9911796707
TMI Blog1998 (7) TMI 25X X X X Extracts X X X X X X X X Extracts X X X X ..... to allow the writ petitions as prayed for. On behalf of the respondents though no counter affidavit was filed, they argued the matter. Heard the arguments advanced by learned counsel appearing for the petitioner and also those of learned senior counsel appearing for the Department. I have perused the contents of the affidavits together with all the relevant material documents available on record in the form of typed set of papers. I have also taken into consideration the various points raised by learned counsel appearing for the parties during the course of their arguments. The brief facts of the case of the petitioner herein as seen from the affidavits are as hereunder. The assessment years concerned in these writ petitions are 1976-77, 1977-78, 1980-81, 1981-82 and 1982-83. In all these assessments, there was disallowance of interest under section 40A(8)/58(2) of the Income-tax Act. Such disallowance of interest is as follows for the respective assessment years : ---------------------------------------------------------------------------------------------------------------------------------------------------- Assessment year Disallowance of interest (Rs.) ------------ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urities' and 'House property'---no disallowance is called for. The Income-tax Officer is directed to modify the disallowance accordingly." The question whether section 40A(8)/58(2) was applicable to the petitioner was neither raised nor argued or considered by the Commissioner of Income-tax (Appeals) and was not an issue before him. Subsequently, the petitioner made applications to the Income-tax Officer, Companies Circle I(4), Madras 600 034, requesting the officer to rectify his assessment under section 154 of the Income-tax Act on the ground that the petitioner is a miscellaneous financial company referred to in sub-clause (vi) of clause (c) of the Explanation to section 40A(8)/58(2) and that, therefore, the said section was not applicable to the petitioner-company. The Income-tax Officer by his common order for the assessment years 1976-77, 1977-78, 1980-81 to 1984-85 dated July 11, 1986, declined to pass an order rectifying the assessment and he dismissed the petitions under section 154 of the Income-tax Act. Aggrieved by the order of the Income-tax Officer, the petitioner filed a petition under section 264 of the Income-tax Act with the first respondent. However, the first ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 40A(8) of the Income-tax Act, 1961, by the Income-tax Officer is correct or not. Such disallowance is vehemently objected to by the petitioner on the ground that the entire interest cannot be treated for disallowance under section 40A(8)/58(2), but that amount attributable to the business. According to the petitioner, section 40A(8) has to be applied to the "interest on deposits" charged against business income. The Income-tax Officer did not accept the said contention of the petitioner. But on appeal before the Commissioner of Income-tax (Appeals) IV, by his common order he accepted the contention of the petitioner and directed the Income-tax Officer to modify his order, In the said order it has been specifically held by the Commissioner of Income-tax (Appeals) IV, as follows : "Under section 40A(8) interest payments made by an assessee under the head 'Business' should be subjected to a 15 per cent. disallowance. Similarly, under section 58(2) a 15 per cent. disallowance should also be made in respect of interest payments considered under the head 'Income from other sources'. In respect of other interest payments, for example-under the heads 'Interest on securities' and 'house ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnificant to note that section 264 only provides that no appeal should have been filed against the order which was subject-matter of dispute under the provisions of section 264 and in this case it is an admitted fact that no appeals have been filed against the order of the officer refusing to rectify the assessment under section 154 of the Act en respect of the question whether the provisions of section 40A(8)/58(2) are applicable to the petitioner's case at all. That factum was not at all taken into consideration by the first respondent while dismissing the revision petition under section 264. That apart, yet another significant circumstance in this case is that the first respondent himself by his order C. No. 217-1/28 of 1987, dated September 21, 1988, for the assessment year 1983-84 and C. No. 217-1(27) of 1986-87, dated September 21, 1988, for the assessment year 1984-85 allowed the petitioner's submissions on the ground that section 40A(8)/58(2) was not applicable and directed the Income-tax Officer to delete the disallowance of interest for these assessment years. Therefore, there is every force in the argument of learned counsel for the petitioner that the first respondent s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... are not applicable to the petitioner's case. Therefore, the Income-tax Officer is not correct in dismissing the petitions under section 154 for rectification on the merits. Further, the order rejecting the revision petitions on a technical ground is illegal and without jurisdiction for the only reason that the first respondent had accepted the contention of the petitioner on the merits that section 40A(8)/58(2) is not applicable to the petitioner for certain assessment years. Therefore, the first respondent is not correct in dismissing the petition under section 264 on technical grounds. Further, it is a clear case where the first respondent himself has accepted the contention of the petitioner on the merits that section 40A(8)/58(2) is not applicable to the petitioner for certain assessment years (1983-84 and 1984-85). That being so, there is no explanation from the Department as to why that benefit is denied to the petitioner for the assessment years in question. That apart, in this case the Commissioner of Income-tax (Appeals) has also categorically held that under section 40A(8) interest payments made by an assessee under the head "Business" should be subjected to a 15 per cent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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