Pr Commissioner Of Income Tax Jaipur-Ii v. M/S Modern Threads (I) Ltd

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 160 / 2017 Pr Commissioner Of Income Tax Jaipur-Ii ----Appellant Versus M/S Modern Threads (I) Ltd ----Respondent _____________________________________________________ For Appellant(s) : Mr. K.D. Mathur for Mr. R.B. Mathur _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE DR. JUSTICE VIRENDRA KUMAR MATHUR Judgment 02/06/2017 1. The issue is covered by the decision of this Court in taxAppeal No.144/2010, 145/2010 and 146/2010 decided on 26[th]April, 2017 wherein it has been held as under:- "Counsel for the appellant contended that issue is nowsquarely covered by the decision of Delhi High Court inCommissioner of Income Tax vs. Jindal Equipments Leasingand Consultancy Services Ltd. reported in (2010) 325 ITR87 (Delhi) wherein it has been observed as under:- "7. We do not find any merit in this preliminarysubmission of the learned Counsel for the assessee.The assessing officer had made the addition in termsof Section 41(1) of the Act read with Section 28(i) ofthe Act, which was upheld by the Commissioner(Appeals). No doubt, the Tribunal has held that Section41(1) does not apply to which legal position isconstituted (sic-conceded) by the learned Counsel forthe revenue before us, the revenue still wants that theaddition be sustained under provisions of Clause (iv) ofSection 28 of the Act. The revenue is not disputing thefacts on the basis of which decision of the Tribunal isbased. Submission is that on these very facts,provisions of Section 28(iv) of the Act shall beattracted. It is a pure question of law and therefore,the amended ground as raised by the revenue can beallowed. The position in MCorp Global (P) Ltd. (supra)was entirely different. In that case, the transaction in question was treated as lease transaction in the earlierassessment years and depreciation was granted onthat basis. However, in the assessment year inquestion, the same very transaction was treated asfinancial transaction and depreciation was disallowed.It was in this backdrop, the Supreme Court opined thatthe depreciation given to the assessee could not bewithdrawn, (sic) when the finding of fact that thetransaction in question was leased and not financialtransaction had become final and had not beenchallenged. 8. With this, we proceed to examine this aspect on itsown merit, viz., whether provisions of Section 28(iv) ofthe Act are attracted in the given case. Thus, what isto be seen is that as to whether the written off amountof Rs. 1,46,53,065 in its books of accounts by JSPLamounts to the value of any benefit or perquisitewhether convertible into money or not can be treatedas "profits and gains from business". The prerequisitesfor attracting the said provisions are: (i) Benefit or perquisite arising in the course ofbusiness is of the nature, other than cash or money. Itis for this reason expression "whether convertible intomoney or not" is mentioned in Clause (iv). BombayHigh Court has interpreted this very Clause in the caseofMahindra&MahindraLtd.v.CIT MANU/MH/0199/2003: (2003) 261 ITR 501 (Bom)in the following manner: The-income which can be taxed under Section 28(iv)must not only be referable to a benefit or perquisite,but it must be arising from business. Secondly, Section 28(iv) does not apply to benefits incash or money see CIT v. Alchemic (P)Ltd.MANU/GJ/0053/1980: (1981) 130 ITR 168 (Guj).” (i) Benefit or perquisite arising in the course ofbusiness is of the nature, other than cash or money. Itis for this reason expression "whether convertible intomoney or not" is mentioned in Clause (iv). BombayHigh Court has interpreted this very Clause in the caseofMahindra&MahindraLtd.v.CIT MANU/MH/0199/2003: (2003) 261 ITR 501 (Bom)in the following manner: The-income which can be taxed under Section 28(iv)must not only be referable to a benefit or perquisite,but it must be arising from business. Secondly, Section 28(iv) does not apply to benefits incash or money see CIT v. Alchemic (P)Ltd.MANU/GJ/0053/1980: (1981) 130 ITR 168 (Guj).” 4.1The same view taken by the Madras High Court inThe Commissioner of Income Tax vs. M/s Innvol MedicalIndia Ltd. (2013) 219 Taxman 123 (Mad); IskraemecoRegent Limited (Originally Seahorse Industries Ltd. andsubsequently in Iskraemeco Seahorse Ltd.) vs. TheCommissioner of Income Tax (2011) 331 ITR 317 (Mad);Mahindra and Mahindra Ltd. vs. Commissioner of IncomeTax and Commissioner of Income Tax vs. Mahindra andMahindra Ltd. (2003) 261 ITR 501 (Bom) and otherjudgment of Bombay High Court in CIT vs. Xylon Holdings(P) Ltd. in ITA No.3704/2010 decided on 13.9.2012 anddecision of Gujarat High Court in Commissioner of IncomeTax-I vs. Gujarat State Fertilizers and Chemicals Ltd.(2013) 217 Taxman 343 (Guj.). 5.Counsel for the department Mr. Mathur has supportedthe judgment of the Tribunal and contended that in view ofthe observations made by the Supreme Court in Polyflex (India) Pvt. Ltd. vs. Commissioner of Income Tax (2001)251 ITR 527 wherein it has observed as under:- “We are inclined to think that in a case where astatutory levy in respect of goods dealt in by theassessee is discharged and subsequently the amountpaid is refunded, it is the first clause that moreappropriately applies. U will not be a case of benefitaccruing to him on account of cessation or remission oftrading liability. U will be a case which squarely fallsunder the earlier clause, namely, "obtained anyamount in respect of such expenditure". In otherwords, where expenditure is actually incurred byreason of payment of duty on goods and the deductionor allowance had been given in the assessment forearlier period, the assessee is liable to disgorge thatbenefit as and when he obtains refund of the amountso paid. The consideration whether there is apossibility of the refund being set at naught on afuture date will not be a relevant consideration. Oncethe assessee gets back the amount which was claimedand allowed as business expenditure during the earlieryear, the deeming provision in Section 41(1) of the Actcomes into play and it is not necessary that theRevenue should await the verdict of higher Court orTribunal. If the Court or Tribunal upholds the levy at alater date, the assessee will not be without remedy toget back the relief.” 5.1He also relied upon the decision of Supreme Court inCIT vs. T.V. Sundaram Iyengar and Sons Ltd. (1996) 222 ITR344 wherein it has been held as under:- 5.1He also relied upon the decision of Supreme Court inCIT vs. T.V. Sundaram Iyengar and Sons Ltd. (1996) 222 ITR344 wherein it has been held as under:- “The principle appears to be that if an amount isreceived in course of trading transaction, eventhough it is not taxable in the year of receipt asbeing of revenue character, the amount changes itscharacter when the amount becomes the assessee'sown money because of limitation or by any otherstatutory or contractual right. When such a thinghappens, commonsense demands that the amountshould be treated as income of the assessee. Theassessee had received deposits in course of itsbusiness which were originally treated as capitalreceipts. Some of the deposits were neither claimedby nor returned to the depositors. There is nodispute that the deposits were received in course ofthe carrying on of the business of the assessee.Although it was treated as deposit and was ofcapital nature at the point of time it was received,by influx of time the money has become theassessee's own money. What remains afteradjustment of the deposits has not been claimed bythe customers. The claims of the customers havebecome barred by limitation. The assessee itself has treated the money as its own money and taken theamount to its profit and loss account. There is noexplanation from the assessee why the surplusmoney was taken to its profit and loss account evenif it was somebody else's money. In fact, asAtkinson, J. pointed out that what the assessee didwas the commonsense way of dealing with theamounts. Therefore, the amount was taxable astrade receipt in the hands of the assessee.” 6.We have heard counsel for the parties. 7.In view of the above, even otherwise the loanwhich was taken was capital investment and alwaystreated in the capital account as liability and if it is so, itwill naturally go as wiping out the capital liability. 8.In that view of the matter, the contention taken bythe appellant is required to be accepted. The view takenby the CIT(A) is required to be restored and that of thetribunal is required to be reversed.” 2.In view of the above, no substantial question of law arises. 3.The appeal stands dismissed. (VIRENDRA KUMAR MATHUR),J. (K.S. JHAVERI),J. b.m.Gandhi/4