Income Tax Officer Ward-2 , Chitradurga V. M.s Vani Vilas Co-operative Sugar Factory Limited , Chitradurga

ITA 2474/BANG/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 7194 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-09-2020
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 31-08-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: S RAMASUBRAMANYAM

Judgement Text

ITA NO.2474/BANG/2018 M/S. VANI VILAS CO-OP. SUGAR FACTORY LTD., CHITRADU RGA DIST. IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: BANGALORE BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT AND SHRI B.R. BASKARAN, ACCOUTANT MEMBER ITA NO.2474/BANG/2018 ASSESSMENT YEAR: 2013-14 INCOME TAX OFFICER WARD-1 CHITRADURGA PAN NO : AAAAV0234E VS. DEPUTY REGISTRAR OF CO- OPERATIVE SOCIETIES CHITRADURGA LIQUIDATOR OF THE ASSESSEE M/S. VANI VILAS CO0- OPERATIVE SUGAR FACTORY LTD. CHALLAKERE ROAD HIRIYUR, CHITRADURGA DIST. APPELLANT RESPONDENT APPELLANT BY : SHRI PRADEEP KUMAR, D.R. RESPONDENT BY : SHRI S. RAMASUBRAMANYAM, A.R. DATE OF HEARING : 10.06.2020 DATE OF PRONOUNCEMENT : 02.09.2020 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE REVENUE HAS FILED THIS APPEAL CHALLENGING THE O RDER DATED 01-06-2018 PASSED BY LD CIT(A), DAVANGERE FOR ASSES SMENT YEAR 2013-14, WHEREIN THE LD CIT(A) HAS DELETED THE ADDI TION OF RS.6.24 CRORES MADE BY THE AO U/S 41(1) OF THE INCOME-TAX A CT,1961 ['THE ACT' FOR SHORT]. 2. THE FACTS RELATING TO THE ISSUE ARE DISCUSSE D IN BRIEF. THE ASSESSEE IS A COOPERATIVE SUGAR FACTORY. ACCORDING TO LD A.R, IT STOPPED ITS OPERATIONS IN THE YEAR 2004 AND IT IS U NDER THE CONTROL OF LIQUIDATOR. THE LD A.R ALSO STATED THAT THE ASSESSE E HAS NOT FILED ITS RETURNS OF INCOME SINCE ASSESSMENT YEAR 2003-04 ONW ARDS. ITA NO.2474/BANG/2018 M/S. VANI VILAS CO-OP. SUGAR FACTORY LTD., CHITRADU RGA DIST. PAGE 3 OF 6 4. IN THE APPELLATE PROCEEDINGS, THE LD CIT(A) A CCEPTED THE CONTENTIONS OF THE ASSESSEE. SINCE THE ASSESSEE DI D NOT FILE RETURNS OF INCOME FOR EARLIER YEARS, THE LD CIT(A) HELD THA T THE EXPENDITURE HAS NOT BEEN CLAIMED BY THE ASSESSEE. ACCORDINGLY H E HELD THAT THE WAIVER OF INTEREST OF RS.6,23,97,844/- IS NOT TAXAB LE U/S 41(1) OF THE ACT. THE REVENUE IS AGGRIEVED BY THE SAID DECISION . 5. THE LD D.R SUBMITTED THAT THE ASSESSEE HAS B EEN PREPARING FINANCIAL STATEMENTS YEAR AFTER YEAR, WHEREIN THE I NTEREST EXPENDITURE HAS BEEN ACCOUNTED FOR, MEANING THAT THE ASSESSEE H AS BEEN CLAIMING INTEREST EXPENDITURE IN ITS BOOKS OF ACCOUNTS. HEN CE MERE NON-FILING OF RETURN OF INCOME CANNOT LEAD TO THE CONCLUSION T HAT THE ASSESSEE DID NOT CLAIM INTEREST AMOUNTS AS EXPENDITURE. ACC ORDINGLY, HE SUBMITTED THAT THE AO WAS RIGHT IN ASSESSING THE IN TEREST WAIVER AMOUNT AS INCOME OF THE ASSESSEE U/S 41(1) OF THE A CT. 6. HOWEVER, ACCORDING TO LD A.R, EXPENDITURE SHA LL BE DEEMED TO HAVE BEEN ALLOWED UNDER THE INCOME TAX ACT, ONLY IF THE RETURN OF INCOME HAS BEEN FILED UNDER THE ACT. ACCORDINGLY, I T WAS CONTENDED THAT THE ENTIRE INTEREST EXPENSES CANNOT BE CONSIDE RED AS ALLOWED, SINCE THE ASSESSEE HAS NOT FILED RETURNS OF INCOME FROM 2003-04 ONWARDS. THE LD A.R SUBMITTED THAT THE PROVISIONS OF SEC. 41(1) SHALL BE ATTRACTED ONLY IF THE EXPENDITURE HAD BEEN ALLOW ED EARLIER. ACCORDINGLY HE CONTENDED THAT THE PROVISIONS OF SEC . 41(1) ARE NOT ATTRACTED IN THE FACTS OF THE PRESENT CASE, SINCE N O RETURN OF INCOME HAS BEEN FILED BY THE ASSESSEE. HE FURTHER SUBMIT TED THAT THE ASSESSEE HAS BEEN INCURRING LOSS YEAR AFTER YEAR EV EN WITHOUT CONSIDERING THE INTEREST EXPENSES ALSO. ACCORDINGL Y SUBMITTED THAT THE ORDERS PASSED BY LD CIT(A) DOES NOT CALL FOR AN Y INTERFERENCE. ITA NO.2474/BANG/2018 M/S. VANI VILAS CO-OP. SUGAR FACTORY LTD., CHITRADU RGA DIST. PAGE 5 OF 6 STATEMENTS, THE STATEMENT OF TOTAL INCOME COULD BE PREPARED FOR EVERY YEAR BY DISALLOWING INTEREST CLAIM COVERED BY WAIVE R SCHEME. ON A PERUSAL OF FINANCIAL STATEMENTS, WE NOTICE THAT THE LOSS DECLARED BY THE ASSESSEE EVERY YEAR IS MORE THAN THE AMOUNT OF INTEREST (NET INTEREST IN AY 2011-12), MEANING THEREBY, THERE SHO ULD NOT BE ANY TAX LIABILITY, EVEN IF THE INTEREST EXPENSES ARE DI SALLOWED. ACCORDINGLY, WE DIRECT THE ASSESSEE TO COMPUTE TOTAL INCOME OF E ARLIER YEARS BY DISALLOWING THE INTEREST EXPENDITURE, WHICH HAVE BE EN WAIVED BY THE GOVERNMENT OF KARNATAKA. IN THAT CASE, IT CAN BE E ASY FOR ANYONE TO GIVE A FINDING THAT THE INTEREST EXPENDITURE WAS NO T CLAIMED IN EARLIER YEARS. IN THAT SITUATION, THE INTEREST WAIVED BY T HE GOVERNMENT WILL NOT BE ASSESSABLE U/S 41(1) OF THE ACT. 9. ACCORDINGLY, WE DIRECT THE ASSESSEE TO FURNI SH THE INCOME COMPUTATION STATEMENTS FOR ASSESSMENT YEARS 2006-07 ONWARDS (PERIOD COVERED BY THE INTEREST WAIVER SCHEME) TO T HE ASSESSING OFFICER FOR HIS CONSIDERATION BY DISALLOWING INTEREST EXPEN DITURE COVERED BY THE WAIVER SCHEME. THE AO, AFTER EXAMINING THE FIN ANCIAL STATEMENTS AND AFTER SATISFYING HIMSELF THAT THE INTEREST EXPE NDITURE HAS BEEN DISALLOWED BY THE ASSESSEE, MAY DESIST FROM ASSESSI NG THE WAIVER AMOUNT U/S 41(1) OF THE ACT. WE CONFINE OURSELVES WITH ASSESSMENT YEAR 2013-14 ONWARDS. ON THE BASIS OF INCOME COMPUT ATION STATEMENT FILED FOR EARLIER YEARS, IF ANY ACTION IS WARRANTED, THE AO MAY DEAL WITH IT IN ACCORDANCE WITH LAW. 10. IN VIEW OF THE FOREGOING DISCUSSIONS, WE SE T ASIDE THE ORDER PASSED BY LD CIT(A) AND RESTORE THE ISSUE TO THE FI LE OF THE AO FOR EXAMINING IT AFRESH AS PER DISCUSSIONS MADE SUPRA A ND ALSO IN ACCORDANCE WITH LAW.