Deputy Commissioner of Income-tax, V. M/s. Shutham Electric Pvt. Ltd., Pune

ITA 1480/PUN/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7543 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 09-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR VIVEK AGGARWAL
• Keywords: Deemed to accrue or arise in india; Validity of assessment
• Section: 43B

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE . . . . , , BEFORE SHRI D.KARUNAKARA RAO, AM AND SHRI VIKAS AWASTHY, JM . / ITA NO. 1480/PUN/2015 / ASSESSMENT YEAR : 2006-07 DCIT, CIRCLE - 6 , PUNE . /APPELLANT V/S M/S. SHUTHAM ELECTRIC PVT. LTD., 107, GAT NO.819/1/2, TALUKA SHIRUR, SANASWADI, PUNE 412 207 PAN : AACCS3772Q . /RESPONDENT ASSESSEE BY : NONE REVENUE BY : DR. VIVEK AGGARWAL / ORDER PER D. KARUNAKARA RAO, AM : THIS APPEAL IS FILED BY THE REVENUE AGAINST THE OR DER OF CIT(A)-4, PUNE DATED 18-08-2015 FOR THE ASSESSMENT YEAR 2006-07. 2. REVENUE RAISED THE FOLLOWING GROUNDS : 1. WHETHER ON THE FACT AND IN CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) IS CORRECT IN HOLDING THAT THE AO HAS ERR ED IN RE-OPENING THE ASSESSMENT AFTER THE EXPIRY OF 4 YEARS FROM THE END OF THE ASSESSMENT YEAR INSPITE OF THE FACT THAT THE ORIGINAL ORDER WAS PAS SED U/S.143(3) AND ALL THE FACTS WERE FULLY AND TRULY DISCLOSED. 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD.CIT(A) IS CORRECT IN NOT TREATING THE WAIVER OF INTEREST BY IDBI AS DEEMED INCOME U/S.41(1)(A). / DATE OF HEARING : 06.09.2017 / DATE OF PRONOUNCEMENT:06.09.2017 2 ITA NO.1480/PUN/2015 M/S. SHUTHAM ELECTRIC PVT. LIMITED 3. THERE IS NONE TO REPRESENT THE ASSESSEE. HOWEVE R, THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE NARRATE D THE FACTS AND SUBMITTED THAT BENCH MAY TAKE DECISION BASED ON THE FACTS AVAILABLE IN THE FILE. 4. BRIEFLY RELEVANT FACTS ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE MANUFACTURE OF AUTOMOTIVE SWITCHES. ASSESSEE FILED THE RETURN ELECTRONICALLY ON 29-11-2006 UNDER PROVISIONAL ACKNOWLEDGEMENT AND LATER FILED THE PAPER RETURNS ON 13-12-2006. ASSESSMENT WAS PASSED ON 17 -12-2008 U/S.143(3) OF THE ACT. THE AO THEREAFTER REOPENED THE ASSESSMENT VIDE HIS ORDER DATED 15-07-2011 AND MADE ADDITION OF RS.3,92,02,459/- ON ACCOUNT OF INTEREST WAIVER U/S.41(1) OF THE ACT TO THE TOTAL INCOME. A SSESSEE, WHILE COMPUTING THE TOTAL INCOME, DEBITED AN AMOUNT OF RS.3,92,02,4 59/- TO THE PROFIT AND LOSS ACCOUNT ON ACCOUNT OF INTEREST WAIVER BY IDBI BANK . THE AMOUNT WAS CREDITED TO THE PROFIT AND LOSS ACCOUNT UNDER THE H EAD OTHER INCOME AND DEBITED BANK INTEREST TO PROFIT AND LOSS ACCOUNT C LAIMED DEDUCTION U/S.43B OF THE ACT. 5. ASSESSEE CHALLENGED THE VALIDITY OF ASSESSMENT B EYOND 4 YEARS BEFORE THE CIT(A). ASSESSEE ALSO CHALLENGED THE ADDITION OF RS.3,92,02,459/- ON MERITS BEFORE THE CIT(A). FIRST APPELLATE AUTHORIT Y QUASHED THE ORDER OF AO REOPENING THE ASSESSMENT U/S.148 AS WELL AS ALLOWED THE CLAIM OF INTEREST WAIVER BY IDBI BANK AMOUNTING TO RS.3,92,02,459/-. AGGRIEVED WITH THE ORDER OF CIT(A) THE REVENUE IS IN APPEAL BEFORE THE TRIBU NAL WITH THE GROUNDS EXTRACTED ABOVE. 6. WE HEARD BOTH THE SIDES AND PERUSED THE ORDERS O F THE REVENUE. WE FIND THE CIT(A) AS PER THE DISCUSSION GIVEN IN PARA NO.2.1.3 OF HIS ORDER HELD 3 ITA NO.1480/PUN/2015 M/S. SHUTHAM ELECTRIC PVT. LIMITED THE RE-ASSESSMENT AS INVALID HOLDING THAT ASSESSEE HAS DISCLOSED ALL THE MATERIAL FACTS NECESSARY FOR COMPLETION OF THE ASSE SSMENT IN THE COMPUTATION OF INCOME. FURTHER, THE CIT(A), AS PER THE DISCUSS ION GIVEN IN PARA NO.2.2.7 HAS RIGHTLY DELETED THE INTEREST WAIVER BY IDBI BAN K. FOR THE SAKE OF COMPLETENESS, WE FIND IT TO RELEVANT TO EXTRACT THE FINDINGS OF CIT(A) AS UNDER: 2.2.7 I HAVE CONSIDERED THE FACTS AND SUBMISSIONS OF THE APPELLANT. DURING APPELLATE PROCEEDINGS THE APPELLANT SUBMITTED THE D ETAILS OF INTEREST DEBITED TO PROFIT AND LOSS ACCOUNT, INTEREST DISALLOWED IN STATEMENT OF TOTAL INCOME, DETAILS OF INTEREST PAID AND ALLOWED IN STATEMENT O F TOTAL INCOME FROM 1996-97 TO 2005-06 AS UNDER : . . . . . . . . . . THE APPELLANT FOLLOWS MERCANTILE SYSTEM OF ACCOUNTI NG. AS PER THE ABOVE CHART THE ASSESSEE HAS DEBITED INTEREST OF RS.5,99,56,371 /- IN ITS PROFIT AND LOSS ACCOUNT IN VARIOUS YEARS AND HAS THEREAFTER DISALLOWED I NTEREST OF RS. 5 , 99,56 , 371/- IN ITS STATEMENT OF TOTAL INCOME U/S 43B . THE ASSESSEE HAS DEDUCTED AN AMOUNT OF RS . 1 , 45 , 80 , 000/ - IN ITS STATEMENT OF TOTAL INCOME WHEN THE INTEREST WAS ACTUALLY PAID BY IT . SO AN AMOUNT OF RS . 5,99 , 56,371/- HAS BEEN ACTUALLY DEBITED BY THE APPELLANT IN ITS P ROFIT AND LOSS ACCOUNT BUT OUT OF THIS AN AMOUNT OF RS . 4 , 53 , 76 , 371/- HAS BEEN DISALLOWED U/S 4 3 B IN ITS COMPUTATION OF INCOME IN VARIOUS YEARS AND INCOME S HOWN IN VARIOUS YEAR S A R E THEREFOR E HIGHER BY THAT AMOUNT . IF THE INCOME SHOWN ARE HIGHER THAN THE PROFIT IN PROFIT & LOSS ACCOUNT, IT IS CLEAR THAT THE ASSESSEE HAS NOT TAKEN BENEFIT OF INTEREST EXPENDITURE IN VARIOUS YEARS TO THE EXTENT OF RS.4,53 , 76 , 371/- . AS PER SECTION 41(1), THE REMIS S ION OF A LIABILITY CAN BE INCOME ONLY WHEN AN ALLOWAN C E OR DEDUCTION HAS BEEN MAD E IN TH E ASSESSMENT FOR ANY YEAR. SINCE IN RESPECT OF RS.4,53,76,371/- THE DEDUCTION HAS NOT BEEN MADE IN VARIOUS YEARS, THE W AIVER OF INTEREST OF THIS MUCH AMOUNT CANNOT LEAD TO ADDITION U/S. 41 (1) AS THE AMOUNT HAS NOT BEEN DEDUCTED IN THE ASSESSMENT IN T HE FIRST PLACE. HOWEVER, THE APPELLANT HAS GOT WAIVER OF INTEREST O F ONLY RS.3,92,00,000/- WHICH IS LESS THAN RS.4,53,76,371/ -. HENCE THE ASSESSEE IS FULLY JUSTIFIED IN CREDITING THIS AMOUN T TO PROFIT AND LOSS ACCOUNT AND THEN IN DEDUCTING THIS AMOUNT FROM THE PROFITS IN ITS STATEMENT OF TOTAL INCOME, AS THERE IS NO REAL INCO ME TO THE ASSESSEE ON ACCOUNT OF THIS WAIVER OF INTEREST. IT IS ONLY REMISSION OF A LIABILITY WHICH HAD NOT AT ALL BEEN DEDUCTED BY THE APPELLANT IN ITS STATEMENT OF TOTAL INCOME FOR VARIOUS YEARS . IN THE CASE OF M/S . GARWARE CHEMICALS LIMITED , HON ' BLE ITAT , MUMBAI HAS ONLY BROUGHT OUT THIS POSITION OF LAW CL EARLY . HENCE THIS GROUND OF APPEAL IS ALLOWED. (EMPHASIS SUPPLIED) 7. THE REASONING GIVEN BY THE CIT(A) ABOVE IS FAIR AND VALID LEGALLY. THEREFORE, WE CONCUR WITH THE ABOVE FINDINGS OF THE CIT(A) HAVING FOUND THE FINDINGS AS FAIR AND REASONABLE. THEREFORE, THE OR DER OF CIT(A) DOES NOT CALL 4 ITA NO.1480/PUN/2015 M/S. SHUTHAM ELECTRIC PVT. LIMITED FOR ANY INTERFERENCE. GROUND NO.2 RAISED BY THE RE VENUE ARE ACCORDINGLY DISMISSED. WE DISMISS GROUND NO.2 RELATING TO MERI TS. HENCE, THE ADJUDICATION OF GROUND OF REVENUE ON THE LEGAL ISSU E RAISED IN GROUND NO.1 BECOMES AN ACADEMIC EXERCISE. WE DISMISS THE SAME AS ACADEMIC. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 6 TH DAY OF SEPTEMBER, 2017. SD/- SD/- (VIKAS AWASTHY) (D. KARUNAKARA RAO) /JUDICIAL MEMBER / ACCOUNTANT MEMBER PUNE; DATED : 06 TH SEPTEMBER, 2017. COPY OF THE ORDER FORWARDED TO : / BY ORDER , // TRUE COPY // //TRUE COPY// SENIOR PRIVATE SECRETARY , / ITAT, PUNE 1. / THE APPELLANT 2. / THE RESPONDENT 3. THE CI T (A) - 4 , PUNE 4. CIT - 4 , PUNE 5. , , B BENCH PUNE; 6. GUARD FILE.