DCIT, Circle - 8, Kolkata, Kolkata V. M/s. Antai Balaji Limited, Kolkata

ITA 958/KOL/2010

• Counselvise Citation: 95823514 RSA 2010
• Duration Of Justice: 2 year(s) 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-07-2012
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 03-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 10-05-2010
• Court: TRIBUNAL
• Department Lawyers: L K S DEHIYA
• Assessee Lawyers: SREYA LAYALKA
• Keywords: Opportunity of being heard; Notional interest
• Section: 2

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL, BEN CH A, KOLKATA () BEFORE , ,, , , SHRI MAHAVIR SINGH, JUDICIAL MEMBER. /AND . .. . ! ! ! !. .. . , '# SHRI C.D.RAO, ACCOUNTANT MEMBER $ $ $ $ / ITA NO . 958/KOL/2010 %& '(/ ASSESSMENT YEAR : 2006-07 (*+ / APPELLANT ) D.C.I.T., CIRCLE-8, KOLKATA (,-*+/ RESPONDENT ) M/S.ANTAI BALAJI LIMITED, KOLKATA (PAN:AADCA 4284 C) *+ . / '/ FOR THE APPELLANT: SHRI L.K.S.DEHIYA ,-*+ . / '/ FOR THE RESPONDENT: MISS. SREYA LAYALKA 0%1 . !# /DATE OF HEARING : 18.06.2012. 2' . !# /DATE OF PRONOUNCEMENT : 20.07.2012. '3 / ORDER . .. . ! ! ! !. .. . , '# PER SHRI C.D.RAO, AM THE ABOVE APPEAL IS FILED BY REVENUE AGAINST ORDER DATED 15.02.2010 OF THE LD. CIT-(A)-VIII, KOLKATA PERTAINING TO A.YR. 2006-07. 2. IN THIS APPEAL THE REVENUE HAS RAISED THE FOLLOW ING GROUNDS :- 1) THAT LD. CIT(A) ERRED ON FACTS AND IN CIRCUMSTA NCE OF THE CASE AND IN LAW IN HOLDING THAT WAIVER OF PRINCIPAL AMOUNT OF RS.11,52,74,989/ - BY THE BANK DOES NOT AMOUNT TO INCOME IN THE HAND OF THE ASSESSEE AS PER SECTION 2 (24) OF THE INCOME TAX ACT, 1961. 2) THAT LD. CIT(A) ERRED ON FACTS AND IN CIRCUMSTAN CE OF THE CASE AND IN LAW IN HOLDING THAT CESSATION OF LIABILITY TO THE EXTENT OF RS.11, 52,74,989 IS NOT A WINDFALL OF THE COMPANY AND IT CANNOT BE TREATED AS CASUAL AND NON- RECURRING INCOME. 3) THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR ABRO GATE ANY GROUND OF APPEAL AT THE TIME OF HEARING. 2 3. THOUGH THERE ARE TWO GROUNDS BOTH ARE RELATING TO ONE ISSUE, THE FACTS OF WHICH ARE AS UNDER :- 2. DURING THE COURSE OF SCRUTINY PROCEEDINGS, IT W AS FOUND THAT THE BANK HAD WAIVED PRINCIPAL AMOUNT OF LOAN OF RS. 11,52,74,989/-. THI S AMOUNT WAS LIABILITY OF ASSESSEE AS ON 31.03.2005. HOWEVER, DUE TO WAIVER OF LOAN, LIAB ILITY TO THE EXTENT OF RS.1L,52,74,989/- CEASED TO EXIST. THE DEFINITION O F INCOME IN SECTION 2(24) OF INCOME TAX ACT, 1961 IS INCLUSIVE ONE. IN PRESENT CASE, CE SSATION OF LIABILITY IS NOTHING BUT A WINDFALL TO THE COMPANY AND IT IS TO BE TREATED AS CASUAL AND NON-RECURRING INCOME. SO, THE AMOUNT OF RS. 11,52,74,989/- IS INCOME OF THE A SSESSEE. ACCORDINGLY, SUM OF RS.11,52,74,989/- IS ADDED TO TOTAL INCOME. PENALTY PROCEEDINGS UNDER SECTION 271(1) (C) OF INCOME TAX ACT, 1961 IS INITIATED FOR CONCEALMEN T OF INCOME AND GIVING INACCURATE PARTICULARS OF INCOME. 3.1. ON APPEAL AFTER TAKING INTO CONSIDERATION OF T HE VARIOUS SUBMISSIONS AS RECORDED BY THE LD.CIT(A) AT PAGES 2 TO 4 HE DELETE D THE ADDITION BY OBSERVING AS UNDER :- IN THIS GROUND OF APPEAL THE APPELLANT IS DISPUTIN G THE ASSESSING OFFICER (AO)S ACTION IN ADDING TO ITS INCOME THE PRINCIPAL AMOUNT OF ITS LOAN WAIVED BY THE STATE BANK OF INDIA. THE AOS CONTENTION IS THAT THE APPELLANTS LIABILITY HAS CEASED TO EXIST ONCE LOAN HAS BEEN WAIVED. HE HAS REFERRED TO SEC. 2(24) OF T HE INCOME TAX ACT AS BEING INCLUSIVE IN NATURE AND HAS MADE THE ADDITION. THE APPELLANT S SUBMISSION HAS BEEN PLACED ON RECORD. IN A NUT SHELL, IT STATES THAT NO DEDUCTION HAS EVER BEEN ALLOWED IN ANY PAST YEAR IN RESPECT OF THE PRINCIPAL AMOUNT OF THIS LOAN AND ACCORDINGLY NO INVOCATION OF SEC. 41(1) OF THE INCOME TAX ACT CAN BE DONE IN THIS CAS E. THE APPELLANT HAS RELIED ON A NUMBER OF JUDICIAL DECISIONS IN ITS SUBMISSION. THE SE HAVE BEEN PERUSED. IN MY OPINION, THE PROVISIONS OF SEC. 41(1) OF THE INCOME TAX ACT CANNOT BE INVOKED IN THE APPELLANTS CASE AS, ADMITTEDLY THE SAID SECTION CAN ONLY BE IN VOKED WHEN ANY ALLOWANCE IN RESPECT OF LOSS, EXPENDITURE OR TRADING LIABILITY HAS BEEN MADE IN A PAST YEAR AND THERE HAS BEEN CESSATION OF SUCH LIABILITY. THIS IS CLEARLY NOT TH E CASE HERE. THE AO HIMSELF HAS NOT INVOKED THE PROVISIONS OF SEC. 4 1(1) OF THE INCOME TAX ACT FOR MAKING THIS ADDITION. HE HAS INSTEAD INVOKED THE PROVISIONS OF SEC. 2(24) OF THE INCOME TAX ACT. HOWEVER, IN DOING SO HE HAS NOT POINTED OUT ANY SPECIFIC CLAUSE OF THE SAID SECTION UNDER WHICH SUCH ADDITION CAN BE MADE. RATHER, HE RELIES ON THE INCL USIVE DEFINITION OF INCOME GIVEN IN THAT SECTION. THE PROVISION OF SEC. 2(24) OF THE IN COME TAX ACT HAS BEEN PERUSED. IN MY OPINION, THE PRESENT ISSUE CANNOT BE FITTED INTO AN Y OF THE CLAUSE OF SEC. 2(24) OF THE INCOME TAX ACT. EVEN IF DEFINITION OF INCOME IS CON SIDERED TO BE INCLUSIVE, I DO NOT SEE BY WHAT LOGIC CAN THE PRINCIPAL AMOUNT OF LOAN WHIC H HAS BEEN WAIVED CAN BE TREATED AS INCOME. IN MY OPINION, THE A.OS RELIANCE ON SEC. 2 (24) OF THE INCOME TAX ACT IS WITHOUT BASIS. IT IS NOT EVEN CLEAR FROM THE AOS O RDER WHETHER THE SAID WAIVER, IF AT ALL IT IS TO BE TREATED AS RECEIPT CAN BE TREATED AS SU CH DURING THE PREVIOUS YEAR. MOREOVER, EVEN IF IT IS TO BE TREATED AS A RECEIPT, IT SHOULD BE REMEMBERED THAT NOT ALL RECEIPTS ARE IN THE NATURE OF INCOME. I FIND NO DISCUSSION IN THE A OS ORDER ON THIS ISSUE. KEEPING IN VIEW OF THE FACTS OF THE CASE, THE AO IS DIRECTED T O DELETE THIS ADDITION. 3.2. AGGRIEVED BY THIS NOW THE REVENUE IS IN APPEAL BEFORE US. 3 4. AT THE TIME OF HEARING THE LD. DR APPEARING ON B EHALF OF THE REVENUE HAS SUBMITTED THE DETAILED SUBMISSIONS. THE MAIN CONTEN TION OF THE LD. DR ARE THAT THE CIT(A) HAS ALLOWED THE RELIEF ON THE FOLLOWING GROU NDS :- A) THE AO HAS NOT POINTED OUT ANY SPECIFIC CLAUSE OF S ECTION 2(24) WHILE MAKING THE ADDITION. B) THERE IS NO LOGIC TO TREAT WAIVER OF PRINCIPAL AMOU NT OF LOAN AS INCOME. C) ALL RECEIPTS ARE NOT INCOME. THE CIT(A) HAS NOT RELIED UPON ANY DECISION AND HAS ALSO NOT MENTIONED ANY CASE LAW CITED ON BEHALF OF THE ASSESSEE WHILE GIVING HIS DE CISION. 4.1. HE FURTHER ARGUED THAT THE TAX LAWS ARE CLEAR THAT WHEN AN ASSESSEE CEASES TO BE LIABLE TO PAY SOMETHING THAT HE WAS LEGALLY BOUND T O PAY, THEN IN EFFECT, HE GAINS THE AMOUNT THAT HE WAS BOUND TO PAY. THEREFORE, PRINCIP AL AMOUNT OF LOAN WRITTEN OFF WAS NOTHING BUT GAIN/INCOME IN THE HANDS OF THE ASSESSE E. FURTHER PRIOR TO THE WAIVER ACCRUED ON SETTLEMENT THE CLAIM OF THE BANK WAS ALI VE AND THAT INCOME MUST BE RECOGNIZED IN THE PERIOD DURING WHICH SETTLEMENT TO OK PLACE. ALSO INCOME IS TAXABLE UNDER THE HEAD PROFIT AND GAINS OF BUSINESS AND PRO FESSION BECAUSE LOAN WAS TAKEN FOR THE PURPOSE OF BUSINESS AND ONE TIME SETTLEMENT WAS AN INTEGRAL PART OF THE BUSINESS. 4.2. HE FURTHER RELIED ON THE FOLLOWING CASE LAWS ALONG WITH THE OBSERVATIONS MADE IN EACH CASE LAWS :- I) CIT VS T.V.SUNDARAM IYENGAR & SONS LTD. (1996) 222 ITR 344 II) CIT VS KARAM CHAND THAPAR AND OTHERS 222 ITR 112 III) LOGITRONICS PVT. LTD. VS CIT 333 ITR 386 (DEL) 2011 IV) SOLID CONTAINERS LTD. VS DCIT 308 ITR 417 (BOM) V) ROLLATAINERS LTD VS IT IN ITA NO.127 OF 2011 DATED 30.8.2011 THEREFORE, HE REQUESTED THAT THE ORDER OF LD. CIT(A ) MAY BE SET ASIDE AND THE ORDER OF AO MAY BE RESTORED. 5. ON THE OTHER HAND, THE LD. COUNSEL APPEARING ON BEHALF OF ASSESSEE HAS ALSO RELIED ON SEVERAL CASE LAWS AND FILED THE SAME IN T HE PAPER BOOK FROM PAGES 1 TO 83. IN ADDITION TO THAT SHE RELIED ON THE FOLLOWING LATEST ITATS DECISIONS : 4 A) CIT VS TOSHA INTERNATIONAL LTD. (2009) 176 TAXMA N 187 (DEL) B) COCHIN BENCH IN THE CASE OF ACCELERATED FREEZ & DRYING CO.LTD. VS DCIT (2009) 31 SOT 442 (COCH) C) DELHI BENCH OF ITAT IN THE CASE OF SHYAM TELELIN K LTD. VS ITO (2006) 101 TTJ 387 (DEL) (2006) 99 ITD 576 (DEL) THEREFORE SHE REQUESTED TO UPHELD THE ACTION OF LD. CIT(A). 6. AFTER HEARING THE RIVAL SUBMISSIONS AND ON CAREF UL PERUSAL OF MATERIALS AVAILABLE ON RECORD, IT IS OBSERVED THAT AS POINTED OUT BY THE LD. DR THAT THE LD. CIT(A) HAVING CO-TERMINUS POWER THAN THE AO HE IS NOT JUST IFIED IN DELETING THE ADDITION SIMPLY BY STATING THAT THE AO HAS NOT POINTED OUT A NY SPECIFIC CLAUSE OF SECTION 2(24) WHILE MAKING THE ADDITION.. FURTHER HE DISCUSSED TH E APPLICATION OF SECTIONS 41(1) AND 28(IV) OF THE IT ACT. IT IS FURTHER OBSERVED THAT A S PER THE APPROVAL OF THE MID CORPORATE CREDIT COMMITTEE OF THE STATE BANK OF IND IA HELD ON 31.08.2005 THE ASSESSEE HAS GOT A REMISSION OF RS.14.69 CRORES ON ACCOUNT OF OUTSTANDING BALANCE IN CASH CREDIT ACCOUNT AS WELL AS TERM LOAN ACCOUNT AN D RS.12.10 CRORES ON ACCOUNT OF WAIVER OF NOTIONAL INTEREST WHICH WAS PLACED ON REC ORD BY THE LD. COUNSEL FOR ASSESSEE. IT IS FURTHER OBSERVED THAT MID CORPORATE CREDIT CO MMITTEE HAS WAIVED AN AMOUNT OF RS.26.79 CRORES AS PER THE ABOVE LETTER. HOWEVER, T HE AO HAS OBSERVED THAT THE BANK HAS WAIVED ONLY AN AMOUNT RS.11,52,74,989/-. KEEPIN G IN VIEW OF THE ABOVE OBSERVATIONS, WE ARE OF THE VIEW THAT NEITHER THE A O NOR LD. CIT(A) HAS PROPERLY ANALYSED THE FACTS OF THE CASE AND APPLIED THEIR MI NDS BEFORE MAKING THE ADDITION TO THE INCOME OF ASSESSEE BY THE AO OR BY DELETING THE SAME BY LD. CIT(A). THEREFORE WE SET ASIDE THE ORDERS OF THE REVENUE AUTHORITIES ON THIS ISSUE AND REMIT BACK THE SAME TO THE FILE OF AO TO DO THE ASSESSMENT DE NOVO. AFTER ANALYZING THE FACTS AS APPEARING IN THE BOOKS OF ASSESSEE AS WELL AS THE BANK AND AFTER APPLYING THE RATIOS RELIED ON BY BOTH THE LD. DR AND THE LD. AR IT IS NEEDLESS TO SA Y THAT BEFORE DOING THIS EXERCISE SUFFICIENT OPPORTUNITY OF BEING HEARD TO ASSESSEE I S TO BE GIVEN. 5 7. IN THE RESULT THE APPEAL OF REVENUE IS ALLOWED F OR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 20.07.2012. SD/- SD/- , , , , MAHAVIR SINGH, JUDICIAL MEMBER . .. . ! ! ! !. .. . , , , , '# '# '# '# , C.D.RAO, ACCOUNTANT MEMBER. ( (( (!# !# !# !#) )) ) DATE: 20.07.2012. R.G.(P.S.) '3 . ,4 5'4'6- COPY OF THE ORDER FORWARDED TO: 1. M/S.ANTAI BALAJI LIMITED, 12, HO CHI MINH SARANI, 2 ND FLOOR, KOLKATA-700071. 2 D.C.I.T., CENTRAL CIRCLE-8, KOLKATA. 3. THE C.I.T. 4. CIT(A)-VIII, KOLKATA. 5. THE CIT(DR), KOLKATA BENCHES, KOLKATA -4 ,/ TRUE COPY, '3%0/ BY ORDER, DEPUTY /ASST. REGISTRAR , ITAT, KOLKATA BENCHES 6