Spel Semiconductor Limited, CHENNAI V. ACIT, CHENNAI

CO 62/CHNY/2013

• Counselvise Citation: [2013] 122 COUNSELVISE.COM (IT) 8492 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 17 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 28-05-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 10-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R VIJAYARAGHAVAN
• Assessee Lawyers: N MADHAVAN
• Keywords: Capital asset
• Section: 43B; 143(3)

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH, CHENNAI. BEFORE DR.O.K. NARAYANAN, VICE-PRESIDENT & SHRI V. DURGA RAO, JUDICIAL MEMBER ITA NO. 264/MDS/2013 ASSESSMENT YEAR : 2005-06 & C.O. NO. 62/MDS/2013 [IN I.T.A. NO.264/MDS/2013] THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE V(1), CHENNAI. VS. M/S. SPEL SEMICONDUCTOR LTD., NO. 5, CMDA INDUSTRIAL ESTATE, MARAIMALAR NAGAR, CHENNAI 600 032. [PAN: AAACS8519B] (APPELLANT) (RESPONDENT/ CROSS OBJECTOR) APPELLANT BY : SHRI N. MADHAVAN, JCIT RESPONDENT BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE DATE OF HEARING : 22.05.2013 DATE OF PRONOUNCEMENT : 28.05.2013 O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE AND CROSS OBJECTION AT T HE BEHEST OF THE ASSESSEE, EMANATE FROM THE ORDER OF THE COMMISSIONE R OF INCOME TAX (APPEALS) V, CHENNAI DATED 18.12.2012 RELEVANT TO T HE ASSESSMENT YEAR 2005-06. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S ENGAGED IN THE BUSINESS OF MANUFACTURE OF INTEGRATED CIRCUITS. THE ASSESSEE HAD FILED RETURN OF INCOME FOR THE ASSESSMENT YEAR 2005-06 DECLARING TOTAL LOSS OF I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.2 22 264 6464 64/M/ /M/ /M/ /M/1 11 13 & 3 &3 & 3 & C.O. NO. 62/MDS/13 C.O. NO. 62/MDS/13 C.O. NO. 62/MDS/13 C.O. NO. 62/MDS/13 2 ` .49,11,440/-. THE RETURN WAS PROCESSED UNDER SECTIO N 143(1) OF THE INCOME TAX ACT, 1961 AND NO SCRUTINY ASSESSMENT UNDER SECT ION 143(3) OF THE ACT HAS BEEN PASSED. HOWEVER, DURING THE COURSE OF SCRU TINY PROCEEDINGS FOR THE ASSESSMENT YEAR 2006-07, IT WAS FOUND THAT THE ASSESSEE HAD RECEIVED SOME INTEREST WAIVER AND THE SAME WAS NOT OFFERED F OR TAX AND THE ASSESSMENT WAS REOPENED. EVEN IN THE YEAR UNDER CON SIDERATION ASSESSMENT WAS REOPENED BASED ON 2006-07 ASSESSMENT . DURING ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSER VED THAT THE ASSESSEE HAS RECEIVED WAIVER OF INTEREST AS ONE TIME SETTLEM ENT [OTS] TO THE EXTENT OF ` .3,43,59,395/- DURING THE ASSESSMENT YEAR 2005-06 A ND AS PER THE PROVISIONS OF SECTION 43B INTEREST PAYABLE ON LOANS TAKEN FROM FINANCIAL INSTITUTION CAN BE CLAIMED ONLY ON PAYMENT BASIS. I N THIS CASE, SINCE, THE FINANCIAL INSTITUTIONS HAVE WAIVED THE INTEREST PAY ABLE BY THE ASSESSEE COMPANY, THERE IS BENEFIT ACCRUED TO THE ASSESSEE, WHICH HAS NOT OFFERED TO TAX. SINCE THE FINANCIAL INSTITUTIONS HAVE WAIVED T HE INTEREST, THE QUESTION OF PAYMENT DOES NOT ARISE AND HENCE ASSESSEES CLAIM O F DEDUCTION OF ` .3,43,59,395/- TOWARDS WAIVER OF INTEREST UNDER OTS REQUIRES TO BE TAXED. ACCORDINGLY, THE INCOME TO THE EXTENT OF ` .3,43,59,395/- WAS TAXED. 3. ON BEING AGGRIEVED, THE ASSESSEE CARRIED THE MA TTER BEFORE THE CIT(APPEALS). 4. THE LD. CIT(APPEALS) HAS OBSERVED THAT THE WAIV ER OF THE INTEREST, WHICH WAS NOT ALLOWED AS DEDUCTION IN EARLIER ASSES SMENT CANNOT BE TAXED I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.2 22 264 6464 64/M/ /M/ /M/ /M/1 11 13 & 3 &3 & 3 & C.O. NO. 62/MDS/13 C.O. NO. 62/MDS/13 C.O. NO. 62/MDS/13 C.O. NO. 62/MDS/13 3 UNDER SECTION 41(1). THEREFORE, INTEREST PAYABLE TO THE BANKS TO THE EXTENT THEY HAVE NOT BEEN ALLOWED AS DEDUCTION IN EARLIER ASSESSMENT CANNOT BE TAXED UNDER SECTION 41(1) OF THE ACT. ACCORDINGLY, THE CIT(APPEALS) DIRECTED THE ASSESSING OFFICER TO VERIFY THE SAME AND DELETE . IN SO FAR AS SECTION 28(IV) IS CONCERNED, HE HAS OBSERVED THAT IF THE LO ANS WERE UTILIZED FOR ACQUISITION OF CAPITAL ASSETS, THEN THE LOAN AS WEL L AS THE INTEREST ON SUCH LOANS WAIVED WILL BE IN THE CAPITAL FIELD AND CANNO T BE TAXED UNDER SECTION 41(1) OR UNDER SECTION 28(IV). HOWEVER, IF THE LOAN S WERE UTILIZED FOR WORKING CAPITAL REQUIREMENT, THE AMOUNT OF INTEREST ON SUCH LOANS WAIVED MAY BE ASSESSED AS REVENUE RECEIPT AND DIRECTED THE ASSESS ING OFFICER TO CONSIDER THE SAME AND PASS FRESH ORDER. 5. AGGRIEVED, THE REVENUE PREFERRED APPEAL AND THE ASSESSEE FILED CROSS OBJECTION BEFORE THE TRIBUNAL. 6. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT IN SO FAR AS APPLICATION OF SECTION 41(1) IS CONCERNED, NO BENEF IT UNDER SECTION 43B WAS AVAILED BY THE ASSESSEE IN EARLIER YEARS. THEREFORE , PROVISIONS OF SECTION 41(1) HAVE NO APPLICATION TO ASSESSEES CASE. IN SO FAR AS APPLICATION OF 28(IV) IS CONCERNED, THE ASSESSEE HAS RECEIVED A CA SH BENEFIT AND THEREFORE, SECTION 28(IV) IS NOT APPLICABLE AND RELIED ON THE DECISION IN THE CASE OF ISKRAEMECO REGENT LTD. V. CIT 331 ITR 317 (MAD.). 7. ON THE OTHER HAND, THE LD. DR HAS RELIED ON THE ORDER OF THE ASSESSING OFFICER. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.2 22 264 6464 64/M/ /M/ /M/ /M/1 11 13 & 3 &3 & 3 & C.O. NO. 62/MDS/13 C.O. NO. 62/MDS/13 C.O. NO. 62/MDS/13 C.O. NO. 62/MDS/13 4 8. WE HAVE HEARD BOTH PARTIES, PERUSED THE MATERIA LS AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. I N THIS CASE, THE ASSESSEE HAS RECEIVED WAIVER OF INTEREST AS OTS TO THE EXTEN T OF ` .3,43,59,395/- DURING THE ASSESSMENT YEAR 2005-06. THE CLAIM OF TH E ASSESSEE UNDER SECTION 43B WAS NOT ALLOWED BY THE ASSESSING OFFICE R IN EARLIER YEARS. THEREFORE, THE CASE OF THE ASSESSEE IS THAT WHEN TH E ASSESSEE RECEIVED WAIVER OF INTEREST AND THE ASSESSING OFFICER IN EAR LIER YEARS RELATING TO THE SAME RECEIPT NOT ALLOWED BENEFIT UNDER SECTION 43B, THE PROVISIONS OF SECTION 41(1) HAVE NO APPLICATION. WE FIND THAT THERE IS A FORCE IN THE ARGUMENT OF LD. COUNSEL FOR THE ASSESSEE FOR THE REASON THAT TO APP LY SECTION 41(1), THE ASSESSEE SHOULD HAVE CLAIMED EARLIER YEAR ANY BENEF IT AND ALLOWED BY THE ASSESSING OFFICER. IN THE PRESENT CASE, THE ASSESSI NG OFFICER HAS NOT ALLOWED DEDUCTION UNDER SECTION 43B TO THE ASSESSEE . THEREFORE, SECTION 41(1) OF THE ACT CANNOT BE APPLIED IN ASSESSEES CA SE. 9. IN SO FAR AS APPLICATION OF SECTION 28(IV) IS C ONCERNED, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT WAIVER OF INTER EST RECEIVED BY THE ASSESSEE IS A CASH BENEFIT AND SECTION 28(IV) DO NO T APPLY IN VIEW OF THE CASE LAW RELIED ON BY THE ASSESSEE. WE ALSO FIND TH AT IN THE CASE OF ISKRAEMECO REGENT LTD. V. CIT (SUPRA), THE HONBLE HIGH COURT HAS OBSERVED THAT SECTION 28(IV) OF THE ACT SPEAKS ABOUT THE BEN EFIT OR PERQUISITE RECEIVED IN KIND. SUCH A BENEFIT OR PERQUISITE RECEIVED IN K IND OTHER THAN IN CASH WOULD I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.2 22 264 6464 64/M/ /M/ /M/ /M/1 11 13 & 3 &3 & 3 & C.O. NO. 62/MDS/13 C.O. NO. 62/MDS/13 C.O. NO. 62/MDS/13 C.O. NO. 62/MDS/13 5 BE AN INCOME AS DEFINED UNDER SECTION 2(24) OF THE ACT. IN OTHER WORDS, ANY TRANSACTION WHICH INVOLVES MONEY, SECTION 28(IV) HA S GOT NO APPLICATION. SIMILAR VIEW HAS BEEN EXPRESSED BY THE HONBLE GUJA RAT HIGH COURT IN THE CASE OF CIT V. ALCHEMIC PVT. LTD. [130 ITR 168]. TH E HONBLE GUJARAT HIGH COURT HAS OBSERVED THAT IF WHAT IS RECEIVED EITHER BY WAY OF BENEFIT OR PERQUISITE IS MONEY, THERE IS NO QUESTION OF CONSID ERING THE VALUE OF SUCH MONETARY BENEFIT OR PERQUISITE UNDER CLAUSE (IV) OF SECTION 28. IT IS ONLY IF THE BENEFIT OR THE PERQUISITE IS NOT IN CASH OR MONEY T HAT SECTION 28(IV) WOULD APPLY AND QUESTION OF INCLUDING VALUE OF SUCH BENEF IT OR PERQUISITE AS INCOME FROM BUSINESS WOULD EVER ARISE. 10. IN ANOTHER DECISION, THE HONBLE DELHI HIGH CO URT IN THE CASE OF RAVINDER SINGH V. CIT [205 ITR 353], THE HONBLE DE LHI HIGH COURT HAS OBSERVED THAT SECTION 28(IV) CAN BE INVOKED ONLY WH ERE THE BENEFIT OR PERQUISITE IS OTHER THAN THE CASH. IT WAS FURTHER H ELD THAT IT WAS ONLY THE BENEFIT OR PERQUISITE WAS NOT IN CASH OR MONEY THAT SECTION 28(IV) WOULD APPLY. 11. IN THE PRESENT CASE, THE ASSESSEE HAS RECEIVED THE INTEREST WAIVER OF ` .3,43,59,395/-, WHICH IS PAYABLE TO BANK. THIS IS A CASH BENEFIT RECEIVED BY THE ASSESSEE. THEREFORE, SECTION 28(IV) HAS NO APPL ICATION TO ASSESSEES CASE BECAUSE IN VIEW OF THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF ISKRAEMECO REGENT LTD. V. CIT (SUPRA ) AND ALSO THE DECISION I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.2 22 264 6464 64/M/ /M/ /M/ /M/1 11 13 & 3 &3 & 3 & C.O. NO. 62/MDS/13 C.O. NO. 62/MDS/13 C.O. NO. 62/MDS/13 C.O. NO. 62/MDS/13 6 OF HONBLE DELHI HIGH COURT IN THE CASE OF RAVINDER SINGH V. CIT (SUPRA). 12. IN SO FAR AS THE CASE LAW RELIED ON BY THE REV ENUE IN ONE OF THE GROUNDS M/S. PROTEX ENGINEER COMPANY PVT. LTD. [211 ITR 919(BOM.)], THE FACTS ARE ENTIRELY DIFFERENT. IN THAT CASE, THE ASS ESSEE HAS RECEIVED THE EXCESS AMOUNT OR ADVANCE RECEIPT AGAINST SUPPLY ETC . RECEIVED IN EARLIER YEARS. THE HONBLE BOMBAY HIGH COURT HAS HELD THAT SECTION 28(IV) APPLIES TO THE FACTS OF THE CASE. 13. IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED AND THE CROSS OBJECTION F ILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON TUESDAY, THE 28 TH OF MAY, 2013 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) VICE - PRESIDENT (V. DURGA RAO) JUDICIAL MEMBER CHENNAI, DATED, THE 28.05.2013 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.