Delhi High Court
Commissioner Of Income Tax Del vs M/S Banaras House Ltd. on 17 January, 2018
$~R-17
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Date of Judgment: 17th January, 2018
+ ITA 583/2005
COMMISSIONER OF INCOME TAX DEL ..... Appellant
Through Mr. Puneet Rai, Adv.
versus
M/S BANARAS HOUSE LTD. ..... Respondent
Through None
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE CHANDER SHEKHAR
SANJIV KHANNA, J. (ORAL)
This appeal by the Revenue pertains to the Assessment Year
1996-1997 and arises from the order of the ITAT dated 29.11.2004
passed in ITA No. 2074/Del/2000 in the case of M/s Banaras House
Ltd.
2. By order dated 02.08.2005, the appeal was admitted and the
following substantial questions of law were framed:-
1) Whether on the facts and in the
circumstances of the case the Tribunal was
correct in law in holding that for the purposes
of applying explanation (baa) below Sub-
Section 4B of Section 80HHC and while
deducting 90% of the receipt by way of interest
from the profits of the business, it is only the
90% of the net interest remain after allowing a
set off of interest paid?
2) Whether the Ld. ITAT was correct in law
and in facts and circumstances of the case in
deleting the addition of Rs.18,90,273/- made by
the A.O. by invoking the provisions of Section
41 (1) of the Act?"
3. We have heard counsel for the appellant but there is no
appearance on behalf of the counsel for the respondent/assessee in
spite of service.
4. The first question of law is covered by decision of this Court
in Commissioner of Income Tax Etc. v. Shri Ram Honda Powers
Equipment Ltd. (2007) 289 ITR 475 (Del) and the Supreme Court in
ACG Associated Capsules P. Ltd. v. The Commissioner of Income
Tax, Central-IV Mumbai (2012) 343 ITR (SC). The Assessing
Officer will apply their ratio on applicability and effect of Explanation
(baa) and compute deduction under Section 80 HHC of the Act.
5. The first question of law is answered accordingly.
6. We now turn to the second question. Assessee during the
course of the assessment proceedings had furnished details of
creditors. The Assessing Officer made addition of Rs.18,90,273/-
under Section 41(1) of the Act in case of old creditors i.e., where there
was no transaction between the assessee and the creditors during the
last three years or more. The Assessing Officer held that there has to
be some time limit for the credit recorded to be carried forward.
7. The addition was partly confirmed by the Commissioner of
Income Tax (Appeal), who had tallied the list of old creditors with
payments by the assessee to these creditors in the subsequent years.
The Assessing Officer was required to verify and rectify, if required.
He observed that Rs.8,32,130/- had not still not been paid.
8. Income Tax Appellate Tribunal on the said issue held that the
assessee had carried forward the balances from earlier years. Some
credit balances were written off in the year in question and some in
succeeding years. Further, when a liability was acknowledged by the
debtor, it cannot be said that the claim of the creditor was barred by
limitation. In case of 16 creditors, the credit balance was returned or
adjusted for the next financial year. Provisions of Section 41(1) of the
Act were not attracted.
9. We do not see any error in the findings and reasons given by the
Tribunal. The respondent assessee is a company and accounts were
audited as per the mandate of the Companies Act. In the accounts, the
respondent assessee had accepted and acknowledged its liability. The
creditors can rely on the said acknowledgment. Even otherwise many
of the creditors were paid, adjusted or eased in the subsequent years as
accepted by the Commissioner of Income Tax (Appeals) and the
Tribunal. No special facts or reasons were given by the Assessing
Officer to hold and observe that the liabilities had ceased and amounts
should be added under Section 41(1) of the Act.
10.The second question is accordingly decided against the revenue
and in favour of the assessee.
11. The appeal is disposed of without any order as to costs.
SANJIV KHANNA, J
CHANDER SHEKHAR, J
JANUARY 17, 2018/b
