DCIT, CHENNAI v. M/s. Apple Credit Corporation Ltd., CHENNAI

ITA 1385/CHNY/2011 | 2008-2009
Pronouncement Date: 21-09-2011 | Result: Dismissed

Appeal Details

RSA Number 138521714 RSA 2011
Assessee PAN AACCA2996C
Bench Chennai
Appeal Number ITA 1385/CHNY/2011
Duration Of Justice 1 month(s) 18 day(s)
Appellant DCIT, CHENNAI
Respondent M/s. Apple Credit Corporation Ltd., CHENNAI
Appeal Type Income Tax Appeal
Pronouncement Date 21-09-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 21-09-2011
Date Of Final Hearing 12-09-2011
Next Hearing Date 12-09-2011
Assessment Year 2008-2009
Appeal Filed On 02-08-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH CHENNAI BEFORE DR. O.K. NARAYANAN VICE-PRESIDENT AND SHRI HARI OM MARATHA JUDICIAL MEMBER I.T.A.NO. 1385/MDS/2011 (ASSESSMENT YEAR : 2008-09) THE DEPUTY COMMISSIONER OF INCOME-TAX COMPANY CIRCLE-I(1) CHENNAI 600 034. VS. M/S. APPLE CREDIT CORPORATION LTD. NO.2 GOKUL ARCADE SARDAR PATEL ROAD ADAYAR CHENNAI 600020. PAN AACCA 2996 C (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SANJAY V.R.DESHMUKH IR S JCIT-DR RESPONDENT BY : SHRI R. VIJAYARAGHAVAN A DVOCATE DATE OF HEARING : 12 TH SEPTEMBER 2011 DATE OF PRONOUNCEMENT : 21 ST SEPTEMBER 2011 O R D E R PER DR. O.K. NARAYANAN VICE-PRESIDENT THIS APPEAL IS FILED BY THE REVENUE. THE RELEVANT ASSESSMENT YEAR IS 2008-09. THE APPEAL IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEAL S)-III AT CHENNAI DATED 25.5.2011. THE APPEAL ARISES OUT OF THE ITA 1385/11 :- 2 -: ASSESSMENT COMPLETED UNDER SECTION 143(3) OF THE IN COME-TAX ACT 1961. 2. IN THE COURSE OF ASSESSMENT PROCEEDINGS THE ASS ESSING AUTHORITY HAS MADE AN ADDITION OF ` 103 52 03 873/- BY TREATING THE PRINCIPAL REMISSION IN RESPECT OF BANK AND INST ITUTIONAL LOANS OBTAINED BY THE ASSESSEE. THIS REMISSION WAS TREAT ED AS INCOME OF THE ASSESSEE. THE REMISSION WAS MADE AS A RESULT OF ONE-TIME SETTLEMENT (OTS) ARRIVED AT BETWEEN THE ASSESSEE AND BANK/INSTITUTIONS. WHEN THE PROPOSAL OF ADDITI ON WAS MADE TO THE ASSESSEE THE ASSESSEE REPLIED THAT THE REMI SSION OF PRINCIPAL LOAN AMOUNT DOES NOT ENTAIL ANY TAX APPLI CATIONS AS THAT WERE OF IN THE NATURE OF BORROWINGS FROM THE B ANKS AND FINANCIAL INSTITUTIONS. BUT THE ASSESSING OFFICER REJECTED THE EXPLANATION OFFERED BY THE ASSESSEE AND RELYING ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE O F TVS SUNDARAM IYENGAR & SONS 222 ITR 344 AND THAT OF TH E HONBLE BOMBAY HIGH COURT IN THE CASE OF SOLID CONTAINERS L TD. V. CIT 308 ITR 417 TREATED THE REMISSION AMOUNT AS INCOME OF THE ASSESSEE. ITA 1385/11 :- 3 -: 3. IN FIRST APPEAL THE COMMISSIONER OF INCOME-TAX (APPEALS) HELD THAT THE WAIVER OF LOANS MADE BY THE BANKS AND INSTITUTIONS REPRESENTED ONLY THE PRINCIPAL COMPONENT AND THOSE FUNDS WERE USED FOR THE PURPOSE OF PURCHASE OF CAPITAL ASSETS AND THEREFORE CANNOT BE TREATED AS INCOME OF THE ASSES SEE. THE COMMISSIONER OF INCOME-TAX (APPEALS) RELIED ON THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF ISK RAEMECO REGENT LTD. V. CIT 331 ITR 317 TO OBSERVE THAT WHE RE THERE IS A WAIVER OF LOAN RELATING TO A CAPITAL ASSET THE S AME CANNOT BE TREATED AS REVENUE IN NATURE AND WHERE THE WAIVER O F A LOAN UTILIZED FOR THE PURPOSE OF TRADING OBLIGATION OR I NTEREST THE REMISSION IS CHARGEABLE TO TAX AS A REVENUE RECEIPT . HE ALSO CONSIDERED THE JUDGMENT OF THE HONBLE DELHI HIGH C OURT IN THE CASE OF CIT V. TOSHA INTERNATIONAL LTD. 311 ITR 34 0 AND ALSO THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN TH E CASE OF MAHINDRA AND MAHINDRA LTD. V. CIT 271 ITR 501. IN ALL THE ABOVE CASES THE COMMISSIONER OF INCOME-TAX (APPEAL S) OBSERVED THAT THE COURTS HAVE DISTINGUISHED THE LOA N RELATING TO CAPITAL ASSETS AND THE LOAN RELATING TO BUSINESS PU RPOSES SO AS TO DECIDE THE NATURE OF REMISSION OF LIABILITY AS I NCOME OR NOT. HE HELD THAT THE FACTS OF THE PRESENT CASE ARE EXAC TLY SIMILAR TO ITA 1385/11 :- 4 -: THE CASE OF MAHINDRA AND MAHINDRA LTD. V. CIT 271 ITR 501 CONSIDERED BY THE HONBLE BOMBAY HIGH COURT AND HEL D THAT THE ADDITION MADE BY THE ASSESSING AUTHORITY WAS NO T SUSTAINABLE IN LAW. ACCORDINGLY THE SAID ADDITION WAS DELETED. 4. IT IS AGAINST THE ABOVE THAT THE REVENUE HAS COM E IN APPEAL BEFORE THE TRIBUNAL. 5. THE FOLLOWING ARE THE GROUNDS RAISED BY THE REVE NUE IN THE PRESENT APPEAL : 2. THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION MADE TOWARDS REMISSION OF LIABILITY TO THE EXTENT OF ` 103 52 03 873/- 2.1 HAVING REGARD TO THE HONBLE SUPREME COURTS DECISION IN THE CASE OF M/S. T V SUNDARAM IYENGAR & SONS LTD. (222 ITR 344) WHEREIN IT WAS HELD THAT THE CHARACTER OF RECEIPT CHANGES OVER A PERIOD OF TIME FROM CAPITAL TO REVENUE RECEIPT THE LEARNED CIT(A) OUGHT TO HAVE UPHELD THE ACTION OF THE ASSESSING OFFICER. 2.2 IT IS SUBMITTED THAT THE MADRAS HIGH COURTS DECISION IN THE CASE OF M/S. ISKRAEMECO REGENT ITA 1385/11 :- 5 -: LTD. HAS NOT BECOME FINAL AND THE DEPARTMENT HAS PREFERRED AN APPEAL TO SUPREME COURT. 6. WE HEARD SHRI SANJAY V.R. DESHMUKH THE LEARNED JOINT COMMISSIONER OF INCOME-TAX APPEARING FOR THE REVENUE AND SHRI R. VIJAYARAGHAVAN THE LEARNED COU NSEL APPEARING FOR THE RESPONDENT-ASSESSEE. 7. THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE IN ADDITION TO THE JUDICIAL PRONOUNCEMENTS FOLLOWED BY THE COMMISSIONER OF INCOME-TAX (APPEALS) BROUGHT TO TH E NOTICE OF THE TRIBUNAL THAT THE VERY SAME ISSUE WAS CONSIDERED IN ASSESSEES OWN CASE FOR THE ASSESSMEN T YEAR 2006-07 BY I.T.A.T. CHENNAI D BENCH THROUGH THEIR ORDER PASSED IN ITA NO.954/MDS/2011. HE HAS FILED A COPY OF THE SAID ORDER OF THE TRIBUNAL ON RECORD. 8. WE HAVE GONE THROUGH THE SAID ORDER OF THE TRIBU NAL. THE SAID ORDER WAS PASSED BY THE TRIBUNAL IN TAX RE VISION ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX UNDE R SECTION 263 OF THE INCOME-TAX ACT 1961. WHILE DIS POSING OF THE SAID APPEAL THE TRIBUNAL HAS EXAMINED NOT ONLY THE ITA 1385/11 :- 6 -: VALIDITY OF THE REVISION ORDER PASSED UNDER SECTION 263 BUT ALSO THE MERITS OF THE CASE. HAVING EXAMINED THE C ASE IN DETAIL THE TRIBUNAL CAME TO THE CONCLUSION THAT TH E ASSESSEE HAD MADE ONE-TIME SETTLEMENT WITH BANKERS LIKE VIJAYA BANK BANK OF BARODA ORIENTAL BANK OF COMME RCE ALLAHABAD BANK FEDERAL BANK STATE BANK OF HYDERAB AD ETC. AND ALSO INSTITUTIONS LIKE SMALL INDUSTRIES DE VELOPMENT BANK OF INDIA. THE TRIBUNAL ALSO FOUND THAT THE LO ANS WAIVED BY THE BANKS/INSTITUTIONS WERE UTILIZED BY T HE ASSESSEE IN ITS CAPITAL ACCOUNT. ONCE THOSE FACTS WERE MADE CLEAR THE TRIBUNAL HELD THAT THE REMISSION OF LIABILITY IN CAPITAL ACCOUNT CANNOT BE TREATED AS INCOME OF THE ASSESSEE IN VIEW OF THE DECISION OF THE HONBLE DEL HI HIGH COURT IN THE CASE OF CIT V. TOSHA INTERNATIONAL LTD . 176 TAXMAN 187. IN THE SAID CASE THE HONBLE HIGH COU RT HELD THAT THE PRINCIPAL AMOUNT OF LOAN WAIVED BY THE BAN KS AS PART OF ONE-TIME SETTLEMENT OF WHICH FUNDS WERE UTI LIZED BY THE ASSESSEE IN ITS CAPITAL ACCOUNT COULD NOT BE HE LD TO BE THE INCOME OF THE ASSESSEE. THE TRIBUNAL RELIED ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF MAHINDRA & MAHINDRA LTD. VS. COMMISSIONER OF INCOME -TAX ITA 1385/11 :- 7 -: 261 ITR 501 AND ALSO THE JUDGMENT OF THE HONBLE MA DRAS HIGH COURT IN THE CASE OF ISKRAEMECO REGENT LTD. V. COMMISSIONER OF INCOME-TAX 331 ITR 317 AND FINALLY HELD THAT THE REMISSION OF LIABILITY NOT TO BE TREATED A S INCOME OF THE ASSESSEE. 9. WE FIND THAT THE ABOVE ORDER OF THE TRIBUNAL WH ICH IS PRODUCED BY THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE SQUARELY COVERS THE PRESENT ISSUE AND THE REFORE WE HAVE TO HOLD THAT THE COMMISSIONER OF INCOME-TAX (APPEALS) HAS RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING AUTHORITY. 10. IN RESULT THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON WEDNESDAY THE 16 TH OF SEPTEMBER 2011 AT CHENNAI. SD/- SD/- (HARI OM MARATHA) (DR.O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI DATED THE 21 ST SEPTEMBER 2011 MPO* COPY TO : APPELLANT/RESPONDENT/CIT/CIT(A)/DR