ACIT 12(3), MUMBAI V. LEMUIR AIR EXPRESS, MUMBAI

ITA 2106/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 48759 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 15-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJIV AGARWAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH A,MUMBAI BEFORE SHRI R.S. SYAL (AM) & SHRI V. DURGA RAO (JM ) I.T.A.NO.2106/MUM/10 (A.Y. 2004-05) ASSTT. COMMR. OF INCOME-TAX-12(3), ROOM NO.121, AAYKAR BHAVAN, M.K. ROAD, MUMBAI-400 020. VS. M/S. LEMUIR AIR EXPRESS, ORICON HOUSE, 2 ND FLOOR, 12, K.DUBHASH MARG, FORT, MUMBAI-400 023. APPELLANT RESPONDENT APPELLANT BY MR. RAJIV AGARWAL. RESPONDENT BY MS. AR ATI VISSANJI. O R D E R PER R.S. SYAL, AM : THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER PASSED BY THE CIT(A) ON 16-12-2009 IN RELATION TO THE ASSTT. YEAR 2004-0 5. 2. THE ONLY GROUND RAISED IN THIS APPEAL IS AGAINS T THE DELETION OF ADDITION OF 1,94,98,801/- MADE BY THE AO U/S. 41(1) OF THE ACT. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ORIGINAL ASSESSMENT IN THIS CASE WAS COMPLETED U/S.143(3) ASSESSING TOTAL INCOM E AT RS.56,19,31,901/-. THEREAFTER, NOTICE U/S.148 WAS ISSUED BY RECORDING THE REASON THAT THE ASSESSEE SOLD ITS INTERNATIONAL CARGO BUSINESS DURING THE PR EVIOUS YEAR RELEVANT TO ASSTT. YEAR 2004-05 AND THERE WERE HUGE CREDITORS RELATING TO SUCH BUSINESS WHICH THE ASSESSEE HAD WRITTEN BACK IN THE FOLLOWING MANNER : ASST. YEAR AMOUNT 2004-05 RS. 25,84,792/- 2005-06 RS. 41,67,282/- 2006-07 RS.1,53,31,519/- ITA NO.2106/M/10 LEMUIR AIR EXPRESS 2 IN THE OPINION OF THE AO, THE CESSATION OF LIABILIT Y OCCURRED IN ASSTT. YEAR 2004-05 WHEN THE INTERNATIONAL BUSINESS WAS TRANSFERRED AND THUS AS PER SEC. 41(1), THE WHOLE OF THE CREDITORS RELATING TO SUCH BUSINESS SH OULD HAVE BEEN WRITTEN BACK IN ASSTT. YEAR 2004-05 INSTEAD OF SPLITTING THIS AMOU NT OVER A PERIOD OF 3 YEARS AS INDICATED ABOVE AND ACCORDINGLY OFFERING IT FOR TAX ATION IN SUCH THREE YEARS. ON BEING SHOW-CAUSED, THE ASSESSEE SUBMITTED THAT A CO NSISTENT POLICY OF WRITING BACK THE AMOUNT OUTSTANDING FOR 3 YEARS OR MORE BY WAY OF A TRANSFER TO THE P & L A/C. WAS FOLLOWED BY THE ASSESSEE. IT WAS ALSO EX PLAINED THAT THE AMOUNTS OF RS.41.67 LAKHS AND RS.153.31 LAKHS WERE TRANSFERRED TO THE P & L A/C. OF THE SUCCEEDING YEARS ON THAT BASIS ALONE AS IN MANY CAS ES THE AMOUNTS WERE PAID TO THE REMITTERS IN SUBSEQUENT YEARS. NOT CONVINCED WI TH THE ASSESSEES SUBMISSIONS, THE LD. AO MADE THE ADDITION OF RS.194 .98 LAKHS ON THE GROUND THAT THE LIABILITIES CEASED TO EXIST WHEN THE SALE OF IN TERNATIONAL CARGO BUSINESS TOOK PLACE AND AS SUCH THE AMOUNT OUGHT TO HAVE BEEN OFF ERED FOR TAXATION IN THAT YEAR ALONE. HE, HOWEVER, ASSESSED THE INCOME OFFER ED BY THE ASSESSEE IN THE SUCCEEDING TWO YEARS ON PROTECTIVE BASIS. 4. THE LD. CIT(A) GOT CONVINCED WITH THE ASSESSEES SUBMISSIONS AND ORDERED FOR THE DELETION OF ADDITION. 5. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE RELEVANT MATERIAL ON RECORD, IT IS NOTICED THAT THE ASSESSEE SOLD ITS IN TERNATIONAL BUSINESS TO DHL DANZAS LEMUIR PRIVATE LTD. BY WAY OF DEED OF TRANSF ER OF BUSINESS, COPY OF WHICH IS AVAILABLE ON PAGES 38 ONWARDS OF THE PAPER BOOK. THIS SALE TOOK PLACE ON 29-05-2003 I.E. IN THE PREVIOUS YEAR RELEVANT TO THE ASSTT. YEAR UNDER CONSIDERATION. A BARE PERUSAL OF THE TRANSFER AGREE MENT SHOWS THAT THE ASSESSEE TRANSFERRED ITS BUSINESS TO THE ABOVESAID PARTY WIT HOUT TRANSFERRING FIXED ASSETS, CURRENT ASSETS AND LOANS & ADVANCES, SUNDRY DEBTORS , SUNDRY CREDITORS, ETC. IT ITA NO.2106/M/10 LEMUIR AIR EXPRESS 3 WOULD BE FRUITFUL TO MAKE REFERENCE TO CLAUSE 8.1.2 OF THE AGREEMENT, WHICH READS AS UNDER : 8.1.2. EXCLUDED ASSETS IT IS AGREED BY AND BETWE EN THE PARTIES THAT IN RESPECT OF THE BUSINESS BEING TRANSFERRED, NONE OF THE FOLLOWING SHALL BE TRANSFERRED TO THE PURCHASER BY THE VENDOR BY OR UNDER THIS AGREEMENT: (A) THE FIXED ASSETS OF THE VENDOR; (B) THE CURRENT ASSETS OF THE VENDOR (SAVE AND EXCEPT A S PROVIDED IN CLAUSE 4.3. ABOVE) AND (C) LOANS AND ADVANCES, SUNDRY DEBTORS, SUNDRY CREDITOR S AND OTHER LIABILITIES OF THE VENDOR. FROM THE ABOVE CLAUSE OF AGREEMENT, IT IS CLEAR THA T THE CREDITORS OF THE INTERNATIONAL CARGO BUSINESS WERE NOT TRANSFERRED B Y THE ASSESSEE TO THE OTHER PARTY. IT IS APPARENT FROM THE FACTS ON RECORD THAT THE AMOUNT OF THE CREDITORS CONTINUED TO REMAIN IN THE BALANCE-SHEET OF THE ASS ESSEE EVEN AFTER THE TRANSFER OF THE BUSINESS. IT WAS ONLY ON WRITING BACK OF THE TOTAL AMOUNT AS INDICATED ABOVE IN THE ABOVE TABLE IN THREE ASSESSMENT YEARS THAT THE AMOUNT OF CREDITORS OF INTERNATIONAL BUSINESS CAME TO NAUGHT IN THE ASS ESSEES BOOKS OF ACCOUNT. THE VIEWPOINT OF THE AO THAT THE ENTIRE LIABILITY CEASE D TO EXIST ON THE SALE OF ITS INTERNATIONAL CARGO BUSINESS IN RESPECT OF THE TOT AL CREDITORS AND SUCH AMOUNT SHOULD HAVE BEEN WRITTEN BACK IN THE YEAR UNDER CON SIDERATION, IS WITHOUT MERITS. IT IS MANIFEST THAT THE ASSESSEE WAS CONTIN UING WITH THE LIABILITY OF THE INTERNATIONAL CARGO BUSINESS AND IT IS THE ASSESSEE ALONE WHO HAS OFFERED THE AMOUNT IN QUESTION FOR TAXATION IN THREE YEARS AS A ND WHEN THE AMOUNT BECAME IRRECOVERABLE FOLLOWING ITS CONSISTENT POLICY OF WR ITING BACK THE AMOUNT. APART FROM THE AOS POINT OF VIEW THAT THE AMOUNT BECAME TAXABLE U/S.41(1) ON THE CLOSURE OF BUSINESS, THERE IS NOTHING TO INDICATE T HAT THE AMOUNT WRITTEN BACK BY THE ASSESSEE IN THREE YEARS WAS NOT APPROPRIATE. IT IS APPARENT THAT THE ASSESSEE VOLUNTARILY OFFERED THE SAID AMOUNT FOR TAXATION I N THREE YEARS WHICH THE AO HAS ITA NO.2106/M/10 LEMUIR AIR EXPRESS 4 ALSO ASSESSED ALBEIT ON PROTECTIVE BASIS IN THE SUBSEQUENT TWO YEARS. I N OUR CONSIDERED OPINION, THE LD. CIT(A) WAS JUSTIFIED IN OVERTURNING THE ASSESSMENT ORDER ON THIS POINT. WE, THEREFORE, HOLD THAT THE A MOUNT OF RS.25.84 LAKHS OFFERED BY THE ASSESSEE FOR TAXATION U/S. 41(1) IN THIS YEAR WAS RIGHTLY ASSESSABLE AS SUCH, WHEREAS THE AMOUNTS OF RS.41.67 LAKHS AND RS.153.31 LAKHS WERE LIABLE TO TAX IN ASSTT. YEARS 2005-06 AND 2006-07, WHICH THE ASSESSEE DID AT ITS OWN. 6. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED ON THE 11TH DAY OF MAY, 2011. SD/- SD/- (V. DURGA RAO) (R.S. SYAL) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI: 11TH MAY , 2011. NG: COPY TO : 1. DEPARTMENT. 2.ASSESSEE. 3 CIT(A)-23,MUMBAI. 4 CIT-XII,MUMBAI. 5.DR,A BENCH,MUMBAI. 6.MASTER FILE. (TRUE COPY) BY ORDER, ASST.REGISTRAR, ITAT, MUMBAI. ITA NO.2106/M/10 LEMUIR AIR EXPRESS 5 DETAILS DATE INITIALS DESIGN ATION 1. DRAFT DICTATED ON 03-05-11 SR.PS/ 2. DRAFT PLACED BEFORE AUTHOR 03-05-11 SR.PS/ 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/ 6. KEPT FOR PRONOUNCEMENT ON SR.PS/ 7. FILE SENT TO THE BENCH CLERK SR.PS/ 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9. DATE ON WHICH FILE GOES TO THE AR 10. DATE OF DISPATCH OF ORDER *