1 REPORTABLE IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL NO.1964 OF 2008 M/S GANAPATHY & CO., BANGALORE ...APPELLANT VERSUS COMMISSIONER, INCOME TAX BANGALORE ...RESPONDENT J U D G M E N T RANJAN GOGOI, J. 1. High Court of Karnataka by impugned order dated 3rd July, 2007 had answered questions referred to it for its opinion under Section 256(2) of Income Tax Act, 1961 (as it then existed) against assessee and in favour of revenue. Aggrieved, assessee has filed this appeal upon grant of leave under Article 136 of Constitution of India. Page 1 2 2. At outset, questions of law on which High court had rendered its opinion may be set out as below. i. Whether on facts and in circumstances of case, Income Tax Appellate Tribunal was right in law in deleting disallowance of service charges paid to M/s Universal Trading Company made under Section 40A(2)? ii. Whether on facts and in circumstances of case, Tribunal was justified in holding that loss shown by assessee in film business amounting to Rs.31,48,670/- was allowable? iii. Whether on facts and in circumstances of case, Tribunal was justified in allowing assessee's claim for deduction under Section 35(2A) in respect of donation to Aparna Ashram? 3. necessary discussions can best be unfolded by taking up each of claims of deduction made by assessee which were decided against assessee by High Court by order under challenge. Page 2 3 4. Disallowance of Service charges For Assessment Year in question i.e. 1984-1985, assessee claimed benefit of disallowance of service charges paid to one M/s Universal Trading Company ( UTC for short). Assessing Officer disallowed said claim on ground that in proceedings arising out of Assessment Order for previous year i.e. 1983-1984 said claim had been negatived by C.I.T. in appeal. Assessing Officer, in addition, also took note of fact that membership in asseessee-firm and UTC is common and one K.L. Srihari had sizeable holding in each of two firms. Assessing Officer also had regard to fact, while disallowing said claim, that assessee had failed to provide proof of service rendered by UTC in period covered by Assessment Year in question. He also took note of advice Page 3 4 of Chartered Accountant contained in Note which was found in course of search proceeding. said Note contained advise to assessee to include service charges to UTC as one of methods to reduce incidence of Income Tax. aforesaid conclusions of Assessing Officer were upheld in Appeal by CIT. Aggrieved, Revenue filed appeal before Income Tax Appellate Tribunal ( ITAT for short) which reversed findings and conclusions of Primary and First Appellate Authority primarily on ground that order of CIT (Appeals) in earlier assessment proceeding, relied upon by Assessing Officer, was reversed in appeal by ITAT and also that in course of said earlier assessment proceeding legal effect of advice tendered by Chartered Accountant to reduce incidence of Income Tax was found to be Page 4 5 permissible in law. High Court reversed said conclusion of ITAT which has been challenged by assessee in present appeal. reading of order of ITAT in favour of assessee which has been reversed by High Court would indicate that learned ITAT did not address itself to very fundamental issue that had arisen before it, namely, effect of failure of assessee to produce evidence in support of services claimed to have been rendered by UTC during Assessment Year in question i.e. 1984-1985. answer given by assessee in response to specific query made by Assessing Officer in this regard was that explanations in this regard had already been submitted for previous Assessment Year i.e. 1983-1984. If service had been rendered to assessee by UTC during Assessment Year Page 5 6 in question and service charges had been paid for such service rendered, naturally, it was incumbent on part of assessee to adduce proof of such service having been rendered during period under assessment. There is no dispute on issue that assessee did not, in fact, offer any proof of service rendered during Assessment Year in question. In such circumstances, High Court was perfectly justified in reversing eventual conclusion of learned ITAT on basis that findings and conclusions recorded in course of assessment proceedings of previous year cannot foreclose findings that are required to be arrived at for Assessment Year in question i.e. 1984- 1985. We, therefore, can find no fault with order of High Court on aforesaid score. Page 6 7 5. Disallowance of loss shown by assessee in Film business: aforesaid claim had been negatived both by Assessing Officer and learned CIT (Appeals) but relief had been afforded by learned ITAT. learned ITAT while allowing deduction appears to have taken into account view recorded in another proceeding by ITAT itself in case of sister concern [ITA No.3717/Mds/1987]. relief granted in case of sister concern in ITA No.3717/Mds/1987 was on identical facts and, therefore, perhaps, ITAT did not think it proper to depart from view already taken in said case of sister concern. However, High Court found aforesaid view taken by Tribunal in ITA No.3717/Mds/1987 to be wholly untenable and, therefore, interfered with reliance placed by ITAT on aforesaid decision in Page 7 8 present case. There was no legal bar for High Court in taking aforesaid view. Taking into account above and facts of case which have been set out by High Court in paragraphs 29 and 30 of its order, we do not see how same can be faulted. Having regard to facts and circumstances in which investment was made and loss claimed, we can find no fault in view taken by High Court that entire transaction was sham transaction and was calculated device to avoid tax liability. 6. Disallowance of donation to Aparna Ashram: Disallowance of donation made to Aparna Ashram by assessee was refused by Primary and First Appellate Authority on ground that necessary certificate showing that donee (Aparna Page 8 9 Ashram) had complied with conditions subject to which registration was granted to it under Section 35(2A) of Act was not produced by assessee so as to entitle it to claim of deduction of donation made. learned ITAT took view that aforesaid conditions were not material. High Court on due consideration found that said conditions were necessary preconditions to grant of statutory registration and had to be satisfied. There is no dispute on fact that no such certificate had been furnished by assessee and also that all Authorities have consistently held that if and when such certificate is produced consequential benefit can be afforded to assessee. In aforesaid circumstances, we do not see how view taken by High Court that assessee was not entitled to benefit of donation made to Aparna Ashram can be Page 9 10 faulted. 7. issue on which there could be little dispute on law, nevertheless, needs to be dealt with in view of elaborate arguments advanced on behalf of appellant assessee, namely, that High Court had relied on findings of fact independent of those considered by learned ITAT which is final fact finding authority. Reliance in this regard has been placed on several judgments of this Court to contend that issues of fact determined by Tribunal are final and High Court in exercise of its reference jurisdiction should not act as appellate Court to review such findings of fact arrived at by Tribunal by process of reappreciation and reappraisal of evidence on record. aforesaid position in law has been consistently laid down by this Court in several of its Page 10 11 pronouncements out of which, illustratively, reference may be made to Karnani Properties Ltd. Vs. Commissioner of Income-Tax, West Bengal [82 ITR 547], Rameshwar Prasad Bagla vs. Commissioner of Income-Tax, U.P. [87 ITR 421], Commissioner of Income-Tax, Bombay City vs. Greaves Cotton and Co. Ltd. [68 ITR 200] and K. Ravindranathan Nair vs. Commissioner of Income-Tax [247 ITR 178]. 8. legal position in this regard may be summed up by reiterating that it is Tribunal which is final fact finding authority and it is beyond power of High Court in exercise of its reference jurisdiction to reconsider such findings on reappraisal of evidence and materials on record unless specific question with regard to issue of fact being opposed to weight of materials on record is raised in Page 11 12 reference before High Court. 9. Having reiterated above position in law we do not see how same can be said to have been transgressed by impugned order of High Court. Each relevant fact considered by High Court to answer questions referred to it on claim(s) of deduction raised by appellant assesee are acknowledged, admitted and undisputed facts. No fresh determination of facts found by Tribunal have been made by High Court. What, however, High Court did was to take into account certain additional facts, already on record, which were however not taken note of by Tribunal to arrive at its findings, e.g., that appellant assessee had failed to furnish any proof of service rendered by UTC in course of relevant Assessment Year i.e. 1984-1985. Alternatively, High Page 12 13 Court construed certain facts as, for example, compliance of conditions subject to which registration was granted to Aparna Ashram under Section 35(2A) of Act to be of significance as against contrary/different view of learned Tribunal on this score. There was no departure from basic facts found by learned Tribunal in two illustrative situations cited above, namely, that (i) assessee had not adduced any proof of service rendered by UTC in Assessment Year 1984-1985; (ii) that Aparna Ashram had not complied with conditions subject to which registration had been granted to it under Section 35(2A) of Act. 10. difference in approach between learned Tribunal and High Court, therefore, is not one relating to determination of new or additional facts Page 13 14 but was merely one of emphasis on facts on which there is no dispute. This is surely exercise that was within jurisdiction of High Court in exercise of its reference power under provisions of Act as it then existed. 11. For aforesaid reasons, we find no fault in view taken by High Court while answering questions referred to it. Accordingly, appeal is dismissed however without any order as to costs. ....................,J. (RANJAN GOGOI) ....................,J. (PRAFULLA C. PANT) NEW DELHI JANUARY 18, 2016 Page 14 Ganapathy & Co. v. Commissioner of Income-tax, Bangalore