The Commissioner Of Income Tax,Chennai v. M/S.wheels India Ltd.,Padi, Chennai-600 050

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED : 11.06.2019 CORAM THE HONOURABLE MR.JUSTICE T.S.SIVAGNANAMandTHE HONOURABLE MRS.JUSTICE V.BHAVANI SUBBAROYAN Tax Case Appeal No.285 of 2018 The Commissioner of Income tax,Chennai. .. Appellant -vs- M/s.Wheels India Ltd.,Padi, Chennai-600 050.PAN: .. Respondent Appeal under Section 260A of the Income Tax Act, 1961,againsttheorderdated31.10.2017madeinI.T.A.No.1904/Mds/2017 on the file of the Income Tax AppellateTribunal 'C' Bench, Chennai for the assessment year 2011-12, asagainst the order of the Commisioner of Income Tax (Appeals)-17made in ITA No.3/14-15/CIT(A)-17 dated 08/06/2017 as against theorder of the Deputy Commissioner of Income Tax, Large Tax PayerUnit-II, Chennai 600 101, dated 07/03/2014 in GI.No./PANAAACW0315K for the Assessment Year 2011-12. For Appellant:Mrs.R.Hemalatha,Senior Standing CounselFor Respondent :Mr.R.Venkatanarayanan,for M/s.Subbaraya Aiyar Padmanabhan & Ramamani JUDGMENT This appeal, by the Revenue filed under Section 260A of theIncome-tax Act, 1961 is directed against the order dated31.10.2017 passed by the Income Tax Appellate Tribunal 'C'Bench,Chennai(forbrevity,“theTribunal”),inI.T.A.No.1904/Mds/2017 for the assessment year 2011-12. https://hcservices.ecourts.gov.in/hcservices/ 2.The above appeal has been filed raising the followingsubstantial questions of law:- “(i) Whether the Tribunal was right in holdingthat the difference between the sales-tax loanamount and the amount paid on Net present valuebasis under the sales-tax deferral scheme ofMaharashtra Government is not a remission ofliability u/s.41(1) of the I.T.Act 1961? (ii) Whether the Tribunal ought to havefollowed the judgment of the Madras High Court inthe case of Ramaniyam Homes P Ltd – reported in 68Taxman.com page 289 wherein it was held that thewaiver of a portion of the loan would certainlytantamount to value of a benefit that arose frombusiness which was to be treated as a revenuereceipt? (iii) Whether the difference between thesales-tax loan amount and amount paid on the NetPresent Value basis as per Scheme of MaharashtraGovernment sales-tax deferral scheme is a revenuereceipt and is to be considered as a income as perSec.28(iv) of the I.T.Act, 1961?” 3.Heard Mrs.R.Hemalatha, learned Senior Standing Counsel forthe appellant/Revenue; and Mr.R.Venkatanarayanan, learnedcounsel for the respondent/assessee. 4.The Tribunal has followed the assessee's own case decidedby the Special Bench of the Tribunal at Mumbai in the case ofSulzer India Ltd. vs. JCIT reported in 138 ITD 137. The saiddecision was challenged before the Hon'ble High Court of Bombay,which was dismissed by judgment dated 05.12.2014 reported in[2014] 369 ITR 717 (Bombay). The decision of the Hon'ble HighCourt of Bombay was affirmed by the Hon'ble Supreme Court in CITvs. Balkrishna Industries Ltd., reported in [2017] 88taxmann.com 273 (SC). The Hon'ble Supreme Court approved thesaid decision of the Bombay High Court wherein it was held asfollows:- “The argument of the revenue is not that theassessee having paid Rs.3.37 crores has obtainedfor himself anything in terms of section 41(1),but the assessee is deemed to have received thesum of Rs.4.14 crores, which is the differencebetween the original amount to be remitted withthe payment made. The revenue terms this as deemedpayment by the State to the assessee. TheTribunal has found that the first requirement ofsection 41(1) is that the allowance or deductionis made in respect of the loss, expenditure or a “The argument of the revenue is not that theassessee having paid Rs.3.37 crores has obtainedfor himself anything in terms of section 41(1),but the assessee is deemed to have received thesum of Rs.4.14 crores, which is the differencebetween the original amount to be remitted withthe payment made. The revenue terms this as deemedpayment by the State to the assessee. TheTribunal has found that the first requirement ofsection 41(1) is that the allowance or deductionis made in respect of the loss, expenditure or a trading liability incurred by the assessee and theother requirement is the assessee has subsequentlyobtained any amount in respect of such loss andexpenditure or obtained a benefit in respect ofsuch trading liability by way of a remission orcessation thereof. As rightly noted by theTribunal, the Sales Tax collected by the assesseeduring the relevant year was treated by the StateGovernment as loan liability payable after 12years in 6 annual/equal instalments. Subsequentlyand pursuant to the amendment made to the 4[th]proviso to section 38 of the Bombay Sales Tax Act,1959, the assessee accepted the offer of SICOM,the implementing agency of the State Government,paid certain amount to SICOM, which, according tothe assessee, represented the NPV of the futuresum as determined and prescribed by the SICOM. Inother words, what the assessee was required topay after 12 years in 6 equal instalments waspaid by the assessee prematurely in terms of theNPV of the same. That the State may have receiveda higher sum after the period of 12 years and ininstalments. However, the statutory arrangementand vide section 38, 4[th] proviso does not amount toremission or cessation of the assessee's liabilityassuming the same to be a trading one. Rather thatobtains a payment to the State prematurely and interms of the correct value of the debt due to it.There is no evidence to show that there has beenany remission or cessation of the liability by theState Government.” 5.While affirming the order passed by the High Court ofBombay, the Hon'ble Supreme Court in Balkrishna Industries Ltd.(supra) held that the approach of the High Court of Bombay iswithout any blemish, inasmuch as all the requirements of Section41(1) of the Act could not be fulfilled in the case on hand. 6.In the light of the above, the appeal filed by the Revenuefails and the same is dismissed and the substantial questions oflaw are answered against the Revenue. No costs.Sd/- Assistant Registrar(CS V) //True Copy// Sub Assistant Registrar To 1.The Deputy Commissioner of Income-tax, Large Taxpayer Unit-II, Chennai-600 101. Large Taxpayer Unit-II, Chennai-600 101. 2.The Commissioner of Income-tax (Appeals)-17, Chennai-600 101. Chennai-600 101. 3.The Income-tax Appellate Tribunal 'C' Bench, Chennai. +1cc to Mr.T.Ravikumar, Advocate Sr.46852+1cc to M/s.Subbaraya Aiyar, Advocate Sr.47293T.C.A.No.285 of 2018kk[co]srg 19/07/2019