Coats of India Ltd., , Kolkata V. DCIT, Special Range - 17, , Kolkata

ITA 200/KOL/1994

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 9826 (ITAT-KOLKATA)
• Duration Of Justice: 24 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 1990-1991
• Appeal Filed On: 24-01-1994
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR
• Keywords: Question of law; Revenue expenditure

Judgement Text

ITA NO.766/CAL/1993 & 200/CAL/1994 COATS OF INDIA L TD. A.Y.1989-90 & 1990-91 1 IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH KOL KATA [BEFORE HONBLE SHRI J.SUDHAKAR REDDY, AM & SMT. MADHUMITA ROY, JM ] ITA NO.766/CAL/1993 ASSESSMENT YEAR : 1989-90 COATS OF INDIA LTD. -VERSUS- D.C.I.T., SPEC IAL RANGE-17 KOLKATA CALCUTTA (PAN: AABCC 0703 C) (APPELLANT) (RESPONDENT) ITA NO.200/CAL/1994 ASSESSMENT YEAR : 1990-91 COATS OF INDIA LTD. -VERSUS- D.C.I.T., SPEC IAL RANGE-17 KOLKATA CALCUTTA (PAN: AABCC 0703 C) (APPELLANT) (RESPONDENT) FOR THE APPELLANT: SHRI AKKAL DUDHEWALA, AR FOR THE RESPONDENT: SHRI SAURABH KUMAR, ADDL. CIT, SR.DR DATE OF HEARING : 12.09.2018 DATE OF PRONOUNCEMENT : 26.09.2018. ORDER PER MADHUMITA ROY, JM THE INSTANT APPEALS HAVE BEEN FILED BY THE ASSESSEE FORMERLY KNOWN AS COATS INDIA LIMITED NOW DIC INDIA LTD BEFORE US FOR A.Y.1 989-90 AND 1990-91 BY AN UNDER COMMON ORDER DATED 17.09.1992. THE LD. TRIBUNAL WAS PLEASED TO DISPOSE OF THESE TWO APPEALS AGAINST WHICH THE ASSESSEE PREFERRED REFERE NCE APPLICATIONS U/S 256(1) OF THE INCOME TAX ACT, 1961 (THE ACT) BEFORE THE LD. TRIBU NAL BEING R.A.NO.604/CAL/1997 AND R.A.NO.605/CAL/1997 RESPECTIVELY WHICH WERE ALS O DISMISSED BY THE LD. TRIBUNAL BY AN UNDER COMMON ORDER DATED 17.02.1998. ITA NO.766/CAL/1993 (A.Y.1989-90) 2. BEING AGGRIEVED BY THE ORDER PASSED BY THE LD. T RIBUNAL DATED 17.02.1998 REFERENCE APPLICATION U/S 256(2) IN CONNECTION WITH ITA NO.766/CAL/1993 WAS FILED BEFORE THE HONBLE CALCUTTA HIGH COURT WHICH WAS AD MITTED ON 05.01.1998. ITA NO.766/CAL/1993 & 200/CAL/1994 COATS OF INDIA L TD. A.Y.1989-90 & 1990-91 2 ULTIMATELY THE SAME WAS DISPOSED OF BY A JUDGMENT O RDER DATED 20.06.2018 BY A DIVISIONAL BENCH PRESIDED BY HONBLE JUSTICE I.P.MU KHERJEE AND HONBLE JUSTICE AMRITA SINHA WHEREBY THE FOLLOWING ORDERS WERE PASS ED :- AS FAR AS QUESTION (B) IS CONCERNED, IT IS CLEARL Y COVERED BY THE JUDGMENT OF THE SUPREME COURT IN COMMISSIONER OF IN COME TAX VERSUS WOODWARD GOVERNOR INDIA P.LTD REPORTED IN [2009] 31 2 ITR 254 (SC). WE ARE ALSO CONVINCED THAT THIS PARTICULAR ISSUE IS NOT COVERED BY SECTION 43A OF THE INCOME TAX ACT WHICH HAS COME INTO FORCE FROM 1 ST APRIL, 2003 INASMUCH AS THERE IS NO ACQUISITION BY THE ASSESSEE OF ANY ASSET FROM A COUNTRY OUTSIDE INDIA FOR THE PURPOSE OF ITS BUSIN ESS. THE QUESTION IS ANSWERED IN THE NEGATIVE IN FAVOUR OF THE ASSESSEE. AS FAR AS QUESTIONS (C),(D),(E),(F),(G) ARE CONCERNED, MR. KHAITAN SUBMITS THAT THE ORDER OF THE TRIBUNAL IS PERVERSE. HE SAID THAT ON THE ONE HAND THE ASSESSING OFFICER HAD PARTIALLY ALLOWED CO MMISSION PAYMENTS AS EXPENDITURE AND ON THE OTHER HAND QUESTIONED THE AU THORITY OF THE ASSESSEE TO MAKE SUCH PAYMENT. THIS ACCORDING TO LE ARNED COUNSEL WAS CONTRADICTORY RESULTING IN A PERVERSE ORDER. IN ANY EVENT, THE ASSESSEE SHOULD HAVE REFRAINED FROM DISALLOWING RS.14,25,276 /- ON THAT ACCOUNT. FIRST OF ALL, IN OUR OPINION, THE AMOUNT IN VOLVED IS VERY SMALL. AFTER SO MANY YEARS WE ARE NOT INCLINED TO DEAL WITH THE ISSUE. MOREOVER, THE PERVERSITY IF AT ALL ARISES FROM NON APPLICATION O F QUESTIONS OF FACT. HERE, ALSO AFTER PASSAGE OF SO MANY YEARS WE ARE NOT INCL INED TO INVESTIGATE THE CORRECTNESS OF FACTUAL FINDINGS. THEREFORE, THE ABOVE QUESTIONS (C) TO (G) NEE D NOT BE ANSWERED. WE DIRECT THE REGISTRAR GENERAL OF THIS COURT TO TRANSMIT A COPY OF THIS ORDER TO THE INCOME TAX TRIBUNAL C BENCH, KOLKA TA. WE DIRECT THAT IT SHOULD REVISE ITS ORDER OUT OF WHICH THIS REFERENCE ARISES IN ACCORDANCE WITH THE OBSERVATIONS MADE IN THIS ORDER, RESULTING IN ANSWERING QUESTION (B) REFERRED TO ABOVE IN FAVOUR OF THE ASSESSEE. WE REQUEST THE TRIBUNAL TO MAKE ITS DECISION W ITHIN THREE MONTHS OF COMMUNICATION OF THIS ORDER. THE ORDER OF THE TRIBUNAL RELATING TO THE ISSUE COV ERED BY QUESTION (B) IS SET ASIDE. ITA NO.766/CAL/1993 & 200/CAL/1994 COATS OF INDIA L TD. A.Y.1989-90 & 1990-91 3 3. RESPECTFULLY FOLLOWING THE JUDGEMENT AND ORDER D ATED 20.06.2018 PASSED BY THE HONBLE HIGH COURT OF CALCUTTA WE NOW DEAL WITH THE ISSUE IN TERMS OF THE DIRECTION GIVEN BY THE HONBLE CALCUTTA HIGH COURT. THE ISSUE RELATING TO THE DISALLOWANCE OF SUBSCRIPT ION TO STAFF RECREATION CLUB U/S 40(A)(9A) HAS NOT BEEN PRESSED BY THE ASSESSEE BEFORE THE HONBLE CALCUTTA HIGH COURT. HENCE THE SAME WAS DISMISSED BY THE HONBLE COURT AS NOT PRESSED. THUS THE ORDER PASSED BY THE LD. TRIBUNAL ON THIS ISSUE REJE CTING THE CLAIM OF THE ASSESSEE IS HEREBY CONFIRMED. THE ISSUE RELATING TO THE DISALLOWANCE OF LIABILITY ARISING OUT OF AN ACCOUNT OF EXCHANGE FLUCTUATION LOSS IN RESPECT OF FEES PAYABL E TO FOREIGN COMPANY TO THE TUNE OF RS.7,00,200/- HAS BEEN CONSIDERED BY THE HONBLE JU RISDICTIONAL HIGH COURT. FOLLOWING THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE MATTER OF CIT VS WOODWORTH GOVERNOR PVT. LTD. (312 ITR 254) THE HON BLE HIGH COURT AT KOLKATA HAS BEEN PLEASED TO DIRECT US TO ALLOW DEDUCTION THEREB Y ALLOWING THE ISSUE ITSELF IN FAVOUR OF THE ASSESSEE. IN THAT VIEW OF THE MATTER WE ALLOW THE LIABILITY A RISING ON ACCOUNT OF FOREIGN EXCHANGE LOSS IN RESPECT OF FEES PAYABLE TO THE FOR EIGN COMPANY TO THE TUNE OF RS.700,200/-, THE ISSUE RELATING TO THE DISALLOWANCE OF COMMISSIO N PAID TO SELLING AGENT TO THE TUNE OF RS.14,25,276/- HAS BEEN DISMISSED BY TH E ORDER DATED 20.06.2018 PASSED BY THE JURISDICTIONAL HIGH COURT AT KOLKATA SINCE N O SUBSTANTIAL QUESTION OF LAW AROSE. THUS THE ORDER PASSED BY THE LD. TRIBUNAL REJECTING THE CLAIM OF THE ASSESSEE ON THIS ISSUE IS HEREBY CONFIRMED. THE ISSUE RELATING TO THE DISALLOWANCE OF CREDIT LI ABILITY TO THE TUNE OF RS.13,85,130/- U/S 40A(7) OF THE ACT HAS BEEN DISMI SSED BY THE HONBLE HIGH COURT AT KOLKATA WAS NOT PRESSED BY THE ASSESSEE. IN VIEW OF THE MATTER THE ORDER PASSED BY THIS LD. TRIBUNAL REJECTING THE CLAIM OF THE ASSESSEE ON THIS PARTICULAR ISSUE IS CONFIRMED. ITA NO.200/KOL/1994 A.Y.1990-91 ITA NO.766/CAL/1993 & 200/CAL/1994 COATS OF INDIA L TD. A.Y.1989-90 & 1990-91 4 4. THE REFERENCE IN CONNECTION WITH ITA NO.200/CAL/ 1993 WAS DISPOSED OF BY A JUDGEMENT ORDER DATED 21.06.2018 BY A DIVISIONAL BE NCH PRESIDED BY HONBLE JUSTICE I.P.MUKHERJEE AND HONBLE JUSTICE AMRITA SINHA WHER EBY THE FOLLOWING ORDERS WERE PASSED :- AS FAR AS QUESTIONS (H) AND (I) OF THIS REFERENCE APPLICATION ARE CONCERNED, THE ISSUE IS COVERED AND ADMITTED TO BE COVERED BY LEAR NED COUNSEL FOR THE REVENUE, IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE SU PREME COURT IN COMMISSIONER OF INCOME TAX VS. GENERAL INSURANCE CORPORATION REP ORTED IN [2006] 286 ITR 232 (SC) WHERE THE HIGHEST COURT AFFIRMED THE BOMBA Y AND CALCUTTA HIGH COURT DECISIONS REFERRED TO THEREIN AND HELD THAT THE EXP ENDITURE FOR ISSUANCE OF BONUS SHARES WAS REVENUE EXPENDITURE. THE COURT WHILE DEA LING WITH THE ISSUE REFERRED TO ITS OWN EARLIER DECISIONS IN PUNJAB STATE INDUST RIAL DEVELOPMENT CORPORATION LIMITED REPORTED IN (1997) 225 ITR 292, AND BROOKE BOND INDIA LIMITED REPORTED IN (1997) 225 ITR 798 AND REMARKED THAT TH EY WERE NOT OF MUCH ASSISTANCE TO IT. WE DIRECT THE REGISTRAR, ORIGINAL SIDE OF THIS COU RT TO SEND A COPY OF THIS ORDER TO THE INCOME TAX APPELLATE TRIBUNAL, C BENCH: CALC UTTA. WE DIRECT THE TRIBUNAL TO ANSWER THE REFEREN CE IN ACCORDANCE WITH OUR OBSERVATIONS ABOVE RESULTING IN ANSWERING THE QUEST IONS (A), (H) AND (I) IN FAVOUR OF THE ASSESSEE. WE REQUEST THE LEARNED TRIBUNAL TO PRONOUNCE ITS DECISION WITHIN THREE MONTHS OF COMMUNICATION OF THIS ORDER. 5. RESPECTFULLY FOLLOWING THE JUDGEMENT ORDER DATED 21.06.2018 PASSED BY THE HONBLE HIGH COURT OF CALCUTTA WE NOW DEAL WITH THE ISSUE IN TERMS OF THE DIRECTION GIVEN BY THE HONBLE CALCUTTA HIGH COURT. THE ISSUE RELATING TO THE DISALLOWANCE OF LIABILITY ARISING ON ACCOUNT OF EXCHANGE FLUCTUATION LOSS IN RESPECT OF FEES PAYABL E TO THE FOREIGN COMPANY TO THE TUNE OF RS.1,92,227/- WHICH HAS BEEN REFERRED BY THE AS SESSEE BEFORE THE HONBLE HIGH COURT AND WAS CONSIDERED. RELYING UPON THE JUDGEMEN T OF THE HONBLE SUPREME COURT IN THE MATTER OF CIT VS WOODWORTH GOVERNOR PVT. LTD . (312 ITR 254) THE HONBLE JURISDICTIONAL HIGH COURT HAS BEEN PLEASED TO DIREC T US TO ALLOW THE DEDUCTION AND THEREBY THE ISSUE IN FAVOUR OF THE ASSESSEE. IN VIE W OF THE MATTER WE ALLOW THE LIABILITY ITA NO.766/CAL/1993 & 200/CAL/1994 COATS OF INDIA L TD. A.Y.1989-90 & 1990-91 5 TO THE TUNE OF RS.1,92,227/- ARISING ON ACCOUNT OF EXCHANGE FLUCTUATION LOSS IN RESPECT OF FEES PAYABLE TO THE FOREIGN COMPANY. THE ISSUE RELATING TO DISALLOWANCE OF EXPENSES OF RS.69,692/- INCURRED ON ACCOUNT OF BONUS SHARES HAS BEEN CONSIDERED AND DIS POSED OFF BY THE JURISDICTIONAL HIGH COURT. RELYING UPON THE JUDGEMENT OF THE HONB LE SUPREME COURT IN THE CASE OF CIT VS GENERAL INSURANCE CORPORATION (286 ITR 232) THE HONBLE COURT HAS BEEN PLEASED TO DIRECT US TO ALLOW DEDUCTION AND THEREB Y ALLOWING THE ISSUE IN FAVOUR OF THE ASSESSEE. WE THUS RESPECTFULLY FOLLOWING THE JUDGME NT AND ORDER PASSED BY THE JURISDICTIONAL HIGH COURT ALLOW THE EXPENSES TO TH E TUNE OF RS.69,692/- INCURRED ON ISSUE OF BONUS SHARES IN FAVOUR OF THE ASSESSEE. 6. BOTH THE ASSESSEES APPEALS ARE HEREBY DISPOSED OF IN TERMS OF THE MANDATES/DIRECTIONS GIVEN BY THE HONBLE JURISDICT IONAL HIGH COURT. O RDER PRONOUNCED IN THE COURT ON 26.09.2018. SD/- SD/- [J.SUDHAKAR REDDY] [ MADHUMITA ROY ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 26.09.2018. [RG SR.PS] COPY OF THE ORDER FORWARDED TO: 1. COATS OF INDIA LTD., TRANSPORT DEPOT ROAD, TARAT OLLA, CALCUTTA-700088. 2. DCIT, SPECIAL RANGE-17, KOLKATA. 3. C.I.T.(A)-XI, KOLKATA. 4. C.I.T-2, KOLKATA 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER, SENIOR PRIVATE SECRETARY ITAT KOLKATA BENCHES KOLKATA ITA NO.766/CAL/1993 & 200/CAL/1994 COATS OF INDIA L TD. A.Y.1989-90 & 1990-91 6