M/s. Sakthi Sugars Ltd., CHENNAI v. ACIT, Coimbatore

ITA 977/CHNY/2011 | 2006-2007
Pronouncement Date: 29-02-2012 | Result: Dismissed

Appeal Details

RSA Number 97721714 RSA 2011
Assessee PAN AADCS0651B
Bench Chennai
Appeal Number ITA 977/CHNY/2011
Duration Of Justice 8 month(s) 25 day(s)
Appellant M/s. Sakthi Sugars Ltd., CHENNAI
Respondent ACIT, Coimbatore
Appeal Type Income Tax Appeal
Pronouncement Date 29-02-2012
Appeal Filed By Assessee
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 29-02-2012
Date Of Final Hearing 22-02-2012
Next Hearing Date 22-02-2012
Assessment Year 2006-2007
Appeal Filed On 03-06-2011
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH CHENNAI BEFORE SHRI ABRAHAM P. GEORGE ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN JUDICIAL MEMBER I.T.A. NO. 977/MDS/2011 (ASSESSMENT YEAR : 2006-07) M/S SAKTHI SUGARS LTD. NO.180 RACE COURSE ROAD COIMBATORE 641 018. PAN : AADCS0651B (APPELLANT) V. THE ASSISTANT COMMISSIONER OF INCOME TAX COMPANY CIRCLE I(1) COIMBATORE 641 018. (RESPONDENT) APPELLANT BY : SHRI R. VIJAYARAGHAVAN ADVOCATE RESPONDENT BY : SHRI R.B. NAIK CIT DR-II DATE OF HEARING : 22.02.2012 DATE OF PRONOUNCEMENT : 29.02.2012 O R D E R PER ABRAHAM P. GEORGE ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE IT ASSAILS AN ORDER DATED 25.3.2011 OF COMMISSIONER OF INCOME TAX-I COIMBATO RE PASSED UNDER SECTION 263 OF INCOME-TAX ACT 1962 (IN SHORT 'THE ACT'). AS PER THE ASSESSEE THE ORIGINAL ASSESSMENT WHICH WAS SE T ASIDE BY LD. CIT EXERCISING HIS POWER UNDER SECTION 263 OF THE A CT WAS NOT ERRONEOUS INSOFAR AS IT WAS PREJUDICIAL TO THE INTE RESTS OF REVENUE. I.T.A. NO. 977/MDS/11 2 2. SHORT FACTS APROPOS ARE THAT ASSESSEE ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF SUGAR INDUSTRIAL ALCO HOL AND SOYA PRODUCTS HAD FILED ITS RETURN FOR THE IMPUGNED ASS ESSMENT YEAR DECLARING A LOSS OF ` 13 96 25 313/- WHICH WAS LATER REVISED TO ` 38 96 25 313/- VIDE A REVISED RETURN. ASSESSMENT W AS ORIGINALLY CLAIMED AFTER SCRUTINY UNDER SECTION 143(3) OF THE ACT ON 24 TH DECEMBER 2008. ASSESSEE HAD PRODUCED ANNUAL REPOR TS AUDIT REPORTS AND BOOKS OF ACCOUNTS BEFORE A.O. DETAILS PERTAINING TO UNSECURED LOAN GOODWILL SALES-TAX ASSESSMENT ORDE R LOAN EXPENDITURE CANE PRICE EQUALIZATION FUND DEPRECIA TION ETC. WERE ALSO PRODUCED BY THE ASSESSEE. WHILE COMPLETING TH E ASSESSMENT A.O. MADE DISALLOWANCE OF DEPRECIATION ON SIVAGANGA BEVERAGE UNIT DISALLOWED THE CLAIM OF EXPENDITURE RESULTING OUT OF ORDER UNDER SECTION 5A OF DIRECTOR OF SUGARS AND MADE CERTAIN OTHER DISALLOWANCES ALSO. THIS RESULTED IN A TOTAL INCOM E OF ` 85 7 61 938 WHICH AFTER ADJUSTMENT OF CARRIED FORWARD BUSINESS LOSS AND DEPRECIATION BECAME NIL. THERE WAS A COMPUTATION OF BOOK PROFIT ALSO AND TAX WAS DEMANDED AS PER SECTION 115JB OF T HE ACT. 3. LATER ON 17.3.2011 LD. CIT ISSUED A NOTICE UND ER SECTION 263 OF THE ACT. ACCORDING TO HIM A SUM OF ` 8 96 61 035/- CLAIMED BY THE ASSESSEE TO HAVE BEEN PAID UNDER A CDR SCHEME WAS N OT ALLOWABLE I.T.A. NO. 977/MDS/11 3 IN VIEW OF EXPLANATION 3C TO SECTION 43B OF THE ACT . FURTHER ACCORDING TO HIM AN AMOUNT OF ` 1 56 23 926/- INCURRED IN CONNECTION WITH ARRANGEMENT OF LOAN HAD TO BE DISALLOWED SINCE IT WAS A CAPITAL OUTGO. THIS NOTICE WAS REPLIED BY THE ASSESSEE INT ER-ALIA POINTING OUT THAT THE AMOUNT OF INTEREST PAID UNDER CDR SCHEME ` 8 96 61 035/- THOUGH CONVERTED INTO FUNDED INTEREST TERM LOAN WA S PAID ON 28.11.2006 BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME. ASSESSEE ALSO FILED DETAILED PROOF OF PAYMENT BEFOR E THE LD. CIT. AS PER THE ASSESSEE THE CLAIM WAS MADE IN ACCORDANCE WITH EXPLANATION 3C AND 3D OF SECTION 43B OF THE ACT. V IS--VIS EXPENSES INCURRED IN ARRANGING LOAN ASSESSEE GAVE A BREAK-U P AND ARGUED THAT SUCH AMOUNTS WERE DEFERRED REVENUE EXPENDITURE AND SHOWN IN BALANCE SHEET AS SUCH. THE WRITTEN-OFF PART WAS NO T SEPARATELY CLAIMED AS PER THE ASSESSEE. ASSESSEE ALSO POINTED OUT THAT FOR ASSESSMENT YEAR 2006-07 SIMILAR CLAIM WAS ANALYZED IN A PROCEEDINGS UNDER SECTION 263 OF THE ACT AND SUCH C LAIM WAS REMITTED BACK TO A.O. FOR ALLOWANCE AFTER VERIFYING THE ACTUAL AMOUNTS PAID AND TAX DEDUCTED AT SOURCE THEREOF. 4. HOWEVER LD. CIT WAS NOT IMPRESSED. ACCORDING T O HIM WITH REGARD TO THE PAYMENTS MADE UNDER CDR SCHEME ONCE THE AMOUNT OF INTEREST WAS CONVERTED INTO LOAN OR ADVANCE SUC H CONVERSION COULD I.T.A. NO. 977/MDS/11 4 NOT BE CONSIDERED AS ACTUAL PAYMENT AND THIS ASPECT WAS NOT EXAMINED BY THE A.O. DURING ORIGINAL ASSESSMENT. V IS--VIS THE CLAIM OF ASSESSEE ON EXPENSES FOR ARRANGING LOAN LD. CIT WAS OF THE OPINION THAT THE OUTGO WAS CAPITAL IN NATURE AND WA S NOT ALLOWABLE UNDER SECTION 37 OF THE ACT. HE THEREFORE CAME T O A CONCLUSION THAT THE ASSESSMENT WAS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVENUE AND SET IT ASIDE FOR BEING REFRAMED AFTER P ROPER EXAMINATION. 5. NOW BEFORE US LEARNED A.R. SUBMITTED THAT DIREC TION OF LD. CIT ON CDR SCHEME WAS NOT WARRANTED. FILING A COPY OF THE ORDER OF A.O. GIVING EFFECT TO THE DIRECTION OF LD. CIT UNDE R SECTION 263 OF THE ACT LEARNED A.R. POINTED OUT THAT THE A.O. HAD IN SUCH ORDER REFUSED TO ALLOW THE CLAIM OF THE ASSESSEE FOR A REASON THA T CDR DEBTS WITH INTEREST HAD CRYSTALIZED ONLY ON APPROVAL BEING GRA NTED BY THE CDR EMPOWERED GROUP AT ITS MEETING HELD ON 21 ST SEPTEMBER 2006 WHICH DATE FELL AFTER THE RELEVANT PREVIOUS YEAR. LEARNE D A.R. POINTED OUT THE AMOUNTS CLAIMED BY THE ASSESSEE WAS INTEREST AN D JUST BECAUSE LOANS WERE COVERED UNDER CDR INTEREST PAYMENTS COU LD NOT BE DISALLOWED SINCE THE AMOUNT OF INTEREST WAS PAID BE FORE 30 TH SEPTEMBER 2006 AND THE PAYMENT WAS EFFECTED BY DD/CHEQUE/RTGS FROM M/S IDBI. REFERRING TO PAPER-B OOK PAGES 2 AND 3 FILED BY THE ASSESSEE LEARNED A.R. SUBMITTED THAT IT WAS CLEAR I.T.A. NO. 977/MDS/11 5 THEREFROM THAT BOTH INTEREST AND PRINCIPAL STOOD PA ID AND THE CLAIM OF THE ASSESSEE VIS--VIS THE INTEREST COULD NOT HAVE BEEN CONSIDERED FOR DISALLOWANCE. INSOFAR AS SECOND ISSUE REGARDIN G OF EXPENSE DISALLOWANCE ON ARRANGEMENT OF LOANS LEARNED A.R. SUBMITTED THAT HE HAD NO DISPUTE WITH THE ORDER OF LD. CIT SINCE T HE A.O. HAD ALLOWED THE CLAIM OF THE ASSESSEE IN THE GIVING EFFECT ORDE R BUT FOR THE AMOUNT ON WHICH TDS WAS NOT DEDUCTED. 6. PER CONTRA LEARNED D.R. STRONGLY SUPPORTING TH E ORDER OF LD. CIT SUBMITTED THAT WHETHER THE PAYMENT OF THE ASSE SSEE INCLUDED INTEREST ON INTEREST HAD TO BE VERIFIED. ACCORDING TO HIM ONLY THE PAYMENT OF INTEREST RELEVANT FOR PREVIOUS YEAR COUL D BE ALLOWED TO THE ASSESSEE AND NOTHING MORE. IN ANY CASE ACCORDING TO HIM INTEREST ON INTEREST IF INCLUDED IN THE AMOUNT COULD NOT H AVE BEEN ALLOWED. LD. CIT EXERCISING HIS POWER UNDER SECTION 263 OF T HE ACT WAS THEREFORE JUSTIFIED IN SETTING ASIDE THE ORDER OF A.O. REQUIRING HIM TO HAVE A FRESH LOOK AT THE MATTER. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND GONE TH ROUGH THE ORIGINAL ASSESSMENT ORDER AS WELL AS ASSESSMENT ORD ER SUBSEQUENT TO 263 PROCEEDINGS GIVING EFFECT TO THE ORDER OF LD . CIT. IT IS CLEAR FROM PAPER-BOOK PAGES 2-3 FILED BY THE ASSESSEE THA T AN INTEREST OF ` I.T.A. NO. 977/MDS/11 6 89 661 035/- WAS PAID BY THE ASSESSEE ON LOANS COVE RED UNDER CDR PACKAGES. THE CLAIM OF THE ASSESSEE IS THAT SUCH P AYMENTS WERE EFFECTED BEFORE 30 TH SEPTEMBER 2006 HAS NOT BEEN DISPUTED BY THE REVENUE AND THAT WHOLE OF THE AMOUNT WAS NOTHING BU T INTEREST AND THE PAYMENT HAVING BEEN EFFECTED BEFORE THE DUE DAT E FOR FILING THE RETURN IT HAD TO BE ALLOWED. EVEN IF WE CONSIDER THE ORIGINAL ASSESSMENT ORDER OF THE A.O. TO BE ERRONEOUS FOR NO N-EXAMINATION OF THIS ISSUE THE SECOND LEG PREJUDICIAL TO THE INTE RESTS OF REVENUE IS ALSO NECESSARY TO BE SATISFIED FOR INVOKING SECTION 263. IT IS NOT DISPUTED THAT THE PAYMENTS WERE ACTUALLY EFFECTED A ND IT WAS NOT A MERE CONVERSION OF INTEREST INTO TERM LOANS. THERE FORE THE EXPENDITURE ON INTEREST ATLEAST TO THE EXTENT IT WA S INCURRED FOR THE RELEVANT PREVIOUS YEAR HAD TO BE ALLOWED UNDER SEC TION 43B OF THE ACT. A.O. HAVING NOT VERIFIED THIS ASPECT IN THE O RIGINAL ASSESSMENT PREJUDICE WAS CAUSED TO THE REVENUE ATLEAST TO THIS EXTENT. 8. WITH REGARD TO SECOND ISSUE REGARDING EXPENDITUR E INCURRED ON ARRANGEMENT OF LOAN AS ALREADY MENTIONED BY US LE ARNED A.R. DID NOT SERIOUSLY ARGUE ON THIS SINCE IN THE ORDER GIV ING EFFECT THE A.O. HAD ALLOWED THE CLAIM OF THE ASSESSEE BUT FOR DISA LLOWANCE MADE FOR NON-DEDUCTION OF TAX AT SOURCE. THUS WE ARE OF TH E OPINION THAT LD. CIT WAS JUSTIFIED IN INVOKING HIS POWER UNDER SECTI ON 263 OF THE ACT. I.T.A. NO. 977/MDS/11 7 HOWEVER THE DIRECTIONS OF CIT NEED TO BE MODIFIED SO THAT THE INTEREST ON LOANS TO THE EXTENT IT PERTAINED TO PRE VIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2006-07 IS ALLOWED TO THE ASSESSEE AND DISALLOWANCE IF ANY IS RESTRICTED TO THE INTEREST FOR YEARS OTHER THAN PREVIOUS ASSESSMENT YEAR 2006-07 AND ALSO ANY INTER EST ON INTEREST IF ANY CLAIMED BY THE ASSESSEE. 9. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMISS ED SUBJECT TO THE DIRECTION AS MENTIONED BY ABOVE. THE ORDER WAS PRONOUNCED IN THE COURT ON 29 TH FEBRUARY 2012. SD/- SD/- (GEORGE MATHAN) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI DATED THE 29 TH FEBRUARY 2012. KRI. COPY TO: APPELLANT/RESPONDENT/CIT-I COIMBATORE/ D.R./GUARD FILE