The Commissioner Of Income Tax, Patiala v. The Punjab State Industrial Development Corporationchandigarh

IN THE HIGH COURT OF PUNJAB AND HARYANAAT CHANDIGARH. ITR No. 8 of 1995 (O&M)Date of decision:4.11.2009 The Commissioner of Income Tax, Patiala -----Petitioner Vs. The Punjab State Industrial development CorporationChandigarh ----Respondent CORAM:- HON'BLE MR JUSTICE ADARSH KUMAR GOELHON'BLE MR.JUSTICE GURDEV SINGH Present: Ms. Urvashi Dhugga, Advocate for the revenue. Adarsh Kumar Goel,J. 1.Following questions of law have been referredfor opinion of this Court by the Income Tax AppellateTribunal, Chandigarh Bench, Chandigarh arising out of itsorder dated 18.1.1994 in ITA No.717/Chandi/1988,relating to assessment year 1985-86 :- “1. Whether on the facts and in thecircumstances of the case, the ITAT was right in law in upholding the order of the CIT (A) deleting the addition made by the AO onaccount of waiver of interest in the case ofM/s Punjab Tenneries Limited, PunjabScooters Limited and M/s Punjab Spinningand Weaving Mills, Bhatinda (Shri OPMittal) Punjab Maize Products and PunjabGovernment? 2. Whether on facts and in the circumstances of the case, the ITAT was right in law inupholding the order of the CIT(A) deletingthe addition made by the AO on account ofinterest remitted and entries reversed by theassessee amounting to Rs.24,48,161/-? 3. Whether on facts and in the circumstances of the case, the ITAT was right in law inupholding the order of the CIT(A) directingthe AO to allow opportunity to the assesseefor creating further reserve which falls shortof admissible deduction under section 36(1)(viii) of the IT Act?” 2. The assessee is a Public Sector Undertaking and raised certain issues for the assessment year in question.The Assessing Officer rejected the view point of theassessee on the issue of claim of deduction for waiver of interest in favour of sister concerns. The Assessingofficer also made additions on account of interest remittedof which entries were reversed by the assessee. Third issuerelates to giving of opportunity for creating further reserveto the extent permissible under section 36(1)(viii) of theAct.3.The Assessing Officer held that interest liability had not crystalised in the year under consideration and,therefore, the assessee could not claim deduction. The CIT(A) following the order of the Tribunal for the assessmentyear 1977-78 in the case of the assessee and also his owndecision for some of the assessment years, granted relief tothe assessee. The Tribunal upheld the order of the CIT(A)on the basis of its earlier orders. 4.We have heard learned counsel for the revenue. Re: (i) & (ii) 5. The Assessing Officer disallowed the waiver of interest on the ground that for the period to which waiverrelated, income had already been taxed, as mercantilesystem of accountancy had been employed. The CIT (A)followed the earlier orders which have not been annexed with the paper book. It appears that the basis for thedecision of CIT(A) is that since interest was waived in theyear in question, the assessee could claim deduction. Sincethe revenue has neither filed the orders for the earlierassessment years, which have been followed nor it hasbeen shown that the said orders have been interfered with,the questions have to be answered against the revenue andin favour of the assessee to maintain consistency.Re: (iii) 6.In respect of this question, the finding of theTribunal is as under:- interest on the ground that for the period to which waiverrelated, income had already been taxed, as mercantilesystem of accountancy had been employed. The CIT (A)followed the earlier orders which have not been annexed with the paper book. It appears that the basis for thedecision of CIT(A) is that since interest was waived in theyear in question, the assessee could claim deduction. Sincethe revenue has neither filed the orders for the earlierassessment years, which have been followed nor it hasbeen shown that the said orders have been interfered with,the questions have to be answered against the revenue andin favour of the assessee to maintain consistency.Re: (iii) 6.In respect of this question, the finding of theTribunal is as under:- “17. The last effective ground is against the directionof the learned CIT(A) not to restrict the allowanceunder section 36(1) (viii) upto the reserve created.The assessee is admittedly approved by the centralGovernment for purposes of section 36(1) (viii) of theact. During the year under consideration, the assesseecorporation claimed deduction under the said section.The assessee created reserve on the basis of bookprofits. The assessee corporation was, however,entitled to a higher deduction under section 36(1)(viii) for which the reserve already created was notsufficient. The learned CIT(A) therefore directed theassessing officer to afford an opportunity to theassessee to create further reserve. It was furtherobserved by him that a similar issue had been decided in favour of the assessee in the appealfor assessment year 1983-84.” 7. Learned counsel for the revenue has not shown that the order for the earlier assessment year which hasbeen followed, has not attained finality nor any error hasbeen shown in the view that reserve to the extent stipulatedunder section 36(1)(viii) could be duly allowed to theassessee. Learned counsel states that she tried to seekinformation from the department but has not been able toget. 8.Accordingly, this question is also answeredagainst the revenue and in favour of the assessee. 9.The reference is disposed of accordingly. (Adarsh Kumar Goel)Judge November 4, 2009‘gs’ (Gurdev Singh)Judge