By TIOL News Service

NEW DELHI, JAN 18, 2016: A) THE assessee is a service center for electronic items. The assessee had claimed the allowance of the service charges paid to one UTC. The AO disallowed the same on the ground the CIT(A) had deleted the same claimed in previous year and also that the assessee had failed to provide proof of service rendered by UTC in the Assessment Year in question. It also held that the membership in the asseessee-firm and UTC was common and one K.L. Srihari had a sizeable holding in each of the two firms. On appeal, the Tribunal allowed the claim of the assessee on the ground that the order of the CIT (Appeals) in the earlier assessment proceeding, relied upon by the AO was reversed by the ITAT. The HC reversed the order of the ITAT.

B) The assessee had also claimed loss in Film business, which was disallowed by the AO and CIT(A). However, the Tribunal allowed the claim of the assessee on the ground that such deduction had been taken into account in another proceeding by the ITAT itself in the case of a sister concern of the assessee.

C) The assessee had further claimed donation made to Aparna Ashram. The AO however disallowed the same 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. The CIT(A) confirmed the same and the same was upheld by the HC.

The SC held that,

A) ++ 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 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. We, therefore, can find no fault with the order of the High Court on the aforesaid score;

B) ++ taking into account the above and the facts of the case which have been set out by the High Court in its order, we do not see how the same can be faulted. Having regard to the facts and circumstances in which the “investment” was made and “loss” claimed, we can find no fault in the view taken by the High Court that the entire transaction was a sham transaction and was a calculated device to avoid tax liability;

C) ++ 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 assessee had failed to furnish any proof of service rendered by UTC in the course of the relevant Assessment Year. Alternatively, the High Court construed certain facts as, for example, compliance of the conditions subject to which registration was granted to the Aparna Ashram under Section 35(2A) to be of significance as against the contrary/different view of the Tribunal on this score. The difference in the approach between the 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. For the aforesaid reasons, we find no fault in the view taken by the High Court.

(See 2016-TIOL-04-SC-IT)