In The Case Of Commissioner Of Income Tax v. Feeling Aggrieved, The Assessee Challenged

Digitally signed by MALA KNLocation: HIGH COURT OFKARNATAKA IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE 11 DAY OF DECEMBER, 2023 PRESENT THE HON'BLE MR JUSTICE P.S.DINESH KUMAR AND THE HON'BLE MR JUSTICE T.G. SHIVASHANKARE GOWDA -WRIT APPEAL NO. 1373 OF 2023 (TIT) BETWEEN: DEPUTY COMMISSIONER OF INCOME TAX CIRCLE -3 (1) (1), OFFICE OF THE PR COMMISSIONER OF INCOME TAX-3 5 FLOOR, BMTC BUILDING, 80 FEET ROAD 6 BLOCK, KORAMANGALA, BENGALURU - 560 095 …APPELLANT (BY SRI. E I SANMATHI, STANDING COUNSEL) AND: 1. M/S I.G PETRO CHEMICALS (PUBLIC LIMITED COMPANY INCORPORATED UNDER THE COMPANIES ACT 1 OF 1956) MANUFACTURER OF PHTHALIC ANHYDRIDE D-4, JYOTHI COMPLEX, 134/1, INFANTRY ROAD BENGALURU - 560 001 (PAN.AAC14115R) REP. BY ITS EXECUTIVE DIRECTOR SRI JITENDRA KUMAR SABOO AGED ABOUT 72 YEARS SON OF LATE VISWANATH SABOO) 2. THE INCOME TAX APPELLATE TRIBUNAL C BENCH NO. 51, 1 CROSS, 4 BLOCK TILAK NAGAR BENGALURU - 56041 …RESPONDENTS (BY SRI.S. GANESH, SR. ADV. FOR SMT. JINITA CHATERJEE, ADV.) THIS WRIT APPEAL FILED UNDER SECTION 4 OF THE KARNATAKA HIGH COURT ACT PRAYING TO i. SET ASIDE THE ORDER DATED 23/9/2023 PASSED IN WRIT PETITION No. 20579 OF 2022 (T-IT) PASSED BY THE HONBLE LEARNED SINGLE JUDGE AND ii. GRANT SUCH OTHER ORDER AS THIS HONBLE COURT DEEMS FIT UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE, IN THE INTEREST OF EQUITY AND JUSTICE THIS APPEAL, COMING ON FOR ORDERS, THIS DAY, P.S.DINESH KUMAR J., DELIVERED THE FOLLOWING: JUDGMENT In this intra-court appeal, Revenue has called in question the order dated 23.09.2023 in WP No.20579/2022. 2. Heard Shri E.I. Sanmathi, learned Standing Counsel for the Revenue and Shri S. Ganesh, learned Senior Advocate for the assessee. 3. Briefly stated the facts of the case are, certain loans availed by the assessee were waived by the Consortium of Banks. Assessee had filed its return of income for assessment year 2005-06 and 2006-07. The current lis is with regard to assessment year 2006-07. 4. The Assessing Officer did not make any additions in the assessment year with regard to waiver of loans by the Consortium. The matter was taken up in suo motu revision by the Commissioner of Income Tax (Appeals) under Section 263 of the Income Tax Act, 1961 and certain additions were made. Assessee challenged the same before the ITAT[1]. The ITAT, by its order[2] dated 21.01.2022 held that the addition pursuant to waiver of principle was just and appropriate and remitted the matter so far as waiver of interest was concerned, to decide having regard to the assessment during earlier period. Feeling aggrieved, the assessee filed ITA No.302/2022 in this Court. Simultaneously, the assessee also filed a Miscellaneous Petition[3] before ITAT to reconsider the order in ITA 302/2022, on the premise that the issue was covered by the decision 1 Income Tax Appellate Tribunal "C" Bench, Bangalore 2 ITA No.1317/Bang/2018 3 MP No.47/Bang/2022 in the case of Commissioner of Income Tax Vs. Mahindra & Mahindra Ltd.[4]. The ITAT vide order dated 05.09.2022, allowed and disposed of the Miscellaneous Petition holding that the waiver of loan which was used for the purpose of acquisition of capital equipment was not taxable under Section 28 (iv) of the Income Tax Act, 1961 ('Act' for short). However, the waiver of loan attributable for the working capital was taxable under Section 28 (iv) of the Act. 5. Feeling aggrieved, the assessee challenged the same in the instant writ petition. The Hon'ble Single Judge has allowed the writ petition and disposed of the said writ petition by holding thus: 1 Income Tax Appellate Tribunal "C" Bench, Bangalore 2 ITA No.1317/Bang/2018 3 MP No.47/Bang/2022 in the case of Commissioner of Income Tax Vs. Mahindra & Mahindra Ltd.[4]. The ITAT vide order dated 05.09.2022, allowed and disposed of the Miscellaneous Petition holding that the waiver of loan which was used for the purpose of acquisition of capital equipment was not taxable under Section 28 (iv) of the Income Tax Act, 1961 ('Act' for short). However, the waiver of loan attributable for the working capital was taxable under Section 28 (iv) of the Act. 5. Feeling aggrieved, the assessee challenged the same in the instant writ petition. The Hon'ble Single Judge has allowed the writ petition and disposed of the said writ petition by holding thus: "35. Accordingly, the order dated 05.09.2022 at Annexure-'F' passed by the Income Tax Appellate Tribunal "C" Bench, Bangalore in M.P. No.47/Bang/2022 in ITA No.1317/BANG/2018 for the Assessment Year 2006-2007 is set aside. The Tribunal is directed to reconsider M.P.No.47/Bang/2022 in light of the discussion made hereinabove without re-opening any fresh question for consideration. Accordingly, the petition is disposed off." 4 (2018) 404 ITR 0001 SC Feeling aggrieved, the Revenue has challenged the order passed by the Hon'ble Single Judge in this appeal. 6. Shri Sanmathi, for the Revenue urged following two contentions: (i) Firstly that in the case of Mahindra & Mahindra Ltd. (supra), the waiver of loan was in respect of the loan advanced for acquisition of capital equipments. In the assessee's case, the waiver of loan is towards working capital; Mahindra Ltd. (supra), the waiver of loan was in respect of the loan advanced for acquisition of capital equipments. In the assessee's case, the waiver of loan is towards working capital; (ii) Secondly, right course open for the assessee was to challenge the order passed in MP No.47/2022 by filing an ITA in this Court and not by filing a writ petition was not maintainable as an alternative efficacious statutory remedy was available to the assessee. assessee was to challenge the order passed in MP No.47/2022 by filing an ITA in this Court and not by filing a writ petition was not maintainable as an alternative efficacious statutory remedy was available to the assessee. 7. In reply, Shri Ganesh submitted that though there exists an alternative remedy, a writ petition is maintainable as held by the Apex Court in several judgments, ending with M/s Godrej Sara Lee Ltd. Vs. The Excise and Taxation Officer[5]. He submitted that in the instant case, the issue is fully covered by the decision in Mahindra & Mahindra Ltd. (supra). The Hon'ble Single Judge has found it appropriate to entertain the petition keeping in view the facts and circumstances of the case. 8. Placing reliance on Manjunath Anandappa urf. Shivappa Hanasi Vs. Tammanasa and others[6], Shri Ganesh urged that an Appellate Court should be slow in entertaining an appeal against an order of dismissal exercised by the Hon'ble Single Judge. 9. We have carefully considered rival contentions and perused the records. 10. The Revenue's first contention that the loan waived was availed towards working capital. 5 Civil Appeal No.5393/2010, dated 01.02.2023 6 Appeal (Civil) 5662 of 1998 Therefore in contra-distinction with the ratio in Mahindra & Mahindra Ltd. (supra), the Hon'ble Single Judge has held that the nature of loan would be of no relevance. He has further held that the benefit of waiver of loan in the case on hand is not other than in the shape of money. Therefore, the benefit would fall outside the ambit of Section 24 (iv) of Income Tax Act. It is not in dispute that the assessee had availed loan from several banks and the Consortium of Banks had waived the loan. Thus, whether the loan was availed for the purpose of working capital or acquisition of capital assets should not really matter and we are at one with the Hon'ble Single Judge with regard to findings recorded in paragraphs No.31 and 32 of the impugned order. 6 Appeal (Civil) 5662 of 1998 Therefore in contra-distinction with the ratio in Mahindra & Mahindra Ltd. (supra), the Hon'ble Single Judge has held that the nature of loan would be of no relevance. He has further held that the benefit of waiver of loan in the case on hand is not other than in the shape of money. Therefore, the benefit would fall outside the ambit of Section 24 (iv) of Income Tax Act. It is not in dispute that the assessee had availed loan from several banks and the Consortium of Banks had waived the loan. Thus, whether the loan was availed for the purpose of working capital or acquisition of capital assets should not really matter and we are at one with the Hon'ble Single Judge with regard to findings recorded in paragraphs No.31 and 32 of the impugned order. 11. The second contention of the Revenue is that right recourse for the assessee was to file an ITA and not a writ petition. Shri Sanmathi is right in his submission. Ordinarily, a writ Court should not entertain a matter where there exists an alternative efficacious remedy except in rare cases such as violation of Principles of Natural Justice, imposition of disproportionate penalty, etc. In the instant case, the Hon'ble Single Judge has entertained the writ petition by recording that the issue involved is covered by Mahindra & Mahindra Ltd. (supra). Having heard the learned Advocates on both sides, we are at one with the view taken by the Hon'ble Single Judge. 12. In that view of the matter, though the contention with regard to appellate remedy urged on behalf of the Revenue would merit some consideration, in the facts and circumstances of this case, we do not think it appropriate to interfere with the order passed by the Hon'ble Single Judge. In any event, the matter has been remitted to ITAT and Miscellaneous Petition is pending consideration. In the circumstance, we find no merit in this appeal and accordingly the appeal stands dismissed. 13. In view of dismissal of the appeal, pending interlocutory applications, if any, do not survive for consideration and they stand disposed of. No costs. Sd/- JUDGE Sd/- JUDGE PA CT:HS List No.: 2 Sl No.: 3