DCIT, Bangalore V. M/s Sun electronic Technologies Ltd., Bangalore

ITA 570/BANG/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7018 (ITAT-BANGALORE)
• Duration Of Justice: 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 28-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: P DHIVAHAR J
• Assessee Lawyers: N O N E
• Keywords: Business income; Capital receipt
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER A ND SHRI JASON P.BOAZ, ACCOUNTANT MEMBER ITA NO. 570 / BANG/20 14 (ASSESSMENT YEAR: 20 0 5 - 06 ) DEPUTY COMMISSIONER OF INCOME - TAX, CIRCLE 1 2(3) , BANGALORE . APPELLANT VS. M/S.SUN ELECTRONIC TECHNOLOGIES LTD. PB NO.845, BRAHMALINGESHWARA COMPLEX, 499/3, AIRPORT ROAD, BANGALORE - 560008. RESPONDENT PAN:AACCS0375D APPELLANT BY: SHRI P.DHIVAHAR , JCIT(DR). RESPONDENT BY: N ONE. DATE OF HEARING : 1 7 /12/2014 . DATE OF PRONOUNCEMENT: 31 /12/2014 . O R D E R PER SMT.P.MADHAVI DEVI, JM: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A), LTU, BANGALORE, DATED 2 1/0 1 /201 4 FOR THE ASSESSMENT YEAR 200 5 - 06 . THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE CIT(A) , WITHOUT APPRECIATING THAT THE ASSESSEE HAD DERIVED A BENEFIT BY THE WAIVER DURING THE COURSE OF BUSINESS, HAS ERRED IN LAW IN DIRECTING THE ASSESSING OFFICER (AO) TO DELETE ITA NO . 570/BANG/2014 M/S.SUN ELECTRONIC TECHNOLOGIES LTD. PAGE 2 OF 4 THE ADDITION OF RS.53,5 5,202/ - MADE ON ACCOUNT OF WAIVER OF PRINCIPAL AMOUNT . 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE - COMPANY WHICH IS IN THE BUSINESS OF MANUFACTURE OF VARIOUS PRODUCTS SUCH AS MEMORY MODULES ALONG WITH CONTRACT MANUFACTURE/JOB WORK, DESIGN AN D CONSULTANCY, MANUFACTURE OF ELECTRIC ENERGY METERS AND TRADING IN COMPUTER/ELECTRONIC EQUIPMENTS , HAD FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR 2005 - 06 ON 28/10/2005 DECLARING BUSINESS INCOME OF RS.1,58,12,557/ - BEFORE SET OFF OF BROUGHT FORWARD LOSSES AND ALSO DECLARED SHORT TERM CAPITAL GAINS OF RS.15,01,251/ - . DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE INCOME - TAX ACT, 1961[HEREINAFTER REFERRED TO AS 'THE ACT'], THE ASSESSING OFFICER (AO) OBSERVED THAT DURING THE YEAR, TWO BANKS I.E. IDBI AND SYNDICATE BANK HAVE WAIVED INTEREST TO THE EXTENT OF RS.3,10,04,927/ - AS ONE TIME SETTLEMENT WHICH WAS SHOWN AS INCOME IN THE PROFIT & LOSS ACCOUNT BELOW THE LINE. HE ALSO OBSERVED THAT THE BANKS HAVE ALSO WAIVED THE PRINCIPAL TO THE EXTENT OF RS .53,55,000/ - . HOWEVER, SINCE THE ASSESSEE HAS NOT FILED ANY EVIDENCE IN SUPPORT OF THE SAID WAIVER OF THE PRINCIPAL AMOUNT, THE AO DISALLOWED THE SAME AND BROUGHT IT TO TAX. HE ALSO BROUGHT TO TAX THE INTEREST WAIVED BY THE SAID BANKS. ITA NO . 570/BANG/2014 M/S.SUN ELECTRONIC TECHNOLOGIES LTD. PAGE 3 OF 4 3. AGGR IEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) ALONG WITH RELEVANT DOCUMENTS. THE CIT(A) CALLED FOR A REMAND REPORT FROM THE AO. ON THE ISSUE OF WAIVER OF THE PRINCIPAL AMOUNT OF RS.53.55 LAKHS, THE AO CONFIRMED THE NATURE OF THE SAID AMOUNT I N HIS REMAND REPORT AS BEING CAPITAL WHICH WOULD NOT CONSTITUTE INCOME U/S 41(1) OF THE ACT. SINCE THE AMOUNT WAS NOT A REVENUE RECEIPT, THE CIT(A) HELD THAT IT CANNOT BE BROUGHT TO TAX AND DIRECTED THE AO TO DELETE THE SAME. AGAINST THIS DIRECTION OF TH E CIT(A), THE REVENUE IS IN APPEAL BEFORE US. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUPPORTED THE ORDER OF THE AO. 4. HAVING REGARD TO THE CONTENTIONS OF THE LEARNED DEPARTMENTAL REPRESENTATIVE , WE FIND THAT THE AO, IN THE REMAND REPORT, HAS ACCEPT ED THAT THE WAIVER OF PRINCIPAL AMOUNT IS A CAPITAL RECEIPT. IN VIEW OF THE SAME, WE DO NOT FIND ANY DISCREPANCY IN THE ORDER OF THE CIT(A) HOLDING THAT THE SAME IS NOT LIABLE TO TAX. THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF T HE CIT(A). 5. IN THE RESULT, THE REVENUE S APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 31 ST OF DECEMBER, 2014. SD/ - SD/ - (JASON P BOAZ) (SMT. P.MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER EKSRINIVASULU ITA NO . 570/BANG/2014 M/S.SUN ELECTRONIC TECHNOLOGIES LTD. PAGE 4 OF 4 COPY TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME - TAX APPELLATE TRIBUNAL BANGALORE.