The Commissioner Of Incometax vs Mayflower Hotls P Ltd. Cochin-18 on 30 January, 2008

       

  

  

 
 
  IN THE HIGH COURT OF KERALA AT ERNAKULAM

ITA.No. 128 of 2001()



1. THE COMMISSIONER OF INCOMETAX
                      ...  Petitioner

                        Vs

1. MAYFLOWER HOTLS P LTD. COCHIN-18
                       ...       Respondent

                For Petitioner  :SRI.P.K.R.MENON(SR.),SC FOR IT

                For Respondent  :SRI.T.M.SREEDHARAN

The Hon'ble MR. Justice C.N.RAMACHANDRAN NAIR
The Hon'ble MR. Justice T.R.RAMACHANDRAN NAIR

 Dated :30/01/2008

 O R D E R
                      C.N.RAMACHANDRAN NAIR &
                     T.R.RAMACHANDRAN NAIR, JJ.
                 ....................................................................
                            I.T. Appeal No.128 of 2001
                 ....................................................................
                 Dated this the 30th day of January, 2008.

                                        JUDGMENT

C.N.Ramachandran Nair, J.

The appeal is filed against Annexure-C order of the Tribunal

whereunder the Tribunal has cancelled the intimation issued under Section

143(1)(a) including the demand of additional tax under Section 143(1A) of

the Income Tax Act. In the return filed even though the assessee claimed

deduction of Rs.16,60,165/- towards interest payable to KSIDC, it is made

clear that the amount was not paid on account of instalment facility granted

by KSIDC. Consequently the claim was not allowable by virtue of Section

43B of the Income Tax Act. The assessee does not dispute this position.

Since the claim was prima facie inadmissible by virtue of operation of

Section 43B, the Assessing Officer issued proceedings under Section 143(1)

(a) computing tax liability including additional tax payable under Section

143(1A) of the Act. Even though rectification application was filed against

this under Section 154, the same was dismissed by the officer. Appeal

filed, however, was allowed by the first appellate authority and the second

appeal filed by the department was also dismissed by the Tribunal. It is

2

against this order of the Tribunal that the department has filed this appeal.

We have heard Standing Counsel appearing for the department-appellant

and counsel appearing for the respondent-assessee.

2. Counsel for the appellant referred to decision of this court in

COMMISSIONER OF INCOME TAX V. SITARAM TEXTILES LTD.

(2001) 248 ITR 139 and contended that proceedings initiated under Section

143(1)(a) is perfectly justified. We find that the decision squarely applies to

the facts of this case because in the proceedings under Section 143(1)(a) of

the Act the Officer has only disallowed expenditure under Section 43B of

the Act. Consequently the assessee is liable to pay additional tax under

Section 143(1A) of the Act. Counsel for the respondent-assessee submitted

that the financial institution involved in this case is covered under Section

43B only with effect from 1.4.1991. According to him, even though the

amendment applies for this year also, the assessee was not aware of the

provision. Counsel for the assessee also submitted that in the assessee’s

own statement, part payment made on 25.6.1991 was mentioned and the

payment so made qualifies for deduction even under proviso to Section 43B

of the Act. We find force in this contention and, therefore, we feel the

Assessing Officer should have rectified the proceedings issued under

Section 143(1)(a) by limiting the addition to the extent of the amount not

3

paid till the due date for filing the return. The appeal is therefore partly

allowed reversing the order of the Tribunal, but with direction to the officer

to allow deduction to the extent of interest paid as on date of filing the

return and to rework additional tax liability under Section 143(1A) of the

Act.

C.N.RAMACHANDRAN NAIR
Judge

T.R.RAMACHANDRAN NAIR
Judge
pms