THE COMMISSIONER OF INCOME TAX V. M/S TELCO CONSTRUCTION EQUIPMENT CO. LTD

ITA/504/2007

AI Insights

The case involves appeals by the Commissioner of Income Tax and the Assistant Commissioner of Income Tax against M/s Telco Construction Equipment Co. Ltd., concerning the Tribunal's dismissal of their appeals related to the assessment years 2000-01 and 2001-02. The primary issues revolved around the deductibility of provisions made for mediclaim, warranty expenses, and doubtful debts. The Tribunal had previously dismissed the revenue's appeals, leading to the current proceedings where the High Court decided to remand the matter for fresh consideration in light of relevant legal precedents and amendments.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 701220 (HC-KARNATAKA)
• Appeal Type: Others
• Pronouncement Date: 04-02-2014
• Assessment Year: misc
• Other Referred Cases: Rotork Controls India (P) Limited vs. Commissioner of Income Tax
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Partly Allowed
• Court: HIGH COURT
• Department Lawyers: S PARTHASARATHI
• Assessee Lawyers: K V ARAVIND
• Keywords: Allowable deduction; Assessment Year; Contingent Liability; Doubtful Debts; Income Tax; MAT income; Warranty expenses; Mediclaim Provision
• Section: 115JA; 260-A

Judgement Text

" 1 IN THE HIGH COURT OF KARNATAKA AT BANGALORE DATED THIS THE 4th DAY OF FEBURARY 2014 PRESENT THE HON’BLE MR. JUSTICE DILIP B BHOSALE AND THE HON’BLE MR. JUSTICE B MANOHAR ITA.NO.504/2007 C/W ITA.NO.502/2007 BETWEEN 1. THE COMMISSIONER OF INCOME TAX C R BUILDING, QUEENS ROAD BANGALORE 2. THE ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 12(3), C R BUILDING, QUEENS ROAD BANGALORE ... COMMON APPELLANTS (BY SRI K V ARAVIND, ADV.,) AND M/S TELCO CONSTRUCTION EQUIPMENT CO. LTD NO.45, JUBILEE BUILDING, MUSEUM ROAD BANGALORE ... COMMON RESPONDENT (BY SRI S PARTHASARATHI, ADV.,) THIS ITA.NO.504/2007 FILED U/S.260-A OF I.T.ACT, 1961 ARISING OUT OF ORDER DATED 18-01-2007 PASSED IN ITA NO. 561/BANG/2005 FOR THE ASSESSMENT YEAR 2001-02, 2 PRAYING THAT THIS HON'BLE COURT MAY BE PLEASED TO: I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, II. ALLOW THE APPEAL AND SET ASIDE THE ORDER PASSED BY THE ITAT, BANGALORE IN ITA NO. 561/BANG/2005 DATED 18- 01-2007 AND CONFIRM THE ORDER PASSED BY THE ASST. COMMISSIONER & INCOME TAX, CIRCLE-12(3), BANGALORE, IN THE INTEREST OF JUSTICE AND EQUITY. THIS I.T.A. NO.502/2007 FILED U/S.260-A OF I.T.ACT 1961 ARISING OUT OF ORDER DATED 18-01-2007 PASSED IN ITA NO. 276/BANG/2005 FOR THE ASSESSMENT YEAR 2000- 2001, PRAYING THAT THIS HON'BLE COURT MAY BE PLEASED TO: I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW STATED THEREIN, II. ALLOW THE APPEAL AND SET ASIDE THE ORDERS PASSED BY THE ITAT, BANGALORE IN ITA NO. 276/BANG/2005 DATED 18-01-2007 AND CONFIRM THE ORDER PASSED BY THE ASST.COMMISSIONER OF INCOME TAX, CIRCLE-12(3), BANGALORE, IN THE INTEREST OF JUSTICE AND EQUITY. THESE ITA’s COMING ON FOR HEARING, THIS DAY, DILIP B. BHOSALE J. DELIVERED THE FOLLOWING: PC: These income tax appeals are directed against the common order dated 18th January 2007 passed by Income Tax Appellate Tribunal, Bangalore Bench “B” (for short “the Tribunal”) in ITA Nos.276 & 561/Bang/2005 for the 3 assessment years 2000-01 and 2001-02, whereby, the Tribunal dismissed the appeals filed by the revenue. The appeals before the Tribunal were preferred against two separate orders passed by Commissioner of Income Tax (Appeals)-III, Bangalore (for short “Appellate Authority) dated 7th December 2004 and 1st February 2005, respectively in ITA Nos.37/C-12(3)/CIT(A)III/03-04 and ITA No.23/AC 12(3)/CIT(A)III/04-05, in which two separate assessment orders passed by the Assessing Officer (for short “Assessing Officer\") dated 23-7-2003 and 27-2-2004 were called in question. 2. In the memorandum of appeals, they have raised the following substantial questions of law : 1. Whether the Tribunal was correct in holding that a provision made by the assessee in respect of mediclaim of Rs.72,11,380/- is an allowable deduction during the current assessment year despite the assessment officer holding that such payments will be made only on the claim being made under the 4 policy which may happen in any one or the succeeding assessment years. 2. Whether the Tribunal was correct in holding that the provision made for warranty expenses is an allowable deduction even though the assessing officer had held that the same will be expended by the assessee only on the happening of an event like a claim being made by the assessee’s customers and therefore the same is a contingent liability. 3. Whether the tribunal was correct in holding that the provision made for doubtful debts cannot be added back for computing MAT income as held by the assessing officer that these debts is a charge to the profits which get reduced and consequently is an unascertained liability.” 3. Insofar as first two questions are concerned, learned counsel appearing for the parties state that in view of the judgment of the Supreme Court in Rotork Controls India (P) Limited vs. Commissioner of Income Tax 5 (2009) 314 ITR 62, the matter deserves remand with a direction to the Tribunal to consider these two questions afresh in the light of the said judgment. 4. We have perused the judgment of the Supreme Court in Rotork Controls India Ltd (supra) and we are satisfied that these two questions deserve to be considered by the Tribunal afresh in the light of the judgment. 5. Insofar as the third question is concerned, learned counsel for the revenue submitted that Section 115JA has been amended vide Finance Act, 2009 with effect from 1-4-1998 and the amendment may have some bearing on the decision of the third question also. Learned Counsel for the respondent-assessee does not dispute the statement made by the learned counsel for the revenue and he also agreed for remanding the matter for deciding the third question also to the Tribunal in the light of the amendment. In the circumstances, we pass the following: 6 ORDER The order passed by the Tribunal dated 18th January 2007 in ITA No.276 and 561/2005 for the assessment years 2000-01 and 2001-02 is set-aside insofar as these three questions are concerned. Rest of the order passed by the Tribunal shall remain unaltered. The Tribunal shall consider all the three questions afresh and decide them on merits and in accordance with law, as expeditiously as possible and preferably within a period of six months from the date of receipt of this order. All contentions of parties are kept open. With these observations, the appeals are disposed of. Sd/- JUDGE Sd/- JUDGE Ia "