2013 (1) TMI 179 - HC - Income Tax

Interest on loan - disallowance as the assessee had not utilized the loan amount in the course of its business activity and the same had been utilized by its sister concern - CIT (appeals) allowed the appeal of assessee in part and further rectified in respect of the remaining disallowed part of the expenses - revenue filed two appeal one against initial order of CIT(A) & then rectified order - revenue filed an application under Order 6 Rule 17 r/w section 151 of the Code of Civil Procedure seeking for substitution of the appeal numbers in cause title by making a reference to the order of the Tribunal passed related to not allowing the entire interest and also for suitable amendment in the Memorandum of Appeal - Held that - It is not necessary to opine on the scope of Order VI Rule 17 of the Code of Civil Procedure being applicable in a proceeding of this nature particularly as it relates to amendment of pleading and the Court is now examining an appeal under section 260-A the question would be more relevant within the scope of section 260-A. Allowing the application of this nature at this point of time and also to permit the revenue to agitate such question by further alteration of the Memorandum of Appeal etc., is not a feasible course of action at this point of time. However, it is open for the revenue to agitate the matter separately and in a manner permitted in law and if they are so desirous to pursue the question. Maintainability of this appeal is not allowed at this point of time as the revenue involved is not more than Rs. 2,00,000/- and therefore, in terms of board Circular No. 2/05, dated 24.10.2005 the appeal should not be entertained.

Summary

Issues:
Appeal by Revenue against Tribunal's order on interest deduction, maintenance charges, commission fee deduction, and penalty deduction.

Analysis:
1. The appeal (I.T.A. No.77/2006) by the Revenue challenges the Tribunal's common order on various issues. The first issue pertains to interest deduction claimed by the assessee, not utilized in its business but by a sister concern. The Revenue contests the Tribunal's decision as a perverse finding. The second issue questions the Tribunal's failure to consider a separate appeal by the Revenue on part of the interest component allowed by the Appellate Commissioner. The third issue concerns maintenance charges allowed as a business expenditure without proper evidence. The fourth issue challenges the deduction of a commission fee paid for obtaining a loan utilized by the assessee's sister concern. The fifth issue disputes the allowance of a penal fee paid to a bank as a deduction despite being impermissible due to a legal infraction.

2. The dispute primarily revolves around the assessment order for the year 1999-2000, where the Assessing Officer disallowed significant deductions claimed by the assessee, including interest and various business expenses. The CIT(A) partially allowed these claims, leading to further rectifications by the Commissioner for Income Tax. Subsequently, appeals were filed by both the Revenue and the assessee against these orders, which were clubbed together and disposed of by the Tribunal.

3. During the proceedings, the Revenue sought to amend the appeal numbers to include references to another order by the Tribunal, which the assessee vehemently opposed. The opposing counsel argued against the application, citing issues of limitation and potential prejudice to the assessee. The court deliberated on the applicability of the amendment rules and the implications of allowing such changes at that stage.

4. Ultimately, the court decided not to permit the application for amendment, emphasizing that the Revenue could pursue the matter separately if desired. The court also addressed a preliminary objection raised by the assessee regarding the maintainability of the appeal due to the amount involved, as per a board Circular. While the Revenue did not contest this objection, they suggested keeping the appeal pending due to a related appeal before the Supreme Court.

5. The court dismissed the appeal solely on the question of maintainability as per the board Circular, without delving into the merits of the case. The court highlighted that the pending Supreme Court appeal did not necessitate keeping this appeal on hold, as the issues were distinct. The dismissal was made without prejudice to any other contentions that may arise, ensuring the questions were not answered on the merits.

This detailed analysis highlights the various legal arguments, procedural aspects, and the court's decision-making process in addressing the issues raised in the appeal before the Karnataka High Court.