Commissioner Of Income Tax I vs M/S Arihant Cotsyn Limited on 21 November, 2008

ITA No.123 of 2008                                                 1




 IN THE HIGH COURT OF PUNJAB AND HARYANA AT

                          CHANDIGARH.


                                         ITA No.123 of 2008
                                        Date of decision: 21.11.2008




Commissioner of Income Tax I, Ludhiana

                                                        -----Appellant
                                 Vs.
M/s Arihant Cotsyn Limited


                                                     -----Respondent

CORAM:- HON’BLE MR JUSTICE ADARSH KUMAR GOEL
HON’BLE MR JUSTICE L.N.MITTAL

Present: Mr. Rajesh Sethi, Sr. Standing counsel for the
revenue.

Adarsh Kumar Goel, J

1. The revenue has preferred this appeal under section 260-A

of the Income Tax Act, 1961 (in short, ‘the Act’), against the order of

the Income tax Appellate Tribunal, Chandigarh bench ‘A’ Chandigarh

passed in ITA No.787/CHANDI/2002 dated 27.6.2005, for the
ITA No.123 of 2008 2

assessment year 1996-97, proposing to raise substantial questions of

law:-

“i) Whether on the facts and law, the Hon’ble Income Tax
Appellate Tribunal was justified in ignoring the
respondent as only a manufacturer as it did not have the
object of earning commission and service charges as per
the Memorandum of Articles of the respondent company?

ii) Whether on the facts and law, the Hon’ble Income Tax
Appellate Tribunal was justified in ignoring the proviso
to section 43A of I.T.Act, in respect of liability on
account of foreign exchange rate fluctuations on the basis
of the time of actual payment?

2. The assessee, in its business income, included income

from commission and service charges. The Assessing Officer,

however, assessed the said part of the income as income from other

sources on the ground that business of the assessee was not to earn

commission or to provide service. The claim of the assessee for

depreciation was allowed to the extent of increase in price due to

fluctuation in foreign exchange rates resulting in increase in the price

of the machinery. The Assessing Officer held that since actual

payment was not made for the increased price, the assessee was not

entitled to the said benefit.

ITA No.123 of 2008 3

3. The CIT(A) allowed that claim of the assessee on both

the counts, which order has been affirmed by the Tribunal. It was held

that income from commission and service charges was business

income and the same could not be treated to be income from other

sources. The CIT(A) followed the decision in the case of the assessee

for the previous year.

4. As regards, claim for higher depreciation on account of

increase of prices due to fluctuation in foreign exchange rate, the

Tribunal held as under:-

“6…..In our considered view, the assessee is entitled to
adjust the cost of acquisition in accordance with the
provisions of section 43A and all the consequences as
provided under the said section will follow
notwithstanding there not being any direction by the
appellate authority in this regard. Thus, we see no
infirmity in the order of the CIT(A) in having directed the
AO to give effect to the provisions of section 43A…”

5. We have heard learned counsel for the appellant.

6. As far as Question No.(i) is concerned, there is nothing to

show that order on which the impugned order is based has been

challenged by the revenue. Moreover, it cannot be held that merely

because the assessee is manufacturer, it cannot have business income

from commission or service charges.

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7. Question No.(ii) can also not be held to be a substantial

question of law in view of statutory provisions of Section 43-A.

8. Accordingly, the appeal is dismissed.

                                          (Adarsh Kumar Goel)
                                                    Judge



November 21, 2008                                (L.N.Mittal)
'gs'                                                 Judge