Core Health Care Ltd., Ahmedabad V. The Dy.CIT., .Circle-5, Ahmedabad

ITA 1172/AHD/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6884 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 18-12-2014
• Assessment Year: 2005-2006
• Appeal Filed On: 21-04-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VIMALENDU VERMA
• Assessee Lawyers: S N SOPARKAR
• Keywords: Capital receipt
• Section: 143(3); 244A; 148; 56

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD 0 0 , 0 0 , BEFORE SHRI G.C. GUPTA, VICE PRESIDENT AND SHRI N.S. SAINI , ACCOUN TANT MEMBER ./ ITA NO . 1 563 /AHD/ 20 1 1 [ [ / ASSESSMENT YEAR : 200 5 - 0 6 DCIT CIRCLE - 5, AHMEDABAD VS CORE HEALTHCARE LTD, JIVABHAI CHAMBERS, B/H.SWASTIK SUPER MARKET ASHRAM ROAD, AHMEDABAD PAN : AAACC 6252 H ./ ITA NO . 117 2 /AHD/ 201 1 [ [ / ASSESSMENT YEAR : 200 5 - 0 6 CORE HEALTHCARE LTD, AHMEDABAD PAN : AAACC 6252 H VS DCIT CIRCLE - 5, AHMEDABAD / (APPELLANT) / (RESPONDENT) REVENUE BY : SHRI VIMALENDU VERMA, CIT - DR ASSESSEE(S) BY : SHRI S.N. SOPARKAR, AR / DATE OF HEARING : 18 / 12 /2014 / DATE OF PRONOUNCEMENT: 23 / 12 /2014 / O R D E R PER SHRI N.S. SAINI, ACCOUNTANT MEMBER: THESE ARE THE CROSS APPEALS FILED BY THE REVENUE AND THE ASSESS EE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME - TAX (APPEALS) - XI , AHMEDABAD DATED 28 .0 3 .201 1 FOR ASSESSMENT YEAR 200 5 - 0 6 . ITA NOS. 1563 & 1172 /AHD/20 11 CORE HEALTHCARE LTD - AY 200 5 - 0 6 - 2 - 2. THE SOLE GROUND OF APPEAL TAKEN BY THE REVENUE READS AS UNDER: - THE LD. COMMISSIONER OF INCOME - TAX(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.6,74,54,77,332/ - MADE U/S 28(IV) R.W.S. 41 R.W. EXPLANATION 2(IV) OF THE INCOME - TAX ACT, 1961. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSING OFFICER OBSERVED THAT DURING THE YEAR UNDER CONSIDERATION , SACHNA UN IT OF THE ASSESSEE - COMPANY GOT DEMERGED WITH NIRMA LIMITED. CONSEQUENT ON COMPROMISE, RE - CONSTRUCTION AND DEMERGER, THE TOTAL AMOUNT OF SECURED AND UNSECURED LOANS AND LIABILITIES HAD GONE DOWN FROM RS.16,82,94,84,000/ - TO RS.138 CRORES. AS A RESULT OF SE TTLEMENT WITH THE FINANCIAL INSTITUTIONS ETC., THE LIABILITIES OF THE ASSESSEE - COMPANY WEND DOWN BY RS.15,44,94,84,000/ - . OUT OF THIS REDUCTION, RS.8,70,40,06,668/ - PERTAINED TO THE INTEREST PAYABLE ON THE LOANS BORROWED FROM FINANCIAL INSTITUTIONS ETC. SINCE THE SAID AMOUNT OF INTEREST WAS NOT PAID, IT WAS ADDED BACK BY THE ASSESSEE WHILE FILING THE RETURNS OF INCOME FOR THE EARLIER YEARS. AFTER DEDUCTING THE SAID AMOUNT FROM THE AMOUNT OF REDUCTION OF LOANS AND LIABILITIES, THE PRINCIPAL AMOUNT WHICH GO T REDUCED/WAIVED WORKED OUT OF RS.6,74,54,77,332/ - . THIS AMOUNT WAS ADDED BY THE ASSESSING OFFICER U/S 41 R.W. EXPLANATION 2(IV) AS WELL AS SECTION 28 (IV). 4. ON APPEAL, THE CIT(A) DELETED THE ADDITION BY FOLLOWING THE DECISION OF HONBLE GUJARAT HIGH C OURT IN THE CASE OF CIT V. CHETAN CHEMICALS PVT LTD., 267 ITR 770 (2004), THE DECISION OF THE HONBLE DELHI HIGH COURT IN THE CASE OF CIT V. TOSHA INTERNATIONAL LTD, 176 TAXMAN 187 (DEL) AND THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF SOLID CONTAI NERS LTD V. DCIT & ANR, 308 ITR 417. ITA NOS. 1563 & 1172 /AHD/20 11 CORE HEALTHCARE LTD - AY 200 5 - 0 6 - 3 - 5. THE DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE ASSESSING OFFICER, WHEREAS THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THIS ISSUE IS NOW COVERED BY A CONSOLIDATED ORDER OF THIS BENCH OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE ITSELF PASSED IN ITA NOS. 2543 - 2547/AHD/2007 IN ASSESSMENT YEARS 1998 - 99 TO 2002 - 03, VIDE ORDER DATED 05.06.2009, WHEREIN THE TRIBUNAL DELETED THE ADDITION BY OBSERVING AS UNDER: - 8. WE HAVE HEARD THE RIVAL CONTE NTIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE HAVE ALSO PERUSED THE CASE RECORDS INCLUDING THE ASSESSMENT ORDER AS WELL AS THE ORDER OF CIT(A). THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS CLAIMED AN AMOUNT OF RS.24,10,42,443 / - A S AMOUNT OF LOAN WAIVER AS PER NOTE NO.21 AS UNDER: - 'THE ASSESSEE HAS CLAIMED AN AMOUNT OF RS.24,10,42,443/ - AS AMOUNT OF LOAN WAIVED. AS PER NOTE 21, THE ASSESSEE ASUNDER: IN ACCORDANCE WITH DEED OF COMPROMISE EXECUTED BY THE COMPANY WITH TWO BANKS, T HE BANKS HAVE WAIVED RS.24,10,42,443/ - AS PER FOLLOWING PARTICULARS (A) PRINCIPAL AMOUNT OF LOAN RS. 14,12,15,000 (B) UNPAID INTEREST RS. 9,98,27,443 UNPAID INTEREST, WHICH WAS DEBITED TO P&L ACCOUNT IN EARLIER YEARS BUT NOT PAID WAS DISALLOWED U/S. 43B. THEREFORE, THE AMOUNT WA I VED BY BANKS IN RESPECT OF INTEREST IS NOT CHARGEABLE TO TAX. IT IS SUBMITTED THAT THE PRINCIPAL AMOUNT OF LOAN WAIVED OF R S. 14,12,15,000/ - IS A CAPITAL RECEIPT AND THEREFORE NOT CHARGEABLE TO TAX' THE ASSESSING OFFICER REQU IRES THE ASSESSEE THAT WHY THE ABOVE RECEIPT BE NOT TREATED AS INCOME IN THE NATURE OF BUSINESS. THE ASSESSEE REPLIED TO THE ASSESSING OFFICER THAT ON SETTLEMENT OF DUES WITH THE BANK, PRINCIPAL AMOUNT OF LOAN HAS BEEN PARTLY WAIVED BY THE LENDER PURSUANT TO AN AGREEMENT. THE AMOUNT ITA NOS. 1563 & 1172 /AHD/20 11 CORE HEALTHCARE LTD - AY 200 5 - 0 6 - 4 - WAIVED BY THE LENDER BANK IS NOT INCOME U/S.2(24) OF THE INCOME - TAX ACT. FURTHER SECTION 28 ALSO DOES NOT INCLUDE AMOUNT OF LOAN WAIVE BY THE LENDER. AS THE AMOUNT IS NOT INCOME, IT IS NOT CHARGED U/S .4 OR SECTION 5 OR SECTION 5 6 OF THE ACT. FURTHER, SECTION 41 ALSO DOES NOT APPLY TO THIS RECEIPT IN RESPECT OF THIS AMOUNT, AS NO ALLOWANCE OR DEDUCTION HAD BEEN CLAIMED OR GRANTED BY THE COMPANY IN ANY EARLIER YEAR. ACCORDINGLY, THE AO WAS NOT CONVINCED AND ADDED THIS AS INCOME U /S.41(1) OF THE ACT. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE CIT(A) AND CIT(A) ALSO CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY GIVING FOLLOWING FINDING IN PARA - 10.2 OF HIS APPELLATE ORDER: - '10.2 I HAVE CAREFULLY CONSIDERED THE ISSUE. I T IS A FACT THAT IF PRINCIPAL AMOUNT OF LOAN IS WAIVED THEN THE SAME CANNOT BE EQUATED WITH CESSATION OF LIABILITY U/S.41(1) OF THE ACT. HOWEVER, THE ISSUE HERE DOES NOT APPEAR TO BE SO SIMPLE. IN THIS CASE THE ASSESSEE HAD OBTAINED LOANS FROM BANKS AND FO R THE YEAR UNDER CONSIDERATION A COMPROMISE WAS EXECUTED AND AS STATED BY THE ASSESSEE, THE AMOUNT OF PRINCIPAL AS WELL AS UNPAID INTEREST WAS WAIVED. IT IS STATED THAT UNPAID INTEREST WAS DISALLOWED U/S.43B AND HENCE THE BALANCE AMOUNT OF PRINCIPAL SHOULD HAVE BEEN ALLOWED AS IT WAS NEVER CLAIMED AS DEDUCTION BY THE ASSESSEE. IN THIS CONNECTION, IT IS NOTICED THAT THESE LOANS WERE TAKEN MUCH EARLIER AND APART FROM THE UNPAID INTEREST FOR SEVERAL YEARS, INTEREST WAS CHARGED AND ALLOWED A/SO IN ASSESSMENT. T HUS SIMPLY FOR THE REASON THAT BY WAY OF COMPROMISE PRINCIPAL AMOUNT OF LOAN WAS WAIVED, IT DOES NOT AUTOMATICALLY MEAN THAT THESE ALLEGED AMOUNTS STATED TO BE AS PRINCIPAL AMOUNT IS ONLY A PRINCIPAL. IN FACT THE ASSESSEE HAS ALREADY BEEN ALLOWED MUCH MORE ' AMOUNT AS INTEREST PAYMENT. IN THIS REGARD, ONLY THE AMOUNT PENDING AT A PARTICULAR DATE HAS BEEN CLASSIFIED AND DIVIDED BETWEEN PRINCIPAL AND OUTSTANDING INTEREST. SINCE, IN THIS CASE MUCH MORE THAN THE AMOUNT WAIVED HAS ALREADY BEEN ALLOWED AS INTEREST IN THE EARLIER YEA RS, I AM IN FULL AGREEMENT WITH THE AO THAT THIS AMOUNT WOULD ALSO BE LIABLE TO BE TAXED U/S.41(1) OF THE ACT BECAUSE MERELY GIVING IT A NOMENCLATURE OF PRINCIPAL, THE BASIS FACT CANNOT BE IGNORED THAT MUCH MORE THAN THIS AMOUNT HAS ALRE ADY BEEN ALLOWED TO THE ASSESSEE AS INTEREST. IN VIEW OF THIS, ADDITION MADE BY THE AO IS CONFIRMED.' AGGRIEVED, NOW THE ASSESSEE CAME IN SECOND APPEAL BEFORE US. ITA NOS. 1563 & 1172 /AHD/20 11 CORE HEALTHCARE LTD - AY 200 5 - 0 6 - 5 - 9. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE STATED THAT THE ISSUE IS EXACTLY COVERED IN F AVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT V. CHETAN CHEMICALS PVT. LTD. (2004) 267 ITR 770 (GUJ), WHEREIN THE HON'BLE JURISDICTIONAL ! COURT HAS HELD: - 'WE HAVE HEARD MR. AKIL KURESHI, LEARNED STANDING COUNSEL APPEARING ON BEHALF OF THE APPLICANT - REVENUE. THOUGH SERVED, NONE APPEARS ON BEHALF OF THE ESPONDENT - ASSESSEE. AT THE TIME OF HEARING, MR. KURESHI INVIT ED OUR A TTENTION TO THE PROVISIONS OF SECTION 41(1) OF THE ACT AND CONTENDED THAT THI S WAS A LIABILITY IN SO FAR AS THE ASSESSEE - COMPANY WAS CONCERNED AND SUCH LIABILITY HAD BEEN REMITTED BY THE CREDITORS OF THE COMPANY, AND THUS A BENEFIT HAD BEEN OBTAINED BY THE ASSESSEE - COMPANY WHICH WAS LIABLE TO PAYMENT OF TAX UNDER SECTION 41(1) READ WITH SECTION 28(IV) OF THE ACT. SECTION 41(1) AS WAS APPLICABLE FOR THE ASSESSMENT YEAR UNDER CONSIDERATION READS AS UNDER : - '(1) WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIA BILITY INCURRED BY THE ASSESSEE, AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR THE ASSESSEE HAS OBTAINED, WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAINED BY HIM OR THE VALUE OF BENEFIT ACCRUING TO HIM, SHALL BE DEEMED TO BE PROFITS AND GAINS OF BUSINESS OR PROFESSION AND ACCORDINGLY CHARGEABLE TO INCOME - TAX AS THE INCOME OF THAT PREVIOUS YEAR, W HETHER THE BUSINESS OR PROFESSION IN RESPECT OF WHICH THE ALLOWA NCE OR DEDUCTION HAS BEEN MADE IS IN EXISTENCE IN THAT YEAR OR NOT.' ON A READING OF THE PROVISIONS, IT IS APPARENT THAT BEFORE THE SECTION CAN BE INVOKED, IT IS NECESSARY THAT AN ALLOWANCE OR A DEDUCTION HAS BEEN GRANTED DURING THE COURSE OF ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIABILITY WHICH IS INCURRED BY THE ASSESSEE, AND SUBSEQUENTLY DURING ANY - PREVIOUS YEAR THE ASSESSEE OBTAINS, WHETHER IN CASH OR IN ANY O THER MANNER, ANY AMOUNT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION OF SUCH LIABILITY. IN THAT CASE, EITHER THE AMOUNT OBTAINED BY THE ASSESSEE OR THE VALUE OF THE BENEFIT ACCRUING TO THE ASSESSEE CAN BE DEEMED TO BE THE PROFITS A ND GAINS OF BUSINESS OR PROFESSION AND CAN BE ITA NOS. 1563 & 1172 /AHD/20 11 CORE HEALTHCARE LTD - AY 200 5 - 0 6 - 6 - BROUGHT TO TAX AS INCOME OF THE PREVIOUS YEAR IN WHICH SUCH AMOUNT OR BENEFIT IS OBTAINED. IN THE FACTS OF THE CASE ON HAND, WITHOUT ENTERING INTO THE ASPECT AS TO WHETHER THE LIABILITY TO REPAY THE LOANS WOULD BE A TRADING LIABILITY OR NOT, IT IS AN ADMITTED POSITION THAT THERE HAD BEEN NO ALLOWANCE OR DEDUCTION IN ANY OF THE PRECEDING YEARS AND, HENCE, THERE IS NO QUESTION OF APPLYING THE PROVISION AS SUCH. SECTION 28 OF THE ACT DEALS WITH PROFITS AND GAINS O F BUSINESS OR PROFESSION AND CLAUSE (IV) THEREOF SAYS .THAT THE VALUE OF ANY BENEFIT OR PERQUISITE, WHETHER CONVERTIBLE INTO MONEY OR NOT, ARISING FROM BUSINESS OR THE EXERCISE OF A PROFESS/ON SHALL BE CHARGEABLE AS INCOME UNDER THE HEAD 'PROFITS AND GAINS OF BUSINESS OR PROFESSION'. IN THE FACTS OF THE PRESENT CASE, IT CANNOT BE SAID THAT THE ASSESSEE - COMPANY WAS CARRYING ON BUSINESS OF OBTAINING LOANS AND THAT THE REMISSION OF SUCH LOANS BY THE CREDITORS OF THE COMPANY WAS A BENEFIT ARISING FROM SUCH BUSI NESS.' IN VIEW OF THE ABOVE PRINCIPLE LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH THAT THE AMOUNT WAIVED BY THE LENDER BANK IS NOT AN INCOME U/S.2(24) OF THE ACT AND FURTHER SECTION 28 ALSO DOES NOT INCLUDE AMOUNT OF LOAN WAIVE BY THE LENDER U/S 41 OF T HE ACT CANNOT APPLY TO THIS RECEIPT IN RESPECT OF THIS AMOUNT . RESPECTFULLY, FOLLOWING THE HONBLE JURISDICTIONAL HIGH COURT ON THIS ISSUE, WE DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. 6. HE FURTHER SUBMITTED THAT THIS ORD ER OF THE TRIBUNAL WAS CARRIED IN APPEAL BY THE REVENUE AND THE HONBLE GUJARAT HIGH COURT DISMISSED THE APPEAL OF THE REVENUE IN TAX APPEAL NO.1905 OF 2010, VIDE ORDER DATED 14.12.2011 , BY OBSERVING AS UNDER: - FACTS ARE SIMILAR IN THE PRESENT CASE. T HE DECISION IN THE CASE OF CHETAN CHEMICALS PVT. LTD. (SUPRA) COVERS THE SITUATION. COUNSEL FOR THE REVENUE WAS UNABLE TO ESTABLISH THAT THE AMOUNT OF RS.14.12 CRORES REPRESENTED ANY PART OF INTEREST. FROM THE ASSESSING OFFICERS ORDER WE NOTICE THAT THE AM OUNT OF RS.24.10 CRORES REPRESENTED THE PRINCIPAL AMOUNT AN RS.14.12 CRORES AND THE UNPAID INTEREST OF 9.98 CRORES BOTH OF WHICH WERE WAIVED BY THE BANK. SINCE WE ARE NOT CONCERNED WITH THE WAIVER OF UNPAID INTEREST, WE FIND THAT THE ISSUE IS SQUARELY ITA NOS. 1563 & 1172 /AHD/20 11 CORE HEALTHCARE LTD - AY 200 5 - 0 6 - 7 - COVE RED BY THE DECISION IN THE CASE OF CHETAN CHEMICALS PVT . LTD. WE MAKE IT CLEAR THAT WE HAVE PROCEEDED ON THE FOOTING THAT THE AMOUNT OF RS.14.12 CRORES REPRESENTED THE PRINCIPAL AMOUNT ALONE WAIVED BY THE BANK. 7. IN VIEW OF THE ABOVE, AS DEPARTMENTAL R EPRESENTATIVE HAS NOT DISPUTED THAT THE FACTS IN THE PRESENT YEAR ARE IDENTICAL TO THE FACTS THAT WERE BEFORE THE TRIBUNAL IN THE ASSESSMENT YEAR 2002 - 03, WE RESPECTFULLY FOLLOWING THE ABOVE DECISION OF HONBLE GUJARAT HIGH COURT, DISMISS THE APPEAL OF THE REVENUE. 8. IN THE A SSESSEES APPEAL, THE GROUND NOS. 2 & 3 RAISED BY THE ASSESSEE READ AS UNDER: - 2. IN LAW AND FACTS AND CIRCUMSTANCES OF THE APPELLANT COMPANYS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN DISMISSING GROUND OF THE APPELLANT THAT LD . A.O. HAS GROSSLY ERRED IN ISSUING NOTICE U/S 148 OF THE INCOME - TAX ACT DT. 26.05.2008. 3. IN LAW AND FACTS AND CIRCUMSTANCES OF THE APPELLANT COMPANYS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN CONFIRMING RE - ASSESSMENT ORDER PASSED U/S 143(3) R.W.S . 147 OF INCOME - TAX ACT DT. 2 9 . 12 .200 9 . 9. AT THE TIME OF HEARING, THE AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT HE IS NOT PRESSING TH ESE GROUND S OF APPEAL. HENCE, THE SAME ARE DISMISSED AS NOT PRESSED. 10. GROUND NO.4 OF THE ASSESSEES A PPEAL READS AS UNDER: - 4. IN LAW AND FACTS AND CIRCUMSTANCES OF THE A PPELLANT COMPANYS CASE, THE LEARNED CIT(A) HAS GROSSLY ERRED IN REJECTING APPELLANTS GROUND REGARDING WITHDRAWAL OF INTEREST U/S 244A OF IT ACT FOR RS.1,96,240/ - ITA NOS. 1563 & 1172 /AHD/20 11 CORE HEALTHCARE LTD - AY 200 5 - 0 6 - 8 - 11. AT THE TIME OF H EARING, THE AUTHORIZED REPRESENTATIVE SUBMITTED THAT CHARGING OF INTEREST WAS CONSEQUENTIAL. ACCORDINGLY, TH IS GROUND OF APPEAL OF THE ASSESSEE IS DISMISSED. 12. IN THE RESULT, THE REVENU E S APPEAL AS WELL AS THE ASSESSEE S APPEAL , BOTH ARE DISMISSED OR DER PRONOUNCED IN THE COURT ON TUESDAY , THE 23 RD OF DECEMBER , 2014 AT AHMEDABAD. SD/ - SD/ - ( G.C. GUPTA ) VICE PRESIDENT ( N.S. SAINI) ACCOUNTANT MEMBER AHMEDABAD; DATED 23 / 12 /2014 * BIJU T , PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) - XI, AHMEDABAD 5. , , / DR, ITAT, AHMEDABAD 6. [ / GUARD FILE . / BY ORDER, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD