DCIT, Circle - 3(1), , Kolkata V. M/s. MSL Industries Limited , Kolkata

ITA 2034/KOL/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9453 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2013-2014
• Appeal Filed On: 25-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DHRUBAJYOTI RAY
• Assessee Lawyers: D S DAMLE
• Keywords: Recovery proceedings; Earning of tax free income
• Section: 14A; 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA A BENCH, KOLKATA [BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER] I.T.A. NO. 2034/KOL/2018 ASSESSMENT YEAR: 2013-14 DCIT, CIRCLE-3(1), KOLKATA............................................................................................RESPONDENT VS. M/S. MSL INDUSTRIES LIMITED.....................................................................APPELLANT [PAN: AACCM 0109 M] APPEARANCES BY: SH. DHRUBAJYOTI RAY, JCIT, SR. DR, APPEARED ON BEHALF OF THE REVENUE. SH. D.S. DAMLE, FCA, APPEARED ON BEHALF OF THE ASSESSEE. DATE OF CONCLUDING THE HEARING : DECEMBER 05 TH , 2019 DATE OF PRONOUNCING THE ORDER : JANUARY 8 TH , 2020 ORDER PER J. SUDHAKAR REDDY, AM : THIS IS AN APPEAL FILED BY THE REVENUE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-01, KOLKATA [CIT(A) FOR SHORT] DATED 19.06.2018 U/S 250 OF THE INCOME TAX ACT, 1961 (THE ACT FOR SHORT) FOR AY 2013-14 ON THE FOLLOWING GROUNDS: 01. IN THE FACTS AND CIRCUMSTANCES AND LAW POINTS OF THE CASE, THE ORDER OF THE LD. CIT(A) IS ERRONEOUS IN DELETING THE ADDITION OF RS. 4,77,56,000/- U/S 41(1) OF THE ACT ON ACCOUNT OF CESSATION OF LIABILITY. 02. IN THE FACTS AND CIRCUMSTANCES AND LAW POINTS OF THE CASE, THE ORDER OF THE LD. CIT(A) IS ERRONEOUS IN DELETING THE DISALLOWANCE OF RS. 47,188/- U/S 14A OF THE ACT. 03. DEPARTMENT CRAVES LEAVE TO ADD, ALTER OR MODIFY ANY GROUND OF APPEAL DURING THE COURSE OF HEARING. 2. AFTER HEARING RIVAL CONTENTIONS, WE FIND THAT THE LD. CIT(A) HAS AT PAGE 6-7 OF HIS ORDER HELD AS FOLLOWS: I HAVE CONSIDERED THE FINDINGS OF THE A.O., WRITTEN SUBMISSIONS AND MATERIALS ON RECORD. THE APPELLANT COMPANY WAS DECLARED A SICK COMPANY WITH BIFR. THE SECURED CREDITORS I.E. BANKS ALONG WITH RDBI, ICICI AND SBI HAVING FIRST CHARGE ON THE ASSETS OF THE COMPANY. ALL THE ASSETS ARE TAKEN OVER BY ARCIL UNDER THE SARFAESI ACT, 2002. OUT OF THIS SALE PROCEEDS ARCIL TO THE SECURED CREDITORS OUT OF THE SALE PROCEEDS BUT AS NO DUE CERTIFICATE WAS NOT ISSUED BY THE SECURED CREDITORS PENDING THE RECEIPT OF THE SAID AMOUNTS AND PENDING THE ADJUSTMENT. THE 2 I.T.A. NO. 2034/KOL/2018 ASSESSMENT YEAR: 2013-14 M/S. MSL INDUSTRIES LIMITED. AUDITORS HAS CERTIFIED IN SCHEDULE 3 & 4 OF THE BALANCE SHEET THAT THE BALANCE OF PENDING LOANS INCLUDING INTEREST ACCRUED THEREON WAS ADJUSTED TO CREDIT OF THE P & L ACCOUNT FOR THE YEAR 31ST MARCH, 2010, AND THE PAYMENT OF RS.4,77.56 LACS MADE TO IDBI WAS SHOWN AS SECURED LOANS IN THE BALANCE SHEET PENDING ADJUSTMENT OR THE WRITING OF THE SAID LIABILITY FOR THE YEAR ENDED 31.03.2012 AND 31.03.2013. HOWEVER, THE A.O. TREATED THE SAID AMOUNT OF RS 4,77,56,000/- AS DEEMED PROFIT FOR THE YEAR ENDING 31.03.2013 WHICH WAS ADDED BACK TO THE TOTAL INCOME. THE APPELLANT'S A.R. HAS REITERATED THE ABOVE SUBMISSIONS MADE BEFORE THE A.O. AND HAS ALSO ARGUED THAT THE IMPUGNED AMOUNT OF RS.4,77,56,000/- WAS THE TOTAL AMOUNT REALIZED FROM THE SALE OF ASSETS AND WAS PAID PROPORTIONALLY TO IDBI AS THEIR SHARE OUT OF THE TOTAL LOANS BORROWED FROM FINANCIAL INSTITUTION OF RS.22,79,00,000/- AND THE BALANCE AMOUNT WAS WRITTEN BY 'ASSET RECONSTRUCTION CORPORATION OF INDIA' (ARCIL) WHICH WAS APPOINTED BY FINANCIAL INSTITUTION DURING THAT RECOVERY PROCEEDINGS FOR NEGOTIATING THE SALE OF THE ASSETS OF THE SICK COMPANY. THE A.R. HAS ALSO EXPLAINED THE NATURE OF THE IMPUGNED AMOUNT OF RS.4,77,56,000/- AS ''HAD THERE ADJUSTMENT ENTRIES WOULD HAVE DONE, THE RS.4,77,56,000/- WOULD NOT HAVE REMAINED IN THE ASSET SIDE OF THE BALANCE SHEET AND THE LOAN AMOUNT FROM IDBI WOULD HAVE STAND REDUCED BY RS.4,77,56,000/- I.E. TO RS. 18,01,44,000/- ONLY. THESE FACTS WERE DULY MENTIONED IN THE BALANCE SHEET BY WAY OF NOTES ON THE BALANCE SHEET AND ALSO BY THE AUDITORS.' IN VIEW OF THE ABOVE DISCUSSION AND DOCUMENTS ON RECORD, IT IS FOUND THAT THERE IS MERIT IN THE ARGUMENTS OF THE A.R. THAT THE A.O. HAD ERRED IN TREATING THE IMPUGNED AMOUNT OF RS.4,77,56,000/- SHOWN AS LIABILITY IN THE BALANCE SHEET AS ON 31.03.2013 PENDING ADJUSTMENT, AS INCOME OF THE APPELLANT, WITHOUT BRINGING ANY MATERIAL ON RECORD TO ESTABLISH THAT THERE WAS ANY 'CESSATION OF LIABILITY IN THIS REGARD WHICH WAS NOT JUSTIFIED. THEREFORE, THE A.O. IS DIRECTED TO DELETE THE ADDITION OF RS.4,77,56,000/-. THIS GROUND IS ALLOWED. 3. THE LD. DR COULD NOT CONTRADICT HIS FACTUAL FINDING OF THE LD. CIT(A). 4. WE FIND NO INFIRMITY IN THIS ORDER AND WE UPHOLD THE SAME. 5. THE NEXT ISSUE IS DISALLOWANCE U/S 14A OF THE ACT. THE LD. CIT(A) HAS RESTRICTED THE DISALLOWANCE TO THE DIVIDEND INCOME EARNED BY THE ASSESSEE. THIS ISSUE IS SUPPORTED BY THE PROPOSITIONS OF LAW LAID DOWN BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VS. M/S. ASHIKA GLOBAL SECURITIES LTD . RESPECTFULLY FOLLOWING THE JUDGMENT OF M/S ASHIKA GLOBAL SECURITIES LTD . (SUPRA) WE HOLD THAT NO DISALLOWANCE CAN BE MADE U/S 14A OF THE ACT, IN EXCESS OF THE EXEMPT INCOME EARNED BY THE ASSESSEE DURING THE YEAR. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. KOLKATA, THE 8 TH JANUARY, 2020. SD/- SD/- [S.S. GODARA] [J. SUDHAKAR REDDY] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 08.01.2020 BIDHAN 3 I.T.A. NO. 2034/KOL/2018 ASSESSMENT YEAR: 2013-14 M/S. MSL INDUSTRIES LIMITED. COPY OF THE ORDER FORWARDED TO: 1. DCIT, CIRCLE-3(1), KOLKATA. 2. M/S. MSL INDUSTRIES LIMITED, 1 ST FLOOR, P-22, SWALLOW LANE, KOLKATA-700 001. 3. CIT(A)-01, KOLKATA. (SENT THROUGH E-MAIL) 4. CIT- 5. CIT(DR), KOLKATA BENCHES, KOLKATA. (SENT THROUGH E-MAIL) TRUE COPY BY ORDER ASSISTANT REGISTRAR ITAT, KOLKATA BENCHES