Case Law Details

Case Name : M/s Ganapathy & Co. Vs CIT (Supreme Court of India)
Appeal Number : Civil Appeal No. 1964 of 2008
Date of Judgement/Order : 18/01/2016
Related Assessment Year : 1984 -1985
Courts : Supreme Court of India (343)

Brief of the Case

Supreme Court held In the case of M/s Ganapathy & Co. vs. CIT that in the current case, each relevant fact considered by the High Court to answer the questions referred to it on the claim(s) of deduction raised by the assessee are acknowledged, admitted and undisputed facts. No fresh determination of facts found by the Tribunal has been made by the High Court.

What, however, the High Court did was to take into account certain additional facts, already on record, which were however not taken note of by the Tribunal to arrive at its findings, e.g., that the appellant – assessee had failed to furnish any proof of service rendered by UTC in the course of the relevant Assessment Year i.e. 1984-1985. There was no departure from the basic facts found by the learned Tribunal. This is surely an exercise that was within the jurisdiction of the High Court in the exercise of its reference power under the provisions of the Act.

Facts of the Case

Disallowance of Service charges

The assessee claimed the benefit of disallowance of the service charges paid to one M/s Universal Trading Company (UTC). The Assessing Officer disallowed the said claim on the ground that in the proceedings arising out of the Assessment Order for the previous year i.e. 1983-1984 the said claim had been negatived by the C.I.T. in appeal. The Assessing Officer, in addition, also took note of the fact that the membership in the asseessee-firm and UTC is common and one K.L. Srihari had a sizeable holding in each of the two firms. The Assessing Officer also had regard to the fact, while disallowing the said claim that the assessee had failed to provide proof of service rendered by UTC in the period covered by the Assessment Year in question. He also took note of the advice of a Chartered Accountant contained in a Note which was found in the course of a search proceeding. The said Note contained an advice to the assessee to include service charges to UTC as one of the methods to reduce the incidence of Income Tax.

Disallowance of donation to Aparna Ashram

Disallowance of donation made to Aparna Ashram by the assessee was refused by the Primary and First Appellate Authority on the ground that the necessary certificate showing that the donee (Aparna Ashram) had complied with the conditions subject to which registration was granted to it under Section 35(2A) was not produced by the assessee so as to entitle it to the claim of deduction of the donation made.

Held by ITAT

Disallowance of Service charges

ITAT allowed the appeal of the assessee. It was held that the order of the CIT (A) in the earlier assessment proceeding, relied upon by the Assessing Officer, was reversed in appeal by the ITAT and also that in the course of said earlier assessment proceeding the legal effect of the advice tendered by the Chartered Accountant to reduce the incidence of Income Tax was found to be permissible in law.

Disallowance of donation to Aparna Ashram

ITAT allowed the appeal of the assessee and held that conditions were not material.

Held by High Court

Disallowance of Service charges

High Court allowed the appeal of the revenue.

Disallowance of donation to Aparna Ashram

High Court allowed the appeal of the revenue. It was held that said conditions were necessary preconditions to the grant of statutory registration and had to be satisfied.

Held by Supreme Court

Disallowance of Service charges

Supreme Court held that ITAT did not address itself to a very fundamental issue that had arisen before it, namely, effect of the failure of the assessee to produce evidence in support of the services claimed to have been rendered by UTC during the Assessment Year in question i.e. 1984-1985. The answer given by the assessee in response to a specific query made by the Assessing Officer in this regard was that explanations in this regard had already been submitted for the previous Assessment Year i.e. 1983-1984. If service had been rendered to the assessee by UTC during the Assessment Year in question and service charges had been paid for such service rendered, naturally, it was incumbent on the part of the assessee to adduce proof of such service having been rendered during the period under assessment.

Further, there is no dispute on the issue that the assessee did not, in fact, offer any proof of the service rendered during the Assessment Year in question. In such circumstances, the High Court was perfectly justified in reversing the eventual conclusion of the learned ITAT on the basis that the findings and conclusions recorded in the course of the assessment proceedings of the previous year cannot foreclose the findings that are required to be arrived at for the Assessment Year in question i.e. 1984- 1985.

Disallowance of donation to Aparna Ashram

Supreme Court held that there is no dispute on the fact that no such certificate had been furnished by the assessee and also that all Authorities have consistently held that if and when such certificate is produced the consequential benefit can be afforded to the assessee. In the aforesaid circumstances, we do not see how the view taken by the High Court that the assessee was not entitled to the benefit of donation made to Aparna Ashram can be faulted.

Powers of High court to consider additional facts

It is clear from several judgments that issues of fact determined by the Tribunal are final and the High Court in exercise of its reference jurisdiction should not act as an appellate Court to review such findings of fact arrived at by the Tribunal by a process of re-appreciation and reappraisal of the evidence on record unless a specific question with regard to an issue of fact being opposed to the weight of the materials on record is raised in the reference before the High Court.. Reference may be made to Karnani Properties Ltd. Vs. Commissioner of Income-Tax, West Bengal [82 ITR 547], Rameshwar Prasad Bagla vs. Commissioner of Income-Tax, U.P. [87 ITR 421], Commissioner of Income-Tax, Bombay City vs. Greaves Cotton and Co. Ltd. [68 ITR 200] and K. Ravindranathan Nair vs. Commissioner of Income-Tax [247 ITR 178].

Supreme Court held that in the current case, each relevant fact considered by the High Court to answer the questions referred to it on the claim(s) of deduction raised by the assessee are acknowledged, admitted and undisputed facts. No fresh determination of facts found by the Tribunal has been made by the High Court. What, however, the High Court did was to take into account certain additional facts, already on record, which were however not taken note of by the Tribunal to arrive at its findings, e.g., that the appellant – assessee had failed to furnish any proof of service rendered by UTC in the course of the relevant Assessment Year i.e. 1984-1985. There was no departure from the basic facts found by the learned Tribunal. The difference in the approach between the learned Tribunal and the High Court, therefore, is not one relating to determination of new or additional facts but was merely one of emphasis on facts on which there is no dispute. This is surely an exercise that was within the jurisdiction of the High Court in the exercise of its reference power under the provisions of the Act as it then existed.

Accordingly appeals of the assessee dismissed.

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Posted Under

Category : Income Tax (20858)
Type : Judiciary (8910)