AI Drafter 
TaxTMI 
TaxTMI 
TaxTMI 
2016 (9) TMI 946
X X X X Extracts X X X X
X X X X Extracts X X X X
....MPL and the consortium of banks, who had advanced finance to the assessee company. The total receivables as per accounts were Rs. 93.45 crores and the bank loan liabilities were Rs. 89.86 crores. The Commissioner of Income-tax found that the differential amount of Rs. 3.59 crores has been shown as recoverable in the accounts of the assessee. But, in the light of the assignment of receivables to the Special Purpose Vehicle URMPL, the Assessing Officer has not considered whether the said differential amount of Rs. 3.59 crores would be in the nature of income or not. The Commissioner of Income-tax also observed that the total receivable assigned to URMPL is Rs. 89.86 crores, against which the said URMPL has to make a payment of Rs. 43 crores alone to the consortium of banks, resulting in remission of liability. The Assessing Officer has not considered the taxability of the above remission of liability. Based on the above findings, the Commissioner of Income-tax issued notice under section 263, proposing to revise the order of assessment passed under section 143(3). After examining the detailed reply filed by the assessee company, the Commissioner of Income-tax confirmed the proposals ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....es by the Special Purpose Vehicle URMPL to the consortium of banks. 12. Clause 7 of the tripartite agreement reads as below:- "7. The Parties agree that on the SECOND PART paying the THIRD PART the aforesaid sum of Rs. 43 crores in terms of Clause 5 above and interest in terms of Clause 6 above, all dues, claims, demands and liabilities of the THIRD to FOURTEENTH PARTS against the SECOND PART shall cease and the same shall constitute a full and final settlement and absolute release of the SECOND PART from any obligation whatsoever to the THIRD to FOURTEENTH PARTS and the THIRD to FOURTEENTH PARTS shall not be entitled to commence any legal proceedings against the SECOND PART either in the Debt recovery Tribunal or elsewhere." 13. The above clauses in the tripartite agreement clearly shows that the liability to the consortium of banks has been crystallised at Rs. 43 crores and once the said amount of Rs. 43 crores was paid over to the banks, the liabilities of the assessee company towards the banks stand fully discharged and settled. Thereafter, the banks do not have any option for legal proceedings against the assessee or the Special Purpose Vehicle. Ther....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e hire purchase and lease receivables of the assessee shall be transferred to the SPV on 01.10.2005. The bank liabilities shall also be treated as the liabilities of the SPV to the banks. Upon such transfer in favour of the SPV, the appellant shall be relieved , of the liabilities to the banks. As per clause(3) the dues of the assessee amounting to Rs. 89.05 crores to the bank was crystalised and fixed at Rs. 43 crores. It is clear from the agreement that both the fund based activities of the appellant together with all the receivables and bank liabilities were transferred to the SPV. Accordingly, the appellant did not have any assets or bank liabilities relating to the fund based activities in its book. Therefore, there was no reduction on the liability in the hands of the assessee. The liability was on the transferee SPV which is clear from clause (5) of the aateent which states that "The SECOND PART agrees to pay the aforesaid sum of Rs. 43 crores to the THIRD PART in the following manner -. .. ." The SECOND PART is the SPV and not the appellant (FIRST PART). Clause (5)(d) stipulates that any amount collected over and above the crystalised amount will also be paid to the banks. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ame reason that the decision in T.V.Sundram Iyengar's case has no application. The argument that it would be taxable u/s 28(iv) was also dismissed s iti1oftanaaction not coming within the purview of sec 2(24). The Hon'bie Delhi High Court in the case of CIT v. Tosha International Ltd, 331 ITR 440 has also dismissed the appeal of revenue by holding that the amount of Rs. 1048 crores waived by the financial institutions under scheme approved by BIFR cannot be taxed n the hands of the assessee. Under these circumstances, Ld.CIT(A) came to a conclusion that the impugned amount cannot also be taxed in the hands of the appellant either u/s 41(1) or u/s 28(iv) of the Act. Against this, the Revenue is in appeal before us. 5. Before us, the ld.D.R submitted that the question of the differential amount between Rs. 89.86 crores and Rs. 43 crores is a very predominant issue. The tripartite agreement entered Into between the assessee, the Special Purpose Vehicle URMPL and the State Bank of Mysore, as the representative of the consortium of lending banks, entered into on 28.06.2006, lists out of the terms and conditions of the assignment of receivables to the Special Purpose Vehicle and the r....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... the assessee company towards the banks stand full discharged and settled. Thereafter, the banks do not have any option for legal proceedings against the assessee or the Special Purpose Vehicle. Therefore, it is clear that prime facie there is a remission of liability in favour of the assessee company. Further, ld.D.R submitted that the case law relied on by the assessee company i.e. in the case of M/s.Iskraemeco Regent Ltd., reported in 331 ITR 317 (Mad.) cannot be applied to the facts of the case. In that case, assessee engaged in the business of development, manufacturing and marketing of electro-Mechanical and State Energy Meters. It had taken a loan from the bank for purchase of capital assets. A one-time settlement with the Bank is reduced the loan liability. In that case, reduction in loan was credited to the 'capital reserve account' as it was in the capital field. However, in the present case, it is herein current liability which is in revenue field. He relied on the order of Tribunal in the assessee's own case in ITA No.871/Mds./2011 vide order dated 3rd April, 2012 wherein the Tribunal had already given the findings against the assessee while confirming the order of CIT ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....eduction. k. Anyway waiver if any wilt have to be considered in the hands of URL. l. ICCL transferred the business of fund based financing. The entire assets and Liabilities were transferred to URL. There was no reduction of Liability in the hands of ICCL. m. URL continued to show the liability in its books which has been accepted by the Bank. The ld.A.R further submitted that the consideration for transfer of receivables was the value of liabilities transferred (Clause 12). According to ld.A.R, If Banks had waived liability over and above Rs. 43 Crores, then the value of liabilities transferred would only be Rs. 43 Crore. The contention of the ld.A.R is that the consideration for transfer of receivables of Rs. 93.45 Crores would be only Rs. 43 Crores resulting in loss of the differential amount of appx Rs. 50 Crores arising from transfer in the hands of ICCL. Finally, ld.A.R empahsised that the agreement is subject to payment of Rs. 43 crores which was completed only in August, 2009. Furhter, ld.A.R placed reliance in the case of M/s.Iskraemeco Regent Ltd., reported in 331 ITR 317 (Mad.). 7. We have heard both the parties and perused the material o....