High Court Of Delhi
CIT vs. Jolly & Co.
D.K. Jain & Ms. Sharda Aggarwal, JJ.
IT Appeal No. 150 of 2002
16th September, 2002
Counsel Appeared
R.C. Pandey with Ajay Jha, for the Revenue : None, for the Assessee
JUDGMENT
D.K. JAIN, J. :
This appeal by the Revenue under s. 260A of the IT Act, 1961 (for short the Act), is directed against the order, dt. 12th Oct., 2001, passed by the Income-tax Appellate Tribunal, Delhi Bench ‘B’, New Delhi (for short the Tribunal) in ITA No. 5425/Del/1995.
2. Briefly stated, the material facts are : During the course of assessment proceedings pertaining to the asst. yr. 1984-85, the AO noticed that the assessee had claimed as expenditure the amount of interest of Rs. 10,25,953 paid to one M/s Jolly Bawa & Associates on the loans raised from them. He was of the view that since under an agreement dt. 1st Oct., 1981, between the assessee and M/s Jolly Bawa & Associates, the latter was to arrange the necessary funds for construction of cinema and for other business activities, the assessee was not required to pay any interest, and therefore, the said payment towards interest could not be allowed as business expenditure. Rejecting the stand of the assessee that the said agreement had been varied subsequently, the AO disallowed the said expenditure. It appears that against the disallowance the matter was taken up in further appeals and vide order dt. 17th March, 1992, the Tribunal (in ITAs No. 594/Del/1989 and 1438/Del/1989) set aside the said disallowance and remanded the case back to the AO to reconsider the issue in the light of certain directions contained in the said order. On reconsideration, the AO took the same view, which had been taken earlier.
Aggrieved, the assessee preferred appeal to the CIT(A), who vide his order dt. 29th March, 1995, deleted the said disallowance. The CIT(A) was of the view that agreement dt. 1st Aug., 1981, was not a sacrosanct document beyond amendment by the parties to the agreement; the parties were free to change any terms of the agreement by mutual consent and the observation of the AO that no amendment to the agreement could be carried out without taking the matter to arbitration was without any foundation. Taking into consideration the correspondence exchanged between the parties, he came to the conclusion that there was nothing illegal or irregular in the payment of interest by the assessee to M/s Jolly Bawa & Associates.
The Revenue took the matter in further appeal to the Tribunal. The Tribunal after noticing the movement of the loan amounts inter se between the assessee, M/s Jolly Bawa & Associates and one M/s Laxmi Chand Bhagyaji, has upheld the view taken by the CIT(A). The Tribunal has noted that there is no dispute between the parties that certain changes were made in the aforenoted agreement by mutual consent. Hence the present appeal .
It is submitted by Mr. Pandey, learned senior standing counsel for the Revenue, that once the parties arrive at a particular arrangement which is reduced to writing, the parties are bound by the terms agreed to. It is urged that since the Tribunal has ignored a vital term of the agreement to the effect that the agreement shall not be varied till 31st July, 1984, its order is perverse, giving rise to a substantial question of law.
We do not agree. We find that both the CIT(A) and the Tribunal have noticed that by mutual consent, the parties had carried out certain changes in the original agreement and the interest was paid by the assessee in terms of the changed terms. The AO had not doubted the genuineness of the subsequent arrangement but had rejected assessee’s claim only on the short ground that in view of the aforenoted restriction against change in terms, the original agreement could not be ignored. The Tribunal has come to the conclusion that there was no element of collusiveness in the parties agreeing to vary the terms of the initial agreement. We are of the view that this conclusion is essentially factual. The issue raised by the Revenue cannot be said to involve any question of law, much less a substantial question of law. It cannot be said that finding of the Tribunal is without any evidence or material or is perverse. It cannot also be held that no person acting judicially and properly instructed as to the relevant law could have come to the same conclusion as the Tribunal has come to. The Act does not contain provision governing rights between the parties.
The appeal is, accordingly, dismissed.
[Citation : 259 ITR 657]
