PCIT vs. Pukhraj S. Jain (Bombay High Court)

IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INCOME TAX APPEAL NO. 1288 OF 2016
Pr. Commissioner of Income Tax19
..Appellant
Vs.
Pukhraj S. Jain ..Respondent
…………
Mr. Ashok Kotangle a/w. Ms. Padma Divakar for appellant.
Mr. Tanzil Padvekar for respondent.
…………
CORAM : AKIL KURESHI &
M.S. KARNIK, JJ.
DATE : 4th JANUARY, 2019
P.C. :
The Revenue is in Appeal against the judgment of
Income Tax Appellate Tribunal dated 10/11/2015. Following
questions have been presented for our consideration :
1. Whether on the facts and circumstances of
the case and in Law, the Hon. ITAT was justified in
upholding the decision of the Ld. CIT(A) by completely
ignoring the contention of the revenue in respect of
violation of Rule 46A of the I T Rules, 1962 ?
2. Whether on the facts and circumstances of
the case and in Law, the Hon. ITAT was justified in
upholding the decision of the Ld. CIT(A) wherein the
addition by the A.O., by invoking section 41 of the I T
Act, 1961 was deleted ?
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2. Briefly stated the facts are that,
The respondent – assessee is an individual and
engaged in the business of imports. The Assessing Officer while
assessing return of the respondent – assessee for the assessment
year 201011
noticed that there were several sundry creditors
towards whom the assessee had not repaid a sum of Rs.1.79
crores (rounded off) for over three years. The Assessing Officer
therefore after putting the assessee to notice invoked Section
41(1) of the Income Tax Act, 1961 (‘the Act’ for short).
3. The assessee carried the matter in Appeal and in
addition to raising legal contentions, the appellant contended
that in subsequent years most of the creditors were paid off. The
evidence in this respect was produced before the Commissioner
(Appeals). The Commissioner (Appeals) allowed the Appeal
upon which the Revenue approached the Tribunal. The Tribunal
by the impugned judgment dismissed the Revenue’s Appeal. The
Tribunal noted that the assessee was unable to repay the
creditors because of weak financial position and further that the
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assessee had never completely stopped making repayments. The
Tribunal also noted that in next couple of years the assessee had
in fact repaid a sum of Rs. 1.54 crores out of Rs.1.79 crores. The
Tribunal, therefore, concluded that the assessee never treated
the liability to have ceased.
4. It is well settled through series of judgments that
merely because a debt has not been repaid for over three years,
would not automatically imply cessation of liability. Exhaustion
of period of limitation may prevent filing of recovery
proceedings in a Court of law, nevertheless it cannot be stated
by itself that the liability to repay the amount had ceased. Going
by this logic itself, the Assessing Officer, in our opinion,
committed an error invoking Section 41(1) of the Act. Further
the assessee had produced additional evidence on record before
the Appellate Authority after following the procedure and
pointed out that substantial portion of the debt was cleared in
later assessment years.
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5. We do not find any error in the decision of the
Tribunal. Income Tax Appeal is dismissed.
(M.S. KARNIK, J.) (AKIL KURESHI, J.)
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IN THE HIGH COURT OF JUDICATURE AT BOMBAY
ORDINARY ORIGINAL CIVIL JURISDICTION
INCOME TAX APPEAL NO. 1769 OF 2016
The Pr. Commissioner of Income Tax1
.. Appellant
v/s.
Mahalaxmi Infra Projects Ltd. .. Respondent
Mr. N.N. Singh for the appellant
Mr. Mihir Naniwadekar I/b Alisha Pinto for the respondent
CORAM : AKIL KURESHI &
M.S. SANKLECHA, J.J.
DATED : 30th JANUARY, 2019
P.C.
1. This appeals is admitted for consideration on following reframed
substantial questions of law 🙁
a) Whether, the respondent / assessee fulfills the requirement
stipulated in Section 80IA(
4) of the Income Tax Act, 1961 once
the conclusion reached is that it is contractor and not developer
as stated in the subsection?
(b) Whether, in the facts and circumstances of the case the
Income Tax Appellate Tribunal was right in holding that even if
the Assessee is termed as contractor he had developed, operated
and maintained infrastructural facility and hence entitled to the
deductions within the meaning of subsection?
2. Registry is directed to communicate a copy of this order to the
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Tribunal. This would enable the Tribunal to keep the papers and
proceedings relating to the present appeals available, to be produced
when sought for by the Court.
3. Mr. Naniwadekar, learned Counsel appearing for the respondent
waives service.
4. To be heard along with Income Tax Appeal Nos. 183 and 184 of
2012.
5. We notice that the Revenue has proposed following additional
questions for our consideration 🙁
i) Whether on the facts and in the circumstances of the case
and in law, the Tribunal was right in deleting the addition made
by the AO u/s 41(1) on account of bogus claim of expenses in the
name of labour contractors / subcontractors
which are
outstanding for a number of years?
(ii) Whether on the facts and in the circumstances of the case
and in law, the Tribunal erred in allowing depreciation @80%
on civil construction, electrical and other nonintegral
installations ?
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(ii) Whether on the facts and in the circumstances of the case
and in law, the Tribunal erred in allowing depreciation @80%
on civil work on which depreciation was allowable @ 10% and
since civil works are not specially designed devices, the same are
not entitle for higher rate of depreciation?
(iii) Whether on the facts and in the circumstances of the case
and in law, the Tribunal erred in allowing higher rate of
depreciation on electrical and other installations without
appreciating the fact that electrical items are not part of
electricity generating apparatus but are part of electricity selling
apparatus and these constitute the block ‘Plant and Machinery’
on which depreciation is allowable @15% ?
6. In so far as question no.(i) is concerned, the same arises out of
the additions made by the Assessing Officer under Section 41(1) of the
Income Tax Act, 1961 (“the Act” for short) on account of bogus claim of
liability. The Tribunal while giving relief to the assessee, referred to
the decision of the Supreme Court and other decisions holding that
merely because period of 3 years expired from arising of the liability
would not automatically mean that the liability has ceased. We do not
find any error in the view of the Tribunal.
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7. Question nos. (ii), (iii) and (iv) relate to the Revenue’s objection
to the assessee claiming higher rate of depreciation on the civil
construction, electric and other installations by the assessee in the
process of erecting and installing windmill. The Revenue argues that
the expenditure in such activities cannot be seen as a part of installation
of windmill and, therefore, the depreciation prescribed for the same
would not be available to the assessee. We notice that the similar
question had come up for consideration before this Court in Income Tax
Appeal No.1326 of 2010, wherein the appeal was dismissed by order
dated 14th June, 2017 making following observations:“
2. The Tribunal has recorded finding of fact that windmill
was erected in the desert area of Rajasthan which required
special foundation of reinforced cement concrete and that the
said reinforced cement concrete formed integral part of the
windmill. The Tribunal has also followed the decision of this
Court in the case of Commissioner of Income Tax Vs. Herdilla
Chemicals Ltd. reported in (1995) 216 I.T.R. 742 (Bom) in
allowing the claim of the assessee. In our opinion, the finding
recorded by the Tribunal that RCC foundation forms integral
part of the windmill is a finding of fact and no question of law
arises from the same. Hence the appeal is dismissed with no
order as to costs.”
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8. In the result, these additional questions are not entertained.
(M.S. SANKLECHA, J.) (AKIL KURESHI, J.)
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