Full Judgment Text
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CASE NO.:
Appeal (civil) 1100-1101 of 2005
PETITIONER:
Bhuna Coop. Sugar Mills Ltd.
RESPONDENT:
Commissioner of Income Tax,Rohtak & Anr.
DATE OF JUDGMENT: 11/02/2005
BENCH:
N.Santosh Hegde & S.B.Sinha
JUDGMENT:
J U D G M E N T
(Arising out of SLP ) Nos.1659-1660 of 2004)
(With C.A.Nos. 1116-1117/05 @ SLP)No.3154-55 of 2004)
SANTOSH HEGDE,J.
The appellant, a cooperative sugar Mill, filed its return of
income for the assessment year 1992-93 declaring a loss of
Rs.6,95,63,045.72. While computing the said loss the appellant
declared in its return a sum of Rs.1,48,38,263.88 as interest which
had accrued for the relevant assessment year which was payable to
the creditors and had been debited in the profit and loss account,
hence, sought for its deduction. A return claiming similar losses
were also filed for the Assessment Year 1993-94. The assessing
officer processed the returns filed by the appellant under section
143(1)(a) of the Income Tax Act (the Act) and disallowed the
deduction of Rs.1,48,38,263.88 claimed by the appellant on
account of interest payable to the creditors. He also imposed a
penal additional tax of Rs.11,62,502 under section 143(1)(a) of the
Act. Being aggrieved by the said order of assessment the appellant
preferred an appeal before the Commissioner of Income Tax
(Appeals), Rohtak. The said appeal filed by the appellant came to
be allowed. The said order of the Appellate Commissioner was
challenged by the Revenue before the Income Tax Appellate
Tribunal, Delhi, which allowed the appeal of the tribunal setting
aside the order of the Appellate Commissioner. It restored the
order of the assessing authority. Consequent to the said order of the
tribunal the appellant also received a demand notice directing it to
deposit the additional tax imposed. The appellant challenged the
order of the tribunal as well as the demand notice in regard to the
additional tax payable by way of appeals and writ petitions which
came to be dismissed by the impugned order of the High Court,
hence, the appellant is before us in these appeals.
The main contention of the appellant herein is that it is
entitled to deduction of interest payable on the loans taken by it
from bodies other than the financial institutions as provided under
Section 43B of the Act. Learned counsel submitted that the
tribunal as well as the High Court on an erroneous appreciation of
fact and without giving an opportunity to the appellant to establish
its case came to the conclusion that the money borrowed by the
appellant, was from the institutions enumerated in Section 43B(d),
hence, disallowed the deduction. In support of this contention
learned counsel pointed out from the order of the tribunal that it
had noted that the loan taken by the appellant was from Haryana
Financial Corporation (HFC) which according to the appellant is
wholly incorrect and the appellant had not taken any such loan
from Haryana Financial Corporation. On the contrary, the loans
taken by it were all from IFCI, IDBI, ICICI and Harcoo Bank and
under the act interest payable to these banks are entitled to
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deduction. It was contended that clause (e) of Section 43B will
have no application as the said provision was introduced by the
Finance (No) 2 Act, 1996 with effect from 1.4.1997. Learned
counsel for the appellant also argued that in view of the fact that it
had succeeded before the Commissioner of Income Tax (Appeals)
on other grounds there was no need for it to have challenged the
levy of additional tax. Learned counsel also argued that the
appellant had specifically raised a ground as to the non
applicability of section 141(1)(A) and the consequent demand
made for payment of additional tax, but the High Court without
dealing with this objection of the appellant proceeding to agree
with the tribunal without properly considering the material
available before it as to the entitlement of the appellant for
deduction of interest payable. It is also contended that the High
Court did not apply its mind as to the liability of the appellant to
pay the additional tax and proceeded to dismiss its appeals and
petition without considering all aspects of the case.
Learned counsel for the Revenue submitted that the
appellant had not produced any material to show that the institution
from which it had taken loans were institutions other than those
enumerated in sub-section (d) of section 43B of the Act, therefore
unless the appellant proves that such interest had actually been
paid, it was not entitled to claim deduction on interest which is
only payable. It was further submitted on behalf of the Revenue
that though a factual error was made by the tribunal in noting that
the loan taken was from HFC it had really not affected the legality
of the order of the tribunal because the appellant had failed to
establish that the institutions from which it had taken the loan are
those which would not fall within the institutions mentioned in
sub-section (d) of section 43B. Therefore, the authorities below
were justified in rejecting the prayer of the appellant for deduction
of interest as also were justified in levying the additional tax under
section 141(1)(A) of the Act.
Having heard learned counsel and having perused the
records we think there was some confusion in the mind of the
tribunal when it proceeded to consider the case of the appellant for
deduction on a ground that the loan in question was taken from
HFC which is a Bank contemplated under Section 43B(d) and
since the appellant contends that it has material to show that the
loan taken by it and the interest payable to institutions which
would not fall within sub-section (d) of section 43B, in the interest
of justice we think an opportunity should be given to the appellant
to prove its case. We also think that since the tribunal or the High
Court have not taken into consideration the contention of the
appellant in regard to the liability to pay additional tax under
section 141(1)(A) of the Act, an opportunity should be given to the
appellant to argue its case on this issue also.
We may note herein that learned counsel for the appellant
relied on a judgment of this Court in the case of Commissioner of
Income Tax, Bhopal v. Hindustan Elector Graphites Ltd., Indore
(2000 (3) SCC 595) while the learned counsel for the Revenue
relied on a judgment of this Court in the case of Asstt.
Commissioner of Income Tax, New Delhi vs. J.K.Synthetics Ltd.
etc. (2003 (10) SCC 623).
In the view of the fact that we are remanding the matter to
the tribunal we do not think that we should express any view as to
the applicability of these judgments. We leave it to the tribunal to
consider the same.
For the reasons stated above, these appeals succeed, the
matters are remanded to the Income Tax Appellate Tribunal, Delhi
Bench ’E’, New Delhi or its successor. The impugned orders of the
tribunal in appeal and that of the High Court in appeals and writ
petitions are set aside.
Ordered accordingly.
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