The Commissioner Of Income Tax vs M/S Mcdowell & Company Ltd on 7 March, 2008

[Cites 7, Cited by 1]

Karnataka High Court

The Commissioner Of Income Tax vs M/S Mcdowell & Company Ltd on 7 March, 2008

Bench: K.L.Manjunath

IN THE HIGH COURT ow KARNATAKA AT  
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(BY sm D.L.N.RAO, SR.ADV. AND sMr.s.R.ANURAI2}iA,j 3' A 114.13 .A.1>1>1:.A.1.. IS may BY SECTION 260A or' THE meow; TAXACT, 1961 ?1m'mo 1 C0'u'R'i' T6 THE A1=i=EAL ﬁ;I~3B,.SET Asma o.-"mar: i PASSED BY THE INCOME TAX. APPELLATE .'r1r.BUNA1. ' BANGALORE IN Misc.1*eméo.92/(Bang)/2oo1o %(ino I'I?A A No. 3191L!a,n.g/1997)L)A_'1'I*_1L): o * Lnm tu'rm=u.. v . fo BE£*r:"1iEs;agv'En mo co you PRONOUNCEMENT or: Ju.oG:.41sr4fi*f1'i:o1s DAY, an Nqgarqi, J. DELIVEREDTHE FOLI.0W1NG:_ o '1"vt'rIn A'l'n'I'!'l1A'l' 'l'IA'l'!"I"I. ﬁn "ML 1- "

I111 I961 (**moe§rM1' has challenged the correctness oftho under Section 254(2) oftho 11' Act by the -mo Tribuml ("the 'J.'ribunal" for short) in 'Iviiso;Poatitié)n rovea'sm2' _ its earlier oomm___ on ow . _ A V ' ' .*.a..." :.;~ .. ....... .. 1 ......t _....1 2:'s.*,:~J.2e,...,'(~2.w...~.a..~-'§ ETA N.».39o:a....y'1997 .. 42mm 1997 unu _ di;fec':i;o'gATtho Assessing to ailow the of' about mum' g the some as revenue expenditure' which deduction A féwaos 'oéﬁoanowed by the Assessing Oﬁioer and was cmﬁrmed by the % " Coomﬁssiona of Income Tax (Appeals) |_ for short "Cl'I'(A_)" _| and also the " 'r:;...::~-Ii -Ir U»)

a) The assessee namely Mo Howell" *1 respondent herein, has made foreign liqtiot. 1993-94 this also filed _a-revis&d"reti3i'9z ii me said returns tne deductions. The Assessing bide: dated 29.3.1996 allowing :';_some and disallowing some others of Ogle' disallowed by the Assessing Oﬁicer

4.-

a sum ef %'".3,82,tl3,1-m"":'- 'w"u'| claimed by um 'revenue expenditure'.

r iby the said order of assessment the assessee company Z as its appeal before the ems) and the same came to be iiaillowed in part and some of the items of deductions claimed by the assessee ...:t éeellowed by the Assessing f.}ﬁi.ee w...- aliowed by the lem ' ' C1'i'(A). However, leao Ci'i'(A) did not allow the deduction of the said amount of Rs.3.82 crores .,»~.s"'~x.-----

an 43- hnitun 3 'H1 L . HIIINIA eaqoenditure' and .. "of assessment so far as it related A _ Aggrieved by the said or('£e'1-..4_):.f.'Cﬂ*(A) the olsoﬁee Revenue both ﬁxed their the Tribunal. .A_f.ter eg {appeals ﬁe Tribunal, by ...........1 Inﬁll ..._.l__ _..I...

_ _ 2 , - V _ 1... .. .

passing Iii» -utucr 9 '°'""" «V was tutu uf 'ﬂiw ef' Assess' 'V ee Lompan' y in part and fleéluetions which were not allowed tl3eAVVfV.ii"if(f.4:)'.' b>}ie§vever, me Tribunal conﬁrmed the order of Crete; it to the disallowanee of the deductions 1 cf 1-13.3.8 D of the ..... .. e holding L... *.!-.9. my-.e was C ' n ., _V _ but not 'revenue expenditure as ciaimed by h d company.

the usessee company ﬁled Misc.Petition V' " * No.92/Bang/2001 under Section 254(2) of the 1'1' Act contending petition was seriously opposed by the hot" the sides the urvuna lull

-.;-.1. 3"-..-er.' .wi@i1w;..;iiig by passing its modified para No. :4 of its was passed by it on the said--- filed by the assessee and also it Vellowed in its ijnpnglled older the, of Rs.3_.67_.34_.886/. '"""" {Eat ".'5iT' 'rc'«f_§"i1ii*e "x'p6ihiit'ai-e' but '-not "*4"-i*°' said common order. It is the ﬂiiisiiiorder which is challenged by the 3.4 We have ofthe learned eounsel for both sides "i.Va.-i{*.';6--er.as..§. 95 grounds ofaﬁl ta.-'gt.-d ar... *...e 9.;b..~*.:.-..-i*.i;-.1 que..=*.ione of ieim it "2 'dappeiiarii-revenue. 'i'houg'n it has trained" ' three H 0' _substaiitial of law, in our opinion, only one substantial question for our consideration and decision which some as under:

0 " it "Whether the Tribunal was justified in passing the impugned order dated 23.10.2002 in exercise of its under Section 254(2) of the IT Act modifying para No.14 of its earlier common order ¢-.{"'\--\...-----

dated 25.9.2009 passed in the appeals mei sssessee and the revenue and thereby its' _ M findings therein and directingilie. ieeeiiieeiieeeei ed "

allow deduction of iis.3,o7i34,siiii.L% same as 'revenue expentzliture' disaiiowed by the Officer. by .14.! ..'.-...........-le';i...... I the Ci'i'(A' tr"."ung tiiesa:'ne*:1s' eapzm wspmuuu: e. (_ _: dings on t_h_is the 'negative' and In

4. 'll'hei'acts' essesse's claim for deduction of Rs.3.82 crores jwiiieh ieiie dieaiiewed by the Assessing Officer, conﬁrmed by K .3! nnrnd I": the Tri Innl in 1: .3 A f ' Q. ngwar I_;g_d__§_r JFQ I\I'I'C"I II' XI IIJIIIIIIQI I-IA TJWCJCIIIC It CHIC '1 VIC'. iiiiiiﬁi) 1'1' Act are: "Tile assessee incurrea' ' uuring*'""" ihe _ releveszit of Rs.4,24,47,933/- in respect of issuance of a view to increase its share capital. This expenditure was towards refund of the money to the unsuccessful applicants as the VT " iesue was over subscribed by seven times. Therefore the assessee claimed .2 _ _'l-_ .42 .... -1' u3.'tuuU|-I 1 F I E L i i > I F U 3 x.

L- .....;!.. ,.... ' .. ....... ' tut: cunt any luuuuw u as uunu ihei $6 same 13 allowable under Section 37(1) of the 1'1' Act as 'revenue luv mwmi. -' 0ﬁ'ice:' allwﬁ 3.-..-ed...-' Swim: 3.5!.) ofL___i'T .,..iy 1.-'..!.(,¥"?'.._ ofthe said expenditure as aiiowabie of Rs.3,82,03,140/- (being 9/ 10"' oftho the said entire expenditure was _'9ihiej§ﬁnding of the Assessing Officer came to :« appeal. The 's'ei...e.-.e1, though eeeﬁrmed ;£ie«s1$e_he'eAs;§ee§eg (ﬂee: and ems.) OI.-.'-'I ww. w.-1 v--._ was 'capitslin epplicaﬁon ofthe assesses ﬁled yr it reversed in said ﬁnding and allowed the bending it as 'revenue expenditure' and " the 'to allow deduction of a sum of V i' of the Tribunal under Section 254(2) of the 1'1' Act is apparent ﬁom the records Sri D.L.N.Rao_. the learned ~. 'gnu .e..;.p_.I ' .\\"U|l.I '.3 cr IRA uanaun.nA-'Anne! _n 1 HIV IUDIJIJIIUUIJI. 'CIﬂﬁUDUU Jun! um-rvu II > V ' ofiﬂzeil-ion"bie Supreme in Honda Sinai mum" vs. Ci?' V is (Appeals), Delhi reported in 2007-'_I'!0I»2I1-SC-IT. The facts in the said decision were; "The assessee company therein had taken a term loan in _,_A_ g---S;'|V""\--"\..-r :..--:g._-

weigh. exe.a_h_nge for the import of On aeeolimef in 1 eigi xeuung saw LII liauiaaty et' ti-.e assee&3~te 3&2. terms of rupew went up. By referring toitihe oi'~.._ the Ir Act the assessee enhanced _:\ra1i_ijieuVot':t1te assets and claimed depreciation R Officer held the same as not admissible. V til'l'(A) took the vied.' that Lee claim oft!-.e I, ﬁsthet by the to claim the said amount as ._ moved an application under Section 254(2) ofthe-..le':_i' eefeee eeekmg' reetiﬁcation of miataite on t..L- g.r._{x.i.Ii¢.ieetl.1..s:t.Vt,1ie. ind arrived at the conclusion that the said _LI amount 'v'v'eeejtietI'e'd'w me as éaepretsiatim 'try rm eeer'-"' ﬂee dmueeieim ef~.its..eoorVt A VV"i:i3iii3!i1eiﬂbietIch in the case of i..'i'1). The V i' --V oonsidemed the said decision while disposing of the said d i i it was cited aad relied upon by the learned counsel for the therein, and therefore it considered the said judgment and then " it etaeueu me I-mlie-2-..i.... ..fﬂ1e aI.._..see by pa_ssi_ng it Department filed its appeal before the High Court. The % the conclusion that the power to rectify of ' . Power to review or recall the sought 0 e-.e ggie-g. er the '1'.l...1sVI.hznu.*!,:;I*='~:.}.&,.V' which feii outside the scope of at - ' the High Court set aside the ofthe 'Be appeal of the Department". held at para 12 of "" of mistake ﬁom the records' 154. It also ﬁnds place in 'am-on 254(2). '¥:'heV'J;Jutpose behind enactment of j -- .. 125-.f:(2,)A."!8h5ttl8ed on the ﬁmdamental principles itisot nohhjjorty----appearing before the Yttbunal be it an

--.__'assess-ee or the department, should suffer an account " :'"o_f"'mtstake committed by the "t"rt'bunat'. This prtruetpte has mthtng to do wtth the '~ ":.:'.~the.ne.-at powers of the Irthunoé In the present case the '_1_'ribunat in its order dated 10.9.2003 allowing the rectification application has given a ﬁnding that Some! Colour Ltd., supra, was cited before it by the assessee but through oversight it has missed out the said judgment while dismissing the appeolﬁled by the assessee on the question of admtsstbtttty/aiiowabtitty gﬂgﬁr-\'-5.4"

of the claim ofrhe assedsee for enhanced depfecioﬁoﬁ A under Section 43.4. One oj"the»{mporta:ti'r3eo,§on;i~,t'orAV {Ln V 4' = * '. M" « Q; nsI'a'u_;ua'uuun iﬁ In: Jr ﬁrm: a':'-__ H a_qnear1'ng before it by itd_§iectstoh' Mead ooiistaké apparent fi-om the record, _'_'_ "1 - . _ -- ..

5. Holding as above ﬂue }ioe'bie?VSt:pn'e0nei_:' set aside the judgnent ofthe l-iig_li'~'i:2oort and 'passed by the Tribunal glowing the of Vtheovaesesnee therein. However, ....:..-:..t-- i ..a .na-.L4 L-.i'*}:i;; i_i.,..;.;7L .. "";.."..'........ I .. :. 1.... ..i.....- ........ prlnul was lj u u .».u his _r.1z_| in 3'p1'w1n \.'«mh'i. I 'u nuuvu van:

cannot be hofthe present case inasmuch as it was not the before the Tribunal in the said Section 254(2) of the 1'1' Act that the of its appeal, did not comider any of the = 11...... ..,..... .._, ..... ............ -..........-. .... .....- ..,.,.......... _. it is the case of the assessee the Tribunal did not A _ of the facts on record constituting the assessetfs claim for V t On the other hand, on perusal ofparagraph 14 ofthe earlier of the Tribunal dated 25.9.2000 wherein it concurred with the ﬁndi an _ft_he A_sses_:ei_og @ (.3l1'(A.; as to of the .......--.-.ca--

e <-L

--

said claim of the assessee, it could be seen that only 'the ratio in the decisions of Hon'ble Supreme comi (i) % vs.' CIIl'reporled in (1997) 225 ITR 798 4 225 i'i"R 792 11" 'i'ri'e-aria! as-ts'-;v% s-gs!-ieiamciiisica * said ded.I..Ic*..ir.m was not aiiowabie under s 1'i' Act as expenditure' . ii is has recorded its ﬁnding in paragraph No. es iiie ratio in the decisions of supreme in 'ii2 ;5.:VI15Tl€'::?!l£'ia11d 225 HR 792 (supnu it is clear !..a."!..e' e2iei;on.riI.i;1.raeVite1i_.I;.g to _h_a_re exnenses has to be tiisaiiowed as {'i"rse page i'1't.'u"1"1i3&" cuf first ~i'sa'ei~i i.e., 225 i - mossimed in the said paragraph as "225 mi {said page number is to be read as '-793").

ii failure to consider by the Tribunal in decision or a fact _' V to an appeal may amountto a mistake apparent ﬁ'om ii 1 T 1.0 at'si'act ese previsiens ef seoniios 254(2) efthe IT .A.ci, " oensiciering and discussing of such decision i fact by the Tribunai in its cirderandarrivingataconcluaionbasedonthesamecannotbesaidtobe a ('-uC""""5""-""

mist-_lt.e apparent ﬁmn the record warranting any in ex&*c'"e -'fits pcwa u....e.r 33...-.i....s '.2.54(..)_ 1 ll

7. The learned counsel for the reliance on the decision of the Hiﬂn of 0' of Malian Niki! Breweries vs. CIT I01 (1979) 10 one my 405 mailing ofthe l-lon'ible Supreme Court in % case cl' in 140 CTR (SC) 958 -= (1???) meme is ale-:2 relied.

upon by the    1-"lacing has strong
reliance    for the appellant-revenue

contended V by the assesaee-company in issue being capital in nature was not allowable as in allowing the same by its f"16li""S "1 its y it 25.9.2000 in exercise of its power under Section 0 of tliel'l' Act. Per contra the learned counsel for the respondent-

lplacing his strong reliance on the same decisions contended that 0 ii» em' ...i*.:.-..-.'c was allowable Section 37(3) of the IT Act and as revenue expenditure and as §""l'1 tlr was I-ui..e ju9.lﬁ.ed in '__g'p----\__,..--.

allowing the same as revenue expenditure and Officer to allow the said deduction. 'l'lreee two the. decision ofthe I-lon'ble Supreme Loud' 22501241:

upon is «,a.a_m_u_a by the 1: at; wiiepomgr an deduction by the assessee 'gap 3: the e has to be treated as rever1ue_expendiu1rje. 0 V V

8. We are the question: "whether the said exoenup _ """ " e*reivenue in nature' as contended by any '\t\|4I'l4.I"|' at' i' assemee i'=.'4.....,.--.._..._l,*'.V~*-1* 'es;"e.ei,3i_*.;-.,l in ..e...I..e' " as by the 3 'Jr revenue _ only with the question *"v"vhether the ' izmevexsing its ﬁndings recorded in its earlier order exercise of its power under section 254(2) of the 1'1' need not discuss in detail the principles laid down in

1... said t...e decisac--.s V "VII 1.. __.I_.. ;_ .l'.'L..I .... nu. 4.. 61... nuua.:al-:n.n"1nI-and'-|Ar 1 A "'1'; Inn' um:

31'. m OTUGI LU 11110 zuuswan LU lllﬁ uiinuuu vuwusm uaw Aiuuuluu vvuu ' 0' juciiﬁed in passing the impu' gned order' reversing its ﬁnding" s in its said . earlier order in exercise of its power under Section 254(2) of the 1'1' Act?" We have to see whether the impugned order dated 23.10.2002 passed by the (-\g""""\..-----""*---"' ' '1'rib1.1_ns1 to only a 'rectification of mistake the WA-'J3. as Ll!' 'inn 1 no-nay' 'Jr' _ " ' £3 cmriimnvjr gg amounts to reviewing of' its ea:-iier said 'by. * reversal of its ﬁnding therein. _ V V _V

10. As could be seen ﬁom the dated 25.9.2000, at para Nos. 10 to of the order) the '1'rib'ar.a!, aide.' and 10 urged by the and diseassing tlie principles upon by both the parties particularljtlie (1939) s20 me 175 (Karnataka High Court), no and (ii) (1997) 225 me 798 (SC), and detail the provisions of Section 351) and Section 7.3"is'1'}«snu C5}. oi me 1'1' Act iii' Rates 61) of the inwnte '1';-..x Rules, em'.

exn 3 gs ofthe Assessing Oﬁieer and those of Ci'i'(A) in V it their as to the disallowanoe of the said expenditure, the 'iii'Vi*ifibmL1iultinmtely held at para No.14 ofits said order dated 25.9.2000 um ﬁiew'ofthe ratio of the 1-lon'b!e Supreme Court in the said decisions the " eﬁﬁmw relating to *...e s!-......- Em- e'.I.g.Ien.ses wn_s to be 2

8..

E 5'.

3. 3 e B 3 3 .2 E 2 E. the issue by allowing 1/10"' of the said expenditure' def % the ITAetandbydisallowing the:-etnaini:1gV.9:'i9'.'? d

11. hzrther, on perusal of the ......._.a by n-...e_~. '|'gi.,.;...a.! the Q- ;1;. of its'

-.}.1J L. ..I.'.-... I. V3 .. ..: ..... 'uuau Du scan 551313 ﬁic Tub'uunl power under Section 254('') i'i' _ '- again considered the same by the assessee company in its considered by it in detaii in its it considered the same deeisions ofnhe 225 me 792 and 225 me 793 E3

351) :1 ohm 37(1) 1! 3 1'!-II-In-I I \ Inn-

(3) of' order reversing its findings in 3 order of the Asst.Commissioner and that of 'so to diaallowanoe of the said exprenditure. Thus it ﬁihuml in its impugned order dated 23.10.2002 which _':'eg~.-.; has ..viewet_l its emire in so far as it ' uphoiding of the "f vii' 1-1 euuunuiu u * uiuwl Us Oﬁicer as to the disallowance of the said expenditure. This V V V d A ». Lfeview was not permissible in exercise of its power under Section 254(2) of the IT Act.

(..'-'¥"\-._,»\--v

12. Application ofthe principles laid down by the V the facts of the case before the Tribunal on erroneous ' principles; recording of an erroneous l at n on iaw to facts offne case, ac, & 4.-.'. cc-..c.-c.-c-. from the record' warranting in exercise of its povlier reconsidering the application of to facts of the case or by the application of and: nF1'k_e anon Q 1 dnns-_ I1 ﬂu! 1113 In!!! lg vllv try at ..c-.*.*%-'. te.

i an exercise of power under " review of its earlier order on merits but not apparent from the record' and such review would scope of Section 254(2) ofthe 1'1' Act 'l'hcrefore, me View by the impugned order dated nnnnaannunu r _.DJ'L.. ....-u...uun.n 'ha I "I5 ﬂﬂﬁgﬂucﬁ UUIIII-lﬁllyn HIV on it , in exercise of its power under Section 234(2) ofthe 1'1' Act, wscrccmaa it reviewed its earlier order dated 25.9.2000 and reversed its findings recorded under it As such, the impugned order deserves to be set _,(""|.u-I;_._ 44 c-._.. V V

It aside by allowing this appeal. 'l'herefou'e, substantial p has emerged in this appeal for our considemticza :< in the 'negative' and in favour ofﬂle S T A

13. in Ina': -u--- --'-,-Irv 1 s:\ ' [3 order 'i3.iii.'.'2uU'2 )' ;f%}'1§-i§'i' rue'; u Income tax Appellate 'l'rib® A T in Misc.Petition No.29/Bang/2001 is eepepy me; em. 1 =_...tn . E'-

n n' 0 an e I 1 x

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