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

ITA 634/BANG/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 95377 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-02-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 09-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P K SRIHARI
• Keywords: Capital asset; Capital receipt; Revised return
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO.6 34/BANG/2014 (ASST. YEAR 2011-12) THE DY. COMMISSIONER OF INCOME-TAX, CIRCLE-1, UDUPI. . APPELLANT VS. M/S MANIPAL FINANCE CORPN., LTD., MANIPAL. . RESPONDENT APPELLANT BY : DR. PK SRIHARI, ADDL. CIT RESPONDENT BY : SMT. SHEETAL, ADVOCATE DATE OF HEARING : 17-11-2015 DATE OF PRONOUNCEMENT : 20-11 -2015 O R D E R PER SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER THE APPEAL IS DIRECTED AGAINST THE ORDER OF COMMIS SIONER OF INCOME-TAX (APPEALS), MYSORE DATED 4/3/2014 FOR THE ASSESSMENT YEARS 2011-12. ITA NO.634/B/14 2 2. THE ASSESSEE IS A DOMESTIC COMPANY ENGAGED IN TH E BUSINESS OF ACCEPTANCE OF DEPOSITS FROM PUBLIC AND ALSO CARRYIN G ON THE BUSINESS OF ACCEPTANCE OF DEPOSITS FROM PUBLIC AND ALSO CARR YING ON THE BUSINESS OF HIRE PURCHASE, LEASING OF MACHINERY, MO TOR VEHICLES ETC. FOR THE ASSESSMENT YEAR 2011-12, THE ASSESSEE HAD F ILED THE RETURN OF INCOME ON 24.9.2011, DECLARING THEREIN BUSINESS LOS S OF RS.25,88,340/-. ALSO FILED A REVISED RETURN ON 25. 9.2012 DECLARING REVISED BUSINESS LOSS OF RS.1,44,61,942/-. THE RET URN WAS INITIALLY PROCESSED U/S 143(1) OF THE INCOME-TAX ACT. AFTER ISSUE OF NOTICES U/S 143(2) & 142(1) OF THE ACT THE ASSESSMENT WAS COMPL ETED ON 29.11.2013 U/S 143(3). 3. THE ASSESSEES CLAIM OF PRINCIPLE WRITTEN BACK A RISING OUT OF SETTLEMENT OF DEPOSITS, DEBENTURES AND DEBTS AMOUNT ING TO RS.21,03,900/-, RS.1,21,13,200/- AND RS.4,13,650/- RESPECTIVELY AGGREGATING TO RS.1,46,30,750/- AS CAPITAL EXPENDIT URE WAS REJECTED BY AO TREATING THE SAME AS INCOME FROM BUSINESS. ITA NO.634/B/14 3 4. THE AO HAS STATED THAT, ON GOING THROUGH THE FIN ANCIAL STATEMENTS IT WAS FOUND THAT THE COMPANY HAS SETTLE D THE DEPOSITS/DEBENTURES/DEBTS AT A DISCOUNT AND PRINCIP AL WRITE BACK ARISING ON SUCH SETTLEMENT HAS BEEN TRANSFERRED TO CAPITAL RESERVE AMOUNTING TO RS.1,46,31,750/-. HOWEVER, THE INTERE ST WRITTEN BACK ON SUCH SETTLEMENT WAS RS.36,91,000/-, DULY INCLUDED I N THE TOTAL INCOME. THE COMPANY HAS FILED THE DETAILS REGARDING AMOUNT TRANSFERRED TO CAPITAL RESERVE AS BELOW. ON ACCOUNT OF SETTLEMENT OF DEBENTURES. RS. 21,03, 900 ON ACCOUNT OF SETTLEMENT OF DEBTS RS.1,21,13,200 ON ACCOUNT OF SETTLEMENT OF DEPOSITS RS. 4,1 3,650 TOTAL RS.1,46,30,750 5. THE AR WHILE REITERATING THE ARGUMENTS BEFORE TH E AO EMPHASIZED ON THE FACT THAT, IN THE ASSESSEES OWN CASE, HONBLE ITAT BANGALORE BENCH FOR THE ASSESSMENT YEAR 2009-2010 I N ITA NO.1369/BANG/2012 VIDE ORDER DATED 2.8.2013 HAS ALL OWED THIS ISSUE IN FAVOUR OF THE ASSESSEE. HE HAS ALSO RELIED ON T HE DECISION OF THE HONBLE HIGH COURT OF KARNATAKA IN THE CASE OF CIT VS. COMPAQ ELECTRIC LTD. 42 (I) (ITCL-491) WHEREIN IT WAS HEL D THAT, LOAN WRITTEN ITA NO.634/B/14 4 BACK BY THAT ASSESSMENT AMOUNTED TO CAPITAL RECEIPT AND HENCE, NOT CHARGEABLE TO TAX U/S 41(1). 6. ON APPEAL BEFORE THE CIT(A), THE CIT(A) HELD THA T THIS ISSUE WAS ALSO BEFORE HIM IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009-10 IN ITA NO.154/UDP/CIT(A)MNG/11-12, DATED 18 .1.2012, WHEREIN HE HAD DECIDED THE ISSUE IN FAVOUR OF THE A SSESSEE. 7. SINCE, THE DECISION OF HONBLE TRIBUNAL IN THE A SSESSEES OWN CASE IN THE OTHER YEARS CITED ABOVE, IS IN FAVOUR O F THE ASSESSEE, THE CIT(A) STATED THAT HE WAS BOUND TO RESPECTFULLY FOL LOW THE DECISION OF HONBLE TRIBUNALS DECISION IN THE ASSESSEES OWN C ASE AND ALLOWED THE APPEAL ON THIS ISSUE. 8. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS UNDER: THE ORDER OF LEARNED CIT(A) IS AGAINST LAW AND FA CTS OF THE CASE. THE LEARNED CIT(A) ERRED IN ALLOWING THE PRINCIPA L PORTION OF DEPOSITS AMOUNTING TO RS.4,13,650/- PRI NCIPAL ITA NO.634/B/14 5 PORTION OF DEBENTURES AMOUNTING TO RS.21,03,900/- A ND PRINCIPAL PORTION OF DEBTS AMOUNTING TO RS.1,21,13, 200/- AS CAPITAL RECEIPTS. THE LEARNED CIT(A) FAILED TO APPRECIATE THE FACT THAT THE PRINCIPAL PORTION OF DEPOSITS, DEBENTURES AND D EBS FOREGONE BY THE DEPOSITORS/CUSTOMERS IS SIMILAR TO FORFEITURE OF DEPOSITS AND ATTAINS THE CHARACTER OF REVENUE RECEIPTS, AND HENCE, IT BECOMES APPELLANTS INCOME AS HELD BY THE HONBLE SUPREME COURT IN THE CASE OF CI T VS. LAKSHMI VILAS BANK LTD. (220 ITR 305). THE LEARNED CIT(A) FAILED TO APPRECIATE THE FACT THAT THOUGH THE AMOUNT IS NOT TAXABLE IN THE YEAR OF REC EIPT, THE AMOUNT CHARGES ITS CHARACTER WHEN THE AMOUNT BECOMES APPELLANTS OWN MONEY BECAUSE OF LIMITATION OR ANY OTHER STATUTORY OR CONTRACTUAL RIGHTS AS HELD B Y HONBLE SUPREME COURT IN THE CASE OF CIT VS. TV SUNDARAM IYENGAR & SONS LTD. (222 ITR 344). THE LEARNED CIT(A) ERRED IN NOT TAKING COGNIZANCE OF THE PROVISIONS OF SEC.28(IV) OF THE IT ACT AND F AILING TO NOTE THAT SINCE THE APPELLANT IS CARRYING ON FINANC E BUSINESS THE PRINCIPAL PORTION FORGONE BY THE DEPOS ITORS IS BENEFIT OR PERQUISITE ARISING FROM EXERCISE OF B USINESS. THE LEARNED CIT(A) ERRED IN NOT CONSIDERING THE DECISION OF HONBLE ITAT, BANGALORE BENCH, IN EH CA SE OF MANIPAL SOWBHAGYA NIDHI LTD. FOR THE ASST. YEAR 200 3- 04, WHO IN THEIR ORDER DATED 7/11/2008 IN ITA ITA NO.634/B/14 6 NO.379(BANG)/08 HAVE UPHELD THE ASSESSMENT OR PRINCIPAL PORTION OF DEPOSITS FORGONE BY THE DEPOSI TORS. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING, THE ORDER OF CIT(A) MAY BE SET ASIDE AND THAT OF AO IS RESTORED. THE APPELLANT CRAVES LEAVE TO ADD, DELETE, AMEND OR MODIFY ANY OF THE GROUNDS OF APPEAL. 9. WE FIND THAT SIMILAR ISSUE HAS BEEN DECIDED BY T HE CO-ORDINATE BENCH OF TRIBUNAL IN ITA NO.1369/BANG/2012 FOR THE ASST. YEAR 2009- 10. THE RELEVANT PORTION IS REPRODUCED AS FOLLOWS: - PER CONTRA, THE LEARNED AUTHORIZED REPRESENTATIVE OF THE ASSESSEE SUBMITTED THAT THIS ISSUE OF TREATM ENT OF PRINCIPAL PORTION OF DEPOSITS, DEBENTURES AND DEBTS AS CAPITAL HAS BEEN HELD IN FAVOUR OF THE ASSESSEE BY THE CO- ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES O WN CASE FOR ASST. YEAR 2005-06 IN ITS ORDER IN ITA NO.298/BANG/2009 DT. 7.8.2009 AND WHICH DECISION WA S FOLLOWED BY ANOTHER CO-ORDINATE BENCH OF THIS TRIBU NAL IN THE ASSESSEES OWN CASE FOR ASST. YEARS 2007-08 AND 2008-09 IN ITA NO.667 & 668/BANG/2012 DT. 12.3.2013 . IN THIS VIEW OF THE MATTER, THE LEARNED AUTHORIZED ITA NO.634/B/14 7 REPRESENTATIVE PLEADED THAT SINCE THIS ISSUE HAS BE EN ADJUDICATED IN FAVOUR OF THE ASSESSEE IN ITS OWN CA SE FOR THE EARLIER YEARS, REVENUES APPEAL FOR ASST. YEAR 2009-10 WAS LIABLE TO BE DISMISSED. WE HAVE HEARD BOTH PARTIES AND CAREFULLY PERUSED AND CONSIDERED THE MATERIAL ON RECORD, INCLUDING TH E JUDICIAL DECISIONS CITED. WE FIND FROM THE RECORD THAT THIS ISSUE HAS BEEN CONSIDERED AND ADJUDICATED IN FAVOUR OF THE ASSESSEE BY A CO-ORDINATE BENCH OF THIS TRIBUNA L IN THE ASSESSEES OWN CASE FOR ASST. YEAR 2003-04 AND 2004 -05 IN ITA NOS.626 & 627/BANG/2007 DT. 7.3.2008 WHEREIN AT PARA 4 ON PAGE 3 THEREOF IT HAS BEEN HELD AS UNDER: 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS IN OUR OPINION, THE FOLLOWING UNDISPUTED FACTS EMERGE OUT. THE BALANCE AMOUNT OF DEPOSIT WHICH COULD NOT BE PAID B Y THE ASSESSEE TO THE DEPOSITORS WAS NEVER A CHARGE TO TH E 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 CONS IDERED BY THE BOMBAY HIGH COURT. THERE IS NO CESSATION OF A TRADING LIABILITY. WHAT WAS BORROWED BY THE ASSESS EE WAS A CAPITAL ASSET REPAYABLE AS SUCH, COULD NOT BE REP AID IN VIEW OF THE CIRCUMSTANCES IN WHICH THE ASSESSEE WAS PLACED. SECTION 41(1) OF THE ACT WOULD GET ATTRACT ED ONLY WHEN THERE IN AN AMOUNT THAT IS CHARGED TO THE PROF IT AND ITA NO.634/B/14 8 LOSS ACCOUNT REDUCING THE TAX LIABILITY OF ANY OF T HE 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. THE AFORESAID DECISION (SUPRA) HAS BEEN FOLLOWED I N SUBSEQUENT YEARS BY CO-ORDINATE BENCHES OF THIS TRI BUNAL AS UNDER: (I) FOR ASST. YEAR 2005-06 IN ITA NO.298/BANG/2009 DT. 7.8.2009; AND (II) FOR ASST. YEARS 2007-08 AND 2008-09 IN ITA NOS.667 & 668/BANG/2012 DT. 12.3.2013: WE, THEREFORE, FOLLOWING THE ABOVE MENTIONED DECISIONS OF THE CO-ORDINATE BENCHES OF THIS TRIBUN AL IN THE ASSESSEES OWN CASE FOR THE EARLIER YEARS, DISMISS THE GROUNDS RAISED BY REVENUE ON THIS ISSUE. 10. RESPECTFULLY FOLLOWING THE CO-ORDINATE BENCH DE CISION WE DISMISS THE REVENUES APPEAL. 11. IN THE RESULT, THE APPEAL OF THE REVENUE IS D ISMISSED. ITA NO.634/B/14 9 ORDER PRONOUNCED IN THE OPEN COURT ON 20TH NOV, 2015 . SD/- SD/- (INTURI RAMA RAO) (ASHA VIJAY ARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE DATED : 20/11/2015 VMS COPY TO :1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER ASST. REG ISTRAR, ITAT, BANGALORE.