JUDGMENT IN HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 1004 of 2006 With TAX APPEAL NO. 1005 of 2006 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE KS JHAVERI Sd and HONOURABLE MR.JUSTICE K.J.THAKER Sd/ =================================================================
1 Whether Reporters of Local Papers may be allowed to see No judgment ? 2 To be referred to Reporter or not ? No 3 Whether their Lordships wish to see fair copy of No judgment ? 4 Whether this case involves substantial question of law as No to interpretation of Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to civil judge ? No
=================================================================== COMMISSIONER OF INCOME TAX....Appellant(s) Versus DIGVIJAY CEMENT CO. LTD.....Opponent(s) ====================================== Appearance: MR PRANAV G DESAI, ADVOCATE for Appellant(s) No. 1 NOTICE SERVED for Opponent(s) No. 1 ====================================== CORAM: HONOURABLE MR.JUSTICE KS JHAVERI and HONOURABLE MR.JUSTICE K.J.THAKER Date : 09/12/2014 ORAL JUDGMENT (PER : HONOURABLE MR.JUSTICE KS JHAVERI) Page 1 of 4 HC-NIC Page 1 of 4 Created On Sat May 07 10:21:43 IST 2016 O/TAXAP/1004/2006 JUDGMENT 1. By way of these appeals, appellant Revenue has challenged judgment and order dated 15.12.2005 passed by Income Tax Appellate Tribunal, Rajkot Bench, in ITA Nos.414 & 415/Rjt/2005 for Assessment Years 1989 90 and 1990 91. 2. While admitting these appeals on 29.8.2006, this Court has framed following substantial question of law: Whether Appellate Tribunal is right in law and on facts in deleting disallowance made under Section 43B in respect of interest on proforma credit under Central Excise Rules ? 3. facts of present case are that assessee had availed proforma credit of excise duty on purchase of raw materials. excise department did not allow claim and raised demand of Rs.443.88 Lacs. company lost its case before this Court. This Honourable High Court directed company to pay duty with interest thereon at 13%. company claimed this interest liability as deduction. said liability was disallowed on ground that company has contested this liability in Honourable Supreme Court, where matter was pending and it is also disallowed under Section 43 B. In Assessment Year 1991 92 Commissioner of Income Tax (Appeals) has stated that Assessing Officer has disallowed amount on ground that although liability to pay interest is ordinarily deductible, since it is linked with payment of taxes, it has to be disallowed under Section 43 B. CIT (A) in said year, has allowed claim on ground that liability has arisen on account of decision of this Court and since interest liability emanates from decision of this Court and not due to any statutory provision of law, same decision was followed by him in Assessment Year 1992 93 and accordingly held Page 2 of 4 HC-NIC Page 2 of 4 Created On Sat May 07 10:21:43 IST 2016 O/TAXAP/1004/2006 JUDGMENT liability to be allowable. Income Tax Appellate Tribunal following its own decision held that facts being identical there is no reason to interfere with order of CIT (A) for deleting disallowance on account of proforma credits under Central Excise Rules, by invoking provisions of Section 43 B and dismissed appeal of revenue. Being aggrieved by said order, present appeal is preferred by revenue. 4. Heard learned advocate appearing for revenue and considered submissions. While passing impugned order, Tribunal has relied upon its earlier decision in assessee's own case pertaining to Assessment Years 1994 95 to 1997 98 in ITA No.4808 to 411/RJT/2004 dated 14.6.2005 and ITA No.157/RJT/2003 dated 8.6.2005, wherein it was observed as under: 9. Next grievance of Revenue relates to disallowance on account of interest by proforma credit under Central Excise Rules, by invoking provisions of Section 43 B. Rival contentions have been heard. In course of assessment, AO disallowed assessee's claim of interest of Rs.57,70,426 on account of interest on proforma credit, by observing that amount was not paid before filing return, therefore, it warrants disallowance U/s. 43 B. From record we find that assessee company has availed proforma credit on excise duty on purchase of raw material. excise department disallowed this claim and raised demand. assessee agitated this demand. assessee agitated this demand before Gujarat High Court but lost case and High Court directed assessee to pay this amount with 13% interest. assessee has claimed this interest as expenditure which is arising out of order of High Court and Page 3 of 4 HC-NIC Page 3 of 4 Created On Sat May 07 10:21:43 IST 2016 O/TAXAP/1004/2006 JUDGMENT not on account of any statutory provisions of law. Therefore, as per our considered view, provision of Section 43 B is not applicable and amount of interest claimed is allowable as deduction U/s. 37 (1). CIT (A) has allowed assessee's claim for deduction by relying on decision of ITAT, Ahmedabad Bench in case of Shri Dinesh Mills Limited, and also Saurashtra Cement Limited. 5. Not only that identical issue also came up for consideration before this Court in Tax Appeal No. 1917 of 2005 in case of Commissioner of Income Tax v. Saurashtra Cement Ltd., wherein this Court has observed as under: 3. In circumstances, it is not necessary to set out facts and respective contentions in detail. Today, by judgment of even date, reference on this issue has been answered by this Court against revenue and in favour of assessee. Hence, for self same reasons, question in present tax appeal stands answered accordingly in favour of assessee and appeal stands disposed of with no order as to costs. 6. In that view of matter, no elaborate reasons are required and we answer question in favour of assessee and against Revenue. Both these Tax Appeals are dismissed accordingly. Sd/ (K.S.JHAVERI, J.) Sd/ (K.J.THAKER, J) *malek Page 4 of 4 HC-NIC Page 4 of 4 Created On Sat May 07 10:21:43 IST 2016 Commissioner of Income-tax v. Digvijay Cement Co. Ltd