The Commissioner Of Income Tax,Trichy v. M/S.samudra Shoe Overseas Ltd

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 06.06.2016 CORAM: THE HONOURABLE MR.JUSTICE S.MANIKUMARandTHE HONOURABLE MR.JUSTICE D.KRISHNA KUMAR T.C.A.No.349 of 2016 The Commissioner of Income Tax,Trichy .. Appellant/Appellant versus M/s.Samudra Shoe Overseas Ltd.,No.71, Centry Plaza,560-561 Anna Salai,Chennai 600 018. ..Respondent/Respondent Prayer: Tax Case Appeal filed under Section 260A of the IncomeTax Act, 1961, against the order of the Income Tax AppellateTribunal Madras 'B' Bench made in I.T.A.No.1515/Mds/2012, dated29.05.2015 and against the order of the Commissioner of IncomeTax Appeals-V, Chennai-34, Dated 31.05.2012 and made in ITA369/2011-12 and against the assessment order of the AssistantCommissioner of Income Tax Company Circle VI(1) Aayakar Bhavan,New Block (7th floor) 121 Nungambakkam High Road, Chennai 34dated 26.12.11 and made in GIR No/PAN for theAssessment Year 2006-2007. For Petitioner:Mr.J.Narayanasamy Senior Standing Counsel for Income-Tax ORDER (Order of the Court was made by S.MANIKUMAR, J.) Challenge in this Tax Case Appeal, is to an order made bythe Income Tax Appellate Tribunal in I.T.A.No.1515/Mds/2012,dated 29.05.2015, by which, the Tribunal has dismissed theappeal preferred by the revenue, against the order of theCommissioner of Income-Tax, dated 31.05.2012. 2.Before the Income Tax Appellate Tribunal, two groundsof appeal have been raised. The first ground of appeal was withregard to addition of Rs.6,63,48,983/-, towards interest waived https://hcservices.ecourts.gov.in/hcservices/ by the financial institution and the second ground was to theaddition of Rs.1,98,92,271/-, being the principal amount waivedby the financial institution. 3.As regards first ground of appeal, the Income TaxAppellate Tribunal has confirmed the findings of theCommissioner of Income Tax (Appeals), disallowing the above sumof Rs.6,63,48,983/-, which was debited in the Profit & LossAccount in the assessment years 1994-95 to 2002-03 and the samewas taken as income of the assessee. With regard to secondground of appeal, the Tribunal set aside the order of theCommissioner of Income Tax (Appeals) and directed the AssessingOfficer to reconsider the issue afresh, in the light of thematerials and thereafter, to decide the same, in accordance withlaw, after considering all the judgments referred before theTribunal and giving reasonable opportunity to the assessee. 4.Aggrieved by the orders of the Income Tax AppellateTribunal, Chennai, the Commissioner of Income Tax, Chennai,appellant herein, has filed this appeal, on the followingsubstantial questions of law, “(1) Whether on the facts and in the circumstancesof the case, the Tribunal was right in holding thatthe assessee is entitled for deduction under Section43B, with respect to the interest on loan waived bythe Bank in one time settlement? (2) While dealing with the issue relating to thedisallowance of the principal waived by the bank,whether the Tribunal was right in remitting the caseback to the assessing authority with the direction toexamine the purpose of loan and the utilisationthereof and pass orders, as per the decision reportedin 331 ITR 337 (Mad.)?” 5.Mr.J.Narayanasamy, learned counsel appearing for theappellant fairly submitted that he is not pressing SubstantialQuestion No.2. Submission is placed on record. 6.As regards disallowance of interest under Section 43B,learned counsel appearing for the appellant submitted that theTribunal has erred in holding that the assessee is entitled fordeduction under Section 43B with respect to the interest on loanwaived by the bank in one time settlement. He further submittedthat the Tribunal ought to have appreciated that the assesseehaving not actually paid the interest, no deduction underSection 43B is warranted. 5.Mr.J.Narayanasamy, learned counsel appearing for theappellant fairly submitted that he is not pressing SubstantialQuestion No.2. Submission is placed on record. 6.As regards disallowance of interest under Section 43B,learned counsel appearing for the appellant submitted that theTribunal has erred in holding that the assessee is entitled fordeduction under Section 43B with respect to the interest on loanwaived by the bank in one time settlement. He further submittedthat the Tribunal ought to have appreciated that the assesseehaving not actually paid the interest, no deduction underSection 43B is warranted. 7.According to the Assistant Commissioner of Income-Tax,the assessee-companydisallowedanexpenditureofRs.6,63,48,983/-, under Section 43B of the Income-tax Act, 1961(in short 'the Act') towards interest payable to financialinstitution which was return back. The above said amount ofRs.6,63,48,983/-, relates to interest due to IDBI bank for theperiod relating to assessment years 2003-04 to 2005-06. IDBIbank has agreed to the proposal for payment of one-timesettlement and accordingly, waived the interest to an extent ofRs.6,63,48,983/-. However, for the year under consideration, theassessee claimed the interest of Rs.6,63,48,983/- as deduction,under Section 43B of the Act. The appellant has contended thatunder Section 43B of the Act, interest would be allowed in thecase where the same was paid to the financial institution on orbefore filing of return of income. Since the entire interest waswaived by IDBI Bank, there was no actual payment. Therefore, theclaim of the assessee for deduction under Section 43B cannot beallowed. 9.Per contra, it is the case of the assessee that theinterest claimed by the assessee, as deduction for the yearunder consideration to the extent of Rs.6,63,48,983/-, relatesto the period of assessment years 2003-04 to 2005-06. Duringthose years, the assessee disallowed the interest under Section43B of the Act, since it was not actually paid. Therefore, forthe earlier years, the assessee itself has treated the abovesaid amount of Rs.6,63,48,983/-, as its income. During the yearunder consideration, IDBI Bank has waived the entire interest ofRs.6,63,48,983/-. Since the interest which was waived by theIDBI Bank was already taken as income for the earlier yearsunder Section 43B of the Act, the same was claimed as deductionunder Section 43B of the Act, during the year underconsideration. 10.Having regard to the rival submissions and the materialon record, the Tribunal has passed the following orders,“Admittedly, the Assessing Officer disallowed theinterest to the extent of Rs.6,63,48,983/- underSection 43B of the Act, while computing the taxableincome for the assessment years 2003-04 to 2005-06. Inother words, the interest, which is otherwise to beallowable under mercantile system of accounting, wastaken as income in view of Section 43B of the Act.During the year under consideration, the IDBI Bankwaived the entire interest portion to the extent ofRs.6,63,48,983/-. The assessee claimed this amount asdeduction while computing the total income. TheAssessing Officer disallowed the claim of the assesseeon the ground that there was no actual payment ofinterest. However, the CIT(Appeals) found that the above sum of Rs.6,63,48,983/-, which was debited inthe Profit & Loss account in the assessment years1994-95 to 2002-03, was disallowed and the same wastaken as income of the assessee. Therefore, there isno question of any disallowance once again during theyear under consideration. It is not in dispute thatthe claim made by the assessee with regard to waiverof interest was taken as income in the earlierassessment years by disallowing the claim of theassessee under Section 40A(3) of the Act. Therefore,as rightly pointed out by the CIT(Appeals), there isno need for disallowing the very same amount onceagain. Accordingly, this Tribunal do not find anyinfirmity in the order of the CIT(Appeals) andaccordingly, the same is confirmed.” 11.Going through the material on record, this Court is ofthe view that the Tribunal was right in holding that theassessee is entitled for deduction under Section 43B, withrespect to the interest on loan waived by the Bank in one timesettlement and thus, answered the first substantial question oflaw against the revenue. 12.No valid grounds have been made to reverse the impugnedorder. In the result, the Tax Case Appeal is dismissed. Nocosts. Consequently, connected Miscellaneous Petition is alsoclosed. Sd/- Assistant Registrar(CS IV) //True Copy// Sub Assistant Registrar To 1.The Income Tax Appellate Tribunal,Madras, “B” Bench, Chennai. “B” Bench, Chennai. 2.The Commissioner of Income Tax, Appeals-V, Chennai-34. Appeals-V, Chennai-34. 3.The Assistant Commissioner of Income Tax Company Circle VI(1), Aayakar Bhavan, New Block, 7th Floor, Aayakar Bhavan, New Block, 7th Floor, 121, Nungambakkam High Road, Chennai-34. +1cc to Mr.J.Narayanasamy, Advocate sr.30014 T.C.A.No.349 of 2016rsy[co]srg 12/07/2016