PRINCIPAL COMMISSIONER OF vs. M/S SAKTHI SUGARS LTD

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TCA/432/2018HC Madras23 February 2021Bench: Hon`ble Mr Justice T. S. SIVAGNANAM4 pages
AI SummaryWithdrawn

What did the High Court hold?

The High Court noted that the assessee had filed a declaration under the Vivad Se Vishwas Scheme, 2020, and was awaiting orders. In light of this subsequent event, the Court directed the Competent Authority to process the assessee's application under the Direct Tax Vivad Se Vishwas Act, 2020, and pass appropriate orders expeditiously. The assessee was granted liberty to restore the appeal if the decision on their declaration was not in their favour. If restoration was sought, the Registry was directed to entertain the miscellaneous petition without insisting on a condonation of delay application. Consequently, the substantial questions of law framed by the Revenue were left open and not decided on merits. The Tax Case Appeal was disposed of with the aforementioned liberty.

What were the facts?

The Revenue, Principal Commissioner of Income Tax 1, Coimbatore, filed an appeal before the High Court of Judicature at Madras against an order dated 25.01.2018 passed by the Income Tax Appellate Tribunal (ITAT), Madras 'A' Bench. The appeal pertains to the assessment year 2009-10 and challenges the ITAT's decision regarding depreciation on notional loss on foreign currency convertible bonds (FCCB). The assessee is M/s. Sakthi Sugars Ltd. The High Court heard arguments from both the Revenue and the assessee. The assessee informed the court that they had filed a declaration under the Vivad Se Vishwas Scheme and were awaiting orders.

What were the issues?

1. Whether the ITAT was justified in holding that the assessee is eligible for depreciation on the notional loss arising from exchange fluctuation of FCCB, considering it as a mere notional and not a real loss? (Question of law) 2. Whether the Appellate Tribunal was correct in ignoring the Supreme Court's decision in M/s. Woodward Governor India Pvt Ltd (2009) 179 Taxman 326 (SC), which stipulated that under amended Section 43A of the Income Tax Act, 1961, actual payment of decreased/enhanced liability is a condition precedent for adjusting the carrying amount of a fixed asset? (Question of mixed law and fact) Assessee's contention: The assessee stated that they had filed a declaration/undertaking under the Vivad Se Vishwas Scheme and were awaiting orders. No specific arguments on the merits of the appeal were recorded for the assessee. Revenue's contention: The Revenue argued that the loss on exchange fluctuation of FCCB was notional and not real, and that the ITAT erred in allowing depreciation on such a loss. They also contended that the ITAT ignored the Supreme Court's ruling in Woodward Governor India Pvt Ltd regarding the condition precedent for adjustment of fixed asset carrying amounts under Section 43A.

Which sections of the Income-tax Act were involved?

Section 43A,Section 260A

AI-generated summary — verify with the full judgment below

TCA.No.432 of 2018 IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 23.02.2021 CORAM : The Honourable Mr.Justice T.S.SIVAGNANAM and The Honourable Ms.Justice R.N.MANJULA Tax Case Appeal No.432 of 2018 Principal Commissioner of Income Tax 1, No.63, Race Course Road, Coimbatore. ...Appellant Vs M/s.Sakthi Sugars Ltd., 180, Race Course Road, Coimbatore - 641 018. ...Respondent APPEAL under Section 260A of the Income Tax Act, 1961 against the order dated 25.01.2018 made in ITA.No.1547/Mds/2017 on the file of the Income Tax Appellate Tribunal, Madras 'A' Bench, for the assessment year 2009-10. For Appellant: Mr.T.R.Senthil Kumar Senior Standing Counsel For Respondent: Mr.R.Vijayaraghavan for M/s.Subbaraya Aiyar Padmanabhan 1/4 https://www.mhc.tn.gov.in/judis/ TCA.No.432 of 2018 JUDGMENT (Delivered by

T.S.Sivagnanam,J

) This appeal, filed by the Revenue, is directed against the order dated 25.01.2018 made in ITA.No.1547/Mds/2017 on the file of the Income Tax Appellate Tribunal, Madras 'A' Bench ('the Tribunal' for brevity) for the assessment year 2009-10. 2. The Revenue has raised the following substantial questions of law for consideration: "1. Whether the ITAT is justified in holding that the assessee is eligible for depreciation on the notional loss without appreciating that the loss on the exchange fluctuation of FCCB is mere notional and not real loss? 2. Whether the Appellate Tribunal is correct in ignoring the decision of the Hon'ble Supreme Court in the case of M/s Woodward Governor India Pvt Ltd (2009) 179 Taxman 326 (SC) wherein it was clearly laid out that under amended Section 43A with effect from 01.04.2003 such actual payment of the decreased/enhanced liability is made a condition precedent for making adjustment in the carrying amount of the fixed asset?" 3. We have heard Mr.T.R.Senthil Kumar, learned Senior Standing Counsel appearing for the appellant-Revenue and Mr.R.Vijayaraghavan, 2/4 https://www.mhc.tn.gov.in/judis/ TCA.No.432 of 2018 appearing for M/s.Subbaraya Aiyar Padmanabhan, learned counsel for the respondent/assessee. 4. The learned counsel for the respondent/assessee submits that the respondent/assessee has already filed the declaration/undertaking under the Vivad Se Vishwas Scheme and is awaiting orders to be passed in Form No.3. 5. In the light of the subsequent event, the Competent Authority shall process the application/declaration in accordance with the Direct Tax Vivad Se Vishwas Act, 2020 (Act 3 of 2020) and pass appropriate orders as expeditiously as possible. The assessee is given liberty to restore this appeal in the event the ultimate decision to be taken on the declaration filed by the assessee under Section 4 of the said Act is not in favour of the assessee. If such a prayer is made, the Registry shall entertain the prayer without insisting upon any application to be filed for condonation of delay in restoration of the appeal and on such request made by the assessee by filing a miscellaneous petition for restoration, the Registry shall place such petition before the appropriate Division Bench for orders. 3/4 https://www.mhc.tn.gov.in/judis/ TCA.No.432 of 2018 T.S.SIVAGNANAM,J AND R.N.MANJULA,J hvk 6. The tax case appeal stands disposed of with the aforementioned liberty and consequently, the substantial questions of law framed are left open. No costs. (T.S.S.,J.) (R.N.M.,J.) 23.02.2021 Index:Yes/No Internet:Yes/No hvk To 1. The Income Tax Appellate Tribunal, Madras 'A' Bench, Chennai. 2. Principal Commissioner of Income Tax 1, No.63, Race Course Road, Coimbatore. TCA.No.432 of 2018 4/4 https://www.mhc.tn.gov.in/judis/

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