Commissioner Of Income Tax,Chennai v. M/S. S L Lumax Ltdg-15 Spcot Industrial Park,Irrungattukotaisripermbadur 602 105

IN THE HIGH COURT OF JUDICATURE AT MADRAS THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN TCA.No117 of 2018 Commissioner of Income Tax,Chennai. .. Appellant Vs. M/s. S L Lumax LtdG-15 Spcot Industrial Park,IrrungattukotaiSripermbadur 602 105. .. Respondent Prayer :Tax Case Appeal filed under Section 260A of theIncome Tax Act, 1961, against the order of the Income TaxAppellate Tribunal Madras 'C' Bench, Chennai, dated 21.10.2016in I.T.A.No.1578/Mds/2016 for the assessment year 2010-2011against the order of the Commissioner of Income Tax(A)-15 dated25.02.2016 made in I.T.A.No.544/CIT(A)-15/13-14 and against theDeputy Commissioner of Income Tax Company Circle-VI(1) Chennai34 dated 30.10.2013 made in PAN.No. AAACL18578. For Appellant: Mr. T.R.Senthil Kumar, Senior Standing CounselFor Respondent: Mr.R.Venkatanarayanan for Mr.Subbaraya Padmanabhan J U D G M E N T [Judgment of the Court was delivered by T.S.Sivagnanam, J.] This appeal filed by the assessee under Section 260 A ofthe Income Tax Act, 1961 (hereinafter referred to as the Act) isdirected against the order dated 21.10.2016 passed by the IncomeTaxAppellateTribunalMadras'C'BenchinI.T.A.No.1578/mds/2016 for the Assessment Year 2010-2011. 2.The revenue has filed this appeal raising the followingsubstantial questions of law: https://hcservices.ecourts.gov.in/hcservices/ “ (i) Whether on the facts and in thecircumstances of the case the order of theTribunal erroneous in law and perverse on facts. (ii) Whether on the facts and in thecircumstances of the case the order of theTribunal was right in holding that the remissionof the loan liability by availing the earlyrepayment and discount scheme of the Governmentwith respect to the deferred sales tax underInterest Free Sales Tax deferral scheme is notincome under Section 28(iv) r.w. 41(1) of theAct, even though the assessee had collected asum of Rs.5,79,43,346/- as sales tax and hadpaid only an amount of Rs.3,58,79,577/- and hadretained the balance income of Rs.2,20,63,219/- (iii) Whether on the facts and in thecircumstances of the case the Tribunal was rightin not following the decision of thejurisdictional High Court in the case reportedin 384 ITR 530(Mad).” 3. We have heard Mr.T.R.Senthil Kumar, learned SeniorStandingCounselfortheappellant/RevenueandMr.R.Venkatanarayan, learned counsel for M/s. Subbaraya AiyarPadmanabhan and Ms.Ramamani, learned counsel for therespondent/assessee. 4. The revenue preferred an appeal before the tribunalchallenging the order passed by the Commissioner of Income Tax(Appeals)-15' (hereinafter referred to as CIT(A)) inITA.No.544/CIT(A)-15/13-14 dated 25.02.2016 by which the CIT(A)deleted the addition of Rs.2,20,63,819/- made by the AssessingOfficer under Section 41(1) read with Section 28(iv) of the Act. 5. The assessee has availed deferral scheme for sales taxliability called interest free sales tax deferral schemeintroduced by Government of Tamil in the year 1990. In terms ofsaid scheme, the eligible units are allowed to collect sales taxand retain for a prescribed period. The assessee opted under thescheme for nine years and after such period, the sales taxcollected by the assessee should be remitted by it either inlumpsum or in installments. The Government of Tamil Nadu videorder in G.O(Ms).NO.48 had allowed an option to persons takingthe benefit of deferral scheme, to pay the deferred tax in onelumpsum at the discounted rate of 8%. The assessee availed thebenefit under the said G.O., thereby the assessee received a rebate of Rs.2,20,63,819/-. The Assessing Officer has opined thatthe assessee has received benefit, which would fall under Section41(1) read with Section 28(iv) of the Act and therefore made theaddition. rebate of Rs.2,20,63,819/-. The Assessing Officer has opined thatthe assessee has received benefit, which would fall under Section41(1) read with Section 28(iv) of the Act and therefore made theaddition. 6. The assessee challenged the same by filing an appealbefore the CIT(A), which was allowed by following the decisionof the High Court of Karnataka in CIT Vs.Mcdowell & CO Ltdreported in 369 ITR 684 and the decision of the High Court ofBombay in the case of CIT Vs. Sulzar India Ltd reported in 369ITR 717, wherein it was held that Section 41(1) of the Act wasnot attracted to such benefit on account of pre-payment atdiscounted rate. 7. The revenue preferred an appeal before the Tribunalcontending that the similar issue was decided in favour of therevenue by the Hon'ble Supreme Court in CIT Vs. ThirumalaiswamyNaidu & Sons reported in 230 ITR 534 (SC). The Tribunal afterconsidering the case of the revenue, held in our view correctlythat Thirumalaiswamy Naidu & Sons (supra) was clearlydistinguishable on facts and rightly followed the decision inMcdowell & Co Ltd (supra). 8. We had an occasion to consider a similar issue in thecase of CIT Vs. Wheels India Ltd, wherein identical issue came upfor consideration noting that the tribunal in the said case,rightly took note of the decision of the Bombay High Courtreported in [2014] 369 ITR 717 (Bombay), which was affirmed bythe Hon'ble Supreme Court in CIT Vs. Balkrishna Industries Ltdreported in [2017] 88 taxmann.com 273 (SC) dismissing the appealfiled by the revenue by judgment dated 11.06.2019. The operativeportion of the order reads as follows: “4.The Tribunal has followed the assessee'sown case decided by the Special Bench of theTribunal at Mumbai in the case of Sulzer IndiaLtd. vs. JCIT reported in 138 ITD 137. The saiddecision was challenged before the Hon'ble HighCourt of Bombay, which was dismissed by judgmentdated 05.12.2014 reported in [2014] 369 ITR 717(Bombay). The decision of the Hon'ble HighCourt of Bombay was affirmed by the Hon'bleSupreme Court in CIT vs. Balkrishna IndustriesLtd., reported in [2017] 88 taxmann.com 273(SC). The Hon'ble Supreme Court approved thesaid decision of the Bombay High Court whereinit was held as follows:-own case decided by the Special Bench of theTribunal at Mumbai in the case of Sulzer IndiaLtd. vs. JCIT reported in 138 ITD 137. The saiddecision was challenged before the Hon'ble HighCourt of Bombay, which was dismissed by judgmentdated 05.12.2014 reported in [2014] 369 ITR 717(Bombay). The decision of the Hon'ble HighCourt of Bombay was affirmed by the Hon'bleSupreme Court in CIT vs. Balkrishna IndustriesLtd., reported in [2017] 88 taxmann.com 273(SC). The Hon'ble Supreme Court approved thesaid decision of the Bombay High Court whereinit was held as follows:- “The argument of the revenue is notthat the assessee having paid Rs.3.37crores has obtained for himself anythingin terms of section 41(1), but theassessee is deemed to have received thesum of Rs.4.14 crores, which is thedifference between the original amount tobe remitted with the payment made. Therevenue terms this as deemed payment bythe State to the assessee. The Tribunalhas found that the first requirement ofsection 41(1) is that the allowance ordeduction is made in respect of the loss,expenditure or a trading liabilityincurred by the assessee and the otherrequirementistheassesseehassubsequently obtained any amount inrespect of such loss and expenditure orobtained a benefit in respect of suchtrading liability by way of a remission orcessation thereof. As rightly noted by theTribunal, the Sales Tax collected by theassessee during the relevant year wastreated by the State Government as loanliability payable after 12 years in 6annual/equal instalments. Subsequentlyand pursuant to the amendment made to the4[th] proviso to section 38 of the BombaySales Tax Act, 1959, the assessee acceptedthe offer of SICOM, the implementingagency of the State Government, paidcertain amount to SICOM, which, accordingto the assessee, represented the NPV ofthe future sum as determined andprescribed by the SICOM. In other words,what the assessee was required to payafter 12 years in 6 equal instalments waspaid by the assessee prematurely in termsof the NPV of the same. That the Statemay have received a higher sum after theperiod of 12 years and in instalments.However, the statutory arrangement andvide section 38, 4[th] proviso does notamount to remission or cessation of theassessee's liability assuming the same tobe a trading one. Rather that obtains apayment to the State prematurely and interms of the correct value of the debtdue to it. There is no evidence to show that there has been any remission orcessation of the liability by the StateGovernment.” 5.While affirming the order passed by theHigh Court of Bombay, the Hon'ble Supreme Courtin Balkrishna Industries Ltd. (supra) held thatthe approach of the High Court of Bombay iswithout any blemish, inasmuch as all therequirements of Section 41(1) of the Act couldnot be fulfilled in the case on hand. 6.In the light of the above, the appealfiled by the Revenue fails and the same isdismissed and the substantial questions of laware answered against the Revenue.” mp/skaTo 9.The Revenue cannot dispute the fact that the abovedecision, which has been rendered by the Hon'bleSupreme Court in Balkrishna Industries Ltd. (supra) isclearly applicable to the facts of the present case.Thus, we find there is no error in the order passed bythe Tribunal. In the result, the appeal filed by theRevenue is dismissed and the substantial questions oflaw are answered against the revenue. No costs.-s/d- Assistant Registrar(CS-I) True Copy Sub-Assistant Registrar 1.The Income Tax Appellate TribunalMadras “ C” BenchChennai.Madras “ C” BenchChennai. 2.The Commissioner of Income Tax(A) -15, Chennai 34. 3.The Deputy Commissioner of Income Tax, Company Circle VI(1)Chennai 34. +1 CC to Mr.T.R.Senthil Kumar, Advocate sr 54855. +1 CC to Mrs. Subbaraya Aiyar Padmanabhan, Advocate sr 54857. EV(CO)SP(24/07/2019) TCA.No117 of 2018