Commissioner of Income Tax vs Jindal Saw Pipes Ltd.

Manmohan, J.—CM No. 3201 of 2010.

Allowed, subject to all just exceptions.

I.T.A. No. 221 of 2010

The present appeal has been filed u/s 260A of the Income Tax Act, 1961 (hereinafter referred to as "the Act, 1961") challenging the order dated November 7, 2008 passed by the Income Tax Appellate Tribunal (for brevity "the Tribunal") in I.T.A. No. 2587/Del/2006 for the assessment year 2003-04.

By way of present appeal, the following questions of law have been raised:

(i) Whether the Income Tax Appellate Tribunal/Commissioner of Income Tax (Appeals) erred in directing the Assessing Officer (in short "AO") to allow the revised claim of the Assessee-company for deduction u/s 10B ?

(ii) Whether the Income Tax Appellate Tribunal erred in law in treating the revised return filed by the Assessee on March 31, 2006 as valid, when the last date for filing of return as per the provisions of Section 139(5) March 31, 2005 ?

(iii) Whether the Income Tax Appellate Tribunal erred in accepting the change of method of accounting the financial charges from turnover base to capital investment base which has been regularly followed by the Assessee ?

(iv) Whether the Income Tax Appellate Tribunal erred in law in deleting the addition of Rs. 47,84,365 for infraction of law in paying sales commission on Government purchases under Explanation to Section 37(1) of the Income Tax Act, 1961 ?

Since the first two questions relate to the jurisdiction of the Commissioner of Income Tax (Appeals) (in short, "the Commissioner") to entertain a revised claim of the Assessee during appellate proceedings, we are dealing with both the questions simultaneously.

In our opinion, the authority of the Commissioner is co-extensive with that of the Assessing Officer. Moreover, Section 250(5) of the Act, 1961 allows the Assessee to raise an issue not even forming part of the grounds of appeal. In fact, the Supreme Court in National Thermal Power Co. Ltd. Vs. Commissioner of Income Tax, has held as under (page 387):

The view that the Tribunal is confined only to issues arising out of the appeal before the Commissioner of Income Tax (Appeals) takes too narrow a view of the powers of the Appellate Tribunal (vide, e.g., Commissioner of Income Tax, Delhi-I Vs. Anand Prasad and others, , Commissioner of Income Tax, Gujarat I Vs. Karamchand Premchand Private Ltd., and Commissioner of Income Tax, Gujarat-I Vs. Cellulose Products of India Ltd., . Undoubtedly, the Tribunal will have the discretion to allow or not to allow a new ground to be raised. But where the Tribunal is only required to consider a question of law arising from the facts which are on record in the assessment proceedings we fail to see why such a question should not be allowed to be raised when it is necessary to consider that question in order to correctly assess the tax liability of an Assessee.

The reframed question, therefore, is answered in the affirmative, i.e., the Tribunal has jurisdiction to examine a question of law which arises from the facts as found by the authorities below and having a bearing on the tax liability of the Assessee.

Consequently, in our opinion, the first two questions are conclusively settled against the Revenue.

As far as the objection of the Department with regard to the change in method of distribution of common expenses is concerned, we are of the view that the Tribunal has given cogent reasons for rejecting the Revenue''s argument. The relevant portion of the Tribunal''s order is reproduced hereinbelow:

We are of the view that once the new method by the Assessee is found to be more scientific and appropriate, the bona fides of the Assessee to adopt such a method cannot be doubted merely because the same is resulting into more benefits to it. Moreover, this entire issue had cropped up as a result of the Assessing Officer''s refusal to allow the claim of the Assessee-company for netting of the interest income against interest expenditure and since the Assessee-company has finally given up the said claim of netting before the learned Commissioner of Income Tax (Appeals) while adopting the new method of allocation of interest expenses incurred at HO level, we are of the view that there is no reason to doubt the bona fides of the Assessee company in adopting the new method. As such, considering all the facts of the case, we hold that there is no infirmity in the impugned order of the learned Commissioner of Income Tax (Appeals) allowing the revised claim of the Assessee for higher deduction u/s 10B on the basis of new method of allocation of interest expenditure incurred at HO level to different units and upholding the same on this issue, we dismiss ground No. 2 of the Revenue''s appeal.

From the above, it is apparent that the Assessee has in a bona fide manner adopted a more scientific basis for distribution of common expenses and accordingly, the Revenue cannot raise a grievance on this score.

As far as the fourth question is concerned, we find that the Tribunal has followed its own decision in the case of the Assessee itself for the assessment year 2002-03 in I.T.A. No. 3879/Del/2005. It is pertinent to mention that even an appeal preferred by the Department against the said order has been dismissed by this Court in I.T.A. No. 758 of 2009 on August 4, 2009. The aforesaid order dated August 4, 2009 is reproduced hereinbelow:

In our order dated July 28, 2009, we had recorded the statement of the counsel for the Appellant that on second question of law I.T.A. No. 784 of 2007 has already been admitted. It is pointed out by learned Counsel that there is a typing error and in fact the appeal which is admitted is I.T.A. No. 784 of 2005. However, it is not necessary to summon that file inasmuch as after going through the proposed second question of law as raised in this appeal and the orders passed by the Income Tax Appellate Tribunal, we find that it is a pure question of fact decided by the Tribunal since no question of law arises, this appeal is dismissed.

Consequently, the present appeal, being bereft of merit, is dismissed in limine.