Year. In The Reported Judgment In Commissioner Of Income-Tax v. Question

IN THE HIGH COURT OF KERALA AT ERNAKULAMPRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR. JUSTICE BECHU KURIAN THOMASTHURSDAY, THE 29 DAY OF JULY 2021 / 7TH SRAVANA, 1943ITA NO. 172 OF 2013 AGAINST THE ORDER IN ITA 430/2006 OF I.T.A.TRIBUNAL,COCHIN BENCH,ERNAKULAM APPELLANT/S: THE COMMISSIONER OF INCOME TAX-I, COCHIN BY ADVS.SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES)SRI.JOSE JOSEPH, SC, FOR INCOME TAXCHRISTOPHER ABRAHAM, INCOME TAX DEPARTMENTAPOLLO TYRES LTD.6TH FLOOR, CHERUPUSHPAM BUILDING, SHANMUGHAM ROAD, KOCHI-682031 RESPONDENT/S: BY ADVS.SRI.V.ABRAHAM MARKOSSRI.ABRAHAM JOSEPH MARKOSSRI.JOSEPH MARKOSE SR.SRI.TOM THOMAS KAKKUZHIYIL THIS INCOME TAX APPEAL HAVING COME UP FOR HEARING ON 29.07.2021,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: S.V. Bhatti, J. J U D G M E N T Heard learned Standing Counsel Mr. Christopher Abrahamand learned Senior Counsel Mr. Joseph Markos for parties. 2.The Commissioner of Income Tax/Revenue is theappellant. M/s. Apollo Tyres Ltd., Kochi/Assessee is therespondent. The subject appeal is at the instance of Revenuefrom the order of Income Tax Appellate Tribunal (for short‘Tribunal), Cochin Bench in ITA No.430/Coch/2006 dated24.08.2012. The appeal deals with the Assessment Year 2003-04. 3.The following substantial questions are stated forconsideration: “1. Whether, on the facts and in the circumstances of thecase and also in the light of Section 43B of the Income TaxAct, the Tribunal is right in allowing the deduction of thebonus in the Asst. Year 2003-04 claimable and paid in theAssessment Year 2002 03? I.T.A. No.172/2013 2. Whether, on the facts and in the circumstances of thecase and for the reasons stated in the grounds, the Tribunalis right in law allowing the claim of Rs.2,32,93,575/- statingthat it was spent for acquisition of revenue items and isallowable under Section 37 of the Act as current expenses? 3. Whether, on the facts and in the circumstances of thecase the Tribunal is right in law and fact in holding that DGPower Generation Units 1 and II constituted an"undertaking" under Section 80 1A of the Income Tax Act ? 4. Whether DG Power Generation Units 1 and II areentitled to the benefit of Section 80 1A of the Income TaxAct ? Learned counsel appearing for the parties have confined theirsubmissions to substantial question nos.1 and 2. 4.Substantial question no.1 deals with payment ofbonus by the assessee in the Assessment Year 2003-04 claimable and paid in the Assessment Year 2002-03. The Department,raising similar questions of law, filed ITA No.40/2011 for theAssessment Year 2002-03. In the said appeal, question no.4 I.T.A. No.172/2013 deals with the payment of bonus in the subsequent Assessment Year. In the reported judgment in Commissioner of Income-Tax v. Apollo Tyres Ltd[1] the question was answered in favour of theassessee and against the Revenue. Except the change ofAssessment Years, the circumstances in the reported judgmentand the instant case are substantially similar. Hence, questionno.1 is answered in favour of the assessee and against theRevenue, by following the reported judgment between theparties. 5.Question no.2 deals with the claim of assesseetowards debts and advances written off. The assessee claimed a total deduction of Rs.8,74,73,974/- out of which a sum ofRs.6,13,12,992/- related to the trade debts and the remainingamount represented two categories as follows: 1. Advances given for acquisition of capital assets- Rs.28,67,407/- 2. Advances given for acquisition of Revenue items -Rs.2,32,93,575/- 1(2019) 419 ITR 100 I.T.A. No.172/2013 5.Question no.2 deals with the claim of assesseetowards debts and advances written off. The assessee claimed a total deduction of Rs.8,74,73,974/- out of which a sum ofRs.6,13,12,992/- related to the trade debts and the remainingamount represented two categories as follows: 1. Advances given for acquisition of capital assets- Rs.28,67,407/- 2. Advances given for acquisition of Revenue items -Rs.2,32,93,575/- 1(2019) 419 ITR 100 I.T.A. No.172/2013 The Assessing Officer treated the claim of Rs.28,67,407/- ascapital loss and disallowed the claim. As regards advancesgiven for acquisition of Revenue items amounting toRs.2,32,93,575/- the Assessing Officer held that the claim is notallowable under Section 36(1)(vii) read with Section 36(2) as thesaid amount was not offered for taxation. The Assessing Officerrejected the alternative claim for deduction under Section 37(1)of the Act. The Tribunal, by referring to the judgmentsreported in Chenab Forest Company v. CIT[2], CIT v. Mysore SugarCompany Ltd[3], and CIT v. Mahalakshmi Textile Mills Ltd[4]., held thatthe advances of Rs.28,67,407/- made for acquisition of capitalassets is liable to be disallowed as 'capital loss' and the advancesamounting to Rs.2,32,93,575/- given for acquisition of revenueitems subsequently written off are held as allowable underSection 37 of the Act as 'current expenses'. 2(1974) 96 ITR 568 (J&K)3(1962) 46 ITR 649 (SC)3(1962) 46 ITR 649 (SC) 4(1967) 66 ITR 710 (SC) I.T.A. No.172/2013 5.1The present question deals with the view taken bythe Tribunal that the claim of assessee though is notpermissible under Section 36(1)(vii) of the Act, still the same isadmissible under Section 37 of the Act. The contention ofRevenue is that the specific provision applicable in this behalf isSection 36(2) of the Act which governs the allowance of baddebts. Section 37 deals with general provision for allowances.When the special provision is inapplicable to the claim of theassessee, giving the deduction under Section 37 of the Act isillegal and impermissible. The argument of assessee is that theclaim of assessee, though was at the first instance presentedunder Section 36(2) of the Act, for the reasons recorded by theAssessing Officer upto the Tribunal, the claim has been rejectedunder Section 36(2) of the Act. It does not mean that the claimis rejected on the merits. The claim if can be brought within theambit of Section 37, no exception could be pointed out for I.T.A. No.172/2013 according deduction under Section 37 of the Act. 6.We have perused the judgments which were takennote of by the Tribunal while recording a finding in favour ofthe assessee that the claim can be brought under Section 37 ofthe Act. Except raising a general argument that generalprovision ought not to have been applied when a specialprovision is available and found to be not applicable, we noticethat the argument does not satisfactorily demonstrate as to howthe claim of assessee does not merit consideration underSection 37 of the Act. The finding of the Tribunal has proceededon the footing that the claim amounting to Rs.2,32,93,575/-would come within the scope of Section 37 of the Act. For thecircumstances noted by the authorities and the findingsrecorded by the Tribunal, we are of the view that accepting theclaim of assessee under Section 37 of the Act for the AssessmentYear does not warrant interference at the instance of Revenue. I.T.A. No.172/2013 The question framed is not substantial question of law, however dependent on the findings of fact recorded by the Tribunal aswell as other authorities. Since no exception to the otherreasoning is pointed out, we are satisfied that no ground ismade out warranting interference with the findings recordedby the Tribunal. Hence the question is answered in favour ofthe assessee and against the Revenue. I.T.A. No.172/2013 The question framed is not substantial question of law, however dependent on the findings of fact recorded by the Tribunal aswell as other authorities. Since no exception to the otherreasoning is pointed out, we are satisfied that no ground ismade out warranting interference with the findings recordedby the Tribunal. Hence the question is answered in favour ofthe assessee and against the Revenue. The substantial question nos.1 and 2 are accordinglyanswered in favour of the assessee and against the Revenue.The appeal fails. Hence, dismissed accordingly. No order as tocosts. Sd/-S.V.BHATTIJUDGE Sd/- BECHU KURIAN THOMASJUDGE I.T.A. No.172/2013 PETITIONER ANNEXURE ANNEXURE A ANNEXURE B ANNEXURE C ANNEXURE D ANNEXURE E APPENDIX OF ITA 172/2013 COPY OF THE ASSESSMENT ORDER U/S. 143(3) PASSED BY THE ASSESSING OFFICER ON 27/03/2006 FOR AY 2003-04. COPY OF THE ASSESSMENT ORDER U/S. 143(3) R.W.S.147 DATED 12/12/2008. COPY OF CIT(A)'S ORDER DATED 25/04/2006. COPY OF CIT(A)'S ORDER DATED 30/03/2009. ORDER OF THE ITAT, IN ITA NO.430/COCH/2006 AND 378/COCH/2009 DATED 24/08/2012.