2014 (11) TMI 858 - HC - Income Tax

Interest on investment in shares deleted - Notional interest attributable to investment in shares - Whether the Tribunal was right in confirming the order passed by the CIT(A) deleting the interest attributable to investment in shares Held that - The Tribunal was justified in granting benefit of the earlier years orders to the assessee, which are final - the AO decided the issue against the assessee following earlier years or in similar circumstances - the issue involved was never carried in appeal before the Court and therefore, the earlier years orders, on which the Appellate Tribunal placed reliance, had become final Decided against revenue.

Summary

Issues Involved:
1. Appeal against the judgment and order of the Income Tax Appellate Tribunal.
2. Notional interest attributable to investment in shares.
3. Benefit of earlier years' orders granted to the assessee.

Issue 1: Appeal against the judgment and order of the Income Tax Appellate Tribunal

The Tax Appeal was filed under section 260A of the Income Tax Act, 1961, challenging the judgment and order dated 17.11.1999 passed by the Income Tax Appellate Tribunal in ITA No.1129/Ahd/1994, which resulted in the dismissal of the appeal. The facts revealed that the assessee firm had filed its return of income on 31.12.1990, declaring income at Rs. 50,26,263. After processing the return, the Assessing Officer passed an order under section 143(3) of the Act on 29.03.1993. Subsequently, an appeal was filed before the CIT(A), partly allowed on 12.01.1994, leading to appeals before the Income Tax Appellate Tribunal. The Tribunal, through its judgment and order dated 17.11.1999, dismissed both appeals, prompting the Revenue to file this Tax Appeal.

Issue 2: Notional interest attributable to investment in shares

The Appellate Tribunal's observation in para 15 of the judgment highlighted the issue of notional interest attributable to investment in shares. The CIT(A) had ruled in favor of the assessee by relying on earlier years' orders, a decision upheld by the Appellate Tribunal. Notably, for the assessment year 1984-85, the Revenue had filed a Reference Application before the Appellate Tribunal, seeking clarification on whether an amount contributed by the assessee to the Gujarat Cricket Association should be treated as of capital nature or allowed as revenue expenditure. Despite the rejection of the Reference Application, the Appellate Tribunal applied the same decision to the present case, citing the benefit of earlier years' final orders in favor of the assessee.

Issue 3: Benefit of earlier years' orders granted to the assessee

The Appellate Tribunal's justification for granting the benefit of earlier years' orders to the assessee, which were considered final, played a crucial role in the decision. By affirming the legality of the judgment rendered by the Appellate Tribunal and concurring with its view, the High Court found no irregularity in the Tribunal's decision. Consequently, the appeal was dismissed based on the consistent application of previous decisions in favor of the assessee, establishing the validity and appropriateness of the Tribunal's ruling.

This detailed analysis of the judgment from the Gujarat High Court provides insights into the legal intricacies surrounding the issues raised in the Tax Appeal, particularly concerning notional interest on shares and the application of earlier years' orders in determining the outcome of the case.