The Same And Moreover The Respondent Had v. Champion Commercial Pvt. Ltd. And By The

OD–9 IN THE HIGH COURT AT CALCUTTASPECIAL JURISDICTION (CENTRAL EXCISE)ORIGINAL SIDE ITAT/120/2023IA NO: GA/2/2023PRINCIPAL COMMISSIONER OF INCOME TAX, CENTRAL 2 KOLKATAVSM/S. SALARPURIA PROPERTIES PVT. LTD. BEFORE :THE HON’BLE THE CHIEF JUSTICE T.S. SIVAGNANAMAndTHE HON’BLE JUSTICE SUPRATIM BHATTACHARYADate : 22[nd] November, 2023 Appearance :Mr. Amit Sharma, Adv.led by Mr. Vipul Kundalia, Adv.…for appellant Mr. J.P. Khaitan, Sr. Adv.Mr. Pratyush Jhunjhunwala, Adv.Ms. Sretapa Sinha, Adv.…for respondent The Court : - This appeal filed by the revenue under Section 260A of theIncome Tax Act, 1961 (the Act) is directed against the order dated 17[th] May,2022 passed by the Income Tax Appellate Tribunal, “A” Bench, Kolkata(Tribunal) in ITA No. 67/Kol/2020 for the assessment year 2011-12. The revenue has raised the following substantial questions of law forconsideration : i)Whether the Learned Tribunal has committed substantial error inlaw in allowing deduction under Section 80IB(10) of the Income TaxAct and dismissing the appeal of the Revenue on this ground ?law in allowing deduction under Section 80IB(10) of the Income TaxAct and dismissing the appeal of the Revenue on this ground ? ii)Whether the Learned Tribunal has committed substantial error I lawin allowing deduction under Section 80IB(10) of the Income Tax Actby failing to consider that in Section 80IB(10) there is no provisionfor claim of proportionate deduction if the assessee has compliedwith the clause (e) and (f) of Section 80IB to some extent in oneresidential unit and further that Section 80IB lays down certainconditions which are required to be fulfilled for claiming deductionunder the said Section. Clause (e) of sub-section 10 states that anyperson other than an individual can be allotted only one residentialproject and if more than one is allotted to such person, then thededuction under Section 80IB in respect of an undertaking,developing and building housing projects pre-approved, shall not beavailable, and all the conditions mentioned are independent of eachother and are equally important and violation of any one of theconditions would lead to denial of deduction under this Section butin the instant case the respondent has failed to fulfill the conditionsof Section 80IB(10) of the said Act and thus it is no eligible for suchdeduction ? iii) Whether the Learned Tribunal has substantially erred in law bydeleting the additions made under Section 68 of the said Act whenthe respondent failed to give proper details to show identity of shareapplicants and to prove genuineness of transactions and creditworthiness of the share applicants along with other detail and noallotting the same and moreover the respondent had iv) v) Rs.19,18,30,000/- outstanding as share application money as on31.03.2010 and the same was refunded back during the financialyear under assessment and at the same time the respondent hadfurther received fresh application money of Rs.17,90,15,000/-duringthe F.Y. 2010-11 which clearly indicates that the respondent had nointention of allotting shares to such share applicants and it hasdevised a plan and using this route to bring its own unaccountedmoney by rotating such transactions in order to change the identityof the share applicants as evident from outstanding in capitalsuspense account as on 31.03.,2010 and 31.03.2011? Whether the Learned Tribunal has substantially erred in law inallowing disallowing addition made under Section 68 of the IncomeTax Act, 1961 by failing to consider that the respondent failed toprovide any explanation regarding share application moneyremaining in the Capital Suspense Account which clearly showsthat these share applications are not genuine transactions but amechanism to bring in the books the respondent’s unaccountedmoney through the route of share application under the guise ofchanging the names of the share applicants ? Whether the Learned Tribunal has substantially erred in law inallowing disallowing addition made under Section 68 of the IncomeTax Act, 1961 by failing to consider that the respondent failed toprovide any explanation regarding share application moneyremaining in the Capital Suspense Account which clearly showsthat these share applications are not genuine transactions but amechanism to bring in the books the respondent’s unaccountedmoney through the route of share application under the guise ofchanging the names of the share applicants ? Whether the Learned Tribunal has substantially erred in law bydeleting the additions made under Section 14 of the Income Tax Act,1961 read with Rule 8D of the Income Tax Rules by ignoring thesettled position of law as laid down by the Learned Kolkata Tribunalin the case of ACIT Vs. Champion Commercial Pvt. Ltd. and by the Learned Chennai Tribunal passed in Southern Petro ChemicalIndustries Vs. DCIT as well as ignoring the CBDT’s CircularNo.5/2014 dated 11.02.2014, in view of which disallowance underSection 14A and Rule 8D can also be made in cases where thecorresponding exempt income has not been earned in the previousyear ? vi)Whether the Learned Tribunal has substantially erred in law indeleting the additions of interest paid/debited on account ofborrowed money part of which was utilized for providing interest freeloans and advances under Section 3691)(iii) of the Income Tax Act,1961 inasmuch as from the details of interest free loans andadvances at the end of financial year in comparison to the openingbalance of financial year, it is palpable that some parts of the fundswere utilized for the purpose of providing ‘interest free loan andadvances’ and thus the interest on borrowed monies which wasrouted to provide ‘Interest Free Loans & Advances’ is not allowableas business expenses of the respondent ? vii)Whether the Learned Tribunal has substantially erred in law andfacts in deleting the additions of interest paid on service tax andTDS which is penal in nature under Section 37 of the Income TaxAct, 1961? viii)Whether the Learned Tribunal has substantially erred in law infailing to appreciate that interest on Service Tax and interest on TDSare not allowable as per provisions of Section 37(1) of the said Act and the said legal position has been settled in the case of ShreePipes Vs. DCIT reported in 4 TMI 97 wherein it was held thatinterest on sales tax is penal in nature and the same should bedisallowed in computing taxable income ? ix) Whether the Learned Tribunal has substantially erred in law bydeleting the additions of Sundry Balances and Stock Written Offunder Section 37 of the Income Tax Act, 1961? x) Whether the Learned Tribunal has substantially erred in law infailing to appreciate that the write off claimed by the respondent iscapital in nature and such claim is not in consonance with theprovisions contained in Section 37(1) of the said Act as well as lawlaid down in the case of Hashimara Industries Ltd.-Vs.-CIT [200 ITR654 (CAL)]? We have heard Mr. Amit Sharma, led by Mr. Vipul Kundalia, learnedstanding Counsel appearing for the appellant and Mr. J.P. Khaitan, learnedsenior counsel appearing with Mr. Pratyush Jhunjhunwala, Advocate for therespondent. The substantial questions of law which have been raised for considerationcan be clubbed under six broad heads and a decision on those six broad headswill enable us to answer the substantial questions of law which have been raisedby the revenue. The first issue pertains to Section 80IB. The Assessing Officer consideredthe deduction claimed by the assessee for deduction under section 80IB(10) ofthe Act in respect of one of its projects called “Salarpuria Serenity”. The assessee We have heard Mr. Amit Sharma, led by Mr. Vipul Kundalia, learnedstanding Counsel appearing for the appellant and Mr. J.P. Khaitan, learnedsenior counsel appearing with Mr. Pratyush Jhunjhunwala, Advocate for therespondent. The substantial questions of law which have been raised for considerationcan be clubbed under six broad heads and a decision on those six broad headswill enable us to answer the substantial questions of law which have been raisedby the revenue. The first issue pertains to Section 80IB. The Assessing Officer consideredthe deduction claimed by the assessee for deduction under section 80IB(10) ofthe Act in respect of one of its projects called “Salarpuria Serenity”. The assessee claimed that the project was approved on 31[st] December, 2007 and completed on8[th] December, 2009. The Assessing Officer disallowed the said deduction on theground that it is impossible to complete the said project within the said time.The assessee carried the matter in appeal before Commissioner of Income Tax(Appeals) – 6 Kolkata (A), who has passed an order dated 21[st] October,2019. The assessee placed before the CIT(A) the commencement certificate datedDecember 31, 2007 and the completion certificate dated December 8, 2009,issued by the local authority. It examined the genuineness of those certificatesand accepted the same. The Tribunal in the impugned order confirmed thefindings rendered by the CIT(A). As long as the completion certificate has notbeen accepted by the department, the question of disallowing the deductionclaimed under Section 10IB(10) of the Act does not arise and, therefore, theCIT(A) as well as the Tribunal were justified in their approach and deciding theissue in favour of the assessee. In respect of the same project in respect of two ofthe flats sold to two persons namely, husband and wife, those transactions wereprior to the insertion of clauses (e) and (f) of Section 80IB(10) with effect fromApril 1, 2010. The CIT(A) took into consideration the facts of the case and notedthat except the two residential units which were sold no other flats were sold inviolation of Clause (e), (f) of Section 80IB(10) and therefore granted partial reliefto the assessee. The CIT(A) rightly took note of the decision of this Court in thecase of CIT Vs. Bengal Ambuja Housing Development Ltd., reported inITA/453/2006, dated 5[th] January, 2017. This order passed by the CIT(A) wasaffirmed by the Tribunal wherein the Tribunal took note of the decision of thisCourt in CIT Vs. Martin Burn Limited, reported in ITAT/94/2013 dated July 19, 2018. Thus, we find that CIT(A) and the Tribunal rightly decided the issue infavour of the assessee. Therefore, the impugned order passed by the Tribunaldoes not call for any interference on this aspect. 2018. Thus, we find that CIT(A) and the Tribunal rightly decided the issue infavour of the assessee. Therefore, the impugned order passed by the Tribunaldoes not call for any interference on this aspect. The second issue is with regard to the applicability of Section 68 in respectof share capital. The CIT(A) held that only and when all the three ingredients asrequired under Section 68 are met, the assessee would be entitled to reliefnamely, the identity, creditworthiness and genuineness. This, in the opinion ofthe Assessing Officer, were not established. When the matter travelled on appealto the CIT(A), a remand report was called for and once again the AssessingOfficer stated that the three ingredients are missing. Therefore, the CIT(A)embarked upon an exercise to examine the facts and after taking note of thedocuments filed by the assessee in the form of a paper book, in paragraph 8.2 ofthis order dated 21[st] August, 2019, the facts have been elaborately discussedand more importantly the CIT(A) noted that the four groups are group companieswho have pledged their funds with the appellant/assessee, more particularly,when the profit of the appellant/assessee was consistently substantial and therelevant figures for the years ended 31.03.2008, 31.3.2009, 31.3.2010 and31.3.2011 were referred to. Thus, it was held that assessee had established theidentity, creditworthiness and genuineness of the transaction. This finding wasaffirmed by the Tribunal and we find no grounds to take a different view.Therefore, the order passed by the Tribunal on this issue stands affirmed. The next issue is with regard to the applicability of Section 14A of the Act,read with Rule 8(D)(2)(ii). The CIT(A) rightly took note of the various decisionswherein it has been held that Section 14A will not apply if no exempt income is received during the assessment year under consideration. The CIT(A) placedreliance on the decision of this Court in the case of CITA Vs. Ashika GlobalSecurities Limited, ITAT/100/2014, dated 11[th] June 2018 and also the decisionof the Hon’ble Supreme Court in CIT Vs. Chettinad Logistics (P) Ltd., (2018) 95taxmann.com 250(SC). This finding of the CIT(A) was, in our opinion, rightlyapproved by the Tribunal and therefore, the order passed by the Tribunal doesnot call for any interference and the same is affirmed. The next issue is with regard to disallowance of interest under Section36(4)(iii) of the Act. The CIT(A) took note of the facts and particularly noted thatthe assessee had sufficient funds of its own as was established by the assesseeby producing the audited accounts for the relevant assessment years as well asthe preceding two years and therefore, held that finding of the Assessing Officerwas merely an assumption without appreciating the factual position. This issuewas considered by the Tribunal and the factual position was re-appraised andthe Tribunal affirmed the finding of the CIT(A) and we find no good grounds tointerfere with the same. Accordingly, the order of the Tribunal on this issuestands affirmed. The next issue is with regard to the disallowance of the expenses towardsinterest of service tax in the profit and loss account and TDS. The CIT(A), in ourview, rightly took note of the decision of the Hon’ble Supreme Court inLachmandasMathuradas v. CIT (2002) 254 ITR 799 (SC), wherein it was heldthat the interest paid to the Sales Tax authority on arrears of the sales tax is anadmissible deduction under Section 37 of the Act being compensatory in nature.This order passed by the CIT(A) was considered for its correctness and the Tribunal after noting the findings recorded by the CIT(A) also noted the decisionin the case of Mahaluxmi Sugar Mills Company Vs. CIT, (1980) 123 ITR 429(SC). Thus, we find no grounds to interfere with order passed by the Tribunaland the findings of the Tribunal on the said aspect is affirmed. Tribunal after noting the findings recorded by the CIT(A) also noted the decisionin the case of Mahaluxmi Sugar Mills Company Vs. CIT, (1980) 123 ITR 429(SC). Thus, we find no grounds to interfere with order passed by the Tribunaland the findings of the Tribunal on the said aspect is affirmed. The last issue is with regard to the claim of the appellant who have writtenoff on account of sundry balance and stock claiming it as a business loss and tobe considered under Section 37(1) of the Act. The Assessing Officer rejected suchclaim. On appeal, the assessee had contended that the Assessing Officer hasmerely mentioned the write off so made as capital in nature and held that theassessee’s claim cannot be allowed under Section 37(1) of the Act. The assesseepointed out that out of the sum of Rs.73,55,162/- pertaining to and included inthe assessment year 2011-12 was towards the abandoned SEZ and has to beallowed. The assessee placed reliance on the decision of this Court in BinaniCement Limited v. CIT (2015) 380 ITR (CAL). The CIT(A) took note of the factsand also the decision of this Court as well as the decision in the case of CIT Vs.Britannia Industries Ltd. (2015) 376 ITR 299 (Kol) and granted relief to theassessee. The matter was carried in appeal before the Tribunal and the Tribunalaffirmed the finding and while doing so took note of the decision of the Hon’bleSupreme Court in CIT Vs. TRF Ltd. 323 ITR 500 (SC) and allowed the claim ofthe assessee for writing off the stock being in the nature of business loss.Further, the Tribunal also affirmed the order passed by the CIT(A) and allowedthe claim of bad debts as they were sales/rental made in the past accorded asrevenue but being not realisable and therefore was clamed as bad debts in the regular books of accounts. In this regard, the learned Tribunal quoted thedecision in the case of CIT Vs. TRF Limited and rejected the appeal filed by therevenue. We find that the Tribunal was fully justified in affirming the findings ofthe CIT(A). In the result, the appeal filed by the revenue is dismissed and thesubstantial questions of law are answered against the revenue. The stay application IA No : GA/2/2023 is also dismissed. (T.S. SIVAGNANAM, CJ.) (SUPRATIM BHATTACHARYA, J.) GH/SN.