Income Tax Appellate Tribunal - Kolkata
Emec Private Limited, Kolkata vs Department Of Income Tax on 28 October, 2011
आयकर अपीलीय अधीकरण, Ûयायपीठ - "ए ", कोलकाता,
IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH "A", KOLKATA
(सम¢)Before ौी महावीर िसंह, Ûयायीक सदःय, एवं/and
Shri Mahavir Singh, Judicial
Member.
ौी सी.
सी.डȣ.
डȣ.राव, लेखा सदःय
Shri C.D.Rao, Accountant Member
आयकर अपील संÉया /
ITA No.1887/Kol/2008
िनधॉरण वषॅ/Assessment Year : 2003-04
-वनाम-
(अपीलाथȸ/APPELLANT ) - (ू×यथȸ/RESPONDENT)
A.C.I.T., Circle-9, Kolkata. Versus- M/sEMEC Private Ltd.,
. Kolkata
(PAN:AABCE 0128 K)
अपीलाथȸ कȧ ओर से/ For the Appellant: Shri S.K.Roy
ू×यथȸ कȧ ओर से/For the Respondent: Shri Arvind Agarwal
सुनवाई कȧ तारȣख/Date of Hearing : 28.10.2011.
घोषणा कȧ तारȣख/Date of Pronouncement : 29.12.2011.
आदे श/ORDER
(सी.
सी.डȣ.
डȣ.राव)
राव), लेखा सदःय
Per Shri C.D.Rao, AM
The above appeal is filed by the Revenue against the order dated 24.07.2008 of the ld. CIT(A)-VIII, Kolkata pertaining to A.yr.2003-04.
2. The grounds of appeal raised by revenue read as under :-
1. The order is bad in law.
2. Ld. C.I.T(Appeal) has stated that no allowance or deduction has been made for any year in respect of loss, expenditure or trading liability in the present case but on going through the assessment order for the AY 1992-93 U/s. 143(3) dated 23.03.1995 , nowhere in the order it has been stated that interest on bank loan was not allowed as deduction that means it is implied that interest has been allowed as deduction. Thus, assessee fulfills the conditions required for applicability of the provisions of Sec 41(1) of the Act i.e. deduction has been allowed to the tax payer in respect of loss, expenditure, or trading liability incurred by the ssessee.2
3. In the order of Ld. C.I.T(A) it has been stated appellant company did not derive any benefit of the bank interest waived for in any of the earlier years Viz. AY 1991-
92,1992--93 & 1993--94 but it has been observed that in the AY 1993-94 if interest on bank loan was added back to the total income then assessee will be having income in that particular year that means assessee has derive benefit, hence, sec 41(1) of the Act is applicable.
4. In the order of Ld. C.I.T(A) it has been also observed that instead of directing not to add Rs. 29,31,698/-- Ld. C.I.T(A) has directed not to add Rs. 23,52,984/--, without citing any reason for the same. If ld C.I.T(A) feels that assessee has not derived any benefit in any of the aforesaid three AY then why ld.C.I.T(A) has not ordered not to add Rs. 29, 31,698/-.
5. In the order of Ld. C.I.T(A) it has been directed to allow the assessee to carry forward the business loss for the AY 1999--2000 at Rs. 99,471/-- as determined in the order dated 17.03.2006 but I think Ld. C.I.T has passed this order without going through the submissions of the assessee because assessee has filed return on 30.12.1999 i.e. after due date then how come assessee can be allowed to carry forward the business loss even if the return is filed after due date."
3. Ground No.1 is general in nature. Hence no adjudication is required.
4. Ground no. 2 to 4 raised by the revenue relate to the issue u/s 41(1) of the IT Act.
5. The brief facts of the issue are that while doing the scrutiny assessment u/s 143 of the IT Act the ld. Assessing Officer disallowed assessee's request to take bank interest of Rs.29,31,698/- from the net income of Rs.7,70,585/- arose out of settlement of bank loan on the ground of natural justice.
5.1. On further appeal the ld. CIT(A) did not find any merit on the above issue. Accordingly he confirmed the action of AO in dismissing assessee's request.
5.2. On appeal to this Tribunal, assessee has preferred an additional issue which is as under :-
"Because that in the facts and circumstances of the case and the law the amount of remission of interest by the bank and written back as liability no longer required is not taxable."
5.3. After accepting the additional ground this Tribunal has directed Assessing Officer by observing as under :
3"As the alternative Ground pleaded by the assessee is another angle of the claim of the assessee which required to be examined under the given facts and circumstances of the case accordingly to be decided, this is a fit issue to be restored to the file of the A.O. for De Novo consideration, by strictly following the principles of Natural Justice and pass necessary consequential orders as per law."
5.4. While passing the consequential order u/s 254 of the IT Act Assessing Officer has again rejected the claim of assessee by observing as under :-
" In course of hearing following ground were raised by the A/R:
7.1 A/R claimed that Section 41(1) is not applicable for the bank's remission of interest of 3 years for the following legal propositions: -
a. As all 3 years' loss returns were filed out of time allowed U/s. 139(3), hence are non-est. Sec 139(4) does apply to loss return.
b. No assessment has been made and as no bank interest has been actually allowed in an assessment, as intimation U/s. 143(1)(a) does not amount to assessment. c. As no loss was allowed to be carried forward in any assessment, and as the returns were non-est, the assessee has not derived any benefit or advantage in respect of bank interest for the three years, hence Sec. 41(1) is not applicable. 7.2 The salient issues arising out of the discussion are as under:-
7.2. 1 As per section 41(1) (a) state that " where an allowance or deduction has been made in the assessment for any year in respect of loss, expenditure, or trading liability incurred by the assessee and subsequently during any previous year the first mentioned person has obtained, whether in cash or in any other manner whatsoever, any amount in respect of such trading Liability by way of remission or cessation thereof ". From the given provision it was cleared that Section 41(1) is applicable if the following conditions are satisfied: -
a. In any of the earlier years a deduction was allowed to the taxpayer in respect of loss, expenditure, or trading liability incurred by the assessee. b. during the current previous year, the taxpayer
1. has obtained a refund of such trading liability and
2. has obtained any amount in respect of expenditure or some benefit in respect of such trading liability by way of remission or cessation In the instant case, assessee has fulfilled both the aforesaid conditions:-
1. In all the three years assessee was given deduction in respect of bank interest.
2. Second condition was also fulfilled by the assessee as he has obtained benefit by way of cessation of bank interest.
On the basis of above discussion assessee contention is not acceptable that he has not derived any benefit in the earlier years being loss returns filed. 7.2.2 Without prejudice of the above, even if we go through the ground raised by the assessee that he has not derived any benefit:
1. The assessee has claimed that he has filed loss return after due date hence business loss become nil is not acceptable due to following reasons:
a. In all three years the losses were carried forward even though the returns were filed after due date and these losses were set off against income of the succeeding years. b. Had the assessee not carried forward the losses then income for the year which was set off against the carried forward losses become taxable. In the AY 1995-96 and 1996-97 assessee has income of Rs. 2,49,886/- and 1,95,836/- respectively, which 4 were set off against the carried forward business losses of the AY 1991-92, 1992-93 & 1993-94.
Thus, it is clear that assessee has derived benefit in respect of bank interest for the three years."
5.5. On appeal the ld. CIT(A) has allowed the claim of assessee by observing that
4. In the facts of the case, the assessee-cornpany got a one time settlement and by virtue of the same, the bank interest waived by Canara Bank on settlement during the year totaling to Rs.29,31,698/- debited to the Profit & Loss A/c in the year under consideration which were relevant to the Asstt. Year 1991-92, 1992-93 & 1993-94, was claimed as deduction by the appellant during the year on the ground that the remission of interest by the bank and written back as liability no longer required is not taxable u/s 41(1) as the appellant did not derive any benefit of the same in any of the earlier years. Before the ACIT written submissions were made in respect of the issues which are at Paper Book page 1 to page 17.
4.1 It was explained to the ITO with documentary evidence which are at Paper Book pages 18 to 43 that the assessee did not derive any benefit in respect of the Bank interest in-question in any of the earlier years. It was contended before the ACIT that the returns for the Asstt. Year 1991- 1992-93&1993-94 the years to which the interest waived by the Bank related to, were filed beyond the time allowed u/s 139(3), and no carry forward of the losses of those years were claimed by the assessee in subsequent years. A chart reflecting the position in respect of the said three years is at Paper Book page 24 and a chart of subsequent assessments page 15.
4.2 Although all the three returns were processed u/s 143(1)(a) for granting of refund but in all those intimations it has clearly been written that the losses will not be carry forward. In this regard, reference is drawn to page 25.
4.3 It was contended before the ACIT that sec. 41(1) is not applicable for the Bank remission of interest of three years on the following legal propositions:--
(a) As all three years loss returns were filed out of time allowed u/s 139(3) hence the returns are non-est. The provision of sec. 139(4) does apply to loss returns. The decision of the Hon'ble Supreme Court in B.B. Danganavar Vs. I.T.O, reported in 65 ITR 370 (SC) at 377 and the decision of the Hon'ble Gauhati High Court in the case of MP Industries Pvt. Ltd vs. CIT reported in 222 ITR page 328 at page 332 and 333 are cited, the decisions of the same are mentioned in paper Book pages 2 & 3.
(b) As no assessment has been made and as no Bank interest has actually been allowed in any assessment as intimated u/s 143(1)(a) does not amount to assessment, no benefit was derived. The various decisions were relied upon which are at Paper Book page 3 to page 5.
(c) As no loss was allowed to be carry forward in any assessment and the returns were non-est, the assessee has not derived any benefit or advantage in respect of the Bank interest for the three years i.e. Asstt. Years 1991-92, 1992-93 & 1993-94 in any assessment for any assessment year, hence sec. 41(1) is not applicable. Various decisions were relied upon which are at Paper Book page 5.
(d) Whether the interest was actually allowed in the relevant assessment years within the meaning of sec. 41(1), onus lies on the Department. The decision of the Hon'ble Delhi High Court in Steel and General Mills Co. Ltd. reported in 96 ITR 438 at 442 is relied upon.
(e) Interpretation of law should be made reasonable and in consonance with justice and where two constructions/ views possible one favourable to the assessee should be 5 adopted. Various judgment are relied upon which are at pages 6 & 7 of the Paper Book.
(f) Deemed provision including the provision of sec. 41(1) are to be strictly construed and the various judgements are also relied upon which are at pages 7 & 8 of the Paper Book.
(g) It was further explained to the ACIT vide letters dated 29th December 2007, 4th January 2008 and 29th April 2008 which are at Paper Book pages 9 to 15 that the appellant-company had not derived any benefit of the losses of the set off of the said three years of the Bank interest as debited in the Profit & Loss A/c in those years and no carry forward of loss was claimed by the assessee or allowed by the A. 0. for which a chart was also filed before him which is at Paper Book page 15.
4.5 Under the above facts and circumstances and the contentions made by the assessee in its written submission supported by documentary evidences filed as Paper Book, the amount of Rs.29,31,698/-should be allowed."
.
6. At the time of hearing the ld.DR appearing on behalf of the Revenue heavily relied on the orders of AO and further submitted that when once assessee has debited the interest due to the bank in the respective profit and loss accounts for three previous assessment years this indicates that assessee has derived the benefit due of the said interest expenditure. Whether assessee has derived the benefit from the tax authorities or not is not the relevant issue. Therefore, he requested to upheld the action of AO by setting aside the orders of the ld. CIT(A).
7. On the other hand, the ld. Counsel appearing on behalf of assessee has submitted that though it is a fact that assessee has debited the interest in all the preceding three assessment years and the fact is that assessee is running in losses and assessee has not been getting the carry forwarding of the losses since in all the three years assessee has filed the returns belatedly. Therefore he supported the orders of the ld. CIT(A) and requested to upheld the same.
8. After hearing the rival submissions and on careful perusal of materials available on record, we are of the view that when once assessee has debited the interest in the profit and loss account assessee has already taken the benefit of the interest in its accounts whether he has taken the benefit of the Income Tax Act it is not the relevant issue for consideration. If we accept the contention of assessee and the ld. CIT(A) we are of the view that we are acting to the contrary to the provision of the IT 6 Act. Since in this case assessee himself has admitted that he has filed the returns of losses belatedly and not entitled for carry forwarding of the losses then when we allow the interest component which was part of the losses which is not allowable to the assessee to set off because the said loss return has been filed belatedly by assessee then this will be contrary to the provisions of the IT Act. Therefore we are unable to accept the contention of the assessee as well as the ld. CIT(A). In the result we concur with the view of AO and upheld the same by setting aside the orders of the ld. CIT(A).
9. In the result ground Nos. 2 to 4 of the revenue are allowed.
10. The issue raised by the Revenue is not arising out of the order of the Tribunal. Therefore, in our considered opinion while passing the consequential order u/s 143(3)/254 of the I.T. Act the AO is not empowered to rectify the mistake initially committed on the basis of the assessment order made u/s143(3) of the IT Act dated 17.03.2006.
11. In the result ground no.5 of the revenue is dismissed.
12. In the result the appeal of the revenue is partly allowed.
पǐरणामतः ǒवभाग का अपील अंशतः मंजूर Ǒकया गया।
Order pronounced in the court on 29.12.2011
Sd/- Sd/-
महावीर िसंह, Ûयाियक सदःय सी.
सी.डȣ.
डȣ.राव,
राव, लेखा सदःय,
सदःय
Mahavir Singh, Judicial Member C.D.Rao, Accountant Member.
(तारȣख)
तारȣख)Date: 29.12.2011.
R.G.(.P.S.)
7
आदे श कȧ ूितिलǒप अमेǒषतः-
Copy of the order forwarded to:
1. M/s.EMEC Private Ltd., 1, Satya Doctor Road, Kidderpore, Kolkata-
700023.
2 The A.C.I.T.Circle-9, Kolkata
3. The CIT, 4. The CIT(A)-VIII, Kolkata.
5. DR, Kolkata Benches, Kolkata स×याǒपत ूित/True Copy, आदे शानुसार/ By order, Deputy /Asst. Registrar, ITAT, Kolkata Benches