Principal Commissioner Of Income Tax-3, Kolkata v. M/S. Fairluck Commercial Co. Limited

Form No.(J2) IN THE HIGH COURT AT CALCUTTASPECIAL JURISDICTION (INCOME TAX)ORIGINAL SIDE Present : THE HON’BLE JUSTICE T.S. SIVAGNANAM A N D THE HON’BLE JUSTICE HIRANMAY BHATTACHARYYA IA NO.GA/2/2017(Old.GA/1676/2017) ITAT/189/2017 PRINCIPAL COMMISSIONER OF INCOME TAX-3, KOLKATA -Versus- M/S. FAIRLUCK COMMERCIAL CO. LIMITED For the Appellant: Mr. Radhamohan Roy, Adv. For the Respondent: Mr. A. K. Dey. Adv. Mr. Sanjoy Bhowmick, Adv. Heard on : 06.12.2021 Judgment on : 06.12.2021 T. S. SIVAGANANAM, J. : The appeal filed by the revenue underSection 260A of the Income Tax Act, 1961 (the ‘Act’ in brevity) isdirected against the order dated 6[th] May, 2016 passed by the IncomeTax Appellate Tribunal, Kolkata “A” Bench (the ‘Tribunal’ inshort) in ITA No.1427/Kol/2013 for the assessment year 2007-08. The revenue has raised the following substantial questionsof law for consideration: “(a) Whether in the facts and circumstances of thecase, the learned Income Tax Appellate Tribunal, “A” Bench,Kolkata is right in law and fact in holding that the interestclaimed by the respondent/Assessee was automatically eligiblefor deduction under Section 36(1)(iii) of the Income Tax Act,1961?” (b) Whether in the facts and circumstances of thecase, the learned Income Tax Appellate Tribunal, “A” Bench,Kolkata is right in law and fact in holding that theborrowings as made by the respondent/Assessee were made forthe purpose of lending business and once it was proved thatthe interest payments were made thereon, the same shallautomatically be eligible deduction under Income Tax Act,1961?” We have Mr. Smarajit Roychowdhury, learned counsel for theappellant/revenue and Mr. A.K. Dey, learned counsel for therespondent/assessee. Learned counsel appearing for the respondent/assesseesubmitted that this appeal cannot be pursued by the revenue as itis below the threshold limit of Rs.1 crore prescribed by thecircular issued by the Central Board of Direct Taxes (CBDT).Learned counsel for the respondent does not have instruction onthe aspect. Therefore, we proceed to hear out the appeal anddecide the matter on merits. The question involved was whether the assessing officerwas right in disallowing the assessee’s claim on interestexpenditure on the facts and circumstances of the case. Thetribunal noted that the assessee is a non-banking financialcompany and had advanced loan to several parties and derivedinterest income out of the lending made in the earlier years aswell as during the year under consideration i.e (A.Y. 2007-08).Further, the tribunal accepted the stand taken by the assesseethat the assessee being a non-banking financial company has tominutely follow prudential norms prescribed the Reserve Bank ofIndia on revenue recognition. Further, after going through thefacts of the case, the tribunal noted that the assessee has notgiven interest free advance to any of the parties at the time ofgranting of loan and this is only because of the fact that non-payment of the prescribed number of instalments, the assessee wasforced, as per law, to stop recognition of interest income onaccrual basis. Further, the tribunal on facts noted that theborrowings made by the assessee had been utilized for advancingfunds to various parties. Thus, the tribunal concluded that theborrowings were made by the assessee for the purpose of itslending business. Having been satisfied with the facts of thecase, the tribunal held that the assessee shall be automaticallyeligible for protection under Section 36(1)(iii) of the Act. The tribunal also followed the decision of this Court in the case ofCaldern Pharmaceuticals Ltd. vs. CIT reported in 265 ITR 244(Cal). With the above factual finding, the appeal filed by theassessee was allowed. tribunal also followed the decision of this Court in the case ofCaldern Pharmaceuticals Ltd. vs. CIT reported in 265 ITR 244(Cal). With the above factual finding, the appeal filed by theassessee was allowed. We find that the tribunal being the last fact findingauthority has re-appreciated the facts and granted relief. Wefind that there is no question of law much less substantialquestion of law arising for consideration in this appeal.Accordingly, the appeal fails and is dismissed.The connected application for stay (IA No.GA/2/2017, oldNo.GA/1676/2017)) also stands closed. (T.S. SIVAGNANAM, J.) I agree. (HIRANMAY BHATTACHARYYA, J.) A/s./bp