MANSINGKA INDUSTRIES LTD, MUMBAI V. ITO 1(2)(3), MUMBAI

ITA 418/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84652 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 03-12-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 19-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AKHILENDRA YADAV
• Keywords: Capital asset
• Section: 143(3); 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI D. KARUNAKAR RAO, ACCOUNTANT MEMBER AND SHRI AMIT SHUKLA, JUDICIAL MEMBER ITA NO. 418/MUM/2012 ASSESSMENT YEAR: 2008-09 MANSINGKA INDUSTRIES LTD. MAKER BHAVAN, 2 ND FLOOR, SIR VITHALDAS MARG, MUMBAI- 400 020 PAN:AAACM 8588 Q VS. ITO 1(2)(3) AAYAKAR BHAVAN, MK ROAD MUMBAI (APPELLANT) (RESPON DENT) ASSESSEE BY : SHRI K. GOPAL REVENUE BY : SHRI AKHILENDRA YADAV DATE OF HEARING : 04 . 12 . 2014 DATE OF ORDER : 19 . 1 2 .2014 O R D E R PER AMIT SHUKLA, JM: THIS APPEAL HAS BEEN PREFERRED BY THE REVENUE AG AINST ORDER DATED 19.12.2011, PASSED BY THE LD.CIT-2, MUM BAI, FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) FOR THE A.Y . 2008-09, MAINLY ON THE FOLLOWING GROUND:- 1. THE LEARNED CIT(APPEALS) ERRED IN CONFIRMING AD DITION OF RS.8,23,880/- OUT OF TOTAL ADDITION MADE BY ITO AMO UNTING TO RS.16,92,000/-. 2. THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING AD DITION OF RS.2,877/- U/S 14A. 3. THE LEARNED CIT (APPEALS) ERRED IN CONFIRMING AD DITION OF RS.50,91,198/- OUT OF ADDITION OF RS.14,40,35,100/- MADE BY AO U/S 41(1). ITA NO. 418/MUM/2012 MANSINGKA INDUSTRIES LTD ASSESSMENT YEAR: 2008-09 2 2. AT THE OUTSET, LEARNED COUNSEL SUBMITTED THAT GR OUND NO. 1 AND 2 ARE NOT PRESSED, THEREFORE, THEY ARE TREATED AS DIS MISSED BEING NOT PRESSED. 3. BRIEF FACTS, QUA THE ISSUE INVOLVED IN GROUND NO . 3 ARE THAT, THE ASSESSEE COMPANY HAD TAKEN A TERM LOAN OF RS.6.52 C RORES AND CASH CREDIT LOAN OF RS.3.46 CORES, AGGREGATING TO RS.9.9 8 CRORES FROM PUNJAB NATIONAL BANK, IN THE PREVIOUS YEAR, RELEVANT TO TH E A.Y. 1993-94. IN THE SUBSEQUENT YEARS THE ASSESSEE CLAIMED INTEREST PAYA BLE TO PNB ON ACCRUAL BASIS, WITHOUT MAKING ANY ACTUAL PAYMENT OF INTEREST TO THE BANK. OUT OF THE INTEREST CLAIMED IN THE P&L ACCOUN T IN THE A.YS. 1994- 95 AND 1995-96, THE INTEREST EXPENSES TO THE EXTENT OF RS.1,96,58,883/- AND RS.2,32,40,565/- RESPECTIVELY WAS ALLOWED BY TH E AO. THE ASSESSEE FURTHER CLAIMED PAYABLE INTEREST OF RS.2,68,54,800/ - IN THE A.Y. 1996-97 AND RS.3,20,89,102/- IN THE A.Y. 1997-98 IN ITS P&L ACCOUNT, WHICH WAS DISALLOWED BY THE AO. THEREAFTER, THE ASSESSEE HAD NOT MADE ANY PROVISION TOWARDS INTEREST PAYABLE TO THE BANK. THE ASSESSEE WAS LATER DECLARED AS SICK AND HENCE, IT ENTERED INTO ONE TIM E SETTLEMENT WITH THE PNB FOR THE WAIVER OF PRINCIPAL LOAN AND THE INTERE ST THEREON. AS PER SCHEDULE III ANNEXED TO THE P/L ACCOUNT FOR THE PER IOD ENDING 31 ST MARCH 2008, THE ASSESSEE HAD SHOWN PRINCIPAL AMOUNT DUE TO THE PNB AT RS.4,53,30,890/- AND THE INTEREST ACCRUED THEREO N WAS SHOWN AT RS.9,87,04,208/-, AGGREGATING TO RS.14,40,35,099/-. THIS ENTIRE AMOUNT WAS WAIVED BY THE PNB. WHILE COMPLETING THE IMPUGNE D ASSESSMENT PROCEEDINGS, THE AO NOTED THAT, ALTHOUGH THE PNB HA S WAIVED RS.14,40,35,100/- WHICH IS WRITTEN BACK BY THE ASSE SSEE BUT SAME HAS NOT BEEN SHOWN AS THE INCOME IN P&L ACCOUNT. IN RES PONSE TO THE SHOW CAUSE NOTICE, THE ASSESSEE SUBMITTED THAT THE WAIVE R OF LOAN BY PNB ITA NO. 418/MUM/2012 MANSINGKA INDUSTRIES LTD ASSESSMENT YEAR: 2008-09 3 CANNOT BE TAXED U/S 41(1). HOWEVER, THIS CONTENTION OF THE ASSESSEE WAS NOT ACCEPTED BY THE AO AND AFTER RELYING UPON T HE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF SOLID CONTAINERS VS. DICT [308 ITR 417 (BOM)] HE HELD THAT WAIVER OF LOAN IS INCOME OF THE ASSESSEE AND THEREFORE IS TAXABLE IN THE HANDS OF T HE ASSESSEE. ACCORDINGLY HE ADDED THE ENTIRE SUM OF RS.14,40,35, 100/- AS CESSATION OF LIABILITY U/S 41(1). 4. BEFORE THE LD.CIT(A), THE ASSESSEE SUBMITTED THA T THE SAID DECISION OF THE HONBLE BOMBAY HIGH COURT IS NOT AP PLICABLE, BECAUSE THE SAID LOAN WAS NOT PAYABLE BY THE ASSESSEE TO TH E PNB UNDER OTS. THE LD.CIT(A) TOO HELD THAT THE DECISION OF HONBLE BOMBAY HIGH COURT IS CLEARLY APPLICABLE HOWEVER, THE AMOUNT OF INTERE ST WHICH HAD ALREADY BEEN DISALLOWED IN THE A.Y. 1996-97 AND 1997-98 SHO ULD BE DELETED AND THE BALANCE AMOUNT SHOULD BE ADDED. ACCORDINGLY, OU T OF THE ADDITION OF RS.14,40,35,100/- ADDITION TO THE EXTENT OF RS.8,50 ,91,198/- WAS CONFIRMED. 5. BEFORE US, THE LEARNED COUNSEL STRONGLY RELIED U PON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. XYLON HOLDINGS INDIA PVT. LTD. REPORTED IN (2013) 90 DTR (BOM) 205, WHEREIN THE HONBLE HIGH COURT AFTER TAKING NOTE OF THE EARLIER DECISIO N OF SOLID CONTAINERS (SUPRA) AND HONBLE SUPREME COURT DECISION IN THE CASE OF CIT VS. T.V. SUNDARAM IYENGAR AND SONS LTD. (1996) 222 ITR 344 ( SC), HELD THAT, CESSATION OF LIABILITY TO REPAY THE LOAN LIABILITY TAKEN FOR ACQUIRING CAPITAL ASSET WAS NOT TAXABLE U/S 41(1) OR U/S 28 (IV). HE FURTHER SUBMITTED THAT IN THIS CASE, THE LOAN WAS TAKEN FOR ACQUISITION OF A CAPITAL ASSET, THEREFORE, NO ADDITION SHOULD BE MADE. ITA NO. 418/MUM/2012 MANSINGKA INDUSTRIES LTD ASSESSMENT YEAR: 2008-09 4 6. ON THE OTHER HAND, LD. DR STRONGLY RELIED UPON T HE ORDER OF THE LD.CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND ALSO PER USED THE RELEVANT FINDING GIVEN IN THE IMPUGNED ORDER. FROM THE PERUS AL OF THE ASSESSMENT ORDER, IT IS NOT CLEAR AS TO FOR WHAT PU RPOSE, THE ASSESSEE HAS TAKEN A LOAN FROM THE PNB. IF THE LOAN HAS BEEN TAKEN FOR ACQUIRING A CAPITAL ASSET, THEN CESSATION OF SUCH A LOAN LIAB ILITY CANNOT BE TAXED U/S 41(1). HOWEVER, IF THE LOAN HAS BEEN TAKEN FOR TRADING PURPOSE DURING THE COURSE OF BUSINESS, THEN SUCH A CESSATIO N OF LOAN LIABILITY IS TO BE TAXED U/S 41(1) AS HELD BY THE HONBLE BOMBAY HI GH COURT IN THE CASE OF SOLID CONTAINERS (SUPRA). THEREFORE, WE ARE OF THE OPINION THAT THIS MATTER NEEDS TO BE RESTORED BACK TO THE AO TO EXAMINE THE NATURE OF THE LOAN AND THE PURPOSE FOR WHICH IT WAS TAKEN AND ACCORDINGLY DECIDE THE ISSUE IN ACCORDANCE WITH THE LAW AND ALS O CONSIDERING THE AFORESAID TWO DECISIONS OF THE HONBLE BOMBAY HIGH COURT. THUS THE GROUND NO. 3 RAISED BY THE ASSESSEE IS TREATED AS A LLOWED FOR STATISTICAL PURPOSE. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 19 TH DAY OF DECEMBER, 2014. SD/- SD/- (D.KARUNAKAR RAO) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 19.12.2014 *SRIVASTAVA ITA NO. 418/MUM/2012 MANSINGKA INDUSTRIES LTD ASSESSMENT YEAR: 2008-09 5 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR B BENCH //TRUE COPY// BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.