2019 (7) TMI 417 - HC - Income Tax

High Court Upholds Tribunal Decision on Income Tax Appeal

Commissioner of Income Tax, Chennai Versus M/s. SL Lumax Ltd.

The High Court dismissed the Revenue's appeal under Section 260 A of the Income Tax Act, 1961, challenging the order regarding remission of loan liability ... Addition u/s.41(1) r.w.s 28(iv) - assessee had availed deferred scheme for sales tax liability called interest free sales tax deferral scheme introduced by Tamil Nadu Government in May, 1990 - CIT- A deleted addition - Option to persons taking the benefit of deferral scheme, to pay the deferred tax in one lumpsum at the discounted rate of 8% as availed by assessee - HELD THAT:- See CIT Vs. Balkrishna Industries Ltd. [2017 (11) TMI 1626 - SUPREME COURT] wherein dismissing the appeal filed by the revenue as held what the assessee was required to pay after 12 years in 6 equal instalments was paid by the assessee prematurely in terms of the NPV of the same. That the State may have received a higher sum after the period of 12 years and in instalments. The statutory arrangement and vide section 38, 4th proviso does not amount to remission or cessation of the assessee's liability assuming the same to be a trading one. Rather that obtains a payment to the State prematurely and in terms of the correct value of the debt due to it. There is no evidence to show that there has been any remission or cessation of the liability by the State Government - Decided against revenue. Issues:1. Appeal against order under Section 260 A of the Income Tax Act, 1961.2. Interpretation of remission of loan liability under Interest Free Sales Tax deferral scheme.3. Applicability of Section 41(1) read with Section 28(iv) of the Act.4. Comparison with relevant legal precedents.5. Final decision on the appeal.Issue 1:The appeal was filed under Section 260 A of the Income Tax Act, 1961, challenging the order passed by the Income Tax Appellate Tribunal Madras 'C' Bench in I.T.A.No.1578/mds/2016 for the Assessment Year 2010-2011.Issue 2:The case involved the remission of loan liability by availing the early repayment and discount scheme of the Government under the Interest Free Sales Tax deferral scheme. The assessee collected a sum as sales tax, paid a portion, and retained the balance. The question was whether this remission constituted income under Section 28(iv) r.w. 41(1) of the Act.Issue 3:The Assessing Officer contended that the benefit received by the assessee fell under Section 41(1) read with Section 28(iv) of the Act. However, the CIT(A) allowed the appeal, relying on legal precedents from the High Courts of Karnataka and Bombay, which held that Section 41(1) was not attracted to such benefits.Issue 4:The Tribunal considered the revenue's appeal, comparing it to a Supreme Court decision in CIT Vs. Thirumalaiswamy Naidu & Sons, and upheld the decision based on the distinction in facts. The Tribunal also referred to a similar case involving the Bombay High Court, which was affirmed by the Supreme Court, emphasizing that the requirements of Section 41(1) were not fulfilled in the present case.Issue 5:The High Court dismissed the Revenue's appeal, citing the precedent set by the Supreme Court in Balkrishna Industries Ltd., where it was held that Section 41(1) was not applicable in the case at hand. The Court found no error in the Tribunal's decision and answered the substantial questions of law against the Revenue, consequently dismissing the appeal.This detailed analysis of the judgment highlights the legal intricacies surrounding the interpretation of the Income Tax Act and the application of relevant legal precedents in determining the tax liability of the assessee.