2016 (12) TMI 1812 - AT - Income Tax

Tribunal remands depreciation, loan issues for review, deletes interest charge under section 234B, Revenue appeal dismissed.

The Tribunal partially allowed the assessee's appeal, remanding the issues of depreciation disallowance and remission of loan back to the AO for fresh ... Depreciation on assets leased - Whether such transactions to be finance transactions instead of lease transactions? - HELD THAT:- As decided in own case [2015 (4) TMI 725 - ITAT MUMBAI] in the absence of any proper material and record to come to such a finding, we are of the opinion that this matter needs to be restored back to the file of the Assessing Officer to examine it afresh. Thus the claim of depreciation on the assets pertaining to the aforesaid three sale and leaseback transactions which have been entered into this year is set aside to the file of the Assessing Officer to decide the issue afresh - Decided partly in favour of assessee for statistical purposes. Addition of remission of loan both under the normal provision and also u/s.115JB - HELD THAT:- Neither the provisions of Section 41(1) is applicable nor assessee’s income was liable to tax u/s.28(iv) of the IT Act. The CIT(A) has also called remand report and after considering the same and applying various proposition of the law, reached to the conclusion that remission of loan would not be chargeable to tax either u/s.41(1) or u/s.28(iv) of the IT Act. The detailed finding so recorded by CIT(A) has not been controverted by DR by bringing any positive material on record. Accordingly, we do not find any reason to interfere in the order of the CIT(A) deleting the addition made on account of remission of loan. MAT computation for remission of loan - We found that there was a remission of principal amount of loan - As decided in NILGIRI TEA ESTATES LTD. [2012 (2) TMI 553 - ITAT COCHIN] profit from sale of agricultural land, which is not a “Capital Asset”, cannot be included for the purpose of computing book profit u/s 115JB - we restore the matter back to the file of the AO for deciding afresh Charging of interest u/s.234B where income is assessed u/s.115JB - HELD THAT:- As relying on KWALITY BISCUITS LIMITED [2006 (4) TMI 121 - SC ORDER] we direct the AO to delete the interest charged u/s.234B Issues Involved:1. Disallowance of depreciation on assets leased.2. Inclusion of remission of loan in the computation of 'book profit' under section 115JB.3. Levy of interest under section 234B.Detailed Analysis:1. Disallowance of Depreciation on Assets Leased:The assessee challenged the disallowance of depreciation amounting to Rs. 2,15,65,145 on assets leased to Konkan Railway Corporation Ltd. and Andhra Pradesh State Electricity Board. The CIT(A) upheld the disallowance by treating the transactions as finance transactions instead of lease transactions. The Tribunal referred to its earlier decision in the assessee's own case for the assessment years 1997-98 and 2002-03, wherein similar disallowances were restored to the AO for fresh examination. The Tribunal observed that the transactions were not properly examined by the lower authorities, and there was no adverse material on record to support the disallowance. The Tribunal restored the matter back to the AO for a fresh decision, directing the AO to examine the nature of the transactions in light of the Delhi High Court's decision in CIT v. Cosmo Films Ltd. (338 ITR 266).2. Inclusion of Remission of Loan in the Computation of 'Book Profit' under Section 115JB:The assessee contested the inclusion of Rs. 114,98,30,400, representing remission of a subordinated interest-free loan by the Government of Maharashtra, in the computation of 'book profit' under section 115JB. The CIT(A) deleted the addition under normal computation of income, holding that remission of debt is not chargeable to tax unless it falls under section 41(1) or section 28(iv). The CIT(A) relied on various judicial precedents, including the Bombay High Court's decision in Mahindra & Mahindra Ltd. v. CIT (261 ITR 501), which held that waiver of principal loan amount is not taxable. The Tribunal upheld the CIT(A)'s decision, noting that the detailed findings were not controverted by the Revenue. However, the Tribunal restored the matter back to the AO for fresh examination regarding the inclusion of the remission amount in the computation of book profit under section 115JB, considering relevant judicial pronouncements.3. Levy of Interest under Section 234B:The assessee argued against the levy of interest under section 234B, contending that the provisions were not attracted as the income was returned under section 115JB (MAT provisions). The assessee relied on the Supreme Court's decision in CIT v. Kwality Biscuits Ltd. (284 ITR 434) and the Bombay High Court's decision in Snowcem India Ltd. v. DCIT (2009-TIOL-39-HC-MUM-IT), which held that advance tax provisions, including section 234B, do not apply where income is assessed under MAT provisions. The Tribunal referred to its earlier decisions in similar cases, including Alok Industries Ltd. (ITA No.8340/Mum/2010), where it was held that no interest under section 234B is leviable when income is assessed under MAT provisions. The Tribunal directed the AO to delete the interest charged under section 234B, following the precedent set by the Supreme Court and other High Courts.Conclusion:The Tribunal allowed the assessee's appeal in part, restoring the issues of depreciation disallowance and remission of loan back to the AO for fresh examination. The Tribunal directed the deletion of interest charged under section 234B, following judicial precedents. The Revenue's appeal was dismissed.