DCIT, Udupi V. M/s. Manipal Finance Corporation Ltd., Manipal

ITA 542/BANG/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0687 (ITAT-BANGALORE)
• Duration Of Justice: 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 25-11-2009
• Assessment Year: 2006-2007
• Appeal Filed On: 27-05-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V S SREELEKHA
• Keywords: Capital asset; Capital receipt
• Section: 143(3)

Judgement Text

PAGE 1 OF 4 ITA NO.542/B/09 1 IN THE INCOME TAX APPELLATE TRIBUNA L, BANGALORE BENCH B BEFORE SHRI GEORGE GEORGE K, J.M. AND SHRI A MOHAN ALANKAMONY, A.M ITA NO.542/BANG/2009 (ASSESSMENT YEAR 2006-07) THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, UDUPI. - APPELLANT VS M/S MANIPAL FINANCE CORPORATION LTD., MANIPAL HOUSE, MANIPAL. - RESPONDENT APPELLANT BY : SMT. V S SREELEKHA RESPONDENT BY : SHRI S PARTHASARATHI ORD ER PER GEORGE GEORGE K : THIS APPEAL, FILED BY THE REVENUE, IS DIRECTED AG AINST THE ORDER OF LEARNED CIT(A), MANGALORE DATED 19TH M ARCH, 2009. THE ASST. YEAR CONCERNED IS 2006-07. 2. THE SOLITARY ISSUE RAISED IN THIS APPEAL, IS WHE THER THE CIT(A) IS JUSTIFIED IN TREATING AS CAPITAL RECEIPT THE PRINCIPAL PORTION OF DEBENTURES AMOUNTING TO RS.72,32,000/- A ND PRINCIPAL PORTION OF DEPOSITS AMOUNTING TO RS.6,41,000/- (TOT AL RS.78,73,000/-), SURRENDERED BY THE DEBENTURE/DEPOSI T HOLDERS. PAGE 2 OF 4 ITA NO.542/B/09 2 3. THE BRIEF FACTS OF THE CASE ARE AS FOLLOWS:- THE ASSESSEE IS A NON-BANKING FINANCE COMPANY. IT IS ENGAGED IN THE BUSINESS OF HIRE PURCHASE, LEASING, BILL DISCOUNTING, LOANS AND ADVANCES, MONEY LENDING, DEALING IN SECURI TIES. RETURN OF INCOME FOR THE CONCERNED ASST. YEAR WAS FILED ON 16 .11.2006, DECLARING A LOSS OF RS.3,89,500/-. ASSESSMENT U/S 143(3) WAS COMPLETED ON 27.11.2008 WHEREIN, ASSESSING OFFICER REJECTED THE ASSESSEE'S CLAIM OF PRINCIPAL WRITTEN BACK ARISING OUT OF SETTLEMENT OF DEPOSITS AND DEBENTURES OF RS.78,73,000/- AS CAP ITAL RECEIPT. THE ASSESSING OFFICER HELD THE SAME AS INCOME FROM BUSINESS. 4. AGGRIEVED BY THE ORDER OF ASSESSMENT, TREATING A SUM OF RS.78,73,000/- AS INCOME FROM BUSINESS, THE ASSE SSEE PREFERRED AN APPEAL BEFORE THE CIT(A). THE VARIOUS CONTENTIO N OF THE ASSESSEE IS REPRODUCED AT PAGE 2 AND 3 OF CIT(A) OR DER. THE LEARNED CIT(A), FOR HIS REASONING MENTIONED IN PARA 5 TO 5.4 OF HIS ORDER, ALLOWED THE APPEAL OF THE ASSESSEE. THE CI T(A) DISTINGUISHED THE ORDER OF TRIBUNAL IN THE CASE OF MANIPAL SOWBHAGYA NIDHI, RELIED ON BY THE ASSESSING OFFICER, AND FOLLOWED THE ORDER OF THE TRIBUNAL IN ASSESSEE'S OWN CASE FO R AY 2003-04 AND 2004-05. 5. THE REVENUE, BEING AGGRIEVED, IS IN APPEAL BEFO RE US. THE LEARNED DR SUPPORTED THE FINDING OF THE ASSESSI NG OFFICER AND RELIED ON THE DECISION OF THE TRIBUNAL IN THE CASE OF MANIPAL PAGE 3 OF 4 ITA NO.542/B/09 3 SOWBHAGYA NIDHI LTD. FOR A.Y.2003-04 (ITA NO.379/BAN G/2008 DATED 7.11.2008). 6. THE LEARNED AR, ON THE OTHER HAND, SUBMITTED TH AT THE ISSUE IN QUESTION IS SQUARELY COVERED IN FAVOUR OF A SSESSEE BY THE ORDER OF TRIBUNAL IN ASSESSEE'S OWN CASE CONCERNING ASST. YEARS 2003-04, 2004-05 AND 2005-06 (ITA NOS.626 & 627/BAN G/2007 DATED 7.3.2008 AND ITA NO.298/BANG/2009 DATED 7.8.2 009). 7. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED TH E MATERIAL ON RECORD. THE TRIBUNAL, IN ASSESSEE'S OW N CASE CITED SUPRA, HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. THE RELEVANT PARA OF THE TRIBUNAL ORDER IS REPRODUCED BELOW:- '4. AFTER CONSIDERING THE RIVAL SUBMISSIONS, IN OUR OPINION, THE FOLLOWING UNDISPUTED FACTS EMERGED OUT. THE BALANCE AMOUNT OF DEPOSIT WHICH COULD NOT BE PAID BY THE ASSESSEE TO THE DEPOSITORS WAS NEVER A CHARGE TO THE PROFIT AND LOSS ACCOUNT AND THEREBY AT NO POINT THE TAX LIABILITY, IF ANY, OF THE EARLIER YEARS WAS REDUCED. WE FIND THE SITUATION IS IDENTICAL TO THE ONE THAT WAS CONSIDERED BY THE BOMBAY HIGH COURT. THERE IS NO CESSATION OF A TRADING LIABILITY. WHAT WAS BORROWED BY THE ASSESSEE WAS A CAPITAL ASSET REPAYABLE AS SUCH, COULD NOT BE REPAID IN VIEW OF THE CIRCUMSTANCES IN WHICH THE ASSESSEE WAS PLACED. SECTION 41(1) OF THE ACT WOULD GET ATTRACTED ONLY WHEN THERE IS AN AMOUNT THAT IS CHARGED TO THE PROFIT AND LOSS ACCOUNT REDUCING THE TAX LIABILITY OF PAGE 4 OF 4 ITA NO.542/B/09 4 ANY OF THE EARLIER YEARS. THAT NOT BEING THE CASE HERE, THE DECISION OF THE BOMBAY HIGH COURT (SUPRA) SQUARELY APPLY AND, ACCORDINGLY, WE UPHOLD THE CLAIM OF THE ASSESSEE'. RESPECTFULLY FOLLOWING DECISION OF CO-ORDINATE BENCH OF TRIBUNAL IN ASSESSEE'S OWN CASE, WE DISMISS THE GROUNDS RAISED IN THIS APPEAL. 8. IN THE RESULT, THE APPEAL FILED BY REVENUE IS DI SMISSED. PRONOUNCED IN THE OPEN COURT ON 27TH NOVEMBER, 2009 . SD/- SD/- (A MOHAN ALANKAMONY) (GEORGE GEORGE K) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE, DATED :27/11/2009 COPY TO : 1. THE REVENUE 2. THE ASSESSEE 3. THE CIT CONCERNED. 4. THE CIT(A) CONCERNED. 5. DR 6. GF 7. GF, ITAT, NEW DELHI. MSP/26/11/ BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.