COMMR OF INCOME TAX,AP-I,HYD V. M/S.GVK INDUSTRIES LTD.,HYD

ITTA/24/2003

AI Insights

The case involves an appeal by the Commissioner of Income Tax against M/s. G.V.K. Industries Ltd. concerning the assessment year 1995-96. The core issue was the disallowance of interest on deposits claimed by the respondent, which the assessing officer initially adjusted under Section 143(1)(a) of the Income Tax Act, 1961. This adjustment was contested and led to a series of appeals. The Commissioner of Income Tax (Appeals) reversed the assessing officer's adjustment, a decision which was later upheld by the Income Tax Appellate Tribunal. The Commissioner of Income Tax's appeal to the High Court argued that the issue was no longer debatable and thus could be adjusted prima facie. However, the court found that the issue remained debatable at the time of the original adjustment, and thus the prima facie adjustment was not appropriate.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 728362 (HC-TELANGANA)
• Appeal Type: Others
• Pronouncement Date: 23-11-2022
• Assessment Year: misc
• Other Referred Cases: CIT v. Darco Cooling Coils Ltd., Andhra Pradesh Carbides Limited v. CIT, Godavari Fertilisers & Chemicals Ltd. v. CIT, Samtel Color Ltd. v. Union of India, S.R. Grover v. Assistant Commissioner of Income Tax, CIT v. Nagarjuna Steels Ltd., CIT v. Tuticorn Alkali Chemicals and Fertilizers Ltd., Kamal Textiles v. ITO, Modern Fibotex India Ltd. v. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: CHALLA GUNARANJAN
• Assessee Lawyers: K MAMATA CHOUDARY
• Keywords: Assessment Year 1995-96; Debatable Issue; Income Tax; Interest on deposits; Prima-facie adjustment
• Section: 143(2); 260A; 143(1)(a)

Judgement Text

"IN THE HIGH COURT FOR THE STATE OF TELANGANA AT HYDERABAD WEDNESDAY ,THE TWENTY THIRD DAY OF NOVEMBER TWO THOUSAND AND TWENTY TWO PRESENT THE HON'BLE THE CHIEF JUSTICE UJJAL BHUYAN AND THE HON'BLE SRIJUSTIGE C.V. BHASKAR REDDY INCOME TAX TRIBU NAL APP Appeal Under Section 260- A of the lncome Tax Act, 1961 against the order of the lncome Tax Appellate Tribunal, Hyderabad Bench \"B\" Hyderabad in ITA No. 1845 I Hl96, dated 21'08-2001 for Assessment Year 1995-96 preferred against the order of the Commissioner of lncome Tax ( Appeals )-1, Hyderabad in Appeal No. 27lDC (Assts) l/ CIT (A) l/ 96-97 dated 15-07-1996 . Between: The Commissioner of lncome Tax - I, Hyderabad ...APPELLANT AND M/s. G.V.K. lndustries Ltd., Road No. 1, Banjara Hills, Hyderabad' ...RESPONDENT Counsel for the Appellant : Ms. K. MAMATA CHOUDARY Counsel for the Respondent: SRI CHALLA GUNARANJAN The Court Delivered t he following: Judgment THE HON'BLE THE CFIIEF TUSTICE UIIAI BHLryAN AND THE HON'BLE SRI IUSTI CE C.V.B REDDY T T.A.No I MENT, (Per tbe Hon'bh the ChieJ lustit Ujja/ Bhryaa) Heard Ms. I(.Mamata Choudary, learned counsel for the appellant and Mr. Challa Gunaranian, Iearned counsel [or thc respondent. 2. This appcal has been prclcrred undcr Section 260A ol the Incomc'I'ax Act, 1961 (briefly'the Act'hercinafter) assailing the order dated 21.08.2001 passed by the lncome'fax Appcllatc fribunal, I\"lvdcrabad Bcnch 'R', Hydcrabad (briefly 'the 'I'ribunal' hereinafter) in I.T.A.No.1845/Hyd/1996 for the assessment year 1995-96. 3. On 02.11.2022, earned couflsel [or the aPPellant madc a submission that the disputed tax may be below the l-imit of onc crore. Shc therefore, prayed lor time to obtain lnstfuctrons. I I 4. On instructions received, today learned counsel for the appcllant submits that disputed tax would be above one crorc outer limit. 1'here[ore, the appeal would have to be heard on me fl ts. 5. Though this appeal was admitted lor hearing or 24.02.2003, no substantial question o[ law was framed However, from the memo o[ appeal we find that appellant/revenue has proposed the following question as a substantiai qucstion of iaw: Whethcr on the facts and in the circumstances o[ thc case, 'Iribunal was justified in upholding the order of the 6rst appellate authoriry setting aside the intimation of the assessing officer under Section 1a3()(a) o[ the Act on the ground that issuc was debatable at the time of issuance of the intimation ? 6. It may be mentioned that respondent is an assessce under the Act having the status of a company. For the assessment year 1995-96, it filed return of income ..),. .'1 on 29.1.1 .1,995. Assessrng Officcr in thc intimation undcr Section 1,a3()(a) of the Act dated 27.03.1996 disallowed interest on deposits, dcduction of which was claimed by the respondent. 7. In the intimation, assessing officer noted that the interest income ol Rs.2,06,77,948.00 was added to thc income of the respondent under the head 'income from other sources' in view of the binding nature of the following decisions of this Court: CIT v. Darco Cooling Coils Ltdr. Andhra Pradesh Carbides Limited v. CIT2 Godavari Fertilisers & Chemicals Ltd. v. CIT3 8. Aggrievcd by thc same, rcspondent prelerred appeal before the Frrst appellate authoriry 2.e., Commissioner oI Income Tax (Appeals)-I, Hyderabad @riefly 'CfTe)' na efcl h fter) 1 2 3 196 l-fR 375 i98ITR JE6 r98lTR 388 9. One of the issucs considered by CIT(A) was whethcr disallowing adjustment o[ interest on deposits made by the respondent could be construed as a pina facie adiustment so that thc samc could be carti.ed out under Section 143(1)(a) ol the Acl lly thc order dated 15.07.1996, CIT(A) allowed the appeal o[ the respondcnt by declaring that such pina farie ad,ustmeflt could not have been carried out by the assessing offrcer while issuing intimation under Scction 143(1)(a) of the Act. 10. Rcvenue carried the matter in further appeal beFore thc 'Iribunal. By the order dated 21.08.2001, Tribunal dismissed the appcal of the revenue. Hcnce, this appeal. 11. Lcarned Senior Standing Counsei for the appellant submits that sct-off o[ adjustment o[ interest earned by the rcspondcnt against intercst paid for borrowed funds was no longer a debatable issue inasmuch as the said issue was ) l conclusively detcrmined by this Court in the three decisions t-- ::1: z refered to and relied upon by the assessing officcr which was also urged before the 'fribunal. The samc no longcr being a debatabie issue could be ciisalrowed by thc assessing officer as a pinafacie adiustment under Sectioo U3(t)(a) o[ the Act. In support of her conrendons, she has placed reliance ofl a Division Bench judgmenr of the Delhi High Coun in Samtel Color Ltd. v. Union of Indiaa which was subse