Law Involved And They Are, As Extracted Above v. Appollo Tyres Ltd

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE P.R.RAMACHANDRA MENON & THE HONOURABLE MR.JUSTICE N.ANIL KUMAR WEDNESDAY,THE 13TH DAY OF MARCH 2019 / 22ND PHALGUNA, 1940 ITA.No. 1099 of 2009 AGAINST THE ORDER IN ITA 1104/DEL/1998 of I.T.A.TRIBUNAL,COCHINBENCH DATED 28-03-2008 APPELLANT/RESPONDENT: THE COMMISSIONER OF INCOME TAXCOCHIN. BY ADV. SRI.CHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENT RESPONDENTAPPELLANT: APPOLLO TYRES LTD.CHERUPUZHPAM BUILDING, SHANMUGHAM ROAD,, KOCHI.BY ADVS.SRI.BINU MATHEWSRI.B.J.JOHN PRAKASHSRI.JOSEPH KODIANTHARA (SR.)SRI.K.M.V.PANDALAI, INCOME TAX DEPARTMENTSRI.MATHEWS K.UTHUPPACHANSRI.TERRY V.JAMESSRI.TOM THOMAS (KAKKUZHIYIL)SRI.V.ABRAHAM MARKOS THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 13.03.2019, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: P.R.Ramachandra Menon, J. This appeal has been preferred by the Revenue, suggesting some questions of law as 'substantial questions of law', as givenbelow:- “1.Whether, on the facts and in the circumstances ofthe case and also in view of the fact that some of theprojects have not started even during the relevantprevious year- i) The ITAT is right in law in directing theAssessing Officer to consider the capitalexpenditure under 35D(1) and (2) of theIncome Tax Act, 1961? ii)Should not the ITAT have upheld theaddition the same as capital expenditure? 2(a) Whether, on the facts and in the circumstances ofthe case and in the absence of the ground withreference to issue of fluctuation in currency rate beingraised before the Commissioner of Income tax(Appeals), the Tribunal is justified in accepting andacting upon the ground raised before it and also inconsidering the issue of fluctuation in the value offoreign currency on merit? (b) Whether, on the facts and in the circumstances ofthe case, the ITAT is right in law in allowingdepreciation on an imaginary amount based on thefluctuation of foreign currency without having an actualpayment and is not the direction/decision against theprovisions of the Income tax Act? (c)Whether, on the facts and in the circumstances ofthe case, and in the light of the wording “for makingthe payment towards the whole or part of the cost ofthe asset” obtained in Sec.43A is not the order of the Tribunal against law.” 2.Heard Sri.Christopher Abraham, the learned Standing Counsel for the appellant as well as Sri.Joseph Markos, the learnedSenior Counsel appearing for the respondent/assessee. 3.The sequence of events disclosed from the proceedingsis that the assessee filed return for the assessment year 1994-95on 30.11.1994, followed by a revised return on 29.3.1996. Theassessment was completed in terms of Section 143(3) of theIncome Tax Act ('Act' in short) by the Assessing Officer as perAnnexure-A order. The assessee sought to challenge the same byfiling an appeal before the Commissioner of Income Tax (Appeals),which led to Annexure-B order dated 31.12.1997; whereby theappeal was allowed in part. To the extent the assessee wasaggrieved of Annexure-B order, they preferred further appealbefore the Tribunal as I.T.A.No.1104/Del/1998. Similarly, theRevenue also preferred an appeal to the extent they wereaggrieved, as I.T.A.No.1209/Del/1998. Both the appeals wereconsidered together and the matter was finalized by the Tribunal asper Annexure-C order dated 28.3.2008. The Revenue has nowcome up before this Court stating that two issues are germane tobe considered by this Court in view of the substantial question of law involved and they are, as extracted above. law involved and they are, as extracted above. 4.The learned Standing Counsel for the Revenue fairlysubmits that the issue with reference to the applicability of Section43A stands already settled in favour of the assessee, by virtue ofthe law declared by the Supreme Court in Oil & Natural GasCorporation Ltd., Dehradun through Managing Director Vs.The Commissioner of Income Tax, Dehradun [(2010) 322ITR 180 (SC)]. This being the position, there cannot be anyfurther dispute in this regard and the surviving issue is only withregard to the one with reference to Section 35D of the Income TaxAct. 5.The assessee had shown the disputed amount as part ofthe revenue expenses, which was not accepted by the assessingofficer in Annexure-A order, holding that it had to be treated as ofcapital in nature and assessed the tax accordingly. The finding andreasoning given by the Assessing Officer was upheld by theCommissioner of Appeals vide Annexure-B order and this made theassessee to have it challenged by way of further appeal before theTribunal. The matter was considered and the proper course tohave it shown as capital in nature was affirmed by the Tribunal.However, it was observed that it was never examined by the authorities whether it would still come within the purview ofSection 35D of the Income Tax Act, so as to have the benefitextended to the assessee. It was in the said circumstance, that the Tribunal thought it fit and proper to have the matter remanded tothe Assessing Officer for consideration in the above line. This madethe Revenue to feel aggrieved, who is before this Court, by filingthis appeal. 6.Sri.Christopher Abraham, the learned Standing Counselfor the Revenue submits that Section 35D of the Income Tax Act isnot at all attracted to the case in question as the assessee hereinhad already abandoned the project and as such, no benefit wasliable to be extended and hence further consideration would onlybe a futile exercise. Section 35D of the Act can be attracted only ifit is in connection with the business and since the assessee doesnot have any such case, no benefit could be claimed under thishead, submits the learned Standing Counsel. 7.After hearing both the sides, this Court finds that nofinding on merit has been arrived at by the Tribunal and it is onlyan 'open remand'. It is quite possible for the Revenue to raise allthe relevant contentions including the 'question of law', if any,before the Assessing Officer, even with reference to Section 35D of the Income Tax Act. No prejudice is caused in any manner. Thatapart, in so far as no finding has been rendered by the Tribunal asto the applicability of Section 35D of the Income Tax Act, it cannotbe said that the appeal involves any 'substantial question of law' soas to call for interference of this Court in exercise of the powerunder Section 260A of the Income Tax Act. The appeal fails. It is dismissed accordingly. Sd/- P.R.RAMACHANDRA MENON, JUDGE Sd/- N.ANIL KUMAR, JUDGE skj/okb //True copy// P.S. to Judge