SKG Refractories Ltd., Hyd, Hyderabad V. ACIT, Cirlce-3(2), Hyd, Hyderabad

ITA 148/HYD/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 5929 (ITAT-HYDERABAD)
• Duration Of Justice: 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 04-08-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 12-02-2016
• Court: TRIBUNAL
• Department Lawyers: SUMAN MALIK
• Keywords: Depreciation; Retrospective amendment; Revised return
• Section: 43B; 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 148/HYD/2016 ASSESSMENT YEAR: 2004-05 SKG REFRACTORIES LIMITED, HYDERABAD [PAN: AADCS4040G] VS ASST. COMMISSIONER OF INCOME TAX, CIRCLE-3(2), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : NONE FOR REVENUE : SMT. SUMAN MALIK, DR DATE OF HEARING : 17-11-2016 DATE OF PRONOUNCEMENT : 21-12-2016 O R D E R PER B. RAMAKOTAIAH, A.M. : THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF TH E COMMISSIONER OF INCOME TAX (APPEALS)-3, HYDERABAD D ATED 03-11-2015, CONFIRMING THE ACTION OF THE ASSESSING OF FICER (AO) IN REJECTING THE APPLICATION U/S. 154 OF THE INCOME TAX AC T [ACT]. 2. THE ISSUE IN THIS APPEAL IS WITH REFERENCE TO CLAIM OF FUNDED INTEREST PAID UNDER THE PROVISIONS OF SECTION 43B, INV OKING EXPLANATION 3C. ASSESSEE FILED RETURN OF INCOME FOR AY. 2004-05 ON 01-11-2004 BY DECLARING TOTAL INCOME OF NIL AFTER SETTING-OFF THE UN-ABSORBED BROUGHT FORWARD DEPRECIATION. A REVISED RETURN WAS I.T.A. NO. 148/HYD/2016 SKG REFRACTORIES LIMITED :- 2 -: FILED ON 20-10-2005 BY DECLARING TOTAL INCOME OF NIL AFTER OFFERING AN INTEREST OF RS. 21,670/- ON INCOME TAX REFUND AND A GAIN SETTING- OFF OF UN-ABSORBED BROUGHT FORWARD DEPRECIATION. SUB SEQUENTLY, ASSESSEE FILED A PETITION U/S. 154 STATED TO BE ON 18-02 -2009 ACKNOWLEDGED BY THE ADDL. CIT, RANGE ON 25-02-2009 SEEKING ALLOWANCE OF AN AMOUNT OF RS. 28,10,000/- BEING INTER EST PORTION OF A LOAN WHICH WAS FUNDED AND PAID DURING THE YEAR. ASSESSEE RELIED ON THE EXPLANATION 3C TO SECTION 43B INSERTED BY FINANCE ACT, 2006 W.E.F. 01-04-1989. HOWEVER, AO VIDE ORDER DT.11-07-2011 REFERRING TO ASSESSEE-COMPANYS LETTER DT.04-03-2010, REJECTED THE APPLICATION ON THE REASON T HAT ASSESSEE HAS NOT MADE ANY CLAIM IN THE REVISED RETURN AND FOLLO WING THE PRINCIPLES LAID DOWN BY THE SUPREME COURT IN THE CASE OF GOETZ (INDIA) LTD., VS. CIT 284 ITR 323 (SC), THE CLAIM CAN NOT BE ALLOWED BY THE AO. HOWEVER, AO GAVE A FINDING THAT THE INTER EST PAYMENT ON RE-SCHEDULED TERM LOAN WAS ELIGIBLE FOR DEDUCTION , IN ACCORDANCE WITH THE EXPLANATION 3C TO SECTION 43B OF THE ACT. ASSESSEE CONTESTED THE SAME BEFORE THE LD. CIT(A). 3. LD. CIT(A) AFTER EXAMINING THE FACTS INVOLVED, GA VE A FINDING THAT ASSESSEE HAS NOT CLAIMED THE INTEREST ORIGINALLY W HEN IT WAS DUE AS IT HAS NOT PAID THE AMOUNT ,BUT SUBSEQUENTLY, A SSESSEE PAID THE AMOUNTS DURING THE YEAR. HOWEVER, THE CLAIM WAS AGAIN REJECTED ON THE REASON THAT ALLOWABILITY OF FUNDED IN TEREST PAID IS NOT A MISTAKE APPARENT FROM RECORD. LD. CIT(A) ALSO GA VE A FINDING THAT INTRODUCTION OF EXPLANATION HAS NOTHING TO DO WITH CLAIM MADE BY ASSESSEE AND EXPLANATION ONLY CLARIFIES THAT INTERE ST INCLUDING FUNDED INTEREST IS ALLOWABLE ON ACTUAL PAYMENT. HENCE THE PRESENT APPEAL. I.T.A. NO. 148/HYD/2016 SKG REFRACTORIES LIMITED :- 3 -: 4. WHEN THE APPEAL WAS POSTED NUMBER OF TIMES, NONE AP PEARED ON BEHALF OF ASSESSEE. ON 16-11-2016, THE LD. DR WA NTED A DAY TO VERIFY THE SUBMISSIONS MADE BY ASSESSEE AND ARGUE THE CASE. ACCORDINGLY, THE CASE WAS ADJOURNED TO 17-11-2017. ASSESSEE HAS FILED DETAILED SUBMISSIONS ON THE ISSUE AND THE GROUND S ITSELF ARE VERY ELABORATE. AFTER HEARING THE ARGUMENTS OF THE LD . DR, THE APPEAL IS DISPOSED-OFF CONSIDERING THE SUBMISSIONS AND GROUNDS OF ASSESSEE. 5. AS SEEN FROM THE ORDERS OF THE AO AND CIT(A), THER E IS NO DISPUTE THAT ASSESSEE WAS ENTITLED TO CLAIM THE AMOUNT AS FUNDED INTEREST U/S 43B READ WITH EXPLANATION C ON PAYMENT BAS IS. AT THE TIME OF FILING THE ORIGINAL RETURN AS WELL AS REVIS ED RETURN, THERE WAS A DISPUTE WHETHER FUNDED INTEREST ITSELF CAN BE TREAT ED AS PAYMENT. THIS WAS CLARIFIED BY THE FINANCE ACT, 200 6 W.E.F. 01-04-1989 BY INSERTION OF EXPLANATION 3C. THE EXPLA NATION IS AS UNDER: SECTION 43B . [EXPLANATION 3C.FOR THE REMOVAL OF DOUBTS, IT IS H EREBY DECLARED THAT A DEDUCTION OF ANY SUM, BEING INTEREST PAYABLE UNDER CLAUSE (D) OF THIS SECTION, SHALL BE ALLOWED IF SUCH INTEREST HAS BEEN ACTUALLY PAID AND ANY INTEREST REFERRED TO IN THAT CLAUSE WHICH HAS BEEN CONVERTED INTO A LOAN OR BORROWING SHALL NOT BE DEEMED TO HAVE BEEN ACTUALLY PAID.] THUS THE CLAIM COULD NOT BE MADE WHEN THE INTEREST WAS FUNDED OR CONVERTED TO A LOAN, BUT WHEN PAYMENT WAS M ADE THE CLAIM CAN BE ALLOWED. I.T.A. NO. 148/HYD/2016 SKG REFRACTORIES LIMITED :- 4 -: 5.1. LD.CIT(A) EXAMINED AND RECORDED THE FACTS AS UNDER: 5.6 ACTUAL PAYMENT OF FUNDED INTEREST FOR AY 2004 -05 IS AS UNDER: DUE DATE AMOUNT (RS) CHQ. NO. DT. OF PAYMENT AMOUNT (RS) REMARKS 15.05.2003 7,02,500 168640 28-05-2003 4,02,500 PAID BY SKG 168652 03.06.2003 3,00,000 PAID BY SKG 15.08.2003 7,02,500 184827 19.12.2003 7,02,500 PAID BY SKG 15.11.2003 7,02,500 184656 12.11.2003 7,02,500 PAID BY SKG 15.02.2004 7,02,500 185110 14.02.2004 7,02,500 PAID BY SKG SINCE THE APPELLANT PAID THE INTEREST BEFORE THE DU E DATE OF FILING OF RETURN OF INCOME (I.E. 01.11.2004), HE COULD HAVE CLAIMED THE INTEREST AT THE TIME OF FILING THE RETURN ITSELF, HOWEVER HE DID NOT DO SO. AFTER A GAP OF SIX YEARS, THE ASSESSEE MOVED AN APPLICATION BEFORE ASS ESSING OFFICER ON 04.03.2010 REQUESTING FOR ALLOWING INTEREST PAID OF RS. 28,10,000 ON THE GROUND THAT EXPLANATION 3C TO SEC.43B WAS INTRODUCE D THE FINANCE ACT 2006 WITH RETROSPECTIVE EFFECT FROM 01.04.1989 CLAR IFYING THAT FUNDED INTEREST CAN BE CLAIMED ON PAYMENT BASIS. 6. ASSESSEE DID NOT CLAIM THE AMOUNT EARLIER, BUT CL AIMED THE AMOUNT AFTER THE AMENDMENT WAS MADE RETROSPECTIVELY. A O GIVES A FINDING THAT ASSESSEE WAS ELIGIBLE FOR DEDUCTION. LD. CIT(A) ALSO GIVES A FINDING THAT ASSESSEE WAS ELIGIBLE FOR DEDUCTI ON. HOWEVER, AO AND CIT(A) REJECTED ON TECHNICAL GROUNDS. AO REJ ECTED THE PETITION STATING THAT THE CLAIM WAS NOT MADE IN THE REVISED RETURN. LD. CIT(A) HOWEVER, REJECTED THAT THERE IS NO MISTAKE A PPARENT FROM RECORD ON THE FACTS OF THE CASE. 7. WE ARE UNABLE TO UNDERSTAND WHY AND HOW THIS DOES N OT FALL UNDER THE CATEGORY OF MISTAKE APPARENT FROM RECORD . ASSESSEE HAS INDEED MADE A CLAIM AFTER AMENDMENT OF THE ACT. CON SEQUENTLY, TO I.T.A. NO. 148/HYD/2016 SKG REFRACTORIES LIMITED :- 5 -: THAT EXTENT, ONE HAS TO CONSIDER THAT THE CLAIM WAS PROPER LY MADE. THE BOARD CIRCULAR NO. 68 DT. 17-11-1971 CLARIFIES TH AT WHERE AN ASSESSEE MOVES AN APPLICATION U/S. 154 POINTING OUT A ND IN THE LIGHT OF A LATER DECISION OF THE SUPREME COURT PRONOUN CING THE CORRECT LEGAL POSITION, A MISTAKE HAD OCCURRED IN ANY OF THE COMPLETED ASSESSMENTS. KEEPING THAT IN MIND THE APPLIC ATION COULD HAVE ACTED UPON, PROVIDED THE SAME HAS BEEN FI LED WITHIN THE TIME AND IS OTHERWISE IN ORDER. EVEN WHEN APPLICATION WAS ORIGINALLY REJECTED, THE SAID CIRCULAR ALLOWS A FRES H APPLICATION TO CONSIDER. LIKE-WISE, CIRCULAR NO. 73 DT. 17-01-1972 EMPOWERS THE OFFICER THAT IN ALL CASES WHERE A VALID APPLICATION UN DER CLAUSE B OF SUB-SECTION 2 OF SECTION 154 HAD BEEN FILED BY ASSESS EE WITHIN THE STATUTORY LIMIT BUT WAS NOT DISPOSED-OFF WITHIN THE TIME LIMIT SPECIFIED UNDER SUB-SECTION 7 OF SECTION 154, IT MAY B E DISPOSED- OFF BY THAT AUTHORITY EVEN AFTER EXPIRY OF THE STATUTORY TI ME LIMIT ON MERITS AND IN ACCORDANCE WITH LAW. KEEPING THE ABOVE CIRCULARS IN VIEW, WE ARE OF THE OPINION THAT ASSESSEES CLAIM IS AN ALLOWABLE CLAIM, IF THE CLAIM FOR RECTIFICATION WAS MADE AS PER THE TIME LIMITS PRESCRIBED IN SECTION 154. 8. HOWEVER, IT IS TO BE NOTED THAT AO MADE A REFERENCE TO COMPANYS LETTER DT. 04-03-2010 IN THE ORDER U/S. 154 . THE ORDER ALSO DOES NOT MENTION WHEN THE RETURN WAS PROCESSED U/S . 143(1). MOREOVER, THE ENCLOSURES TO THE APPEAL INDICATE THAT APP LICATION U/S. 154 HAS BEEN FILED ON 25-02-2009. IF THIS DATE I S TAKEN, THE APPLICATION MAY BE WELL WITHIN THE STATUTORY PERIOD. HO WEVER, NEITHER THE AO NOR THE CIT(A) HAS EXAMINED WHETHER THE APPLICATION WAS MADE WITHIN THE STATUTORY PERIOD OF FOUR YEARS FROM THE DATE OF ORDER SOUGHT TO BE AMENDED, AS PER SECTION 154(7) OF I.T.A. NO. 148/HYD/2016 SKG REFRACTORIES LIMITED :- 6 -: THE ACT. THE CIT(A) STATED THAT APPLICATION WAS MADE AFT ER SIX YEARS. HOW THE PERIOD WAS COUNTED WAS NOT SPECIFIED. THE STARTING POINT SHOULD BE THE ORDER, WHICH IS SOUGHT TO BE AMEND ED. SINCE THERE IS NO CLARITY ON THIS POINT, WE DIRECT THE AO TO E XAMINE THE RECORD AND IF THE APPLICATION IS MADE WITHIN THE STATUTORY PERIOD THEN, ASSESSEES CLAIM SHOULD BE ALLOWED U/S 154 OF THE ACT. FOR THIS PURPOSE, AO IS DIRECTED TO VERIFY THE DATES OF THE ORDER(S) AND THE DATE ON WHICH ASSESSEE FILED RECTIFICATION PETITION U/S. 154. SUBJECT TO VERIFICATION AS STATED ABOVE, THE GROUNDS ARE CONSIDERED ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED FOR S TATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST DECEMBER, 2016 SD/- SD/- (D. MANMOHAN) (B. RAMAKOTAIAH) VICE PRESIDENT ACCOUNTANT MEMB ER HYDERABAD, DATED 21 ST DECEMBER, 2016 TNMM I.T.A. NO. 148/HYD/2016 SKG REFRACTORIES LIMITED :- 7 -: COPY TO : 1. SKG REFRACTORIES LIMITED, HYDERABAD. C/O. S. DAG A & CO., CHARTERED ACCOUNTANTS, 403, PAIGAH PLAZA, BASH EER BAGH, HYDERABAD. 2. THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE-3(2 ), HYDERABAD. 3. CIT (APPEALS)-3, HYDERABAD. 4. PR.CIT-3, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.