The Principal Commissioner Of Income Tax – 3, Kolkata v. M/S. Shalini Properties & Developers Pvt. Ltd

IN THE HIGH COURT AT CALCUTTASPECIAL JURISDICTION (INCOME TAX)ORIGINAL SIDE IA NO.GA/2/2017(OLD NO. GA/3651/2017)InITAT/369/2017 THE PRINCIPAL COMMISSIONER OF INCOME TAX – 3, KOLKATAVS.M/S. SHALINI PROPERTIES & DEVELOPERS PVT. LTD. BEFORE :THE HON’BLE JUSTICE T.S. SIVAGNANAMA N DTHE HON’BLE JUSTICE HIRANMAY BHATTACHARYYADate: January 3, 2022. [Via video conference] Appearance :Mr. Tilak Mitra, Adv.Mr. A. Bhowmik, Adv.… for the appellant/revenue Mr. Chayan Gupta, Adv.Mr. Soumyajyoti Nandy, Adv.… for the respondent The Court : This appeal by the revenue filed under Section260A of the Income Tax Act, 1961 (the Act) is directed against theorder dated 28[th] February, 2017 passed by the Income Tax AppellateTribunal, “A” Bench, Kolkata (the Tribunal) in ITA No. 171/Kol/2013for the assessment year 2009-10. The Revenue has raised the following substantial questionsof law for our consideration :- 1.Whether on the facts and circumstances of the case theLearned Income Tax Appellate Tribunal has erred in lawin allowing of expenditure on account of processing feesamounting to Rs. 13,19,24,685/- on a loan taken by thethird party without considering that the assessee hasfailed to produce copy of the debit note raised by ICICIbank during the assessment proceedings which materialsevidence has not been examined by the LearnedCommissioner of Income Tax (Appeals) as well as by theLearned Income Tax Appellate Tribunal?Learned Income Tax Appellate Tribunal has erred in lawin allowing of expenditure on account of processing feesamounting to Rs. 13,19,24,685/- on a loan taken by thethird party without considering that the assessee hasfailed to produce copy of the debit note raised by ICICIbank during the assessment proceedings which materialsevidence has not been examined by the LearnedCommissioner of Income Tax (Appeals) as well as by theLearned Income Tax Appellate Tribunal? 2.Whether on the facts and circumstances of the case theLearned Income Tax Appellate Tribunal has erred in lawin not considering the provisions of Section 37 of theIncome Tax Act, 1961 where under third party paymentis not for business provisions and not allowable fordeduction?Learned Income Tax Appellate Tribunal has erred in lawin not considering the provisions of Section 37 of theIncome Tax Act, 1961 where under third party paymentis not for business provisions and not allowable fordeduction? 3.Whether on the facts and circumstance of the case theLearned Income Tax Appellate Tribunal has erred in lawby allowing the processing fee Rs.13,19,24,685/- paid tothe ICICI Bank on a loan taken by the third party asdeduction under Section 37(1) of the Income Tax Act,1961?Learned Income Tax Appellate Tribunal has erred in lawby allowing the processing fee Rs.13,19,24,685/- paid tothe ICICI Bank on a loan taken by the third party asdeduction under Section 37(1) of the Income Tax Act,1961? We have heard Mr. Tilak Mitra, learned standing Counsel forthe appellant and Mr. Chayan Gupta, learned Counsel appearing forthe respondent/assessee. We have heard elaborately the learned Counsel for theparties and carefully perused the materials placed on record. We findthat the issue before us is entirely factual in this appeal. The followingfinding returned by the CIT(A) will clearly demonstrate what is thenature of transaction and as to how the CIT(A) held the expenditureto be of revenue in nature. After considering the remand reportsubmitted by the assessing officer as well as noting the law on thesubject as to when an expenditure could be construed as revenueexpenditure, the CIT(A) has held as follows ; We have heard Mr. Tilak Mitra, learned standing Counsel forthe appellant and Mr. Chayan Gupta, learned Counsel appearing forthe respondent/assessee. We have heard elaborately the learned Counsel for theparties and carefully perused the materials placed on record. We findthat the issue before us is entirely factual in this appeal. The followingfinding returned by the CIT(A) will clearly demonstrate what is thenature of transaction and as to how the CIT(A) held the expenditureto be of revenue in nature. After considering the remand reportsubmitted by the assessing officer as well as noting the law on thesubject as to when an expenditure could be construed as revenueexpenditure, the CIT(A) has held as follows ; “In the instant case, the payment has not been madefor acquiring a brand name, but for facilitating for acquisition ofthe brand name, which in turn, made substantial improvement inearning capacity of the appellant’s business. The payment is inthe form of a brokerage or commission or service charges (not-withstanding its liability for TDS). Therefore, on the facts andin the circumstances of the case, in my view, the expenditureincurred by the appellant company for the payment made to M/sShalini Properties & Developers Pv. Ltd. is a revenueexpenditure.” But this finding was tested for its correctness by theTribunal and the Tribunal after taking note of the factual position in no uncertain terms held that CIT(A) has examined each and everyaspect of the case and held in favour of the assessee. But with regardto the issue whether the expenditure is allowable as businessexpenditure, under Section 37(1) of the Act, the CIT(A) has taken noteof the various decisions on the point, namely the positive test and thenegative test, which are to be applied, and thereafter proceeded toexamine the facts, and held that the case of the assessee is entirelydifferent from that of the case of M/s Ruia Sons P Ltd. In this regard,it is relevant to take note of the finding recorded by the CIT(A) inparagraph 5.1.16 of the order dated 27[th] November, 2012. Thisfinding was reexamined by the Tribunal and the Tribunal has on factsconcurred with the CIT(A). Thus we find that there is no question, much less substantialquestions of law, raising for consideration in this appeal. Accordingly, the appeal stands dismissed, consequently theapplication also stands dismissed. (T. S. SIVAGNANAM, J.) (HIRANMAY BHATTACHARYYA, J.)