ITO 8(3)(1), MUMBAI V. SANTOGEN SILK MILLS LTD, MUMBAI

ITA 1700/MUM/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2851 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2016
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 17-12-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 01-03-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: VISHWAS JADHAV
• Assessee Lawyers: R C JAIN
• Keywords: Capital asset

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SANJAY ARORA, A M AND SHRI PAWAN SINGH, J M ./ I.T.A. NO. 1700/MUM/2013 ( / ASSESSMENT YEAR: 2009 - 10 ) ITO - 8(3) - 1, ROO M NO. 201, 2 ND FLOOR, AAYAKAR BHAVAN, MUMBAI - 20 / VS. SANTOGEN SILK MILLS LTD. 69 - A, MIDC INDUSTRIAL AREA, ANDHERI EAST, MUMBAI - 93 ./ ./ PAN/GIR NO. AAACS 7361 R ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI VISHWAS JADHAV / RESPONDENT BY : SHRI R. C. JAIN / DATE OF HEARING : 30.5.2016 / DATE OF PRONOUNCEMENT : 22 .6.2016 / O R D E R PER SANJAY ARORA, A. M.: THI S IS AN A PPEAL BY THE REVENUE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 18 , MUMBAI (CIT(A) FOR SHORT) DATED 04.12.2012 , PARTLY ALLOWING THE A SSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 ( THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2009 - 10 VIDE ORDER DATED 30.12.2011. 2. THE ASSESSING OFFICER (A.O.) , RELYING ON THE DECISION S IN THE CASE OF SOLID CONTAINERS LTD. VS. D Y. CIT [2009] 308 ITR 417 (BOM ) AND CIT V. T. V. SUNDARAM I YENGAR AND SONS LTD. [1996] 222 ITR 344 (SC), BROUGHT THE PRINCIPAL AMOUNT OF THE 2 ITA NO. 1700/MUM/2013 (A.Y.2009 - 10) ITO VS. SANTOGEN SILK MILLS LTD. LOAN WAIVER OF RS.460.93 LACS ALLOWED TO THE ASSESSEE DURING THE YEAR BY M/S. KA RUR VYASA BANK LTD. AND INDIAN B ANK ( PER THE O NE T IME S ETTLEMENT SCHEME (OTS) ARRIVED AT WITH THEM ) , TO TAX U/S. 28(IV) OF THE ACT, WHICH READS AS UNDER ; T HE ASSESSEE HAVING ALREADY DISCLOSED THE INTEREST WA I V ER OF RS.345.17 LACS ALLOWED ALONG WITH AS INCOME U/S.41(1), THE SAME HAVING BEEN ALLOWED AS DEDUCTION FOR A.Y. 2008 - 09: PROFITS AND GAINS OF BU SINESS OR PROFESSION 28. THE FOLLOWING INCOME SHALL BE CHARGEABLE TO INCOME - TAX UNDER THE HEAD ' PROFITS AND GAINS OF BUSINESS OR PROFESSION', - (I) (IV) THE VALUE OF ANY BENEFIT OR PERQUISITE, WHETHER CONVERTIBLE INTO MONEY OR NOT, ARISING FROM BUSI NESS OR THE EXERCISE OF A PROFESSION WITHOUT PREJUDICE, HE ALSO INVOKE D SECTION 41(1) OF THE ACT. THE CREDIT OF THE PRINCIPAL WAIVE D TO THE CAPITAL RE SE R V E ACCOUNT WAS FOUND BY HIM AS OF NO MOMENT. HOWEVER, RELYING ON THE DECISION BY THE T RIBUNAL IN THE ASSESSEES OWN CASE FOR A.Y. 2007 - 08, THE LD. CIT(A) ALLOWED RELIEF TO THE ASSESSEE. AGGRIEVED THE REVENUE IS IN APPEAL. 3. THE LD. A UTHORIZED REPRESENTATIVE (A R ) WOULD BEFORE US SUBMIT THAT THE ISSUE STANDS COVERED IN THE ASSESSEES FAVOUR BY THE ORDER B Y THE TRIBUNAL FOR A.Y. 2007 - 08, SINCE FOLLOWED BY THE FIRST APPELLATE AUTHORITY , SO THAT THE SAME BE ADOPTED FOR THE CURRENT YEAR AS WELL. THE LD. DEPARMENTAL REPRESENTATIVE (DR) , ON THE OTHER HAND, REL IED ON THE ASSESSMENT ORDER, ADDING THAT THE ISSUE IS COVERED IN FAVOUR OF THE REVENUE BY THE DECISIONS AFORE - REFERRED. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATERIAL ON RECORD. W E MAY, TO BEGIN WITH, REPRODUCE THE OPERATIVE PART OF THE IMPUGNED ORDER: 6. MOREOVER, THE HONBLE TRIBUNAL VIDE ORD ER DATED 18.10.2012 HAS DECIDED THIS ISSUE IN THE CASE OF THE APPELLANT FOR THE A.Y. 2007 - 08 BY HOLDING AS UNDER: WE HAVE PERUSED THE LOAN AGREEMENTS FILED IN THE PAPER BOOK. IT IS FOUND THAT LOAN FROM ICICI BANK LTD. WAS A TERM LOAN FOR PURCHASING 3 ITA NO. 1700/MUM/2013 (A.Y.2009 - 10) ITO VS. SANTOGEN SILK MILLS LTD. MACHI NERY BY THE APPELLANT - COMPANY. AS FAR AS LOAN FROM ADCB IS CONCERNED AR FAIRLY CONCEDED THAT SAID LOAN WAS AGAINST HYPOTHECATION OF STOCK AND NOT A TERM LOAN. HE ADMITTED THAT IT WAS A REVENU E RECEIPT. AS THE LOAN SANCTIONED BY THE ICICI BANK WAS NOT FOR C ARRYING OUT BUSINESS ACTIVIT Y OF THE ASSESSEE RATIO LAID DOWN BY THE HONBLE SUPREME COURT AND HON'BLE BOMBAY HIGH COURT IN THE CASES OF T. V. SUNDARAM IYENGAR & SONS LTD. (SUPRA ) AND SOLID CONTAINER LTD. (SUPRA) RESPECTIVELY ARE NOT APPLICABLE TO THE FACT S OF THE CASE UNDER CONSIDERATION. AS FAR AS LOAN FROM ADCB IS CONCERNED, WE ARE OF THE OPINION THAT SAME IS TAXABLE AS IT WAS ADVANCED FOR STOCK IN TRADE. IN THESE CIRCUMSTANCES , THE WAIVER GRANTED BY THE ADCB AMOUNTING TO RS.1.33 CRORE HAS TO BE TAXED AS TAXABLE INCOME FOR THE YEAR UNDER CONSIDERATION WHEREAS WAIVED AMOUNT OF RS.3.06 CRORES BY ICICI BANK HAS TO BE EXCLUDED FROM THE TAXABLE INCOME. SINCE THE FACTS OF THE PRESENT CASE ARE SQUARELY COVERED BY THE DECISION OF THE HONBLE TRIBUNAL IN ASSESSE ES OWN CASE FOR A.Y. 2007 - 08, THEREFORE, FOLLOWING THE SAME DECISION THE ADDITION MADE BY THE ASSESSING OFFICER IS DELETED AND GROUND OF APPEAL IS ALLOWED. T HE DECISION BY THE TRIBUNAL FOR A.Y. 2007 - 08 , INSOFAR AS IT ALLOWS RELIEF TO THE ASSESSEE , IS BASED ON THE WAIVER OF A TERM LOAN (FROM ICICI BANK) FOR THE PURCHASE OF MACHINERY. THE SAME STANDS ON A DIFFERENT FOOTING, AND IS COVERED IN THE ASSESSEES FAVOUR BY THE DECISION IN MAHINDRA & MAHINDRA LTD. VS. CIT [2003] 261 ITR 501 (BOM) , EVEN OTHERW ISE BINDING ON THIS TRIBUNAL. IN FACT, THE TRIBUNAL HAS CLEARLY HELD THAT THE LOAN OF ADCB, BEING TOWARD STOCK - IN - TRADE, THE BENEFIT ARISING ON ITS WAIVER IS TAXABLE. THERE IS NO FINDING AT ANY STAGE OF THE PROCEEDINGS AS T O THE PROFILE OF THE LOAN /S WAIV E D , AND THE MANNER OF ITS UTILIZATION , I.E., WHETHER FOR CAPITAL ASS ET/S OR FOR WORKING CAPITAL O F THE BUSINESS, I.E., TOWARD FINANCING THE SAME . THE MATTER IS ACCORDINGLY RESTORED BACK TO THE FILE OF THE A.O. TO VERIFY AND EXAMINE THE ASSESSEES CLAIM /S AS BEING EITHER AN ADVANCE FOR AND UTILIZED FOR THE ACQUISITION OF CAPITAL ASSETS AND/OR TOWARD WORKING CAPITAL OR REGULAR BUSINESS PURPOSES , SO THAT IT WOULD STAND TO BE ASSESSED ONLY IN CASE OF, AND TO THE EXTENT OF THE LATTER . NO DOUBT, THE HONBLE HIGH COURT IN CIT VS. RAMANIYAM HOMES (P.) LTD. [ 2016 ] 68 TAXMANN.COM 289 ( MAD ) HAS HELD THAT A LOAN /ADVANCE , EVEN IF FOR A CAPITAL ASSET, WOULD ON IT S W AI V ER YIELD A 4 ITA NO. 1700/MUM/2013 (A.Y.2009 - 10) ITO VS. SANTOGEN SILK MILLS LTD. BENEFIT ARISING IN THE COURSE OF BUSINESS , ASSESSABLE U/S. 28( IV ), THE DECISION IN MAHINDRA & MAHINDRA LTD. (SUPRA) , BEING BY THE HON'BLE JURISDICTIONAL HIGH COURT , S HALL PREVAIL. THE SAID DECISION, AS WELL AS THAT IN SOLID CONTAINERS LTD. (SUPRA) , STAND IN FACT CONSIDERED AND ENDORSED BY THE SAID COURT IN CIT VS. XYLON HOLDINGS PVT. LTD. (ITA NO . 3704 OF 2010) . THE A.O. SHALL , UPON ISSUING HIS FINDINGS , DECID E THE MATTER IN TERMS OF THE DECISION BY THE HON'BLE JURISDICTIONAL HIGH COURT IN SOLID CONTAINERS LTD. (SUPRA) AND/OR, AS THE CASE MAY BE , MAHINDRA & MAHINDRA LTD. (SUPRA). W E DECIDE ACCORDI NGLY. 5. IN THE RESULT, THE R EVENUE S APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON JUNE 22 , 201 6 SD/ - SD/ - ( PAWAN SINGH ) (S ANJAY ARORA) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 22 . 0 6 .201 6 . . ./ ROSHANI , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI