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Judgment
This appeal under s. 260A of the IT Act, 1961 (''the Act'') has been preferred by the Revenue aggrieved against order dt. 30th March, 2012 passed by the income tax Appellate Tribunal, Jodhpur Bench, Jodhpur (''the Tribunal''), whereby, the appeal preferred by the Department against order dt. 22nd Feb., 2010 passed by the CIT(A), Jodhpur was dismissed. The facts in brief are that the return of income for the asst. yr. 2007-08 was filed by the assessee on 31st Oct., 2007 declaring total income of Rs. 75,59,309 and the assessment was completed under s. 143(3) of the Act on 21st Dec., 2009 at a total income of Rs. 1,60,04,266 by making addition/disallowance of Rs. 84,44,957 on various issues.
The appeal preferred by the assessee before the CIT(A) was partly allowed and the plea raised by the assessee regarding reducing the carry forward long-term capital loss from Rs. 50,91,592 to Rs. 11,42,535, addition of Rs. 65,000 made on account of notional interest on advance given to J.K. Cement and disallowing expenses of Rs. 38,29,125 under s. 40(a)(ia) of the Act was accepted.
On appeal, the Tribunal vide its order dt. 30th March, 2012 upheld the findings of CIT(A) on all the three issues and dismissed the appeal filed by the Department.
It is submitted by learned counsel for the appellant that the findings recorded by the Tribunal are ex facie contrary to the facts and law and the same have not been examined objectively by the Tribunal.
The CIT(A) while elaborately dealing with the issues raised by the assessee, inter alia, recorded its finding on the issues raised as under:
(A) Redaction of carry forward long-term capital loss:
In my opinion, the action of the AO in reducing the determined and assessed, long-term capital loss to the extent of Rs. 11,54,535 cannot be held justified because there is no dispute that such loss has been determined and accepted by the Department in the relevant assessment year i.e. in asst. yrs. 2005-06 and 2006-07 and the appellant is entitled to carry forward and set off such loss against the capital gain if earned in the subsequent year. In the case of the appellant the year in which the appellant sought for set off of such loss is the assessment year under appeal. If the AO was of the opinion that the capital loss has been determined in excess wrongly, then he should have taken action to determine the correct loss in the relevant year where such loss has been claimed and determined and he should not have reduced such loss in the year under appeal where the appellant has claimed only set off of the assessed and determined loss in the previous assessment years. Therefore, in my view, the AO has acted upon beyond his authority by reducing the assessed and determined loss which was allowed to be carried forward and set off. Therefore the action of the AO is held to be against the provisions of law and the appellant is entitled to set off the long-term capital loss as determined in the assessment years on account of sale of land as referred in this order. Thus, this ground of appeal is decided in favour of the appellant.
(B) Addition on account of notional interest on advance given to J.K. Cement:
On going through the same, it is seen that at the date of advance i.e. on 15th Jan., 2007, there were funds available with the appellant at Rs. 34,93,866 and out of this, the appellant has advanced the sum to M/s. J.K. Cement. The said loan was received back on 30th June, 2007. Admittedly the AO has not brought any evidence to suggest that the appellant has advanced the amount out of the borrowed funds. In absence of such evidence, it is not possible to sustain the disallowance.
(C) Disallowance of expenses under s. 40(a)(ia):
In my opinion the submissions of the learned Authorised Representative are acceptable for the following reasons:
As regards payment of Rs. 26,94,427 toward ocean freight paid to Indian agents of non-resident shipping companies is covered by Circular No. 723 dt. 19th Sept., 1995 [ (1995) 128 CTR (St) 6] and therefore provisions of s. 194C cannot be made applicable. The finding of the AO that the payments made to Indian agent of non-resident shipping companies are not clearly identified is incorrect in view of cross-verification of every payment with bill of lading numbers submitted before me at the time of hearing the appeal which include the copy of such bill referred by the AO in his assessment order.
As regards payment of railway freight of Rs. 2,16,873 to Container Corporation of India, it may be mentioned that the payment of railway freight is excluded from the provisions of s. 194C and therefore, the disallowance made is apparently against the provisions of law.
In respect of payment of Rs. 2,02,479, it consists of individual payments below Rs. 20,000. Therefore provision of s. 194C is not applicable.
As regards the disallowance of Rs. 7,15,346, it is seen from the details filed that TDS has already been made and paid as per provisions of the Act.
In view of above discussions, the disallowance of Rs. 38,29,125 made under s. 40(a)(ia) cannot be sustained and the same is therefore deleted.
The findings as recorded above by the CIT(A) were upheld by the Tribunal by its impugned order. On the three issues raised, the Tribunal came to the conclusion that there was no jurisdiction of the AO to examine the allowability of the loss determined in earlier years, there is no direct nexus of the borrowed fund and the interest-free loan and the payments made were on account of reimbursement of the expenses, to which provisions of s. 194C of the Act were not applicable, whereas Board Circular No. 723 dt. 19th Sept., 1995 [ (1995) 128 CTR (St) 6] was squarely applicable respectively.
It was submitted by learned counsel for the appellant that the long-term capital loss, which was allowed to be carried forward by the AO while completing the assessment for the asst. yrs. 2005-06 and 2006-07 was on account of non-application of mind and, therefore, it was open for the AO to deal with the same while framing the assessment order for the asst. yr. 2007-08.
We are afraid such a submission on part of the Department cannot be countenanced, which is ex facie against settled position of law.
Having scrutinized the detailed and exhaustive findings recorded by the CIT(A) and the order passed by the Tribunal upholding the said findings, which findings are essentially findings of fact, we are of the firm opinion that the impugned order does not call for any interference on part of this Court and no substantial question of law arises for consideration by this Court. Consequently, there is no substance in the appeal and the same is, therefore, dismissed. No costs.