Saumabha Dasgupta v. The Commissioner Of Income Tax (Appeal) – 6, Kolkata & Anr

ITA/30/2022IA No.GA/2/2020GA/3/2020IN THE HIGH COURT AT CALCUTTASpecial Jurisdiction (Income Tax)ORIGINAL SIDE SAUMABHA DASGUPTAVERSUS THE COMMISSIONER OF INCOME TAX (APPEAL) – 6, KOLKATA & ANR. BEFORE The Hon’ble Justice HARISH TANDONThe Hon’ble Justice PRASENJIT BISWASDate: 5[th] July, 2023 AppearanceMr. Raghunath Das, AdvocateMs. Monalisa Das, Advocate….for the appellantMr. Prithu Dudheria, Advocate…for the respondents The Court: This is virtually a second round of litigation beforethis Court, assailing an order of Income Tax Appellate Tribunal, KolkataBench “SMS” Kolkata dismissing the appeal filed by the assessee/petitionerpertaining to the assessment year 2009-10. While filing the income taxreturn, the petitioner disclosed the income and further deducted theamount of interest paid on personal loan and other loans. At the time ofscrutiny, it was found that substantial amount of money was deposited incash with the savings bank account by the petitioner who is admittedly amedical practitioner and purchased a CT Scan machine for his professionor business. The department was of the view that the personal loan cannotbe equated with the business loan where the interest is an allowable expenditure and added the component of the interest to the income andmade an assessment of the tax payable by the petitioner. The Appellate Tribunal concurred with the decision of theassessing officer, which was further challenged by the petitioner before theTribunal. The Tribunal succinctly jotted down the core issues involvedtherein. The first issue relates to a deduction of the interest paid on thepersonal loan and the second one relates to depreciation to the extent of40% over the life saving machine (CT Scan) under Section 32 of the IncomeTax Act. Both the assessing officer as well as the appellate authorityproceeded on the ipsi dixit of the petitioner as it claimed the depreciation of15% in the relevant assessment year. Though the contention appears to beat a subsequent stage of a proceeding that he is entitled to depreciation tothe extent of 40% of life saving machine, the Tribunal being confrontedwith the aforesaid two issues proceeded to hold that since the depreciationto the extent of 40% is permissible for a life saving machine, which in fact,has been allowed for MRI, i.e. Magnetic Resonance Imaging, there is nojustification in disallowing the similar depreciation in relation to CT Scanmachine as both functions on tomography. It is held by the Tribunal thatCT Scan machine is an earlier life saving machine but with theadvancement of the technology the MRI machine has replaced andtherefore, both can be equated on the same pedestal. The Tribunal furtherheld that though the petitioner claimed 15% depreciation on the same life saving machine but law permits depreciation to the extent of 40% and itwould be unjust and unfair to an assessee if the assessing officer allowedthe depreciation as claimed before ignoring the statutory provision. Onboth counts, the Tribunal was of the view that the assessing officer as wellas the appellate authority committed error in not permitting the interestpaid by the petitioner on personal loan which was admittedly used forbusiness purposes and depreciation to the extent of 15% which in factshould be allowed to the extent of 40% under Section 32(1) of the IncomeTax Act. The department assailed the order of Tribunal before this Courtand the said appeal was disposed of modifying the order relatable to thepercentage of depreciation without interfering and touching upon the meritand the other part of the order of the Tribunal. This Court held that thepetitioner is entitled to depreciation to the extent of 15% only instead of40% as allowed by the Tribunal which obviously led the matter to go beforethe assessing officer for revising the assessment in the light of thejudgment of this Court. The department assailed the order of Tribunal before this Courtand the said appeal was disposed of modifying the order relatable to thepercentage of depreciation without interfering and touching upon the meritand the other part of the order of the Tribunal. This Court held that thepetitioner is entitled to depreciation to the extent of 15% only instead of40% as allowed by the Tribunal which obviously led the matter to go beforethe assessing officer for revising the assessment in the light of thejudgment of this Court. The second round of litigation started after revised assessmentorder has been issued by the assessing officer and claiming the amount oftax liable to be paid by the petitioner for the aforesaid assessment year. Atthe first blush, it is contended by the petitioner that the moment theTribunal has interfered with the order of the assessing officer as well as the appellate authority in disallowing the interest paid on the personal loan asallowable expenditure, the assessing authority cannot include the saidamount in assessing the taxable income for the purpose of ascertaining thetax to be paid thereupon. There is no dispute that the depreciation to theextent of 15% was allowed instead of 40%. The petitioner challenged thenotice of demand as well as the revised assessment order taking a furtherplea that the assessing officer not only included the interest paid on thepersonal loan but also included the interest paid on the other loan whichwas also disallowed in an earlier litigation. However, the Tribunal hasassessed the said part of the order and therefore, instead of Rs.26 lakhsand odd, an amount of Rs.59 lakhs should be excluded from thecomputation of the taxable income of the petitioner. According to thepetitioner, both the interest on the personal loan and on the other loanwere the subject matter of challenge in an earlier round of litigation and themoment the Tribunal has interfered with the order of the assessing officeras well as the appellate authority in declining to allow the aforesaid amountas allowable expenditure, the authority cannot include the said amount inthe income of the petitioner for the relevant assessment year. We have anxiously perused the order passed by the assessingofficer as well as the Appellate Tribunal in the first round of litigationwherefrom it appears that the assessing officer was of the view that themoment the personal loan has been taken by the petitioner, the interest paid thereupon cannot be treated as an allowable expenditure in thebusiness run by the petitioner as it cannot be equated with the businessloan. The Tribunal, however, did not concur with the aforesaid finding thatonce the said amount is used for business, the nomenclature loses itsimportance. Therefore, both the authorities ought not to have disallowedthe interest paid on the personal loan and directed the said amount to beincluded as allowable expenditure. The computation for assessment wouldalso reveal that the amount of interest paid on personal loan has beentaken off from the taxable income and thereafter, the assessing officerproceeded to revise the assessment order in the light of the directionspassed by this Court in an earlier appeal. The moment the point does notappear to have been taken by the petitioner in an earlier round of litigationwhich was restricted to a specific issue, it is not open to the petitioner toagitate such point before the assessing officer whose task is to revise theassessment order in tune with the direction of the High Court. In theappeal, our endeavour has failed to find in the assessment order that theamount of interest paid on the personal loan has been included within thegross income of the petitioner and therefore, the contention of thepetitioner does not appear to be logical or sound both on facts and law.However, we notice that while computing the income andcalculating the tax to be paid, the authority had taken note of a sum ofRs.97,000/ and odd having paid as TDS. The manner in which the calculation has been made appears to us that after determining the totaltaxable income, the tax is assessed and/or determined and the statutorypenalty and/or interest leviable thereupon were also added thereto and thetotal amount arrived was subject to the deduction of amount of TDSdeposited with the authority. The manner in which the calculation hasbeen made as well as the mode of such calculation is faulty one for thereason that penalty and interest appears to have been charged even on theamount of TDS which, in our opinion, is not justified. The proper mode ofcalculation is that after ascertaining the total amount of tax payable on thetotal amount of taxable income, the authority must deduct the amount ofTDS and thereafter proceed to impose penalty and tax on the basis of thestatutory provisions. To that extent, the order is modified. The assessingofficer is directed to revise the assessment order in the light of theobservations/directions made hereinabove and it goes without saying thatthe same will be done within two weeks from the date of communication ofthis order. The appeal and the connected applications are disposed of. [HARISH TANDON, J.] [PRASENJIT BISWAS,J.]