NON REPORTABLE IN SUPREME COURT OF INDIA CIVIL APPELLATE JURISDICTION CIVIL APPEAL No.4026 OF 2019 (Arising out of S.L.P.(C) No.1153 of 2018) Pr. Commissioner of Income Tax 3, Nagpur .Appellant(s) VERSUS Ballarpur Industries Ltd. .Respondent(s) JUDGMENT Abhay Manohar Sapre, J. 1. Leave granted. Signature Not Verified 2. This appeal is filed against final judgment Digitally signed by ANITA MALHOTRA Date: 2019.04.22 and order dated 17.07.2017 passed by High Court 17:18:04 IST Reason: of Judicature at Bombay, Bench at Nagpur in ITA 1 1 No.38 of 2003 whereby High Court dismissed appeal filed by appellant herein and upheld order dated 30.06.2003 passed by Income Tax Appellate Tribunal (for short, Tribunal ). 3. few facts need mention hereinbelow for disposal of this appeal, which involves short point. 4. appellant is Commissioner of Income Tax and respondent is assessee. 5. respondent assessee is Limited Company, which is engaged in business of manufacturing of various kinds of papers. dispute in this appeal relates to assessment year 1993 94. 6. question arose in assessment year in question before Assessing Officer (AO) as to what is true nature of payment of Rs.3.25 crores made by respondent Company(assessee) to one Mr. G.R.Hada pursuant to compromise arrived at between respondent assessee Company and Mr. 2 2 G.R.Hada in civil suit filed by Mr. G.R. Hada against respondent Company and others. 7. According to respondent Company(assessee), Mr. G.R. Hada and respondent Company were joint promoters of one Company called M/s Andhra Pradesh Rayons Limited in which Mr. G.R. Hada was holding 10.25% shares and remaining shares were held by other promoter shareholders with different percentage. 8. Since dispute arose amongst promoter shareholders, Mr. G.R. Hada filed civil suit against respondent Company(assessee) and other promoter shareholders on basis of agreement, which was entered into amongst promoter shareholders. 9. In abovementioned suit, compromise was arrived at between respondent Company(assessee) and Mr. G.R. Hada. Pursuant to said compromise, 3 3 respondent Company(assessee) paid sum of Rs.3.25 crores to Mr. G.R. Hada. 10. respondent Company(assessee), however, claimed deduction of Rs.3.25 crores in assessment year in question as revenue expenditure because, according to them, they had paid said sum to Mr. G.R. Hada for running their business. 11. AO examined claim in context of terms of agreement in Para 12 (a) of his order dated 29.03.1996 (pages 54 to 60 of SLP paper book) and held that claim cannot be considered as "revenue expenditure". AO, therefore, rejected claim. 12. respondent Company(assessee) felt aggrieved by order of AO and filed appeal to Commissioner of Income Tax (Appeals) I, Nagpur. CIT (Appeals) dealt with this issue in Para 15 of his order (pages 92 to 94 of SLP paper book) and by his order 18.12.1998 confirmed addition made by 4 4 AO. In other words, CIT (Appeals) was also of view that claim made by respondent Company(assessee) cannot be considered as "revenue expenditure". 13. respondent Company(assessee) felt aggrieved and filed second appeal in Income Tax Appellate Tribunal. Tribunal examined question in Paras 26 and 27 and by its order dated 30.06.2003 allowed appeal and directed AO to allow deduction of Rs.3.25 crores as claimed by respondent Company(assessee). 14. Commissioner of Income Tax Revenue felt aggrieved and filed appeal in High Court of Judicature at Mumbai, Nagpur Bench. By impugned order, High Court dismissed appeal, which has given rise to filing of present appeal by way of special leave by Revenue in this Court. 15. So, short question, which arises for consideration in this appeal, is whether High Court 5 5 was justified in dismissing appeal filed by Commissioner of Income Tax. 16. Heard Mr. Sanjay Jain, learned Additional Solicitor General for appellant Revenue and Ms. Vanita Bhargava, learned counsel for respondent Company(assessee). 17. Having heard learned counsel for parties and on perusal of record of case, we are inclined to allow appeal, set aside impugned order as well as order of Tribunal and remand case to Tribunal to decide appeal filed by respondent Company(assessee) afresh on merits in accordance with law. 18. need to remand case to Tribunal has arisen for following reasons. 19. From perusal of Para 26 of order of Tribunal, we find that Tribunal has recorded finding, which reads as under: 6 6 "26 AO did not dispute fact that expenditure related to business of assessee. CIT (A), however, reversed findings of AO and held that expenditure cannot be considered as business expenditure. perusal of CIT (A)'s order can only lead to conclusion that CIT(A) was of view that expenditure in question was not capital expenditure but of revenue nature .." 20. aforesaid observation of Tribunal, on what AO and CIT (Appeals) held, does not seem to be correct and rather inconsistent when we peruse finding of AO (concluding Para 12 (a) & (d) of AO s order at page 60 of SLP and concluding Para 15.1 of CIT (Appeals) at page 93 of SLP). 21. In other words, we find that Tribunal did not correctly appreciate as to what AO and CIT (Appeals) held and what was their reasoning which led to their respective conclusion. 22. Having wrongly observed about their respective reasoning and finding, Tribunal proceeded to examine case and eventually reversed order of CIT (Appeals). High court did not notice 7 7 aforesaid observation of Tribunal and upheld order of Tribunal. 23. In such situation like one arising in case and keeping in view question involved, we are of considered opinion that matter deserves to be remanded to Tribunal for deciding appeal filed by respondent Company (assessee) afresh on merits because Tribunal being last Court of appeal on facts, its finding on question of fact is of significance. 24. In our view, remanding case is not likely to cause any prejudice to any party because aggrieved party will have right of appeal to High Court and then to this Court against any adverse order. 25. Though learned counsel for parties argued question on merits but having taken note of approach of Tribunal, we consider, in interest of both parties, to remand appeal to 8 8 Tribunal for its hearing afresh on merits in accordance with law, keeping all issues open. 26. It is for this reason, we allow appeal, set aside orders of High Court and Tribunal and remand appeal to Tribunal for its decision afresh on merits in accordance with law uninfluenced by any observations made in impugned order, order of Tribunal and in this order. Needless to observe, parties will be entitled to raise all contentions in appeal before Tribunal. 27. We make it clear that we have not expressed any opinion on merits of case having formed opinion to remand case to Tribunal in light of what we have observed supra. . ..........J. [ABHAY MANOHAR SAPRE] ... .............J. [DINESH MAHESHWARI] New Delhi; April 22, 2019 9 9 10 10 Pr. Commissioner of Income-tax-3, Nagpur v. Ballarpur Industries Ltd