The Principal Commissioner Of Income Tax (Central), Ludhiana v. M/S Mbd Printographics Pvt. Ltd., Jalandhar

ITA-20-2017 (O&M) -1- IN THE HIGH COURT OF PUNJAB & HARYANA AT CHANDIGARH ITA-20-2017 (O&M) Date of Decision: 8.8.2017 The Principal Commissioner of Income Tax (Central), Ludhiana ....Appellant. Versus M/s MBD Printographics Pvt. Ltd., Jalandhar ...Respondent. CORAM:- HON'BLE MR. JUSTICE AJAY KUMAR MITTAL.HON'BLE MR. JUSTICE AMIT RAWAL. PRESENT: Mr. Rajesh Katoch, Senior Standing Counsel for the appellant. Mr. Pankaj Jain, Senior Advocate with Mr. Sachin Bhardwaj, Advocate for the respondent. AJAY KUMAR MITTAL, J. 1.This order shall dispose of two appeals bearing ITA-20 and 21-2017 as according to learned counsel for the parties, similar issues arise forconsideration in these appeals. For brevity, the facts are being extractedfrom ITA-20-2017. 2.ITA-20-2017 has been filed by the revenue under Section 260Aof the Income Tax Act, 1961 (in short “the Act”) against the order dated24.6.2016 (Annexure A-III) passed by the Income Tax Appellate Tribunal,Amritsar Bench, Amritsar (hereinafter referred to as “the Tribunal”) in ITANo. 195(Asr)/2015 for the assessment year 2011-12, claiming the followingsubstantial questions of law:- ITA-20-2017 (O&M) (i)Whether on the facts and in the circumstances ofthe case, the Hon'ble Income Tax AppellateTribunal, Amritsar Bench, Amritsar has erred indeleting the addition of ` 1,94,74,037/- on accountof disallowance of interest expenditure, ignoringthe specific finding of the CIT(A) that the assesseehad not even attempted to show that theinvestments in sister concerns served any businesspurpose?the case, the Hon'ble Income Tax AppellateTribunal, Amritsar Bench, Amritsar has erred indeleting the addition of ` 1,94,74,037/- on accountof disallowance of interest expenditure, ignoringthe specific finding of the CIT(A) that the assesseehad not even attempted to show that theinvestments in sister concerns served any businesspurpose? (ii)Whether on the facts and in the circumstances ofthe case, the Hon'ble Income Tax AppellateTribunal, Amritsar Bench, Amritsar has erred indeleting the addition of ` 1,94,74,037/- on accountof disallowance of interest expenditure withoutappreciating the finding of the CIT(A) that fundsraised on interest for working capital requirementshad to be raised to make up for the shortfall causedby interest free investments in sister concernswhich did not serve any business purpose for theassessee company?the case, the Hon'ble Income Tax AppellateTribunal, Amritsar Bench, Amritsar has erred indeleting the addition of ` 1,94,74,037/- on accountof disallowance of interest expenditure withoutappreciating the finding of the CIT(A) that fundsraised on interest for working capital requirementshad to be raised to make up for the shortfall causedby interest free investments in sister concernswhich did not serve any business purpose for theassessee company? (iii)Whether the Hon'ble ITAT, while allowing reliefto the assessee, has erred in law in ignoring animportant issue that the investment made by theassessee in the shape of 'Share Application Money'in those sister concerns, the share capital of whichwas almost fully subscribed, was a colorableto the assessee, has erred in law in ignoring animportant issue that the investment made by theassessee in the shape of 'Share Application Money'in those sister concerns, the share capital of whichwas almost fully subscribed, was a colorable ITA-20-2017 (O&M) transaction of interest free loans/advances to itssister concerns and such colorable transactions arenot permissible in the eyes of law? (iii)Whether the Hon'ble ITAT, while allowing reliefto the assessee, has erred in law in ignoring animportant issue that the investment made by theassessee in the shape of 'Share Application Money'in those sister concerns, the share capital of whichwas almost fully subscribed, was a colorableto the assessee, has erred in law in ignoring animportant issue that the investment made by theassessee in the shape of 'Share Application Money'in those sister concerns, the share capital of whichwas almost fully subscribed, was a colorable ITA-20-2017 (O&M) transaction of interest free loans/advances to itssister concerns and such colorable transactions arenot permissible in the eyes of law? 2.Put shortly, the facts necessary for adjudication of the presentappeal as narrated therein are that the assessee is engaged in the businessactivity of publication and printing of books and manufacturing of paper.The assessee filed its return of income electronically on 30.9.2011 declaringthe total income at ` (-) 1,64,95,079/-. The case was selected for scrutinyunder CASS and notice dated 28.8.2012 under Section 143(2) of the Actwas issued. Subsequently, statutory notices dated 29.9.2013 and21.11.2013 under Section 142(1) of the Act along with questionnaires wereissued to the assessee followed by queries vide order sheet entries dated6.12.2013 and 18.12.2013. During the course of assessment proceedings, itwas noticed that an amount of ` 67,25,52,955/- was standing as investmentsin various related sister concerns but the assessee had not received anyinterest to its sister concern in the shape of 'Share Application Money'. Theassessee had claimed expenditure on account of bank interest. Accordingly,the Assessing Officer vide assessment order dated 30.12.2013 (Annexure A-I) disallowed the expenditure of ` 1,94,74,037/- of bank interest on CCLimit and added the same to the income of the assessee. Feeling aggrieved,the assessee filed an appeal before the Commissioner of Income Tax(Appeals) [for brevity “the CIT (A)”]. The CIT(A) vide order dated27.2.2015 (Annexure A-II) confirmed the disallowance of interestexpenditure made by the Assessing Officer and dismissed the appeal.Against the order, Annexure A-II, of the CIT(A), the assessee filed anGurbachan Singhappeal before the Tribunal, who vide order dated 24.6.2016 (Annexure A-2017.08.28 14:21I attest to the accuracy andintegrity of this document III) allowed the appeal and deleted the additional on account ofdisallowance of interest expenditure. Hence, the present appeals by therevenue. 3.We have heard learned counsel for the parties.4.It is not disputed by the learned counsel for the revenue that theissue raised herein stands concluded by the decisions of this Court in ITANo. 163 of 2017 [The Pr. Commissioner of Income Tax (Central),Ludhiana v. Shri Satish Bala Malhotra, Legal Heir of Shri AshokKumar Malhotra, Prop. M/s Modern Publishers, MBD House, RailwayRoad, Jalandhar] decided on 17.4.2017 and ITA No. 31 of 2017 [The Pr.Commissioner of Income Tax (Central), Ludhiana v. M/s MalhotraBook Depot, MBD House, Railway Road, Jalandhar] decided on23.2.2017 wherein the appeals filed by the revenue on similar issues havebeen dismissed. 5.In view of the above, both the appeals are dismissed. (AJAY KUMAR MITTAL) JUDGE August 8, 2017gbs (AMIT RAWAL)JUDGE Whether Speaking/ReasonedYesWhether ReportableYes