Ms. Linhares Placed Reliance On The Decision Of The Apexcourt In The Case Of Commissioner Of Income-Tax v. Section 145(2) Has Been Amen

1 txa109-17-28-2-18 Santosh IN THE HIGH COURT OF BOMBAY AT GOA TAX APPEAL NO. 109 OF 2017 The Principal Commissioner of Income Tax, Panaji.V/s.Milroc Good Earth PropertyAnd Developers LLP, 501, 5th Floor, Panaji, Goa. ….. Appellant …... Respondent. Ms. Susan Linhares, Junior Central Govt. Standing Counsel for the appellant. Mr. A. Kulkarni, with Ms. Tanvi Kamat Ghanekar, Advocate for the respondent. Coram : N.M. Jamdar & Prithviraj K. Chavan, JJ. Date : 28 February 2018. P.C.: By this appeal, the Revenue, through the PrincipalCommissioner of Income Tax, has challenged the order passed by theIncome Tax Appellate Tribunal, Panaji, dated 22 November 2016. 2. The Respondent-Assessee is in business of developmentand construction of residential buildings. In the year 2013, theRespondent-Assessee filed return of income for the year 2012-13, 2 txa109-17-28-2-18 declaring a total income of 7748250/-. The case was selected for₹scrutiny by the Assessing Officer and a notice was issued on 6 August2013 under Section 143(2) of the Income Tax Act. Another noticewas given in view of the change of the Assessing Officer. Theassessment under Section 143(3) was finalised, determining the totalincome at 24027928/-, after making addition of 15927795/-₹₹since interest expenditure was included in closing of work in progressand addition of 351883/- was made in respect of sponsorship₹expenses to the returned income. The Assessing Officer, accordingly,passed an order on 27 March 2015. 3.The Respondent-Assessee filed an appeal before theCommissioner of Income Tax (Appeals). The Commissioner ofIncome Tax, on the question of disallowance of Interest paid on loansof 15927795/- after considering the material on record, concluded₹that the bank overdraft was taken for the purpose of workingrequirement and was not utilized for construction work alone, butalso for other expenses such as advertisements and publicity, businesspromotion, brokerage, commission (sales), etc. The Commissioneralso observed that the valuation of stock and work in progress wasdone as per the Accounting Standards issued by the Institute ofChartered Accountants of India. The Commissioner accordinglyallowed the appeal of the Respondent-Assessee by order dated 3 txa109-17-28-2-18 19 May 2016 and confirmed the disallowance to the extent of ₹50000/-. 4.The Revenue filed an appeal before the Income TaxAppellate Tribunal (ITAT), Panaji and the Tribunal dismissed theappeal by an order dated 22 November 2016 and confirmed thefindings of the Commissioner (Appeals). 5.We have heard Ms. Susan Linhares, learned StandingCounsel for the Revenue and Mr. A. Kulkarni, learned Counsel forthe Respondent. 6.Ms. Linhares, the learned Standing Counsel for theAppellant urged that the appeal involves the question of law, namelywhether the Tribunal has ignored the fact that the Assessee has takenloan for development and construction of residential buildings andthe findings that the loan was taken for working capital requirementcannot be directly attributed to the work in progress, is incorrect.Mr. Kulkarni, the learned Counsel for the Respondent-Assessessubmitted that the question raised is a question of fact and noquestion of law arises. 7.We have gone through the orders passed by the AssessingOfficer, the Commissioner (Appeals) and the Tribunal. The Tribunal 4 txa109-17-28-2-18 6.Ms. Linhares, the learned Standing Counsel for theAppellant urged that the appeal involves the question of law, namelywhether the Tribunal has ignored the fact that the Assessee has takenloan for development and construction of residential buildings andthe findings that the loan was taken for working capital requirementcannot be directly attributed to the work in progress, is incorrect.Mr. Kulkarni, the learned Counsel for the Respondent-Assessessubmitted that the question raised is a question of fact and noquestion of law arises. 7.We have gone through the orders passed by the AssessingOfficer, the Commissioner (Appeals) and the Tribunal. The Tribunal 4 txa109-17-28-2-18 and the Commissioner (Appeals) had, after considering the materialbefore them, found that no additions were made in the work inprogress, which fact was not controverted by the DepartmentalRepresentative and rather it was conceded by the DepartmentalRepresentative. The Tribunal observed that the Revenue did notcontrovert the contention of the Respondent-Assessee that theamount was advanced keeping in view the commercial expediency.The Tribunal also observed that the Revenue was not able to showthat the inventories were acquired out of borrowings and interest wasto be capitalized keeping in view AS-16, issued by the Institute ofChartered Accountants of India. Further, the Tribunal also notedthat the advances received from the customers by the Assessee were at₹ 68.57 crores, while the closing work in progress was 45.04 crores₹and the advances were higher than the closing work in progress as on31 March 2012. These findings, as rightly contended by the learnedCounsel for the Respondent-Assessee, are purely factual issues. 8.Ms. Linhares placed reliance on the decision of the ApexCourt in the case of Commissioner of Income-tax vs. M/s. BritishPaints India Ltd.,1. We have perused this decision. When thedecision was rendered, the Assessment Years 1963-64 and 1964-65were under consideration. Mr. Kulkarni has placed on record theSection 145 which was applicable to those assessment years. Now,1 1992 Suppl SCC 55 5 txa109-17-28-2-18 Section 145(2) has been amended and contemplates a notification bythe Central Government in respect of the accounting standards to befollowed by the class of assessees. Mr. Kulkarni placed reliance on thedecision of the Apex Court in the case of J.K. Industries Ltd., andanother vs. Union of India and ors.,1 in respect of the accountingstandards. According to Mr. Kulkarni even though the decision isrendered under the Companies Act, the observations have been madewhich are relevant for construing Section 145(2) of the Income-taxAct, 1961. Be that as it may, in the decision of the Apex Court inBritish Paints India Ltd. (supra), itselfthe Apex Court has indictedwhat is profit or trade or business and how it is to be ascertained andthe questions analogous to the same, as involved in the presentappeal, are essentially questions of fact. Both the authorities haverendered a concurrent finding of fact. The learned Standing Counselfor the appellant has not been able to demonstrate as to how thequestion of law will still arise, if the question of fact rendered by boththe authorities are confirmed. The scope of the appeal under Section260A of the Income Tax Act, is well settled. The High Court willentertain an appeal on pure questions of facts rendered on theassessment of evidence. 6 txa109-17-28-2-18 9.and we are only called upon to adjudicate the questions of fact, theappeal cannot be entertained and the same is dismissed. In the circumstances, since no question of law is involved and we are only called upon to adjudicate the questions of fact, the Prithviraj K. Chavan, J. N.M. Jamdar, J.