HIGH COURT OF KARNATAKA
Commissioner of Income-tax
Versus
Golf View Homes Ltd.
IT APPEAL NO. 77 OF 2006†
DECEMBER 4, 2012
JUDGMENT
1. I.T.A. No. 77/2006 is an appeal by the Revenue against the common order dated 26.08.2005 passed in common in four appeals before the Tribunal. Two appeals at the instance of the Revenue in I.T.A. Nos. 3125 and 1742/Bang/2004 relating to assessment years 1999-00 and 2000-01 and two other appeals that are been preferred by the assessee in I.T.A. Nos. 1743/04 and 939/03 relating to the assessment years 1999-00 and 2000-01 respectively, but insofar as it relates to the order concerning I.T.A. No. 3125/04 an appeal by the Revenue before the Tribunal purporting to arise out of the order passed by the Commissioner Income Tax (appeals) [for short CIT (appeals)] in I.T.A. No. 76/AC-11(2)/CIT(A)-1/03-04, appeal had been admitted by this Court on 16.8.07 to examine the following questions as indicated in this appeal:
“(i) Whether the Tribunal was correct in holding that the interest deduction claimed by the assessee is an allowable deduction without taking into account the fact that the assessee had not utilized the loan amount in the course of its business activity and the same had been utilized by its sister concern and consequently, recorded a perverse finding.
(ii) Whether the Tribunal was correct in failing to take into consideration the separate appeal filed by the revenue in respect of part of the interest component allowed by the Appellate Commissioner which was pending consideration before the Tribunal and as the controversy was interrelated.
(iii) Whether the Tribunal was correct in proceeding to hold that the maintenance charges claimed by the assessee should be allowed as a business expenditure without basing such finding on any evidence and consequently recorded a perverse finding.
(iv) The Tribunal committed an error in proceeding to hold that a sum of Rs. 5,00,000/- should be allowed as deduction paid as commission fee for obtaining loan which was actually utilized by its sister concern and not in the course of assessee’s business.
(v) Whether the Tribunal was correct in proceeding to hold that a sum of Rs. 7,12,000/- penal fee paid to Jammu and Kashmir Bank i.e., penalty is an allowable deduction despite the same being not permissible as there was infraction of law.”
2. The question is one relatable to the assessment order dated 28.03.2002 passed by the Assessing Officer in respect of the assessment year 1999-2000. The Assessing Officer had disallowed deduction by way of interest as part of the business expenditure of the assessee to an extent of Rs. 2,91,45,992/-. The claim was allowed only to an extent of Rs. 4,32,000/-. The Assessing Officer had also disallowed various items of expenditure as part of business expenditure as had been claimed by the assessee totaling a sum of Rs. 33,18,099/- as under:
