ACIT, CHENNAI V. M/s. Sigma Blooms Pvt Ltd. (Rep. by Sh.Rajavel Erstwhile Director), CHENNAI

ITA 2001/CHNY/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57903 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 31-01-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 24-11-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH C CHENNAI BEFORE SHRI N. S. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER .. I.T.A. NO. 2001/MDS/2010 ASSESSMENT YEAR : 2003-04 THE ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-VI(3), CHENNAI. V. M/S. SIGMA BLOOMS PVT. LTD. (REPRESENTED BY SHRI RAJAVEL, ERSTWHILE DIRECTOR), NO.54, RGL COLONY, PHASE-II, MOHALVAKKAM, CHENNAI-600 116. [PAN: AAACS7744J] (APPELLANT) (RESPONDENT) APPELLANT BY : DR. I. VIJAYAKUMAR, CIT-DR RESPONDENT BY : SHRI R. MEENAKSHISUNDARAM, ADVOCATE DATE OF HEARING : 31-01-2012 DATE OF PRONOUNCEMENT : 31-01-2012 O R D E R PER GEORGE MATHAN, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED CIT(APPEALS)-V, CHENNAI IN ITA NO. 553/2008-09 DATE D 13-09-2010 FOR THE ASSESSMENT YEAR 2003-04. I.T.A. NO. 2001/MDS/2010 2 2. DR. I. VIJAYAKUMAR, LEARNED CIT-DR REPRESENTED O N BEHALF OF THE REVENUE AND SHRI R. MEENAKSHISUNDARAM, ADVOCATE REPRESENTED ON BEHALF OF THE ASSESSEE. 3. IT WAS SUBMITTED BY THE LEARNED DR THAT THE ASSE SSEE IS A COMPANY WHICH IS IN THE BUSINESS OF FLORICULTURE. IT WAS THE SUBMIS SION THAT DURING THE RELEVANT ASSESSMENT YEAR STATE BANK OF MYSORE WHO HAD LENT T ERM LOANS AND WORKING TERM LOANS TO THE ASSESSEE COMPANY HAD MADE A WAIVER OF PRINCIPAL AND INTEREST TO AN EXTENT OF ` 73,63,603/- AS THE ASSESSEE COMPANY HAD BECOME SIC K AND HAD BEEN INCURRING CONTINUOUS LOSSES. IT WAS THE SUBMISSION THAT OUT OF THE SAID AMOUNT WAIVED BY STATE BANK OF MYSORE, ` 69,01,181/- REPRESENTED THE WAIVER OF PRINCIPAL OUTSTANDING AND ` 4,62,422/- REPRESENTED INTEREST WAIVER. IT WAS TH E SUBMISSION THAT WHEN THE ASSESSEE HAD FILED ITS RETURN OF INCO ME, THE ASSESSEE HAD OFFERED THE AMOUNT OF ` 4,62,422/- AS INCOME UNDER THE HEAD INCOME FROM O THER SOURCES BY APPLYING THE PROVISIONS OF SECTION 41(1) OF THE ACT . IT WAS THE SUBMISSION THAT IN THE COURSE OF ASSESSMENT THE ASSESSING OFFICER HAD TREATED THE PRINCIPAL WAIVER OF ` 69,01,181/- AS A DEEMED PROFIT AND BROUGHT THE SAME TO TAX. IT WAS THE SUBMISSION THAT ON APPEAL THE LEARNED CIT(A) HAD DE LETED THE ADDITION BY HOLDING THAT THE ADDITION COULD NOT BE MADE UNDER SECTION 2 8(4) OF THE ACT. IT WAS THE SUBMISSION THAT AS THE ASSESSEE HAD RECEIVED A BENE FIT ON ACCOUNT OF THE WAIVER OF THE PRINCIPAL AMOUNT, THE SAME WAS LIABLE TO BE TRE ATED AS INCOME OF THE ASSESSEE. 4. IN REPLY, THE LEARNED AUTHORISED REPRESENTATIVE VEHEMENTLY SUPPORTED THE ORDER OF THE LEARNED CIT(A). IT WAS THE SUBMISSION THAT AFTER THE DECISION OF THE I.T.A. NO. 2001/MDS/2010 3 HON'BLE SUPREME COURT IN THE CASE OF T.V.SUNDARAM I YENGAR & SONS LTD., REPORTED IN 222 ITR 344, AS THE PRINCIPAL AMOUNT OF LOAN WAI VED WAS NOT ALLOWED AS A DEDUCTION FOR COMPUTATION OF THE TOTAL INCOME OF TH E ASSESSEE AT ANY POINT OF TIME, THE SAME COULD NOT HAVE BEEN TREATED AS INCOME. IT WAS THE FURTHER SUBMISSION THAT EVEN THE PROVISIONS OF SECTION 41(1) COULD NOT BE BROUGHT INTO PLAY INSOFAR AS THE ASSESSEE HAD NOT MADE A CLAIM OF DEDUCTION OF T HE SAID AMOUNT IN THE ASSESSMENTS FOR ANY OF THE PREVIOUS YEARS ON ACCOUN T OF THE LOAN AMOUNT WAIVED. IT WAS THE FURTHER SUBMISSION THAT THE LEARNED CIT(A) HAD FOLLOWED THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF T.V.SUNDARAM I YENGAR & SONS LTD., REFERRED TO SUPRA, AS ALSO THE DECISION IN THE CASE OF KESAR IA TEA COMPANY LTD., REPORTED IN 254 ITR 434. IT WAS THE SUBMISSION THAT THE WAIVER BEING OF THE PRINCIPAL AMOUNT, THE SAME WAS LIABLE TO BE TREATED AS A CAPITAL RECE IPT ONLY. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. UNDIS PUTEDLY, THE AMOUNT RECEIVED BY THE ASSESSEE ON ACCOUNT OF THE WAIVER O F THE PRINCIPAL LOAN TO AN EXTENT OF ` 69,01,181/- IS ON THE CAPITAL FIELD. THE ASSESSEE HAS NOT BEEN SHOWN TO HAVE CLAIMED THIS AMOUNT AS A DEDUCTION OR AS AN EXPENDI TURE IN ANY OF THE EARLIER ASSESSMENT YEARS. ADMITTEDLY, THE LOAN WAS TOWARDS THE WORKING CAPITAL AND TERM LOANS. A PERUSAL OF THE DECISION OF THE HON'BLE SU PREME COURT IN THE CASE OF T.V. SUNDARAM IYENGAR & SONS LTD. CLEARLY SHOWS THAT ONL Y AN AMOUNT RECEIVED IN THE REVENUE FIELD CAN BE BROUGHT TO TAX U/S 28(4) OF TH E ACT. A PERUSAL OF THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF TIRUNEL VELI MOTOR BUS SERVICE COMPANY I.T.A. NO. 2001/MDS/2010 4 PRIVATE LTD. V. CIT, REPORTED IN 78 ITR 55, FURTHER CLEARLY SHOWS THAT UNLESS AN ALLOWANCE OF DEDUCTION HAS BEEN MADE IN THE ASSESSM ENT FOR ANY PREVIOUS YEAR IN RESPECT OF ANY LOSS, EXPENDITURE OR LIABILITY, THE PROVISIONS OF SECTION 41(1) CANNOT BE INVOKED FOR CHARTING TO TAX A RECEIPT BY THE ASS ESSEE. IN THE PRESENT CASE THE WAIVER OF THE LOAN ON THE PRINCIPAL ACCOUNT BY STAT E BANK OF MYSORE CLEARLY IS NOT IN THE REVENUE FIELD NOR IT IS AN AMOUNT WHICH HAS BEE N CLAIMED AS DEDUCTION OR ALLOWED AS A DEDUCTION IN THE ASSESSMENT FOR ANY OF THE EARLIER ASSESSMENT YEARS. IN THE CIRCUMSTANCES, THE AMOUNT CANNOT BE BROUGHT TO TAX EITHER BY INVOKING THE PROVISIONS OF SECTION 28(4) OR SECTION 41(1) OF THE ACT. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE FINDING OF THE LEARNED CIT (A) ON THIS ISSUE IS ON A RIGHT FOOTING AND DOES NOT CALL FOR ANY INTERFERENCE. IN THE CIRCUMSTANCES, THE APPEAL OF THE REVENUE STANDS DISMISSED. 6. THE ORDER WAS PRONOUNCED IN THE COURT ON 31/01/2 012. SD/- SD/- (N. S. SAINI) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 31 ST JANUARY, 2012. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE