ITO wd- 1 [1] Aurangabad, Aurangabad V. M/s Mayo India Ltd, Aurangabad

ITA 440/PUN/2012

• Counselvise Citation: 44024514 RSA 2012
• Duration Of Justice: 2 year(s) 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 10-03-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 01-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Keywords: Capital asset; Depreciation
• Section: 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO.440/PN/2012 (A.Y: 2008-09) ITO, WARD 1(1), AURANGABAD APPELLANT VS. M/S. MAYO (INDIA) LTD., NATH HOUSE, NATH ROAD, DIST. AURANGABAD. PAN: AAACM8056D RESPONDENT APPELLANT BY : SHRI S.P. WA LIMBE RESPONDENT BY : NONE DATE OF HEARING: 19.06.2014 DATE OF ORDER : 30.06.2014 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEAL), [IN SHORT C IT(A)] AURANGABAD, DATED 28.12.2011 FOR A.Y. 2008-09 ON TH E FOLLOWING GROUNDS. 1. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN DELETING THE ADDITIONS AND ADJUSTME NTS MADE UNDER SECTION 115JB OF THE INCOME-TAX ACT, 196 1 IN THE CASE OF THE ASSESSEE BY THE AO. 2. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN CANCELING THE DEMAND RAISED AT RS.86,75,102/-. 3. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) ERRED IN NOT HAVING CONSIDERED THE APPLICABI LITY OF CIRCULAR NO.683 DATED 8.6.1994 ISSUED BY THE CBDT REGARDING GRANT OF CONSENT OR DENIAL TO THE ASSESSE E FOR FINANCIAL ASSISTANCE. 2 ITA NO.440 OF 12 M/S. MAYO (INDIA) LTD. 4. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, ALTER OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL EITHER BEFORE OR DURING THE COURSE OF HEARING. 5. THE OTHER GROUNDS THAT MAY BE TAKEN UP DURING THE COURSE OF HEARING. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUF ACTURING OF PHARMACEUTICAL PRODUCTS AND DURING THE YEAR UNDER CONSIDERATION, IT WAS ENGAGED IN EXECUTION OF JOB W ORK ON BEHALF OF AJANTA PHARMA LTD. THE ASSESSEE COMPANY FILED I TS RETURN OF INCOME ON 29.09.2008 DECLARING TOTAL INCOME AT NIL. THE ASSESSING OFFICER HAS MADE ADDITION OF 3,46,00,000/- AND AFTER ALLOWING SET-OFF OF BROUGHT FORWARD BUSINESS LOSS O F (-) 1,13,92,487/- AND DEPRECIATION LOSS OF (-) 2,32,07,513/-, ASSESSED THE INCOME OF ASSESSEE COMPANY AT NIL. THE ASSESSING OFFICER HAS ASSESSED THE BOOK PROFITS FOR MAT U/S.1 15JB OF THE ACT AT 8,67,51,020/-. 3. AGGRIEVED BY THE SAME, THE ASSESSEE WENT IN APPE AL. IN APPEAL, WITH REGARD TO THE WAIVER OF LOAN IN RESPEC T OF ASSESSEE, THE ASSESSING OFFICER HAS HELD THAT THE SAID LOAN H AS BEEN UTILIZED FOR TRADING ACTIVITY AND THE ASSESSEE HAS NOT REBUTTED THIS FACT CLAIMED BY THE ASSESSING OFFICER. THE ASSESSE E HAS SIMPLY CLAIMED THAT THE LOAN GRANTED BY FINANCIAL INSTITUT ION IS NOT TRADING ACTIVITY AND THE OUTSTANDING BALANCE OF THE SAME IS NOT TRADING LIABILITY REFERRED TO IN SECTION 41(1) OF T HE ACT. THE CIT(A) OBSERVED THAT IN THE CASES WHERE THE LOAN HAS BEEN OBTAINED AND UTILIZED FOR TRADING ACTIVITY I.E. FOR REGULAR BUSI NESS OF ASSESSEE AND NOT ACQUIRING CAPITAL ASSETS, THE SAID LIABILIT Y IS TO BE TREATED AS TRADE LIABILITY AND WAIVER OF SUCH LOAN SHALL BE LIABLE TO TAX U/S.41(1) OF THE ACT. IN VIEW OF ABOVE FACTS AND D ISCUSSION, THE CIT(A) HELD THAT THE ASSESSING OFFICER WAS JUSTIFIE D IN MAKING ADDITION OF 3,46,00,000/- OF WAIVER OF LOAN WHICH HAS BEEN 3 ITA NO.440 OF 12 M/S. MAYO (INDIA) LTD. UTILIZED FOR TRADING PURPOSE AND NOT FOR ACQUIRING CAPITAL ASSETS. SO, THE ADDITION OF 3,46,00,000/- WAS CONFIRMED. IT IS PERTINENT TO MENTION HERE THAT THE ASSESSEE COMPANY HAS GONE UNDER LOSSES AND OFFICIAL LIQUIDATOR HAS BEEN APPOINTED A S PER LAW AND NOTICES WERE SERVED ON OFFICIAL LIQUIDATOR, SO THE MATTER IS BEING DECIDED ON THE BASIS OF ARGUMENTS OF LEARNED DEPART MENTAL REPRESENTATIVE AND MATERIAL ON RECORD. THE ASSESSE E BEFORE CIT(A) VIDE SUBMISSION DATED 01.11.2011 HAS RAISED A CONTENTION THAT AS PER PROVISIONS OF CLAUSE-VII OF SECTION 115 JB, THE ASSESSEE IS NOT LIABLE TO MAT AND THE PROVISIONS OF MAT WOULD BE APPLICABLE SUBSEQUENT TO THE YEAR UNDER APPEAL. TH IS ISSUE WAS RAISED BY THE ASSESSEE BEFORE CIT(A) BY WAY OF AMEN DED GROUND. THE SUBMISSION OF ASSESSEE IN THIS REGARD BEFORE CI T(A) ARE REPRODUCED AS UNDER: 'FURTHER TO OUR WRITTEN SUBMISSION DATED MAY 27 201 1 IN RESPECT OF APPEAL PREFERRED AGAINST THE ASSESSMENT ORDER DATED 31.12.2010 PASSED BY THE INCOME TAX OFFICER W ARD (1) (1) AURANGABAD, WE SUBMIT THE FOLLOWING FOR YOU R KIND CONSIDERATION 1. FOLLOWING EROSION OF ITS NET WORTH AS PER THE AU DITED BALANCE SHEET AS OF MARCH 31 2002 , APPELLANT COMPA NY WAS DECLARED A SICK UNIT BY HONORABLE BOARD FOR IND USTRIAL AND FINANCIAL RECONSTRUCTION UNDER THE PROVISIONS O F SICK INDUSTRIAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 COPY OF ORDER DATED 13.01.2010 IN CASE NOS. 236 AND 237/200 4 ENCLOSED.- ANNEXURE A. 2. IN THE FOLLOWING YEARS, COMPANY HAD REACHED A NE GOTIATED ONE TIME SETTLEMENT WITH FINANCIAL INSTITUTIONS / B ANKS TOWARDS THE PAYMENT OF THEIR DUES AMOUNTING TO RS. 174 LACS. IN ORDER TO GIVE EFFECT TO ONE TIME SETTLEMEN T, PROMOTERS OF THE COMPANY HAD BROUGHT IN RS. 300 LAC S IN THE FORM OF EQUITY AND PAID THE SETTLED AMOUNT TO F INANCIAL INSTITUTIONS AND BANKS. 3. AS A RESULT OF AN INCREASE IN EQUITY CAPITAL, CO MPANY WAS ABLE TO SETTLE THE DUES TO FINANCIAL INSTITUTIONS / BANKS AND AT THE SAME TIME MAKE ITS NET WORTH POSITIVE AS ON 31.03.2009 DETAILED AS UNDER: 4 ITA NO.440 OF 12 M/S. MAYO (INDIA) LTD. RS. IN LACS 4. CONSEQUENTLY APPELLANT COMPANY SUBMITTED A MISCELLANEOUS APPLICATION TO HONORABLE BIER SEEKING DE- REGISTRATION AS A SEQUEL TO POSITIVE NET WORTH. COP Y OF MISCELLANEOUS APPLICATION ENCLOSED - ANNEXURE B 5. WHILE PASSING THE ASSESSMENT ORDER U/S 143 (3) O F IT ACT FOR AY 2008.09, THE LEARNED ASSESSING OFFICER HAS L EVIED MAT AT 10 % ON BOOK PROFIT AGGREGATING TO RS. 86, 7 5,102. THIS IS NOT IN ORDER IN AS MUCH AS CLAUSE VII OF SE CTION 115 JB OF INCOME TAX ACT 1961 PROVIDES THAT, IN THE CAS E OF SICK INDUSTRIAL COMPANY MAT WOULD BE APPLICABLE SUBSEQUE NT TO THE ASSESSMENT YEAR DURING WHICH THE NET WORTH OF T HE COMPANY BECOMES EQUAL TO OR EXCEEDS THE ACCUMULATED LOSSES. IN THE CASE OF APPELLANT COMPANY NET WORTH HAS BECOME POSITIVE DURING AY -2008.09 AND THEREFORE PROVISIONS OF SECTION 115JB TAX ON BOOK PROFITS ARE NOT APPLICABLE IN THE CASE OF APPELLANT COMPANY FOR THE ASSESSMENT YEAR 2008-09. 6. IT IS SUBMITTED THAT, THE FACT OF THE MATTER THA T THE COMPANY WAS A BIFR UNIT WAS BROUGHT TO THE NOTICE O F THE LEARNED ASSESSING OFFICER VIDE OUR LETTER DATED DEC EMBER 23 2010. ( COPY ENCLOSED ), HOWEVER, THE ASSESSING OFF ICER HAS NOT TAKEN COGNIZANCE OF THE SAME WHILE PASSING THE ASSESSMENT ORDER. 7. IT IS SUBMITTED THEREFORE THAT, HAVING REGARD TO PROVISIONS OF SECTION 115 JB OF IT ACT , 1961 AND THE FACTS OF THE CASE, MAT AMOUNTING TO RS. 86,75,102 LEVIED BY THE LEARNE D ASSESSING OFFICER MAY KINDLY BE SET ASIDE.' 4. THE SUBMISSIONS OF ASSESSEE WERE SENT TO THE ASS ESSING OFFICER, WHO HAS ATTENDED THE APPELLATE PROCEEDINGS AND RELIED ON THE ASSESSMENT ORDER. THE CIT(A) HAVING CONSIDERED THE SUBMISSION OF ASSESSEE AND OBJECTIONS OF THE ASSESS ING OFFICER, AS ON 31.03.2008 NET WORTH PAID UP SHARE CAPITAL EQUITY SHARES 500.00 RESERVE AND SURPLUS 654.28 NET WORTH 1154.28 ACCUMULATED LOSSES 1091.96 EXCESS NET WORTH OVER ACCUMULATED LOSSES 62.32 5 ITA NO.440 OF 12 M/S. MAYO (INDIA) LTD. HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. THE S AME HAS BEEN OPPOSED BEFORE US BY THE REVENUE, INTER ALIA, SUBMI TTED THAT THE CIT(A) ERRED IN DELETING THE ADDITIONS AND ADJUSTME NTS MADE U/S. 115JB OF THE I.T. ACT, 1961. THE CIT(A) ERRED IN C ANCELING THE DEMAND RAISED AT 86,75,102/-. THE CIT(A) ALSO ERRED IN NOT HAVING CONSIDERED THE APPLICABILITY OF CIRCULAR NO. 683 DATED 08.06.1994 ISSUED BY THE CBDT REGARDING GRANT OF CO NSENT OR DENIAL TO THE ASSESSEE FOR FINANCIAL ASSISTANCE. I N THIS REGARD, REQUESTED TO SET ASIDE THE ORDER OF CIT(A) AND THAT OF ASSESSING OFFICER BE RESTORED. 5. AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND MA TERIAL ON RECORD, WE FIND THAT THE STAND OF THE ASSESSEE HAS BEEN THAT AS PER PROVISIONS OF CLAUSE-VII OF SECTION 115JB, THE ASSESSEE WAS NOT LIABLE FOR MAT IN THE RELEVANT YEAR UNDER CONSI DERATION. FOR THE SAKE OF CONVENIENCE, THE PROVISIONS OF SECTION 115JB(2) IS EXTRACTED BELOW. 'BOARD FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION CASENO.236 & 237/2004 IN RE: M/S. MAYO (INDIA) LTD. SUMMARY RECORD OF PROCEEDINGS OF THEHERAING HELD ON 13.1.2010 BEFORE THE BENCH CONSISTING OF S/SHRI K.CHERIAN VARGHESE. CHAIRMAN AND V.K. MALHOTRA. MEMBER PRESENT BENCH NAME & DESIGNATION OF THE REPRESENTATIVE S/SHRI M/S MAYO (INDIA) LTD. (MIL) ABSENT ALLAHABAD BANK (AB) ABSENT BANK OF INDIA MUTUAL FUND ABSENT . 6 ITA NO.440 OF 12 M/S. MAYO (INDIA) LTD. 1.1 BASED ON ITS AUDITED BALANCE SHEET (ABS) AS ON 31.3.2002 AND 31.3.2002, M/S. MAYO (INDIA) LTD. (MI L) FILED A REFERENCE WITH BIFR U/S 15(1) OF THE SICK INDUSTR IAL COMPANIES (SPECIAL PROVISIONS) ACT, 1985 (HEREINAFT ER REFERRED TO AS 'SICA) WAS CONSIDERED IN THE HEARING HELD ON 14.6.2006 AND THE BENCH DECLARED THE COMPANY AS A S ICK INDUSTRIAL COMPANY BASED ON ABS AS ON 31.3.2002 IN TERMS OF SECTION 3(L)(O) OF SICA AND APPOINTED ALLAHABAD BANK AS THE OPERATING AGENCY (OA) U/S. 17(3) OF SICA WITH DIRECTIONS TO PREPARE A REVIVAL SCHEME FOR THE COMP ANY, IF FEASIBLE. THE OA WAS DIRECTED TO KEEP IN VIEW THE P ROVISIONS OF SECTION 18 OF SICA AND THE ENCLOSED GUIDELINES W HILE CARRYING OUT THIS EXERCISE. THE CUT-OFF DATE (COD) FOR THE SCHEME WAS TO BE TAKEN AS 30.9.2006. THE BENCH OBSE RVED THAT AS THE COMPANY WAS DECLARED SICK BASED ON ABS AS ON 31.3.2002, THE REFERENCE REGISTERED AS 237/2004 HAD BECOME INFRUCTUOUS. 2.1 IN THE HEARING HELD TO-DAY (13.1.2010), THE REPRESENTATIVE OF BANK OF INDIA MUTUAL FUND (BOIMF) STATED THAT THEIR DUES WERE PAID UNDER OTS OF RS. 44 LAKH. THE BENCH NOTED THAT THE COMPANY AND ALLAHABAD BANK (OA ) ARE ABSENT. HOWEVER, THE COMPANY VIDE THEIR WRITTEN SUBMISSIONS RECEIVED 22.9.2008 HAD ENCLOSED THE AUD ITED BALANCE SHEET (ABS) OF THE COMPANY AS ON 31.3.2008 AND REQUESTED TO DE-REGISTER THE REFERENCE AS ITS NETWO RTH HAD BECOME POSITIVE. THE BENCH NOTED FROM THE COPY OF T HE ABS SUBMITTED BY THE COMPANY THAT ITS NETWORTH HAS BECO ME POSITIVE AS ON 31.3.2008 AND IT HAD A SALES TURNOVE R OF RS. 62.19 LAKH AND OTHER INCOME OF RS. 121.47 LAKH FOR THE PERIOD ENDED 31.3.2008. THE COMPANY IS ALSO NOT PUR SUING ITS REFERENCE WITH BIFR. IN VIEW OF THE ABOVE, THE BENCH DE- REGISTERED THE REFERENCE OF THE COMPANY. SD/- SD/- (V.K. MALHOTRA) (K.CHERIAN VARGHESE) MEMBER CHAIRMAN 6. IN VIEW OF ABOVE, IN THE EARLIER YEARS BASED ON BALANCE SHEET AS ON 31.03.2002 THE ASSESSEE COMPANY WAS DECLARED AS A SICK INDUSTRIAL COMPANY WAS ESTABLISHED. FURTHER, THE C ONTENTION OF THE ASSESSEE COMPANY THAT ITS NET WORTH HAS BECOME POSITIVE ON 31.03.2008 HAS ALSO BEEN ESTABLISHED. FROM THE PROV ISIONS OF SECTION 115JB REPRODUCED ABOVE IT IS CLEAR THAT A S ICK INDUSTRIAL COMPANY IS NOT LIABLE TO MAT FOR THE YEAR IN WHICH ITS NET WORTH 7 ITA NO.440 OF 12 M/S. MAYO (INDIA) LTD. HAS BECOME POSITIVE. THE SAID PROVISIONS OF SECTIO N 115JB ARE, THEREFORE, NOT APPLICABLE TO THE ASSESSEE COMPANY F OR A.Y.2008- 09 AND SHALL BE APPLICABLE TO IT W.E.F. A.Y.2009-10 . IN VIEW OF THE ABOVE THE ASSESSING OFFICER WAS NOT JUSTIFIED IN AP PLYING PROVISIONS OF SECTION 115JB OF THE ACT TO THE ASSES SEE COMPANY AND IN ASSESSING THE BOOK PROFIT OF 8,67,51,020/- UNDER MAT. ACCORDINGLY, THE DEMAND OF 86,75,102/- RAISED BY THE ASSESSING OFFICER AS MAT U/S.115JB OF THE ACT WAS R IGHTLY CANCELLED BY THE CIT(A). THIS REASONED FINDING OF CIT(A) WHO HAS DELETED THE DEMAND OF 86,75,102/- NEEDS NO INTERFERENCE FROM OUR SIDE. WE UPHOLD THE SAME. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. PRONOUNCED IN THE OPEN COURT ON THIS THE DAY 30 TH OF JUNE, 2014. SD/- SD/- (R.K. PANDA) (SHAILENDRA KUMAR YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED: 30 TH JUNE, 2014 GCVSR COPY TO:- 1) DEPARTMENT 2) ASSESSEE 3) THE CIT(A), AURANGABAD 4) THE CIT, AURANGABAD 5) THE DR, B BENCH, I.T.A.T., PUNE. 6) GUARD FILE BY ORDER //TRUE COPY// SENIOR PRIVATE SECRETARY, I.T.A.T., PUNE