The Commissioner Of Income-Tax-3, Mumbai v. Indian Rayon And Industries Limited, Mumbai

1 IN THE HIGH COURT OF JUDICATURE AT BOMBAYORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO.429 OF 2009 The Commissioner of Income-tax-3, Mumbai Versus Indian Rayon and Industries Limited, Mumbai ..Appellant. ..Respondent. Mr.Vimal Gupta for the appellant.Mr.Niraj Sheth i/by Dave & Girish & Co. for the respondent. CORAM : Dr.D.Y. Chandrachud & J.P. Devadhar, JJ. DATE : 8 June, 2010. P.C. : 1.Eight questions of law have been formulated in the appeal by the Revenue against the decision of the Income Tax Appellate Tribunal dated 30 July 2008 pertaining to the assessment year 1994-1995. During the course of the submissions however the learned Counsel appearing on behalf of the revenue has urged submissions only in respect of questions (d) and (g) since the Court is informed that the other questions are covered against the Revenue by the decision of this Court dated 25 March 2010 in Income Tax Appeal (L) No.1239 of 2008 pertaining to the same assessee. Questions (d) and (g) are as follows: (i)Whether on the facts and in the circumstances of the case and in law the Tribunal was right in holding that the Assessee Company was entitled to a deduction u/s 35D of the Income-tax Act in respect of issue expenses of Rs.2,47,42,890/- claimed by the Assessee Company for issue of non-convertible and convertible debentures by the Assessee Company ?law the Tribunal was right in holding that the Assessee Company was entitled to a deduction u/s 35D of the Income-tax Act in respect of issue expenses of Rs.2,47,42,890/- claimed by the Assessee Company for issue of non-convertible and convertible debentures by the Assessee Company ? (ii)Whether on the facts and in the circumstances of the case and in law the Tribunal was right in allowing the claim of the Assessee Company of allowance of expenditure amounting to Rs.1,52,96,120/- incurred by the Assessee Company on issue of non-convertible debentures ?law the Tribunal was right in allowing the claim of the Assessee Company of allowance of expenditure amounting to Rs.1,52,96,120/- incurred by the Assessee Company on issue of non-convertible debentures ? 2.In so far as first of the aforesaid two questions is concerned, the Assessing Officer by his order dated 26 March 1997 held that the deduction under Section 35D was not allowable for assessment year 1994-1995 since the condition subject to which the deduction is to be allowed had not been fulfilled during that year. The Assessing Officer however held that the deduction would be allowable from the year in which the assessee’s project commenced production. The Commissioner (Appeals), on the other hand came to the conclusion that the provisions of Section 35D were not applicable. The Tribunal purported to rely on its own order for assessment year 1988-1989 in ITA No.1638/B/1993 as concluding the issue in favour of the assessee. 3.During the course of the hearing of these proceedings, Counsel appearing on behalf of the assessee has drawn the attention of the Court to the fact that the reference made to the earlier order of the Tribunal suffers 3.During the course of the hearing of these proceedings, Counsel appearing on behalf of the assessee has drawn the attention of the Court to the fact that the reference made to the earlier order of the Tribunal suffers from an inadvertent error and the correct reference should have been to the order of the Tribunal for assessment year 1989-1990 in CO 1816/Bom/93. Be that as it may, it has also been stated on behalf of the assessee during the course of hearing that for assessment year 1994-1995, the assessee did not fulfill the requirements contained in Section 35D and that consequently the claim for deduction for that year would not be pressed. Learned Counsel has however relied on a judgment of a Division Bench of this Court in Commissioner of Income Tax V/s. Mahindra Ugine & Steel Company Limited[1] in support of the finding of the Assessing Officer that the provisions of Section 35D were as such not inapplicable. Hence, relying upon the judgment it has been urged that the only question was as to whether the conditions laid down in Section 35D were fulfilled and the assessee concedes before this Court that for assessment year 1994-1995 those conditions were as a matter of fact not fulfilled. In terms of the statement, which has been made on behalf of the assessee that the conditions requisite to the applicability of Section 35D were not fulfilled for assessment year 1994-1995, we hold that the assessee shall not be entitled to the benefit of a deduction under Section 35D for assessment year 1994-1995. 3.In so far as the second question is concerned, that relates to the allowability of the expenditure incurred by the assessee on the issue of non-convertible debentures. In para 41 of its order, the Tribunal has noted that the issue stands decided in favour of the assessee by the decision of the Tribunal in the case of the same assessee for assessment years 1988-89 and 1989-1990. Counsel appearing on behalf of the Revenue is unable to demonstrate before this Court at the hearing that the order of the Tribunal has been disturbed. In the circumstances, we do not find that any substantial question of law would arise in so far as the second question is concerned. 4.In view of the aforesaid discussion, we dispose of the appeal and modify the order of the Tribunal to the aforesaid extent. In the circumstances of the case, there shall be no order as to costs. (J.P. Devadhar, J.) (Dr.D.Y. Chandrachud, J.)