DCIT CC 3(2) CEN RG 3, MUMBAI V. WORLD SPORTS (INDIA) P . LTD, MUMBAI

ITA 3314/MUM/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3897 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-01-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2012-2013
• Appeal Filed On: 05-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHAUDHARY ARUN KUMAR SINGH
• Keywords: Capital receipt
• Section: 143(3); 133(6)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI PAWAN SINGH (JUDICIAL MEMBER) AND SHRI N.K. PRADHAN (ACCOUNTANT MEMBER) ITA NO. 3314 /MUM/201 7 ASSESSMENT YEAR: 2012 - 13 DEPUTY COMMISSIONER OF INCOME TAX, CC.3(2), CENTRAL RANGE - 3, ROOM NO. 1913, 19 TH FLOOR, AIR INDIA BUILDING, NARIMAN POINT, MUMBAI - 400021. VS. M/S WORLD SPORTS (INDIA) PVT. LTD., 6 - 02, SAPPHIRE, PLOT NO. 82, S.V. ROAD, KHAR WEST, MUMBAI - 400052. PAN NO. AAACW6355R APPELLANT RESPONDENT REVENUE BY : MR. CHAUDHARY ARUN KUMAR SINGH , DR ASSESSEE BY : MR. MADHUR AGARWAL , AR DATE OF HEARING : 27 /11/2018 DATE OF PRONOUNCEMENT: 31/01/2019 ORDER PER N.K. PRADHAN, AM THIS IS AN APPEAL FILED BY THE REVENUE . THE RELEVANT ASSESSMENT YEAR IS 2012 - 13. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) - 5 1, MUMBAI [IN SHORT CIT(A)] AND ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF TH E INCOME TAX ACT 1961, (THE ACT). M/S WORLD SPORTS ITA NO. 3314/MUM/2017 2 2. THE GROUNDS OF APPEAL FILED BY THE REVENUE READ AS UNDER: ON THE FACTS AND CIRCU MSTANCES OF THE CASE AND IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCES OF RS.1,26,00,000/ - MADE BY THE AO U/S 41(1) AGAINST OUTSTANDING LIABILITY IN RESPECT OF BCCI. 3. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER (AO) FOUND THAT CERTAIN CREDITORS WERE OUTSTANDING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE. IN ORDER TO VERIFY THE GENUINENESS OF THESE CREDITORS, HE ISSUED NOTICE U/S 133(6) TO THEM. HOWEVER, THE FOLLOWING CREDITORS DID NOT RESPOND TO HIS NOTICE. SR. NO. NAME OF THE CREDITOR AMOUNT OUTSTANDING AS ON 31.03.2012 1. BCCI 1,26,00,000/ - 2. IFTE - HAM SOFTWARE (I) LIMITED 19,85,400/ - TOTAL 1,45,85,400/ - THE AO NOTED THAT EVEN AFTER GIVING OPPORTUNITY TO THE ASSESSEE TO FURNISH CONFIRMATION OF THE ABOVE CREDITORS, THE ASSESSEE FAILED TO FILE ANY EVIDENCE TO SHOW THAT THESE LIABILITIES WERE EXISTING AND WERE PAYABLE AT THE END OF THE YEAR. THEREFORE, THE AO CONCLUDED THAT THE ABOVE PARTIES WERE NON - EXISTE NT AND THUS MADE AN ADDITION OF RS.1,45,85,400/ - U/S 41(1) OF THE ACT. 4. IN APPEAL, THE LD. CIT(A) OBSERVED THAT T HE ASSESSEE HAS NEITHER WRITTEN BACK THE LIABILITY NOR THE BCCI HAS WRITTEN OFF THE SAME IN ITS BOOKS OF ACCOUNTS. THE ASSESSEE IS STILL SHOWING THIS AMOUNT IN ITS BOOKS OF ACCOUNTS AS LIABILITY PAYABLE TO BCCI AND BCCI HAS NOT FORGONE ITS M/S WORLD SPORTS ITA NO. 3314/MUM/2017 3 RIGHTS TO RECOVE R THIS AMOUNT FROM THE ASSESSEE. THE LD. CIT(A) THUS HELD : INFACT, THIS AMOUNT COULD HAVE BE SETTLED AT THE LEGAL DISPUTE BETWEEN THE ASSESSEE ON ONE HAND AND THE BCCI ON OTHER HAND, WOULD HAVE BEEN FINALLY DECIDED BY THE COURTS. HOWEVER, THE MATTER IS STILL PENDING AND THIS IS THE REASON THAT THIS LIABILITY IS S TILL OUTSTANDING. IT IS RELEVANT TO MENTION OVER HEAR, THAT ON ACCOUNT OF LEGAL DISPUTES THE ASSESSEE IS CLAIMING CERTAIN DAMAGES FROM BCCI FOR CANCELLATION OF MEDIA RIGHTS IN RESPECT OF IPL MATCHES. IN DUE COURSE, THOSE ISSUES WILL BE DECIDED AND THEREAFT ER THE FATE OF THIS RS.1.26 CRORES WILL BE DECIDED. NONETHELESS, BCCI REMAINS A W ELL - RESPECTED ORGANIZATION AND IT IS NOT THE CASE THAT BCCI IS NOT TRACEABLE OR IS ANY BOGUS PARTY. THE LD. AR IN THIS REGARD HAS ALSO RELIED UPON VARIOUS CASE LAWS. IN CASE O F TRINERVELI MOTOR BUS CO SERVICES P. LTD. V/S CIT 78 ITR 55, THE HONBLE SUPREME COURT HELD THAT UNLESS THAT THE DEPARTMENT IS ABLE TO ESTABLISH THAT THE SAID AMOUNT WHICH IS PROPOSED TO BE TAXED U/S 41(1), HAS BEEN ALLOWED AS A DEDUCTION OR EXPENDITURE, NO ADDITION CAN BE MADE UNDER THIS SECTION. SIMILARLY, IN CASE OF MAHINDRA & MAHINDRA V/S CIT 261 ITR 501, THE HONBLE BOMBAY HIGH COURT HELD THAT WAIVER OF LOAN WOULD NOT BE CHARGEABLE TO TAX U/S 41(1) AND WOULD CLEARLY BE A CAPITAL RECEIPT. SIMILAR DECIS ION HAS BEEN GIVEN BY HONBLE ITAT, MUMBAI IN CASE OF HELIOS FOOD IMPROVERS P. LTD. V/S DCIT 40 SOT 546. FURTHER IN CASE OF CIT V/S SUGAULI SUGAR WORKS P. LTD. 236 ITR 518, THE HONBLE COURT HELD THAT EVEN THE UNILATERAL ACT OF WRITING BACK OF CREDIT BALAN CES WOULD NOT ATTRACT THE PROVISIONS OF SEC 41(1) UNLESS EVIDENCE WAS PRODUCED TO PROVE THAT THERE WAS A REMISSION OR CESSATION OF THE SAID LIABILITY. 5. BEFORE US, THE LD. DR RELIES ON THE ORDER OF THE AO, WHEREAS THE LD. COUNSEL OF THE ASSESSEE RELIES O N THE ORDER OF THE LD. CIT(A). M/S WORLD SPORTS ITA NO. 3314/MUM/2017 4 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. AS LAID DOWN IN SECTION 41(1), WHERE AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN THE ASSESSMENT FOR ANY YEAR IN RESPECT OF (I) LOSS, (II) EX PENDITURE, OR (III) TRADING LIABILITY INCURRED BY THE ASSESSEE AND SUBSEQUENTLY, DURING ANY PREVIOUS YEAR, HE (THE SAME ASSESSEE) HAS OBTAINED, WHETHER IN CASH OR IN ANY OTHER MANNER, WHATSOEVER: (I) ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE; OR (II) SOME BENEFIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF, THEN, THE AMOUNT OBTAINED BY THE ASSESSEE OR THE AMOUNT OF THE LIABILITY WHICH IS EXTINGUISHED SHALL BE DEEMED TO BE PROFIT AND GAINS OF BUSINESS OR PROFESS ION AND ACCORDINGLY CHARGEABLE TO INCOME TAX AS THE INCOME OF THAT PREVIOUS YEAR. IN THE INSTANT CASE, THE ADDITION OF RS.1,26,00,000/ - MADE BY THE AO U/S 41(1) HAS BEEN RIGHTLY HELD BY THE LD. CIT(A) AS UNSUSTAINABLE IN LAW. 7. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/01/2019. SD/ - SD/ - ( PAWAN SINGH) (N.K. PRADHAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED: 31/01/2019 RAHUL SHARMA, SR. P.S. M/S WORLD SPORTS ITA NO. 3314/MUM/2017 5 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A) - 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE . BY ORDER, //TRUE COPY// ( SR. PRIVATE SECRETARY ) ITAT, MUMBAI