DCIT RG 8(1), MUMBAI V. GARWARE CHEMICALS LTD, MUMBAI

ITA 5886/MUM/2012

• Counselvise Citation: 588619914 RSA 2012
• Duration Of Justice: 2 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-05-2015
• Appeal Filed By: Department
• Bench Allotted: G
• Next Hearing Date: 13-04-2015
• Assessment Year: 2005-2006
• Appeal Filed On: 27-09-2012
• Court: TRIBUNAL
• Department Lawyers: AJIT KUMAR SHRIVASTAVA
• Assessee Lawyers: HARSH BHUTA
• Keywords: Business income
• Section: 43B; 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL G , BENCH MUMBAI . . , , BEFORE SHRI R.C.SHARMA , A M & SHRI SANJAY GARG , J M ./ ITA N O. 5886 / MUM/20 1 2 ( / ASSESSMENT YEAR : 200 5 - 06 ) DCIT RG.8(1), MUMBAI VS. GARWARE CHEMICALS LTD., WESTERN EXPRESS HIGHWAY, VILE PARLE (E), MUMBAI - 400057 ./ ./ PAN/GIR NO. : A A B CG 2467 M ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI AJIT KUMAR SHRIVASTAVA /ASSESSEE BY : SHRI HARSH BHUTA / DATE OF HEARING : 13 /0 4 / 2015 / DATE OF PRONOUNCEMENT 15 /05 /2015 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - 16 , MUMBAI , DATED 26 - 7 - 2012 FOR THE ASSESSMENT YEAR 200 5 - 06 IN THE MATTER OF IMPOSITION OF PENALTY U/S. 271(1)(C) OF THE IT ACT . 2. AT THE OUTSET, LD. AR PLACE D ON RECORD ORDER OF THE TRIBUNAL IN WHICH ISSUE REGARDING DISALLOWANCE OF INTEREST WAS ALLOWED BY THE TRIBUNAL IN ASSESSEE S FAVOUR VIDE ITS ORDER DATED 21 - 1 - 2015 IN ASSESSEES OWN CASE AND CONTENDED THAT SINCE THE ADDITION ITSELF HAS BEEN DELETED, NO PENALTY IS IMPOSABLE FOR SUCH ADDIT ION. ITA NO. 5886 /1 2 2 3. WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT DURING THE COURSE OF SCRUTINY ASSESSMENT, ADDITION WAS MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST OF RS.14 CRORES ON THE PLEA OF SECTION 43B. THE ADDI TION SO MADE WAS DELETED BY THE TRIBUNAL VIDE ITS ORDER DATED 21 - 1 - 2015 IN ITA NO.7819/MUM/2010 AFTER HAVING THE FOLLOWING OBSERVATIONS : - 18. IN VIEW OF THE ABOVE DISCUSSION AS WELL AS DECISION OF SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF BIOCON LTD . VS. DCIT (SUPRA0, WE ARE OF THE VIEW THAT THE INTEREST EXPENDITURE WHICH IS OTHERWISE ALLOWABLE DEDUCTION U/S.36(1)(III) BUT DEFERRED AS PER THE PROVISIONS OF SECTION 43B CANNOT BE DISALLOWED BECAUSE OF THE REASON THAT THE PAYMENT IS NOT IN CASH BUT BY ISSUANCE OF SHARE CAPITAL. ACCORDINGLY, WE CONCUR WITH THE VIEW OF THE TRIBUNAL IN THE CASE OF SURYALAKSHMI COTTON MILLS LTD. VS. ACIT(SUPRA), JSW STEEL LTD. VS. ACIT (SUPRA) AND CABLE CORPORATION OF INDIA LTD. VS. DCIT (SUPRA ) AND BY FOLLOWING THE DECISIO N OF SPECIAL BENCH IN THE CASE OF BIOCON LTD. VS. DCIT (SUPRA), IN OUR VIEW, THE EXPLANATION 3C CANNOT BE APPLIED IN CASE OF INTEREST PAYABLE, CONVERTED INTO SHARE CAPITAL AS THE INTEREST LIABILITY STAND CEA SED TO EXIST AND NOT DEFERRED A S IN THE CASE OF C ONVERSION OF INTEREST LOAN OR BORROWING. THE RBI MASTER CIRCULAR WOULD NOT HELP THE CASE OF REVENUE AS IT WAS A GUIDELINE FOR THE BANKS OUGHT TO GIVE THE ACCOUNTING TREATMENT OF RESTRICTED LOAN AND INTEREST. BEFORE PARTING WITH THE MATTER IT IS PERTINENT TO NOTE THAT THE CIT(A) HAS TAKEN A WRONG ITEM OF DISALLOWANCE WHILE DIRECTING THE ASSESSING OFFICER IN THE LAST PARA OF THE IMPUGNED ORDER AS UNDER: - 2.3.11 IN VIEW OF THE FOREGOING, I AM OF THE VIEW THAT THE APPELLANT CONTENTION CAN NOT BE ACCEPTED MAINLY ON TWO COUNTS, FIRSTLY THE RESTRUCTURING PACKAGE NO WHERE STATES THAT THE INTEREST COMPONENT OF THE LOAN IS RE STRUCTURED, ON THE CONTRARY FACT IS THAT LOAN IS RESTRUCTURED. SECONDLY THE SO CALLED LIABILITY OF INTEREST DISCHARGED THROUGH THE ISSUANCE OF SHARE CAPITAL CAN NOT BE SAID TO BE DISCHARGED IN VIEW OF AMENDMENT CARRIED OUT BY FINANCE ACT 2006, W.E.F. 1.04. 1989 INSERTING EXPLANATION 3C AND 3D TO SECTION 43B. I ALSO FIND THAT THE LD. AO IN THE BODY OF THE MAIN ORDER U/S 143(3) OF THE ACT HAS DISALLOWED A SUM OF RS. 14 CRORES HOWEVER, WHILE COMPUTING THE INCOME HAS ADDED BACK ONLY RS. 8,82,00,000/ - ONLY. ACCO RDINGLY, THE LD. AO IS DIRECTED TO MAKE. THE DISALLOWANCES OF THE SUM OF RS. 14 CRARES ONLY AND THAT IS THE AMOUNT WHAT THE APPELLANT IS ALSO CONTESTING BEFORE ME. 19. THE AMOUNT OF 8.82 CRORE WAS INCORRECTLY ASSUMED BY THE CIT(A) BECAUSE THE ASSESSING OF FICER HAS DISALLOWED A SUM OF RS. 8.82 ITA NO. 5886 /1 2 3 CRORE ON ACCOUNT OF WRITE BACK OFF RESTRUCTURED SETTLEMENT AMOUNT WHICH WAS ALREADY DISALLOWED BY THE ASSESSEE IN THE COMPUTATION OF INCOME. APART FROM THE SAID DISALLOWANCE, THE ASSESSING OFFICER HAS ALSO DISALLOWED A SUM OF RS. 14 CRORE U/S 43B ON ACCOUNT OF CONVERSION OF INTEREST PAYABLE INTO SHARES ISSUED TO IDBI. WE FIND THAT THESE TWO AMOUNTS OF DISALLOWANCE ARE SEPARATE AND DISTINCT AND THERE IS NO CONFUSION OR AMBIGUITY IN THE ORDER OF ASSESSING OFFICER. THE A SSESSING OFFICER TOOK THE BUSINESS INCOME AS LOSS OF RS. 8.04 CRORE PRIOR TO THE DEDUCTION OF RS. 14 CRORE. THEREFORE, THE SAID AMOUNT WAS NOT ALLOWED IN THE COMPUTATION OF TOTAL INCOME BY THE ASSESSING OFFICER. HENCE, WE FIND THAT THE CIT(A) HAS MISUNDERS TOOD THE COMPUTATION OF TOTAL INCOME IN THE ASSESSMENT ORDER. ACCORDINGLY, WE SET ASIDE THE DIRECTION GIVEN BY THE CIT(A) IN PARA 2.3.11 AS THE SAME IS FACTUALLY INCORRECT. IN VIEW OF THE ABOVE FINDING WE SET ASIDE THE ORDERS OF AUTHORITIES BELOW ON THIS I SSUE AND ALLOW THE CLAIM OF THE ASSESSEE REGARD ING THE INTEREST PAYABLE OF RS. 14 CRORE U/S 43 B. 20. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. 4 . AS THE ADDITION OF RS.14 CRORES WITH RESP ECT TO WHICH PENALTY WAS IMPOSED , HAS BEEN DELETED BY THE TRIBUNAL, THE PENALTY IMPOSED THEREON HAS NO LEGS TO STAND. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING THE PENALTY. 5 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED . O RDER PRONOUNCED IN THE OPEN COURT ON THIS 15/05 / 201 5 . SD/ - ( ) ( SANJAY GARG ) SD/ - ( . . ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 15/05 /201 5 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//