Case Law Details
HIGH COURT OF CALCUTTA
Peerless General Finance & Investment Co. Ltd.
versus
Commissioner of Income-tax, W.B.-I, Kolkata
IT Appeal No. 302 of 2003
May 17, 2012
ORDER
K.J. Sengupta, J
This appeal is at the instance of the assessee Peerless General Finance & Investment Co. Limited against the judgment and order of ‘E’ Bench of the learned Tribunal dated 30th of June, 2003 in relation to assessment year 1993-94. This appeal was admitted by an order of this Court dated 15th January, 2004 on the following substantial questions of law:-
“I. Whether on the facts and in the circumstances of the case the Tribunal erred in holding that allowability or disallowability of the sum of Rs.180.97 lakh under the heading “Return to Certificate-holders” as outgoing from profit depends on the revenue or capital nature of the receipt of subscriptions from the certificate-holders, regardless of its decision to the contrary?
II. Whether the Tribunal erred in remitting the matter to the Assessing Officer in departure from its earlier decision that return to certificate-holders represents the assessee’s liability by way of interest and bonus due to the subscribers on their deposits, and partakes of the nature of revenue outgoing, while the subscriptions represent capital liability?
III. Whether on the facts and in the circumstances of the case the Tribunal erred in deviating from its decision in appeal for Asst. Year 1991-92 with regard to the interest-free loans in the set of facts and circumstances, admitted by the Assessing Officer to be same as those in instant year and perversely remitted the issue involving addition of similar interest of Rs.13,26,11,700/-?
IV. Whether on the facts and in the circumstances of the case the failure of the Tribunal to appreciate that the restrictions contained in Residuary Non-banking Company (Reserve Bank of India) Direction, 1987 precludes presumption of diversion of depositors’ money is perverse and ex facie erroneous and the addition is arbitrary?
V. Whether the Tribunal on the facts and in the circumstances of the case erred in disallowing the entirety of the expenditure of foreign tour Rs.16,77,208/- overruling the allowance by the CIT (Appeals) of Rs.8,38,604/- being 50% thereof and in disregard of its own order for such allowance under similar circumstances in the past?
VI. Whether the Tribunal erred in declining depreciation in entirety in respect of the long-term lease-hold properties including the lease for perpetuity and restricting the depreciation only with regard to capital expenditure for any structure by way of addition and/or alteration?”
2. At the time of hearing learned Senior Counsel Mr. S. Bagchi appearing for the assessee submits upon instruction that his client is not interested to proceed with the appeal except on the point formulated in clause (v) and clause (vi). In view of this submission we do not need to decide other points as formulated under grounds No.(i) to (iv). Hence we take up hearing on those two grounds only.
3. Mr. Bagchi submits that the nature of the assessee’s business is a non-banking financing that includes acceptance of deposit from public to pool for making investments within the limitation of prudential norms issued by the RBI, and it obviously precludes the possibility of any purpose of capital nature. The continuity of collection in foreign exchange and the long history of regular campaign over years per se is a circumstance of substantially evidentiary value.
4. He submits that both the assessing officer and the learned Tribunal had gone wrong not accepting this fact of collecting business from foreign countries and as such travel tour by the officials of the assessee to the foreign countries is an essential part of the business. Therefore, he contends that non-availability of formal evidence as recorded by the learned Tribunal, does not amount to a case of absence of evidence because the nature of campaign involving man to man and group contacts amongst the non-resident Indians produces no document. Thus the standard of proof set by the learned Tribunal is not a pragmatic one. It is submitted placing reliance on a judgment in case of CIT v. Coimbatore Salem Transport Co. (P.) Ltd. [1966] 61 ITR 480 (Mad.) that in a situation like this onus of proof is required to be discharged by the Revenue. According to him enough evidence was produced giving list of names of the places and names of the personnel visited therefore no other proof was required. According to him result of the foreign trip for the business purpose is not determinative factor as have been wrongly held by the learned Tribunal. The learned Tribunal went wrong not accepting the earlier decision of the Tribunal on the same fact. A precedent ceases to be a precedent when subsequent Bench sitting in judgment over the same issue decides to the contrary.
5. On the question of allowability of depreciation of leasehold buildings used for business his contention is as follows:-
The learned Tribunal failed to notice the definition of owner under Section 27 of the Act for the purpose of charging of the tax on ‘income from house property’ as amended by Finance Act, 1987 where the leasehold interest exists 12 years or more. It will appear from Section 269 UA(f) to the definition of owner in Section 27 of the Act that same definition has to be accepted. The explanation under Section 32(1) applies only in relation to any lease for less than 12 years. According to him that the concept of ownership is common for Section 22, the charging section of income from house property and under Section 32(1) of the Act for depreciation of allowance and this concept has been well settled in the following decisions of the Courts:
1. Addl. CIT v. State of U.P. Agro Industrial Corpn. Ltd. [1981] 127 ITR 97/5 Taxman 211 (All.),
2. CIT v. General Marketing & Mfg. Co. Ltd. [1996] 222 ITR 574/86 Taxman 488 (Cal.).
3. CIT v. Sahney Steel & Press Works (P.) Ltd. [1987] 168 ITR 811/32 Taxman 96 (AP).
6. He further contends that the Hon’ble Supreme Court has approved decision in case of CIT v. Poddar Cements (P.) Ltd. [1997] 226 ITR 625/92 Taxman 541 (SC) the ratio decided in case of U.P. State Agro Industries Ltd. (supra) and General Marketing & Mfg. Co. Ltd. (supra).
7. He further contends that significantly the learned Tribunal has not mentioned the tenure of the leases in the case for the CIT (Appeals) in the appeal for assessment year 1994-95 which is also under similar dispute in appeal before this Hon’ble Court in ITA No.303 of 2003 mentioned that one lease in perpetuity one for 36 years and the rest for 99 years. Therefore leasehold right in the present case perfectly satisfies the definition of owner in Section 27 of the Act.
8. The learned Counsel for the Revenue-respondent contended that the assessee-appellant failed to prove by supporting documents and evidence that there has been travel tour in connection with the business. The Assessing Officer was perfectly justified in disallowing such claim. Even the decision of the CIT (Appeals) allowing 50% of the claim was not legally sustainable as the same was based on surmises and assumptions. Hence the learned Tribunal has correctly reversed the judgment and order of the CIT (Appeals) as nothing was produced though repeated opportunity was given to produce the same. The appellant has not furnished full details and information with regard to following foreign trips by the personnel of the Assessing Officer. Hence, an adverse inference has been drawn against the assessee in terms of Section 114 of the Evidence Act, 1972 which is legally appropriate. The material produced before the authority was not adequate to accept this claim of allowance of deduction. It is the initial burden of the assessee to discharge, which was not done.
9. On the question of disallowance of depreciation in relation to the leasehold interest of the properties including the lease for perpetuity he contends that the order of the learned Tribunal is with regard to the issue does not speak about any long term leasehold property including the lease for perpetuity in absence of any agreement or memorandum of the company it cannot be ascertained whether it is an agreement for lease for year to year or long term lease. Explanation I to Section 32(1)(ii) speaks about where any business or professions is carried on by the assessee in a building not owned by him but in respect of which the assessee holds the lease.
10. Admittedly, the assessee is not the owner and the lessee and as such aforesaid provision squarely and rightly applies in the instant case. The assessee is entitled to depreciation only on that portion of capital expenditure on construction of any structure brought about by the assessee and uses for the parties on business as it is clearly written under Explanation I to Section 32(1). Since no agreement has been produced to substantiate that the assessee holds lease for more than 12 years therefore, the claim made by the assessee is not sustainable hence appeal should be dismissed.
11. We have heard the learned Tribunal for the parties and we have gone through the impugned judgment and order of the Assessing Officer and those of CIT (Appeals) and the learned Tribunals on the question of deduction of the expenditure of foreign tour amounting to Rs.16,77,208/- We think that in order to claim deduction the assessee has to prove by adducing cogent evidence that it was incurred on account of business activities of the company. It appears as rightly pointed out by learned counsel for the respondent that despite opportunity being given they could not produce any materials that such foreign tour was undertaken in relation to the business of the company. Mere furnishing information and making of statement are not good enough to establish the case of foreign travel we, therefore, record the findings of the relevant portion of the Assessing Officer on fact as follows:-
“The assessee was required to give the details of foreign visits and justification related to assessee’s business. The assessee has replied that these are incurred for possible future expansion of business but no other details were given regarding what in the further expansion plan and which visit is for what particular project or purpose and in these visits which foreign concerns were contacted and what business dealing was made. In the absence of these details the assessee has not proved that these are related business activities.”
12. This findings was partly upset by the Commissioner of Income Tax (Appeals) which we think to quote the relevant portion:
“With the help of details of expenditure incurred it has been shown that foreign tours were undertaken to places like Australia, Singapore, Canada, France, Germany, U.S.A., U.K., etc. at different times for business purposes of the Company. The main purposes of these visits were stated to be to meet non-resident Indian residing in those places and to attract business from such non-residents. The result of these visits is stated to have been successful to some extent noticeable in the subsequent years, although there is no such direct indication in the year under consideration. It was claimed that the tours having been undertaken entirely for business purpose the A.O. was not justified in denying a part of the claim.
In a company engaged in the business of this volume it is not unusual for its top executives to visit foreign countries for attracting business and for attracting non-resident Indian clients. However, as the exact nature of business transacted has not been specified and as also the improvement in business through these visits is not immediately noticeable I do not consider the entire claim to be justified or admissible. I do not think that all the tours were conducted fully for business purposes and that there was no personal element involved. Under such circumstances, it will be reasonable to restrict the claim to 50% which works out to Rs.8,38,604/- and the appellant will get a relief of Rs.8,38,604/- under this head.”
13. It will appear that the Commissioner of Income Tax (Appeals) has accepted mere statement made to be correct without caring for evidence and it would appear therefrom it is absolutely based on surmise and conjecture. We therefore find force in the submission of the learned Counsel for the respondent. Therefore the decision of the learned Tribunal is absolutely justified. We are of the view that the appellant-assessee has not been able to discharge initial burden to prove that the expenses on account of foreign visits was relatable to business expenditure. We are unable to accept the contention of Mr. Bagchi that materials produced before the learned Tribunal is quite adequate to hold that the foreign tour was relatable to business activity of the assessee company. We also fail to understand on what basis the Commissioner of Income Tax (Appeals) has allowed 50% we think it was completely guess work and it appears as if just because the Commissioner of Income Tax (Appeals) thinks that the aforesaid expenditure of disallowance should be granted and it was granted.
14. On the question of allowance of depreciation we find that there was no document to show whether it was a leasehold interest or otherwise as this can only be done by producing the document under the provision of Section 17 read with Section 49 of the Registration Act. Unless it is proved by document the allowances is not permissible. The definition given as an owner is only relatable to charging of tax and not in relation to granting disallowance on account of the determination of the leasehold interest. In view of the aforesaid discussion we are of the view that the decision of all the authorities are perfectly justified and no interference is warranted. The decisions cited by Mr. Bagchi on this issue are
absolutely factually inappropriate and have no relevancy. Thus the appeal is dismissed.
There will be no order as to costs.
