West Bengal Transport Corporation Ltd.,[Formerly The Calcutta Tramways Company (1978) Ltd.], Kolkata V. Principal CIT - 2, Kolkata , Kolkata

ITA 1261/KOL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6164 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 1 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 30-05-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: MD USMAN
• Assessee Lawyers: A BISWAS
• Section: 43B; 263

Judgement Text

1 ITA NO.1261/KOL/2017 WEST BENGAL TRANSPORT CORPORATION LTD., AY: 2012-13 , B , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH: KOL KATA ( ) BEFORE . . , /AND , ) [BEFORE SHRI A. T. VARKEY, JM & SHRI WASEEM AHMED, AM] I.T.A. NO. 1261/KOL/2017 ASSESSMENT YEAR: 2012-13 WEST BENGAL TRANSPORT CORPORATION LTD. (FORMERLY THE CALCUTTA TRAMWAYS CO. (1978) LTD.), (PAN:AABCT7674D) VS. PR. COMMISSIONER OF INCOME-TAX-2, KOLKATA. APPELLANT RESPONDENT DATE OF HEARING 24.04.2018 DATE OF PRONOUNCEMENT 18.07.2018 FOR THE APPELLANT SHRI A. BISWAS, FCA FOR THE RESPONDENT MD. USMAN, CIT, DR ORDER PER SHRI A.T.VARKEY, JM THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE RE VISION ORDER OF PR. CIT-2, KOLKATA DATED 07.03.2017 FOR AY 2012-13 PASSED U/S. 263 OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT). 2. THE ASSESSEE HAS FILED THE RETURN OF INCOME DECL ARING TOTAL LOSS OF RS.62,73,68,417/-. THE ASSESSMENT WAS COMPLETED LATER ON BY SCRUTINY O N 24.03.2015 DETERMINING THE TOTAL LOSS AT RS.62,73,68,417/-. LATER ON THE CASE WAS SELECT ED FOR SCRUTINY BY THE LD. PR. CIT AND HAS INVOKED HIS REVISIONAL JURISDICTION U/S. 263 OF THE ACT. THE LD. PR. CIT FOUND FAULT WITH THE ACTION OF THE AO IN ALLOWING INTEREST OF RS.537.34 LACS AS INTEREST ON THE LOAN, THE ASSESSEE HAD TAKEN FROM THE GOVT. OF WEST BENGAL. ACCORDING TO LD. PR. CIT, THE INTEREST COMPONENT WAS A CONTINGENT LIABILITY AND, THEREFORE, EVEN AS PER MERCANTILE SYSTEM OF ACCOUNTING, INTEREST EXPENDITURE OUGHT NOT TO HAVE BEEN ALLOWED BY THE AO, THEREFORE, HE HAS SET ASIDE THE ASSESSMENT ORDER AND DIRECTED THE AO TO COMPLET E THE ASSESSMENT AFTER DISALLOWANCE OF INTEREST OF RS.537.34 LACS. AGGRIEVED, THE ASSESSE E HAS PREFERRED THIS APPEAL BEFORE US AND HAS TAKEN THE FOLLOWING GROUNDS OF APPEAL: 2 ITA NO.1261/KOL/2017 WEST BENGAL TRANSPORT CORPORATION LTD., AY: 2012-13 1. FOR THAT THE INVOCATION OF THE JURISDICTION U/S . 263 BY THE LEARNED PRINCIPAL COMMISSIONER OF INCOME TAX WAS BAD-IN-LAW SO MUCH S O THAT THERE WAS NO FINDING IN THE ORDER UNDER APPEAL AS TO HOW THE ASSESSMENT ORDER I S ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 2. FOR THAT THE LD. PRINCIPAL COMMISSIONER OF INCOM E TAX FAILED TO CONSIDER (A) THE FOLLOWING 'CLAUSE 4' OF THE RELATED W. B. G OVERNMENT LOAN SANCTION LETTERS; '4. REGARDING THE TERMS AND CONDITIONS OF THE LOAN SANCTIONED HEREBY A FURTHER G. O. WILL BE ISSUED' AND ALSO (B) THE G. O. ON THE SUBJECT MATTER 'LOAN AND ADVAN CES OF THE STATE GOVERNMENT- INTEREST RATES AND OTHER TERMS AND CONDITIONS FOR THE YEAR 2 011-2012' BEARING 'NO. 3173-FB' DT. 30.03.2012, ISSUED BY FINANCE DEPARTMENT, GOVERNMEN T OF WEST BENGAL, WHICH WERE FILED BEFORE HIM DURING THE COURSE OF HE ARING. 3. FOR THAT ON THE FACTS AND IN THE CIRCUMSTANCES T HE LEARNED PRINCIPAL COMMISSIONER OF INCOME TAX WRONGLY AND ARBITRARILY CONSIDERED THE I NTEREST CHARGED @ 6.25% IN THE PROFIT AND LOSS ACCOUNT AMOUNTING TO RS. 5,37,34,000/- AS CONTINGENT LIABILITY. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE AT THE FIRST INSTANCE ITSELF NOTE THAT TH E LOAN WAS SANCTIONED BY THE WEST BENGAL GOVERNMENT AND AS PER THE TERMS AND CONDITIONS OF T HE LOAN SANCTIONED IT WAS PROVIDED THAT THE G.O. WILL BE ISSUED LATER ON PRESCRIBING THE TE RMS AND CONDITIONS OF THE LOAN SANCTIONED. THEREAFTER, THE G.O. ON THE SUBJECT MATTER LOANS AND ADVANCES OF THE STATE GOVT. & INTEREST RATES AND OTHER TERM AND CONDITIONS FOR THE YEAR 2 011-12 WHEREIN NO. 3173-FB WHEREIN DIFFERENT RATES OF INTEREST HAS BEEN SPECIFIED DEPE NDING UPON THE CATEGORY OF BORROWER AND THE TYPE OF LOAN WHICH VARIES FROM 6.75% TO 13.50% (PAPER BOOK PAGE 10) AND THE ASSESSEE HAD DEBITED INTEREST AT 6.25% WHICH WAS ESTIMATED O N CONSISTENT BASIS IN ITS P&L ACCOUNT. IN THE LIGHT OF THE AFORESAID G.O. THE INTEREST ON THE BORROWED FUNDS CANNOT BE TERMED AS A CONTINGENT LIABILITY. HOWEVER, WE NOTE THAT THOUGH THE ASSESSEE HAD DEBITED RS.537.34 LACS I.E. 6.25% OF THE BORROWED FUNDS AS INTEREST EXPEND ITURE AND CLAIMED DEDUCTION OF THE SAME. HOWEVER, THE SAID SUM WAS NOT PAID BEFORE THE DUE D ATE OF FILING OF THE RETURN OF INCOME. SO, AS PER SECTION 43B OF THE ACT, THE SUM OF INTER EST NOT PAID CANNOT BE ALLOWED AS EXPENDITURE IN THIS A.Y. AND SINCE THE AO HAS ACCEP TED THE RETURN OF INCOME OF THE ASSESSEE WITHOUT LOOKING INTO THE FACT THAT THE ASSESSEE HAS NOT REMITTED THE INTEREST TO THE LENDER, SO AS PER SECTION 43B OF THE ACT THE EXPENDITURE CLAIM ED ON INTEREST INCURRED ON THE LOAN TAKEN, COULD NOT HAVE BEEN ALLOWED AND, THEREFORE, THE ORD ER OF THE AO IS ERRONEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF THE REVENUE. IN SUC H A SCENARIO, WE UPHOLD THE IMPUGNED ORDER 3 ITA NO.1261/KOL/2017 WEST BENGAL TRANSPORT CORPORATION LTD., AY: 2012-13 ON THE REASON DISCUSSED AND THEREFORE THE PR. CITS ACTION IN SETTING ASIDE THE ORDER OF THE AO AND DIRECTING HIM TO REASSESS THE ASSESSMENT AND DISALLOW INTEREST OF RS.537.34 LACS IS IN ORDER AND CALLS FOR NO INTERFERENCE FROM OUR PAR T. SO, WE DISMISS THE APPEAL OF THE ASSESSEE. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 18.07.20 18 SD/- SD/- (WASEEM AHMED) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : `18TH JULY, 2018 JD.(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1. APPELLANT WEST BENGAL TRANSPORT CORPORATION LT D., (FORMERLY THE CALCUTTA TRAMWAYS CO. (1978) LTD.), 12, R. N. MUKHE RJEE ROAD, KOLKATA-700 001. 2. 3. 4. RESPONDENT PR. C.I.T-2, KOLKATA. DCIT-4(2), KOLKATA. DR, ITAT, KOLKATA. (SENT THROUGH E-MAIL) / TRUE COPY, BY ORDER, SR. PVT. SECRETARY