JCIT, (OSD), CIR-8(1), KOLKATA, Kolkata V. M/s Bansilal Leisure Parks Ltd., Kolkata

ITA 1152/KOL/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6226 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 1 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 25-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SOUMITRA CHOW DHURY
• Assessee Lawyers: S DASGUPTA
• Keywords: Competent authority
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : KOLKATA [BEFORE HONBLE SHRI S.S. GODARA, JM & SHRI M.BAL AGANESH, AM ] I.T.A NO. 1152/KOL/20 16 ASSESSMENT YEAR : 2009-1 0 JCIT(OSD), CIRCLE-8(1), KOLKATA -VS- M/S BANS ILAL LEISURE PARKS LTD. [PAN: AABCB 2932 L] (APPELLANT) (RESPOND ENT) FOR THE APPELLANT : SHRI SOUMITRA CHOW DHURY, ADVOCATE FOR THE RESPONDENT : SHRI S. DASGUPTA, ADDL. CIT (DR) DATE OF HEARING : 27.06.2018 DATE OF PRONOUNCEMENT : 04.07.2018 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE REVENUE ARISES OUT OF THE O RDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-15, KOLKATA [IN SHORT THE LD CI T(A)] IN APPEAL NO. 377/CIT(A)- 15/14-15/CIR-8/R&T/KOL DATED 10.03.2016 AGAINST THE ORDER PASSED BY THE JCIT(OSD), CIRCLE-8(1), KOLKATA [ IN SHORT THE LD AO] UNDER SE CTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 12.12.2011 FOR TH E ASSESSMENT YEAR 2009-10. 2. THE ONLY ISSUE TO BE DECIDED IN THIS APPEAL IS A S TO WHETHER THE LD CITA WAS JUSTIFIED IN DELETING THE DISALLOWANCE MADE IN THE SUM OF RS 1,40,81,843/- U/S 40(A)(IA) OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 2 ITA NO.1152/KOL/2016 M/S BANSILAL LEISURE PARKS LTD. A.YR. 2009-10 2 3. THE BRIEF FACTS OF THIS ISSUE ARE THAT THE ASSES SEE IS ENGAGED IN THE BUSINESS OF WHOLESALER, RETAILER, IMPORTER , TRADER AND RUNNIN G A WATER RECREATION COMPLEX. THE RETURN OF INCOME FOR THE ASST YEAR 2009-10 WAS FILE D BY THE ASSESSEE COMPANY ON 30.9.2009 DECLARING TOTAL LOSS OF RS 2,61,92,407/- . THE RETURN WAS REVISED ON 15.10.2010 SHOWING THE REVISED LOSS OF RS 3,05,34,6 23/-. THE ASSESSEE ISSUED DEEP DISCOUNT DEBENTURES TO M/S BANSILAL CREDIT (P) LTD FOR RS 3 CRORES DURING THE FINANCIAL YEAR 1998-99 WITH FACE VALUE PER DEBENTURE OF RS 2, 00,000/- HAVING MATURITY VALUE OF RS 60 CRORES PAYABLE IN 2019 I.E AFTER 20 YEARS FRO M THE DATE OF ISSUE. THE ASSESEE COMPANY EVOLVED THE SCHEME TO CHARGE DISCOUNT PROPO RTIONATELY AT 16.16% AS PER MERCANTILE SYSTEM IN THE ACCOUNTS AND AN ANNUAL ACC RUAL OF LIABILITY IN RESPECT OF SUCH BONDS AND HAD CLAIMED DEDUCTION THEREOF ANNUALLY. T HE LD AO TREATED THE SOURCE OF RAISING OF FUNDS BY THE ASSESSEE AS LOANS TAKEN BY THE ASSESSEE COMPANY AS DEBENTURE IS AKIN TO LOAN AND ACCORDINGLY OBSERVED THAT THE INTE REST PAYABLE THEREON @ 16.16% HAD NOT SUFFERED ANY DEDUCTION OF TAX AT SOURCE THEREBY VIOLATING THE PROVISIONS OF SECTION 40(A)(IA) OF THE ACT. ACCORDINGLY, HE DISALLOWED TH E SUM OF RS 1,40,81,843/- U/S 40(A)(IA) OF THE ACT IN THE ASSESSMENT. 4. THE LD CITA PLACED RELIANCE ON THE CBDT CIRCULAR NO. 4/2004 DATED 13.4.2004 WHEREIN IT WAS STATED THAT TDS IS TO BE MADE ONLY I N THE YEAR OF REDEMPTION OF BONDS. ACCORDINGLY HE DELETED THE DISALLOWANCE U/S 40(A)(I A) OF THE ACT. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND TH AT THE ASSESSEE HAD ISSUED DEEP DISCOUNT DEBENTURES FOR RS 3 CRORES IN FINANCIAL YE AR 1998-99 WITH A COUPON RATE OF 16.16% PER ANNUM AND THE SAID DEEP DISCOUNT DEBENTU RES ARE REDEEMABLE AT THE END OF 20 YEARS FROM THE DATE OF ISSUE FOR RS 60 CRORES. THE LD AR ARGUED THAT THE CLAIM OF 3 ITA NO.1152/KOL/2016 M/S BANSILAL LEISURE PARKS LTD. A.YR. 2009-10 3 LIABILITY DEBITED IN THE PROFIT AND LOSS ACCOUNT WA S ACCEPTED BY THE LD AO UPTO ASST YEAR 2008-09 AND IN ASSESSMENT YEARS SUBSEQUENT TO ASST YEAR 2009-10. THE LD AR ARGUED THAT THE OBSERVATION OF THE LD AO IS FACTUAL LY INCORRECT IN AS MUCH AS THE ASSESSEE COMPANY IS A PUBLIC LIMITED COMPANY AND NOT A PRIVA TE LIMITED COMPANY AND THAT A LETTER FROM THE REGISTRAR OF COMPANIES, WEST BENGAL DATED 25.11.2008 TO THE ASSESSEE REGARDING CHARGING OF COMPOUND INTEREST RATE AT 16. 16% INSTEAD OF 16.15% AND THE REPLY DATED 1.12.2008 OF THE ASSESSEE WERE PRODUCED BEFORE THE LD AO AND WAS ALSO STATED THAT NECESSARY RECTIFICATION WAS CARRIED OUT IN THE ACCOUNTS ACCORDINGLY. HENCE WE ARE INCLINED TO AGREE THAT THE ISSUANCE OF DEEP DISCOUNT DEBENTURES HAD BEEN DULY APPROVED BY THE COMPETENT AUTHORITY AND IS VERY MUC H WITHIN THE KNOWLEDGE OF THE COMPETENT AUTHORITY AND REVERSE THE OBSERVATION OF THE LD AO IN THIS REGARD. WE FIND FROM THE AUDITED ACCOUNTS FOR THE YEAR ENDED 31.3.2 005, THE ASSESSEE COMPANY HAD ALSO DISCLOSED THE ISSUANCE OF DEEP DISCOUNT BONDS IN TH E NOTES ON ACCOUNTS ATTACHED ALONG WITH THE AUDITED FINANCIAL STATEMENTS. THE RELEVAN T NOTE IS REPRODUCED HEREIN FOR THE SAKE OF CONVENIENCE :- 5. THE COMPANY HAD ISSUED DEEP DISCOUNT BONDS WITH FACE VALUE OF RS 60 CRORES AT RS 3 CRORES PAYABLE AFTER 20 YEARS TO A COMPANY LISTED UNDER SECTION 301 OF THE COMPANIES ACT, 1956 AND ACCORDINGLY CHARGE PROP ORTIONATE DISCOUNT IN THE ACCOUNTS AND BALANCE IN MISCELLANEOUS EXPENDITURE. 5.1. THIS CLEARLY PROVES THAT THE ASSESSEE HAD ISSU ED DEEP DISCOUNT BONDS WITH A DIFFERENCE BETWEEN ISSUE PRICE AND AMOUNT PAYABLE O N MATURITY. WE FIND THAT THE ASSESSEE COMPANY HAD ISSUED BONDS AT A DISCOUNT WIT H AN OBLIGATION TO INCUR LIABILITY TO PAY A LARGER AMOUNT AT A FUTURE DATE I.E ON THE DAT E OF MATURITY WHICH IS AFTER 20 YEARS FROM THE DATE OF ISSUE. WHEN THE SAID BONDS ARE R EDEEMABLE AT THE END OF A FIXED PERIOD OF 20 YEARS, A PROPORTIONATE AMOUNT OF DISCOUNT SHO ULD BE WRITTEN OFF OUT OF REVENUE EVERY YEAR DURING WHICH THE BONDS ARE OUTSTANDING. THIS WRITE OFF WOULD CERTAINLY BE ALLOWABLE AS A DEDUCTION AS IT IS SPREAD OVER THE P ERIOD OF TENURE OF BONDS. WE WOULD 4 ITA NO.1152/KOL/2016 M/S BANSILAL LEISURE PARKS LTD. A.YR. 2009-10 4 LIKE TO PLACE RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD VS CIT REPORTED IN 225 ITR 802 (SC) , WHEREIN IT WAS HELD THAT THE DISCOUNT ON ISSUE OF D EBENTURES WOULD BE ALLOWABLE OVER THE PERIOD OF TENURE OF DEBENTURES. MOREOVER, WE ALSO FIND THAT THE CBDT IN ITS CIRCULAR NO. 4/2004 DATED 13.5.2004 HAD CATEGORICALLY STATED THAT IN RESPECT OF INTEREST ON DEEP DISCOUNT BONDS , TAX IS REQUIRED TO BE DEDUCTED AT SOURCE U/S 193 OR 195 OF THE ACT ONLY AT THE TIME OF REDEMPTION OF SUCH BOND IRRESPECTIVE OF WHETHER THE INCOME FROM THE BONDS HAS BEEN DECLARED BY THE BOND HOLDER ON ACCRU AL BASIS FROM YEAR TO YEAR OR IS DECLARED ONLY IN THE YEAR OF REDEMPTION. 5.2. IN VIEW OF THE AFORESAID FINDINGS IN THE FACTS AND CIRCUMSTANCES OF THE CASE, WE HOLD THAT THE LD CITA HAD RIGHTLY DELETED THE DISALLOWAN CE MADE IN THE SUM OF RS 1,40,81,843/- U/S 40(A)(IA) OF THE ACT WHICH DOES N OT CALL FOR ANY INTERFERENCE. ACCORDINGLY, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE COURT ON 04.07.2018 SD/- SD/- [S.S. GODARA] [ M .BALAGANESH ] JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 04.07.2018 SB, SR. PS 5 ITA NO.1152/KOL/2016 M/S BANSILAL LEISURE PARKS LTD. A.YR. 2009-10 5 COPY OF THE ORDER FORWARDED TO: 1. JCIT(OSD), CIRLCE-8(1), KOLKATA, AAYAKAR BHAWAN, 5 TH FLOOR, P-7, CHOWRINGHEE SQUARE, KOLKATA-700069. 2. M/S BANSILAL LEISURE PARKS LTD., BARIK & ASSOCIA TES, CHARTERED ACCOUNTANTS, 12, CHOWRINGHEE SQUARE,, 2 ND FLOOR, KOLKATA-700069. 3..C.I.T.- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S