DCIT, Circle - 1(1), Kolkata, Kolkata V. M/s. Britannia Engineering Limited, Kolkata

ITA 1502/KOL/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6884 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2019
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 22-06-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AGAINST DATED PASSED

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A, KOLKATA BEFORE SH. J.SUDHAKAR REDDY, ACCOUNTANT MEMBER & SH.S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.-1502/KOL/2017 (ASSESSMENT YEAR-2009-10) ORDER PER S.S. VISWANETHRA RAVI, JUDICIAL MEMBER THIS APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 21.03.2017 PASSED BY CIT(A)-12, KOLKATA FOR AY 2009-10. 2. THE ONLY ISSUE IS TO BE DECIDED AS TO WHETHER THE CIT(A) JUSTIFIED IN DELETING THE ADDITION MADE ON ACCOUNT OF CESSATION OF LIABILITY IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. HEARD BOTH PARTIES AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE BRIEF FACTS OF THE CASE RELATING TO THE ISSUE ARE THAT THE ASSESSEE IS A WHOLLY OWNED UNDERTAKING OF GOVERNMENT OF WEST BENGAL FALLING UNDER THE DEPARTMENT OF PUBLIC ENTERPRISE. THE GOVERNMENT OF WEST BENGAL VIDE ITS ORDER DATED 19.02.2019 DECIDED TO PAY AN AMOUNT OF RS.1,43,48,56,619.93 COMPRISING OF RS.63,08,40,176/- & RS.80,40,16,443.93 UNSECURED LOANS ON ACCOUNT OF OUTSTANDING PRINCIPAL AMOUNT AND UNPAID INTEREST ACCRUED THEREUPON BY WAY OF CONVERSION TOWARDS ACQUISITION OF EQUITY PARTICIPATION AT FACE VALUE AS ON 31.03.2007. ACCORDING TO AO, THE ASSESSEE HAD CONVERTED A SUM OF RS.1,26,51,71,777/-. THE DIFFERENCE OF RS.5,32,94,000/- AND DCIT, CIRCLE-1(1), KOLKATA- 700069. VS M/S. BRITANIA ENGINEERING LTD., CHATTERJEE INTERNATIONAL CENTRE, 33A, J.L.NEHRU ROAD, KOLKATA-700071. PAN-AABCB4796J (APPELLANT) (RESPONDENT) APPELLANT BY SH. A.K. NAYAK, CIT DR RESPONDENT BY SH. A.K.TIBREWAL, FCA DATE OF HEARING 05.02.2019 DATE OF PRONOUNCEMENT 03 .0 5 .2019 ITA NO.-1502/KOL/2017 (ASSESSMENT YEAR-2009-10) PAGE | 2 RS.11,47,11,430/- ON ACCOUNT OF UNSECURED LOAN AND ACCRUED INTEREST RESPECTIVELY WAS NOT CONSIDERED THEREON INTO PAID UP CAPITAL AND OBSERVED THAT THE ENTIRE LOAN INTEREST LIABILITY PAYABLE TO GOVERNMENT OF WEST BENGAL HAD BEEN SEIZED TO EXIST IN THE ASSESSEES ACCOUNT AS ON 31.03.2007. THE AO ASKED THE ASSESSEE WHY THE INTEREST PROVIDED IN THE YEAR 2007-08 OF RS.8,47,84,999/- WAS NOT WRITTEN OFF IN THE ACCOUNTS OF THE ASSESSEE IN THE RELEVANT PREVIOUS YEAR. THE A.O HELD THAT THE EXPLANATION OFFERED BY THE ASSESSEE WAS NOT TENABLE AND ACCEPTABLE AND ADDED THE ENTIRE AMOUNT OF RS.8,57,84,999/- IN TERMS OF PROVISIONS U/S 41(1) OF THE INCOME TAX ACT, 1961 (IN SHORT ACT) TO THE TOTAL INCOME OF THE ASSESSEE. 4. THE ASSESSEE CHALLENGED THE ABOVE SAID ADDITION BEFORE THE CIT(A). IT WAS CONTENDED INTEREST ON OUTSTANDING LOAN ACCRUED ON MERCANTILE BASIS. THE ACCOUNTING SYSTEM REQUIRES THE BOOKING OF EXPENSES ON THE BASIS OF MATCHING PRINCIPAL ON ACCRUAL BASIS. THE ASSESSEE IS FOLLOWING ACCRUAL BASIS OF ACCOUNTING AND AS PER ACCOUNTING STANDARD, THE ACCOUNTING PRINCIPAL MUST BE FOLLOWED ON CONSISTENT BASIS. THE INTEREST OF RS.8,57,84,999/- WAS DULY APPROVED IN FY 2007-08 ON THE AMOUNT OF LOAN AS LOAN WAS OUTSTANDING AS ON 31.03.2008 AND THE ORDER TO CONVERT THE LOAN UPTO 31.03.2007 RECEIVED IN FY 2008-08 I.E. AFTER CLOSER OF BOOKS OF ACCOUNTS. WE NOTE THAT AS IT WAS CONTENTED FURTHER, THE SAID DIFFERENCE IS ONLY RECONCILED DIFFERENCE DUE TO TIME GAP. WHILE CONVERTING THE LOAN INTO EQUITY, INTEREST PROVIDED IN THE FY 2007-08 HAS BEEN CONSIDERED AS THE GOVERNMENT ORDER TO CONVERT THE OUTSTANDING AMOUNT AND INTEREST UPTO 31.03.2007. THE ADJUSTMENT WITH REGARD TO INTEREST FOR FY 2007-08 WILL BE MADE ONLY ON RECEIPT OF GUIDANCE FROM THE STATE GOVERNMENT AND TILL THEN IT WAS SHOWN AS LIABILITY OF THE COMPANY. THE SAID AMOUNT HAS NOT BEEN WAIVED OFF AND NO BENEFIT OBTAINED BY THE ASSESSEE. CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) HELD THE DIFFERENCE AS FOUND BY THE AO WAS REMAINED AS LIABILITY OUTSTANDING IN THE BOOKS OF THE ASSESSEE AND THE SAID AMOUNT HAS NOT BEEN WAIVED OFF AND IT REMAINED AS LIABILITY AND DELETED THE ADDITION MADE BY THE AO U/S 41(1) OF THE ACT. HOWEVER, IT IS NOTED THAT THE ARGUMENT AS ADVANCED BEFORE THE CIT(A), WAS NOT ITA NO.-1502/KOL/2017 (ASSESSMENT YEAR-2009-10) PAGE | 3 AVAILABLE BEFORE THE AO AND THE LD.AR WAS AGREED IN REMANDING THE MATTER TO THE FILE OF AO FOR HIS VERIFICATION WHETHER THE ASSESSEE RECONCILED THE DIFFERENCE OF RS.8,57,84,999/- TO THE SUBSEQUENT AY I.E. 2010-11 AS CONSIDERED FOR CONVERSE INTO EQUITY SHARE CAPITAL. THE LD. DR DID NOT REPORT OBJECTION IN REMANDING THE MATTER TO THE FILE OF AO. IN VIEW OF THE ABOVE DISCUSSION MADE HEREIN ABOVE, GROUND NO.1 RAISED BY THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 03.04.2019. SD/- SD/- (J.SUDHAKAR REDDY) (S.S.VISWANETHRA RAVI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATE:- 03.04.2019 *AMIT KUMAR* COPY FORWARDED TO: 1. APPELLANT- DCIT, CIRCLE-1(1), KOLKATA-700069. 2. RESPONDENT- M/S. BRITANIA ENGINEERING LTD., CHATTERJEE INTERNATIONAL CENTRE, 33A, J.L.NEHRU ROAD, KOLKATA-700071. 3. CIT-KOLKATA 4. CIT(APPEALS)-KOLKATA 5. DR: ITAT -KOLKATA BENCHES BY ORDER AR/H.O.O ITAT, KOLKATA