High Court Of Gujarat
CIT vs. Sarabhai Chemical (P) Ltd.
Section 5
Asst. Year 1981-82, 1982-83
R.K. Abichandani & K.A. Puj, JJ.
IT Ref. No. 57 of 1987
14th February, 2002
Counsel Appeared
B.B. Naik, for the Applicant
Note
The High Court’s decision in the assessee’s case for asst. yrs. 1979-80 and 1980-81 stands reported as Sarabhai Chemicals (P) Ltd. vs. CIT (2002) 173 CTR (Guj) 193.
JUDGMENT
K.A. PUJ, J. :
At the instance of the Revenue, the following question of law is referred by the Tribunal for our opinion for the asst. yrs. 1981-82 and 1982-83 :
“Whether, on the facts and in the circumstances of the case, the deletion of Rs. 4,726 and Rs. 3,544 being interest on deferred sale consideration was justified?”
While framing assessment order for the asst. yr. 1981-82, the ITO has brought to tax an amount of Rs. 4,726 being the interest on deferred sale consideration charged at the rate of 11 per cent per annum. The ITO has observed in his assessment order that there was a clear distinction between the facts as prevalent in the asst. yrs. 1979-80 and 1980-81 and in the present assessment year, i.e., 1981-82 insofar as even as per the modified agreement interest was payable w.e.f. 1st July, 1979. The ITO has also observed that interest was chargeable for the reasons mentioned in the assessment orders for the asst. yrs. 1979-80 and 1980-81 and further interest was also taxable even on the basis of contractual obligation. The ITO has also adopted the same reasoning for charging interest of Rs. 3,546 on unpaid purchase price even for the asst. yr. 1982-83. Being aggrieved by this order, the assessee had preferred two separateappeals for the asst. yrs. 1981-82 and 1982-83 before the CIT(A), Baroda, who confirmed the said addition in both the years while relying upon his order for earlier years, i.e., the asst. yrs. 1979-80 and 1980-81 in the assessee’s own case. Being aggrieved and dissatisfied with the said order, the assessee had preferred second appeal before the Tribunal in respect of both the years. While allowing the appeal of the assessee on this point, the Tribunal has held as under :
3. The first point in the appeal preferred by the assessee pertains to the addition of Rs. 4,726 being interest on deferred sale consideration. At the outset, the learned counsel for the assessee placed before us a copy of the order of the Tribunal in the assessee’s own case for the asst. yrs. 1979-80 and 1980-81 [IT Appeal Nos. 1137 and 1138 (Ahd.) of 1984, dt. 15th Feb., 1985] and pointed out that the decision of the Tribunal on a similar point which came up for its consideration for those years was in favour of the assessee. He, therefore, urged that Rs. 4,726 should be deleted from the total income of the assessee. In this connection, he also pointed out that the CIT (A) relied on his appellate orders for the immediately preceding two years. The learned representative for the Department, on the other hand, relied on the orders of the IT authorities.
4. We have considered the rival submissions of the parties as well as perused the aforesaid order of the Tribunal, to which one of us was a party. Following our said order, we would delete Rs. 4,726 from the total income of the assessee.” Similarly, while allowing the appeal of the assessee for the asst. yr. 1982-83, the Tribunal has observed as under : “8. The next point pertains to the deletion of the addition of interest of Rs. 3,544 on deferred sales consideration. This issue too had come up for our consideration for the asst. yr. 1981-82 in the appeal preferred by the assessee. Following our order in the assessee’s own case for the asst. yrs. 1979-80 and 1981-82 [IT Appeal Nos. 1137 and 1138 (Ahd.) of 1984, dt. 15th Feb., 1985], we had deleted the addition confirmed by the CIT(A) in respect of the asst. yr. 1981-82. Since in the instant case, following our order dt. 15th Feb., 1985, the CIT(A) has deleted Rs. 3,544, we have no hesitation in upholding the same.” It is rather strange and shocking to observe that while disposing of the appeals for the asst. yrs. 1981-82 and 1982-83, the Tribunal has merely relied on the order passed in the case of the assessee for the asst. yrs. 1979-80 and 1980-81. The interest income was deleted by the Tribunal for the asst. yr. 1980-81 only on the ground that as per the revised agreement dt. 30th June, 1978 the interest on unpaid purchase price was to accrue on and w.e.f. ‘1st July, 1979’ instead of ‘1st July, 1978’. Even as per this revised agreement, the interest is chargeable on accrued basis after 1st July, 1979 and the ITO has rightly observed in his assessment order for 1981-82. This material aspect of the above ratio was totally lost sight of by the Tribunal while allowing the appeals of the assessee for the asst. yrs. 1981-82 and 1982-83. The Tribunal has, therefore, grievously erred in deleting the interest charged by the ITO on accrual basis even as per the modified agreement for the asst. yrs. 1981-82 and 1982-83. We are, therefore, of the opinion that the Tribunal has committed an error in deleting the interest of Rs. 4,726 and Rs. 3,544 being interest on deferred sale consideration and that the Tribunal was not justified in deleting the same. We, therefore, answer this question in the negative, i.e., in favour of the Revenue and against the assessee. The reference is, accordingly, disposed of with no order as to costs.
[Citation : 258 ITR 747]
