Principal Commissioner Of Income ... vs M/S. Fairluck Commercial Co. ...
2021 Latest Caselaw 1520 Cal/2

Form No.(J2)



                        IN THE HIGH COURT AT CALCUTTA
                      SPECIAL JURISDICTION (INCOME TAX)
                                ORIGINAL SIDE


Present :

THE HON'BLE JUSTICE T.S. SIVAGNANAM

                     A N D

THE HON'BLE JUSTICE HIRANMAY BHATTACHARYYA



                                 IA NO.GA/2/2017
                               (Old.GA/1676/2017)
                                  ITAT/189/2017

               PRINCIPAL COMMISSIONER OF INCOME TAX-3, KOLKATA
                                     -Versus-
                    M/S. FAIRLUCK COMMERCIAL CO. LIMITED


For the Appellant:    Mr. Radhamohan Roy, Adv.

For the Respondent: Mr. A. K. Dey. Adv.

Mr. Sanjoy Bhowmick, Adv.

Heard on : 06.12.2021

Judgment on : 06.12.2021

T. S. SIVAGANANAM, J. : The appeal filed by the revenue under

Section 260A of the Income Tax Act, 1961 (the 'Act' in brevity) is

directed against the order dated 6th May, 2016 passed by the Income

Tax Appellate Tribunal, Kolkata "A" Bench (the 'Tribunal' in

short) in ITA No.1427/Kol/2013 for the assessment year 2007-08.

The revenue has raised the following substantial questions

of law for consideration:

"(a) Whether in the facts and circumstances of the case, the learned Income Tax Appellate Tribunal, "A" Bench, Kolkata is right in law and fact in holding that the interest claimed by the respondent/Assessee was automatically eligible for deduction under Section 36(1)(iii) of the Income Tax Act, 1961?"

(b) Whether in the facts and circumstances of the case, the learned Income Tax Appellate Tribunal, "A" Bench, Kolkata is right in law and fact in holding that the borrowings as made by the respondent/Assessee were made for the purpose of lending business and once it was proved that the interest payments were made thereon, the same shall automatically be eligible deduction under Income Tax Act, 1961?"

We have Mr. Smarajit Roychowdhury, learned counsel for the

appellant/revenue and Mr. A.K. Dey, learned counsel for the

respondent/assessee.

Learned counsel appearing for the respondent/assessee

submitted that this appeal cannot be pursued by the revenue as it

is below the threshold limit of Rs.1 crore prescribed by the

circular issued by the Central Board of Direct Taxes (CBDT).

Learned counsel for the respondent does not have instruction on

the aspect. Therefore, we proceed to hear out the appeal and

decide the matter on merits.

The question involved was whether the assessing officer

was right in disallowing the assessee's claim on interest

expenditure on the facts and circumstances of the case. The

tribunal noted that the assessee is a non-banking financial

company and had advanced loan to several parties and derived

interest income out of the lending made in the earlier years as

well as during the year under consideration i.e (A.Y. 2007-08).

Further, the tribunal accepted the stand taken by the assessee

that the assessee being a non-banking financial company has to

minutely follow prudential norms prescribed the Reserve Bank of

India on revenue recognition. Further, after going through the

facts of the case, the tribunal noted that the assessee has not

given interest free advance to any of the parties at the time of

granting of loan and this is only because of the fact that non-

payment of the prescribed number of instalments, the assessee was

forced, as per law, to stop recognition of interest income on

accrual basis. Further, the tribunal on facts noted that the

borrowings made by the assessee had been utilized for advancing

funds to various parties. Thus, the tribunal concluded that the

borrowings were made by the assessee for the purpose of its

lending business. Having been satisfied with the facts of the

case, the tribunal held that the assessee shall be automatically

eligible for protection under Section 36(1)(iii) of the Act. The

tribunal also followed the decision of this Court in the case of

Caldern Pharmaceuticals Ltd. vs. CIT reported in 265 ITR 244

(Cal). With the above factual finding, the appeal filed by the

assessee was allowed.

We find that the tribunal being the last fact finding

authority has re-appreciated the facts and granted relief. We

find that there is no question of law much less substantial

question of law arising for consideration in this appeal.

Accordingly, the appeal fails and is dismissed.

The connected application for stay (IA No.GA/2/2017, old

No.GA/1676/2017)) also stands closed.

(T.S. SIVAGNANAM, J.)

I agree.

(HIRANMAY BHATTACHARYYA, J.)

A/s./bp