merely giving advances at the rate lower than the rate on which borrowings are made, cannot justify disallowance is another finding of fact which has been rendered at paragraph 25 of the order under challenge. 7In these circumstances, we are of the view that the question as framed with regard to the disallowance made by the Assessing Officer of Rs.4,81,022/- does not raise a substantial question of law. The findings of facts are consistent with the materials placed on record. are made, cannot justify disallowance is another finding of fact which has been rendered at paragraph 25 of the order under challenge. 7In these circumstances, we are of the view that the question as framed with regard to the disallowance made by the Assessing Officer of Rs.4,81,022/- does not raise a substantial question of law. The findings of facts are consistent with the materials placed on record. 8As far as the questions framed at paragraph 4 (D) and (F) on page No.5 of the paper book are concerned, we are of the opinion that the same findings have been questioned in the case of the very assessee by the department/revenue and by an order dated 29[th ]November, 2010 delivered in Income Tax Appeal No.3219 of 2009, this Court held that such questions cannot be said to be substantial questions of law. For the reasons assigned in that order, we are of the opinion that question No.(D) is not a substantial question of law. So far as question No.(F) is concerned, the controversy stands concluded by the order passed in Income Tax Appeal No.3704 of 2010 in the case of The Commissioner of Income Tax-3 v/s M/s.Xylon Holdings Pvt. Ltd. For the reasons assigned by the Division Bench in that order, we are of the opinion that the findings of facts rendered by the Tribunal and specifically in paragraphs 34 to 37 of the impugned order, do not raise any substantial question of law, particularly, in the light of the Division Bench judgment in the case of M/s.Xylon Holdings Pvt. Ltd. (supra). 9As a result of the above discussion and finding that it will not be possible to take a different view than that taken by the earlier Division Benches of this Court, we refrain from examining the submission of Mr.Chhotaray based on the difference of opinion noted by a Division Bench of the Punjab and Haryana High Court in the case of Commissioner of Income Tax v/s Rockman Cycle Industries Pvt. Ltd., reported in (2010) 326 ITR 291 (P&H). We are of the opinion that the issue may have been referred to a larger Bench in the Punjab and Haryana High Court, but by that itself will not enable us to ignore and brush aside the binding order of the Division Benches of this Court. The appeal, therefore, fails and is dismissed. No costs. (G.S. KULKARNI, J.) (S.C.DHARMADHIKARI, J.)