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2018 (12) TMI 1592
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....or prejudicial to the interest of the revenue. Without prejudice to above ground, III 1. The Learned CIT erred in, in facts and circumstances of the appellant's case in setting aside the Assessment Order and directing fresh Assessment in respect of loans waived by banks and determination of books profit even though the same was determined by the AO after due examination and proper enquiry. Without prejudice to above ground, IV 1. The Learned CIT erred in setting aside the order of the Assessing officer and directing him to verify various aspects of the loans waived by banks and reexamine the taxability thereof. Without prejudice to above ground, V. 1. The Learned CIT also erred in setting aside the order passed by the AO and directing him to recompute the book profit. 3. At the outset, it is noted that there is a delay of 548 days in filing this appeal. The same has been condoned by a bench of the ITAT vide order sheet dated 19.09.2017. Subsequently, this appeal ahs been heard by us on merits of the appeal. 4. In this case, the ld. CIT observed that from the perusal of the records, it is noted that in the computatio....
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....tors Report filed as a part of Annual Report no inquiry whatsoever has been carried by the A.O. He noted that the Directors Report reads as under: "SETTLEMENT OF DUES After the problems with Indian Oil Corporation, the business of the Company had slowed considerably and the Company was unable to service the debts. Due to the above reason the Company came under heavy pressure from Union Bank of India and IDBI for making the payment at the earliest. To overcome the said situation your Company had entered into one time settlement with Union Bank of India and IDBI. As the matter regarding Indian Oil Corporation was not resolved until June, 2008, the Company was unable to clear the OTS payments. Despite adverse circumstances, the Company ultimately made payment during the year under review. Rs. 2.65 crores were paid to Indian Oil Corporation, Rs. 6 crores to IDBI and Rs. 1.75 crores to UBI aggregating to Rs. 10.40 crores from Internal accruals and the Company had to borrow Rs. 6 crores. He observed that it is apparent from the perusal of the Balance-sheet, Schedule under the head "Secured Loan" that assesses company had obtained cash credit an working capital loan f....
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....al error on part of assessee, then also no question has been asked during assessment proceedings. That I found that no question has been asked during assessment proceedings on these issues. The A.O. acted in a mechanical fashion to pass the assessment order. 10. He further noted that it is also noticed that there is reduction of share capital (Rs.10/- per share has been reduced to Rs. 4/- per share). That there is substantial write off from the share premium account. I find that no question has been asked during assessment proceedings on these issues. That the A.O. thus, acted in a mechanical fasion and passed the assessment order without carrying out relevant and meaningful enquiries. 11. Accordingly, show cause notice was issued. The ld. CIT noted the assessee's response as under: We are in receipt of your above mentioned Notice, wherein your Honours have mentioned that you wish to set aside the Assessment for the above mentioned year, with directions to the Assessing Officer to redo the same after giving reasonable opportunity of being heard to the assessee, as per the provisions of law or in alternative your Honour intends to take any other appropriate action ....
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....arred by limitation. The assessee itself has treated the money as its own money and taken the amount to its P & L Account. There is no explanation from the Assessee why the surplus money was taken to its P & L Account even it it was somebody else's money.' We wish to further state that in the instant case the decision of M/s, Solid Containers Ltd is not applicable as your Assessee's case pertains to acquisition of Assets and not a Trading Liability and hence is clearly covered by Mahindra and Mahindra Ltd.,(2003) 261ITR 501 (MUM). It has to be further mentioned that the Mumbai High Court in the case of Xylon Holding P. Ltd., while distinguishing the decision of Solid Containers (Supra) has held that cessation of liability to repay loan taken for capital purpose is not assessable as income. Further, the Mumbai Tribunal in the case of M/s. King Prawns Ltd., v/s. The Income Tax Officer, ITA No. 60/Mum/2010, Assessment Year 2004-clearly distinguished the decision of M/s. Solid Containers Ltd. stating that the Loan token for non-trading activities could no! be taxed in the hands of your Assesses. Copy enclosed. Further, the decision of the....
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....t MIDC.Murbad.Dist.Thane, Maharashtra. The remaining loan amount was given by IDBI Bank & United Bank of India for " working capital" & for "cash credits". In view of the ratio of Mahindra and Mahindra Ltd 261 ITR 501(MUM), it is only waiver granted on this amount of Rs. 485 crores, which can be considered as capital receipts. However, the remaining "amount of loan waived, has to be considered as "revenue receipts". 5. In the detailed working of the loan made by IDBI, it is apparent that this Project Finance Scheme Loan constitutes 22.62% of the net amount due for One Time Settlement (OTS),the amount waived pertaining to this alone could be treated as capital receipt which means only Rs. 104.28 crores would be on account of capital receipt out of Rs. 986.50 crores of the amount waived. The A.O ought to have considered for tax the remaining amount of Rs. 882.22 crores whife passing the assessment order. 6. Similarly, the A.O erred in passing order u/s 115JB, the A.O ought to have considered adjustment of Rs. 4,85,58,547/- instead of-Rs.4,81,70,410/- as pointed out above. 7. In the light of the ratio of the decisions of Malabar Industrial Co. Ltd. ....
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.... ld. Counsel of the assessee submitted that the same was not liable to brought under the ambit of taxation. He submitted that the assessee's objection and submissions have not been dealt with by the ld. CIT. In this regard, he placed reliance upon the decision of the Hon'ble Apex Court in the case of CIT vs. Mahindra and Mahindra Ltd. and others (in Civil Appeal Nos. 6949-6950 of 2004 vide order dated 24.04.2018). He further referred to the decision of Hon'ble Bombay High Court in the case of CIT vs. Gabriel India Ltd. [1993] 203 ITR 108 (Bom) and several other decisions. 15. Per contra, the ld. Departmental Representative (ld. DR for short) submitted that no enquiry whatsoever was done by the A.O. on this issue and the assessment order was passed without any enquiry. He submitted that the ld. CIT has referred to the Hon'ble jurisdictional High Court decision in the case of Solid Containers Ltd. (supra) and the decision of Hon'ble Apex Court in the case of Sundaram Iyergar and Sons Ltd. (supra). He submitted that the nature of the loans was never established by the assessee and, hence, without examining the nature of the loans, the entire loan waiver of cannot be trea....
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....r trading activity and are not covered by the decision of M/s. Solid Containers Ltd. 18. Be as it may, we find that the A.O. has not made any enquiry regarding the nature of the loans waived off and the purposes for which they were utilized. The assessee also has at no stage given the correct and complete details and the purposes for which all the loans were utilized. The case laws on the subject included that from the Hon'ble Apex Court in the case of Mahindra & Mahindra Ltd. (supra), provided that waiver off loans which were taken and utilized for trading purposes would fall under the realm of taxation as revenue receipt. This view is fully fortified by the decision of the Hon'ble Apex Court in the case of Sundaram Iyergar and Sons Ltd. (supra) rendered by the Bench comprising three of lordship. Under such facts and circumstances, what the ld. CIT is directing to the A.O. is to pass an order after doing meaningful enquiry and as per law and after giving the assessee reasonable opportunity. We find that in such circumstances, no prejudice whatsoever is caused to the assessee. In this regard, we draw support from the decision of the Hon'ble Apex Court in the case of Daniel Merch....