ACIT, Coimbatore V. M/s. Kavikumar Spinning Mills (P) Limited, Coimbatore

ITA 855/CHNY/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58150 (ITAT-CHENNAI)
• Duration Of Justice: 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-03-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 15-03-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 09-05-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: M SWAMINATHAN
• Keywords: Capital asset; Opportunity of being heard
• Section: 115JB

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI A BENCH, CHENNAI. BEFORE DR. O.K. NARAYANAN, VICE-PRESIDENT & SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T.A. NO. 855/MDS/2011 ASSESSMENT YEAR: 2005-06 THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE IV(2), INCOME-TAX BUILDING, RACE COURSE ROAD, COIMBATORE 641 018. VS. M/S. KAVIKUMAR SPINNING MILLS (P) LIMITED, 56 H, AMMASI GOUNDER STREET, SARAVANAMPATTI MAIN ROAD, COIMBATORE 641 029. [PAN: AAACK8983F] (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SHAJI P. JACOB, ADDL. CIT ASSESSEE BY : SHRI M. SWAMINATHAN, ADVOCATE DATE OF HEARING : 1 5 . 0 3 .201 2 DATE OF PRONOUNCEMENT : 15.03.2012 ORDER PER CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE DEPARTMENT AGAINST T HE ORDER OF THE CIT(A) I, COIMBATORE DATED 15.02.2011 IN ITA NO.206 /09-10 RELEVANT TO THE ASSESSMENT YEAR 2005-06. SHRI SHAJI P. JACOB, ADDL. CIT REPRESENTED ON BEHALF OF THE REVENUE AND SHRI M. SWAMINATHAN, ADVO CATE REPRESENTED ON BEHALF OF THE ASSESSEE. 2. THE DEPARTMENT HAS RAISED FOLLOWING GROUNDS: 1. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) IS AGAINST FACTS AND CIRCUMSTANCES OF THE CASE. I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.855 855855 855/M/ /M/ /M/ /M/1 11 11 11 1 2 2. THE LEARNED CIT(A) ERRED IN NOT CONSIDERING THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF SOLID CONTAINERS LTD. VS. DCIT (308 ITR 417) WHEREIN IT WAS HELD THA T TO THE EXTENT TO WHICH WAIVER LOANS WERE UTILIZED FOR PURP OSES OTHER THAN ACQUISITION OF FIXED ASSETS, THERE WAS CLEARLY A BENEFIT ARISING FROM BUSINESS AS PER THE PROVISIONS OF SECT ION 28(IV) OF THE ACT. 3. THE LEARNED CIT(A) OUGHT TO HAVE CONSIDERED THA T THE LOAN HAS BEEN TAKEN FOR PURCHASE OF CAPITAL ASSETS OR AS WORKING CAPITAL, AS SUCH THE AMOUNT WAIVED DOES NOT LOSE TH E CHARACTER OF INCOME. 4. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, THE ORDER OF THE CIT(APPEALS) MAY BE CANCELED AND THAT OF THE ASSESSING OFFICER RESTORED. 3. THE GROUND NOS. 1 AND 4 ARE GENERAL IN NATURE A ND REQUIRES NO ADJUDICATION BY US. 4. GROUND NOS. 2 AND 3 RELATES TO THE ISSUE OF WHE THER WAIVER OF PRINCIPAL AMOUNTS OF LOAN IS TAXABLE UNDER THE PROVISIONS OF SECTION 41(1) OF THE ACT. 5. THE ASSESSING OFFICER, WHILE COMPUTING THE INCO ME UNDER NORMAL PROVISIONS AND ALSO UNDER SECTION 115JB OF THE ACT, MADE ADDITION OF ` .58,67,682/- REPRESENTING THE PRINCIPAL WAIVER OF L OAN ON THE GROUND THAT THE WAIVER OF PRINCIPAL AMOUNTS TO CESSATION OF LIABILI TY WITHIN THE MEANING OF CLAUSE (A) OF SECTION 41(1). THE ASSESSEE REDUCED T HE WAIVER OF PRINCIPAL AMOUNTS OF ` .58,67,682/- ON THE GROUND THAT IT IS A CAPITAL REC EIPT. 6. ON APPEAL, THE CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER HOLDING AS UNDER: I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.855 855855 855/M/ /M/ /M/ /M/1 11 11 11 1 3 7. SECTION 41(1) CONSISTS OF TWO MAIN INGREDIENTS (A) LOSS OR EXPENDITURE AND (B) TRADING LIABILITY. THE TWO COMP ONENT OF SECTION 41(1) OF THE ACT HAVE TO BE READ SEPARATELY NAMELY (I) HAS OBTAINED WHETHER IN CASH OR IN ANY OTHER MANNER WHATSOEVER, ANY AMOUNT IN RESPECT OF SUCH LOSS OR EXPENDITURE; (II) SOME BENE FIT IN RESPECT OF SUCH TRADING LIABILITY BY WAY OF REMISSION OR CESSATION THEREOF. THE WORDS REMISSION OR CESSATION SHALL APPLY ONLY TO TRADING LIABILITY AND IT SHALL NOT APPLY TO ANY LOSS OR EXPENDITURE. IT IS NOT IN DISPUTE THAT THE PRINCIPAL PORTION OF LOAN AMOUNT WHICH HAS BEEN WAI VED HAS NOT BEEN CLAIMED AS DEDUCTION IN ANY OF THE EARLIER YEARS. H ENCE, WAIVER OF PRINCIPAL PORTION OF LOAN CANNOT BE TERMED AS WAIVE R OF TRADING LIABILITY AND HENCE THE PROVISIONS OF SECTION 41(1) CANNOT BE APPLIED TO THE FACTS OF THE APPELLANT'S CASE. IN VIEW OF THIS, THE ASSES SING OFFICER IS DIRECTED TO GRANT A DEDUCTION OF ` .58,67,682/- AS CLAIMED BY THE APPELLANT. THE GROUNDS OF APPEAL ARE ALLOWED. 7. WE HAVE HEARD BOTH THE SIDES, CONSIDERED THE MA TERIALS AVAILABLE ON RECORD. WE FIND FROM THE ORDERS OF THE LOWER AUTHOR ITIES THAT THERE IS NO FINDING AS TO WHETHER THE LOAN OBTAINED BY THE ASSE SSEE WAS TOWARDS ACQUIRING CAPITAL ASSETS OR FOR WORKING CAPITAL PUR POSE. THE ASSESSING OFFICER DID NOT GIVE ANY FINDING ON THIS ASPECT. TH EREFORE, WE ARE OF THE CONSIDERED VIEW THAT THE ASSESSING OFFICER SHOULD E XAMINE THIS ISSUE AFRESH BY GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE AND TAKING INTO ALL THE FACTS ON THE ISSUE AS TO WHETHER THE L OAN WAS OBTAINED FOR ACQUIRING CAPITAL ASSETS OR FOR WORKING CAPITAL PUR POSE AND DECIDE THE ISSUE ACCORDINGLY IN ACCORDANCE WITH LAW. THEREFORE, WE S ET ASIDE THE ORDER OF THE I.T.A. I.T.A. I.T.A. I.T.A. NO. NO. NO. NO.855 855855 855/M/ /M/ /M/ /M/1 11 11 11 1 4 CIT(A) AND REMIT THIS ISSUE TO THE FILE OF THE ASSE SSING OFFICER TO DECIDE THIS ISSUE AS PER ABOVE DIRECTIONS. ACCORDINGLY, THE GRO UNDS RAISED BY THE REVENUE ARE ALLOWED FOR STATISTICAL PURPOSE. 8. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALL OWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 15.03.2012. SD/- SD/- (DR. O.K. NARAYANAN) VICE-PRESIDENT (CHALLA NAGENDRA PRASAD) JUDICIAL MEMBER CHENNAI, DATED, THE 15.03.2012 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.