BHUNA COOP. SUGAR MILLS LTD. versus COMMISSIONER OF INCOME TAX, ROHTAK AND ANR.

Citation: [2005] 2 S.C.R. 83 · Decided: 11-02-2005 · Supreme Court of India · Bench: N. SANTOSH HEGDE · Disposal: Appeal(s) allowed

Judgment (excerpt)

BHUNA COOP. SUGAR MILLS LTD. 
A 
v. 
COMMISSIONER OF INCOME TAX, ROHTAK AND ANR. 
FEBRUARY 11, 2005 
[N. SANTOSH HEGDE AND S.B. SINHA, H.] 
B 
Income Tax Act, 1961-Sections 43B, 141(1) (A) & 143(1) (a)-AYs 
1992-93 and 1993-94-Appellant-assesseejiled returns claiming loss-While 
computing the loss, it sought for deduction of interest payable to creditors- C 
Claim disallowed by both Tribunal and the High Court-On appeal, held: 
both the courts erred in not giving opportunity to assessee to establish its 
case-Matter therefore remanded to Tribunal. 
Appellant-assessee, a cooperative sugar mill filed returns of income 
declaring loss. While computing the loss, assessee sought for deduction of D 
the interest payable to the creditors and debited in the profit and loss 
account. Assessing Officer while processing the returns under Section 
143(l)(a) disallowed the deduction claimed by assessee and also imposed 
penal additional tax. The order of Assessing authority was set aside by 
the Appellate Commissioner but restored by the Appellate Tribunal. Writ B 
petitions and appeals challenging the order of Tribunal were dismissed 
by High Court. Hence the present appeals. 
' , 
The assessee contended that it is entitled to deduction of interest 
payable on the loans taken by it from bodies other than the financial 
institutions as provided under section 438, and that the Tribunal as well p 
as the High Court on an erroneous appreciation of fact and without giving 
an opportunity to the assessee to establish its case came to the conclusion 
that the money borrowed by the assessee was from the institutions 
enumerated in Section 43B(d), and disallowed the deduction. 
Allowing the appeals and remanding the matter to the Tr-ibunal, the G 
Court 
HELD : 1. There was some confusion in the mind of the Tribunal 
when it proceeded to consider the case of the assessee for deduction on a 
ground that the loan in question was taken from HFC which is a Bank H.' 
83 
84 
SUPREME COURT REPORTS 
[2005] 2 S.C.R. 
A contemplated under Section 43B(d) and since the assessee contends that 
it has material to show that the loan taken by it and the interest payable 
to institutions which would not fall within sub-section (d) of section 438, 
in the interest of justice, an opportunity should be given to the assessee to 
prove its case. (86-E-FJ 
B 
2. Since the Tribunal or the High Court have not taken into 
consideration the contention of the assessee in regard to the liability to 
pay additional tax under section 141(l)(A) of the Act, an opportunity 
should be given to the assessee to argue its case on this issue also. 186-F~ 
C 
Commissioner of Income Tax, Bhopal v. Hindustan Elector Graphites 
Ltd, Indore, (2000) 3 SCC 595 and Asstt. Commissioner of Income Tax, New 
Delhi v. J.K. Synthetics Ltd. etc., (2003) 10 SCC 623, referred to. 
D 
CIVIL APPELLATE JURISDICTION : Civil Appeal Nos. 1100-l IO I 
of 2005. 
From the Ju.dginenf and Order dated 19.9.2003 of t.he Punjab and 
Haryaria High Court in LT.A. No. 80/2002 and C.W.P. No. 6372 of 2002. 
WITH 
E 
C.A. Nos. 1116-1117 of2005. 
Anoop Choudhary, S.P. Singh, Amit Veer Singh and D. Mahesh Babu 
for the Appellant. 
M.L. Verma, Arijit Prasad, Preetesh Kapoor and B.V. Balaram Das for 
F the Respondents. 
The Judgment of the Court was delivered by 
SANTOSH HEGDE, J. The appellant, a cooperative sugar Mill, filed 
its return of income for the assessment year 1992-93 declating a loss of Rs. 
O 6,95,63,045.72. While computing the said loss the appellant declared in its 
return a sum of Rs. 1,48,38,263.88 as interest which' had accrued for the 
relevant assessment year which was payable to the creditors and had been 
debited in the profit and loss account, hence, sought for its deduction. A 
return claiming similar losses.were also filed for the Assessment Year 1993-
94. The assessing officer proce~sed the returns filed by the appellant under 
B 
-
-
BHUNA COOP. SUGAR MILLS LTD. v. C.l.T. [HEGDE . .I.] 
85 
section 143(1)(a) of the Income Tax Act (the Act) and disallowed the deduction A 
of Rs. l ,48,38,263.88 claimed by the appellant on account of interest payable 
to the creditors. He also imposed a penal additional tax of Rs. 11,62,502 
under section 143(1 )(a) of the Act. Being aggrieved by the said order of 
assessment the appellant preferred an appeal before the Commissioner of 
Income Tax (Appeals), Rohtak. The said appeal filed by the appellant came 
to be allowed. The said order of the Appellate

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