M/s. India Cements Capital and Finance Ltd., CHENNAI V. ACIT, Chettur

MA 273/CHNY/2016

• Counselvise Citation: [2017] 124 COUNSELVISE.COM (IT) 5405 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 30 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 17-02-2017
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 18-10-2016
• Court: TRIBUNAL
• Assessee Lawyers: R VIJAYARAGHAVAN

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , ! ' . #$ , % &' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU RL REDDY, JUDICIAL MEMBER M.A.NO. 273/MDS/2016 (IN ITA NO. 1626/MDS/2012) / ASSESSMENT YEAR : 2006-07 M/S. INDIA CEMENTS CAPITAL AND FINANCE LIMITED, 827, ANNA SALAI, CHENNAI 600 002. PAN AAACA 3071C (APPLICANT) V. THE ASSISTANT COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE-II(3), CHENNAI-34. ( RESPONDENT) APPLICANT BY : SHRI R. VIJAYARAGHAVAN, ADVOCATE RESPONDENT BY : SHRI SHIV SRINIVAS, JCIT / DATE OF HEARING : 18.11.2016 !' / DATE OF PRONOUNCEMENT: 17.02.2017 ( / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER BY THIS MISCELLANEOUS PETITION, THE ASSESSEE SEEK S RECALL/RECTIFICATION OF THE ORDER OF THE TRIBUNAL I N ITA NO.1626/MDS/2012 DATED 11.8.2016. - - MA 273/MDS/16 2 2. THE LD. AR SUBMITTED THAT THE REVENUE CAME IN A PPEAL BEFORE THE TRIBUNAL AND RAISED VARIOUS GROUNDS REGA RDING DELETION OF ADDITION BY CIT(APPEALS) ON ACCOUNT OF CESSATION OF BANK LIABILITY, WHICH WAS ADJUDICATED BY THE TRIBUN AL IN FAVOUR OF THE REVENUE. ACCORDING TO HIM, THE TRIBUNAL REJECT ED THE CONTENTION OF THE ASSESSEE ON THE GROUND THAT THERE WAS CATEGORICAL FINDING OF THE TRIBUNAL AT PARA -7 IN T HE EARLIER IN THE APPEAL AGAINST THE ORDER U/S.263 THAT THERE IS A RE MISSION OF LIABILITY IN FAVOUR OF THE ASSESSEE COMPANY AND THE LIABILITY PAYABLE TO THE BANK HAS BEEN REDUCED TO ` 43 CRORES AND IT HAS TO BE BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE ONLY U/S.41(1) OF THE ACT. ACCORDINGLY, THE GROUND RAISED BY THE REV ENUE IS ALLOWED. 2.1 THE LD.A.R FURTHER PLEADED THAT EVEN IF THERE IS REMISSION OF LIABILITY, THE SAME CANNOT BE ASSESSED U/S.41(1) OF THE ACT. THE REMISSION OF LIABILITY U/S.41(1), THE LIABILITY SHOULD HAVE BEEN ALLOWED EARLIER IN THE ASSESSMENT OF THE ASSESSEE AS LIABILITIES WHICH REPRESENTS THE LOAN FROM THE BANK NEVER BEEN ALLOWED - - MA 273/MDS/16 3 EARLIER EVEN IF THERE IS REMISSION IT CANNOT BE ASS ESSED U/S.41(1) OF THE ACT. 2.1.1 IN SUPPORT OF THE ABOVE ARGUMENT IN PARA 2. 1., THE LD.A.R PLACED RELIANCE IN THE CASE OF M/S.ISKRAMECO REGENT LTD., IN 331 ITR 317(MAD.) AND ARGUED THAT THE DECISION OF THE T RIBUNAL THAT REMISSION OF LIABILITY IS TAXABLE U/S.41(1) IS NOT CORRECT. 2.2 THE LD. AR FURTHER SUBMITTED THAT THE ASSESSE E HAS MADE AN ALTERNATE SUBMISSION, THE CONSIDERATION FOR TRAN SFER OF RECEIVABLES WAS THE VALUE OF LIABILITIES TRANSFERRE D (CLAUSE 12). ACCORDING TO LD.AR, IF BANKS HAD WAIVED LIABILITY O VER AND ABOVE ` 43 CRORES, THEN THE VALUE OF LIABILITIES TRANSFERR ED WOULD ONLY BE ` 43 CRORES. THE CONTENTION OF THE AR IS THAT THE C ONSIDERATION FOR TRANSFER OF RECEIVABLES OF ` 93.45 CRORES WOULD BE ONLY ` 43 CRORES RESULTING IN LOSS OF THE DIFFERENTIAL AMOUNT OF APPX ` 50 CRORES ARISING FROM TRANSFER IN THE HANDS OF ICCL. 2.3 ACCORDING TO THE LD. AR, WITHOUT PREJUDICE TO THE OTHER CONTENTION IF THERE IS REMISSION OF THE LIABILITY I N THE HANDS OF THE ASSESSEE, THEN CONSIDERATION RECEIVED FOR TRANSFER OF RECEIVABLE WORTH OF ` 93.45 CRORES WOULD BE ONLY ` 43 CRORES, WHICH RESULTED IN LOSS OF ` 46.86 CRORES ON TRANSFER OF RECEIVABLE AND THIS LO SS IS - - MA 273/MDS/16 4 ALLOWABLE AS BUSINESS LOSS, WHICH WAS NOT CONSIDERE D BY THE TRIBUNAL. THEREFORE, HE SUBMITTED THAT NOT CONSIDE RING THE ALTERNATE CONTENTION IS A MISTAKE APPARENT FROM THE ORDER OF THE TRIBUNAL AND THE SAME IS RECALLED. 3. THE LD. DR, RELIED ON THE ORDER OF THE TRIBUNAL. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL ON RECORD. THE REVENUE CAME IN APPEAL BEFORE THIS TRIBUNAL WITH REGARD TO DELETION OF ADDITION MADE ON ACCOUNT OF CESSATION OF BANK LIABILITY TO THE EXTENT OF ` 46.05 CRORES. THE TRIBUNAL HAS GIVEN A FINDING THAT THERE IS A REMISSION OF LIABIL ITY IN FAVOUR THE ASSESSEE COMPANY AND THE LIABILITY PAYABLE TO THE B ANK HAS BEEN REDUCED TO ` 43 CRORES AND IT HAS TO BE BROUGHT TO TAX IN THE HANDS OF ASSESSEE U/S.41(1) OF THE ACT AND DECIDED THE ISSUE AGAINST THE ASSESSEE. IN THAT FINDINGS OF THIS TRI BUNAL, WE DO NOT FIND ANY INFIRMITY SO AS TO RECTIFY IN TERMS OF SEC .254(2) OF THE ACT. 5. THE LD.A.R, WITHOUT PREJUDICE TO THE EARLIER AR GUMENT, ALSO SUBMITTED THAT THE ASSESSEE TRANSFERRED ASSET WORTH OF ` 93.45 CRORES TOGETHER WITH LIABILITIES OF ` 89.86 CRORES PLUS RECEIVABLES - - MA 273/MDS/16 5 OF ` 3.59 CRORES FROM SPV. IF THE VALUE OF LIABILITY TR ANSFERRED IS CONSIDERED AT ` 43 CRORES, THEN THE TOTAL AMOUNT RECEIVED AGAINST THE TRANSFERRED RECEIVABLES OF ` 93.45 CRORES IS ONLY ` 46.59 CRORES I.E. LIABILITIES CRYSTALISED AT ` 43 CRORES PLUS RECEIVABLES OF ` 3.59 CRORES. THEREFORE, THE BALANCE AMOUNT OF 46.86 CRO RES WOULD BE BAD DEBT OR BUSINESS LOSS WRITTEN OFF WHICH SHOULD BE ALLOWED AS A DEDUCTION. ACCORDING TO LD.A.R, THIS ARGUMENT O F ASSESSEE WAS FOUND IN FAVOUR OF ASSESSEE BY THE LD.CIT(A) IN HIS ORDER AND RECORDED HIS FINDING IN HIS ORDER AT PARA 6.2 A T PAGE -7, BY OBSERVING THAT THERE IS A MERIT IN THE ALTERNATIVE SUBMISSION OF THE ASSESSEE. HOWEVER, SINCE THE MAIN GROUND IS DE CIDED IN FAVOUR OF ASSESSEE, THE LD.CIT(A) OBSERVED THAT IT IS NOT DEEMED NECESSARY TO ADJUDICATE THIS ISSUE. ACCORDING TO TH E LD.A.R., SINCE THIS FINDINGS OF CIT(A) ARE NOT CONTESTED BY THE DEPARTMENT BEFORE THIS TRIBUNAL, IN VIEW OF THE FINDINGS OF TH E TRIBUNAL AGAINST THE ASSESSEE ON THE MAIN ISSUE, THIS ISSUE IS TO BE DECIDED IN FAVOUR OF ASSESSEE. WE FIND FORCE IN THE ARGUMENT OF LD.A.R TO THAT EXTENT. ADMITTEDLY THERE IS A FINDIN G OF THE LD.CIT(A) IN HIS ORDER TO THIS EFFECT. THERE IS AL SO AN ARGUMENT BY THE LD.A.R BEFORE US ON EARLIER OCCASION ON THIS ISSUE WHICH - - MA 273/MDS/16 6 WAS RECORDED BY THIS TRIBUNAL IN PARA-6 AT PAGE-15 OF ITS ORDER. IN SPITE OF THIS SPECIFIC ARGUMENT BY THE LD.A.R, THIS TRIBUNAL WHILE DISPOSING OFF THE APPEAL, AS CONFINED ITSELF IN RE SPECT OF THE GROUND RAISED BY THE REVENUE WITH REGARD TO TREATME NT OF CESSATION OF BANK LIABILITY TO THE EXTENT OF ` 46.05 CRORES. THE TRIBUNAL HAS NOT CONSIDERED THE ALTERNATIVE ARGUMEN T MADE BY THE LD.A.R TO SUPPORT THE ORDER OF THE LD.CIT(A) R EGARDING THE CLAIM OF BUSINESS LOSS, WRITTEN OFF, IT SHOULD BE A LLOWED AS A DEDUCTION. THE FACTS ARE AVAILABLE ON RECORD CLEARL Y SHOW THAT THE ASSESSEE CLAIMED THE BUSINESS LOSS IN RESPECT O F TRANSFER OF RECEIVABLES AND THERE WAS ALSO FINDING BY THE CIT(A ) IN THIS REGARD. IN THIS FACTUAL CIRCUMSTANCES, THE ORDER OF THIS TRIBUNAL CONFINING ITSELF TO THE ISSUE RELATING TO THE CESSA TION OF BANK LIABILITY AND NON CONSIDERATION OF ALTERNATIVE ARGU MENT OF THE ASSESSEE TO SUPPORT THE ORDER OF THE LD.CIT(A) ON A CCOUNT OF BUSINESS LOSS, WRITTEN OFF AS A DEDUCTION, IT IS AN ERROR WHICH IS APPARENT ON THE FACE OF THE RECORD. IN OTHER WORDS, NON CONSIDERATION OF THE SPECIFIC ARGUMENT MADE BY THE LD.A.R IN THE COURSE OF ARGUMENT BEFORE THIS TRIBUNAL IN SUPPO RT OF THE ORDER OF THE LD.CIT(A) IS AN ERROR APPARENT ON THE FACE O F RECORD. - - MA 273/MDS/16 7 MOREOVER, THERE WAS A CATEGORICAL FINDING BY THE LD .CIT(A) IN PARA 6.2 OF HIS ORDER AT PAGE -7 AND IN OUR OPINION , THE ORDER OF TRIBUNAL SUFFERS AN ERROR WHICH IS APPARENT ON THE FACE OF RECORD AND REQUIRES TO BE RECTIFIED U/S.254(2) OF THE ACT. FURTHER EX FACIE, IT APPEARS THAT DUE TO INADVERTENCE OR BY OV ERSIGHT ARGUMENT RAISED BY LD. AR BEFORE THIS TRIBUNAL WA S NOT CONSIDERED UPON, AS SUCH TO DO JUSTICE IT IS INCUMB ENT ON THE TRIBUNAL TO ACT EX DEBITO JUSTITIAE, TO PREVENT AB USE OF PROCESS OF LAW. AS THERE WAS AN OMISSION IN NOT CONSIDERING AL TERNATIVE ARGUMENT, THERE CREPT AN ERROR CALLING FOR RECTIFIC ATION CONTEMPLATED U/S.254(2) OF THE ACT. ACCORDINGLY, W E INCLINE TO HOLD THAT ALTERNATIVE ARGUMENT OF THE ASSESSEE THAT LOSS SUFFERED IN A TRANSFER OF RECEIVABLES TO BE ALLOWED AS A BUS INESS LOSS ON WRITING OFF AND IT SHOULD BE ALLOWED AS DEDUCTION A S DISCUSSED BY THE LD.CIT(A) IN PARA 6.2 OF HIS ORDER AT PAGE-7. 6. ACCORDINGLY, THE FINAL RESULT OF THE ORDER OF TRIBUNAL DATED 11.08.2016 TO BE READ AS PARTLY ALLOWED INSTE AD OF DISMISSED. AFTER RECTIFICATION THE PARA-8 OF THE OR DER OF TRIBUNAL CITED SUPRA, SHALL BE READ AS FOLLOWS:- - - MA 273/MDS/16 8 IN THE RESULT, ITA NO.1626/MDS./2012, THE APPEAL OF REVENUE IS PARTLY ALLOWED. 6. IN THE RESULT OF MISCELLANEOUS PETITION FILE D BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON 17 TH FEBRUARY , 2017 AT CHENNAI. SD/- SD/- ( # $ % . &' ()*+ ) ( ,-. / 0 1 ) ( DUVVURU RL REDDY ) (CHANDRA POOJARI) 899 :;9 /JUDICIAL MEMBER '( :;9/ACCOUNTANT MEMBER ,(8 /CHENNAI, A:- /DATED, THE 17 TH FEBRUARY, 2017. K S SUNDARAM %:(B CD'E/ FG(E /COPY TO: 1. F/+'HI /APPELLANT 2. CJ9HI /RESPONDENT 3. %9 %9 K (F/+') /CIT(A) 4. %9 %9 K /CIT 5. ELM+9 CN /DR 6. M* O' /GF.