The Commissioner Of Income Tax v. M/S The Hind Samachar Ltd

IN THE HIGH COURT OF PUNJAB AND HARYANA ATCHANDIGARH. I.T.A. No.11 of 2004 & other connected cases beingI.T.A. No.258 of 2003, I.T.R. Nos.1 and 2 of 2007 and I.T.R. Nos.6 and 7 of 2010Date of decision: 14.10.2010 The Commissioner of Income Tax. Vs. M/s The Hind Samachar Ltd. -----Appellant. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOELHON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:-Mr. Vivek Sethi, Advocatefor the appellant. Mr. Sanjay Bansal, Sr. Advocate withMs. Ashima Bindlish, Advocatefor the respondent. --- ADARSH KUMAR GOEL, J. 1. This order will dispose of I.T.A. No.258 of 2003, ITANo.11 of 2004, I.T.R. Nos.1 and 2 of 2007 and I.T.R. Nos.6 and 7of 2010, as common question is involved in all the cases.2. I.T.A. No.11 of 2004 has been filed by the revenueagainst order dated 25.7.2003 of the Income Tax AppellateTribunal, Amritsar in I.T.A. No.465(ASR)/1997 for the assessmentyear 1994-95 raising following substantial question of law:- “Whether, on the facts and in the circumstances of thecase, the learned ITAT was right in law in dismissing the Department’s appeal thereby confirming thedeletion of Rs.44,32,554/- by the learned CIT(A) onaccount of interest payable on “Agents’ Securities”,ignoring the fact that although the assessee-companyhas been following mercantile system of account but itfailed to record the same in its regular books ofaccount?” 3. The assessee is running a newspaper and claimeddeduction on account of interest payable on the securities withthe assessee. The said deduction was disallowed by theAssessing Officer on the ground that the entries for payment ofinterest were not made in the balance sheet by the assessee.However, on appeal, the CIT(A) upheld the plea of the assessee,by holding that payments could be verified from the profit and lossaccount. The CIT(A) followed order of the Tribunal in the case ofthe assessee dated 26.2.1997 for the assessment year 1988-89,which is subject matter of I.T.R. No.6 of 2010. The findingsrecorded by the CIT(A) are as under:- “10.After considering the rival submissions, we areof the view that there is substantial merit in thearguments advanced by the learned counsel for theassessee in support of the claim made as also theview-point canvassed. No doubt the entries for theamount claimed in the year under consideration hadnot been made in the books of accounts, but it isnobody’s case that the same does not pertain to theprevious year relevant to the assessment year underconsideration. It is also not disputed before us by the Revenue that the sum of Rs.17,79,041/- debited tothe profit and loss account was not claimed as adeduction, but was added to the income of thecompany in the statement of taxable income whichaccompanied the return and it was the sum ofRs.4,32,865/- which was claimed as a deduction. Thedecision of the Hon’ble Supreme Court (supra) reliedupon by the learned counsel and which was followedby their Lordships of the Orissa High Court in thedecision cited by the learned counsel (supra) doessupport the stand that entries in the books ofaccounts in a given case may not be a relevant factor.That apart, the assessee is consistently following thesame method in the two preceding assessment yearsand this has been accepted the Department as theassessment orders for these years would show. If asubsequent assessment year is looked at i.e. 1989-90the assessee has appended the statement of taxableincome at page 19 of the compilation and the sum ofRs.4,58,485/- which according to the learned counselincludes the sum of Rs.4,32,865/- claimed in the yearunder appeal has been added to the profit and thereapparently being no claim for deduction on the sameaccount as would be apparent once again from thesame statement.” 4. The above view was upheld by the Tribunal. 5. We have heard learned counsel for the parties. 4. The above view was upheld by the Tribunal. 5. We have heard learned counsel for the parties. 6. The finding that the assessee was followingmercantile system of accountancy is not under challenge. It hasbeen concurrently found by the CIT(A) and the Tribunal that even though in the balance sheet the interest liability continued to beshown, in the profit and loss account, the interest payable wasdebited. This being the undisputed position, there was nojustification to disallow deduction and the CIT(A) and the Tribunalhave rightly upheld the claim of the assessee. Question isaccordingly answered against the revenue. 7. In view of above, I.T.A. No.258 of 2003, ITA No.11 of2004 are dismissed and question referred in I.T.R. Nos.1 and 2 of2007 and I.T.R. Nos.6 and 7 of 2010 is decided against therevenue. 8. Accordingly, appeals will stand dismissed and thereferences will stand answered against the revenue. 9. A photocopy of this order be placed on the files ofeach connected case. (ADARSH KUMAR GOEL) JUDGE October 14, 2010ashwani ( AJAY KUMAR MITTAL ) JUDGE