ITA No. 669/2008

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* THE HIGH COURT OF DELHI AT NEW DELHI

Judgment reserved on : 09.01.2009

%

Judgment delivered on : 23.01.2009

ITA No.669/2008

COMMISSIONER OF INCOME TAX

..... Appellant

versus

GUJARAT GUARDIAN LIMITED

..... Respondent

Advocates who appeared in this case:

For the Appellant

:

Ms. Prem Lata Bansal

For the Respondent

:

Ms. Kavita Jha

CORAM :-

HON'BLE MR JUSTICE VIKRAMAJIT SEN

HON'BLE MR JUSTICE RAJIV SHAKDHER

1.

Whether the Reporters of local papers may

be allowed to see the judgment ?

Yes

2.

To be referred to Reporters or not ?

Yes

3.

Whether the judgment should be reported

in the Digest ?

Yes

RAJIV SHAKDHER, J

1. This is an Appeal under Section 260A of the Income Tax Act, 1961

(hereinafter referred to in short as the ‘Act’) against the judgment dated

05.10.2007 passed by the Income Tax Appellate Tribunal (hereinafter

referred to in short as the ‘Tribunal’) in ITA No. 3224/Del/2005 in respect

of the assessment year 1996-97. Before the Tribunal the Revenue as well

as the assessee, filed an appeal against the order of the Commissioner of

2009:DHC:240-DB

ITA No. 669/2008

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Income Tax (Appeals) dated 26.04.2005 [hereinafter referred to in short as

the ‘CIT(A)’].

2. The Revenue being aggrieved has preferred the present appeal and

proposed the following questions of law for consideration of this Court:-

“(a) Whether ITAT was correct in law in allowing deduction of

export commission of Rs 10,07,22,625/- to the assessee u/s 37(1)

of the Act?

(b) Whether order passed by ITAT is perverse in law when it

allowed deduction to the assessee of export commission ignoring

the relevant facts recorded by the Assessing Officer in the

assessment order and contrary to the provisions of Section

40A(2) of the Act?

(c) Whether ITAT was correct in law in allowing depreciation to

the assessee on training fee of Rs 2,18,48,700/- paid to Guardian

USA, that was capitalized by the assessee as part of Plant &

machinery?

(d) Whether ITAT was correct in law in allowing deduction of

lump sum prepayment premium of Rs 8 crores paid by the

assessee to IDBI?

(e) Whether ITAT was correct in law in allowing entire

prepayment premium of Rs 8 crores to the assessee in the instant

year or the same was to be spread over the period for which,

borrowing was made?

(f) Whether ITAT was correct in law in admitting the additional

ground raised by the assessee and thereby directing the Assessing

Officer to adjudicate upon the claim for depreciation on enhanced

cost of plant & machinery due to exchange rate variation, if

claimed by the assessee?

(g) Whether order passed by ITAT is perverse in law and on

facts?

2.1

Having heard the learned counsel for both the Revenue, as well as,

the assessee, we are of the view that none of the questions proposed are

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ITA No. 669/2008

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substantial questions of law which arise for our consideration for the

reasons given hereinafter.

3. In order to deal with the appeal we have set out separately, the

essential facts pertaining to each issue raised in the appeal.

Export Commission

4. On 05.06.1990 a collaboration agreement was executed between

Guardian International Corporation, USA, (in short ‘GIC’) Modi Rubber

(I) Limited, and Gujarat Alkalies and Chemicals Ltd. Consequent thereto,

the assessee was incorporated as a joint venture between GIC, Modi

Rubber (I) Limited, M/s Gujarat Mineral Development Corpn. Ltd and

Gujarat Alkalies and Chemicals Ltd. GIC with 50% stake in the equity of

the assessee was the major shareholder. The State Government through

Public Sector Undertakings jointly held a stake equivalent to 9.46% of the

total equity of the assessee. It is not disputed that both the purpose and

object of entering into the aforementioned colla