Pr. Commissioner Of Income Tax, Jaipur-Ii, Jaipur Raj v. M/S Modern Syntex (India) Ltd., A

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH AT JAIPUR D.B. Income Tax Appeal No. 80/2018 Pr. Commissioner Of Income Tax, Jaipur-Ii, Jaipur Raj ----Appellant Versus M/s Modern Syntex (India) Ltd., A-4, Vijay Path, Tilak Nagar,Jaipur Raj ----Respondent For Appellant(s) : Mr. K. D. Mathur with Mr. Prateek Kedawat on behalf ofMr. R. B. Mathur: For Respondent(s) HON'BLE MR. JUSTICE K.S.JHAVERI HON'BLE MR. JUSTICE VIJAY KUMAR VYAS 12/04/2018 Judgment 1.By way of this appeal, the appellant has challenged thejudgment and order of the Tribunal whereby the Tribunal hasallowed the appeal of the assessee. 2.Counsel for the appellant has framed the following questionsof law:- “Whetherinthefactsandcircumstances of the case, the ITAT wasjustified in law in deleting the addition ofRs.133790502/- made by the AssessingOfficer on account of remission of principalamount of loan. Whetherinthefactsandcircumstances of the case, the ITAT wasjustified in holding that remission ofprincipal amount of loan obtained fromfinancial institution and banks, does notconstitute a benefit or perquisite arisingfrom business and does not fall within theambit of Section 28(iv) of the Act.” 3.The Tribunal has followed the judgment of this Court inModern Syntex (india) Ltd., A-4, Versus AssistantCommissioner of Income Tax, Circle 6, Jaipur in D. B.Income Tax Appeal No.147/2010 & other connectedmatters, decided on 08.08.2017, which reads as under:- 1. By way of these appeals, the appellants, in oneappeal assessee and in another appeal thedepartment, have challenged the judgment andorder of the tribunal whereby the tribunal haspartly allowed the appeal filed by the assesseeand allowed the appeal of the department. 2. This Court while admitting the Appeal No.147/2010 on 12.04.2010 has framed following substantial question of law:- “Whether the remission of principalamount of loan obtained from financialinstitutions and banks, constitutes abenefit or perquisite arising frombusiness and would fall within theambit of Section 28(iv) of the Act?” 2.1 While admitting Appeal No.123/2016 on04.04.2017hasframedfollowing substantial question of law:-“Whether in the facts andcircumstances of the cae and inlaw,the ITAT was justified in deletingthe additions of Rs.29,40,94,000/-made by the Assessing Officer onaccount of remission of principalamount of loan.” 3. Learned counsel for the appellant submitstht the controversy involved in presentappeals stands concluded by the decision ofthis Court in the case of Modern DenimLimited Vs. Asstt. Commissioner of IT Jaipurin Tax Appeal No.145/2010 decided on26.04.2017 alongwith other connectedappeals. This court while deciding the appealin favour of the assessee has held as under:- 4. Counsel for the appellant contendedthat issue is now squarely covered by thedecision of Delhi High Court inCommissioner of Income Tax vs. JindalEquipments Leasing and ConsultancyServices Ltd. reported in (2010) 325 ITR87 (Delhi) wherein it has been observedas under:- 3. Learned counsel for the appellant submitstht the controversy involved in presentappeals stands concluded by the decision ofthis Court in the case of Modern DenimLimited Vs. Asstt. Commissioner of IT Jaipurin Tax Appeal No.145/2010 decided on26.04.2017 alongwith other connectedappeals. This court while deciding the appealin favour of the assessee has held as under:- 4. Counsel for the appellant contendedthat issue is now squarely covered by thedecision of Delhi High Court inCommissioner of Income Tax vs. JindalEquipments Leasing and ConsultancyServices Ltd. reported in (2010) 325 ITR87 (Delhi) wherein it has been observedas under:- "7. We do not find any merit inthis preliminary submission of thelearned Counsel for the assessee.The assessing officer had madethe addition in terms of Section41(1) of the Act read with Section28(i) of the Act, which wasupheld by the Commissioner(Appeals). No doubt, the Tribunalhas held that Section 41(1) doesnot apply to which legal positionis constituted (sic-conceded) bythe learned Counsel for therevenue before us, the revenuestill wants that the addition besustained under provisions ofClause (iv) of Section 28 of theAct. The revenue is not disputingthe facts on the basis of whichdecision of the Tribunal is based.Submission is that on these veryfacts, provisions of Section 28(iv)of the Act shall be attracted. It isa pure question of law andtherefore, the amended groundas raised by the revenue can beallowed. The position in MCorpGlobal (P) Ltd. (supra) wasentirely different. In that case,the transaction in question wastreated as lease transaction inthe earlier assessment years anddepreciation was granted on thatbasis.However,intheassessment year in question, thesame very transaction wastreated as financial transactionand depreciation was disallowed.It was in this backdrop, theSupreme Court opined that thedepreciation given to theassessee could not be withdrawn,(sic) when the finding of fact thatthe transaction in question wasleasedandnotfinancialtransaction had become final andhad not been challenged. 8. With this, we proceed to examinethis aspect on its own merit, viz.,whether provisions of Section 28(iv) ofthe Act are attracted in the given case.Thus, what is to be seen is that as towhether the written off amount of Rs.1,46,53,065 in its books of accounts byJSPL amounts to the value of any benefitorperquisitewhetherconvertible into money or not can betreated as "profits and gains frombusiness". The prerequisites forattracting the said provisions are: (i) Benefit or perquisite arising in thecourse of business is of the nature,other than cash or money. It is for thisreason expression "whether convertibleinto money or not" is mentioned inClause (iv). Bombay High Court hasinterpreted this very Clause in the caseof Mahindra & Mahindra Ltd. v. CITMANU/MH/0199/2003 : (2003) 261 ITR501 (Bom) in the following manner:The-income which can be taxed underSection 28(iv) must not only bereferable to a benefit or perquisite, butit must be arising from business. Secondly, Section 28(iv) does not applyto benefits in cash or money see CIT v.Alchemic(P)Ltd.MANU/GJ/0053/1980 : (1981) 130 ITR168 (Guj).” 4.1 The same view taken by the MadrasHigh Court in The Commissioner of IncomeTax vs. M/s Innvol Medical India Ltd. (2013)219 Taxman 123 (Mad); Iskraemeco RegentLimited (Originally Seahorse Industries Ltd.and subsequently in Iskraemeco SeahorseLtd.) vs. The Commissioner of Income Tax(2011) 331 ITR 317 (Mad); Mahindra andMahindra Ltd. vs. Commissioner of IncomeTax and Commissioner of Income Tax vs.Mahindra and Mahindra Ltd. (2003) 261 ITR501 (Bom) and other judgment of BombayHigh Court in CIT vs. Xylon Holdings (P) Ltd.in ITA No.3704/2010 decided on 13.9.2012and decision of Gujarat High Court inCommissioner of Income Tax-I vs. GujaratState Fertilizers and Chemicals Ltd. (2013)217 Taxman 343 (Guj.). 4.1 The same view taken by the MadrasHigh Court in The Commissioner of IncomeTax vs. M/s Innvol Medical India Ltd. (2013)219 Taxman 123 (Mad); Iskraemeco RegentLimited (Originally Seahorse Industries Ltd.and subsequently in Iskraemeco SeahorseLtd.) vs. The Commissioner of Income Tax(2011) 331 ITR 317 (Mad); Mahindra andMahindra Ltd. vs. Commissioner of IncomeTax and Commissioner of Income Tax vs.Mahindra and Mahindra Ltd. (2003) 261 ITR501 (Bom) and other judgment of BombayHigh Court in CIT vs. Xylon Holdings (P) Ltd.in ITA No.3704/2010 decided on 13.9.2012and decision of Gujarat High Court inCommissioner of Income Tax-I vs. GujaratState Fertilizers and Chemicals Ltd. (2013)217 Taxman 343 (Guj.). 5. Counsel for the department Mr. Mathurhas supported the judgment of the Tribunaland contended that in view of theobservations made by the Supreme Court inPolyflex (India) Pvt. Ltd. vs. Commissionerof Income Tax (2001) 251 ITR 527 whereinit has observed as under:- “We are inclined to think that in acase where a statutory levy inrespect of goods dealt in by theassesseeisdischargedandsubsequently the amount paid isrefunded, it is the first clause that more appropriately applies. U will notbe a case of benefit accruing to himon account of cessation or remissionof trading liability. U will be a casewhich squarely falls under the earlierclause, namely, "obtained anyamount in respect of suchexpenditure". In other words, whereexpenditure is actually incurred byreason of payment of duty on goodsand the deduction or allowance hadbeen given in the assessment forearlier period, the assessee is liableto disgorge that benefit as and whenhe obtains refund of the amount sopaid. The consideration whetherthere is a possibility of the refundbeing set at naught on a future datewill not be a relevant consideration.Once the assessee gets back theamount which was claimed andallowed as business expenditureduring the earlier year, the deemingprovision in Section 41(1) of the Actcomes into play and it is notnecessary that the Revenue shouldawait the verdict of higher Court orTribunal. If the Court or Tribunalupholds the levy at a later date, theassessee will not be without remedyto get back the relief.” 5.1 He also relied upon the decision ofSupreme Court in CIT vs. T.V. SundaramIyengar and Sons Ltd. (1996) 222 ITR 344wherein it has been held as under:- “The principle appears to be that ifan amount is received in course oftrading transaction, even though itis not taxable in the year of receiptas being of revenue character, theamount changes its characterwhen the amount becomes theassessee's own money because oflimitation or by any other statutoryor contractual right. When such athing happens, commonsensedemands that the amount shouldbe treated as income of theassessee. The assessee hadreceived deposits in course of itsbusiness which were originallytreated as capital receipts. Someof the deposits were neitherclaimed by nor returned to thedepositors. There is no dispute that the deposits were received incourse of the carrying on of thebusiness of the assessee. Althoughit was treated as deposit and wasof capital nature at the point oftime it was received, by influx oftime the money has become theassessee's own money. Whatremains after adjustment of thedeposits has not been claimed bythe customers. The claims of thecustomers have become barred bylimitation. The assessee itself hastreated the money as its ownmoney and taken the amount to itsprofit and loss account. There is noexplanation from the assessee whythe surplus money was taken to itsprofit and loss account even if itwas somebody else's money. Infact, as Atkinson, J. pointed outthat what the assessee did was thecommonsense way of dealing withthe amounts. Therefore, theamount was taxable as tradereceipt in the hands of theassessee.” 6. We have heard counsel for theparties. 6. We have heard counsel for theparties. 7. In view of the above, evenotherwise the loan which wastaken was capital investment andalways treated in the capitalaccount as liability and if it is so, itwill naturally go as wiping out thecapital liability. 8. In that view of the matter, thecontention taken by the appellantis required to be accepted. Theview taken by the CIT(A) isrequired to be restored and that ofthe tribunal is required to bereversed. 9. In view of the above, the issueis answered in favour of theassesseeandagainstthedepartment. 4. In that view of the matter, issues inboth the appeals are answered infavour of the assessee and against thedepartment. 5. The appeal of the assessee is allowedand that of the department isdismissed. “ 4.Hence no substantial question of law arises. The appeal stands dismissed. (VIJAY KUMAR VYAS),J (K.S.JHAVERI),J B.M.G/Gourav/84