ACIT, CHENNAI V. Ramaniyam Homes P Ltd., CHENNAI

ITA 1245/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58018 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 29-02-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 06-07-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI
• Assessee Lawyers: T S SIVA RAMAKRISHNAN
• Keywords: Capital asset; Principle of natural justice; Capital receipt

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NO. 1245/MDS/2011 (ASSESSMENT YEAR : 2006-07) THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE V(2), CHENNAI - 600 034 . (APPELLANT) V. M/S RAMANIYAM HOMES P. LTD., (FORMERLY KNOWN AS RASI SILK INDUSTRIES LIMITED), SRUTI, OLD NO.11, NEW NO.21, 2 ND MAIN ROAD, GANDHI NAGAR, ADYAR, CHENNAI - 600 020. PAN : AABCR5878D (RESPONDENT) APPELLANT BY : SHRI ANIRUDH RAI, CIT-DR RESPONDENT BY : SHRI T.S. SIVA RAMAKRISHNAN, CA DATE OF HEARING : 29.02.2012 DATE OF PRONOUNCEMENT : 09.03.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE REVENUE, IT HAS TAKEN FOUR GROUNDS, OUT OF WHICH, GROUND NOS.1 AND 4 ARE GENERAL NEEDIN G NO ADJUDICATION. I.T.A. NO. 1245/MDS/11 2 2. VIDE ITS GROUND NO.2, REVENUE IS AGGRIEVED THAT LD. CIT(APPEALS) DELETED A DISALLOWANCE OF ` 1,20,26,254/- MADE BY THE A.O., BASED ON FRESH EVIDENCE PRODUCED DURING THE A PPELLATE PROCEEDINGS. AS PER THE REVENUE, THERE WAS VIOLATI ON OF RULE 46A OF INCOME-TAX RULES, 1962. 2. SHORT FACTS APROPOS ARE THAT ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF SILK FABRICS, HAD CLAI MED A SUM OF ` 1,20,26,254/- AS INTEREST ON TERM LOAN ON PAYMENT B ASIS. AS PER THE A.O., THE DETAILS FURNISHED BY THE ASSESSEE PROVED THAT OUT OF THE SAID AMOUNT, ` 93,89,844/- WAS TRANSFERRED TO AN OTS SCHEME AND TH ERE WERE NO ACTUAL PAYMENTS EFFECTED BY THE ASSESSEE. THOUGH ASSESSEE WAS REQUIRED TO FURNISH EVIDENCE FOR PAYME NT OF INTEREST, AS PER THE A.O., THE ASSESSEE COULD PRODUCE ONLY A LED GER PAGE COPY AND NOT ANY BANK STATEMENT. THE ENTIRE CLAIM WAS, THEREFORE, DISALLOWED BY THE A.O. 3. IN ITS APPEAL BEFORE LD. CIT(APPEALS), ARGUMENT OF THE ASSESSEE WAS THAT THERE WAS A SETTLEMENT OF LOAN UNDER A SCH EME CALLED OTS SCHEME. AS PER THE ASSESSEE, SINCE SETTLEMENT WAS UNDER OTS SCHEME, IN ORDER TO ENSURE TRANSPARENCY AND IDENTIF ICATION, A SEPARATE LEDGER FOLIO STYLED AS OTS ACCOUNT NO.457 181236 WAS I.T.A. NO. 1245/MDS/11 3 MAINTAINED. THE AMOUNTS PAID UNDER THE OTS SCHEME WERE SHOWN IN SUCH ACCOUNT AND ON THE YEAR END TRANSFERRED TO INDIAN BANK LOAN ACCOUNT LEDGER FOLIO FITL 576/274. AS PER THE ASSE SSEE, THE PAYMENTS EFFECTED IN THE OTS SCHEME WERE CORRECTLY RECORDED AND THE INTEREST STOOD FULLY PAID. ASSESSEE PRODUCED B EFORE LD. CIT(APPEALS) RELEVANT LEDGER ACCOUNT COPIES AND ALS O A CONFIRMATION FROM BANK. BASED ON THESE, LD. CIT(APPEALS) CAME T O A CONCLUSION THAT ASSESSEE HAD ACTUALLY EFFECTED THE PAYMENTS AN D THE JOURNAL ENTRY WAS ONLY FOR TRANSFER OF BALANCE IN OTS ACCOU NT TO THE BANK ACCOUNT. HE, THEREFORE, DELETED THE DISALLOWANCE O F ` 1,20,26,254/-. 4. NOW BEFORE US, LEARNED D.R. SUBMITTED THAT A FRE SH EVIDENCE WAS PRODUCED BEFORE LD. CIT(APPEALS) WHICH WAS CONS IDERED BY THE LD. CIT(APPEALS) FOR DELETING THE ADDITION AND THIS WAS DONE WITHOUT PUTTING IT BEFORE THE A.O. 5. PER CONTRA, LEARNED A.R. STRONGLY SUPPORTED THE ORDER OF LD. CIT(APPEALS) AND SUBMITTED THAT NO FRESH EVIDENCE W AS SUBMITTED BUT ONLY A CONFIRMATION AS TO THE CLOSING BALANCE A S ON 31.3.2006. ACCORDING TO LEARNED A.R., THIS WAS VERY MUCH AVAIL ABLE BEFORE THE A.O. AT THE TIME OF ASSESSMENT ALSO. I.T.A. NO. 1245/MDS/11 4 6. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. WITH REGARD TO THE DISALLOWANCE OF ` 1,20,26,254/-, WHAT HAS BEEN STATED BY THE A.O. IS REPRODUCED AS UNDER:- IN THE COMPUTATION, THE ASSESSEE HAD CLAIMED ` 1,20,26,254/- AS INTEREST ON TERM LOAN ON PAYMENT BASIS. FROM THE D ETAILS FURNISHED IT IS SEEN THAT ` 93,89,844/- HAD BEEN TRANSFERRED TO OTS SCHEME WITHOUT PAYING IT AS DISCUSSED IN THE AB OVE PARA. FURTHER, BEING ASKED TO PRODUCE THE EVIDENCE FOR PA YOUT OF INTEREST, THE AUTHORIZED REPRESENTATIVE PRODUCED ON LY THE LEDGER, NOT SUPPORTED BY BANK STATEMENT. THEREFORE , THE ENTIRE CLAIM OF PAYMENT OF INTEREST ` 1,20,26,254/- IS DISALLOWED. IT IS CLEAR FROM THE ABOVE THAT ASSESSEE HAD PRODUC ED ONLY LEDGER AND DID NOT PRODUCE THE BANK STATEMENT. MAY BE IT IS TRUE THAT ASSESSEE HAD SEPARATELY SHOWN THE PAYMENTS UNDER TH E OTS SCHEME IN ITS BOOKS, JUST FOR CONVENIENCE AND BALAN CE THEREIN WAS TRANSFERRED TO INDIAN BANK BY PASSING A JOURNAL ENT RY AT THE END OF THE YEAR. NO DOUBT, THE PAYMENTS SHOWN UNDER OTS SCHEM E WERE ACTUAL PAYMENTS AND NOT A JOURNAL ENTRY, BUT, IN OU R CONSIDERED OPINION, IT IS ALSO A FACT THAT ASSESSEE DID NOT PR ODUCE THE RELEVANT BANK STATEMENT BEFORE THE ASSESSING OFFICER. UNLES S THE BANK STATEMENTS WERE PRODUCED, IT COULD NOT BE SAID THAT ASSESSEE HAD FURNISHED FULL DETAILS OF THE PAYMENTS EFFECTED UND ER THE OTS SCHEME AND IT COULD NEVER BE STATED WITH CERTAINTY THAT SU CH PAYMENTS WERE I.T.A. NO. 1245/MDS/11 5 REFLECTED IN THE BANK STATEMENT ALSO. THESE RECORD S WERE NEVER BEFORE THE ASSESSING OFFICER. IN OUR OPINION, THE MATTER NEEDS FRESH LOOK BY THE A.O. THERE WAS VIOLATION OF PRINCIPLE OF NATURAL JUSTICE WHEN LD. CIT(APPEALS) DID NOT PUT ALL THESE SUBMISS IONS BEFORE THE A.O. BEFORE ALLOWING THE CLAIM OF THE ASSESSEE. WE , THEREFORE, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND REMIT THE MATTER TO THE A.O. FOR CONSIDERATION DE NOVO. ASSESSEE SHALL PRO DUCE ALL THE RECORDS RELATING TO OTS SCHEME AND BANK STATEMENTS AND A.O. SHALL PROCEED IN ACCORDANCE WITH LAW. 7. VIDE GROUND NO.3, GRIEVANCE OF THE REVENUE IS TH AT LD. CIT(APPEALS) DELETED AN ADDITION OF ` 3,58,78,222/- REPRESENTING PRINCIPAL PORTION OF THE TERM LOAN WAIVED BY THE BA NK. 8. FACTS APROPOS ARE THAT UNDER THE OTS SCHEME WITH BANK, THE BANK HAD WAIVED A SUM OF ` 3,58,78,222/-, BEING THE PRINCIPAL PORTION REMAINING OUT OF A TERM LOAN. AS PER THE ASSESSING OFFICER, THIS WAIVER RESULTED IN INCOME FALLING UNDER SECTION 28( IV) OF THE ACT, BEING BENEFIT ARISING FOR BUSINESS. HE, THEREFORE, MADE AN ADDITION OF THE SAID SUM IN ASSESSEES HANDS. I.T.A. NO. 1245/MDS/11 6 9. IN ITS APPEAL BEFORE LD. CIT(APPEALS), ARGUMENT OF THE ASSESSEE WAS THAT SECTION 28(IV) OF THE ACT HAD NO APPLICATI ON. AS PER THE ASSESSEE, WHAT WAS WAIVED BY THE BANK UNDER THE OTS SCHEME WAS THE PRINCIPAL PORTION OF TERM LOAN COMING TO ` 3,58,78,222/-. THIS BEING A WAIVER OF TERM LOAN USED FOR ACQUIRING FIXE D ASSETS, IT RESULTED ONLY IN CAPITAL RECEIPT WHICH COULD NOT BE TAXED. ACCORDING TO THE ASSESSEE, THE AMOUNT BEING PRINCIPAL AMOUNT OF TERM LOAN WAIVED, SECTION 28(IV) OF THE ACT HAD NO APPLICATION. RELI ANCE WAS PLACED ON THE DECISION OF JURISDICTIONAL HIGH COURT IN THE CA SE OF ISKRAEMECO REGENT LIMITED V. CIT (331 ITR 317). LD. CIT(APPEA LS) WAS APPRECIATIVE OF THESE CONTENTIONS. ACCORDING TO HI M, THE CASE OF THE ASSESSEE WAS VERY SIMILAR TO THAT BEFORE HONBLE JU RISDICTIONAL HIGH COURT IN ISKRAEMECO REGENT LIMITED (SUPRA). LD. CI T(APPEALS) NOTED THAT THEIR LORDSHIPS HAD GIVEN A SPECIFIC FINDING T HAT SECTION 28(IV) OF THE ACT DEALT WITH BENEFITS RECEIVED IN KIND AND IT HAD NO APPLICATION WHATSOEVER TO A TRANSACTION WHICH INVOLVED MONEY. LD. CIT(APPEALS) THUS DELETED THE ADDITION. 10. NOW BEFORE US, LEARNED D.R. STRONGLY ASSAILING THE ORDER OF LD. CIT(APPEALS), SUBMITTED THAT ASSESSEE WAS ENRICHED BY THE SAID SUM I.T.A. NO. 1245/MDS/11 7 WHEN THE TERM LOAN WAS WAIVED AND THEREFORE, THE A. O. HAD RIGHTLY TAXED THE SUM. 11. PER CONTRA, LEARNED A.R. SUPPORTED THE ORDER OF LD. CIT(APPEALS). 12. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THERE IS NO DISPUTE THAT THE WAIVER OF THE AMOUNT P ERTAINED TO PRINCIPAL AMOUNT OUTSTANDING OUT OF A TERM LOAN. T HERE IS ALSO NO DISPUTE THAT THE TERM LOAN WAS USED BY THE ASSESSEE FOR ACQUIRING CAPITAL ASSETS. HENCE, IN OUR OPINION, WHEN THIS W AS WAIVED, WHAT WAS RECEIVED BY THE ASSESSEE WAS IN THE CAPITAL FIE LD. IF WE LOOK AT SECTION 28(IV) OF THE ACT, AS HELD BY THEIR LORDSHI P, IN THE CASE OF ISKRAEMECO REGENT LIMITED (SUPRA), IT CONCERNS ONLY BENEFITS OR PERQUISITES RECEIVED IN KIND AND NOT SOMETHING WHIC H INVOLVED MONEY. WE ARE OF THE OPINION THAT LD. CIT(APPEALS) WAS WELL JUSTIFIED IN RELYING ON THE DECISION OF HONBLE JURISDICTIONA L HIGH COURT IN THE CASE OF ISKRAEMECO REGENT LIMITED (SUPRA) FOR DELET ING THE ADDITION. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORD ER OF LD. CIT(APPEALS). 13. GROUND NO.3 OF THE REVENUE STANDS DISMISSED. I.T.A. NO. 1245/MDS/11 8 14. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 9 TH MARCH, 2012. SD/- SD/- (VIKAS AWASTHY) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 9 TH MARCH, 2012. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-V, CHENNAI-34 (4) CIT, CHENNAI-III, CHENNAI (5) D.R. (6) GUARD FILE