1998-VIL-127-ITAT-
Equivalent Citation: ITD 070, 387, TTJ 066, 203,
Income Tax Appellate Tribunal MADRAS
Date: 31.08.1998
TATIA SKYLINE AND HEALTH FARMS LTD.
Vs
ASSISTANT COMMISSIONER OF INCOME-TAX
BENCH
Member(s) : ABDUL RAZACK., P. S. KALSIAN.
JUDGMENT
Per Abdul Razack, Judicial Member - The assessee, a public limited company, filed the return declaring a loss of Rs. 59,63,119 worked out in the following manner :
Rs.
"Net profit as per P & L A/c. 1,29,26,869
Add: Items considered
separately - Depreciation 37,760
--------
1,29,64,629
Add: Inadmissible expenses Donation 1,29,601
----------
1,30,94,230
Less :Depreciation under section32 72,673
Deferred Revenue expdr. 1,89,84,676
----------
under section 37 1,90,57,349 -----------
Assessable Loss 59,63,119"
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As is evident from the details of the computation statement, the assessee claimed a sum of Rs. 1,89,84,676 as deferred revenue expenditure. The Assessing Officer has stated that when the details were called for by him, it was represented to him that they were all public issue expenses and formed part of the total deferred revenue expenditure of Rs. 2,20,11,231 shown in the balance-sheet under Miscellaneous Expenditure. The Assessing Officer informed the assessee-company that the said expenditure of Rs. 1,89,84,676 was not allowable as public issue expenses being of capital nature. The Assessing Officer informed about the decision of the Hon'ble Madras High Court in the case of Metro General Credits Ltd v. CIT [1996] 221 ITR 99. But the representative of the assessee-company stated during the course of assessment proceedings that the claimed expenditure could be regarded as an integral part of the profit earning process and not for acquisition of any assets or a right of permanent character. According to the said representative, the same was of a revenue nature and not of a capital nature and further distinguished the decision of the Hon'ble Madras High Court in the aforestated case. The Assessing Officer was of the opinion that the expenditure was of a capital nature and not of a revenue nature and, therefore, not an allowable deduction in computing the income of the assessee-company as the assessee-company raised more capital and incurred the expenditure in that regard and therefore the same being of an enduring advantage to the assessee-company was not allowable. Negativing the claim of the assessee and rejecting all arguments, the expenditure of Rs. 1,89,84,676 was disallowed. The income was computed in a sum of Rs. 1,19,36,250.
2. The assessee-company being aggrieved knocked at the door of the Appellate Commissioner of Income-tax under section 246 of the Act for relief. It was contended that the expenditure of Rs. 1,89,84,676 claimed was not entirely relatable to the raising of capital and not public issue expenses, though it was termed as deferred revenue expenditure. According to the assessee-company it had plans to open a health club holiday project outside Tamilnadu, near Bangalore Highway road and in order to invite Membership for that club, huge expenditure was incurred on printing and stationery, travelling expenses, sending brochures to various persons for making Membership of the company's holiday scheme, advertisement, conference expenses, project appraisal reports and so on and so forth. In order to establish the genuineness of the claim as revenue expenditure, the representative of the assessee-company gave some details before the Commissioner in the first appeal and discussed by the Commissioner in the impugned order. We, therefore, do not wish to incorporate all those in this order. The Commissioner after collecting the facts and analysing various expenditure with relation to certain evidences produced before him came to the conclusion that it was an after-thought on the part of the assessee-company that the sum of Rs. 1,89,84,676 was public issue expenses for raising further capital. While agreeing with the Assessing Officer in treating the said expenditure of capital nature, the Commissioner also relied upon the decision of the Hon'ble Supreme Court in the case of Brooke Bond India Ltd. v. CIT [1997] 225 ITR 798 / 91 Taxman 26. The appeal, therefore, was dismissed by the Commissioner.
3. Being unhappy with the decision of the Appellate Commissioner, second appeal before this Tribunal came to be filed in February 1998 and was taken up for hearing on out-of-turn basis, pursuant to say granted in this appeal as well as in the connected appeals.
4. At the time of hearing, the assessee's counsel Shri V. Ramachandran filed copies of Annual Reports for the years 1993-94 to 1996-97 alongwith the brochures regarding the Tatia Health Farm in relation to which the expenditure of Rs. 1,89,84,676 was incurred and claimed by the assessee. A paper book has also been filed containing various statements in support of the assessee's contention that the expenditure claimed was of a revenue nature and not of a capital nature. During the course of one of the hearing of this appeal the assessee's representative Shri V. Ramachandran was assisted by Shri R. P. Madhu, Chartered Accountant, who appeared before the Assessing Officer as well as before the Commissioner in the first appeal. Certain vouchers which were produced in first appeal before the Commissioner to which reference has been made in the impugned order were also shown to us to convince us that the expenditure was of a revenue nature not of a capital nature and therefore both the lower tax authorities erred in this regard. The learned departmental representative submitted that at this belated stage the assessee cannot produce evidences before this Tribunal and this Tribunal should not give any relief on that basis. He strongly pleaded for upholding the impugned order of the Commissioner agreeing with the Assessing Officer in treating the expenditure of Rs. 1,89,84,676 as capital expenditure and not of a revenue expenditure. The departmental representative strongly relied upon the reasoning given by the Commissioner in the impugned order. The departmental representative also relied upon the decision of the Supreme Court in the case of Brooke Bond India Ltd. (supra) and prayed for dismissal of the assessee's appeal. Shri Ramachandran pleaded for restoration of the matter to the file of the Assessing Officer for another round of enquiry and then for framing of a fresh assessment in accordance with law. This was also put to the Senior Departmental Representative, Shri Suresh, who vehemently opposed the remand to the Assessing Officer because according to him the assessee will get ample time to muster and tinker with the evidence to the prejudice and disadvantage of revenue's interest.
5. We have heard both sides at great length and also perused the copies of various documents placed by the assessee's counsel in its paper book filed during the course of hearing. After carefully studying the same we are of the considered opinion that the impugned order of the Commissioner deserves to be upheld. The facts and evidence on record clearly establish that the assessee had spent a sum of Rs. 1,89,84,676 (hereinafter impugned addition) for the purpose of public issue of shares except for some small expenditure which was for the purpose of inviting Membership of the proposed health-farm.
6. The appellant is a public limited company and its accounts are first prepared and finalised by the Finance and Accounts Department of the company, according to which the entire impugned expenditure was towards public issue. The same was also approved by the Board of Directors of the appellant-company as per its report dated 27-6-1994. The Chartered Accountants of the appellant-company to whom the accounts were finally placed for audit in accordance with the provisions of Companies Act and certification after the approval by the Board of Directors also agreed with the Board of Directors and certified that the accounts give a true fair view of the state of affairs of the company. After the audit of the accounts by the Chartered Accountants, they were placed before the shareholders (owners of the appellant-company) at the General Body Meeting and the same were also approved by it. All these events clearly prove that the impugned expenditure was for public issue of shares and not partly for public issue and partly for Membership drive of the health farm as contended before the Appellate Commissioner and also before us. To the whole world, the appellant-company represented and held out that the impugned expenditure was towards public issue but when it came to the Income-tax Department, it changed the stand and declared in the Statutory verified return that the impugned expenditure was not capital for public issue of shares but was revenue expenditure incurred for encouraging and inviting Membership drive of the proposed health farm. The appellant-company for obvious reasons reduced its tax liability under Income-tax Act and gained undue advantage laid a false and untrue claim that the impugned expenditure was of not a capital expenditure but of a revenue nature and an allowable item in computing the taxable profit of the appellant-company. We think the appellant-company took a chance with the revenue authorities and made such an untrue and untenable claim knowingly fully well that the impugned expenditure was not revenue expenditure but only capital expenditure incurred for the purpose of public issue of shares. In our view, the assessee has, therefore, miserably failed to establish the tenability and truthfulness of its claim that the impugned expenditure was revenue in nature and hence allowable. We agree with the Appellate Commissioner that the assessee's case squarely gets covered in favour of the revenue on the strength of the decision of the Hon'ble Supreme Court in the case of Brooke Bond India Ltd. {supra). The decision of the Hon'ble Supreme Court in the said case is very clear and unambiguous wherein it has been laid down that the expenditure incurred by any company for public issue of shares is a capital expenditure and not a revenue expenditure. After this decision of the Apex Court of this country which is law of the land, the assessee has no case to contend either before the revenue authorities or even before us in the second appeal that the impugned expenditure is of a revenue nature and was required to be allowed in computing the taxable income by the Assessing Officer and that the Commissioner erred in agreeing with the Assessing Officer in this regard. We think the Commissioner did not commit any error or fallacy in this regard. The action of the Assessing Officer is, therefore, perfectly valid and requires to be upheld by us.
7. We now deal with the plea of the assessee's counsel, Shri Ramachandran for remand of the case to the Assessing Officer for fresh enquiry and assessment as per law. After carefully reading the contents of the assessment order as well as the reasoning of the Appellate Commissioner given in the impugned order upholding the assessment order and after elaborately analysing the facts of the case with reference to the evidence on record and the law laid down by the Hon'ble Supreme Court in this regard in the case of Brooke Bond India Ltd. (supra) we have no hesitation to come to the conclusion that the Appellate Commissioner did not go wrong at all. We do not think that the assessee has made out any strong case which can persuade us to remand the matter to the file of the Assessing Officer for further enquiry and a fresh assessment.
8. It is settled law through series of decisions of Courts that remand should only be made in very rare and in exceptional cases and circumstances to the base Officer (Assessing Officer in this case) if at the original stage there was patently grave error committed by the original authority or that the action of the first authority was made in a haste owing to the limitation period or remand can also be justified if the first appellate authority has violated and not followed the salutary rules of natural justice. When we examine the facts of this case, we do not find either of the circumstances existing warranting a remand to the Assessing Officer as was strenuously pleaded by Shri Ramachandran who appeared for the appellant-company.
9. The Courts have also cautioned the appellate authorities for the purpose of remand by holding that remand should only be made in those cases where the original authorities have not passed orders in accordance with law but in no case remand should be made to enable an assessee to fill in the blanks or lacuna in the case which remains present.
10. It is no doubt true that this Tribunal like any other appellate authority does possess the power of remand. But to accept the plea of the assessee's counsel in this case for a remand when the case has been thoroughly examined and investigated by the Assessing Officer will be nothing but travesty of justice.
11. The Division Bench of the Patna High Court in the case of Maharani Kanak Kumari Sahiba v. CIT [1955] 28 ITR 462 has observed that though section 33(4) granted a very wide statutory discretion to the Income-tax Appellate Tribunal in disposing of an appeal, the discretion given under this section to the Income-tax Appellate Tribunal was a judicial discretion which should be exercised in accordance with legal principles, and not in an arbitrary or capricious manner and it must be exercised within the limit to which an honest man competent to discharge his office ought to confine himself. The Division Bench further observed that where all the evidence had been produced and the Assistant Commissioner had, after a full investigation of the evidence and examination of the accounts, come to a definite finding in favour of the assessee, but the Appellate Tribunal remanded the case to the Income-tax Officer directing him to come to a finding on the same point after bringing on record further evidence, making an investigation and examining the accounts, it was held that, on the facts and circumstances of the case the order of remand was not legally valued, and that the appeal preferred to the Tribunal should be treated as still pending before the Tribunal and should be disposed of by Tribunal in accordance with law. This observation was relied with the approval by the Calcutta High Court in the case of the United Commercial Bank v. CIT [1982] 137 ITR 434 / 9 Taxman 260, wherein it has been held
that the Tribunal has power to remand a case for further investigation of facts but such power has to be exercised with proper discretion and it should not be exercised if all the basic facts necessary for the disposal of the matter are already on record and further if these facts appear in the order of the lower tax authorities.
12. In CIT v. Smt. Dhirajben R. Amin [1983] 141 ITR 875 / 12 Taxman 75 (Guj.), the question which arose for consideration was whether donations in kind fall outside the purview of section 80G of the Act. The Court took the view that in deciding whether the donation is in cash or in kind, the substance of the transaction has to be examined and if the Court is satisfied that it is essentially a donation in cash and not in kind, it will grant rebate admissible under section 80G of the Act. In that case, the High Court came to the conclusion that the donation was in kind and not in cash and hence the assessee did not qualify for rebate under section 80G of the Act. Thereupon the assessee's counsel made a request that the assessee should be given an opportunity to prove that in substance the donation was in cash and not in kind. Dealing with this request, the Court observed as under at p. 886 : "We are afraid we cannot permit the assessee to make out a totally new case at this belated stage which would run counter to the stand taken before the authorities below. The statement of case clearly shows that the assessee donated shares and not cash. We, therefore, cannot accede to the assessee's request to permit her to second round of litigation by remanding the case with a view to giving her an opportunity to make out a case, hitherto not pleaded, that the donation, though ex facie of shares, was in substance in cash.
13. The observations of the Gujarat High Court in the case of CIT v. Harikishan Jethalal Patel [1987] 168 ITR 472 / 33 Taxman 217 on the remand are also very important and we deem it fit to reproduce the same which are at page 480 :
"In the present case also, as pointed out earlier, the Income-tax Officer never doubted the genuineness of the firm and/or the transaction. On the record there is no material whatsoever to doubt either. What the revenue desires is a remand so that it may, on introduction of rest facts, if any, examine the genuineness of the firm and/or the transaction. Even at present, it is not the case of the Revenue that it has come into possession of fresh facts which cast a doubt on the genuineness of the firm and/or the transaction. The Revenue wants to take a shot in the dark hoping that it may on remand be able to dig out fresh facts which may cast a doubt on the genuineness of the firm and/or the transaction. It is merely a possibility and that too not supported by an iota of material. The revenue desires to enter upon a more fishing enquiry hoping that in the course of the inquiry some material may fall into its hands which may throw a doubt on the genuineness of the firm and/or the transaction. We are afraid that such a fishing inquiry which would cause considerable harassment, hardship and expenditure to the assessee cannot be permitted on the mere possibility or hope that some facts may emerge which may cast a doubt on the genuineness of the firm and / or the transaction. We are, therefore, of the view that such a fishing inquiry ought not be allowed."
14. The circumstances under which a remand order could be passed are governed by well laid down principles. In this regard we may also refer to a decision in the case of Bishnu Patel v. Bajra Patel AIR 1964 Ori. 250. It has been held therein as follows :
"A remand should not generally speaking be ordered when the defect in the proceeding has been made due to the negligence or default of the party who will benefit by the remand."
15. It has been held by the Karnataka High Court in the case of Karnataka Wakf Board v. State of Karnataka AIR 1996 Kar. 55 at pages 63 & 64 that -
"Where the party had an opportunity of adducing evidence in the case but with open eyes failed to adduce that evidence, the case should not be remanded to give a second chance to the party to adduce that evidence. The policy of the law is that once that matter has been fairly tried between the parties, it should not, except in special circumstances, be reopened and retired. In a recent decision their Lordships of the Supreme Court laid down that power to order retrial after remand, where there had already been a trial on evidence before the court of first instance, cannot be exercised merely because the Appellate Court is of the view that the parties who could lead better evidence in the Court of first instance have failed to do so."
16. From the series of principles laid down by various High Courts in the abovementioned cases discussed by us, it is crystal clear that no strong case has been made out by the assessee's counsel Shri. Ramachandran which could persuade us to remand the case to the file of the Assessing Officer for further enquiry or investigation in relation to the impugned expenditure and then to make a fresh assessment. The prayer being untenable in law and facts, is therefore, hereby rejected. We are further of the opinion that if remand at this belated stage is made accepting the plea of the assessee, then the assessee will have ample time for its disposal as contended by the learned Senior Departmental Representative, Shri Suresh, to muster or tinker with the evidence in the meantime to backup and fortify its case. Remand, in these circumstance will be prejudicial and detrimental to the interest of the revenue. For this reason also we decline the plea of the assessee's counsel for remand of the case to the Assessing Officer for further enquiry and fresh assessement. Accepting such a plea will be nothing short of doing injustice to the cause of revenue.
17. The appeal thus being devoid of merits is hereby dismissed.
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