Prasad Film Laboratories Pvt. Ltd. V. The Commissioner of Income Tax-1, Aayakar Bhavan, Basheerabagh, Hyderabad and The Assistant Commissioner of Income Tax, Circle 13(1), Hyderabad

WP/5667/2005

AI Insights

The case revolves around a dispute concerning the depreciation rate applicable to a theatre building owned by Prasad Film Laboratories Pvt. Ltd., which was treated as plant and machinery by the petitioner and as a building by the tax authorities. Initially, the CIT (Appeals) ruled in favor of the petitioner, allowing a 25% depreciation rate. However, this decision was reversed by the ITAT following the Supreme Court's ruling in CIT Vs. Anand Theatre, which clarified that such buildings should be treated as buildings, not plant and machinery, thus attracting a lower depreciation rate. Consequently, the Income Tax Department raised a demand for interest under Section 220(2) of the Income Tax Act, 1961, for the delay in tax payment, which the petitioner challenged in the High Court.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 685193 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 28-08-2023
• Assessment Year: misc
• Other Referred Cases: CIT Vs. Anand Theatre, Commissioner of Income Tax versus Excel Industries Limited
• Laws Referred To: Income Tax Act, 1961, Constitution of India
• Result in Favour of: Revenue
• Court: HIGH COURT
• Department Lawyers: J V PRASAD
• Assessee Lawyers: CHALLA GUNARANJAN
• Keywords: Depreciation; Income Tax; Interest demand; Legal jurisdiction; Writ of Certiorari
• Section: 220(2); 151 CPC

Judgement Text

"{ [ 3386 ] HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD (Special Original Jurisdiction) IVONDAY, THE TWENTY EIGHTH DAY OF AUGUST TWO THOUSAND AND TWENTY THREE PRESENT THE HONOURABLE SRI JUSTICE P.SAM KOSHY AND THE HONOURABLE SRI JUSTICE LAXMI NARAYANA ALISHETTY WRIT PETITION NO: 5667 OF 2005 Between: lvl/s. Prasad Film Laboratories Pvt. Ltd., L.V Prasad Marg, Banjara Hills, Hyderabad, rep by its General Manager, Shrr Vellanki Nagineedu ...PETITIONER AND 1 The Commissioner of lncome Tax-1 , Aayakar Bhavan, Basheerabagh, Hyderabad - 500 001. The Asisstant Commissioner of lncome Tax, Circle 13(1), Hyderabad. ...RESPONDENTS Petition under Article 226 of lhe Constitution of lndia praying that in the circumstances stated in the affidavit filed therewith, the High Court may be pleased to pass an order or orders or writ particularly one in the nature of Writ of Certiorari and quash the proceedings of the 1st respondent in F.No.ClT/Hyd.t122O(2)t32(1 to 3)/04-05 dated '12-10-2004 to the extent of the demand raised under section 220(2) of the lncome Tax Act, from the due date of notice under section 156 for assessment years 'l 994-95, 1995-96 & 1996-97 as illegal, arbitrary, without jurisdiction and violative of Article 14 and 3004 of the Constitution of lndia. l.A. NO: 'l OF 2005(WPMP. NO: 7494 OF 2005) Petition under Section 151 CPC praying that in the circumstances stated in the affidavit filed in support of the petition, the High Court may be pleased to 2 stay all further proceedings of the 1st F. No. C I T( Hyd - 1 ) I 220 (2)32( 1 to 3 )/O4-05 d ate d 1 2- 1 O -2OO 4. Counsel for the Petitioner: SRI CHALLA GUNARANJAN Counsel for the Respondents: SRI J.V.PRASAD The Court made the following: ORDER respondent IN { f THE HON'BLE SRI JUSTICE P.SAM KOSHY AND THE HON'BLE SRI JUSTICE LAXMI NARAYANA ALISHETTY WRIT PETITION No.5667 of 2OOS ORDER..- er Hon'ble Sri Justice P.SAM KOSHY) The order under challenge in thc prcscnt 'rit pctition is the one which is passed on 12.O2.2004 by thc Commissioner o[ Income Tax, Hyderabad-I, under Section 22O (21 of the Income Tax Act, 196 1. 2. Hcard Sri Challa Gunaranjan, iezri:ned counsel lor the petitioner and Sri J.V. Prasad, learned counsel for the respondents-Department. 3. Vide the said impugned order, thc Commissioner of Incorne Tax has raised a demand of payment of intcrest levied under Section 22O (21 of the Income Tax Act, 1961, for the assessment years 1994-95, 1995-96 and 1996-97. The issue arose in the present u'rit petition is on account of a series of litigations between ,q# 2 { the petitioner and some theatre operators in the entire ccuntry 4. Thc disputc u,as claiming of depreciaticn at 25o/o by the theatre o rners treating the theatre b uilding as plant and machinery. Where the stancl of the Department was that the theatre building would get a depreciation o[ or-r1y 1O%, treating it to be a building The assessment officer, at tl're first instrLncc, has decided the issue in favour of the Department which was cl-rallenged by the assessee before the Commissioner of Income Tax (Appeals) (for short the 'CIT (Appeals)') vide ITA No.202lTR/DC(A)SRI/CIT(A)- llll98-99. The CIT (Appeals) had decided thr: appeal in favour of the assessee holding that the petitic,ner would be entitled for depreciation at 25o/o. Tl:e said order of the CIT (Appeals) was challenged by the Departmt:nt by way of an appeal before the ITAT. Pending appeal before the ITAT, the Hon'bie Supreme Court in the case of CIT Vs. Anand Theatre 124 lTRl92l, supra, while deciding the ,:. 3 f issue whether the theatre building wouid be treated as plant and machinery or whether it would be treated as building, held that it could be treated only as a building and not as plant and machinery. Thus, the issue has been decided in favour of the Department/ Revenue. 5. As a consequence of the decision of the Hon'bie Supreme Court of India, the appeal which was preferred by the Department before the ITAT challenging the order of CIT (Appeals) which stood decided in favour of the petitioner got reversed and the appeal of the Department stood allowed. Thereafter, the main demand of interest under Section 220 (2) of the Income Tax Act, 196 1, u'as raised by the Department which is under challenge in the instant case. 6. Learned counsel for the petitioner today prayed for a limited relief to the extent that since the issue stands decided by the Hon'ble Supreme Court of India in the case of Anand Theatre, supra, the only point he has, as of now is that from the time the CIT (Appeals) stood 4 f decided rn his favour till the decision was rendered by the Hon'ble Suprcme Court of India in the case of Anand Thcatre, supra, on 12.O5.2OOO, for the irrter-vening period since there was no demand put forl.h by the Departrnent, the pctitioner should be entitled lor partial rvaiver of payrne r-rt of inte rest for the said inlerregnum period i.e. from the date the CIT (Appeals) decided the appeal in favour of the petitioner i.e. for the arisessment year 1994 95 on 05.08.1998 and for the subsequent two years 1995-96 and 1996-97 jointly on 19.Oi'.1999 till the judgement ol the Hon'ble Supreme Cour-t of India in the case of Anar-rd Theatre, supra, was Jrassed on 12.05.2000 7 . Learned counsel for the petitione:: fi-rrther contended that in the case of the petitione::, the CIT (Appeats) for the previous assessment year:; l99l-92 and 1993-94 had granted the partial waiver vide order dated 17.09.2OO2. Therefore, the said benefit should a,lso be extended for the subsequent periods ars well. It is 5 f further submitted that the said order has further been affirmed by the Division Bench of this Court in W.P.No.24292 of 2OO2 decided on 21. 2.2022. Learncd counsel for the petitioner also relied upon the decision of the Hon'ble Supreme Court in the case of Commissioner of Income Tax versus Excel Industries Limitedl, rvherein the appeals of the Income Tax Department at the similar circumstances has been rejccted 8. Per contra, learned counsel for the respondents- Department on the other hand opposing the petition submits that it is a case where the Department had promptly challenged the order of the CIT (Appeals) before the ITAT for a-11 the three assessment vears and that the three appeals hied by the Department before the ITAT stood allowed vide order dated 2O.O9.2OO2 and 05.05.2004 respectively. It is further contended that since the order passed by the CIT (Appeals) in favour of I (2014) 13 Supreme Court Cases 459 6 --=r-E* ' -..-rS .iE f the assessec stood reversed by the ITAT, the very order of the CIT (Appeals) would not remain in exisl-ence and the petitioner: cannot claim any waiver on tht: basis of an order wl-rich docs not exist 9. It u,as lurther contention of the Departrnent that the demand during the interregnum period :ould not have been raised for the reason that firstly, the CIT (Appeals) had aliou,ed the appeal of the assesriee and it was under challenge before the ITAT. As long as the appea-l was pending before the ITAT, the dem,lnd could not have been raised. Moreover, it wars lurther contendcd that, the moment the order of the CIT (Appeals) stood reversed, the order relates ber.ck to the date the order in original was passed by the assessment officer. And in vie'\"1, of the provisions of sub-st:ction 2 of Section 22O of the Income Tax Act, 1961, the petitioner therefore would be liable to pay interes t for the intervening period. Even though there might have been an order in his favour by the ITA'1, but the said order 7 f was immediately challenged by the Department and any order ur-lder challenge is always subject to outcome of the ITAT decision 10. Having heard the contentions put forth on either side and on perusal of records, particularly, taking note of the fact that whether the petitioner would be entitled for depreciation of 25'/o on the theatre building treating it to be a plant and machinery or whether they would be liable for depreciation at lOoh treating it to be a building was laid to rest by the Hon'ble Supreme Court in the case of Anand Theatre, supra. What now requires to be seen is the consequence that would fall from the judgement of the Hon'ble Supreme Court of India. 11. Admittedly, the assessment officer has raised a demand of interest against the petitioner for all the three assessment years. The waiver sought for by the petitioner in the opinion of this Bench cannot be accepted for the simple reason that Section 22O of the Act deals u,ith a situation where tax payable and when B TE { the assessee is deemed to be in default. The said section cleariy lays down a situation under which the interest would become leviable and the provisions ol law, particularly, Section 22O (Al of the Act lays down the provisions under which there could be a wai uer of the amount of interest. Admittedly, in the instart case, the petitioner do not fall in any of the category envisaged under sub-section 2 (A) ol Section '.12O of the Act 12. Another fact which needs to be considered is the fact that the Department had immediately <;hallenged the order passed by the CIT (Appeals) before the ITAT, it would squarely be within the ambit of corLtinuit5r of proceedings. When the appeal of the Departnrent stood a-llowed and the order under challenge i.e. order of the CIT (Appeals) is set aside and reversed, the consequence would be that the petitioner becomes liable for payment of tax assessed by the original assessing officer. Further, 9 f he q,ould also be liable for payment of interest, as has been envisaged under Section 220 of the Act. 13. If the analo&y canvassed by the petitioner is to be accepted, tl-rcn it would be literally laying down the law and would also be giving rise to a Pandora's Box of similar claims being raiscd b.\"- all the assesseess who succeed in an appeal and the said order subsequentiy gets reversed at a still higher forum or Court' Such a situation since, has not been prescribed under the statute, this Bench while considering the demand notice raised by the CIT (Appeals) under Section 22O (21 of the Income Tax Act, 196 1, cannot venture into and lay down a law which otherwise is not within the scope and ambit of the instant writ petition 14. In view of the same, we do not Iind any strong case made out by the petitioner calling for an interference with the demand notice under Section 22O (21 of the I Income Tax Act, 196 I and thc writ petition deserves to l j I I l I 1c be and is accordingly rejected. There shall lre no order as to costs. As a sequel, miscellaneous petitions, if artlz pending, shall stand closed f //TRUE COPY// 'l . One CC to SRI CHALLA GUNARANJAN, Advocate [OPUC] 2. One CC to SRI J.V.PRASAD, Advocate [OPUC] 3. Two CD CoPies SDI B.SARASWATHI ASSISTANI' REGISTRAR /'- - --() SECTION OFFICER To, BSR GJ 4 I ' HIGH COURT DATED: 2810812023 ORDER WP.No.5667 of 2005 REJECTING THE WRIT PETITION, WITHOUT COSTS /: --...-._ - r- 5,TAr ti\" ;-l 2E SEP 2M oj40 B.o ,L "