HINDUSTAN STEELWORKS CONSTRUCTION LTD.,KOLKATA vs. ITO, WD-12(1), KOLKATA, KOLKATA

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ITA 1147/KOL/2017Status: DisposedITAT Kolkata12 October 2018AY 2008-093 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the loss from the abandoned project was a revenue loss allowable under Section 37 of the Act, citing jurisdictional High Court decisions. The issue of prior period income was remitted back to the Assessing Officer for fresh adjudication.

What were the facts?

The assessee claimed a loss of Rs. 1,30,62,000/- and Rs. 2,389.97 lakhs in two assessment years, representing the written-down value of assets from an abandoned project in Libya. The assessee also had prior period income of Rs. 33.60 crores added to its income.

What were the issues?

Whether the loss from an abandoned foreign project is a capital or revenue loss, and whether prior period income arising from a change in accounting method is taxable.

Which sections of the Income-tax Act were involved?

Section 37,Section 143(3),Section 147

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Cases cited in this judgment(3)Show list

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Income Tax Appellate Tribunal, KOLKATA BENCH “B” KOLKATA

Before: Shri S.S.Godara & Shri, M. Balaganesh

आदेश /O R D E R PER S.S.Godara, Judicial Member:-

1.

These two assessee’s appeals for assessment years 2006-07 and 2008-09 arises against Commissioner of Income Tax (Appeals)-18, Kolkata’s separate orders, both dated 06.02.2017 passed in case No.527/CIT(A)-18/16- 17/Cir-11(1)/Kol and 528/CIT(A)-18/16-17/Cir-11(1)/Kol, respectively, involving proceedings u/s 143(3) read with section 147 of the Income Tax Act, 1961; in short ‘the Act’.

Heard both the parties. Case file perused.

& 1147/Kol/2017 A.Y. 2006-07 & 2008-09 Hindustan Steelworks Construction Ltd. Page 2 2. The assessee’s sole substantive grievance raised in former and first ground in latter assessment year challenges both the lower authorities action disallowing its loss claim(s) of Rs. 1,30,62,000/- and Rs. 2,389.97 lakhs; respectively by holding the same to be capital in nature. There is no dispute regarding the basic fact of the assessee having written off its project value in Libya in its P & L A/c (supra) in the two assessment years. The sole question is about nature thereof. The Assessing Officer as well as the CIT(A) hold the same to be in the nature of capital loss. We find that this identical claim represent written down value of assessee’s left over assets in its abandoned project in Libya. Hon’ble Jurisdictional High Court decision in Binani Cement Ltd. 2016 380 ITR 116 (Calcutta) has concluded that such a loss emanating from abundant projects amounts to revenue claim u/s 37 of the Act since incurred wholly and exclusively during the course of relevant business. Their lordship, earlier judgment in CIT vs Alom Industries Ltd. in ITA 724 of 2004 decided on 17.08.2015, Indo Rama Synthetics (I) Ltd. vs CIT (2011) 333 ITR 18 (Del) and Asia Power Project (P) Ltd. vs DCIT (2015) 370 ITR 257 (Karnataka) also reiterate the very view. We accept assessee’s impugned identical loss claim in both assessment years therefore. Its former appeal ITA 1146 succeeds accordingly.

3.

This leaves us with assessee’s second substantive ground in AY 2008- 09 seeking to reverse both the lower authorities’ action adding prior period income of Rs. 33.60 crores during the course of assessment as upheld in lower appellate proceedings. The assessee’s case throughout has been that the same related to interest and financial charges arising on account of change in method of charging of interest as prescribed by the Govt. of India for the period from F.Y. 1999-2002 F.Y. 2006-07 and crystalised during the relevant previous year. Learned counsel pleads that it is in the nature of a mere book keeping entry not given rise to any actual income so as to be taxed under the provisions of the Act. We find that neither the Assessing Officer nor CIT(A) have gone into details of the said change in the method of accounting & 1147/Kol/2017 A.Y. 2006-07 & 2008-09 Hindustan Steelworks Construction Ltd. Page 3 in light of Govt. of India’s directions. They have merely held the impugned sum to be taxable income since the assessee has credited the sums in its P & L account. We remit the instant issue back to the Assessing Officer for fresh adjudication as per law after considering all the relevant facts and circumstances giving rise to assessee’s alleged book entries amount to Rs. 33,60,02,654/- after affording adequate opportunity of hearing. This second substantive ground is accepted for statistical purposes. Latter main appeal ITA 1147/K/2017 has partly accepted.

4.

The assessee’s former appeal ITA 1146/K/2017 is allowed and latter appeal ITA 1147/K/2017 is partly allowed in above terms.

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