ACIT, Circle-4(1), Kolkata, Kolkata V. M/s Assambrook Limited, Kolkata

ITA 1735/KOL/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6153 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 30-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C J SINGH
• Assessee Lawyers: S K TULSIYAN
• Keywords: Capital asset; Depreciation; Source of fund; Capital receipt
• Section: 143(3); 36 (1) (iii)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C, BENC H KOLKATA BEFORE SHRI A. T. VARKEY, JM &DR. A.L. SAINI, AM ./ITA NO.1735/KOL/2016 ( / ASSESSMENT YEAR:2010-11) ACIT, CIRCLE-4(1), KOLKATA VS. M/S ASSAMBROOK LTD. 1, A.C. MARKET BUILDING, SHAKESPEARE SARANI, KOLKATA- 700071 ./ ./PAN/GIR NO.: AACCA 4606M (ASSESSEE) .. (REVENUE) ASSESSEEBY : SHRI C.J. SINGH, ADDL. CIT (DR) RESPONDENT BY :SHRI S.K. TULSIYAN, ADVOCATE. / DATE OF HEARING : 24/06/2019 /DATE OF PRONOUNCEMENT : 07/08/2019 / O R D E R PER DR. A. L. SAINI: THE CAPTIONED APPEAL FILED BY THE REVENUE, PERTA INING TO ASSESSMENT YEAR 2010-11, IS DIRECTED AGAINST THE ORDER PASSED BY TH E COMMISSIONER OF INCOME TAX (APPEAL)-16, KOLKATA, WHICH IN TURN ARISES OUT OF A N ASSESSMENT ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 06/03/2013. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS FOLLOWS: 1. WHETHER THE LD. CIT(A) HAS ERRED IN HOLDING THAT ASSESSING OFFICER WAS NOT JUSTIFIED IN TREATING THE WAIVER OF LOAN OF RS. 1,26,93,133/- AS TAXABLE INCOME. 2. WHETHER THE LD. CIT(A) HAS ERRED IN HOLDING THAT ASSESSING OFFICER WAS NOT JUSTIFIED IN NOT ALLOWING DEPRECIATION FOR THE FIXED ASSETS ACQUIRED IN VIEW OF HIS OBSERVATION THAT ASSETS WAS NOT ACQUIRE D BEFORE 31.03.2010. M/S ASSAMBROOK LTD. ITA NO.1735/KOL/2016 ASSESSMENT YEAR:2010-11 PAGE | 2 3. WHETHER THE LD. CIT(A) HAS ERRED IN HOLDING THAT ASSESSING OFFICER WAS NOT JUSTIFIED FOR MAKING ADDITION OF RS. 51,66,613/ - TOWARDS INTEREST SUBSIDY RECEIVED DURING THE RELEVANT PREVIOUS YEAR. 4. THAT THE ASSESSEE CRAVES FOR LEAVE TO ADD, DELET E, AMEND OR MODIFY ANY GROUND BEFORE OR AT THE TIME OF APPELLATE PROCEEDIN GS. 3. GROUND NO. 1 RAISED BY THE REVENUE RELATES TO WA IVER OF LOAN OF RS. 1,26,93,133/- 4. BRIEF FACTS QUA THE ISSUE ARE THAT DURING THE RE LEVANT PREVIOUS YEAR, THE ASSESSEE COMPANY ENTERED INTO ONE TIME SETTLEMENT WITH CATHO LIC SYRIAN BANK FOR WRITE OFF ITS LOAN AMOUNTING TO RS. 193,62,653/- UPON PAYMENT OF RS.220 LACS OUT OF THE TOTAL OUTSTANDING LOAN AND OVERDUE INTEREST ON SUCH LOAN OF RS.413,62,653/-. THE ASSESSEE FURNISHED COMPROMISE PROPOSAL LETTER DATED 03.12.2009 OF THE CATHOLIC SYRIAN BANK. THE BREAK-UP OF THE AMOUNT OF INTERES T AND LOAN WRITTEN OFF DURING THE PREVIOUS YEAR IS AS UNDER- INTEREST RS. 66,69,520 PRINCIPAL OF LOAN RS.126,93,133 TOTAL RS.193,62,653 THE ASSESSEE CREDITED THE AMOUNT OF RS.193,62,653/- , WRITTEN OFF, IN THE PROFIT AND LOSS ACCOUNT BUT CLAIMED THE SAME TO BE EXEMPT FROM TAX IN ITS COMPUTATION OF INCOME. DURING THE SCRUTINY PROCEEDINGS THE ASSESSE E OBJECTED TO THE ACTION OF THE AO FOR REJECTING THE CLAIM OF THE ASSESSE OF WAIVER OF LOAN ON SETTLEMENT OF THE DUES WITH BANK AS NON-TAXABLE INCOME. THE A.O. HAS TREATED THE WAIVER OF LOAN BY CATHOLIC SYRIAN BANK OF RS.1,26,93,133/- AS TAXABLE INCOME IN THE LIGHT OF FACTS AND CIRCUMSTANCES AND VARIOUS JUDICIAL PRONOUNCEMEN TS. THE AO RELIED UPON THE DECISION OF THE HON'BLE DELHI HIGH COURT IN THE CAS E OF LOGITRONICS PVT. LTD.-VS- COMMISSIONER OF INCOME TAX & ANOTHER (333ITR386) WH ICH DEALT WITH THE MATTER OF WRITING OFF OF LOAN UNDER COMPROMISE SETTLEMENT WITH BANKERS AND IT WAS HELD THAT THE SAME WILL BE TAXED. THE AO FURTHER OBSERVE D THAT WAIVER OF THE LOAN OBTAINED BY THE ASSESSEE SHALL BE CONSIDERED AS TAX ABLE INCOME UNDER SECTION 28(IV) OR UNDER SECTION 41(1) OF THE INCOME TAX ACT , THEREFORE, HE TREATED THE M/S ASSAMBROOK LTD. ITA NO.1735/KOL/2016 ASSESSMENT YEAR:2010-11 PAGE | 3 AMOUNT OF RS.1,26,93,133/- AS INCOME FOR THE YEAR A ND ADDED THE SAME TO THE TAXABLE INCOME OF THE ASSESSEE. 5. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. AGGRIEVED BY THE ORDER OF THE L D. CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 6. LD. DR FOR THE REVENUE HAS PRIMARILY REITERATED THE STAND TAKEN BY THE ASSESSING OFFICER WHICH WE HAVE ALREADY NOTED IN OU R EARLIER PARA AND THE SAME IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. 7.ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESS EE SUBMITTED BEFORE US THAT DURING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE C OMPANY HAS WRITTEN BACK RS.1,26,93,133/- UPON ONE TIME SETTLEMENT WITH CATH OLIC SYRIAN BANK. THE ASSESSEE COMPANY HAD CASH CREDIT FACILITY AND TERM LOAN FACILITY FROM CATHOLIC SYRIAN BANK. BREAK UP, OF THE SAME IS GIVEN BELOW: CASH CREDIT RS.244.90 LACS TERM LOAN RS.102.03LACS TOTAL : RS.346.93 LACS IT CAN BE SEEN FROM THE SANCTION LETTERS THAT THE C OMPANY HAD TERM LOAN OF RS. 37 LACS AND 65 LACS, REPAYABLE OVER A PERIOD OF TIME.I N COURSE OF THE HEARING BEFORE THE AO THE ASSESSEE COMPANY SUBMITTED THAT THE CASH CREDIT FACILITY HAD BEEN UTILIZED BY THE ASSESSEE COMPANY TOWARDS PURCHASE O F CAPITAL ASSETS. THE AO IN COURSE OF THE HEARING HAD ASKED TO FURNISH EVIDENCE OF THE UTILIZATION OF WORKING CAPITAL LOAN. IN THIS CONNECTION THE ASSESSEE COMPA NY HAD FILED A DETAILED STATEMENT SHOWING THAT THE ASSESSEE COMPANY HAD ACQUIRED CAPI TAL ASSETS OF RS.1885.24 LACS DURING THE YEAR ENDED 31 ST MARCH, 2005 WITHOUT OBTAINING ANY LOAN FROM ANY SOURCE. THE LD COUNSEL POINTED OUT THAT ASSESSEE HA D ALREADY SUBMITTED BEFORE THE LD CIT(A), A CHART SHOWING UTILIZATION OF FUND FOR ACQUISITION OF CAPITAL ASSETS VIS- A-VIS SOURCES OF FUND FOR THE LAST 6 YEARS PREPARED ON THE BASIS OF THE AUDITED M/S ASSAMBROOK LTD. ITA NO.1735/KOL/2016 ASSESSMENT YEAR:2010-11 PAGE | 4 ANNUAL ACCOUNTS. IT IS EVIDENT FROM THE CHART THAT THE WORKING CAPITAL HAD BEEN UTILIZED FOR THE PURPOSE OF ACQUIRING CAPITAL ASSET S. THEREFORE, LD COUNSEL PRAYED THE BENCH NOT TO TREAT THE AMOUNT OF LOAN WAIVED AS TAXABLE AND ORDER OF LD CIT(A) BE UPHELD. 8. WE HEARD BOTH THE PARTIES AND CAREFULLY GONE THR OUGH THE SUBMISSION PUT FORTH ON BEHALF OF THE ASSESSEE ALONG WITH THE DOCUMENTS FURNISHED AND THE CASE LAWS RELIED UPON, AND PERUSED THE FACT OF THE CASE INCLU DING THE FINDINGS OF THE LD CIT(A) AND OTHER MATERIALS BROUGHT ON RECORD. WE NO TE THAT THE ASSESSEE COMPANY HAD TOTAL LOAN OF RS.346.59 LACS COMPRISING OF CASH CREDIT FACILITY OF RS.240.90 LACS AND TERM LOAN OF RS.102.03 LACS FROM THE CATHO LIC SYRIAN BANK. IT WOULD BE PERTINENT TO NOTE THAT THE ASSESSEE COMPANY HAD TER M LOAN OF RS. 102.03 LACS WHICH IS EVIDENT FROM THE ANNUAL ACCOUNTS FOR THE YEAR EN DED 31 MARCH, 2010. THE ANNUAL ACCOUNTS OF THE COMPANY WERE DULY APPROVED B Y THE SHAREHOLDERS OF THE COMPANY AND ALSO FILED WITH THE MINISTRY OF CORPORA TE AFFAIRS, WHICH WAS DULY ACCEPTED BY THE MCA. AS SUCH, TREATING THE TERM LOA N OF RS.102.03 LACS AS CASH CREDIT FACILITY IS WITHOUT ANY BASIS AND ARBITRARY. THE LD COUNSEL SUBMITTED THAT THE CASH CREDIT FACILITY HAD BEEN UTILIZED BY THE A SSESSEE COMPANY TOWARDS PURCHASE OF CAPITAL ASSETS AND SUBMITTED A DETAILED STATEMENT OF ACQUISITION OF FIXED ASSETS DURING THE FINANCIAL YEAR 2004-05 WHIC H SHOWS THAT THE ASSESSEE COMPANY HAD PURCHASED CAPITAL ASSETS OF RS.18.85 CR ORES. IT WAS FURTHER CONTENDED THAT THE ASSESSEE COMPANY HAD NOT OBTAINED ANY FRES H TERM LOAN DURING THE FINANCIAL YEAR AND THE ASSETS WAS ACQUIRED / PURCHA SED FROM THE CASH CREDIT FACILITY. IN OTHER WORDS, FUND FROM THE CASH CREDIT FACILITY WAS DIVERTED TO PURCHASE LONG TERM ASSETS. THE LD COUNSEL SUBMITTED A CHART SHOWI NG UTILIZATION OF FUND FOR ACQUISITION OF CAPITAL ASSETS VIS-A-VIS SOURCE OF FUND INCLUDING CASH CREDIT FACILITY I.E. CAPITAL FREE RESERVES TERM LOAN AND CASH CREDI T FACILITY. IT IS EVIDENT FROM THE CHART THAT THE WORKING CAPITAL WAS USED FOR ACQUIRI NG CAPITAL ASSETS. 9. WE NOTE THAT THE ASSESSEE COMPANY PAID RS.219.6 6 LACS TOWARDS REPAYMENT OF CASH CREDIT ACCOUNT AND THE BALANCE AMOUNT OF RS 24 .90 LACS WAS WRITTEN BACK TOWARDS CASH CREDIT FACILITY. IN OTHER WORDS, DUES OF THE CASH CREDIT FACILITY WASPAID M/S ASSAMBROOK LTD. ITA NO.1735/KOL/2016 ASSESSMENT YEAR:2010-11 PAGE | 5 FIRST UPON SETTLEMENT OF THE DUES. THE LD AO RELIED UPON THE DECISION OF THE DELHI HIGH COURT IN THE MATTER OF LOGITRONICS PVT. LTD - VS. _ COMMISSIONER OF INCOME TAX. THE LD COUNSEL SUBMITTED THAT THE FACTS OF THE ABOVE CASE IS NOT IDENTICAL TO THE ASSESSEE'S CASE. IN THE AFORESAID CASE, IT WAS OBSERVED BY THE HIGH COURT THAT IN CASE THE WORKING CAPITAL LOAN WAS UTILIZED FOR THE PURPOSE OF ACQUIRING CAPITAL ASSETS, THEN THERE WOULD NOT BE ANY EFFECT TO THE I NCOME TOWARDS WAIVER OF LOAN AMOUNT. WE NOTE THAT WAIVER PART OF THE PRINCIPAL A MOUNT OF LOAN DOES NOT CONSTITUTE INCOME OF THE ASSESSEE. WE NOTE THAT DUR ING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE COMPANY HAD WRITTEN BACK RS.126. 93 LACS UPON ONE TIME SETTLEMENT WITH CATHOLIC SYRAIN BANK. THE COMPANY H AD TOTAL LOAN OF RS.346.59 LACS COMPRISING OF CASH CREDIT FACILITIES OF RS.244 .90 LACS AND TERM LOAN OF RS.L02.03 LACS FROM THE CATHOLIC SYRIAN BANK WHICH IS EVIDENT FROM THE ANNUAL ACCOUNTS FOR FY 2008-09 ( PAGE 28 OF THE PAPERBOOK) . A COPY OF ANNUAL REPORT FOR THE FY 2008-09 IS FURNISHED BEFORE THE BENCH ( PAGES 1-43 OF THE PAPERBOOK). IN THE COURSE OF THE HEARING BEFORE THE AO, THE ASS ESSEE COMPANY SUBMITTED THAT THE CASH CREDIT FACILITY HAD BEEN UTILIZED BY THE C OMPANY TOWARDS PURCHASE OF CAPITAL ASSETS. THE COMPANY HAD PURCHASED CAPITAL A SSETS OFRS.18.85 CRORES APPROX DURING THE FY 2004-05. A DETAILED STATEMENT OF ACQU ISITION OF FIXED ASSETS IS FURNISHED BEFORE US ( PAGE 44 OF THE PAPERBOOK). A COPY OF ANNUAL ACCOUNTS FOR THE FY 2004-05 IS ALSO FURNISHED ( PAGES 45-55 OF THE PAPERBOOK), WHICH SHOWS THAT THE CAPITAL ASSET AMOUNTING TO RS.18.85 CRORES WAS ACQUIRED DURING THE FY 2004-05 ( PAGE 50 OF THE PAPERBOOK). ALSO ON PERUSA L OFTHE ANNUAL ACCOUNTS OF THE COMPANY, IT CAN BE SEEN THAT THE COMPANY HAD NOT OB TAINED ANY FRESH TERM LOAN DURING THE RELEVANT FINANCIAL YEAR AND THUS ASSETS WERE PURCHASED FROM THE CASH CREDIT FACILITIES. IN OTHER WORDS, FUNDS FROM THE C ASH CREDIT FACILITY WERE DIVERTED TO PURCHASE CAPITAL ASSET. WE NOTE THE CHART GIVEN BY THE ASSESSEE SHOWS UTILIZATION OF FUND FOR ACQUISITION OF CAPITAL ASSETS VIS-A-VIS SO URCE OF FUND FOR THE LAST 6 YEARS PREPARED ON THE BASIS OF THE AUDITED ANNUAL ACCOUNT S. (A COPY OF CHART IS ATTACHED AT PAGE 56 OF THE PAPERBOOK). IT IS EVIDEN T FROM THE CHART THAT THE CASH CREDIT AND TERM LOAN WAS UTILIZED FOR THE PURPOSE O F ACQUIRING CAPITAL ASSETS. EVEN IF THE BORROWING WAS IN THE NATURE OF CASH CREDIT, IT WAS NOT UTILIZED FOR WORKING CAPITAL. THEREFORE IT IS CLEAR FROM THE CHART THAT NO PART OF IT IS FALLING WITHIN THE M/S ASSAMBROOK LTD. ITA NO.1735/KOL/2016 ASSESSMENT YEAR:2010-11 PAGE | 6 DOMAIN OF CURRENT ASSET. THUS, IT CANNOT BE SAID TH AT THE LOAN WAS NOT UTILIZED FOR THE PURPOSE OF CAPITAL ASSET. 10. WE NOTE THAT THESE RECEIPTS I.E. CASH CREDIT FA CILITY AND TERM LOAN WERE UTILIZED FOR CAPITAL ASSETS AND THESE RECEIPTS BEING CAPITAL RECEIPTS ARE NOT TAXABLE, FOR THAT WE RELY ON THE JUDGMENT OF THE HON'BLE SUPREME COUR T OF INDIA IN THE CASE OF COMMISSIONER VS. MAHINDRA & MAHINDRA LTD. REPORTED IN [2018] 255 TAXMAN 305, WHEREIN IT WAS HELD AS FOLLOWS: 10. THE TERM 'LOAN' GENERALLY REFERS TO BORROWING SOME THING, ESPECIALLY A SUM OF CASH THAT IS TO BE PAID BACK ALONG WITH THE INTERES T DECIDED MUTUALLY BY THE PARTIES. IN OTHER TERMS, THE DEBTOR IS UNDER A LIABILITY TO PAY BACK THE PRINCIPAL AMOUNT ALONG WITH THE AGREED RATE OF INTEREST WITHIN A STI PULATED TIME. 11. IT IS A WELL-SETTLED PRINCIPLE THAT CREDITOR OR HI S SUCCESSOR MAY EXERCISE THEIR 'RIGHT OF WAIVER' UNILATERALLY TO ABSOLVE THE DEBTO R FROM HIS LIABILITY TO REPAY. AFTER SUCH EXERCISE, THE DEBTOR IS DEEMED TO BE ABS OLVED FROM THE LIABILITY OF REPAYMENT OF LOAN SUBJECT TO THE CONDITIONS OF WAIV ER. THE WAIVER MAY BE A PARTLY WAIVER I.E., WAIVER OF PART OF THE PRINCIPAL OR INT EREST REPAYABLE, OR A COMPLETE WAIVER OF BOTH THE LOAN AS WELL AS INTEREST AMOUNTS . HENCE, WAIVER OF LOAN BY THE CREDITOR RESULTS IN THE DEBTOR HAVING EXTRA CASH IN HIS HAND. IT IS RECEIPT IN THE HANDS OF THE DEBTOR/ASSESSEE. THE SHORT BUT COGENT ISSUE IN THE INSTANT CASE ARISES WHETHER WAIVER OF LOAN BY THE CREDITOR IS TAXABLE A S A PERQUISITE UNDER SECTION 28 (IV) OF THE IT ACT OR TAXABLE AS A REMISSION OF LIA BILITY UNDER SECTION 41 (1) OF THE IT ACT. 12. THE FIRST ISSUE IS THE APPLICABILITY OF SECTION 28 (IV) OF THE IT ACT IN THE PRESENT CASE. BEFORE MOVING FURTHER, WE DEEM IT APPOSITE TO REPRODUCE THE RELEVANT PROVISION HEREIN BELOW: '28. PROFITS AND GAINS OF BUSINESS OR PROFESSION. THE FOLLOWING INCOME SHALL BE CHARGEABLE TO INCOME-TAX UNDER THE HEAD 'PROFITS AN D GAINS OF BUSINESS PROFESSION', ** ** ** (IV) THE VALUE OF ANY BENEFIT OR PERQUISITE, WHETHE R CONVERTIBLE INTO MONEY OR NOT, ARISING FROM BUSINESS OR THE EXERCISE OF A PROFESSI ON; ** ** **' 13. ON A PLAIN READING OF SECTION 28 (IV) OF THE IT AC T, PRIMA FACIE, IT APPEARS THAT FOR THE APPLICABILITY OF THE SAID PROVISION, THE IN COME WHICH CAN BE TAXED SHALL ARISE FROM THE BUSINESS OR PROFESSION. ALSO, IN ORDER TO INVOKE THE PROVISION OF SECTION 28 (IV) OF THE IT ACT, THE BENEFIT WHICH IS RECEIVED H AS TO BE IN SOME OTHER FORM RATHER THAN IN THE SHAPE OF MONEY. IN THE PRESENT CASE, IT IS A MATTER OF RECORD THAT THE AMOUNT OF RS. 57,74,064/- IS HAVING RECEIVED AS CAS H RECEIPT DUE TO THE WAIVER OF LOAN. THEREFORE, THE VERY FIRST CONDITION OF SECTIO N 28 (IV) OF THE IT ACT WHICH SAYS ANY BENEFIT OR PERQUISITE ARISING FROM THE BUSINESS SHALL BE IN THE FORM OF BENEFIT OR PERQUISITE OTHER THAN IN THE SHAPE OF MONEY, IS NOT SATISFIED IN THE PRESENT CASE. M/S ASSAMBROOK LTD. ITA NO.1735/KOL/2016 ASSESSMENT YEAR:2010-11 PAGE | 7 HENCE, IN OUR VIEW, IN NO CIRCUMSTANCES, IT CAN BE SAID THAT THE AMOUNT OF RS 57,74,064/- CAN BE TAXED UNDER THE PROVISIONS OF SE CTION 28 (IV) OF THE IT ACT. 14. ANOTHER IMPORTANT ISSUE WHICH ARISES IS THE APPLIC ABILITY OF THE SECTION 41 (1) OF THE IT ACT. THE SAID PROVISION IS RE-PRODUCED AS UN DER: '41. PROFITS CHARGEABLE TO TAX.- (1) WHERE AN ALLOW ANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF L OSS, EXPENDITURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE (HEREINAFTER REF ERRED TO AS THE FIRST-MENTIONED PERSON) AND SUBSEQUENTLY DURING ANY PREVIOUS YEAR,- (A) THE FIRST-MENTIONED PERSON HAS OBTAINED, WHETHE R IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH LO SS OR EXPENDITURE OR SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF, THE AMOUNT OBTAINED BY SUCH PERSON OR THE VALUE OF BENEFIT ACCRUING TO HIM SHALL BE DEEMED TO BE PROFITS AND GAINS OF BUSINESS OR PROFE SSION AND ACCORDINGLY CHARGEABLE TO INCOME-TAX AS THE INCOME OF THAT PREV IOUS YEAR, WHETHER THE BUSINESS OR PROFESSION IN RESPECT OF WHICH THE ALLOWANCE OR DEDUCTION HAS BEEN MADE IS IN EXISTENCE IN THAT YEAR OR NOT; OR ** ** **' 15. ON A PERUSAL OF THE SAID PROVISION, IT IS EVIDENT THAT IT IS A SINE QUA NON THAT THERE SHOULD BE AN ALLOWANCE OR DEDUCTION CLAIMED B Y THE ASSESSEE IN ANY ASSESSMENT FOR ANY YEAR IN RESPECT OF LOSS, EXPENDI TURE OR TRADING LIABILITY INCURRED BY THE ASSESSEE. THEN, SUBSEQUENTLY, DURING ANY PRE VIOUS YEAR, IF THE CREDITOR REMITS OR WAIVES ANY SUCH LIABILITY, THEN THE ASSESSEE IS LIABLE TO PAY TAX UNDER SECTION 41 OF THE IT ACT. THE OBJECTIVE BEHIND THIS SECTION IS SIMPLE. IT IS MADE TO ENSURE THAT THE ASSESSEE DOES NOT GET AWAY WITH A DOUBLE BENEFI T ONCE BY WAY OF DEDUCTION AND ANOTHER BY NOT BEING TAXED ON THE BENEFIT RECEIVED BY HIM IN THE LATER YEAR WITH REFERENCE TO DEDUCTION ALLOWED EARLIER IN CASE OF R EMISSION OF SUCH LIABILITY. IT IS UNDISPUTED FACT THAT THE RESPONDENT HAD BEEN PAYING INTEREST AT 6 % PER ANNUM TO THE KJC AS PER THE CONTRACT BUT THE ASSESSEE NEVER CLAIMED DEDUCTION FOR PAYMENT OF INTEREST UNDER SECTION 36 (1) (III) OF THE IT AC T. IN THE CASE AT HAND, LEARNED CIT (A) RELIED UPON SECTION 41 (1) OF THE IT ACT AND HE LD THAT THE RESPONDENT HAD RECEIVED AMORTIZATION BENEFIT. AMORTIZATION IS AN A CCOUNTING TERM THAT REFERS TO THE PROCESS OF ALLOCATING THE COST OF AN ASSET OVER A P ERIOD OF TIME, HENCE, IT IS NOTHING ELSE THAN DEPRECIATION. DEPRECIATION IS A REDUCTION IN THE VALUE OF AN ASSET OVER TIME, IN PARTICULAR, TO WEAR AND TEAR. THEREFORE, T HE DEDUCTION CLAIMED BY THE RESPONDENT IN PREVIOUS ASSESSMENT YEARS WAS DUE TO THE DEPRECATION OF THE MACHINE AND NOT ON THE INTEREST PAID BY IT. 16. MOREOVER, THE PURCHASE EFFECTED FROM THE KAISER JE EP CORPORATION IS IN RESPECT OF PLANT, MACHINERY AND TOOLING EQUIPMENTS WHICH AR E CAPITAL ASSETS OF THE RESPONDENT. IT IS IMPORTANT TO NOTE THAT THE SAID P URCHASE AMOUNT HAD NOT BEEN DEBITED TO THE TRADING ACCOUNT OR TO THE PROFIT OR LOSS ACCOUNT IN ANY OF THE ASSESSMENT YEARS. HERE, WE DEEM IT PROPER TO MENTIO N THAT THERE IS DIFFERENCE BETWEEN 'TRADING LIABILITY' AND 'OTHER LIABILITY'. SECTION 41 (1) OF THE IT ACT PARTICULARLY DEALS WITH THE REMISSION OF TRADING LI ABILITY. WHEREAS IN THE INSTANT CASE, WAIVER OF LOAN AMOUNTS TO CESSATION OF LIABIL ITY OTHER THAN TRADING LIABILITY. HENCE, WE FIND NO FORCE IN THE ARGUMENT OF THE REVE NUE THAT THE CASE OF THE RESPONDENT WOULD FALL UNDER SECTION 41 (1) OF THE I T ACT. 17. TO SUM UP, WE ARE NOT INCLINED TO INTERFERE WITH T HE JUDGMENT AND ORDER PASSED BY THE HIGH COURT IN VIEW OF THE FOLLOWING REASONS: M/S ASSAMBROOK LTD. ITA NO.1735/KOL/2016 ASSESSMENT YEAR:2010-11 PAGE | 8 (A) SECTION 28(IV) OF THE IT ACT DOES NOT APPLY ON THE PRESENT CASE SINCE THE RECEIPTS OF RS 57,74,064/- ARE IN THE NATURE OF CASH OR MONEY. (B) SECTION 41(1) OF THE IT ACT DOES NOT APPLY SINCE WA IVER OF LOAN DOES NOT AMOUNT TO CESSATION OF TRADING LIABILITY. IT IS A MATTER OF RECORD THAT THE RESPONDENT HAS NOT CLAIMED ANY DEDU CTION UNDER SECTION 36 (1) (III) OF THE IT ACT QUA THE PAYMENT OF INTEREST IN ANY PREVIOUS YEAR. 18. IN VIEW OF ABOVE DISCUSSION, WE ARE OF THE CONSIDE RED VIEW THAT THESE APPEALS ARE DEVOID OF MERITS AND DESERVE TO BE DISMISSED. A CCORDINGLY, THE APPEALS ARE DISMISSED. ALL THE OTHER CONNECTED APPEALS ARE DISP OSED OFF ACCORDINGLY, LEAVING PARTIES TO BEAR THEIR OWN COST. AFTER CONSIDERING AND GOING THROUGH THE SUBMISSION ALONG WITH THE SUPPORTING DETAILS, DOCUMENTS FURNISHED, CONSIDERING THE FACTS AND LEGAL POSITION AND RESPECTFULLY FOLLOWING THE JUDGMENT OF HON'BLE SUPR EME COURT IN THE CASE OF COMMISSIONER VS. MAHINDRA & MAHINDRA LTD. REPORTED IN [2018] 255 TAXMAN 305 (SUPRA), WE ARE INCLINED TO AGREE WITH THE LD CIT(A ). THAT BEING SO, WE DECLINE TO INTERFERE WITH THE ORDER OF ID. C.I T.(A) IN DELETI NG THE AFORESAID ADDITION. HIS ORDER ON THIS ADDITION IS THEREFORE, UPHELD AND THE GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED. 11.GROUND NO. 2 RAISED BY THE REVENUE READS AS FOLL OWS: WHETHER THE LD. CIT(A) HAS ERRED IN HOLDING THAT AS SESSING OFFICER WAS NOT JUSTIFIED IN NOT ALLOWING DEPRECIATION FOR THE FIXE D ASSETS ACQUIRED IN VIEW OF HIS OBSERVATION THAT ASSETS WAS NOT ACQUIRED BEF ORE 31.03.2010. 12. BRIEF FACTS QUA THE ISSUE ARE THAT DURING THE S CRUTINY PROCEEDINGS, ASSESSING OFFICER NOTICED FROM THE DETAILS SUBMITTED THAT THE ASSESSEE COMPANY HAD PURCHASED A CYCLO REFINER AND CYCLONE DUST COLLECTO R FROM NORTHERN ENGINEERING WORKS COSTING RS.5,77,507/- WHICH WAS RECEIVED ON 3 1/03/2010.THE AO OBSERVED THAT NO EVIDENCE WAS PRODUCED TO PROVE THAT THE MAC HINE WAS INSTALLED AND PUT TO USE WITHIN 31 ST MARCH, 2010. THEREFORE, 7.5% OF RS. 577507 I.E. 43 ,313/-WAS DISALLOWED AND ADDED BACK TO THE TOTAL INCOME OF TH E ASSESSEE COMPANY. M/S ASSAMBROOK LTD. ITA NO.1735/KOL/2016 ASSESSMENT YEAR:2010-11 PAGE | 9 SIMILARLY, IT WAS OBSERVED BY AO THAT THE COMPANY H AD PURCHASED SERRA TRIPLEX CTC TEA PROCESSING MACHINE COSTING RS.12,61,413/- F OR TINKHAR TEA ESTATE WHICH WAS RECEIVED ON 1/4/2010. THEREFORE, AO WAS OF THE VIEW THAT THERE IS NO QUESTION OF THE MACHINERY BEING PUT TO USE ON OR BEFORE 31/0 3/2010. SO 7.5% OF RS. 12,61,413/-I.E 94,606/-WAS ALSO DISALLOWED UNDER TH IS HEAD AND THIS WAY TOTAL ADDITION MADE BY AO UNDER THIS HEAD CAME TO RS.43,3 13 + 94,606 = RS.137919/-. 13. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER , THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS DELE TED THE ADDITION MADE BY THE ASSESSING OFFICER. AGGRIEVED BY THE ORDER OF THE LD . CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 14. THE LD. DR FOR THE REVENUE HAS PRIMARILY REITE RATED THE STAND TAKEN BY THE ASSESSING OFFICER WHICH WE HAVE ALREADY NOTED IN OU R EARLIER PARA AND THE SAME IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE DEFENDED THE ORDER PASSED BY THE LD CI T(A). 15. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT LD COUNSEL FOR THE ASSESSEE SUBMITTED COPIES OF THE INVOICES TOWARDS PURCHASE OF FIXED ASSETS AND CONTENDED THAT THE MAC HINERIES WERE RECEIVED WELL BEFORE 31/03/2010. IT IS FURTHER SUBMITTED THAT THE MACHINERIES WERE DULY INSTALLED WITHIN 31/03/2010 AS THE SAME WAS IN KNOCK DOWN CON DITION. THELDCOUNSEL FURTHER SUBMITTED THAT THE A.O. MISUNDERSTOOD THE F ACTS THAT RC DATE MENTIONED ON THE FACE OF THE INVOICE AS DATE OF RECEIPT. IN FACT THE RC DATE IS THE DATE OF RECEIPT OF INVOICE AT HEAD OFFICE. IT IS EVIDENT FROM THE D ETAILS OF ADDITION TO FIXED ASSETS THAT THE CONCERN MACHINERIES WERE RECEIVED WITHIN 3 1 ST MARCH, 2010. AFTER CONSIDERING AND GOING THROUGH THE SUBMISSION ALONG WITH SUPPORTING DOCUMENTS FURNISHED, WEARE INCLINED TO AGREE WITH THE ORDER O F LD CIT(A). THAT BEING SO, WE DECLINE TO INTERFERE WITH THE ORDER OF ID. C.I T.(A ) IN DELETING THE AFORESAID ADDITION. HIS ORDER ON THIS ADDITION IS THEREFORE, UPHELD AND THE GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED. M/S ASSAMBROOK LTD. ITA NO.1735/KOL/2016 ASSESSMENT YEAR:2010-11 PAGE | 10 16. GROUND NO. 3 RAISED BY THE REVENUE RELATES TO ADDITION OF RS. 51,66,613/- TOWARDS INTEREST SUBSIDY RECEIVED. 17. BRIEF FACTS QUA THE ISSUE ARE THAT ASSESSEE COM PANY RECEIVED SUBSIDY OF RS.51,66,613/-, WHICH WAS TREATED BY THE AO AS INCO ME FOR THE RELEVANT ASSESSMENT YEAR. THE AO HAS OBSERVED WHILE DEALING THE ISSUE IN THE ASSESSMENT ORDER IN THE FOLLOWING MANNER: IT IS SEEN FROM THE RECORDS SUBMITTED BY THE A/R A T THE TIME OF SCRUTINY PROCEEDINGS THAT THE ASSESSEE COMPANY HAS RECEIVED INTEREST SUBSIDY OF RS.51,66,613/-. THE AMOUNT WAS MADE RECEIVABLE TO T HE ASSESSEE COMPANY AGAINST ADJUSTMENT OF PROVIDENT FUND DUES AS IS EVIDENT FRO M THE LETTER WRITTEN BY THE MANAGING DIRECTOR OF THE COMPANY TO THE SECRETARY C UM P.F. COMMISSIONER DATED 17 AUGUST, 2009 HAS TO BE TAXED AT 100%. THIS INCOME HAS TO BE TREATED AS NON-AGRICULTURAL INCOME AND TAXED ACCORDINGLY. 18. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER , THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS DELE TED THE ADDITION MADE BY THE ASSESSING OFFICER. AGGRIEVED BY THE ORDER OF THE LD . CIT(A), THE REVENUE IS IN APPEAL BEFORE US. 19. THE LD. DR FOR THE REVENUE HAS PRIMARILY REITER ATED THE STAND TAKEN BY THE ASSESSING OFFICER WHICH WE HAVE ALREADY NOTED IN OU R EARLIER PARA AND THE SAME IS NOT BEING REPEATED FOR THE SAKE OF BREVITY. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE DEFENDED THE ORDER PASSED BY THE LD CI T(A). 21. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT DURING THE RELEVANT YEAR, THE ASSESSE E COMPANY RECEIVED SUBSIDY OF RS.51,66,613/- AGAINST THE SUBSIDY RECEIVABLE. THE CLAIM FOR INTEREST SUBSIDY WAS LODGED AND ACCOUNTED FOR IN EARLIER YEARS. INTEREST SUBSIDY RECEIVED DURING THE RELEVANT ASSESSMENT YEAR WAS AGAINST CLAIM OF EARLI ER YEARS, WHICH HAS ALREADY BEEN TAXED IN THE EARLIER YEARS. HOWEVER, THE LD. A O MADE ADDITION OF RS.51,66,613/- TOWARDS SUBSIDY RECEIVED DURING THE RELEVANT ASSESSMENT YEAR. (A COPY OF LETTER REGARDING CLARIFICATION ON CENTRAL I NTEREST SUBSIDY SCHEME IS ENCLOSED AT PAGES 79-81 OF THE PAPERBOOK). WE NOTE THAT POIN T NO. L OF NOTE 1 OF SCHEDULE M/S ASSAMBROOK LTD. ITA NO.1735/KOL/2016 ASSESSMENT YEAR:2010-11 PAGE | 11 17 OF THE ANNUAL ACCOUNTS FOR AY 2010-11 RELATE TO ACCOUNTING POLICY OF GOVERNMENT GRANT( PAGE 93 OF THE PAPERBOOK) WHICH I S REPRODUCED AS UNDER: '[L] GOVERNMENT GRANTS: (I) CLAIMS RECEIVABLES ARE ACCOUNTED FOR AT THE TIM E OF LODGEMENT DEPENDING ON THE CERTAINTY OF RECEIPT. ' (A COPY OF ANNUAL ACCOUNTS FOR AY 2010-11 IS ATTACH ED AT PAGES 82-97 OF THE PAPER BOOK) THEREFORE, WE NOTE THAT CLAIMS ARE ACCOUNTED FOR AT THE TIME OF LODGMENT. THE LD. AO WITHOUT GOING ON TO THE FACTS OF THE CASE ADDED INTEREST SUBSIDY RECEIVED DURING THE YEAR WHICH WAS ALREADY TAXED IN EARLIER YEARS. THE DETAILED BREAKUP OF THE INTEREST SUBSIDY RECEIVABLE IS FURNISHED BY ASS ESSEE AT PAGE 98 OF THE PAPERBOOK. WE NOTE THAT NOTES TO ACCOUNTS FOR AY 20 09-10 [NOTE NO. 5, ATTACHED AT PAGE 36 OF THE PAPERBOOK] AND AY 2010-11 [NOTE NO. 5, ATTACHED AT PAGE 94 OF THE PAPER BOOK], WHICH CLEARLY BRINGS OUT THAT INTEREST SUBSIDY HAS ALREADY BEEN ACCOUNTED ON ACCRUAL BASIS IN PRECEDING YEARS. NOTE NO. 5 OF THE SCHEDULE 17 (NOTE ON ACCOUNTS) OF THE ANNUAL ACCOUNTS FOR THE AY 2010 -11 IS REPRODUCED AS UNDER: '(5) THE COMPANY IS ELIGIBLE FOR WORKING CAPITAL IN TEREST SUBSIDY IN TERMS OF NOTIFICATION OF GOVERNMENT OF INDIA FOR INDUSTRIAL UNITS IN NORTH-EAST REGION. ACCORDINGLY, WORKING CAPITAL INTEREST SUBSIDY ESTIM ATED TO RS.293.69 LACS (NET OF RS.51.67 LACS RECEIVED DURING THE YEAR, PREVIOUS YE AR RS.345.36LACS) SHOWN AS RECOVERABLE ON THE BASIS OF CLAIM LODGED WITH APPRO PRIATE AUTHORITIES. THE AMOUNT RECEIVABLES AGAINST THE INTEREST SUBSIDY HAV E BEEN ACCOUNTED FOR IN THE ACCOUNTS AS THE BENEFIT OF THE SCHEME WILL BE AVAIL ABLE FOR 10 YEARS.' FROM THE ABOVE IT IS EVIDENT THAT THE ASSESSEE COMP ANY HAS ALREADY ACCOUNTED FOR SUBSIDY RECEIVABLE FROM THE DIC. THUS, IT SHOULD NO T BE TAXED AGAIN AS IT WILL RESULT INTO DOUBLE TAXATION. WE NOTE THAT THE COMPANY IS R EQUIRED TO FOLLOW ACCOUNTING STANDARD (AS) PRESCRIBED BY THE ICAI. AS PER ACCOUN TING STANDARD AND ACCOUNTING POLICIES, THE COMPANY FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING. AT THIS JUNCTURE IT IS WORTHWHILE TO REFER POINT NO. (I) OF NOTE NO. 1 OF SCHEDULE 17, WHICH IS REPRODUCED AS UNDER: '1. SIGNIFICANT ACCOUNTING POLICIES: (I) INCOME AND EXPENSES, UNLESS SPECIFIED OTHERWISE, AR E RECOGNIZED ON ACCRUAL BASIS. SALES OTHER THAN ON CONSIGNMENT BASIS ARE RE COGNIZED ON PASSING OF PROPERTY IN GOODS AS PER THE TERMS OF SALE OR ON CO MPLETION OF AUCTION IN M/S ASSAMBROOK LTD. ITA NO.1735/KOL/2016 ASSESSMENT YEAR:2010-11 PAGE | 12 CASE OF AUCTION SALES. CONSIGNMENT SALES ARE ACCOUN TED FOR IN THE YEAR OF RECEIPT OF ACCOUNT SALES. SALES ARE SHOWN NET OF RE TURNS. SALES ARE INCLUSIVE OF EXPORT INCENTIVES AND EXCHANGE FLUCTUATIONS ON E XPORT RECEIVABLES AND ARE NET OF TRADE DISCOUNT. EXPORT INCENTIVES ARE ACCOUN TEDFOR AS AND WHEN DUE. ' THUS BY FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING, THE ASSESSEE COMPANY HAS ALREADY PAID TAX ON SUBSIDY RECEIVED. SUBSIDY RECEI VED CANNOT BE TAXED AGAIN AS IT WILL RESULT INTO DOUBLE TAXATION OF INCOME. WE NOT E THAT THE ASSESSEE COMPANY HAS RECEIVED INTEREST SUBSIDY IN EARLIER YEAR (AY 2006- 07 & 2009-10) WHICH IS EVIDENT FROM THE CHART ATTACHED AT PAGE 98 OF THE PAPER BOO K. HOWEVER, THE LD. ASSESSING OFFICER HAD NOT MADE ANY ADDITION OF INTEREST SUBSI DY RECEIVED IN THESE YEARS AS THE AMOUNT WAS ALREADY TAXED ON MERCANTILE BASIS IN PR ECEDING YEARS. (VIDE ASSESSMENT ORDER FOR THESE TWO YEARS, ENCLOSED AT PAGE 99-104 OF THE PAPER BOOK). THEREFORE, THE LD. ASSESSING OFFICER ERRED IN HAVIN G TAKEN A CONTRADICTORY STAND IN THE MATTER AND MAKING ADDITION OF INTEREST SUBSIDY, WHICH RESULTED INTO DOUBLE TAXATION OF SAME INCOME. 22. AT THE COST OF REPETITION WE STATE THAT THE AS SESSEE COMPANY RECEIVED INTEREST SUBSIDY OF RS. 51,66,613/- AGAINST THE SUBSIDY RECE IVABLE DURING THE YEAR. IT IS SUBMITTED THAT THE ANNUAL ACCOUNTS OF THE COMPANY A RE PREPARED AS PER ACCOUNTING STANDARDS AND ACCOUNTING POLICIES AS PRESCRIBED BY THE COMPANIES ACT. THE COMPANY FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING.THE A.O. WITHOUT GOING TO THE FACTS OF THE CASE ADDED INTEREST SUBSIDY RECEIVED D URING THE YEAR TO THE TOTAL INCOME OF THE ASSESSEE. IT IS CLEAR FROM THE NOTE NO. 5 OF THE SCHEDULE 17 (NOTE ON ACCOUNTS) OF THE ANNUAL ACCOUNTS FOR THE PREVIOUS Y EAR 2009-10, THAT THE ASSESSEE COMPANY HAD SHOWN RS. 345.36 LACS AS RECOVERABLE ON THE BASIS OF CLAIM LODGED WITH APPROPRIATE AUTHORITIES IN THE EARLIER YEAR AN D RS. 293.69 LACS HAD BEEN SHOWN AS RECOVERABLE FOR THE PREVIOUS YEAR ENDED 31 ST MARCH, 2010 AFTER ADJUSTING RS. 51.67 LACS RECEIVED DURING THE YEAR. AS SUCH THE SU BSIDY RECEIVED DURING THE YEAR HAS ALREADY TAXED IN EARLIER YEARS. HENCE THE SAME CANNOT BE TAXED TWICE.WE NOTE THAT LD CIT(A) HAS RIGHTLY DELETED THE ADDITION ON THIS ACCOUNT.THAT BEING SO, WE DECLINE TO INTERFERE WITH THE ORDER OF ID. C.I T.(A ) IN DELETING THE AFORESAID M/S ASSAMBROOK LTD. ITA NO.1735/KOL/2016 ASSESSMENT YEAR:2010-11 PAGE | 13 ADDITION. HIS ORDER ON THIS ADDITION IS THEREFORE, UPHELD AND THE GROUNDS OF APPEAL OF THE REVENUE ARE DISMISSED. 23. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON 07.08.2019 SD/- ( A.T. VARKEY ) SD/- (A.L.SAINI) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / DATE: 07/08/2019 ( SB, SR.PS ) COPY OF THE ORDER FORWARDED TO: 1. ACIT, CIRCLE-4(1), KOLKATA 2. M/S ASSAMBROOK LTD. 3. C.I.T(A)- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. 6. GUARD FILE. TRUE COPY BY ORDER ASSIST ANT REGISTRAR ITAT, KOLKA TA BENCHES