IN THE HIGH COURT OF JUDICATURE AT BOMBAY
\nORDINARY ORIGINAL CIVIL JURISDICTION
\nINCOME TAX APPEAL NO. 1288 OF 2016
\nPr. Commissioner of Income Tax19
\n..Appellant
\nVs.
\nPukhraj S. Jain ..Respondent
\n\u2026………
\nMr. Ashok Kotangle a\/w. Ms. Padma Divakar for appellant.
\nMr. Tanzil Padvekar for respondent.
\n\u2026………
\nCORAM : AKIL KURESHI &
\nM.S. KARNIK, JJ.
\nDATE : 4th JANUARY, 2019
\nP.C. :
\nThe Revenue is in Appeal against the judgment of
\nIncome Tax Appellate Tribunal dated 10\/11\/2015. Following
\nquestions have been presented for our consideration :
\n1. Whether on the facts and circumstances of
\nthe case and in Law, the Hon. ITAT was justified in
\nupholding the decision of the Ld. CIT(A) by completely
\nignoring the contention of the revenue in respect of
\nviolation of Rule 46A of the I T Rules, 1962 ?
\n2. Whether on the facts and circumstances of
\nthe case and in Law, the Hon. ITAT was justified in
\nupholding the decision of the Ld. CIT(A) wherein the
\naddition by the A.O., by invoking section 41 of the I T
\nAct, 1961 was deleted ?
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\n2. Briefly stated the facts are that,
\nThe respondent \u2013 assessee is an individual and
\nengaged in the business of imports. The Assessing Officer while
\nassessing return of the respondent \u2013 assessee for the assessment
\nyear 201011
\nnoticed that there were several sundry creditors
\ntowards whom the assessee had not repaid a sum of Rs.1.79
\ncrores (rounded off) for over three years. The Assessing Officer
\ntherefore after putting the assessee to notice invoked Section
\n41(1) of the Income Tax Act, 1961 (‘the Act’ for short).
\n3. The assessee carried the matter in Appeal and in
\naddition to raising legal contentions, the appellant contended
\nthat in subsequent years most of the creditors were paid off. The
\nevidence in this respect was produced before the Commissioner
\n(Appeals). The Commissioner (Appeals) allowed the Appeal
\nupon which the Revenue approached the Tribunal. The Tribunal
\nby the impugned judgment dismissed the Revenue’s Appeal. The
\nTribunal noted that the assessee was unable to repay the
\ncreditors because of weak financial position and further that the
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\nassessee had never completely stopped making repayments. The
\nTribunal also noted that in next couple of years the assessee had
\nin fact repaid a sum of Rs. 1.54 crores out of Rs.1.79 crores. The
\nTribunal, therefore, concluded that the assessee never treated
\nthe liability to have ceased.
\n4. It is well settled through series of judgments that
\nmerely because a debt has not been repaid for over three years,
\nwould not automatically imply cessation of liability. Exhaustion
\nof period of limitation may prevent filing of recovery
\nproceedings in a Court of law, nevertheless it cannot be stated
\nby itself that the liability to repay the amount had ceased. Going
\nby this logic itself, the Assessing Officer, in our opinion,
\ncommitted an error invoking Section 41(1) of the Act. Further
\nthe assessee had produced additional evidence on record before
\nthe Appellate Authority after following the procedure and
\npointed out that substantial portion of the debt was cleared in
\nlater assessment years.
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\n5. We do not find any error in the decision of the
\nTribunal. Income Tax Appeal is dismissed.
\n(M.S. KARNIK, J.) (AKIL KURESHI, J.)
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\nIN THE HIGH COURT OF JUDICATURE AT BOMBAY
\nORDINARY ORIGINAL CIVIL JURISDICTION
\nINCOME TAX APPEAL NO. 1769 OF 2016
\nThe Pr. Commissioner of Income Tax1
\n.. Appellant
\nv\/s.
\nMahalaxmi Infra Projects Ltd. .. Respondent
\nMr. N.N. Singh for the appellant
\nMr. Mihir Naniwadekar I\/b Alisha Pinto for the respondent
\nCORAM : AKIL KURESHI &
\nM.S. SANKLECHA, J.J.
\nDATED : 30th JANUARY, 2019
\nP.C.
\n1. This appeals is admitted for consideration on following reframed
\nsubstantial questions of law \ud83d\ude41
\na) Whether, the respondent \/ assessee fulfills the requirement
\nstipulated in Section 80IA(
\n4) of the Income Tax Act, 1961 once
\nthe conclusion reached is that it is contractor and not developer
\nas stated in the subsection?
\n(b) Whether, in the facts and circumstances of the case the
\nIncome Tax Appellate Tribunal was right in holding that even if
\nthe Assessee is termed as contractor he had developed, operated
\nand maintained infrastructural facility and hence entitled to the
\ndeductions within the meaning of subsection?
\n2. Registry is directed to communicate a copy of this order to the
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\nTribunal. This would enable the Tribunal to keep the papers and
\nproceedings relating to the present appeals available, to be produced
\nwhen sought for by the Court.
\n3. Mr. Naniwadekar, learned Counsel appearing for the respondent
\nwaives service.
\n4. To be heard along with Income Tax Appeal Nos. 183 and 184 of
\n2012.
\n5. We notice that the Revenue has proposed following additional
\nquestions for our consideration \ud83d\ude41
\ni) Whether on the facts and in the circumstances of the case
\nand in law, the Tribunal was right in deleting the addition made
\nby the AO u\/s 41(1) on account of bogus claim of expenses in the
\nname of labour contractors \/ subcontractors
\nwhich are
\noutstanding for a number of years?
\n(ii) Whether on the facts and in the circumstances of the case
\nand in law, the Tribunal erred in allowing depreciation @80%
\non civil construction, electrical and other nonintegral
\ninstallations ?
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\n(ii) Whether on the facts and in the circumstances of the case
\nand in law, the Tribunal erred in allowing depreciation @80%
\non civil work on which depreciation was allowable @ 10% and
\nsince civil works are not specially designed devices, the same are
\nnot entitle for higher rate of depreciation?
\n(iii) Whether on the facts and in the circumstances of the case
\nand in law, the Tribunal erred in allowing higher rate of
\ndepreciation on electrical and other installations without
\nappreciating the fact that electrical items are not part of
\nelectricity generating apparatus but are part of electricity selling
\napparatus and these constitute the block ‘Plant and Machinery’
\non which depreciation is allowable @15% ?
\n6. In so far as question no.(i) is concerned, the same arises out of
\nthe additions made by the Assessing Officer under Section 41(1) of the
\nIncome Tax Act, 1961 (\u201cthe Act\u201d for short) on account of bogus claim of
\nliability. The Tribunal while giving relief to the assessee, referred to
\nthe decision of the Supreme Court and other decisions holding that
\nmerely because period of 3 years expired from arising of the liability
\nwould not automatically mean that the liability has ceased. We do not
\nfind any error in the view of the Tribunal.
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\n7. Question nos. (ii), (iii) and (iv) relate to the Revenue’s objection
\nto the assessee claiming higher rate of depreciation on the civil
\nconstruction, electric and other installations by the assessee in the
\nprocess of erecting and installing windmill. The Revenue argues that
\nthe expenditure in such activities cannot be seen as a part of installation
\nof windmill and, therefore, the depreciation prescribed for the same
\nwould not be available to the assessee. We notice that the similar
\nquestion had come up for consideration before this Court in Income Tax
\nAppeal No.1326 of 2010, wherein the appeal was dismissed by order
\ndated 14th June, 2017 making following observations:\u201c
\n2. The Tribunal has recorded finding of fact that windmill
\nwas erected in the desert area of Rajasthan which required
\nspecial foundation of reinforced cement concrete and that the
\nsaid reinforced cement concrete formed integral part of the
\nwindmill. The Tribunal has also followed the decision of this
\nCourt in the case of Commissioner of Income Tax Vs. Herdilla
\nChemicals Ltd. reported in (1995) 216 I.T.R. 742 (Bom) in
\nallowing the claim of the assessee. In our opinion, the finding
\nrecorded by the Tribunal that RCC foundation forms integral
\npart of the windmill is a finding of fact and no question of law
\narises from the same. Hence the appeal is dismissed with no
\norder as to costs.\u201d
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\n8. In the result, these additional questions are not entertained.
\n(M.S. SANKLECHA, J.) (AKIL KURESHI, J.)
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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<\/p>\n