Andhra Pradesh H.C : Where assessee, in terms of import agreement, furnished certain bank guarantee representing disputed amount of additional custom duty, since said liability had not crystalised during relevant year, amount in question being in nature of contingent liability, could not be allowed as deduction under section 37(1)

High Court Of Andhra Pradesh

CIT, Hyderabad–i vs. Usha Kiran Movies Ltd.

Assessment Year : 1995-96

Section : 4, 263

Kalyan Jyoti Sengupta, Cj. And Sanjay Kumar, J.

I.T.T.A. Nos. 31 Of 2007 & 60 Of 2010

February  6, 2014


Kalyan Jyoti Sengupta, CJ. – I. T. T. A. No. 60 of 2010 :

2. This appeal was admitted for hearing without formulating a substantial question of law as required to be done under section 260A of the Income-tax Act. After hearing the learned counsel for the parties, we are of the view, we would have formulated such questions had we decided the matter in favour of the appellant. However, on perusal of the impugned judgment we noticed that even this case is not fit for admission and the reasons for the aforesaid conclusion of ours are as follows :

The short facts of the case is that the assessee-respondent has filed a return for the assessment year 1995-96 showing nil income explaining that there has been no income after commencement of the business. The assessee started development of certain area for making it suitable for development of infrastructure for shooting locations. While doing so, there has been some rental income which was directly interlinked with the above activity. Explaining all these details, the return was filed and the Assessing Officer has accepted such return. Therefore, we quote the relevant portion of the order of the Assessing Officer :

“For the relevant previous year, the assessee was engaged in developing the film project under the name and style of ‘Ramoji Film City’ at Anajpur, near Hyderabad. The business had not yet started. The assessee filed ‘nil’ return of income on November 30, 1995. Notice under section 143(2) was issued. The case was represented by Shri G. Sambasiva Rao, chartered accountant. After examining the details, the income returned is ‘accepted’.”

3. The Revenue did not prefer any appeal against this order. However, the Commissioner of Income-tax, in exercise of jurisdiction under section 263 of the Income-tax Act had reversed the aforesaid order and directed that the aforesaid income would not have been capitalised and it should have been brought to tax under the head “Income from other sources”.

4. Being aggrieved by the aforesaid order of the revisional authority, an appeal has been preferred before the Tribunal.

5. The learned Tribunal on facts found that the income derived by the assessee herein was at the stage of development activities. In other words, the income derived was having close and direct link with the development activities. That fact finding of the learned Tribunal is as follows :

“On a conspectus of the matter, we are of the view that the income earned by the assessee was in the process of development of the project and, therefore, the factual matrix lend support to the claim of the assessee that the decision in the case of Bokaro Steel Ltd. (supra) is applicable to this case . . .

As could be seen from the reply given to the show-cause notice, the assessee categorically stated that the lease rentals were earned from the land which are developed for creating film shooting facilities/locations and it is directly connected with the main activity of the assessee, i.e., development of infrastructure for shooting locations. Learned Commissioner of Income-tax has not controverted the submissions of the assessee but merely stated in the order that the unutilised land was utilised by the other group companies. In other words, the findings of the Commissioner of Income-tax were not based on correct appreciation of facts.”

6. In view of the aforesaid fact finding, which has not been said to be perverse by the appellant, it is difficult to decide otherwise. Therefore, it has to be held that the income derived by the assessee is in the nature of capital one as it was connected with the main activity. Accordingly, we think that this cannot be said to be income, as rightly held on fact finding by the Assessing Officer initially and thereafter by the Tribunal. We noticed that the learned Tribunal has taken a correct view of the matter as the Commissioner of Income-tax has no jurisdiction to reopen this case because one of the two possible views was taken by the Assessing Officer and such change of view cannot be any ground to reopen the issue under section 263 of the Income-tax Act. Therefore, the Commissioner of Income-tax had passed the order in total illegal exercise of jurisdiction and the learned Tribunal has correctly upset the same.

7. Accordingly, we do not find any merit in this appeal and the same is accordingly dismissed. There will be no order as to costs.

I. T. T. A. No. 31 of 2007 :

8. Since the issue raised in this appeal is similar to the one raised in the above appeal (I. T. T. A. No. 60 of 2010) and the parties are the same, the present appeal is also dismissed in terms of the above said judgment. There will be no order as to costs.

[Citation : 363 ITR 165]

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