Full Judgment Text
NONREPORTABLE
IN THE SUPREME COURT OF INDIA
CIVIL APPELLATE JURISDICTION
CIVIL APPEAL No.4026 OF 2019
(Arising out of S.L.P.(C) No.1153 of 2018)
Pr. Commissioner of Income
Tax3, Nagpur ….Appellant(s)
VERSUS
Ballarpur Industries Ltd. ….Respondent(s)
J U D G M E N T
Abhay Manohar Sapre, J.
1. Leave granted.
2. This appeal is filed against the final judgment
Signature Not Verified
Digitally signed by
ANITA MALHOTRA
Date: 2019.04.22
17:18:04 IST
Reason:
and order dated 17.07.2017 passed by the High Court
of Judicature at Bombay, Bench at Nagpur in ITA
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No.38 of 2003 whereby the High Court dismissed the
appeal filed by the appellant herein and upheld the
order dated 30.06.2003 passed by the Income Tax
Appellate Tribunal (for short, “the Tribunal”).
3. A few facts need mention hereinbelow for the
disposal of this appeal, which involves a short point.
4. The appellant is the Commissioner of Income Tax
and the respondent is an assessee.
5. The respondentassessee is a Limited Company,
which is engaged in the business of manufacturing of
various kinds of papers. The dispute in this appeal
relates to the assessment year 199394.
6. The question arose in the assessment year in
question before the Assessing Officer (AO) as to what is
the true nature of payment of Rs.3.25 crores made by
the respondentCompany(assessee) to one Mr.
G.R.Hada pursuant to the compromise arrived at
between the respondentassesseeCompany and Mr.
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G.R.Hada in a civil suit filed by Mr. G.R. Hada against
the respondentCompany and others.
7. According to the respondentCompany(assessee),
Mr. G.R. Hada and the respondentCompany were the
joint promoters of one Company called M/s Andhra
Pradesh Rayons Limited in which Mr. G.R. Hada was
holding 10.25% shares and the remaining shares were
held by other promoter shareholders with different
percentage.
8. Since the dispute arose amongst the promoter
shareholders, Mr. G.R. Hada filed a civil suit against
the respondentCompany(assessee) and other
promoter shareholders on the basis of an agreement,
which was entered into amongst the promoter
shareholders.
9. In the abovementioned suit, a compromise was
arrived at between the respondentCompany(assessee)
and Mr. G.R. Hada. Pursuant to the said compromise,
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the respondentCompany(assessee) paid a sum of
Rs.3.25 crores to Mr. G.R. Hada.
10. The respondentCompany(assessee), however,
claimed a deduction of Rs.3.25 crores in the
assessment year in question as revenue expenditure
because, according to them, they had paid the said
sum to Mr. G.R. Hada for running their business.
11. The AO examined the claim in the context of the
terms of the agreement in Para 12 (a) of his order
dated 29.03.1996 (pages 54 to 60 of the SLP paper
book) and held that the claim cannot be considered as
"revenue expenditure". The AO, therefore, rejected the
claim.
12. The respondentCompany(assessee) felt aggrieved
by the order of the AO and filed an appeal to the
Commissioner of Income Tax (Appeals)I, Nagpur. The
CIT (Appeals) dealt with this issue in Para 15 of his
order (pages 92 to 94 of the SLP paper book) and by
his order 18.12.1998 confirmed the addition made by
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the AO. In other words, the CIT (Appeals) was also of
the view that the claim made by the respondent
Company(assessee) cannot be considered as "revenue
expenditure".
13. The respondentCompany(assessee) felt
aggrieved and filed second appeal in the Income Tax
Appellate Tribunal. The Tribunal examined the
question in Paras 26 and 27 and by its order dated
30.06.2003 allowed the appeal and directed the AO to
allow the deduction of Rs.3.25 crores as claimed by
the respondentCompany(assessee).
14. The Commissioner of Income Tax Revenue felt
aggrieved and filed appeal in the High Court of
Judicature at Mumbai, Nagpur Bench. By impugned
order, the High Court dismissed the appeal, which has
given rise to filing of the present appeal by way of
special leave by the Revenue in this Court.
15. So, the short question, which arises for
consideration in this appeal, is whether the High Court
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was justified in dismissing the appeal filed by the
Commissioner of Income Tax.
16. Heard Mr. Sanjay Jain, learned Additional
Solicitor General for the appellantRevenue and Ms.
Vanita Bhargava, learned counsel for the respondent
Company(assessee).
17. Having heard the learned counsel for the parties
and on perusal of the record of the case, we are
inclined to allow the appeal, set aside the impugned
order as well as the order of the Tribunal and remand
the case to the Tribunal to decide the appeal filed by
the respondentCompany(assessee) afresh on merits in
accordance with law.
18. The need to remand the case to the Tribunal has
arisen for the following reasons.
19. From the perusal of Para 26 of the order of the
Tribunal, we find that the Tribunal has recorded a
finding, which reads as under:
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"26…………The AO did not dispute the fact
that the expenditure related to the business
of the assessee. The CIT (A), however,
reversed the findings of the AO and held that
the expenditure cannot be considered as
business expenditure. A perusal of the CIT
(A)'s order can only lead to a conclusion that
the CIT(A) was of the view that the
expenditure in question was not a capital
expenditure but of a revenue nature……….."
20. The aforesaid observation of the Tribunal, on
what AO and CIT (Appeals) held, does not seem to be
correct and rather inconsistent when we peruse the
finding of the AO (concluding Para 12 (a) & (d) of the
AO’s order at page 60 of SLP and concluding Para
15.1 of CIT (Appeals) at page 93 of the SLP).
21. In other words, we find that the Tribunal did not
correctly appreciate as to what AO and CIT (Appeals)
held and what was their reasoning which led to their
respective conclusion.
22. Having wrongly observed about their respective
reasoning and the finding, the Tribunal proceeded to
examine the case and eventually reversed the order of
CIT (Appeals). The High court did not notice the
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aforesaid observation of the Tribunal and upheld the
order of the Tribunal.
23. In such a situation like the one arising in the
case and keeping in view the question involved, we are
of the considered opinion that the matter deserves to
be remanded to the Tribunal for deciding the appeal
filed by the respondentCompany (assessee) afresh on
merits because the Tribunal being the last Court of
appeal on facts, its finding on the question of fact is of
significance.
24. In our view, remanding the case is not likely to
cause any prejudice to any party because the
aggrieved party will have a right of appeal to the High
Court and then to this Court against any adverse
order.
25. Though the learned counsel for the parties
argued the question on merits but having taken note
of the approach of the Tribunal, we consider, in the
interest of both the parties, to remand the appeal to
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the Tribunal for its hearing afresh on merits in
accordance with law, keeping all the issues open.
26. It is for this reason, we allow the appeal, set aside
the orders of the High Court and the Tribunal and
remand the appeal to the Tribunal for its decision
afresh on merits in accordance with law uninfluenced
by any observations made in the impugned order,
order of the Tribunal and in this order. Needless to
observe, the parties will be entitled to raise all
contentions in appeal before the Tribunal.
27. We make it clear that we have not expressed any
opinion on the merits of the case having formed an
opinion to remand the case to the Tribunal in the light
of what we have observed supra.
.………...................................J.
[ABHAY MANOHAR SAPRE]
…...……..................................J.
[DINESH MAHESHWARI]
New Delhi;
April 22, 2019
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