MUKUND LIMITED, MUMBAI V. ITO 3(2)(2), MUMBAI

MA 307/MUM/2019

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 7556 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 18 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 24-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 06-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KAILASH C KANOJIYA
• Keywords: Opportunity of being heard; Capital receipt; Set aside
• Section: 115JB; 254(2)

Judgement Text

P A G E | 1 M.A. NO.307/MUM/2019, A.Y. 2004 - 05 (ARISING OUT OF ITA NO.679/MUM/2011) MUKUND LIMITED VS. THE INCOME TAX OFFICER - 3(2)(2) IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, M UMBAI BEFORE SHRI R.C SHARMA , AM AND SHRI RAVISH SOOD, JM M.A. NO. 307 /MUM/201 9 (ARISING OUT OF ITA NO.679 /MUM/201 1 ) ( / ASSESSMENT YEAR:2004 - 05 ) MUKUND LIMITED, BAJAJ BHAVAN, 3 RD FLOOR, 226, NARIMAN POINT, MUMBAI 400 021 / VS. THE INCOME TAX OFFICER - 3(2)(2) AAYAKAR BHAVAN, MAHARSHI KARVE ROAD, MUMBAI 400 020 ./ ./ PAN NO. AAACM500 8R ( / APPLICANT) : ( / RESPONDENT ) / APPLICANT BY : SHRI. KIRIT KAMDAR , A.R / RESPONDENT BY : SHRI . KAILASH C. KANOJIYA , D.R / DATE OF HEARING : 18 . 10 .2019 / DATE OF PRONOUNCEMENT : 2 4 . 10 .2019 / O R D E R PER RAVISH SOOD, JM : THE PRESENT APPLICATION FILED BY THE ASSESSEE ARISES FROM THE ORDER PASSED BY THE TRIBUNAL WHILE DISPOSING OFF ITS APPEAL I.E MUKUND LIMITED VS. INCOME TAX OFFICER - 3(2)(2), MUMBAI (ITA NO.679/MUM/2011, DATED 05.12.2018) FOR A.Y. 2004 - 05. AS IS DISCERNIBLE FROM THE APPLICATION, THE SAME REFERS TO CERTAIN MISTAKES , W HICH AS CLAIMED BY THE ASSESSEE ARISES FROM THE GROUND OF APPEAL NO.1 THAT WAS RAISED BEFORE THE TRIBUNAL, AND READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE COMMISSIONER OF INCOME - TAX (APPEALS) ERRED IN NOT EXCLUDING WAIVER OF PRINCIPAL AND INTEREST UNDER ONE TIME SETTLEMENT WITH LEND ER AMOUNTING TO RS.162,30,33,516/ - WHILE COMPUTING THE BOOK PROFIT UNDER SEC.115JB OF THE ACT. P A G E | 2 M.A. NO.307/MUM/2019, A.Y. 2004 - 05 (ARISING OUT OF ITA NO.679/MUM/2011) MUKUND LIMITED VS. THE INCOME TAX OFFICER - 3(2)(2) IT IS THE CLAIM OF THE ASSESSEE , THAT IT HAD ASSAILED THE FAILURE ON THE PART OF THE CIT(A) IN NOT EXCLUDING THE WAIVER OF P RINCIPAL AND I NTEREST UNDER O NE - TIME SETTLEMENT WITH THE LENDER AMOUNTING TO RS.162,30,33,516/ - , WHILE COMPUTING THE BOOK PROFIT UNDER SEC. 115JB OF THE ACT, O N THE FOLLOWING THREE LIMBS: 2. (A) THE APPLICANT HAD BEEN SUFFERING HUGE LOSSES SINCE THE PAST FEW YEARS AND CONTINUED TO REMAIN A 'POTENTIALLY SICK INDUSTRIAL COMPANY' UNDER THE SICK INDUSTRIAL COMPANIES ACT, 1985, AND IT WAS NOT THE INTENTION OF THE LEGISLATURE TO IMPOSE MINIMUM ALTERNATE TAX ON SICK COMPANIES THAT HAD JUST TURNED THE CORNER; (B) WHILE COMPUTING THE BOOK PROFIT UNDER SECTION 115JB. EFFECT OUGHT TO BE GIVEN TO THE AUDITOR'S QUALIFICATION ON FINANCIAL STATEMENTS, WHEREIN IT WAS MENTIONED THAT THE BENEFIT OF WAIVER OF PRINCI PAL AND INTEREST ON ONE - TIME SETTLEMENT HAS BEEN CREDITED TO THE PROFIT AND LOSS ACCOUNT PRIOR TO THE FULFILMENT OF CONDITIONS OF THE SETTLEMENT AND THAT SUCH CREDIT HAS NOT YET ACCRUED TO THE APPLICANT; (C) WAIVER OF PRINCIPAL AMOUNT OF LOANS IS IN THE N ATURE OF A CAPITAL RECEIPT NOT CHARGEABLE TO TAX SINCE THE SAME DOES NOT CONSTITUTE INCOME, WHICH HAS BEEN ACCEPTED BY THE ASSESSING OFFICER WHILE COMPUTING THE TOTAL INCOME UNDER THE NORMAL PROVISIONS OF THE ACT; IT WAS SUBMITTED BY THE LD. A.R , THAT WH ILE FOR THE TRIBUNAL HAD ADJUDICATED UPON THE CONTENTION RAISED BY THE ASSESSEE AT SERIAL NO. 2 (B) AS STATED HEREINABOVE, HOWEVER, THE REMAINING TWO CONTENTIONS ON THE BASIS OF WHICH THE WORKING OF THE BOOK PROFIT UNDER SEC. 115JB WAS ASSAILED BY THE ASSESSEE , HAD REMAINED OMITTED TO BE ADJUDICATED UPON WHILE DISPOSING OFF THE APPEAL. IT WAS FURTHER SUBMITTED BY THE LD. A.R , THAT IN THE COURSE OF THE HEARING OF THE APPEAL A COPY OF THE SUMMARISED CONTENTIONS IN CONTEXT OF THE AFORESAID TWO ISSUES I.E SERIAL NO. 2 (A) AND SERIAL NO. 2 (C) WERE FURNISHED WITH THE TRIBUNAL, WHICH THOUGH WERE CONSIDERED BY THE TRIBUNAL WHILE DISPOSING THE APPEAL, HOWEVER, NO ADJUDICATION AS REGARDS THE SAME IS DISCERNIBLE FROM ITS ORDER. IN THE BACKDROP OF THE AFORESAID FACTS, IT IS SUBMITTED BY THE ASSESSEE APPLICANT , THAT EITHER THE ORDER DATED 05.12.2018 MAY BE RECALLED F OR ADJUDICATION OF THE CONTENTIONS WHICH WERE RAISED BY THE ASSESSEE AT SERIAL NO.2(A) AND SERIAL NO. 2(C) , OR IN THE ALTERNATIVE , AS THE ISSUE PLACED AT SERIAL NO.2(B) HAD BEEN RESTORED TO THE FILE OF THE A.O FOR FRESH ADJUDICATION, THEREFORE, THE SAID DI RECTIONS TO THE A.O MAY ALSO BE EXTENDED FOR CONSIDERING THE AFORESAID CONTENTIONS OF THE ASSESSEE APPLICANT MENTIONED AT SERIAL NO.2(A ) AND SERIAL NO. 2(C ) ,HEREIN ABOVE. 2. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) OBJECTED TO THE MISCELLANEOUS APPLICATION FILED BY THE ASSESSEE . I T WAS SUBMITTED BY THE LD. D.R, THAT AS NO MISTAKE APPARENT FROM RECORD DID ARISE FROM THE ORDER PASSED BY THE TRIBUNAL WHILE DISPOSING OFF THE APPEAL, THEREFORE, THE PRESENT APPLICATION, FILED BY THE ASSE SSEE DID NOT MERIT ACCEPTANCE AND WAS LIABLE TO BE REJECTED. 3. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDER PASSED BY THE TRIBUNAL WHILE DISPOSING OFF THE APPEAL OF THE ASSESSEE IN ITA NO. 679/MUM/2011, DATED P A G E | 3 M.A. NO.307/MUM/2019, A.Y. 2004 - 05 (ARISING OUT OF ITA NO.679/MUM/2011) MUKUND LIMITED VS. THE INCOME TAX OFFICER - 3(2)(2) 05.12 .2018 , AND ALSO THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, THE ASSESSEE HAD CONTENDED THAT THE AMOUNT WAIVED UNDER ONE - TI M E SETTLEMENT WITH LENDERS OUGHT NOT TO HAVE BE EN TAXED UNDER SEC. 115JB ON THREE GROUNDS, VIZ. (I) THAT, THE ASSESSEE HAD BEEN SUF FERING HUGE LOSSES SINCE THE PAST FEW YEARS AND CONTINUE D TO REMAIN A POTENTIALLY SICK INDUSTRIAL COMPANY UNDER THE SICK INDUSTRIAL COMPANIES ACT, 1985, AND IT WAS NOT THE INTENTION OF THE LEGISLATURE TO IMPOSE MINIMUM ALTERNATE TAX ON SICK COMPANIES THA T HAD JUST TURNED THE CORNER; (II) THAT, WHILE COMPUTING THE BOOK PROFIT UNDER SEC. 115JB, THE AUTHORITIES BELOW HAD ERRED IN NOT GIVING EFFECT TO THE AUDITORS QUALIFICATION ON FINANCIAL STATEMENTS, WHEREIN IT WAS MENTIONED THAT THE BENEFIT OF WAIVER OF PRINCIPAL AND INTEREST ON ONE - TIME SETTLEMENT HAD BEEN CREDITED TO THE P ROFIT AND LOSS ACCOUNT PRIOR TO THE FULFILMENT OF THE CONDITIONS OF THE SETTLEMENT AND THAT SUCH CREDIT H A S NOT YET ACCRUED TO THE ASSESSEE; AND (III) THAT, AS WAIVER OF PRINCIPAL AMOUNT OF LOAN S IS IN THE NATURE OF CAPITAL RECEI PT NOT CHARGEABLE TO TAX SIN CE THE SAME DOES NOT CONSTITUTE INCOME, WHICH HA S BEEN ACCEPTED BY THE A.O WHILE COMPUTING THE TOTAL INCO ME UNDER THE NORMAL PROVISIONS OF THE ACT. AS THE A.O WHILE DETERMINING THE BOOK PROFIT UNDER SEC. 115JB HAD FAILED TO CONSIDER THE N OTES TO THE ACCOUNTS , WHEREIN IT WAS CLEARLY MENTIONED BY THE AUDITORS THAT BY CRE DITING THE BENEFIT OF THE AMOUNT OF WAIVER OF LOAN WHICH HAD NOT YET ACCRUED TO THE COMPANY , THE LOSS TO THE EXTENT OF RS.162,30,33,516/ - WAS TRANSLATED INTO PROFIT AND THE SAME HAD AN EQUIVALENT EFFECT TO THE RESERVES AND SURPLUSES OF THE ASSESSEE COMPANY, THEREFORE, THE TRIBUNAL , TAKING C OGNIZANCE OF THE SAID FACT HAD RESTORED THE MATTER TO HIS FILE WITH A DIRECTION TO RE - ADJUDI CATE THE CLAIM OF THE ASSESSEE AFTER TAKING COGNIZANCE OF THE AFORESAID QUALIFICATIONS OF THE AUDITORS. AS THE MATTER WAS RESTORED FOR FRESH ADJUDICATION ON THE AFO RESAID ISSUE, THEREFORE, THE TRIBUNAL DESPITE RECORDING THE SUBMISSIO N S OF THE LD. A.R IN CONTEXT OF HIS CONTENTIONS STATED AT SERIAL NO. 2(A) AND SERIAL NO. 2(C) , HAD HOWEVER, NOT ADJUDICATED THE SAME, BEING OF THE VIEW THAT AS THE ISSUE AS REGARDS DETERMINING OF THE BOOK PROFIT U/S 115JB HAD BEEN SET ASIDE TO THE FILE OF THE A.O WITH A DIRECTION TO RE - ADJUDICATE THE SAME AFTER AFFORDING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE WHO REMAIN ED AT A LIBERTY TO SUBSTANT IATE ITS CLAIM BEFORE HIM, THEREFORE, THE CLAIM OF THE ASSESSEE QUA THE AFORESAID TWO ISSUES WOULD ALSO BE OPEN FOR CONSIDERATION BEFORE HIM IN THE COURSE OF THE FRESH ADJUDICATION PROCEEDINGS. ON A PERUSAL OF THE PRESENT APPLICATION FILED BY THE ASSESSEE BEFORE US, WE ARE OF THE CONSIDERED VIEW , THAT AS THE ISSUE AS REGARDS DETERMINATION OF THE BOOK PROFIT U/S 115JB WAS RESTORED TO THE FILE OF THE A.O, THEREFORE, A SPECIFIC DIRECTION TO CONSIDER THE CLAIMS RAISED BY THE ASSESSEE AT SERIAL NO. 2(A) AND SE RIAL NO 2(C) IN THE COURSE OF THE DETERMINING OF THE BOOK PROFIT BY HIM, OUGHT TO HAVE BEEN SEPARATELY GIVEN , WHILE DISPOSING OFF THE APPEAL . ACCORDINGLY, FAILURE ON THE PART OF THE TRIBUNAL TO GIVE A SEPARATE DIRECTION IN RESPECT OF THE AFORESAID TWO ISSUES, WHICH WERE SPECIFICALLY RAISED AND ASSAILED BY THE LD. A.R IN THE COURSE OF HEARING OF THE APPEAL, THUS CONSTITUTES A MISTAKE WHICH BEING APPARENT FROM P A G E | 4 M.A. NO.307/MUM/2019, A.Y. 2004 - 05 (ARISING OUT OF ITA NO.679/MUM/2011) MUKUND LIMITED VS. THE INCOME TAX OFFICER - 3(2)(2) RECORD, THEREIN RENDER S THE ORDER PASSED BY THE TRIBUNAL IN ITA NO.679/MUM/2011, DATED 05.12 .2018 AMENABLE FOR RECTIFICATION UNDER SEC. 254(2) OF THE ACT. WE THUS IN TERMS OF OUR AFORESAID OBSERVATIONS DIRECT THE A.O TO CONSIDER THE ASSESSES CONTENTIONS MENTIONED AT SERIAL NO. 2(A) AND SERIAL NO. 2(C) , AS STATED HEREINABOVE, IN THE COURSE OF RE - A DJUDICATING THE ISSUE AS REGARDS COMPUTING OF THE BOOK PROFIT UNDER SEC.115JB OF THE ACT. ACCORDINGLY, THE ORDER PASSED BY THE TRIBUNAL IN ITA NO. 679/MUM/2011, DATED 05.12.2018 FOR A.Y. 2004 - 05 IS MODIFIED IN TERMS OF OUR AFORESAID OBSERVATIONS , WHICH H EREINAFTER MAY BE READ AS A PART OF THE SAID ORDER. 4. THE APPLICATION FILED BY THE ASSESSEE UNDER SEC. 254(2), DATED 06.05.2019 IS ALLOWED IN TERMS OF OUR AFORESAID OBSERVATIONS. ORDER PR ONOUNCED IN THE OPEN COURT ON 2 4 . 10.2019 S D / - S D / - ( R.C SHARMA ) (R AVISH SOOD ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI ; . 2 4 . 10.2019 PS. ROHIT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI P A G E | 5 M.A. NO.307/MUM/2019, A.Y. 2004 - 05 (ARISING OUT OF ITA NO.679/MUM/2011) MUKUND LIMITED VS. THE INCOME TAX OFFICER - 3(2)(2)