Asst. CIT, Circle-1, Aurangabad V. M/s. Nath Bio-Genes (India) Ltd., Aurangabad

ITA 1225/PUN/2013

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 6712 (ITAT-PUNE)
• Duration Of Justice: 11 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 31-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Competent authority

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER ITA NO.1115/PN/2013 (A.Y: 2009-10) NATH BIOGENES INDIA LTD. NATH HOUSE, NATH ROAD, AURANGABAD - 431005 PAN: AABCN7978E APPELLANT VS. JT. CIT, RANGE-1, AURANGABAD RESPONDENT ITA NO.1225/PN/2013 (A.Y: 2009-10) JT. CIT, RANGE-1, AURANGABAD APPELLANT VS. NATH BIOGENES INDIA LTD. NATH HOUSE, NATH ROAD, AURANGABAD - 431005 PAN: AABCN7978E RESPONDENT ASSESSEE BY : NONE (WRITTEN SUBMISSIONS BY THE ASSESSEE) DEPARTMENT BY : SMT. M.S. VERMA, CIT DATE OF HEARING : 28.05.2014 DATE OF PRONOUNCEMENT : 28.05.2014 ORDER PER BENCH : THESE CROSS APPEALS FILED AGAINST THE ORDER OF COMM ISSIONER OF INCOME TAX (APPEALS), [(IN SHORT CIT(A)], AURANG ABAD, FOR A.Y. 2009-10. 2. IN ITA NO.1115/PN/2013, THE ASSESSEE HAS FILED T HE APPEAL ON THE FOLLOWING GROUNDS. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ER RED IN CONFIRMING ACTION OF THE ASSESSING OFFICER IN MAKIN G AN ADDITION OF RS.1,27,53,855/- ON ACCOUNT OF WRITE OF F OF THE PRINCIPAL PORTION OF CASH CREDIT LOAN WAIVED BY BAN KS. THE APPELLANT PRAYS THAT: 1. PERSONAL HEARING MAY BE GRANTED 2. DEMAND OF DISPUTED DEMAND MAY BE STAYED TILL HEARING AND DISPOSAL OF APPEAL ON MERITS 3. ANY OTHER RELIEF YOUR HONORS MAY DEEM FIT 4. THE APPELLANT CRAVES LEAVE TO ADDITION, ALTER, AMEN D OR DELETE ANY OF THE ABOVE GROUND OF APPEAL. 3. THE ASSESSEE IS A PRIVATE COMPANY, ENGAGED IN TH E BUSINESS OF SEED PRODUCTION AND PROCESSING ACTIVITIES. IN A SSESSEES APPEAL, THE ONLY ISSUE IS WITH REGARD TO ADDITION OF 1,27,53,855/- BEING CASH CREDIT LOAN WAIVED BY THE BANK. A SIMILAR ISS UE AROSE ITA NO.367/PN/2012 & ANOTHER IN ASSESSEES OWN CASE FOR A.Y. 2008- 09 AND THE SAME WAS DECIDED AGAINST THE ASSESSEE BY OBSERVING AS UNDER: 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PART IES AND PERUSED THE RECORD. IN THIS CASE IT IS NOT DISPUTE D THAT ON FACTS THE AMOUNT OF RS.1,27,53,855/- PERTAINS TO TH E CASH CREDIT LOAN WAIVED BY THE BANK. THE ASSESSEE HAS N OT DISPUTED THE QUANTUM WORKED OUT BY THE ASSESSING OF FICER APPLYING THE RATIO ON PRORATA BASIS. THE ONLY ISSU E BEFORE US IS NOW WHETHER TO ACCEPT THE SUBMISSION OF THE ASSE SSEE THAT WAIVER OF THE CASH CREDIT LOAN IS NOT LIABLE TO TAX AS THE SAID AMOUNT WAS NOT RECEIVED IN THE COURSE OF TRADING TR ANSACTION. IN FACT THIS ISSUE HAS BEEN CONSIDERED BY THE HON'B LE HIGH COURT OF DELHI IN THE CASE OF LOGITRONICS P. LTD. V S. CIT AND CIT VS. JUBILANT SECURITIES P. LTD. 333 ITR 386 (DE LHI). THE HON'BLE HIGH COURT HAS CONSIDERED THE DECISION OF T HE HON'BLE SUPREME COURT IN THE CASE OF CIT VS. T.V. SUNDARAM IYENGAR AND SONS LTD. (SUPRA) AND PLETHORA OF THE OTHER DEC ISIONS INCLUDING THE DECISION OF THE HON'BLE HIGH COURT OF BOMBAY IN THE CASE OF SOLID CONTAINERS LTD. (SUPRA). THE HON 'BLE HIGH COURT HAS ALSO REFERRED TO THE DECISION OF THE HON' BLE HIGH COURT OF BOMBAY IN THE CASE OF MAHINDRA AND MAHINDR A LTD. VS. CIT 261 ITR 501 (BOM) AND HELD AS UNDER: 23. IN THE CONTEXT OF WAIVER OF LOAN AMOUNT, WHAT FOLLOWS FROM THE READING OF THE AFORESAID JUDGMENT IS THAT THE ANSWER WOULD DEPEND UPON THE PURPOSE FOR WHICH THE SAID LOAN WAS TAKEN. IF THE LOAN WAS TAKEN FOR ACQ UIRING THE CAPITAL ASSET, WAIVER THEREOF WOULD NOT AMOUNT TO ANY INCOME EXIGIBLE TO TAX. ON THE OTHER HAND, IF THIS LOAN WAS FOR TRADING PURPOSE AND WAS TREATED AS SUCH FROM TH E VERY BEGINNING IN THE BOOKS OF ACCOUNT, AS PER T.V. SUNDARAM IYENGAR AND SONS LTD. [1996] 222 ITR 344 (SC), THE WAIVER THEREOF MAY RESULT IN THE INCOME M ORE SO WHEN IT WAS TRANSFERRED TO THE PROFIT AND LOSS ACCO UNT. IN OUR OPINION, THE LD. CIT(A) HAS RIGHTLY CONFIRME D THE ADDITION MADE BY THE ASSESSING OFFICER TO THE EXTEN T OF WAIVER TO THE CASH CREDIT LOAN. WE DO NOT FIND ANY MERIT IN THE APPEAL FILED BY THE ASSESSEE. ACCORDINGLY, THE GRO UND TAKEN BY THE ASSESSEE IS DISMISSED. 3.1 NOTHING CONTRARY HAS BEEN BROUGHT TO OUR KNOWLE DGE ON BEHALF OF ASSESSEE. FACTS BEING SIMILAR, SO FOLLOW ING THE SAME REASONING, WE ARE NOT INCLINED TO INTERFERE WITH TH E FINDING OF CIT(A), WHO HAS CONFIRMED THE ORDER OF ASSESSING OF FICER IN MAKING ADDITION OF 1,27,35,855/- ON ACCOUNT OF WRITE OFF OF PRINCIPAL PORTION OF CASH CREDIT LOAN WAIVED BY THE BANK. IN THE RESULT, THE APPEAL OF ASSESSEE IS DISMISSED. 4. IN ITA NO.1225/PN/2013, THE REVENUE HAS FILED TH E APPEAL ON THE FOLLOWING GROUNDS: 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT(A) WAS RIGHT IN DELETING THE ADDITION ON ACC OUNT OF SECTION 35(2AB) EVEN THOUGH, THE ASSESSEE HAS NOT A PPROVED BY PRESCRIBED AUTHORITY IN THE FORM NO. 3CM. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITION O N ACCOUNT OF PRINCIPLE AMOUNT OF WAIVER OF LOAN EVEN THOUGH IT I S COVERED U/S. 41(1) AND FINDING OF HON'BLE APEX COURT. 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITION ON ACCOUN T OF WEIGHTED DEDUCTION CLAIMED BY THE ASSESSEE U/S. 35( 2AB) OF THE ACT. 4. THE ORDER OF THE AO BE RESTORED AND THAT OF THE CIT (A) BE VACATED. 5. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTER A NY GROUNDS OF APPEAL. 5. THE FIRST ISSUE IS WITH REGARD TO ADDITION ON A CCOUNT OF SECTION 35(2AB). THE LEARNED AUTHORIZED REPRESENTA TIVE HAS POINTED OUT THAT THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE VIDE ORDER IN ITA NO.367/PN/2012 & ANOTHER IN ASSESSEES OWN CASE FOR A.Y. 2008-09, WHEREIN, THE TRIBUNAL ON THIS ISSUE H AS HELD AS UNDER: 12. WE HAVE HEARD THE PARTIES AND ALSO PERUSED THE REASONS GIVEN BY THE LD. CIT(A). THE ONLY RESERVATION OF T HE ASSESSING OFFICER WAS IN RESPECT OF THE FORM IN WHICH THE P RESCRIBED AUTHORITY HAS GIVEN THE RECOGNITION WHICH IN THIS C ASE IS SECRETARY, DEPARTMENT OF SCIENTIFIC & INDUSTRIAL RE SEARCH, GOVERNMENT OF INDIA. THE ASSESSEE FILED THE COPY O F THE APPROVAL RECEIVED FROM THE COMPETENT AUTHORITY. IT IS TRUE THAT IT IS NOT IN CLEAR TERMS IN FORM NO. 3CM WHICH HAS BEEN PRESCRIBED UNDER THE INCOME-TAX RULE, 1962. WE CON CUR WITH THE FINDING OF THE LD. CIT(A) THAT IF THE APPROVAL IS NOT IN PRESCRIBED FORM NO. 3CM IS NOT A SERIOUS DISCREPANC Y WHICH SHOULD RESULT IN DISALLOWANCE OF THE DEDUCTION TO T HE ASSESSEE U/S. 35(2AB) OF THE ACT. IN THIS CASE, IT IS NOT D ISPUTED THAT THE ASSESSEE HAS APPLIED TO THE COMPETENT AUTHORITY FOR GETTING THE APPROVAL/RECOGNITION AND ONLY AFTER THE VERIFICATION OF ALL THE DETAILS THE PRESCRIBED AUTHORITY HAVE IS SUED THE APPROVAL LETTER. IN OUR OPINION, THE LD. CIT(A) HA S RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE AND NO INTERFEREN CE IS CALLED FOR IN THE FINDINGS OF THE LD. CIT(A). ACCORDINGLY , GROUND NO. 1 IS DISMISSED. 5.1 NOTHING CONTRARY HAS BEEN BROUGHT TO OUR KNOWLE DGE ON BEHALF OF REVENUE. FACTS BEING SIMILAR, SO FOLLOWI NG THE SAME REASONING, WE ARE NOT INCLINED TO INTERFERE WITH TH E FINDING OF CIT(A) WHO HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF SECTION 35(2AB). WE UPHOLD THE SAME. 6. THE NEXT ISSUE IS WITH REGARD TO ADDITION ON ACC OUNT OF PRINCIPAL AMOUNT OF WAIVER OF LOAN. AT THE OUTSET OF HEARING, THE LEARNED AUTHORIZED REPRESENTATIVE HAS POINTED OUT T HAT THIS ISSUE IS COVERED IN FAVOUR OF ASSESSEE VIDE ORDER IN ITA NO.367/PN/2012 & ANOTHER IN ASSESSEES OWN CASE FOR A.Y. 2008-09, WHEREIN, THE TRIBUNAL HAS UPHELD THE ORDER OF CIT(A), WHO HAS DE LETED THE ADDITION MADE ON ACCOUNT OF WAIVER OF PRINCIPAL AMO UNT HAS BEEN UPHELD BY OBSERVING AS UNDER: 15. WE HAVE HEARD THE PARTIES. WE FIND THAT THE L D. CIT(A) HAS DISCUSSED THE RELEVANT PRECEDENTS ON THIS ISSUE . ADMITTEDLY, THERE IS NO DISPUTE ABOUT THE FACT THAT THE SAID AMOUNT PERTAINS TO THE TERM LOAN. IN THIS RESPECT WE MAY LIKE TO REFERRED TO THE DECISION OF THE HON'BLE HIGH COU RT OF BOMBAY IN THE CASE OF CIT-3, MUMBAI VS. M/S. XYLON HOLDINGS PVT. LTD., INCOME TAX APPEAL NO. 3704 OF 2 010 JUDGMENT DATED 13-09-2012. THE HON'BLE HIGH COURT HAS CONSIDERED ALL THE RELEVANT DECISIONS ON THIS ISSUE AND HELD AS UNDER: 8) WE HAVE CONSIDERED THE SUBMISSIONS. THE ISSUE ARISING IN THIS CASE STAND COVERED BY THE DECISION OF THIS COURT IN THE MATTER OF MAHINDRA & MAHINDRA (SUPRA). THE DECISION OF THIS COURT IN THE MATTER OF SOLID CONTA INERS (SUPRA) IS ON COMPLETELY DIFFERENT FACTS AND INAPPL ICABLE TO THIS CASE. IN THE MATTER OF SOLID CONTAINERS (SUPRA ) THE ASSESSEE THEREIN HAD TAKEN A LOAN FOR BUSINESS PURP OSE. IN VIEW OF THE CONSENT TERMS ARRIVED AT, THE AMOUNT OF LOAN TAKEN WAS WAIVED BY THE LENDER. THE CASE OF TH E ASSESSEE THEREIN WAS THAT THE LOAN WAS A CAPITAL RE CEIPT AND HAS NOT BEEN CLAIMED AS DEDUCTION FROM THE TAXA BLE INCOME IN THE EARLIER YEARS AND WOULD NOT COME WITH IN THE PURVIEW OF SECTION 41(1) OF THE ACT. HOWEVER, THIS COURT BY PLACING RELIANCE UPON THE DECISION OF THE APEX COUR T IN THE MATTER OF CIT V. T. V. SUNDARAM IYENGAR AND SONS LT D. 222 ITR 344 HELD THAT THE LOAN WAS RECEIVED BY THE ASSESSEE FOR CARRYING ON ITS BUSINESS AND THEREFORE , NOT A LOAN TAKEN FOR THE PURCHASE OF CAPITAL ASSETS. CONSEQUENTLY, THE DECISION OF THIS COURT IN THE MAT TER OF MAHINDRA AND MAHINDRA LIMITED (SUPRA) WAS DISTINGUISHED AS IN THE SAID CASE THE LOAN WAS TAKE N FOR THE PURCHASE OF CAPITAL ASSETS AND NOT FOR TRADING ACTIVITIES AS IN THE CASE OF SOLID CONTAINERS LIMIT ED (SUPRA). IN VIEW OF THE ABOVE, THE DECISION OF THIS COURT IN THE MATTER OF SOLID CONTAINERS LIMITED (SUPRA) WILL HAVE NO APPLICATION TO THE FACTS OF THE PRESENT CASE AND TH E MATTER STANDS COVERED BY THE DECISION OF THIS COURT IN THE MATTER OF MAHINDRA & MAHINDRA LIMITED (SUPRA). THE ALTERNA TIVE SUBMISSION THAT THE AMOUNT OF LOAN WRITTEN OFF WOUL D BE TAXABLE UNDER SECTION 28(IV) OF THE ACT ALSO CAME U P FOR CONSIDERATION BEFORE THIS COURT IN THE MATTER OF MA HINDRA & MAHINDRA LIMITED (SUPRA) AND IT WAS HELD THEREIN THAT SECTION 28(IV) OF THE ACT WOULD APPLY ONLY WHEN A B ENEFIT OR PERQUISITE IS RECEIVED IN KIND AND HAS NO APPLIC ATION WHERE BENEFIT IS RECEIVED IN CASH OR MONEY. 16. IN THIS CASE THE NATURE OF THE LOAN WHICH HAS B EEN WAIVED IN ONE TIME SETTLEMENT IS NOT DISPUTED. IN OUR OPINION, THE ASSESSEES CASE IS SQUARELY COVERED BY THE DECI SION IN THE CASE OF M/S. XYLON HOLDINGS PVT. LTD. (SUPRA) AS TH E AMOUNT WAIVED PERTAINS TO THE TERM LOAN WHICH WAS TAKEN BY THE ASSESSEE FOR ACQUITION OF THE ASSETS. AFTER CONSID ERING THE DETAIL REASONING GIVEN BY THE LD. CIT(A), IN OUR OP INION NO INTERFERENCE IS CALLED FOR. ACCORDINGLY, GROUND NO . 3 IS DISMISSED. 6.1 NOTHING CONTRARY HAS BEEN BROUGHT TO OUR KNOWLE DGE ON BEHALF OF REVENUE. FACTS BEING SIMILAR, SO FOLLOWI NG THE SAME REASONING, WE ARE NOT INCLINED TO INTERFERE WITH TH E FINDING OF CIT(A), WHO HAS RIGHTLY DELETED THE ADDITION MADE B Y THE ASSESSING OFFICER ON ACCOUNT OF PRINCIPAL AMOUNT OF WAIVER OF LOAN. WE UPHOLD THE SAME. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE AS WELL AS REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE DAY OF 28 TH MAY, 2014. SD/- SD/- (G.S. PANNU) (SHAILENDRA KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED THE 28 TH MAY, 2014 GCVSR COPY TO:- 1) ASSESSEE, 2) THE DEPARTMENT 3) THE CIT(A), AURANGABAD 4) THE CIT, AURANGABAD 5) THE DR, A BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, ITAT, PUNE.