Appeal Details
Counselvise Citation
147121114 RSA 2013
Assessee PAN
Bench
Appeal Number
Duration Of Justice
1 year(s) 8 month(s) 8 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
03-07-2015
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
A
Next Hearing Date
10-06-2015
Assessment Year
2008-2009
Appeal Filed On
25-10-2013
Judgement Text
ITA.1417 & 1693/BANG/2015 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'B', BANGALORE BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI. ABRAHAM P. GEORGE, ACCOUNTANT MEMBER I.T.A NO.1417/BANG/2013 (ASSESSMENT YEAR : 2008-09) M/S. TUNGABHADRA FERTILIZERS & CHEMICALS LTD, NO.101, HULAGI ROAD, MUNIRABAD, KOPPAL DISTRICT 583 224 .. APPELLAN T PAN : AABCT1839N V. DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-1, BELLARY .. RESPONDENT I.T.A NO.1693/BANG/2013 (ASSESSMENT YEAR : 2008-09) (BY THE REVENUE) ASSESSEE BY : SHRI. C. R. NULVI, CA REVENUE BY : DR. P. K. SRIHARI, ADDL. CIT HEARD ON : 10.06.2015 PRONOUNCED ON : 03.07.2015 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THESE ARE CROSS APPEALS FILED BY ASSESSEE AND REVE NUE RESPECTIVELY, DIRECTED AGAINST THE ORDER DT.29.08.2013, OF THE CI T (A), HUBLI, FOR THE ASSESSMENT YEAR 2008-09. ITA.1417 & 1693/BANG/2015 PAGE - 2 02. ASSESSEES APPEAL IS TAKEN UP FIRST. ASSESSEE HAS FILED REVISED SET OF GROUNDS AND AS PER THIS REVISED SET OF GROUNDS IT I S ASSAILING AN ADDITION OF RS.66.85,373/- MADE BY THE AO, WHICH WAS CONFIRMED BY THE CIT (A). 03. FACTS APROPOS ARE THAT ASSESSEE, A MANUFACTURER OF CHEMICALS AND FERTILIZERS, HAD FILED RETURN FOR IMPUGNED ASSESSM ENT YEAR DECLARING NIL INCOME UNDER NORMAL PROVISIONS OF THE ACT AND BOOK PROFIT OF RS.1,81,55,129/-, U/S.115JB OF THE ACT. DURING THE COURSE OF ASSESSM ENT PROCEEDINGS, IT WAS NOTED BY THE AO THAT ASSESSEE HAD RESTRUCTURED ITS LOANS BY CONVERTING ACCRUED INTERESTS AS LOAN, BASED ON A BIFR SANCTIONED SCHEM E. AS PER THE AO THIS SCHEME WAS SANCTIONED BY BIFR ON 17.10.2007, BASED ON WHICH CANARA BANK HAD VIDE ITS LETTER DT. 08.02.2008, RESTRUCTURED TH E LOANS TREATING THE INTEREST ON WORKING CAPITAL AND TERM LOAN, UP TO 08.02.2008, AS PART OF TERM LOAN. AS PER THE AO, ASSESSEE HAD IN ITS BALANCE SHEET AS ON 31. 03.2008 SHOWN THE RESTRUCTUREDBALANCES OF PRINCIPAL LOANS, AS PER TH E ABOVE LETTER. HOWEVER, IT DID NOT ACCOUNT THE GAIN ARISING OUT OF REDUCTION OF IN TEREST LIABILITY AS ITS INCOME. ASSESSEE WAS PUT ON NOTICE AS TO WHY INTEREST REDUC TION SHOULD NOT BE ADDED BACK TO ITS INCOME. REPLY OF THE ASSESSEE READ AS UNDER : 'THIS HAS REFERENCE TO YOUR LETTER NO.DCIT C-1/2010 -11 DT. 15.09.2010 ON THE CAPTIONED SUBJECT INVITING DETAILS/INFORMATION/CLARIFICATION ETC FOR THE ASSESSMENT YEAR 2008-09. WE ARE SICK INDUSTRIAL COMPANY REGISTERED WITH BIFR UNDER CASE NO.83/2003. WE ARE ENJOYING WORKING CAPITAL FACILITIES AS WELL AS TERM LOAN FACILITIES FROM CANARA BANK, NAUPADA, THANE. OUR MONITORING AG ENCY UNDER BIFR IS CANARA BANK, BANGALORE. THE BIFR HAS SANCTI ONED REVIVAL SCHEME VIDE ORDER OF HONOURABLE BENCH DT 17.10.2007 AND THE CANARA BANK HAS IMPLEMENTED THE SCHEME IN THE MONTH OF J UNE, 2008. ITA.1417 & 1693/BANG/2015 PAGE - 3 WE WOULD LIKE TO INFORM YOU THAT THERE WAS NO AMOUN T WAIVED BY THE BANK TOWARDS PRINCIPAL AMOUNT AND INTEREST THEREON UNDER BIFR SANCTIONED SCHEME. THE IRREGULARITY IN PAYMENT OF P RINCIPAL LIABILITY AS WELL AS INTEREST HAS BEEN CONVERTED INTO WORKING CA PITAL TERM LOAN (WCTL) AND FUNDED INTEREST TERM LOAN (FITL) AS PER RBI PARAMETERS. OUR POINT-WISE SUBMISSION ARE AS UNDER. 1. THE .OUTSTANDING AGAINST BANK TERM LOAN AND WORK ING CAPITAL LOAN AS ON 0L.04.2007 WAS AS UNDER ;_ 1. 2. 3. CANARA BANK TERM LOAN - RS. 33,66,000 UNPAID INTEREST EN TERM LOAN - RS. 55,27,782 CANARA BANK OCC - MUMBAI -RS. 11,75,434 IRREGULARITY & ACCRUED INTEREST THEREON - RS. 6,44, 84,158 ARGUMENT OF THE ASSESSEE WAS THAT CANARA BANK HAD I MPLEMENTED THE SCHEME ONLY IN THE MONTH OF JUNE, 2008 AND GAIN ARISING OU T OF INTEREST LIABILITY WHICH CAME TO RS.65,92,146/- WAS ACCOUNTED BY IT DURING T HE FINANCIAL YEAR 2008-09, RELEVANT TO A. Y. 2009-10. HOWEVER, AO WAS NOT IMP RESSED BY THE ABOVE REPLY. ACCORDING TO HIM, ITS LIABILITY HAD REDUCED FROM RS .7,72,13,331/- TO RS.6,78,68,000/-, WHICH INCLUDED ACCRUED INTEREST OF RS.4,74,84,760/-. AS PER THE AO INTEREST LIABILITY WAS REDUCED BY A SUM OF R S.93,45,331/-. THOUGH THE ASSESSEE STATED THAT THE SUM OF RS.7,72,13,331/- I NCLUDED INTEREST OF RS.26,59,958/- RELATING TO F. Y. 2007-08 WHICH WAS PAID IN JUNE, 2008, AS PER THE AO, THIS EXPLANATION GIVEN BY ASSESSEE DID NOT FIT WITH ITS EARLIER REPLY. AO NOTED THAT ASSESSEE HAD IN ITS LETTTER DT.27.10.201 0 TO HIM STATED AS UNDER : 'WE ARE SICK INDUSTRIAL COMPANY REGISTERED WITH BIF R UNDER CASE NO.83/2003. THE BIFR HAS SANCTIONED REVIVAL SCHEME VIDE ORDER OF HONOURABLE BENCH DT. 17.10.2007 AND THE CANARA BANK HAS IMPLEMENTED THE SCHEME IN THE MONTH OF JUNE 2008. WE WOULD LIKE TO SUBMIT THE BOOK POSITION AS ON 01/ 04/2007 WITH REGARD TO PRINCIPAL OUTSTANDING AND INTEREST THEREON UNDER BIFR SANCTIONED SCHEME. ITA.1417 & 1693/BANG/2015 PAGE - 4 1.CANARA BANK RRERM LOAN (PRINICLPAL) .. RS. 33,66,000 2.ACCRUED INTEREST ON TERM LOAN .. RS. 55,27,78 2 3.CANARA BANK DCC -1977 .. RS. 11,75,433 4.CANARA BANK ODBD - 2041 .. RS.1,15,66,906 5.CENARA BANK BILL DISCOUNTING .. RS.1,36,17,276 6.ACCRUED INTEREST - WORKING CAPITAL .. RS.3,92,9 9,976 RS.7,45,53,373 THE ABOVE IRREGULARITY CONVERTED INTO FOLLOWING LOA NS AS PER BIFR SANCTIONED SCHEME. 5.WORKING CAPITAL TERM LOAN (WCTL) .. RS.1,64,59, 000 6.FUNDED INTEREST-TERM LOAN (FITL-WC) .. RS.4,12,9 5,000 7.TERM LOAN (PRINCIPAL) .. RS. 56,48,000 8.FUNDED INTEREST TERM LPAN .. RS. 44,66,000 RS.6,78,68,000 GAIN ON BIFR SANCTION SCHEME .. RS.66,85,373 THE ABOVE GAIN ON BIFR SCHEME HAS BEEN CONSIDERED A S INCOME FROM RE- STRUCTURING DURING F .Y. 2008-09 AS THE CANARA BANK HAS IMPLEMENTED THE SCHEME IN THE MONTH OF JUNE 2008., DURING THE F.Y. 2007-08 WE HAVE DEBITED RS.7659958/ - AGAINST INTEREST ON VARIOUS LOAN OF BANK, AND PAYMENT MADE BEFORE 31 ST MARCH 2008 WAS RS.5000600/- (RUPEES FIFTY LAKS ONLY). BALANCE PAYM ENT OF INTEREST WERE MADE IN THE MONTH OF JUNE 2008.' THUS ACCORDING TO THE AO, SUM OF RS.66,85,373/- THO UGH CONSIDERED BY THE ASSESSEE IN ITS BOOKS IN JUNE, 2008 WAS ACTUALLY TH E INCOME FOR THE IMPUGNED ASSESSMENT YEAR. ADDITION WAS MADE ACCORDINGLY. 04. ASSESSEE IN ITS APPEAL BEFORE THE CIT (A) ARGUE D THAT THE SCHEME SANCTIONED BY BIFR WAS IMPLEMENTED BY CANARA BANK O NLY IN JUNE, 2008. AS PER THE ASSESSEE, THE DOCUMENTATION REQUIRED FOR IM PLEMENTATION OF THE SCHEME SET-OUT BY CANARA BANK IN ITS LETTER DT.08.02.2008, WERE EXECUTED ONLY ON 28.05.2008 AND THIS WAS CLEAR FROM LETTER DT.07.06. 2008 FROM THE SAID BANK. ITA.1417 & 1693/BANG/2015 PAGE - 5 THUS ACCORDING TO THE ASSESSEE IT HAD RIGHTLY INCLU DED THE SUM AS INCOME FOR A. Y. 2009-10. HOWEVER, CIT (A) WAS NOT IMPRESSED. A CCORDING TO HIM, CANARA BANK HAD RESTRUCTURED THE LOAN FOR THE YEAR ENDED 3 1.03.2008 AND SUCH RESTRUCTURING WAS REFLECTED IN THE AUDITED BALANCE SHEET OF THE ASSESSEE FOR THE YEAR 31.03.2008. HENCE, HE HELD THAT ADDITION WAS RIGHTLY MADE BY THE AO IN THE IMPUGNED ASSESSMENT ORDER. 06. NOW BEFORE US, LD. AR STRONGLY ASSAILING THE OR DER OF AUTHORITIES BELOW STATED THAT THOUGH THE SETTLEMENT HAPPENED IN FEBRU ARY, 2008, THE CONDITION FOR FRUCTIFYING THE SETTLEMENT CAME ABOUT ONLY IN F. Y. 2008-09. RELYING ON ANNEXURE-2 OF HIS PAPER BOOK WHICH IS THE COPY OF T HE LETTER DT.08.02.2008 OF M/S. CANARA BANK, LD. AR SUBMITTED THAT RESTRUCTURI NG WAS ALLOWED BY THE SAID BANK BASED ON CERTAIN CONDITIONS. ONE WAS THAT ASS ESSEE WAS TO PAY THE DUES TO CANARA BANK ON WCTL/FITL/TEL AT THE TIME OF IMPLEME NTATION OF THE PACKAGE. ACCORDING TO THE LD. AR, CANARA BANK IN I TS LETTER DT.7.06.2008 HAD SPECIFICALLY MENTIONED THAT THE NECESSARY DOCUMENTS AS REQUIRED UNDER THE SCHEME WERE EXECUTED BY THE ASSESSEE ON 28.05.2008. THEREFORE, ACCORDING TO HIM, THE IMPLEMENTATION OF THE BIFR SCHEME HAPPENED ONLY IN THE F. Y. 2008- 09. IN ITS RETURN FOR A. Y. 2009-10, AS PER THE LD . AR, A SUM OF RS.66,85,373/- WAS SHOWN AS PART OF OTHER INCOME. AS PER THE LD. AR, INCOME IF IT IT IS TAXED AGAIN IN THE IMPUGNED YEAR, IT WOULD RESULT IN DOUB LE TAXATION. ITA.1417 & 1693/BANG/2015 PAGE - 6 06. PER CONTRA, LD. DR SUBMITTED THAT ASSESSEE ITSE LF HAD RESTRUCTURED ITS LOAN IN THE BALANCE SHEET AS ON 31.03.2008 AS SUCH AND C ANNOT SAY THAT INTEREST REDUCED WOULD NOT BE ACCOUNTED BY IT IN THAT YEAR, BUT IN A LATER YEAR. 07. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL CONTENTIONS. LETTER DT.08.02.2008, PLACED AS ANNEXURE -2 OF THE PAPER B OOK CLEARLY MENTIONS THAT HEAD OFFICE OF THE SAID BANK HAD PERMITTED RESTRUCT URING UNDER BIFR SCHEME DT.17.10.2007. THE NATURE OF RESTRUCTURING ALLOWED BY CANARA BANK, FORMING A PART OF THE ABOVE LETTER READ AS UNDER : NATURE OF LIMIT WCTL AMOUNT RS.164.59 LACS (RS.ONE CRORE SIXTY FOUR LACS AND FIFTY NINE THOUSAND ONLY) PURPOSE TO SEGREGATE THE DEFICIT IN THE WC LIMITS RATE OF INTEREST 9.75% P. A FROM 01.10.2005 REPAYMENT IN 27 QUARTERLY INSTALMENTS OF RS.5.89 LA CS EACH COMMENCING FROM 01.04.2006 AND LAST INSTALMENT OF RS.5.56 LACS NATURE OF LIMIT FITL (WC) AMOUNT RS.412.95 LACS (RS. FOUR CRORE TWELVE LACS N INETY FIVE THOUSAND ONLY) PURPOSE TO SEGREGATE UNRECOVERED INTEREST IN THE WO RKING CAPITAL LIMITS OF COMPANY PURPOSE 8.75% P. A FROM 01.10.2005 REPAYMENT IN 27 QUARTERLY INSTALMENTS OF RS.14.75 L ACS EACH COMMENDING FROM 01.04.2006 AND LAST INSTALMENT (28 TH OF RS.14.70 LACS NATURE TERM LOAN (PRINCIPAL) AMOUNT RS.56.48 LACS (RS.FIFTY SIX LACS AND FORTY E IGHT THOUSAND ONLY) ROI 13% P. A FROM 01.10.2005 REPAYMENT IN 27 QUATERLY INSTALMENTS OF RS.2.02 LAC S EACH COMMENCING FROM 01.04.2006 AND LAST INSTALMENT (28 TH ) OF RS.1.94 LACS. ITA.1417 & 1693/BANG/2015 PAGE - 7 NATURE OF LIMIT FITL (TL) AMOUNT RS.44.66 LACS (RS.FORTY FOUR LACS SIXTY SIX THOUSAND ONLY) PURPOSE TO APPROPRIATE THE PROCEEDS TOWARDS UNRECOV ERED INTEREST IN THE TERM LOAN LIABILITY OF THE COMPANY. RATE OF INTEREST 8.75% P.A FROM 01.10.2050 REPAYMENT IN 27 QUARTERLY INSTALMENTS OF RS.1.60 LA CS EACH COMMENCING FROM 01.04.2006 AND LAST INSTALMENT (28 TH ) OF RS.1.46 LACS. 08. IT IS CLEAR FROM THE ABOVE THAT RESTRUCTURING H AD COMPLETELY CHANGED THE COMPLEXION OF THE LOANS TAKEN BY THE ASSESSEE. CAS E OF THE AO IS THAT SUCH RESTRUCTURING WAS REFLECTED BY THE ASSESSEE IN ITS BALANCE SHEET AS ON 31.03.2008 AND THEREFORE, REMISION OF INTEREST COULD NOT HAVE BEEN POSTPONED FOR TAXATION TO A SUCCEEDING YEAR. NO DOUBT IN THE LETTER FOR REST RUCTURING THERE ARE TWO CONDITIONS MENTIONED, WHICH READS AS UNDER : 1. COMPANY TO PAY THE DUES TO US ON WCTL/ FITL / T L BEING INTEREST / INSTALMENTS W.E.F. 01.10.2005 AT THE TIME OF IMPL EMENTATION OF THE PACKAGE (RS.169.82 LACS TOWARDS WCTL / FITL INSTALM ENTS + APPLICABLE INTEREST FROM 01.10.200 AT PACKAGE ROI O N REDCING BALANCE) UP-TO-DATE INTEREST AND INSTALMENTS IN RES PECT OF ALL ACCOUNTS DUE TO US TO BE RECOVERED AT THE TIME OF IMPLEMENTA TION OF THE PACKAGE. 2. COMPANY TO PAY THE INTEREST ON THE REGULAR PORTI ON OF WC LIMITS FROM 01.10.2005 ONWARDS. 09. CANARA BANK IN ITS LETTER DT.07.06.2008, (COPY PLACED AT ANNEXURE 3) HAD STATED THAT NECESSARY DOCUMENTS WERE EXECUTED BY TH E ASSESSEE ON 28.05.2008, AND PAYMENTS WERE EFFECTED ON 04.06.2008, FOR GIVIN G EFFECT TO THE SETTLEMENT SCHEME. THE CONTRADICTION THAT ARISES IN THE ARGUM ENT CANVASSED BY THE ASSESSEE IS THAT IF THE RESTRUCTURING WAS EFFECTED BY THE ASSESSEE IN ITS BOOKS ITA.1417 & 1693/BANG/2015 PAGE - 8 DURING THE F. Y. 2007-08, REDUCTION OF INTEREST AL SO SHOULD HAVE BEEN SHOWN IN THE SAID YEAR ITSELF. IT COULD NOT HAVE POSTPONED REDUCTION OF INTEREST ALONE TO THE SUCCEEDING YEAR. NO MATTER WHAT CANARA BANK ST ATED IN THE LETTER DT.07.06.2008, IT REMAINS A FACT THAT ASSESSEE HAD GIVEN EFFECT TO THE SETTLEMENT IN F. Y. 2007-08 ITSELF. HOWEVER,NONE OF THE AUTHO RITIES BELOW HAD GONE INTO WHETHER AND HOW ASSESSEE HAD ACCOUNTED THE REDUCTIO N OF INTEREST IN ITS BOOKS, WHICH NECESSARILY HAD TO HAPPEN WHEN THE LOANS WERE SHOWN IN THE RESTRUCTURED MANNER IN ITS BALANCE SHEET AS ON 31.03.2008. THE ISSUE IS NOT FREE FROM DOUBT. WE ARE OF THE OPINION THAT A FRESH LOOK IS REQUIRED TO VERIFY AS TO HOW THE REDUCTION OF INTEREST WAS ACCOUNTED BY THE ASSESSEE WHILE RESTRUCTURING ITS LOANS IN ITS BALANCE SHEET AS ON 31.03.2008. WE ARE IN F ULL AGREEMENT WITH THE LD. AR THAT THE SAME INCOME CANNOT BE TAXED TWICE. HOWEVE R, ONCE ASSESSEE HAD EFFECTED THE RESTRUCTURING OF ITS LOAN IN F. Y. 200 7-08 AND SHOWN BALANCES OF THE LOANS IN BALANCE-SHEET AS ON 31.03.2008, BASED ON P OST-RESTRUCTURED SCENARIO, THEN REMISSION OF INTEREST ALSO HAD TO HAPPEN IN TH AT YEAR. WE, THEREFORE, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW, AND REM IT THIS ISSUE BACK TO THE AO FOR CONSIDERATION AFRESH AFTER VERIFYING THE FACTS THOROUGHLY AND THE AO SHALL THEREAFTER PROCEED IN ACCORDANCE WITH LAW. ASSESSE E HAS TO COOPERATE AND FURNISH NECESSARY INFORMATION CALLED BY THE AO IN T HIS REGARD. 10. IN THE RESULT, ASSESSEES APPEAL IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ITA.1417 & 1693/BANG/2015 PAGE - 9 11. NOW WE TAKE UP APPEAL OF THE REVENUE. REVENUE IS IN CROSS APPEAL BEING AGGRIEVED THAT CIT (A) DELETED THE DISALLOWANCE MAD E U/S.40(A)(IA) OF THE ACT, FOR A REASON THAT SUCH DISALLOWANCE WAS MADE ON PAI D AMOUNTS AND SECTION 40(A)(IA) WAS ATTRACTED ONLY ON PAYABLE AMOUNTS. 12. LD. DR SOUGHT TO RELY ON JUDGMENT OF HONBLE CA LCUTTA HIGH COURT IN THE CASE OF CIT V. CRESCENT EXPORT SYNDICATE [(2013) 94 DTR (CAL) 81], WHICH IS DECIDED IN FAVOUR OF REVENUE. 13. WE FIND THAT ON THE CONTRARY, THERE IS ONE ANOT HER JUDGMENT OF HONBLE HIGH COURT OF ALLAHABAD IN THE CASE OF CIT V. VECTO R SHIPPING SERVICES (P) LTD [(2013) 357 ITR 642], WHEREIN THE HOBLE HIGH COURT HAD HELD THE ISSUE IN FAVOUR OF THE ASSESSEE. HONBLE ALLAHABAD HIGH COU RT HAD HELD THAT SECTION 40(A)(IA) OF THE ACT STOOD ATTRACTED ONLY ON AMOUNT S WHICH REMAIN PAYABLE DURING THE PREVIOUS YEAR AND NOT ON THE PAID AMOUNT S. SLP FILED BY THE REVENUE AGAINST THIS JUDGMENT WAS DISMISSED BY THE HONBLE APEX COURT. THERE BEING CONFLICTING JUDGMENTS OF NON-JURISDICTI ONAL HIGH COURTS ON THIS ISSUE, WE ARE OF THE OPINION THAT ASSESSEE CAN PLAC E RELIANCE ON THE JUDGMENT WHICH WENT IN ITS FAVOUR. WE, THEREFORE, DO NOT FI ND ANY REASON TO INTERFERE WITH THE ORDER OF CIT (A) IN THIS REGARD. REVENUES APP EAL STANDS DISMISSED. ITA.1417 & 1693/BANG/2015 PAGE - 10 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS TREATE D AS ALLOWED FOR STATISTICAL PURPOSES, WHEREAS APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 03RD DAY OF J ULY, 2015. SD/- SD/- (SMT. P. MADHAVI DEVI) (ABRAHAM P GEO RGE) JUDICIAL MEMBER ACCOUNTANT MEMBER
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