The ACIT,Gandhinagar Circle, Gandhinagar V. Gujarat Industrial Investment Copn., Gandhinagar

ITA 183/AHD/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0222 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 03-09-2009
• Assessment Year: 1993-1994
• Appeal Filed On: 11-01-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B S GEHLOT
• Keywords: Set aside
• Section: 2

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL : B BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HONBLE SH RI N.S. SAINI, A.M.) I.T.A. NOS. 4383 & 4384/AHD./2007 ASSESSMENT YEARS : 1992-1993 & 1993-1994 GUJRAT INDUSTRIAL INVESTMENT CORPORATION LTD. VS.- ADDL. COMMISSIONER OF INCOME TAX, UDYOG BHAVAN, GANDHINAGAR GANDHINAGAR. (P.A. NO. AAACG 5304Q) (APPELLANT) (R ESPONDENT) & I.T.A. NO. 183/AHD./2008 ASSESSMENT YEAR : 1993-1994 ASSISTANT COMMISSIONER OF INCOME TAX, -VS.- GUJRAT INDUSTRIAL INVESTMENT CORPORATION LTD., GANDHINAGAR GANDHINAGAR (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANJAY R. SHAH DEPARTMENT BY : SHRI B.S. GEHLOT O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER :- THESE APPEALS BEING ITA NOS. 4383 & 4384/AHD./2007 FOR THE ASSESSMENT YEARS 1992-93 AND 1993-94 RESPECTIVELY FILED BY THE ASSESSEE AND CROSS APPEAL BEING I.T.A. NO. 183/AHD/2008 FOR THE ASSESSMENT YEAR 1993-94 BY THE DEPARTMENT WERE HEARD TOGETHER ON THE SAME DATE, AR GUED BY LD. REPRESENTATIVES OF THE PARTIES. THEREFORE, WE HAVE DECIDED TO DISPOSE OF THESE APPE ALS BY A COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. NOW WE FIRST TAKE UP ITA NO. 4383/AHD./2007 . THE ASSESSEE HAS FILED THIS APPEAL FOR THE ASSESSME NT YEAR 1992-93 AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX(APPEALS), GANDHINAGAR DA TED 05.10.2007 ON THE FOLLOWING GROUNDS :- (1) THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INC OME TAX(APPEALS) IS BAD IN LAW AND REQUIRES TO BE QUASH ED. IT IS SUBMITTED THAT IT BE SO HELD NOW. 2 (2) THE LD. LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN NOT APPRECIATING THAT ALTERNATIVE GROUND OF ALLOWABILIT Y UNDER SECTION 28/36(1)(VII) RAISED BEFORE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AGAINST REGULAR ASSESSMENT SURVIVES WH EN ITAT HAS SET ASIDE THE MAIN GROUND OF APPEAL AND LEARNED COMMISS IONER OF INCOME TAX(APPEALS) APPEAL OUGHT TO HAVE EXAMINED T HE SAME ON MERIT. IT IS SUBMITTED THAT IT BE SO HELD NOW. (3) THE LD. LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN FACTS AND IN LAW IN DISALLOWING WAIVER OF INTEREST. IN TH E FACTS AND CIRCUMSTANCES OF THE CASE, THE INTEREST WAIVED OUGH T TO HAVE BEEN ALLOWED AS DEDUCTION UNDER SECTION 28/37 OF THE ACT . . (3.1) WITHOUT PREJUDICE TO THE ABOVE IT IS SUBMITTE D THAT EVEN IF THE INTEREST IS NOT PENAL IN NATURE, WAIVER THEREOF WAS GRANTED AS PART OF BUSINESS REQUIREMENTS AND THEREFORE IT OUGHT TO HAVE BEEN AL LOWED. (3.2)WITHOUT PREJUDICE TO THE ABOVE, IT IS SUBMITTE D THAT EVEN IF THE INTEREST IS NOT PENAL IN NATURE, WAIVER THEREOF IS ELIGIBLE AS DEDUCTION U/S. 36(1)(VII) OF THE ACT. 3. THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE IN ITS APPEALS FOR THE ASSESSMENT YEARS 1992-93 AND 1993-94 IS THAT THE LD. COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN NOT ACCEPTING THE ALTERNATE GROUND REGARDING ALLOWABILI TY UNDER SECTION 28/36(1)(VII) RAISED BEFORE HIM AGAINST REGULAR ASSESSMENT SURVIVES WHEN ITAT H AS SET ASIDE THE MAIN GROUND OF APPEAL AND THE LD. COMMISSIONER OF INCOME TAX(APPEALS) OUGHT T O HAVE EXAMINED THE SAME ON MERIT. IN THE GROUNDS OF APPEALS ITSELF, ONE MORE CONTENTION IS R AISED, I.E. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, INTEREST WAIVED OUGHT TO HAVE BEEN ALLOWED AS DEDUCTION UNDER SECTION 28/37 OF THE INCOME TAX ACT, 1961. 4. THE BRIEF FACTS RELATING TO CONTROVERSY INVOLVED IN THIS GROUND OF APPEALS IS THAT THE A.O. DISALLOWED WAIVER OF INTEREST OF RS.21,69,162/-, CO NSIDERING THE SAME AS NOT BEING IN THE NATURE OF PENAL INTEREST. ACCORDING TO HIM, ITAT, AHMEDABA D BENCH VIDE ORDER DATED 30.11.2004 SET ASIDE THE ORDER OF LD. COMMISSIONER OF INCOME TAX(A PPEALS) TO THE FILE OF A.O., ONLY ON THE ISSUE OF ALLOWABILITY OF WAIVER OF INTEREST TO VARI OUS PARTIES TO WHOM LOSS HAVE BEEN ADVANCED AFTER VERIFYING THE APPELLANTS CLAIM THAT ONLY PEN AL INTEREST WAS TO BE WAIVED. 3 5. ON APPEAL, IN THE IMPUGNED ORDER, THE LD. COMMIS SIONER OF INCOME TAX(APPEALS) FULLY ALLOWED THE INTEREST EXCEPT RS.1,68,249/- IN RESPEC T OF ONE PARTY, NAMELY M/S. MOTI CERAMICS LTD. AND RS.1,10,472/- PERTAINING TO OTHERS. AGGR IEVED BY THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS), THE ASSESSEE IS IN APPEAL B EFORE US. 6. AT THE TIME OF HEARING, ON BEHALF OF ASSESSEE SH RI SANJAY R. SHAH APPEARED AND FAIRLY CONCEDED THAT ITAT, AHMEDABAD BENCH VIDE ORDER DATE D 30.11.2004, EARLIER SET ASIDE THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) TO T HE FILE OF A.O. ON THE ISSUE OF ALLOWABILITY OF WAIVER OF INTEREST TO VARIOUS PARTIES TO WHOM LO ANS HAD BEEN ADVANCED, AFTER VERIFYING THE ASSESSEES CLAIM THAT ONLY PENAL INTEREST WHICH IS WAIVED BE ALLOWED. IN VIEW OF THIS, HE POINTED OUT THAT PENAL INTEREST AMOUNT IS ONLY RS.3.26 LAKH S, DETAILS OF WHICH ARE AS UNDER :- STATEMENT SHOWING BREAK UP OF INTEREST IN CASE OF E SCOL ELECTROMCH PARTICULARS GIIC (PAGE 96 OF PAPER BOOK) GSFS (PAGE 96 OF PAPER BOOK INTEREST (21.88 + 10.23+0.18)LACS = 32.29 LACS (8.86+4.20)LACS = 13.06 LACS PENAL INTEREST (2.21 + 1.05) LACS= 3.26 LACS (0.48 + 1.30) LACS = 1.78 LACS TOTAL INTEREST OF EACH PARTY RS.35.55 LACS RS.14.84 LACS TOTAL INTEREST ON BOTH THE PARTIES RS.50.39 LACS THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT AS P ER DIRECTION OF THE TRIBUNAL, RS.3,26,000/- PENAL INTEREST IS REQUIRED TO BE WAIVED. SINCE EARL IER BREAK-UP WAS NOT SUBMITTED, NOW THE SAME IS SUBMITTED. THEREFORE, THE MATTER BE RESTORED TO THE FILE OF A.O. WHO WILL VERIFY THE BREAK-UP AND ALLOW FURTHER PENAL INTEREST TO THE EXTENT OF RS.3. 26 LACS. 7. ON THE OTHER HAND, SHRI B.S. GEHLOT APPEARING FO R THE REVENUE VEHEMENTLY OBJECTED TO THE SUBMISSION OF THE LD. COUNSEL OF THE ASSESSEE. HE SUBMITTED THAT NO SUCH DETAILS WERE FURNISHED BEFORE THE AUTHORITIES BELOW. THEREFORE, FRESH DETAILS NOW SUBMITTED SHOULD NOT BE ADMITTED. IN REPLY TO THIS, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE DETAILS WERE SUBMITTED BEFORE THE AUTHORITIES BELOW BUT BIFURCATION WAS NO T SUBMITTED. THEREFORE, HE HAS NO OBJECTION IF THE A.O. MAY VERIFY THE BIFURCATION AND ALLOW THE P ENAL INTEREST TO THE EXTENT OF RS.3.26 LACS AS DIRECTED BY THE TRIBUNAL VIDE ORDER DATED 30.11.200 4. 4 8. RIVAL SUBMISSIONS WERE CONSIDERED. IT APPEARS TH AT THE ASSESSEE HAS FURNISHED THE DETAILS BEFORE THE A.O. BUT BIFURCATION OF THE SAME, I.E. B ETWEEN GIIC AND GSFS WERE NOT FURNISHED. THE SAME IS NOW FURNISHED. AS PER DECISION OF THE ITAT DATED 30.11.2004 IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR UNDER APPEAL, THE AMOUNT OF PEN AL INTEREST WAIVED IS TO BE ALLOWED. WE ACCORDINGLY DIRECT THE A.O. TO ALLOW THE SAME SUBJE CT TO VERIFICATION OF THE CALCULATION/ BIFURCATION. THE PLEA REGARDING ALLOWABILITY OF REM AINING INTEREST UNDER SECTION 28/37 OF THE I.T. ACT, WHICH IS RAISED IN VARIOUS GROUNDS OF APPEAL W AS NOT PRESSED AT THE TIME OF HEARING. THEREFORE, THE SAME IS BEING REJECTED AS NOT PRESSE D. 9. NOW WE TAKE UP THE ITA NO. 4384/AHD./2007. THE ASSESSEE HAS FILED THIS APPEAL FOR THE ASSESSME NT YEAR 1993-94 AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX(APPEALS), GANDHINAGAR DA TED 05.10.2007 ON THE FOLLOWING GROUNDS :- (1) THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INC OME TAX(APPEALS) IS BAD IN LAW AND REQUIRES TO BE QUASH ED. IT IS SUBMITTED THAT IT BE SO HELD NOW. (2) THE LD. LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN NOT APPRECIATING THAT ALTERNATIVE GROUND OF ALLOWABILIT Y UNDER SECTION 28/36(1)(VII) RAISED BEFORE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) AGAINST REGULAR ASSESSMENT SURVIVES WH EN ITAT HAS SET ASIDE THE MAIN GROUND OF APPEAL AND LEARNED COMMISS IONER OF INCOME TAX(APPEALS) APPEAL OUGHT TO HAVE EXAMINED T HE SAME ON MERIT. IT IS SUBMITTED THAT IT BE SO HELD NOW. (3) THE LD. LEARNED COMMISSIONER OF INCOME TAX(APPEALS) ERRED IN FACTS AND IN LAW IN DISALLOWING WAIVER OF INTEREST. IN TH E FACTS AND CIRCUMSTANCES OF THE CASE, THE INTEREST WAIVED OUGH T TO HAVE BEEN ALLOWED AS DEDUCTION UNDER SECTION 28/37 OF THE ACT . . (3.1) WITHOUT PREJUDICE TO THE ABOVE IT IS SUBMITTE D THAT EVEN IF THE INTEREST IS NOT PENAL IN NATURE, WAIVER THEREOF WAS GRANTED AS PART OF BUSINESS REQUIREMENTS AND THEREFORE IT OUGHT TO HAVE BEEN AL LOWED. 5 (3.2)WITHOUT PREJUDICE TO THE ABOVE, IT IS SUBMITTE D THAT EVEN IF THE INTEREST IS NOT PENAL IN NATURE, WAIVER THEREOF IS ELIGIBLE AS DEDUCTION U/S. 36(1)(VII) OF THE ACT. 10. AT THE TIME OF HEARING, THE LD. COUNSEL OF THE ASSESSEE FAIRLY ADMITTED THAT THE ITAT VIDE ORDER DATED 30.11.2004 IN ASSESSEES OWN CASE IN IT A NO 1218/AHD./2003 SET ASIDE THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) TO THE FILE OF A.O. ON THE ISSUE OF ALLOWABILITY OF WAIVER OF INTEREST TO VARIOUS PARTIES TO WHOM LOANS WERE ADVANCED, AFTER VERIFYING THE ASSESSEES CLAIM THAT ONLY PENAL INTEREST HAS BEEN WAIVED. BY FOLLOWING THE ORDER OF ITAT DATED 30.11.2004, PENAL INTEREST HAS BEEN WAIVED BY THE L EARNED COMMISSIONER OF INCOME TAX(APPEALS) IN HIS IMPUGNED ORDER DATED 05.10.2007 ,. THEREFORE, HE ADMITTED THAT THE VARIOUS GROUNDS RAISED IN THIS APPEAL ARE NOT PRESSED. THE APPEAL OF THE ASSESSEE IS ACCORDINGLY DISMISSED AS NOT PRESSED. 12. NOW WE TAKE UP THE ITA NO. 183/AHD./2008 FILED BY THE DEPARTMENT FOR THE ASSESSMENT YEAR 1993-94. THE ONLY GROUND RAISED IN THIS APPEAL IS AS UNDER :- THE LD. LEARNED COMMISSIONER OF INCOME TAX(APPEALS ) HAS ERRED IN LAW AND ON FACTS IN DELETING DIRECTING TO ALLOW THE CLAIM OF WAIVER OF PENAL INTEREST IN THE CASES OF (1) NARENDRA TEXTILE LTD. AND (2) SUNRISE SOAPS AND CHEMICALS IGNORING THE FACT THAT THE BOAR D OF DIRECTORS HAVE NOT AUTHORIZED FULL WAIVER. 13. BRIEF FACTS RELATING TO CONTROVERSY INVOLVED IN THIS GROUND OF APPEAL IS THAT THE ITAT VIDE ORDER DATED 30.11.2004 SET ASIDE THE EARLIER ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS) TO THE FILE OF ASSESSING OFFICER ON TH E ISSUE OF ALLOWABILITY OF WAIVER OF INTEREST TO VARIOUS PARTIES TO WHOM LOANS HAD BEEN ADVANCED, AF TER VERIFYING THE ASSESSEES CLAIM THAT ONLY PENAL INTEREST HAS BEEN WAIVED. IN PURSUANCE OF THI S ORDER OF ITAT, THE A.O. VIDE ORDER DATED 21.12.2006 CARRIED OUT THE NECESSARY VERIFICATION A ND IN RESPECT OF M/S. NARENDRA TEXTILES PVT. LTD., HE RESTRICTED THE WAIVER OF PENAL INTEREST OF RS.19 LACS AS AGAINST THE CLAIM OF THE ASSESSEE OF RS.21,99,808/-. IN RESPECT OF M/S. SUNRISE SHOPS AN D CHEMICALS, THE A.O. RESTRICTED THE WAIVER OF PENAL INTEREST TO RS.22.85 LACS AS AGAINST THE CLAI M OF RS.25,13,782/-. 14. ON APPEAL BEFORE THE LEARNED COMMISSIONER OF IN COME TAX(APPEALS), ON BEHALF OF THE ASSESSEE IT WAS CONTENDED THAT PAPERS DO SHOW THAT THE CLAIMED AMOUNT IS RS.21,99,809/- IN 6 RESPECT OF M/S. NARENDRA TEXTILES AND RS.25,13,782/ - M/S. SUNRISE SHOPS AND CHEMICALS, WHICH HAD BEEN WRITTEN OFF IN THE BOOKS OF ACCOUNTS. THER E IS NO DISPUTE ABOUT THE FACTS THAT THESE ARE PENAL INTEREST CHARGES. THEREFORE, IF A COMPANY WRI TES OFF IN ITS BOOKS OF ACCOUNTS MORE THAN WHAT IT WAS AUTHORIZED BY ITS BOARD OF DIRECTORS OF SUCH COMMITTEES CONSTITUTED FOR THE PURPOSE BY THE BOARD, IT COULD BE VIOLATION OF CERTAIN RULE S AND REGULATION IN THE COMPANIES ACT BUT AS FAR AS THE INCOME TAX ACT IS CONCERNED, ONE HAS TO GO B Y THE TREATMENT GIVEN TO THE TRANSACTION IN THE BOOKS OF ACCOUNTS. IT WAS, THEREFORE, PLEADED THAT THE A.O. BE DIRECTED TO GIVE THE COMPLETE DEDUCTIONS FOR WAIVER OF PENAL INTEREST AMOUNTING T O RS.21,99,809/- AND RS.25,13,782/- FOR THE ABOVE REFERRED TWO PARTIES RESPECTIVELY. AGGRIEVED BY THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX(APPEALS), THE REVENUE IS IN APPEAL BEFOR E US. 15. AT THE TIME OF HEARING, THE LD. DEPARTMENTAL RE PRESENTATIVE POINTED OUT THAT THERE IS A DIFFERENCE IN FIGURE MENTIONED IN THE MINUTES OF FI NANCE COMMITTEE MADE. WHATEVER THE FIGURES, THE ASSESSEE MENTIONED IN RESPECT OF BOTH THE PARTI ES IN THE MINUTES OF FINANCE COMMITTEE, SAME HAS BEEN ALLOWED BY THE A.O. THEREFORE, THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) CLEARLY ERRED IN DIRECTING THE ASSESSING OFFICER TO ALLOW FURTHER AMOUNT. THE FURTHER AMOUNT TO THE EXTENT OF RS.2,99,808/- IN RESPECT OF NARENDRA TEXTILES AND RS.2,28,782/- IN RESPECT OF M/S. SUNRISE SHOPS AND CHEMICALS HAS BEEN ALLOWED BY LEA RNED COMMISSIONER OF INCOME TAX(APPEALS) IN THE IMPUGNED ORDER. 16. ON THE OTHER HAND, THE LD. COUNSEL OF THE ASSES SEE POINTED OUT THAT DIRECTION OF THE TRIBUNAL WAS TO ALLOW ACTUAL AMOUNT OF PENAL INTERE ST, WHICH HAS BEEN WAIVED. THE ACTUAL AMOUNT WAIVED IS RS.21,99,809/- AND RS.25,13,782/- IN RESPECT OF M/S. NARENDRA TEXTILES AND M/S. SUNRISE SHOPS AND CHEMICALS RESPECTIVELY. THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE DIFFERENCE IN FIGURE WAS ONLY DUE TO THE FACT T HAT FINANCE COMMITTEE MEETINGS WERE HELD BEFORE THE ACTUAL WAIVER OF INTEREST AND FIGURES OF INTEREST CONSIDERED IN THOSE MEETINGS WERE APPROXIMATE FIGURE. IN THE IMPUGNED ORDER, THE LEAR NED COMMISSIONER OF INCOME TAX(APPEALS) HAS RIGHTLY DIRECTED THE ASSESSING OFFICER TO ALLOW ACTUAL AMOUNT OF WAIVED INTEREST IN RESPECT OF BOTH THE PARTIES BECAUSE THE TRIBUNAL HAS DIRECTED TO WAIVE THE ACTUAL AMOUNT OF PENAL INTEREST WAIVED. HE ACCORDINGLY SUBMITTED THAT THE VIEW TAKE N BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS IN ACCORDANCE WITH THE DIRECTION OF THE TRIBUNAL. THEREFORE, THE SAME BE UPHELD. 7 17. WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE RIVAL SUBMISSIONS MADE BEFORE US AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. IT IS TRUE THAT IN THE MEETING OF FINANCE COMMITTEE, THE FIGURES GIVEN WERE TENTATIVE BECAUSE THOSE MEET INGS WERE HELD BEFORE THE END OF THE ACCOUNTING YEAR OR FINALIZATION OF THE ACCOUNTS. TH E DIRECTION OF THE TRIBUNAL WAS TO ALLOW THE ACTUAL AMOUNT OF PENAL INTEREST WAIVED. IN OUR CONS IDERED OPINION, THE VIEW TAKEN BY THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS) IS FAIR AND REA SONABLE. THEREFORE, WE DECLINE TO INTERFERE AND REJECT THE GROUND OF APPEAL. 18. IN THE RESULT, THE APPEAL OF THE ASSESSEE BEING ITA NO. 4383/AHD./2007 FOR ASSESSMENT YEAR 1992-93 IS PARTLY ALLOWED AND BOTH THE APPEALS BEING ITA NOS. 4384/AH./2007 AND 183/AHD./2008 FOR THE ASSESSMENT YEAR 1993-94 FILED BY THE ASSESSEE AND DEPARTMENT RESPECTIVELY ARE DISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON 30.10.200 9 SD/- SD/- (N.S. SAINI) (T.K. SHARMA ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30 / 10 / 2009 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT, 3) CIT(A) CONCERNED, (4) CIT CONCERNED, (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD LAHA/SR.P.S.