HYTONE TEXSTYLES LTD, NAVI MUMBAI V. DCIT WD NO 10(3), MUMBAI

ITA 4225/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 9925 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 24-08-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 20-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: B C S NAIKDR
• Assessee Lawyers: BHADRESH DOSHIAR
• Keywords: Depreciation; Capital receipt; Unabsorbed depreciation
• Section: 28

Judgement Text

, , , , INCOME-TAX APPELLATE TRIBUNAL IBENCH M UMBAI , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & RAVISH SOOD, JUDICIAL MEMBER ./I.T.A./4225/MUM/2016 , /ASSESSMENT YEAR: 2011-12 HYTONE TEXSTYLES LIMITED PLOT NO.70, MIDC TEXTILE PROCESSING ZONE NEAR RAMNATH SOLAR, MAHAPE VILLAGE NAVI MUMBAI-400 701. PAN:AAACH 2033 B VS. DCIT, WARD NO.10 (3) MUMBAI. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI B.C.S. NAIK-DR ASSESSEE BY: SHRI BHADRESH DOSHI-AR / DATE OF HEARING: 24/08/2017 / DATE OF PRONOUNCEMENT: 01.09.2017 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) / PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 31/03/2016, OF THE CIT (A)-24,MUMBAI THE ASSESSEE HAS FILED THE PRESENT APPEAL.ASSESSEE-COMPANY, ENGAGED IN THE BUS INESS OF MANUFACTURING PROCESS AND TRADING IN ALL TYPES OF TEXTILE GARMENTS, FILED ITS RETURN OF INCOME ON 28/09/2011,DECLARING TOTAL INCOME AT RS NIL. THE ASSESSING OFFICER (AO) COMPLETED THE ASSESSMENT U/S. 143 (3), ON 30/12/2013, DETERMINING ITS INCOME AT RS. NIL AF TER ADJUSTING THE BROUGHT FORWARD LOSSES AND UNABSORBED DEPRECIATION OF EARLIER YEARS. 2. EFFECTIVE GROUND OF APPEAL IS ABOUT ADDITION ON ACC OUNT OF WAIVER OF TERM LOAN UNDER ONE- TIME SETTLEMENT SCHEME, AMOUNTING TWO RS.11.48 CROR ES.DURING THE ASSESSMENT PROCEEDINGS,THE AO FOUND THAT THE ASSESSEE HAD SHOW N INCOME ON WAIVER OF BANK DUESAS CAPITAL RECEIPT AND HAD CREDITED TO DEBT RESTRUCTUR ING RESERVE AS PART OF RESERVE AND SURPLUS IN THE BALANCE SHEET. HE DIRECTED IT TO ELABORATE THE CREDIT OF RS.11,48, 24,576/-DIRECTLY IN THE RESERVE AND SURPLUS ACCOUNT OF THE BALANCE SHEET WI THOUT PASSING THE SAME THROUGH P&L A/C.HE FURTHER DIRECTED THE ASSESSEE TO GIVE BREAKU P OF THE SAID LOAN WAIVER.VIDE ITS LETTER, DATED 04/12/2013, THE ASSESSEE FILED EXPLANATION IN THAT REGARD. HOWEVER,THE AO WAS NOT CONVINCED WITH THE EXPLANATION OFFERED AND HELD THA T A BENEFIT OF RS. 11.48 CRORES RECEIVED BY 4225/M/16-HYTONE TEXSTYLES LIMITED 2 THE ASSESSEE DURING THE YEAR WAS A BENEFIT COMING W ITHIN THE MEANING OF SECTION 28 (IV) OF THE ACT AND ADDED THE SAME TO THE TOTAL INCOME OF THE A SSESSEE. 3. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREF ERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY(FAA)AND MADE ELABORATE SUBMISSI ONS.IT ALSO RELIED UPON CERTAIN CASE LAWS. AFTER CONSIDERING THE ASSESSMENT ORDER AND TH E SUBMISSIONS OF THE ASSESSEE, HE HELD THAT THE CASES RELIED UPON BY THE ASSESSEE WERE DECIDED ON THE FACTS OF THOSE CASES, THAT SAME COULD NOT BE TAKEN AS BINDING IN THE CASE UNDER CON SIDERATION. HE FURTHER HELD THAT IN THE CASE OF MAHINDRA AND MAHINDRA LTD (182 CTR 34) THE JUDGM ENTS OF KARAMCHAND THAPAR & OTHERS (222 ITR 112) AND TV SUNDRAM IYENGAR AND SON S LTD. (222 ITR 344) WERE NOT CONSIDERED, THAT THE ASSESSEE HAD DERIVED A DEFINIT E ADVANTAGE BY NOT PAYING THE LOANS, THAT THE HONBLE BOMBAY HIGH COURT HAD CHANCE TO DECIDE THE ISSUE WHERE CAPITAL RECEIPT WAS BEING CLAIMED AND THERE IT HAD BEEN DECIDED THE ISS UE IN FAVOUR OF A REVENUE RELYING ON THE JUDGEMENT OF TV SUNDRAM IYENGAR AND SONS LTD. (SUPR A).HE ALSO REFERRED TO THE CASE OF SOLID CONTAINERS LIMITED (308 ITR 417) AND ROLLATAINERS L TD. (339 ITR 54) AND HELD THAT THE LOAN RECEIVED IN COURSE OF CARRYING ON BUSINESS, EVEN IF IT WAS TREATED AS LOAN AT THE TIME OF RECEIPT ON ITS WAIVER WOULD BECOME REVENUE NATURE. HE FURTH ER OBSERVED THAT THE SUM OF RS.11.48 CRORES WAS ASSESSABLE U/S.41(1) OF THE ACT,EVEN IF THE DISPUTED AMOUNT WAS NOT CHARGEABLE U/S. 41 SAME WAS CHARGEABLE AS PER THE PROVISIONS O F SECTION 28(IV) OF THE ACT,THAT NO CASH OR MONEY WAS PAID TO THE ASSESSEE, THAT IT HAD DERIVED A BENEFIT BY WAIVER OF LOAN.FINALLY, REFERRING TO THE CASES OF PRASHANT S JOSHI (324 ITR 154) AND BALAKRISHNA HIRALAL WANI(321 ITR 519),HE UPHELD THE ORDER OF THE AO. 4. DURING THE COURSE OF HEARING BEFORE US,THE AUTHORIS ED REPRESENTATIVE(AR) ARGUED THAT IT HAD SET OF FACTORIES FOR MANUFACTURING OF TEXTILE S UITINGS,THAT TO SETUP THE PLANT IT HAD AVAILED TERM LOANS FROM TIME TO TIME FROM THE FINANCIAL INS TITUTIONS, THAT IT COULD NOT RUN THE BUSINESS PROFITABLY, THAT IT ACCUMULATED HUGE LOSSES DUE TO WHICH IT WAS DECLARED AS SICK INDUSTRIAL UNDERTAKING AND WAS DULY REGISTERED WITH THE BOARD OF INDUSTRIAL AND FINANCIAL RECONSTRUCTION (BIFR),THAT IT MADE VARIOUS ATTEMPTS TO REVIVE THE UNDERTAKING, THAT IT ENTERED INTO ONE-TIME SETTLEMENT AGREEMENTS WITH THE TERM L ENDING INSTITUTIONS,THAT THE PURPOSE OF TERM LOAN WAS ACQUIRING OF FIXED ASSETS,THAT INTERE ST WAIVED BY THE INSTITUTIONS WAS OFFERED FOR TAX,THAT THE CAPITAL WAIVED BY THE INSTITUTIONS WAS NOT TAXABLE. HE REFERRED TO THE CASE OF XYLONE HOLDING (ITA/3704/MUM/2010).THE DEPARTMENTAL REPRESENTATIVE (DR) SUPPORTED THE ORDER OF THE FAA. 4225/M/16-HYTONE TEXSTYLES LIMITED 3 5. ON A QUERY BY THE BENCH, THE AR ADMITTED THAT SANCT ION LETTER AND FOLLOW-UP LETTER OF IDBI DATED 24/01/1995 AND 10/11/1995 RESPECTIVELY ALONG WITH THE DETAILS OF THAT RESTRUCTURING WERE NOT FILED BEFORE THE AO,THAT EXTRACTS FROM THE PUBLISHED ANNUAL REPORTS FOR THE EARLIER YEARS WERE NOT MADE AVAILABLE TO THE AO AND THE FAA .IN OUR OPINION,TO DECIDE THE ISSUE THESE DOCUMENTS WILL HAVE TO BE TAKEN INTO CONSIDERATION. AS THESE WERE NOT AVAILABLE TO THE REVENUE AUTHORITIES AT THE TIME OF ASSESSMENT/APPEL LATE PROCEEDINGS, SO, IN THE INTEREST OF JUSTICE WE ARE RESTORING THAT THE ISSUE TO THE FILE OF THE AO FOR FRESH ADJUDICATION.HE IS DIRECTED TO CONSIDER THE DOCUMENTS ALONG WITH THE O RDER RELIED UPON BY THE AR BEFORE US. HE WOULD AFFORD REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE.EFFECTIVE GROUND OF APPEAL IS DECIDED IN FAVOUR OF THE ASSESSEE,IN PART. AS A RESULT, APPEAL FILED BY THE ASSESSEE STANDS PA RTLY ALLOWED. . ORDER PRONOUNCED IN THE OPEN COURT ON 1 ST SEPTEMBER, 2017. 01 , 2017 SD/- SD/- ( (( ( /RAVISH SOOD) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; /DATED : 01.09.2017. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR I BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.