World Trade Impex Ltd., Baroda V. The CIT-II, Baroda

ITA 1684/AHD/2007

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5642 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 05-07-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 25-04-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K M SHAH
• Assessee Lawyers: M K PATEL
• Keywords: Opportunity of being heard; Retrospective amendment; Set aside
• Section: 43B; 143(3); 139(1); 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE S/SHRI BHAVNESH SAINI, JM AND A. N. PAHUJA, AM) ITA NO.1684/AHD/2007 A. Y.: 2003-04 WORLD TRADIMPEX LTD., 204, STERLING CENTER, R. C. DUTT ROAD, ALKAPURI, BARODA 390 007 VS THE COMMISSIONER OF INCOME TAX II, 2 ND FLOOR ANNEXE BUILDING, AAYAKAR BHAVAN, RACE COURSE, BARODA 390 007 PA NO. AAACW 2072 K (APPELLANT) (RESPONDENT) APPELLANT BY SHRI M. K. PATEL, AR RESPONDENT BY SHRI K. M. SHAH, DR O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX -II, BARODA DATED 22-03-2007 FOR ASSESSMENT YEAR 2003-04 ON THE FOLLO WING GROUNDS: 1. THE COMMISSIONER OF INCOME TAX- II, BARODA, ERR ED IN HOLDING THAT THE ASSESSMENT ORDER DATED 29-03-2006 WAS ERRONEOUS AND IT WAS PREJUDICIAL TO THE INTERES T OF THE REVENUE AND CONSEQUENTLY FURTHER ERRED IN INVOK ING THE PROVISIONS OF SECTION 263 OF THE ACT TO THE CAS E OF YOUR APPELLANT. 2. THE COMMISSIONER OF INCOME TAX- II, BARODA, GRI EVOUSLY ERRED IN APPLYING THE PROVISIONS OF SECTION 43B OF THE ACT FOR AY 2003-04, ASSESSMENT OF WHICH WAS ALREADY FINALIZED U/S 143(3) OF THE ACT. 3. THE COMMISSIONER OF INCOME TAX- II, BARODA, ERRE D IN HOLDING THAT THE INTEREST OF RS.1,35,27,137/- IS NO T PAID BEFORE THE DUE DATE OF FILING RETURN OF INCOME AND CONSEQUENTLY ERRED IN DIRECTING THE ASSESSING OFFIC ER TO MAKE ADDITION OF RS.1,35,27,137/- BEING INTERS PAYA BLE TO ICICI BANK BUT NOT PAID BEFORE THE DUE DATE OF F ILING ITA NO.1684/AHD/2007 WORLD TRADIMPEX LTD., BARODA VS CIT-II, BARODA 2 RETURN OF INCOME IN VIEW OF PROVISIONS OF SECTION 4 3B OF THE ACT. 4. THE COMMISSIONER OF INCOME TAX- II, BARODA, ERRE D IN SETTING ASIDE THE ASSESSMENT MADE ON 29.03.2006 U/S 143(3) OF THE ACT. 2. BRIEFLY, THE FACTS OF THE CASE ARE THAT IN THIS CASE ASSESSMENT U/S 143(3) OF THE IT ACT WAS MADE ON 29-03-2006 DETERMI NING TOTAL INCOME OF RS.28,56,904/- AS AGAINST THE RETURNED LOSS (MINUS RS.1,57,15,130/-). THE LEARNED COMMISSIONER ON PERUSAL OF THE RECORD I SSUED SHOW CAUSE NOTICE U/S 263 OF THE IT ACT AS IT HAS BEEN FOUND T HAT THE ASSESSEE HAS NOT PAID INTEREST OF RS.1,35,27,137/- TO ICICI BAN K LTD. PAYABLE UNDER CASH CREDIT FACILITY AVAILED BY THE ASSESSEE FROM T HE BANK AND THE ASSESSEE ITSELF PUT A NOTE IN THE STATEMENT OF COMP UTATION OF TOTAL INCOME THAT INTEREST PAYABLE TO ICICI BANK IS NOT INTEREST ON TERM LOAN BUT ON CASH CREDIT FACILITY AVAILED BY THE COMPANY, PRO VISIONS OF SECTION 43B ARE, THEREFORE, NOT APPLICABLE. IN THE ASSESSMENT ORDER, THE AO DID NOT DISALLOW THE AFORESAID INTEREST IN S PITE OF CLEAR CUT PROVISIONS OF SUB CLAUSE (D) AND (E) OF SECTION 43B OF THE IT ACT WHICH READ AS UNDER: [(D) ANY SUM PAYABLE BY THE ASSESSEE AS INTEREST ON ANY LOAN OR BORROWING FROM ANY PUBLIC FINANCIAL INSTITUTION [OR A STATE FINANCIAL CORPORATION OR A STATE INDUSTRIAL INVESTMENT CORPOR ATION], IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE AGR EEMENT GOVERNING SUCH LOAN OR BORROWING [, OR] [(E) ANY SUM PAYABLE BY THE ASSESSEE AS INTEREST ON ANY [LOAN OR ADVANCES] FROM A SCHEDULED BANK IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE AGREEMENT GOVERNING SUCH LOAN 1 [OR ADVANCES],] 3. ACCORDING TO THE LEARNED COMMISSIONER, SINCE IND USTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LTD., A COMPANY FORMED AND REGISTERED UNDER THE COMPANIES ACT HAS BEEN REGARDE D AS A PUBLIC ITA NO.1684/AHD/2007 WORLD TRADIMPEX LTD., BARODA VS CIT-II, BARODA 3 FINANCIAL INSTITUTION U/S 4A OF THE COMPANIES ACT, THE PROVISIONS OF SUB CLAUSE (D) OF SECTION 43B OF THE IT ACT ARE APPLICA BLE. FURTHER, THE WORD BORROWINGS FROM PUBLIC FINANCIAL INSTITUTION USED IN THE SUB CLAUSE MAKE IT IMPERATIVE UNDER THE LAW TO MAKE DISALLOWAN CE OF INTEREST LIABILITY WHICH IS NOT ACTUALLY PAID BY THE ASSESSE E ON OR BEFORE THE DUE DATE OF FURNISHING RETURN OF INCOME U/S 139(1) OF T HE IT ACT. THEREFORE, NON-DISALLOWANCE OF THE AFORESAID INTEREST IN THE A SSESSMENT ORDER IS UNSUSTAINABLE IN LAW. THE ASSESSEE HOWEVER, CONTEND ED THAT PROVISIONS OF SECTION 43B OF THE IT ACT ARE NOT APPLICABLE AND THAT ORDER OF THE AO CANNOT BE TREATED TO BE ERRONEOUS OR PREJUDICIAL TO THE INTEREST OF REVENUE. THE ASSESSEE EXPLAINED REGARDING INTEREST AND FINANCIAL CHARGES PAYABLE TO THE BANK AND ALSO CONTENDED THAT SUB CLA USE (D) OF SECTION 43B OF THE IT ACT IS NOT APPLICABLE TO ICICI BANK L TD. AS THE ABOVE BANK WAS PROMOTED IN 1994 BY INDUSTRIAL CREDIT AND INVES TMENT CORPORATION OF INDIA LTD. (IN SHORT ICICI LTD.) AND WAS ITS WHO LLY OWNED SUBSIDIARY. ICICI SHAREHOLDING IN ICICI BANK LTD. WAS REDUCED T O 46% THROUGH PUBLIC OFFERING OF SHARES IN INDIA IN 1998. THE CON TENTION OF THE ASSESSEE WAS NOT ACCEPTED BECAUSE OF THE FACT THAT ICICI BAN K LTD. IS STILL CONTROLLED BY ICICI LTD. WHICH HAS BEEN REGARDED AS PUBLIC FINANCIAL INSTITUTION U/S 4A OF THE COMPANIES AC. IT WAS FURT HER CONTENDED THAT EXPLANATION 3C AND 3D TO SECTION 43B OF THE IT ACT WITH RETROSPECTIVE EFFECT TO CLARIFY THAT IF ANY SUM PAYABLE BY ASSESS EE AS INTEREST ON ANY LOAN OR BORROWINGS OR ADVANCES IF CONVERTED INTO A LOAN OR BORROWINGS OR ADVANCES, INTEREST CONVERTED AND NOT ACTUALLY PAID SHALL NOT BE DEEMED AS ACTUAL PAYMENT AND ALLOWABLE U/S 43B OF THE IT A CT. IT WAS SUBMITTED THAT THE ABOVE PROVISIONS WERE NOT INSERTED TO RE-A SSESS THE INCOME AGAIN. IT WAS SUBMITTED THAT THESE PROVISIONS ARE I NSERTED BY THE FINANCE ACT, 2006. HENCE, THESE ARE NOT APPLICABLE O THE AS SESSMENT YEAR UNDER APPEAL. IT WAS FURTHER CONTENDED THAT WHEN TWO VIEW S ARE POSSIBLE AND THE VIEW TAKEN BY THE AO IS UNSUSTAINABLE IN LAW, T HE ASSESSMENT CAN BE HELD AS ERRONEOUS. THE LEARNED COMMISSIONER HOWEVER , DID NOT ACCEPT ITA NO.1684/AHD/2007 WORLD TRADIMPEX LTD., BARODA VS CIT-II, BARODA 4 THE CONTENTION OF THE ASSESSEE AND NOTED THAT THE P ROVISIONS OF SECTION 43B OF THE IT ACT ARE APPLICABLE TO THIS CASE IN RE SPECT OF UNPAID INTEREST PAYABLE TO PUBLIC FINANCIAL INSTITUTION AND EXPLANA TION 3C AND 3D ARE APPLICABLE. THEREFORE, DISALLOWANCE OF INTEREST IS NECESSARY AND ACCORDINGLY DIRECTED THE AO TO MAKE THE ABOVE ADDIT ION BEING INTEREST PAYABLE TO ICICI BANK LTD. BUT NOT PAID BEFORE THE DUE DATE OF FILING OF THE RETURN IN VIEW OF THE PROVISIONS OF SECTION 43B OF THE IT ACT. 4. LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SAME SUBMISSIONS MADE BEFORE THE LEARNED COMMISSIONER. THE LEARNED C OUNSEL FOR THE ASSESSEE ALSO FILED COPY OF THE LETTER DATED 25-06- 2007 WRITTEN BY ICICI BANK LTD. TO THE ASSESSEE IN WHICH IT WAS INTIMATED TO THE ASSESSEE I WRITE WITH REFERENCE TO YOUR LETTER DATED JUNE 19, 2007 AND CONFIRM THAT ICICI BANK LIMITED IS A SCHEDULED COMM ERCIAL BANK BELONGING TO THE PRIVATE SECTOR. THE LEARNED COUNSEL FOR THE ASSESSEE BY REFERRING TO THE ABOVE LETTER SUBMITTED THAT SIN CE ICICI BANK LD. IS A SCHEDULED COMMERCIAL BANK BELONGING TO PRIVATE SECT OR, THEREFORE, SAME CANNOT BE TREATED AS PUBLIC FINANCIAL INSTITUTION A S IS NOTED BY THE LEARNED COMMISSIONER. HE HAS SUBMITTED THAT THE MAT ER MAY BE REMANDED TO THE FILE OF THE LEARNED COMMISSIONER FO R VERIFICATION OF THE SAME. THE LEARNED DR ALSO SUBMITTED THAT THE MATER MAY BE REMANDED TO THE FILE OF THE LEARNED COMMISSIONER FOR RE-APPR AISAL OF THE ISSUE. 5. ON CONSIDERATION OF THE SUBMISSIONS OF THE PARTI ES AND FACTS OF THE CASE AND IN VIEW OF THE LETTER OF ICICI BANK LTD. D ATED 25-06-2007 QUOTED ABOVE, WE ARE OF THE VIEW THAT THE MATER REQUIRES R E-CONSIDERATION AT THE LEVEL OF THE LEARNED COMMISSIONER OF INCOME TAX-II, BARODA. THE MAIN THRUST OF THE IMPUGNED ORDER IS THAT SINCE ICICI BA NK LTD. IS REGARDED AS PUBLIC FINANCIAL INSTITUTION U/S 4A OF THE COMPANIE S ACT. THEREFORE, PROVISIONS OF SECTION 43B (D) OF THE IT ACT APPLY T O THE FACTS OF THE CASE. HOWEVER, ICICI BANK LTD. SUBSEQUENT TO IMPUGNED OR DER INTIMATED THE ITA NO.1684/AHD/2007 WORLD TRADIMPEX LTD., BARODA VS CIT-II, BARODA 5 ASSESSEE THAT IT IS A SCHEDULED COMMERCIAL BANK BEL ONGING TO PRIVATE SECTOR. THEREFORE, PRIMA FACIE IT APPEARS THAT THE PROVISIONS OF SECTION 43B (D) OF THE IT ACT MAY NOT APPLY TO THE FACTS OF THE CASE. SINCE THE SUBSEQUENT LETTER OF THE BANK WAS NOT BEFORE THE LE ARNED COMMISSIONER, THEREFORE, INTEREST OF JUSTICE REQUIRES RE-CONSIDER ATION BY LEARNED COMMISSIONER. WE ACCORDINGLY, SET ASIDE THE IMPUGNE D ORDER AND RESTORE THE ISSUE TO THE FILE OF THE LEARNED COMMISSIONER O F INCOME TAX II, BARODA FOR FRESH ADJUDICATION OF THE MATTER IN THE LIGHT OF THE ABOVE LETTER OF THE BANK. THE LEARNED COMMISSIONER SHALL GIVE RE ASONABLE SUFFICIENT OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND MAY ALSO MAKE ENQUIRIES DIRECTLY FROM THE ICICI BANK LTD. AND MAY PASS REA SONED ORDER BY CONFRONTING THE ENTIRE MATERIAL TO THE ASSESSEE. 6. AS A RESULT, APPEAL OF THE ASSESSEE IS ALLOWED F OR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 9-07-2010. SD/- SD/- (A. N. PAHUJA) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER DATE : 9-07-2010 LAKSHMIKANT/- COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD