ACIT, Palakkad V. M/s Branols Pvt. Ltd, Palakkad

ITA 984/COCH/2008

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 65048 (ITAT-COCHIN)
• Duration Of Justice: 4 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2012
• Appeal Filed By: Department
• Bench Allotted: DB
• Next Hearing Date: 18-10-2011
• Assessment Year: 1999-2000
• Appeal Filed On: 03-12-2008
• Court: TRIBUNAL
• Department Lawyers: S VIJAYAPRABHA
• Assessee Lawyers: S RAMACHANDRAN CAAR
• Keywords: Capital receipt
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE S/SHRI N.R.S.GANESAN, JM AND SANJAY AROR A, AM I.T.A NO. 984/COCH/2008 ASSESSMENT YEAR:1999-2000 THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-1, PALAKKAD. VS. BRANOLS PVT. LTD., MOONGILIMADA, VANNAMADA, PALAKKAD - 678 555. [PAN:AABCB 0047Q] (REVENUE-APPELLANT) (ASSESSEE -R ESPONDENT) REVENUE BY MS. S.VIJAYAPRABHA, JR. DR ASSESSEE BY SHRI S. RAMACHANDRAN, CA-AR DATE OF HEARING 18/10/2011 DATE OF PRONOUNCEMENT 27/12/2011 O R D E R PER SANJAY ARORA, AM: THIS APPEAL BY THE REVENUE ARISES OUT OF THE ORDER BY THE COMMISSIONER OF INCOME-TAX (APPEALS)-V, KOCHI (CIT(A) FOR SHORT) DATED 27.8.2008, AND THE ASSESSMENT YEAR (A.Y.) UNDER REFERENCE IS 1999-2000. 2. THE APPEAL RAISES A SINGLE ISSUE, I.E., THE MAIN TAINABILITY OF THE DELETION OF INTEREST WAIVED BY KERALA STATE FINANCE CORPORATION (KSFC) C REDITED TO THE PROFIT AND LOSS ACCOUNT ( ` 2153219/-) AS WELL AS THE CAPITAL WAIVED AMOUNTING TO ` 963806/-. THE ASSESSEES PROFIT AND LOSS ACCOUNT FOR THE YEAR REV EALED A NET PROFIT OF ` 3022132/-. THE ASSESSEE CARRYING UNABSORBED LOSS AND UNABSORBED DE PRECIATION IN ITS BOOKS AT ` 247964/- .AND ` 286701/- RESPECTIVELY, THE ASSESSING OFFICER (AO) ALLOWED IT REDUCTION IN RESPECT OF UNABSORBED BUSINESS LOSS, BEING LESSER OF THE TW O, DETERMINING THE BOOK PROFIT U/S. 115JA OF THE INCOME-TAX ACT, 1961 ('THE ACT', HEREI NAFTER) AT ` 2774168/-. THIRTY PERCENT I.T.A. NO.984/COCH/2008 ASSTT. CIT, PALAKKAD VS. BRANOLS P. LTD . 2 THEREOF, I.E., ` 832250/-, WAS DEEMED AS INCOME U/S. 115JA AND, ACCO RDINGLY, BROUGHT TO TAX. IN THE APPELLATE PROCEEDINGS, THE ASSESSEE WH ILE FURNISHING THE YEAR-WISE DETAILS OF THE AMOUNT WAIVED, SUBMITTED THAT THE NET PROFIT WA S ON ACCOUNT OF WAIVER OF ` 3255163/- BY KSFC, SUBSTANTIATING THE SAME WITH A CERTIFICATE DATED 17.11.2007 FROM THE CHIEF MANAGER, KSFC, PALAKKAD, STATING THAT THE LOAN HAD BEEN SETTLED ON 15.1.1999 BY ALLOWING THE ASSESSEE A ONE-TIME SETTLEMENT. FURTH ER, THE ASSESSEE EXPLAINED THAT OF THE AMOUNT WAIVED, ` 2291357/- WAS ON ACCOUNT OF INTEREST, AND THE BALAN CE ` 963806/- TOWARD LOAN (CAPITAL). THE CREDIT ON ACCOUNT OF INT EREST WAIVED WAS ONLY BY WAY OF REVERSAL OF THE PROVISION THEREFOR MADE EARLIER, AN D WHICH HAD, BEING UNPAID, BEEN IN FACT NOT ALLOWED IN VIEW OF S. 43B OF THE ACT. THE SAME, ACCORDINGLY, COULD NOT BE INCLUDED AS PART OF PROFIT IN VIEW OF CLAUSE (I) OF EXPLANATION TO 115JA(2). THE WAIVER OF THE PRINCIPAL AMOUNT OF ` 9.64 LAKHS, COULD IN ANY CASE BE NOT CONSIDERED AS BOOK PROFIT, BEING A CAPITAL RECEIPT. THE LD. CIT(A) FOUND MERIT IN T HE ASSESSEES CLAIM; CLAUSE (I) OF EXPLANATION TO S. 115JA(2) CLEARLY REQUIRING REDUCTION OF ANY AMOUNT WITHDRAWN FROM ANY RESERVE OR PROVISION, WHERE THE SAME HAS BEEN C REDITED TO THE PROFIT AND LOSS ACCOUNT. NO DOUBT, WITH EFFECT FROM THE ASSESSMENT YEAR COMM ENCING ON OR AFTER 1.4.1997 (BUT BEFORE 1.4.2001), THE SAID REDUCTION WOULD NOT BE E XIGIBLE UNLESS THE `BOOK PROFIT OF THE YEAR IN WHICH THE RESERVE OR PROVISION (SUBSEQUENTL Y WITHDRAWN) WAS MADE STANDS CORRESPONDINGLY INCREASED. HOWEVER, THE TOTAL AMOU NT DEBITED AS INTEREST TO THE OPERATING OR INCOME STATEMENT FOR A.Y. 1997-98 IS NIL AND FOR A.Y. 1998-99 AT ` 138138/-, SO THAT THE BALANCE ` 2153219/- WOULD STAND TO BE REDUCED IN ARRIVING AT THE BOOK PROFIT U/S. 115JA. ALSO, THE CAPITAL WAIVED ( ` 963806/-) COULD NOT FORM PART OF THE BOOK PROFIT, BEING NOT A REVENUE RECEIPT. AGGRIEVED, THE REVENUE IS IN APPEAL. 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. OUR FIRST OBSERVATION IN THE MATTER IS THAT THE INTEREST COMP ONENT OF THE AMOUNT WRITTEN BACK MAY NOT HAVE BEEN ALLOWED AS DEDUCTION U/S. 43B OF THE ACT, AS CONTENDED BY THE ASSESSEE, BUT THE SAID `FACT IS NOT SUPPORTED BY ANY DEFINITE FI NDING BY EITHER AUTHORITY, AND WHICH COULD ONLY BE ON AN EXAMINATION OF ITS ASSESSMENT R ECORD FOR THE PRECEDING YEARS. HOWEVER, THE SAME IS IRRELEVANT IN THE CONTEXT OF D ETERMINATION OF BOOK PROFIT U/S. 115JA, I.T.A. NO.984/COCH/2008 ASSTT. CIT, PALAKKAD VS. BRANOLS P. LTD . 3 AND WOULD ONLY BE SO IN REGULAR ASSESSMENT, TOWARD APPLICATION OR OTHERWISE OF S. 41(1) OF THE ACT. COMING TO THE MERITS OF THE CASE, THE F IGURES ARE NOT DISPUTED AND NEITHER IS THE YEAR-WISE BREAKUP OF THE INTEREST AND THE CAPITAL A MOUNT WAIVED. THE LD. CIT(A) HAS CORRECTLY APPLIED THE LAW IN THE MATTER, WHICH IN F ACT IS SQUARELY COVERED BY THE RELEVANT PROVISION OF LAW, PARTLY ALLOWING THE ASSESSEES AP PEAL, I.E., TO THE EXTENT NOT COVERED BY EXPLANATION (I) BELOW SECTION 115JA(2) READ WITH PROVISO THERETO. THE REVENUE, THOUGH DISPUTES THE IMPUGNED PAYMENT, HAS NOT BEEN ABLE TO STATE BEFORE US ANY REASON FOR DOING SO. FURTHER, IN VIEW OF OUR TOTAL AGREEMENT, WE DO NOT CONSIDER IT NECESSARY TO RE-STATE THE REASONS FOR THE SAME (WHICH ARE, AGAIN, IDENTICAL T O THAT BY THE FIRST APPELLATE AUTHORITY), PLACING RELIANCE ON THE DECISION BY THE APEX COURT IN THE CASE OF CIT VS. K.Y. PILLIAH AND SONS (1967) 63 ITR 411 (SC). WE DECIDE ACCORDINGLY. 4. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . (N.R.S.GANESAN) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE: ERNAKULAM DATED: 27TH DECEMBER, 2011 GJ COPY TO: 1. SHRI S. RAMACHANDRAN, CA, SURYA KIRAN, COLLEGE R OAD, PALAKKAD. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE -1, PALAKKAD. 3. THE COMMISSIONER OF INCOME-TAX (APPEALS)-V, KOCH I. 4. THE COMMISSIONER OF INCOME-TAX, TRICHUR. 5. D.R., I.T.A.T., COCHIN BENCH, COCHIN. 6. GUARD FILE .