DEPUTY COMMISSIONER OF INCOME TAX, JAIPUR V. M/S MODERN DENIM LTD., JAIPUR

ITA 148/JPR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3646 (ITAT-JAIPUR)
• Duration Of Justice: 1 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 29-04-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 05-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROLLY AGARWAL
• Assessee Lawyers: MADHUKAR GARG CA DHK
• Keywords: Capital asset; Depreciation
• Section: 143(3); 28

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOT; IKY JKWO] U;KF;D LNL; ,OA JH FOE FLAG ;K NO ] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM AND SHRI VIKRAM SING H YADAV, AM VK;DJ VIHY LA-@ ITA NO. 135, 147 & 148/JP/2018 FU/KZKJ.K O'K Z@ ASSESSMENT YEARS : 2014-15, 11-12 & 13-14. THE DCIT, CIRCLE-6, JAIPUR. CUKE VS. M/S. MODERN DENIM LTD., A-4, VIJAY PATH, TILAK NAGAR, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AABCM 0861 H VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT JKTLO DH VKSJ LS@ REVENUE BY : SMT. ROLLY AGARWAL (CIT) FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI MADHUKAR GARG (CA) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 02.05.2018. ?KKS'K .KK DH RKJH[K@ DATE OF PRONOUNCEMENT : 03/05/2018. VKNS'K@ ORDER PER VIJAY PAL RAO, J.M. THESE THREE APPEALS BY THE REVENUE ARE DIRECTED AGA INST THREE DIFFERENT ORDERS DATED 22.11.2017 AND 10.11.2017 OF LD. CIT ( A)-2, JAIPUR FOR THE ASSESSMENT YEARS 2014-15, 11-12 & 13-14 RESPECTIVELY. THE REV ENUE HAS RAISED COMMON GROUNDS IN THESE APPEALS EXCEPT THE QUANTUM OF ADDI TION WHICH WAS DELETED BY THE LD. CIT (A). THE GROUNDS RAISED FOR THE ASSESSMENT YEAR 2011-12 ARE REPRODUCED AS UNDER :- I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT (A) IS JUSTIFIED IN DELETING THE ADDITION OF RS. 28,49,75,000/- MADE BY THE A.O. ON ACCOUNT OF REMIS SION OF LIABILITY U/S 41(1) OF THE INCOME TAX ACT, 1961 ? II) WHETHER ON THE FACTS OF THE PRESENT CASE REMISS ION OF PRINCIPAL AMOUNT OF LOAN OBTAINED FROM FINANCIAL INSTITUTION AND BANKS 2 ITA NOS. 135, 147 & 148/JP/2018 M/S. MODERN DENIM LIMITED, JAIPUR. DOES NOT CONSTITUTE A BENEFIT OR PERQUISITE ARISING FROM BUSINESS AND DOES NOT FALL WITHIN THE AMBIT OF SECTION 28(IV ) OF THE ACT ? III) THE APPELLANT CRAVES ITS RIGHTS TO ADD, AMEND OR ALTER ANY OF THE GROUNDS ON OR BEFORE THE HEARING. 2. WE HAVE HEARD LD. D/R AS WELL AS THE LD. A/R AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE AO WHILE COMPLETING THE AS SESSMENT UNDER SECTION 143(3) OF THE ACT FOR ALL THESE THREE ASSESSMENT YEARS, NO TED THAT THE ASSESSEE HAS SHOWN REMISSION OF PRINCIPAL AMOUNT NOT TAXABLE AS THE SA ME ARE CAPITAL LIABILITY AND DUE TO THE SETTLEMENT OF LOAN WITH THE BANKS AND FINANCIAL INSTITUTIONS AS PER THE RECOMMENDATIONS AND SETTLEMENT SCHEME. THUS THE AO DID NOT ACCEPT THE CLAIM OF THE ASSESSEE AND MADE THE ADDITION OF THE RESPECTIV E AMOUNTS BY TREATING THE SAME AS INCOME OF THE ASSESSEE UNDER SECTION 41(1) OR UN DER SECTION 28(IV) OF THE IT ACT. ON APPEAL, THE LD. CIT (A) HAS DELETED THE ADDITION BY FOLLOWING THE DECISIONS OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER ASS ESSMENT YEARS 2009-10, 10-11 AND 11-12. THE CONCLUDING PART OF THE LD. CIT (APPEALS )S DECISION IN PARA 2.3 IS AS UNDER :- 2.3. I HAVE PERUSED THE FACTS OF THE CASE, THE ASSE SSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. SIMILAR ISSUE HAS BEEN DECIDED BY CIT(A)-5, JAIPUR IN THE CASE OF MODERN THREADS (INDIA) LTD. F OR A.Y. 201112, APPEAL NO. 510/13-14, WHEREIN IT WAS HELD AS FOLLOWS :- 'THE ISSUE AS TO WHETHER REMISSION AMOUNT OF LOAN L IABILITY CAN BE CONSIDERED AND TAXED AS INCOME U/S 41(1) HAS BEEN CONSIDERED BY HON'BLE ITAT, JAIPUR BENCH IN THE ASSESSEE'S OWN CASE FOR A. Y.2009-10 IN ITA NO. 622/JP/2014 VI DE ORDER DATED 22-01-2016, WHEREIN IT HAS BEEN HELD AS FOLLOWS: 'WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PA RTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. THE A SSESSEE COMPANY 3 ITA NOS. 135, 147 & 148/JP/2018 M/S. MODERN DENIM LIMITED, JAIPUR. IS MANUFACTURING OF WOOLEN YARN AND OTHER WOOL ITEM S AND TAKEN LOAN FROM BANK AND FINANCIAL INSTITUTIONS. THE ASSE SSEE COMPANY HAD BECOME SICK COMPANY AND BEFORE BIFR THE BANKS/FINAN CIAL INSTITUTIONS HAD SETTLED ITS OUTSTANDING LOAN WHERE BY THE PRINCIPAL LOAN AMOUNT OF RS. 2 9,4 0,94 ,000/- WAS WRITTEN BA CK. THE LOAN WAS TAKEN LONG TIME BACK FOR INSTALLING PLANT AND MACHI NERY AND SAME WAS ON ACCOUNT OF CAPITAL ACCOUNT. THE CASE LAWS RE FERRED BY THE ID CIT(A) I.E. DECISION OF HON'BLE SUPREME COURT IN TH E CASE OF CIT VS. SUNDARAM LYENGAR (T. V.) AND SONS LTD. (SUPRA) IS N OT SQUARELY APPLICATION AS WHEREIN THE ASSESSEE GOT THE BENEFIT OF DEPRECIATION AND ON THE OTHER HAND REMISSION OF THE PRINCIPAL, W HICH IS COVERED U/S 28(IV) OF THE ACT. AS PER SECTION 2 8 (IV) THE VALUE OF ANY BENEFIT OR PREREQUISITE WHETHER CONVERTED INTO MONEY OR NOT ARISING FROM BUSINESS OR THE EXERCISE OF THE PROFESSION CAN BE T AXED. EVEN THE HON'BLE SUPREME COURT IN THE CASE OF NECTAR BEVERAG ES PVT. LTD. VS. DCIT (SUPRA) HAS HELD THAT DEPRECIATION IS NEITHER A LOSS NOR AN EXPENDITURE NOR A TRADING LIABILITY, THEREFORE, SET TLEMENT OF PRINCIPAL AMOUNT BY THE BANK/FINANCIAL INSTITUTION CANNOT BE ASSESSED U/S 41(1) OF THE ACT. THE OTHER CASE LAWS REFERRED BY T HE AR PARTICULARLY THE DECISION IN THE CASE OF MAHINDRA & MAHINDRA LTD . VS. CIT (SUPRA) AND CIT VS. TOSHA INTERNATIONAL LTD. (SUPRA) AND OT HERS ARE SQUARELY APPLICABLE. THEREFORE, WE DELETE THE ADDITION CONFI RMED BY THE ID CIT(A). THE ASSESSEE'S APPEAL ON THIS GROUND IS ALL OWED' 2.4. RESPECTFULLY FOLLOWING THE JUDGEMENT OF HON'BLE ITAT, JAIPUR BENCH, THE ADDITION OF RS. 1,34,70,187/- ON ACCOUNT OF REMISSION OF LIABIL ITY U/S 41(1) IS HEREBY DELETED. THE SAME ISSUE HAS ALSO BEEN DECIDED FOR THE ASSESS MENT YEAR 2010-11 & 2011-12 BY HON'BLE ITAT, JAIPUR VIDE ORDER DATED 07 .10.2016 729 & 730/JP/2016 IN THE CASE OF M/S MODERN THREADS (INDI A) LIMITED, JAIPUR. FURTHER, IN THE ASSESSEE'S OWN CASE, THE HON'BLE RAJASTHAN H IGH COURT VIDE ITS ORDER D.B. INCOME TAX APPEAL NO. 145/2010, 144/2010, 146/ 2010 AND 148/2010 HAS HELD AS FOLLOWS :- '7. IN VIEW OF THE ABOVE, EVEN OTHERWISE THE LOAN WHICH WAS TAKEN WAS CAPITAL INVESTMENT AND ALWAYS TREATED IN THE CAPITAL ACCOUN T AS LIABILITY AND IF IT IS SO, IT WILL NATURALLY GO AS WIPING OUT THE CAPITAL LIABILITY. 8. IN THAT VIEW OF THE MATTER, THE CONTENTION TAKEN BY THE APPELLANT IS REQUIRED TO BE ACCEPTED. THE VIEW TAKEN BY THE CIT(A) IS REQUIRED TO BE RESTORED AND THAT OF THE TRIBUNAL IS REQUIRED TO BE REVERSED. 9. IN VIEW OF THE ABOVE, THE ISSUE IS ANSWERED IN FAVO UR OF THE ASSESSEE AND AGAINST THE DEPARTMENT.' 4 ITA NOS. 135, 147 & 148/JP/2018 M/S. MODERN DENIM LIMITED, JAIPUR. THUS IT IS CLEAR THAT THE ISSUE FOR THESE THREE YEA RS IS IDENTICAL AS IT WAS DECIDED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIE R ASSESSMENT YEARS. THOUGH THE LOAN TRANSACTIONS WERE DIFFERENT AND TAKEN FROM DIF FERENT FINANCIAL INSTITUTIONS, HOWEVER, THE ASSESSEE HAS OBTAINED THESE LOANS FOR ACQUIRING THE FIXED ASSETS/CAPITAL ASSETS AND ON WAIVER OF THE PRINCIPAL AMOUNT OF THE LOAN UNDER ONE TIME SETTLEMENT SCHEME WITH THE FINANCIAL INSTITUTIONS, THE REMISSI ON OF THE PRINCIPAL AMOUNT OF LOAN CANNOT BE TREATED AS INCOME OF THE ASSESSEE. THE H ONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE VIDE DECISION DATED 26.04.20 17 IN DB IT APPEAL NO. 145, 144, 146 AND 148 HAS CONFIRMED THE DECISION OF THIS TRIBUNAL IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, BY FOLLOWING THE EARLIER OR DERS OF THIS TRIBUNAL AS WELL AS THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE IMPUGNED ORDERS OF THE LD. CIT (A). THE SAME ARE UPHELD. 3. IN THE RESULT, THE APPEALS OF THE REVENUE ARE DI SMISSED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 03/05 /2018. SD/- SD/- ( FOE FLAG ;KNO ) ( FOT; IKY JKWO (VIKRAM SINGH YADAV ) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER JAIPUR DATED:- 03/05/2018. DAS/ VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- THE DCIT CIRCLE-6, JAIPUR. 2. THE RESPONDENT M/S. MODERN DENIM LTD., JAIPUR. 3. THE CIT(A). 4. THE CIT, 5. THE DR, ITAT, JAIPUR VKNS'KKUQLKJ@ BY ORDER, 6. GUARD FILE (ITA NO. 135, 147 & 148/JP/2018) LGK;D IATHDKJ@ ASSISTANT. REGISTRAR 5 ITA NOS. 135, 147 & 148/JP/2018 M/S. MODERN DENIM LIMITED, JAIPUR.