DCIT 3(2), MUMBAI V. K R STEEL UNION LTD, MUMBAI

ITA 7212/MUM/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71336 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-09-2013
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 25-09-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 20-10-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Keywords: Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUM BAI . . , , BEFORE SHRI B. R. MITTAL, JM AND SHRI SANJAY ARORA , AM ./ I.T.A. NO. 7212/MUM/2010 ( / ASSESSMENT YEAR: 2006-07) DY. CIT, 3(2), ROOM NO.608, 6 TH FLOOR, AAYAKAR BHAVAN, MUMBAI-400 020 / VS. K. R. STEEL UNION LTD. 509/D, LOHA BHAVAN, 93, P. D. MELLO ROAD, CARNAC BUNDER, MUMBAI-400 009 ! ./' ./PAN/GIR NO. AAACK 1953 F ( !# /APPELLANT ) : ( $!# / RESPONDENT ) !# % / APPELLANT BY : SHRI SURENDRA KUMAR $!# & % / RESPONDENT BY : NONE ' ()* & + / DATE OF HEARING : 25.09.2013 ,-. & + / DATE OF PRONOUNCEMENT : 25.09.2013 / / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN APPEAL BY THE REVENUE AGITATING THE ORDE R BY THE COMMISSIONER OF INCOME TAX (APPEALS)-7, MUMBAI (CIT(A) FOR SHORT) DATED 03.08.2010, ALLOWING THE ASSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S.143 (3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 20 06-07 VIDE ORDER DATED 22.12.2008. 2 ITA NO. 7212/MUM/2010 (A.Y. 2006-07) DY. CIT VS. K. R. STEEL UNION LTD. 2. NONE APPEARED FOR AND ON BEHALF OF THE ASSESSEE WHEN ITS APPEAL WAS CALLED OUT FOR HEARING. IT WAS, HOWEVER, OBSERVED BY THE BENCH THA T THE ASSESSEE HAS FILED AN APPLICATION DATED 11.05.2012, CLAIMING THAT THE INSTANT APPEAL MAY BE DECIDED ON THE BASIS OF THE ORDERS BY THE TRIBUNAL IN THE ASSESSEES OWN CASE F OR EARLIER YEARS, I.E., FOR A.YS. 2002-03 AND 1997-98, PLACING COPIES OF THE SAME ON RECORD. ON THIS BEING PUT TO THE LD. DEPARTMENTAL REPRESENTATIVE (DR), HE COULD NOT BRIN G ANY CHANGE IN THE FACTS AND CIRCUMSTANCES WITH REFERENCE TO THE RELEVANT YEARS TO OUR NOTICE. 3. WE HAVE HEARD THE PARTY BEFORE US, AND PERUSED T HE MATERIAL ON RECORD. THE ONLY ISSUE ARISING IN THE INSTANT APPEAL IS IN RESPECT O F INTEREST ON DEBENTURES, CLAIMED IN THE SUM OF RS.1,24,78,356/- THROUGH DEBIT TO THE PROFIT AND LOSS ACCOUNT FOR THE YEAR. HOWEVER, AS A COMPANY HAD BEEN DECLARED A SICK COMP ANY BY THE BOARD FOR INDUSTRIAL & FINANCIAL RECONSTRUCTION (BIFR OR THE BOARD HER EINAFTER) UNDER THE SICK INDUSTRIAL COMPANIES ACT, 1985 (SICA), WITH THE BOARD HAVING N OT PASSED ANY ORDER FOR THE DISCHARGE OF THE INTEREST LIABILITY FOR THE YEAR FR OM THE ASSETS OF THE COMPANY, THE SAME, IN THE OPINION OF THE ASSESSING OFFICER (AO), WOULD NO T CONSTITUTE AN ACCRUAL OF REVENUE LIABILITY, SO AS TO BE ALLOWED IN COMPUTING THE INC OME FOR THE YEAR CHARGEABLE TO TAX. WE HAVE PERUSED THE ORDERS BY THE TRIBUNAL FOR THE EARLIER YEARS, BEING FOR A.Y. 2002-03 (IN ITA NO. 5872/MUM/2006 DATED 29.12.2008) AND FOR A.Y. 1997-98 (IN ITA NO.5660/MUM/2000 DATED 22.08.2006). THE CLAIM FOR I NTEREST STANDS ALLOWED BY THE TRIBUNAL ON THE BASIS THAT THE LIABILITY TO PAY THE INTEREST WOULD NOT ABATE ON AN ORDER FOR BEING WOUND UP BY BIFR. THE LD. CIT(A) HAS ALSO ALL OWED RELIEF TO THE ASSESSEE FOR THE CURRENT YEAR FOLLOWING THE SAME. WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE MATTER, AND ARE IN FULL AGREEMENT WITH THE ORDER BY THE TRI BUNAL CITED SUPRA FOR THE EARLIER YEARS. THIS IS AS SUSPENSION OF THE CONTRACTUAL LIABILITY TOWARD INTEREST WOULD NOT ARISE ON THE SCHEME FOR REHABILITATION IN ITS RESPECT HAVING BEE N DECLINED OR NOT APPROVED OF BY THE BOARD, RECOMMENDING ITS WINDING UP INSTEAD, BUT ON THE ACTUAL ORDER FOR BEING WOUND UP. IN FACT, THE WINDING-UP ORDER OF ANY COMPANY COULD ONLY BE BY THE HONBLE JURISDICTIONAL HIGH COURT, AND NOT BY THE BOARD. 3 ITA NO. 7212/MUM/2010 (A.Y. 2006-07) DY. CIT VS. K. R. STEEL UNION LTD. SO, HOWEVER, THE ORDER OR THE OPINION OF THE BOARD U/S. 20 OF SICA PROPOSING WINDING-UP OF THE ASSESSE-COMPANY, FOUND BY IT AS A SICK COMPANY IN TERMS THEREOF, IS DATED 19.04.1995 , SO THAT IT IS INCONCEIVABLE THAT AN ORDER FOR WIN DING UP WOULD NOT HAVE BEEN PASSED BY THE HONBLE COURT, OR THE APPLICATIO N IN ITS RESPECT NOT DISPOSED OF BY IT EVEN BY THE PREVIOUS YEAR UNDER REFERENCE, I.E., A DECADE HENCE. NO LIABILITY, ONCE A COMPANY HAS BEEN ORDERED FOR BEING WOUND UP BY THE HONBLE COURT, CAN BE SAID TO ACCRUE. IN FACT, SECTION 22 OF SICA PROVIDES SUSPEN SION OF OPERATION OF ALL CONTRACTS, AGREEMENTS, SETTLEMENTS, AWARDS, ETC., TO WHICH A S ICK INDUSTRIAL COMPANY IS A PARTY, I.E., PENDING THE INQUIRY OR PROCEEDINGS U/SS. 16, 17 OR 18 OF THE SAID ACT. SUCH SUSPENSION THOUGH IS SUBJECT TO A TIME LIMITATION FOR A MAXIMU M OF 7 YEARS IN AGGREGATE VIDE PROVISO TO SECTION 22(3) AND, FURTHER, COULD ALSO BE MODIFI ED IN THE MANNER AS SPECIFIED BY THE BOARD, I.E., DURING THE PERIOD THE DECLARATION IS O PERATIVE. IN OTHER WORDS, IN VIEW OF THE PROVISIONS OF SICA, THE SUSPENSION OF CONTRACTUAL L IABILITIES, AS THE INTEREST ON DEBENTURES, COULD IN FACT COMMENCE EVEN PRIOR TO THE DATE OF TH E WINDING-UP ORDER. AGAIN, THE DEBENTURES, REPRESENTING A SECURED DEBT, ARE NORMAL LY NOT ISSUED FOR A TENOR BEYOND TEN YEARS, WHILE, AS AFORE-STATED, THE ORDER BY BIFR RE COMMENDING WINDING UP UNDER SICA IS OVER TEN YEARS OLD AS AT THE RELEVANT YEAR-END. IN FACT, FOR ALL WE KNOW THE COMPANY MAY HAVE BEEN ORDERED TO BE WOUND UP BY THE HONBLE HI GH COURT OR IN FACT EVEN BEEN WOUND UP, IN EITHER OF WHICH CASE THE REVENUES APPEAL, W HICH DOES NOT IMPLEAD THE OFFICIAL LIQUIDATOR, MAY NOT BE MAINTAINABLE. IN FACT, IN TH AT CASE, THE ASSESSEES APPEAL TO THE LD. CIT(A) WOULD ITSELF BECOME NOT MAINTAINABLE. NO FAC TS QUA THE DEVELOPMENTS SINCE THE BOARDS ORDER DATED 19/4/1995 HAVE BEEN BROUGHT ON RECORD BY THE ASSESSEE, EVEN AS IT FILES THE RETURN OF INCOME IN ITS NAME CLAIMING THE IMPUGNED EXPENDITURE. UNDER THE CIRCUMSTANCES, THE FACTS BEING NOT CLEAR, AND EVEN AS WE IN PRINCIPLE IN AGREEMENT WITH THE ORDERS BY THE TRIBUNAL FOR THE E ARLIER YEARS, WE ONLY CONSIDER IT FIT AND PROPER THAT THE MATTER IS RESTORED BACK TO THE FILE OF THE A.O. TO DECIDE THE MATTER AFRESH AFTER CONSIDERING ALL THE RELEVANT FACTS, ALLOWING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD, AND BY OBSERVING THE DUE PROCESS OF LAW. WE DECIDE ACCORDINGLY. 4 ITA NO. 7212/MUM/2010 (A.Y. 2006-07) DY. CIT VS. K. R. STEEL UNION LTD. 4. IN THE RESULT, THE REVENUES APPEAL IS DISPOSED OF IN THE AFORESAID TERMS. ORDER PRONOUNCED IN THE OPEN COURT ON SEPTEMBER 25, 2013 SD/- SD/- (B. R. MITTAL) (SANJAY ARORA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ' * MUMBAI; 0( DATED : 25.09.2013 ).(../ ROSHANI , SR. PS ! ' #$%& ' &$ / COPY OF THE ORDER FORWARDED TO : 1. !# / THE APPELLANT 2. $!# / THE RESPONDENT 3. ' 1 ( ) / THE CIT(A) 4. ' 1 / CIT CONCERNED 5. 4)56 $ (78 , + 78. , ' * / DR, ITAT, MUMBAI 6. 69: ;* / GUARD FILE ! ( / BY ORDER, )/(* + (DY./ASSTT. REGISTRAR) , ' * / ITAT, MUMBAI