Taxap/443/2019 Of The Principal Commissioner Of Income Tax-1 v. M/S Chiripal Industries Ltd

C/TAXAP/443/2019 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD R/TAX APPEAL NO. 443 of 2019 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE J.B.PARDIWALA and HONOURABLE MR.JUSTICE A.C. RAO ==========================================================1 Whether Reporters of Local Papers may be allowed to see the judgment ?2 To be referred to the Reporter or not ?3 Whether their Lordships wish to see the fair copy of the judgment ?4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ?==========================================================THE PRINCIPAL COMMISSIONER OF INCOME TAX-1 VersusM/S CHIRIPAL INDUSTRIES LTD. ==========================================================Appearance:MRS MAUNA M BHATT(174) for the Appellant(s) No. 1 for the Opponent(s) No. 1========================================================== CORAM: HONOURABLE MR.JUSTICE J.B.PARDIWALAandHONOURABLE MR.JUSTICE A.C. RAO Date : 22/07/2019 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE J.B.PARDIWALA) This Tax Appeal under Section 260A of the Income Tax Act, 1961, is at the instance of the Revenue and is directed against the order passed by the Income Tax Appellate Tribunal, Ahmedabad 'C' Bench, Ahmedabad, in the ITA No.2092/Ahd/2015 for the A.Y.2010-11 dated 10/12/2018 2.The Revenue has proposed the following questions of law : "(A) Whether the Appellate Tribunal has erred in law and on facts in deleting the disallowance of Rs 20,11,387/- made under section 35 D of the Act in respect of preliminary expenses ? (B) Whether the Appellate Tribunal has erred in law and on facts deleting the disallowance of Rs 2,10,000/- made under section 36(1) (iii) of the Act on account of interest free funds given ignoring that assessee failed to prove that such funds were given for business purposes ?" (C) Whether the Appellate Tribunal has erred in law and on facts in deleting the disallowance of Rs 54,50,016 made under section 14 A of the Act read with rule 8D on the ground that no exempt income is earned ?" 3.So far as the first question as proposed by the Revenue is concerned, the findings recorded by the Tribunal are as under : " During the course of assessment proceedings, the assessing officer has disallowed a sum of Rs 25,69,571/- out of preliminary expenses on the ground that int eh assessment year 2008-2009 similar expenses were disallowed. We notices that assessee has claimed preliminary expenses of Rs 23,17,067/- on the basis of (C) Whether the Appellate Tribunal has erred in law and on facts in deleting the disallowance of Rs 54,50,016 made under section 14 A of the Act read with rule 8D on the ground that no exempt income is earned ?" 3.So far as the first question as proposed by the Revenue is concerned, the findings recorded by the Tribunal are as under : " During the course of assessment proceedings, the assessing officer has disallowed a sum of Rs 25,69,571/- out of preliminary expenses on the ground that int eh assessment year 2008-2009 similar expenses were disallowed. We notices that assessee has claimed preliminary expenses of Rs 23,17,067/- on the basis of earlier years expenses and assessee has incurred Rs 12,61,518/- during the year under consideration and claimed 1/5 ie Rs 25,2504/- as preliminary expenses. The assessee has incurred these expenses as IPO expenses of rs 52,50,805/- in f.Y. 2007-08 which was ot allowed by the assessing officer in assessment year 2008-2009 by citing the decision of Hon'ble Gujarat High Court in the case of M/s Varli Textile Ltd. and decision of HOn'ble Supreme Court int he case of Brook Bond India Ltd. During the year under consideration, the assessee has again claimed such expenses under the heard IPO to the amount of Rs 12,62,518/- and the assessing officer has disallowed the entire claim under section 35d of t he Act. In this connection, we have noticed that claim of the assessee as 1/5 of Rs 55,56,127/- releated to expenses IPO F.Y. 2007-2008 and 2009-10, this deduction was allowed. We have also noticed that 1/5 expenses of Rs 52,50,805/- to the amount of Rs 1111226/- was allowed by the CIT(A) in assessment year 2008-2009 and 2009-10. Therefore, we justify the decision of learned CIT(A) to allow the claim of preliminary expenses to the amount of rs 20,11,387/- consisting of Rs 11,11,226+9,00,161. After perusal of the above facts, we observed that claim of the assessee to the amount of Rs 11,11,226/- was never disallowed in any of the earlier years and similarly for the assessment year 2008-09 abd 2010-11the learned CIT(A) had allowed the deduction of Rs 900161/- in the light of the fact and findings reported int he decision of the learned CIT(A), we do not find any merit in the ground of appeal of the revenue therefore the same is dismissed. 4.So far as the second question as proposed by the Revenue is concerned, the findings recorded by the Tribunal are as under : " During the course of assessment proceedings on perusal of the details of loan and advances the assessing officer noticed that assessee has shown Rs 20 lacs as outstanding receivable from M/s Red Event India Pvt. Ltd. He observ4ed that during the assessment years 2008-09 and 2009-10 the assessing officer has given the findings that amount of advances to M/s Red Event Pvt. Ltd. was interest free advances and no purchases or services were obtained from the said party by the assessee. Accordingly the assessing officer has treated this amount advanced for non business purposes. Therefore, the assessing officer has charged interest @ 12% to the amount of Rs 2,10,000/- on the said advances and added the same to the total income of the assessee." 5.The third question, as proposed by the Revenue, is squarely covered by a decision of this Court rendered in the Tax Appeal No. 238/2019, decided on 9.7.2019. 6.Having heard Mr. Bhatt, the learned senior standing counsel appearing for the Revenue, and having gone through the materials on record, we are of the view that the Appeal is substantially on facts, rather than any question of law. We do not find any error, much less an error of law, in the impugned order passed by the Tribunal. 7.In the result, this Tax Appeal fails and is hereby dismissed. (J. B. PARDIWALA, J) (A. C. RAO, J)