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2020 (2) TMI 843 - HC - Income TaxAddition u/s 37 - HELD THAT - Appeal be admitted on the following substantial questions of law A. Whether on the facts and in the circumstances of the case and in law, Tribunal was right in upholding the orders of the lower authorities and disallowing the amount of ₹ 87,61,920.65 paid to Al Azhar Trading Company, Dubai and ₹ 1,78,676.00 paid to Kirloskar Middle East FZE (KMEF) by invoking the provisions of Explanation 1 to Section 37 of the Income Tax Act, 1961 ?. B. Whether on the facts and in the circumstances of the case and in law, the Tribunal was right in holding that the payment of ₹ 87,61,920.65 paid to Al Azhar Trading Company, Dubai and ₹ 1,78,676.00 paid to Kirloskar Middle East FZE (KMEF) was an illicit payment prohibited under the provisions of Indian Law, without coming to any specific finding as to which provision/statute of Indian law the appellant had violated ?. C. Whether on the facts and in the circumstances of the case and in law, the findings of the Tribunal are perverse on the basis of the facts on record ?.
Issues involved:
1. Appeal against the order of the Income Tax Appellate Tribunal regarding the disallowance of certain payments made by the Assessee. 2. Interpretation of Explanation 1 to Section 37 of the Income Tax Act, 1961. 3. Determination of whether the payments made to foreign companies were illicit and violated Indian law. 4. Assessment of the Tribunal's findings as being perverse based on the facts on record. Analysis: Issue A: Disallowance of payments made by the Assessee The High Court considered the primary issue of whether the Tribunal was correct in disallowing payments made by the Assessee to Al Azhar Trading Company, Dubai, and Kirloskar Middle East FZE (KMEF). The Court focused on the interpretation of Explanation 1 to Section 37 of the Income Tax Act, 1961. The Appellant challenged the Tribunal's decision, arguing that the payments should not have been disallowed. The Court examined the facts and circumstances surrounding the payments to determine the correctness of the Tribunal's decision. Issue B: Legality of payments under Indian law Another crucial issue addressed by the High Court was whether the payments made to Al Azhar Trading Company, Dubai, and Kirloskar Middle East FZE (KMEF) were illicit and violated Indian law. The Court analyzed whether the Tribunal correctly held that the payments were prohibited under Indian law without specifying the exact provision/statute that was violated by the Appellant. This issue required a detailed examination of the nature of the payments and their compliance with Indian legal requirements. Issue C: Perversity of Tribunal's findings The High Court also delved into the issue of whether the Tribunal's findings were perverse based on the facts on record. The Appellant contended that the Tribunal's conclusions were erroneous and not supported by the evidence presented. The Court scrutinized the Tribunal's reasoning and the evidence on record to determine the validity of the findings. This issue required a thorough analysis of the Tribunal's decision-making process and its alignment with the facts and legal principles. In conclusion, the High Court's judgment involved a comprehensive analysis of the issues raised by the Appellant regarding the disallowance of payments, the legality of such payments under Indian law, and the perversity of the Tribunal's findings. The Court's detailed examination of these issues underlined the complexity of the case and the importance of interpreting the relevant provisions of the Income Tax Act, 1961 in light of the facts and legal arguments presented.
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