THE COMMISSIONER OF INCOME TAX V. M/S THE HIND SAMACHAR

ITA/11/2004

AI Insights

The case involves multiple appeals and references concerning the assessment years 1994-95, 1988-89, 1989-90, and subsequent years, related to the deduction of interest payable on securities by M/s The Hind Samachar Ltd. The primary legal question was whether the Income Tax Appellate Tribunal was correct in law in dismissing the Department's appeal and confirming the deletion of the said interest amount. The Assessing Officer had initially disallowed the deduction on the grounds that the entries were not recorded in the regular books of account. However, the CIT(A) and the Tribunal found that the payments were verifiable from the profit and loss account and that the assessee had consistently followed the same accounting method in previous years, which had been accepted by the Department.

• Counselvise Citation: [2010] 140 COUNSELVISE.COM (IT) 681472 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 14-10-2010
• Assessment Year: misc
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: SANJAY BANSAL; ASHIMA BINDLISH
• Assessee Lawyers: VIVEK SETHI
• Keywords: Mercantile system of accounting; Interest payable on securities; Deletion of Rs.44,32,554
• Section: 147; 148; 143(3); 153A; 68

Judgement Text

"IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH. I.T.A. No.11 of 2004 & other connected cases being I.T.A. No.258 of 2003, I.T.R. Nos.1 and 2 of 2007 and I.T.R. Nos.6 and 7 of 2010 Date of decision: 14.10.2010 The Commissioner of Income Tax. -----Appellant. Vs. M/s The Hind Samachar Ltd. -----Respondent CORAM:- HON'BLE MR. JUSTICE ADARSH KUMAR GOEL HON'BLE MR. JUSTICE AJAY KUMAR MITTAL Present:- Mr. Vivek Sethi, Advocate for the appellant. Mr. Sanjay Bansal, Sr. Advocate with Ms. Ashima Bindlish, Advocate for the respondent. --- ADARSH KUMAR GOEL, J. 1. This order will dispose of I.T.A. No.258 of 2003, ITA No.11 of 2004, I.T.R. Nos.1 and 2 of 2007 and I.T.R. Nos.6 and 7 of 2010, as common question is involved in all the cases. 2. I.T.A. No.11 of 2004 has been filed by the revenue against order dated 25.7.2003 of the Income Tax Appellate Tribunal, Amritsar in I.T.A. No.465(ASR)/1997 for the assessment year 1994-95 raising following substantial question of law:- “Whether, on the facts and in the circumstances of the case, the learned ITAT was right in law in dismissing I.T.A. No.11 of 2004 the Department’s appeal thereby confirming the deletion of Rs.44,32,554/- by the learned CIT(A) on account of interest payable on “Agents’ Securities”, ignoring the fact that although the assessee-company has been following mercantile system of account but it failed to record the same in its regular books of account?” 3. The assessee is running a newspaper and claimed deduction on account of interest payable on the securities with the assessee. The said deduction was disallowed by the Assessing Officer on the ground that the entries for payment of interest were not made in the balance sheet by the assessee. However, on appeal, the CIT(A) upheld the plea of the assessee, by holding that payments could be verified from the profit and loss account. The CIT(A) followed order of the Tribunal in the case of the assessee dated 26.2.1997 for the assessment year 1988-89, which is subject matter of I.T.R. No.6 of 2010. The findings recorded by the CIT(A) are as under:- “10. After considering the rival submissions, we are of the view that there is substantial merit in the arguments advanced by the learned counsel for the assessee in support of the claim made as also the view-point canvassed. No doubt the entries for the amount claimed in the year under consideration had not been made in the books of accounts, but it is nobody’s case that the same does not pertain to the previous year relevant to the assessment year under consideration. It is also not disputed before us by the 2 I.T.A. No.11 of 2004 Revenue that the sum of Rs.17,79,041/- debited to the profit and loss account was not claimed as a deduction, but was added to the income of the company in the statement of taxable income which accompanied the return and it was the sum of Rs.4,32,865/- which was claimed as a deduction. The decision of the Hon’ble Supreme Court (supra) relied upon by the learned counsel and which was followed by their Lordships of the Orissa High Court in the decision cited by the learned counsel (supra) does support the stand that entries in the books of accounts in a given case may not be a relevant factor. That apart, the assessee is consistently following the same method in the two preceding assessment years and this has been accepted the Department as the assessment orders for these years would show. If a subsequent assessment year is looked at i.e. 1989-90 the assessee has appended the statement of taxable income at page 19 of the compilation and the sum of Rs.4,58,485/- which according to the learned counsel includes the sum of Rs.4,32,865/- claimed in the year under appeal has been added to the profit and there apparently being no claim for deduction on the same account as would be apparent once again from the same statement.” 4. The above view was upheld by the Tribunal. 5. We have heard learned counsel for the parties. 6. The finding that the assessee was following mercantile system of accountancy is not under challenge. It has been concurrently found by the CIT(A) and the Tribunal that even 3 I.T.A. No.11 of 2004 though in the balance sheet the interest liability continued to be shown, in the profit and loss account, the interest payable was debited. This being the undisputed position, there was no justification to disallow deduction and the CIT(A) and the Tribunal have rightly upheld the claim of the assessee. Question is accordingly answered against the revenue. 7. In view of above, I.T.A. No.258 of 2003, ITA No.11 of 2004 are dismissed and question referred in I.T.R. Nos.1 and 2 of 2007 and I.T.R. Nos.6 and 7 of 2010 is decided against the revenue. 8. Accordingly, appeals will stand dismissed and the references will stand answered against the revenue. 9. A photocopy of this order be placed on the files of each connected case. (ADARSH KUMAR GOEL) JUDGE October 14, 2010 ( AJAY KUMAR MITTAL ) ashwani JUDGE 4 "