Madras High Court
M/S.Tatia Sky Line & Health Farms ... vs The Assistant Commissioner Of ... on 5 February, 2021
T.C.A.No.535 of 2019
IN THE HIGH COURT OF JUDICATURE AT MADRAS
DATED : 05.02.2021
CORAM
THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAM
and
THE HONOURABLE MS.JUSTICE R.N.MANJULA
Orders Reserved On Orders Pronounced On
01.02.2021 05.02.2021
T.C.A.No.535 of 2019
and
C.M.P.No.16211 of 2019
M/s.Tatia Sky Line & Health Farms Ltd.,
Now known as M/s.Ashram Online.Com Ltd.,
Rep., by its Chairman cum Director,
Shri. Pannalal Tatial,
Regd., Office No.B-81, 2nd Main Road,
Ambattur Industrial Estate, Chennai-600 058. .. Appellant/Appellant
-vs-
The Assistant Commissioner of Income Tax,
Central Circle III(4), Ayakar Bhavan,
Mahatma Gandhi Road, Nungambakkam,
Chennai-600 034.
(Now Re-designed as Company Circle-I(1) .. Respondent/Respondent
Appeal under Section 260A of the Income Tax, 1961 against the
order dated 31.08.1998, made in I.T.A.No.219/Mds/1998 on the file of the
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T.C.A.No.535 of 2019
Income Tax Appellate Tribunal Chennai Bench 'C' for the assessment year
1994-95.
For Appellant : Mr.J.Sivananda Raj
For Respondent : Ms.V.Pushpa,
Senior Standing Counsel
JUDGMENT
T.S.Sivagnanam, J.
This appeal, filed by the appellant/assessee under Section 260A of the
Income Tax Act, 1961 (hereinafter referred to as “the Act”), is directed
against the order dated 31.08.1998, passed by the Income Tax Appellate
Tribunal Chennai Bench 'C' (for brevity “the Tribunal”) in
I.T.A.No.219/Mds/1998 for the assessment year 1994-95.
2.The appellant/assessee has raised the following substantial
questions of law:-
“(1) Whether on the facts and in the circumstances of
the case, the Tribunal was right in deciding the issue
without taking into consideration the paper book filed by the
Appellant, after acknowledging the fact that these papers
had been produced before the lower authority?
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(2) Whether on the facts and in the circumstances of
the case, the Tribunal was right in refusing to either go
through the evidence themselves, or to remand the matter
for appreciation of evidence, on the suspicion and surmise
that the Appellant would fabricate evidence in the event of
remand?
(3) Whether on the facts and in the circumstances of
the case, the Tribunal after acknowledging the fact that a
part of the expenditure was for the purpose of inviting
membership of health farm, was right in law in refusing to
analyse the evidence to quantify the same or remand the
matter to the assessing officer to do the same? and
(4) Whether on the facts and in the circumstances of
the case, the expenditure incurred on promoting the
membership drive for the health farms can be ignored
merely because the members started coming in only in the
next financial year?”
3.The assessee, a public limited company, is in the business of
running health farms and resorts. For the assessment year under
Consideration, AY 1994-95, the assessee, in its return of income, claimed a
sum of Rs.1,89,84,676/- as revenue expenditure. The Assessing Officer
called upon the assessee to furnish details to which, the assessee responded
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stating that the said amount represents the expenses incurred by the assessee
for public issue. The Assessing Officer rejected the claim made by the
assessee on the ground that expenses incurred for public issue has to be
treated as a capital expenditure and in this regard, placed reliance on the
decision in Metro General Credits Ltd., vs. CIT [(1996) 221 ITR 99
(Madras)].
4.The assessee further stated that the expenses can be regarded as
integral part of the profit earning process and not for acquisition of any
assets or a right of permanent character and the decision in Metro General
Credits Ltd., (supra) will not apply to the assessee's case.
5.The correctness of the stand was examined by the Assessing
Officer, who opined that the details filed in respect of the expenses clearly
bring out the capital nature of the expenditure and the assessee-company
wanted to raise more capital, hence went in for public issue, which has
enduring advantage and has to be regarded as capital expenditure.
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6.The assessee preferred appeal before the Commissioner of Income
Tax (Appeals)-I, Madras (for brevity “the CIT(A)”). The appeal was
dismissed by order dated 28.11.1997. Aggrieved by such order, the
assessee preferred appeal to the Tribunal, which has been dismissed by the
impugned order. Challenging the same, the assessee is before us.
7.Mr.J.Sivananda Raj, learned counsel appearing for the appellant
submitted that the findings rendered by the Tribunal will clearly show that
some portion of the expenditure was incurred by the assessee for the
purpose of inviting membership for the then proposed health farm and the
Tribunal having noted the same, ought to have examined as to what was the
expenditure incurred for inviting membership to the then proposed health
farm and without undertaking any such exercise, the appeal has been
dismissed by the Tribunal and therefore, it is his endeavour to convince this
Court that the matter should be remanded to the Assessing Officer for fresh
consideration to take note of all the documents already produced by the
assessee before the Assessing Officer as well as before the CIT(A) and the
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T.C.A.No.535 of 2019
Tribunal. In this regard, the learned counsel had referred to several portions
of the order passed by the CIT(A) and the Tribunal.
8.Further, it is submitted that at the relevant point of time, there was
an uncertainty as to whether such expenditure was to be regarded as a
capital expenditure or a revenue expenditure and there was a genuine
confusion in the mind of the assessee and the matter stood settled only after
the decision of the Hon'ble Supreme Court in Brooke Bond India Ltd., vs.
CIT [(1997) 10 SCC 362]. Therefore, it is submitted that the matter may be
remanded to the Assessing Officer to reconsider the documents and arrive at
a proper decision.
9.Per contra, Ms.V.Pushpa, learned Senior Standing Counsel for the
Revenue submitted that for the first time before the CIT(A), the assessee
claimed that all expenses are revenue expenditure and did not relate to the
public issue and the correctness of the submission was tested by the CIT(A)
and a finding was rendered upon examination of the printed accounts, which
showed that the assessee had described the deferred revenue expenditure as
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T.C.A.No.535 of 2019
expenditure on public issue only and not even one rupee was collected as
membership subscription by the assessee during the accounting year, when
the membership drive is supposed to have taken place along with the public
issue in September, 1993 and the postage expenditure of Rs.20.20 Lakhs on
the actual despatch of brochures for membership was claimed to have been
incurred in November/December, 1993. The membership subscription of
Rs.42,34,900/- was received only during the accounting year 1994-95.
Therefore, it is submitted that the contention advanced by the assessee,
before the CIT(A) for the first time, was rightly rejected as an afterthought.
Once again, the finding rendered by the CIT(A) was examined by the
Tribunal and after assigning elaborate reasons, the Tribunal has rejected the
appeal. Even before the Tribunal, the assessee argued for remanding the
matter for fresh consideration, which was independently considered by the
Tribunal and held that there is no necessity for remanding the issue to the
Assessing Officer for fresh consideration. Therefore, it is submitted that no
substantial question of law arises for consideration in this appeal.
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10.We have elaborately heard the learned counsels for the parties and
carefully perused the materials placed on record.
11.Since the learned counsel for the appellant has confined his
argument praying for remand of the matter to the Assessing Officer, we
shall proceed to consider the issues raised before us from that perspective.
12.The sheet anchor of the argument of Mr.J.Sivananda Raj, is on the
observations of the Tribunal in paragraph 5 of the impugned order. It is his
submission that the Tribunal having held that there was expenditure for the
purpose of inviting members for the proposed health farm, the Tribunal
could not have brushed aside the same stating that it is a small expenditure
incurred by the assessee and it is not for the Tribunal to consider whether
the expenditure is a large expenditure or a small expenditure, as the said
matter should be looked from the eyes of the assessee.
13.The second limb of the argument of Mr.J.Sivananda Raj rests upon
the decision in the case of Brooke Bond India Ltd. (supra), and it is argued
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that at the relevant time, there was an uncertainty in the legal position and
therefore, the assessee was advised to claim the expenses as revenue
expenditure.
14.Perusal of the assessment order shows that in the statement of
computation of total income, the assessee claimed a sum of Rs.1,89,84,676/-
as deferred revenue expenditure. The Assessing Officer called for details
from the assessee, in response to which, it was stated that the expenditure
represents public issue expenditure. The Assessing officer tested the stand
of the assessee for its correctness and by applying the decision in Metro
General Credits Ltd., (supra), held that the expenditure incurred for
augmenting the capital of the assessee-company by public issue has an
enduring effect and therefore, to be treated as capital expenditure.
15.For the first time before the CIT(A), the assessee appears to have
given certain breakup details and stated that such of those expenditure was
apart from the expenditure incurred by them for the public issue and such
expenditure cannot be regarded as a capital expenditure because, it was for
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conducting a membership drive for enlisting members in one of their
projects. Thus, it could be seen that for the first time before the CIT(A), the
assessee sought to bi-circulate the expenditure into one, which was incurred
for the public issue and the other for the membership drive.
16.The CIT(A) examined the matter for its correctness, perused the
printed accounts of the relevant accounting year and held that not even one
rupee was collected as membership subscription by the company during the
accounting year, when the membership drive is supposed to have taken
place along with the public issue in September, 1993. Further, the CIT(A)
held that from the prospectus of the public issue, issued in September, 1993,
the assessee had only finalized plans for bulk marketing through three
contracting parties and from the subsequent annual report for the accounting
year 1993-94, these balances were shelved and as of June, 1994, publicity
material was under preparation. Therefore, the CIT(A) concluded that the
assessee's claim that the expenses classified as 'public issue expenses'
included expenses of membership drive embarked upon simultaneously, is
an afterthought for which there is no basis.
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17.Before the Tribunal, the assessee canvassed the same grounds
raised before the CIT(A), but with more vehements and the Tribunal
appears to have heard the matter at great length, perused the copies of
various documents placed by the assessee in the form of a paper book
during the course of hearing. The Tribunal by an elaborate order, has
dismissed the appeal. The Tribunal in paragraph 6 has noted that the
assessee is a public limited company, its accounts were prepared and
finalized by the In-house Finance and Accounts Department, who have
certified that the entire expenditure was towards public issue. The said
accounts were approved by the Board of Directors of the assessee as per the
report dated 27.06.1994. The Chartered Accountants of the assessee agreed
with the Board of Directors and certified that the accounts give a true fare
view of the state of affairs of the company. Thereafter, the accounts were
placed before the shareholders at the General Body Meeting and the same
was also approved. Thus, the Tribunal concluded that all these events
clearly prove that the expenditure was for public issue of shares and not
partly for public issue and partly for membership drive of the health farm as
contended by the assessee.
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18.Further, after referring to all the bulk documents produced before
the Tribunal, it held that the assessee miserably failed to establish the
tenability and truthfulness of its claim that the expenditure was revenue in
nature and hence, allowable. The Tribunal approved the finding of the
CIT(A) with regard to the effect of the judgment in Brooke Bond India
Ltd., (supra).
19.From, paragraph 7 of the impugned order, we find that the
assessee had made an elaborate submission requesting the Tribunal to
remand the matter back to the Assessing Officer for fresh consideration.
The Tribunal rightly noted the various decisions of this Court and the
Hon'ble Supreme Court, which have cautioned that orders of remand should
be passed only in cases, where the original authorities have not passed
orders in accordance with law, but in no case, remand should be made to
enable an assessee to fill in the blanks or lacuna in the case which remains
present. After noting various decisions on the power of the Tribunal to
remand matters to the authority and under what circumstances can the Court
pass orders of remand, the Tribunal, on facts, was convinced that there is no
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T.C.A.No.535 of 2019
case made out by the assessee to remand the matter back to the Assessing
Officer for fresh assessment. Further, the Tribunal accepted the argument of
the Revenue that if the plea of remand is to be accepted at such a belated
stage (1998), there is likelihood of tinkering with the evidence and remand
will be prejudicial and detrimental to the interest of revenue and
accordingly, rejected the prayer for remand.
20.We have set out the above facts to show that no question of law,
much less substantial question of law arises for consideration in this appeal.
The entire factual matrix has been examined by the Assessing Officer at the
first instance, based upon the stand taken by the assessee. Before the
CIT(A), for the first time, the assessee set up a case as if portion of the
expenses was not relatable to public issue. The CIT(A) would have been
well justified to pin down the assessee to their original claim in the return of
income filed and reject their case. However, in order to ensure that the
assessee gets a fare deal and the correct income needs to be taxed, the stand
taken by the assessee was examined for its correctness. After elaborately
considering the matter, the CIT(A) found that the assessee miserably failed
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to establish the tenability and truthfulness of its claim that the expenditure
was revenue in nature. Once again before the Tribunal, the assessee made
further attempt on the same grounds, which were considered by the Tribunal
in great length and it was rejected.
21.As was argued by Mr.J.Sivananda Raj before us, the learned
counsel for the assessee argued before the Tribunal for remanding the
matter to the Assessing Officer. This prayer was rejected and rightly so.
The Tribunal rightly noted the decisions on the point that an order of
remand is not for the asking and superior courts should be slow in
remanding a case to the authority, unless it is shown that the case warrants
reconsideration on the already available material or when important legal
issue was not considered and that cannot be considered by the Court
because disputed facts have to be gone into otherwise, prayer for remand
should be rejected.
22.The Tribunal upon reconsideration of the factual position, found
no justifiable reason to accept the prayer of the assessee to remand the
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matter to the Assessing Officer and also rightly observed that the assessee
cannot fill up the gaps and blanks by seeking for a remand. Further, the
Tribunal also agreed with the submission of the Revenue that there is a
likelihood of tinkering of the evidence in the meantime and if the same is
permitted, it would be prejudicial and detrimental to the interest of the
Revenue. Hence. we are not persuaded by the submissions made on behalf
of the assessee both on merits as well as with regard to the prayer for
remand and above all, we find no question of law, much less substantial
question of law arising for consideration in this appeal.
23.Accordingly, the appeal fails and is dismissed. No costs.
Consequently, connected miscellaneous petition is closed.
(T.S.S., J.) (R.N.M., J.)
05.02.2021
Index: Yes/ No
Speaking Order : Yes/ No
abr
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T.C.A.No.535 of 2019
T.S.Sivagnanam, J.
and
R.N.Manjula, J.
(abr)
To
1.The Assistant Commissioner of Income Tax,
Central Circle III(4), Ayakar Bhavan,
Mahatma Gandhi Road, Nungambakkam,
Chennai-600 034.
(Now Re-designed as Company Circle-I(1)
2.The Income Tax Appellate Tribunal, Chennai Bench 'C'.
T.C.A.No.535 of 2019
05.02.2021
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