M/S.mgm Earth Equipment Agencies (P) Limited v. The Chief Commissioner Of Income Tax Chennai-Ii

IN THE HIGH COURT OF JUDICATURE AT MADRASDATED: 15.10.2019 CORAM : M/s.MGM Earth Equipment Agencies (P) Limited,No.1, 9[th] Cross Street,Dr.Radhakrishnan Salai,Mylapore, Chennai-600 034.... Petitioner in both WpsVs. 1.The Chief Commissioner of Income Tax Chennai-II, 121, Nungambakkam High Road, Chennai-600 034. 2.The Commissioner of Income Tax, Chennai-III, 121, Nungambakkam High Road, Chennai-600 034. ... Respondents 1 & 2 in both WPs 3.The Assistant Commissioner of Income Tax, Company Circle IV(2), 121, Nungambakkam High Road, Chennai-600 034.... Respondent No.3 in WP.No.24771/2010 4.The Assistant Commissioner of Income Tax, Company Circle IV(4), 121, Nungambakkam High Road, Chennai-600 034.... Respondent No.3 in WP.No.24772/2010 Prayer in WP.No.24771 of 2010: Writ Petition filed under Article226 of the Constitution of India, for the issuance of Writ ofCertiorarified Mandamus, to call for the records of thePetitioner on the file of the First Respondent to quash theimpugned order dated 20.1.2010 issued in CC-II/B(66)/2001-2002in the rejection of the prayer for waiver of interest underSection 220(2) of the Income Tax Act, 1961 quantified and levied https://hcservices.ecourts.gov.in/hcservices/ for the assessment year 1997-98 and consequently direct theFirst Respondent to accept the prayer for such waiver ofinterest. Prayer in WP.No.24772 of 2010: Writ Petition filed under Article226 of the Constitution of India, for the issuance of Writ ofCertiorarified Mandamus, to call for the records of thePetitioner on the file of the First Respondent to quash theimpugned order dated 20.1.2010 issued in CC-II/B(66)/2001-2002in the rejection of the prayer for waiver of interest underSection 234A & Section 234B of the Income Tax Act, 1961quantified and levied for the assessment year 1997-98 andconsequently direct the First Respondent to accept the prayerfor such waiver of interest. (In both WPs)For Petitioner : Mr.S.SridharFor Respondents : Mrs.Hema Muralikrishnan Senior Standing Counsel C O M M O N O R D E R The petitioner is a company that had filed a return ofincome in respect of AY 1997-1998 in terms of the provisions ofthe Income Tax Act, 1961 (in short, 'Act') claiming depreciationat the rate of 100% on cinematography films. The assessment wascompleted on 30.03.2000 by the respondent disallowing the claimof depreciation on the ground that the claim was bogus andunsubstantiated. While doing so, the Assessing Authority reducedthe lease rentals in regard to the cinematography films from thetotal income returned. 2. The petitioner filed an appeal before the Commissioner ofIncome Tax (Appeals), who, vide order dated 13.10.2000,confirmed the order of assessment, dismissing the appeal filed.A further appeal was filed by the petitioner before the IncomeTax Appellate Tribunal, ('Tribunal') which, by order dated05.06.2003 also confirmed and the findings in regard to the socalled lease transactions. The findings of fact rendered by theTribunal are extracted below: '5.Rival contentions in regard to the above havebeen very carefully considered. The assessee has notbeen able to place before us any material with regardto the observation of the Assessing Officer that threeof the five films owned by M/s.Vivekananda FilmCircuit and M/s.Vivekananda Pictures after the chainof transactions in a matter of 11 days went back tothe owner. The Assessee was not in a position todisprove this factor. Therefore, in regard to thosebeen very carefully considered. The assessee has notbeen able to place before us any material with regardto the observation of the Assessing Officer that threeof the five films owned by M/s.Vivekananda FilmCircuit and M/s.Vivekananda Pictures after the chainof transactions in a matter of 11 days went back tothe owner. The Assessee was not in a position todisprove this factor. Therefore, in regard to those https://hcservices.ecourts.gov.in/hcservices/ three films the transaction has been proved to bebogus by the authorities and therefore the claim ofdepreciation at 100% is not admissible. One otherfilm, it was in Gemini Film Laboratories, the facts ofwhich are almost identical, the assessee could notcontrovert the finding of facts to the effect that thetransactions were bogus. The assessee had not beenable to place any material to suggest that the filmswere exhibited. The other film apparently the factsare also identical, in a sequence of 11 days when theowner of the film who parted with it initially getsback, it clearly goes to show that the assessee bymeans of these transactions wanted to have thebenefits of depreciation. The asset was never intendedto be exhibited and in these facts it has to be takenas the claim of depreciation which is allowed on anasset owned by the assessee which is not the case hereis negatived. The assessee raised an alternativeargument, namely that if the transaction of purchaseand lease was a paper transaction, the income from thelease shown by the assessee cannot be treated as itsassessable income. This matter could be examined bythe Assessing Officer. We accordingly uphold theorders of the authorities except for the lastalternative claim that the income in the circumstancesof the case arising from the lease could be treated asincome of the assessee at all or not. That part isremanded to the file of the Assessing Officer. Theappeal is allowed in part.' 3. A Miscellaneous Application filed by the petitionerbefore the Tribunal was considered and the original ordermodified to conclude that as against seven cinematograph filmsin respect of which depreciation has been disallowed, thedisallowance as against five stand confirmed and thedisallowance as against two would be liable to be reversed. 4. As against the aforesaid order in MiscellaneousApplication, both the Revenue as well as the petitioner filedTax Case (Appeals) before this Court in terms of Section 260A ofthe Act. The appeal of the Revenue in T.C.(A).No.1084 of 2008was dismissed on the ground of low tax effect on 25.03.2019 andthe appeals of the assessee/petitioner in T.C.(A).Nos.464, 1054and 1074 of 2007 were withdrawn on 04.04.2019. Thus, thefindings of fact as regards the five transactions upon whichdepreciation was disallowed have become final. 5.While this is so, the petitioner sought waiver of theinterest levied under Section 220(2) of the Act for delayedremittance of the demands raised. Admittedly the interest levied https://hcservices.ecourts.gov.in/hcservices/ relates to the demands raised as per order of assessment dated30.03.2000. The Chief Commissioner of Income Tax, uponconsideration of the petition under Section 220(2) rejected thesame holding that the conditions set out under Section 220(2A)have not been satisfied in the present case. The conditionsstipulated are (i) that the payment of the amount would causegenuine hardship to the assessee, (ii) default in payment ofamount on which interest was payable was due to circumstancesbeyond the control of the assessee and (iii) the assessee hadco-operated in any enquiry relating to the assessment or anyother proceeding for recovery. 6.In the present case, there is no dispute raised by thedepartment in regard to condition No.(iii) i.e. that theassessee had not co-operated either at the time of assessment orsubsequent proceedings for recovery. As far as condition Nos:(i) and (ii) are concerned, the financial position of thepetitioner has to be necessarily ascertained and appreciatedand the Chief Commissioner has extracted the summary of itsfinancials during the assessment years 1998-1999 to 2002-2003 asfollows: 6.In the present case, there is no dispute raised by thedepartment in regard to condition No.(iii) i.e. that theassessee had not co-operated either at the time of assessment orsubsequent proceedings for recovery. As far as condition Nos:(i) and (ii) are concerned, the financial position of thepetitioner has to be necessarily ascertained and appreciatedand the Chief Commissioner has extracted the summary of itsfinancials during the assessment years 1998-1999 to 2002-2003 asfollows: The summary extracted above indicates that the petitioner is nota loss making concern. Before depreciation, substantial advanceshave been made to sister concerns, even after which amounts havebeen transferred to reserves and surplus. The assessee has notdemonstrated or established hardship and I find no perversityin fact or in law, and thus no reason to interfere with theconclusion of the respondent to the effect that the conditions stipulated under (i) and (ii) have not been satisfied by thepetitioner. 7.W.P.No.24771 of 2010 is dismissed, except to state thatthe amount of interest under Section 220(2) be re-computed soas to relate to the modified demand quantified post the order ofthe Income Tax Appellate Tribunal in Miscellaneous Application.A copy of the order has not been placed on record by thepetitioner but the aforesaid position is not contested by therevenue. Let this exercise be completed expeditiously. Nocosts. Consequently, connected miscellaneous petition is closed. 8. In W.P. No.24772 of 2010, the petitioner has challengedorder dated 20.01.2010 wherein its request for waiver ofinterest under Section 234A and B have been rejected by theChief Commissioner of Income Tax. A perusal of the impugnedorder reveals that the respondent has rightly taken into accountthe Notification of the Board bearing No.400/29/2002-IT(B) dated26.06.2006 setting out four Clauses: 2 (a) deals with waiver of interest arising out of an orderof assessment pursuant to proceedings for search and seizureunder Section 132 of the Income Tax Act, which is inapplicableto the present case.2 (b) deals with the issue of waiver of interest chargeableunder Section 234C of the Income Tax Act, inapplicable to thepresent case. 2 (c) deals with a situation where the assessee has notoffered income to tax, on the legitimate understanding that suchincome is not liable to tax in the light of a Judgment of theSupreme Court or by a larger Bench of the jurisdictional HighCourt or any amount amount liable to tax in consequence of anyretrospective amendment of law. This condition is also notsatisfied in the present case. 2 (d) deals with non-filing of returns of income in certainunavoidable circumstances. This clause is also inapplicable. 9.Thus the conclusion of the Chief Commissioner to theeffect that none of the situations envisaged under theNotification would arise in the present case, is unassailable. 10.Moreover the question of waiver of interest under Section234 A, B and C has been considered by the Supreme Court in thecase of Commissioner of Income Tax vs. Anjum H.Ghaswala andothers ((2001) 252 ITR 1) wherein the Full Bench settles theposition categorically to the effect that there can be nopossibility of waiver of interest outside of the situationsenumerated under Notification No. 400/29/2002-IT(B) dated26.06.2006, as above. 11.W.P.No.24772 of 2010 is dismissed. No costs.Consequently, connected miscellaneous petition is closed. Sd/-Assistant Registrar(CS-IV) // True Copy// vsTo Sub Assistant Registrar 10.Moreover the question of waiver of interest under Section234 A, B and C has been considered by the Supreme Court in thecase of Commissioner of Income Tax vs. Anjum H.Ghaswala andothers ((2001) 252 ITR 1) wherein the Full Bench settles theposition categorically to the effect that there can be nopossibility of waiver of interest outside of the situationsenumerated under Notification No. 400/29/2002-IT(B) dated26.06.2006, as above. 11.W.P.No.24772 of 2010 is dismissed. No costs.Consequently, connected miscellaneous petition is closed. Sd/-Assistant Registrar(CS-IV) // True Copy// vsTo Sub Assistant Registrar 1.The Chief Commissioner of Income Tax Chennai-II, 121, Nungambakkam High Road, Chennai-600 034.2.The Commissioner of Income Tax, Chennai-III, 121, Nungambakkam High Road, Chennai-600 034.3.The Assistant Commissioner of Income Tax, Company Circle IV(2), 121, Nungambakkam High Road, Chennai-600 034.4.The Assistant Commissioner of Income Tax, Company Circle IV(4), 121, Nungambakkam High Road, Chennai-600 034. +1cc to Mr.S.Sridhar, Advocate, SR.No.86238.+2cc to Mrs.Hema Muralikrishnan, Advocate, SR.No.86025. W.P.Nos.24771 & 24772 of 2010andM.P.Nos.1 and 1 of 2010PP(CO)CSR:20.01.2020 https://hcservices.ecourts.gov.in/hcservices/