TaxTMI 
TaxTMI 
2012 (7) TMI 736
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....558/- being diversion of interest bearing funds to sister concerns without charging any interest. In Appeal the learned CIT(A) following his order for assessment year 1998-99 restricted such disallowance to Rs. 68.58 lakhs. We find that identical issue had come up before the Tribunal in assessee's own case and the issue was restored to the file of the AO vide ITA No. 45/PN/2001 for assessment year 1997-98 and ITA No. 257/PN/2003 for assessment year 1998-99. We find the relevant portion of the order of the Tribunal in ITA No. 257/PN/2003 for assessment year 1998-99 reads as under : "4. After carefully considering the rival submissions, we find that identical issue has been restored back to the file of the Assessing Officer in the assessee's own case for the earlier assessment years as stated above. Following the precedent, we restore back to the file of the Assessing Officer for fresh adjudication and to ascertain as to whether the amount advanced to the various companies closely connected to the assessee were made out of the borrowed funds or otherwise and then to decide the issue as per provisions of law after providing assessee a reasonable opportunity of being heard. This Gro....
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....xpenditure and personal use of company's vehicles by officers of the company. He failed to appreciate that as per the service conditions applicable to senior officers, company allows them to use company's vehicles for office work and any incidental personal use is treated as perquisites in the hands of officers as per Income-tax Rules, 1961. 4.1. After hearing both the sides, we find the AO disallowed an amount of Rs. 1,52,654/- being 2% of the vehicle maintenance expenses claimed at Rs. 52,95,627/-. He also disallowed 2% of the depreciation on vehicles at Rs. 46,742/. The above additions were upheld by the CIT(A). We find that identical issue had come up before the Tribunal in assessee's own case for assessment year 1998-99 and the Tribunal vide ITA No. 257/2003 order dated 30-08-2011 has allowed the claim of the assessee by holding as under : "10. After considering the submissions of both the parties, we find that this issue stands decided in favour of the assessee and against the Revenue by the decision of our co-ordinate Bench in the assessee's own case for the assessment year 1995-96 and 1997-98. We further find that the Hon'ble Bombay High Court in the case of CIT v. Ki....
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....our notice this ground raised by the assessee is allowed. 6. Ground of appeal No.5 by the assessee reads as under : 5. Deduction u/s. 28 - Rs. 1,83,74,000/- The learned CIT(A) erred on facts and in law in disallowing assessee's claim u/s. 28 of the Income Tax Act, 1961 as business loss due to recoverability of advances of Rs. 1,83,74,000/-. He failed to fully appreciate the facts. He further erred in holding that the assessee has failed to establish that the loss relates to the current year. 6.1. Learned counsel for the assessee at the time of hearing did not press this ground for which the learned D.R. has no objection. Accordingly, this ground by the assessee is dismissed as not pressed. 7. Ground of appeal No.6 by the assessee reads as under : 6. Disallowance out of Miscellaneous expenses- Rs. 2,00,000/- The learned CIT(A) erred on facts and in law in arbitrarily disallowing Rs. 2,00,000/- out of miscellaneous expenses as non-business expenditure. He failed to appreciate remarks by the auditors as well as the Board's circulars regarding company assessments. 7.1. After hearing both the sides, we find the AO disallowed an amount of Rs. 2 lakhs on adhoc basi....
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.... the depreciation. He failed to appreciate the nature of payment. In any case he ought to have followed the judgment in CIT Vs. HMT Ltd., (203 ITR 820). 9.1. At the time of hearing the learned counsel for the assessee did not press this ground for which learned D.R. has no objection. Accordingly this ground raised by the assessee is dismissed. 9.2 In the result, the appeal filed by the assessee is partly allowed for statistical purposes. ITA No. 176/2004 (By Revenue) : 10. Ground of appeal No. 1 by the revenue reads as under : 1. The learned CIT(A) erred in directing to grant reliefs as per the BIFR's order when in the fact the department was not made party to the BIFR's order. 10.1. Facts of the case, in brief, are that during the year there is a merger of M/s. Shivaji Works Ltd. into M/s. Kirloskar Oil Engines Ltd. During the course of assessment proceedings the assessee submitted BIFR order stating that the concessions mentioned therein, i.e. BIFR order should be allowed in the hands of M/s. Kirloskar Oil Engines Ltd. The AO referred to the order u/s.119(2)(a) of the IT Act, 1961 dated 16-02-2000 issued by CBDT which reads as under : "The CBDT in exercise of....
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....the Central Government and where the department's view had been considered by the BIFR before making such recommendations the reliefs were to be allowed to the assessee by the Assessing Officer. It was only when the BIFR recommended the relief without taking the views of the I.T. Department that it was to be considered by the CBDT before any relief was allowed by the Assessing Officer. However, whether the BIFR directed the relief has to be granted, the effect to the order of the BIFR was to be given immediately irrespective of the facts where the Income Tax Department was made or was not made a party and whether the view of the department were considered by the BIFR or not. It was submitted that in the case of the assessee in view of the sanctioned scheme of BIFR it was the directions of the BIFR in the said scheme and not merely recommendations. Such reliefs in equivocal terms were directions directing the department to grant reliefs, for instance ; 1. On Page No. 18 of the sanctioned scheme it is stated that "On amalgamation KOEL shall be allowed to carry forward and set off losses and unabsorbed depreciation allowance of SWL under section 72A of the Income Tax Act, 1961". ....
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.... by the BIFR. 11. Based on the arguments advanced by the assessee, the learned CIT(A) allowed the claim of the assessee by holding as under : "The submissions have been considered and the provisions of section 32 of SICA as well as the order of the CBDT u/s. 19(2)(a) dated 16-02-2000 have been perused. In my opinion, the whole purpose of SICA is to revive a sick industrial unit. As pointed out by the Hon'ble Finance Minister, while introducing sec.72A and reported also in 218 ITR 140 (Page 147), the sickness in industry is a matter of grave national concern in as much as closure of any manufacturing unit entails social costs in terms of loss of production and unemployment as also waste of valuable capital assets. The preamble to SICA also states that the SICA was introduced in the public interest to make special provisions for detection of sick units and expeditious enforcement of the measures determined by an expert Board (i.e. BIFR) to revive such sick unit. I therefore feel that the issue is to decided in this perspective. Section 32 of the SICA states that the provisions of any scheme made under the SICA shall have effect notwithstanding anything inconsistent therew....
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....ght to be raised for the first time in appellate proceedings. Even otherwise it is observed that SWL was declared as 'Sick' by the BIFR in March 1998. The sanctioned scheme by BIFR expressly states the date of amalgamation as 1.4.98 and that cannot be changed unless there is a motive of tax evasion, as pointed out by the Hon'ble Supreme Court in Marshall & Son's case (223 ITR 809). In the case of appellant as the merger was effected to revive a sick company, that too under a scheme prepared by an Operating Agency and sanctioned by BIFR which is constituted for this very purpose, it would be wrong to ascribe any motive of tax evasion or tax planning without any basis. The issue is to be viewed from a proper perspective that a sick company is being revived. The healthy company takes over the burden of a sick company which involves financial investments by it and therefore the tax concessions are required. In my opinion it would be an irony to view this as a tax planning or tax evasion. It is for this reason that the facts of the present case cannot be equated with that of Finolex case on which the Assessing Officer has placed reliance. In that case, firstly no outside parties were in....
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.... the department has not been made a party to the scheme. In the instant case the department has not been made a party before the BIFR. The Appellant's Representative has also pointed out that the department had asked for the review the order of the BIFR and the BIFR had passed another order on 19-08-2003 after considering the adjournment request of the department and the bench had discharged M/s. SWL out of purview of BIFR since the amalgamation scheme sanctioned by the Board on 03-03-2000 was substantially implemented as a result of which M/s. SEL could become technoeconomically, viable on long term basis. M/s. SWL was discharged from purview of BIFR with immediate effect. Thus, the present sanctioned order of the BIFR subsists as on the date and cannot be ignored until it is modified or set aside by BIFR or the higher authorities. The decision relied by the appellant in M/s. J.K. Corporation 68 ITD 240 is squarely applicable to the facts of the case of the appellant and the scheme if at all because of not following of certain procedure by the BIFR such as not making the department as a party could only make the scheme voidable and not void. In view of section 32(1) of SICA the sc....
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....od of 60 days from the date of such circulation. Referring to Page 191 of the Paper Book the learned DR submitted that as per the direction of the BIFR on amalgamation Kirloskar Oil Engines Ltd. shall be allowed to carry forward and set off of losses and unabsorbed depreciation allowance of SWL u/s.72A of the Income Tax Act, 1961. He submitted that Question of consent comes only when the draft order is circulated to the department. Referring to Page 3 of the Assessment order he submitted that the AO has mentioned that the BIFR order dated 16-12-1999 shows that Income Tax Department was not made a party and its views were not considered by the BIFR before finalising of its proceedings. Referring to the CBDT circular No. 683 dated 08-06-1994 he submitted that unless the draft order is served on the DG it is not binding on the department. Referring to the decision of the Hon'ble Delhi High Court in the case of Government of India (Department of Revenue) Vs. Appellate authority for Industrial and Financial Reconstructions and Others (a copy of which is placed in the Paper Book) the learned DR drew the attention of the Bench to Page 18 of the order and submitted that the nodal agency de....
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.... the assessee drew attention of the Bench to the decision of Calcutta Bench of the Tribunal in the case of J.K. Corporation Ltd. Vs. ACIT reported in 68 ITD 240 and submitted that declaration made by the BIFR is declaration in accordance with law. No other declaration by Central Government is needed and assessee company was entitled to carry forward the losses, unabsorbed depreciation and unabsorbed investment allowances of the amalgamating company where the scheme of amalgamation has been made under the provisions of the SICA 1985 and declaration has been made by BIFR u/s.72(A)(1) of the Income Tax Act. Referring to the certificate u/s.72A(2)(ii) of the Income Tax Act, 1961 by BIFR dated 25-06-2003 (Paper Book Page 150) the learned counsel for the assessee submitted that the BIFR in the certificate has stated that for the assessment year 2001-02 for which set off of accumulated losses/unabsorbed depreciation is claimed by the amalgamated company M/s. Kirloskar Oil Engines Ltd. the business of the amalgamating company M/s. SWL was carried on by the former company. It has further been certified that adequate steps have been taken by the amalgamated company M/s. Kirloskar Oil Engines....
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.... available before AO. He accordingly submitted that the order of the AO should be upheld. 16. We have considered the rival arguments made by both the sides, perused the orders of the AO and the CIT(A) and the Paper Book filed on behalf of the assessee. We have also considered the various decisions cited before us. We find the grievance of the revenue in the impugned ground is that since the department was not made a party to the BIFR proceedings, therefore no effect can be given to the same. From the various details furnished by the assessee we find the Income Tax Department was not made a party when the original order was passed by the BIFR on 8-12-1999 for which the Income Tax Department objected to the BIFR for not giving any opportunity on 25-09-2000. On the basis of such objection the BIFR issued draft modification order dated 13-09-2001 calling for objections, if any, from the Income Tax Department. After various objections made by Kirloskar Oil Engines Ltd. to the proposed draft modification and on the basis of further submissions the BIFR fixed the case for hearing on 19-08-2003. Although the department filed petition seeking adjournment on 18-08-2003 the BIFR did not co....
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...., apply in relation to such amalgamation as they apply in relation to the amalgamation of a company owning an industrial undertaking with another company". In view of the above, direction given by the BIFR is binding on the Assessing Officer. The Sick Industrial Companies (Special Provisions) Act 1985 is a Central Act having legal sanctity. It has got overriding effect on any other provisions of any other Act except the provisions of FERA 1973 and Urban Land (Ceiling Act & Regulation) Act 1976. Therefore, the directions of the BIFR have to be honoured and failure of such directions will bring legal disharmony. Further, we find merit in the submission of the learned counsel for the assessee that if the reliefs are denied now the department has to provide a solution to the assessee as how to undo the amalgamation. In this view of the matter and in view of the detailed order passed by the learned CIT(A) directing to grant relief as per BIFR order we find no infirmity in the same. Accordingly, the same is upheld and the ground raised by the revenue is dismissed. 19. Ground No. 2 by the revenue reads as under : 2. The learned CIT(A) erred in directing to limit the disallowance ....
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.... of advances of Rs. 52.70 Crs. was as established in earlier years and it was as per department's findings only that the borrowings of Rs.3.07 crs. only were used for non-business purposes. 19.4. In appeal, the Ld. CIT(A) following his order for A.Y. 1998-99 restricted such disallowance to 68.58 lakhs. Aggrieved with such order of the CIT(A) the assessee is in appeal before us. 20. After hearing both the sides we find this ground is co-related to ground of appeal No. 1 by the assessee in which the assessee has challenged the order of the CIT(A) for sustaining a part of the interest. We have already decided the issue & the ground raised by the assessee have been restored to the file of the AO for fresh adjudication in the light of the order of the Tribunal for A.Y. 1998-99. Following the same ratio we restore this issue to the file of the AO for fresh adjudication. The AO shall decide the issue afresh and as per law after giving due opportunity of being heard to the assessee. We hold & direct accordingly. This ground by the revenue is accordingly allowed for statistical purposes. 21. Ground of appeal No. 3 by revenue reads as under : 3. The learned CIT(A) erred in direct....