M/S NATIONAL TEXTILE CORPORATION LIMITED,KOLKATA vs. CIT, (APPEALS)-XII, KOLKATA, KOLKATA

- This assessee’s appeal for assessment year 2004-05 arises against the Commissioner of Income Tax (Appeals)-XII’s order dated 09.12.2013 passed in appeal No.269/XII/ACIT.12/06-07 upholding Assessing Officer’s action making additions of interest waiver by National Textile Corporation Ltd. of ₹383,63,20,000/- and interest on raw material to the tune of ₹29,68,63,000/- as chargeable to tax u/s 41(1) of the Act in the nature of cessation of liability, in proceedings u/s 143(3) of the Income Tax Act, 1961; in short ‘the Act’. Heard both the parties. Case records perused. A.Y. 2004-05 M/s National Textile Corpn. Ltd. Vs. CIT-XII, Kol. Page 2 2. We notice at the outset that assessee’s instant appeal suffers from delay of 97 days in filing. Learned authorized representing assessee take us to its condonation petition dated 18.09.2014 solemnly averring therein that its authorized person for the purpose filing the instant appeal was on foreign visit(s) to various countries for official purposes after receipt of the assessment order dated 04.04.2014. Revenue side fails to rebut the said factual averments. It is therefore apparent that the impugned delay of 97 days is neither intentional nor deliberate but because of circumstances beyond assessee’s control. The same stands condoned accordingly. We not take up the instant appeal for adjudication on merits.

We have already made it clear that assessee raises two substantive grounds in its instant appeal challenging both the lower authorities identical action invoking u/s 41(1) qua its interest waived by National Textile Corporation and one pertaining to raw materials involving amount of ₹383,63,20,000/- and ₹29,68,63,000/-; respectively on the ground that the same represented cessation of the past liability in the impugned assessment year to be treated as income u/s. 41(1) of the Act.

This assessee is admittedly a Public Sector Undertaking being wholly owned subsidiary of National Textile Corporation Ltd which in turn is a government company through Government of India, Ministry of Textiles. It is a sick company as well as per the Sick Industrial Companies (Special Provisions) Act, 1985, “SICA” hereafter. The assessee approached Board for Industrial and Financial Re-construction (BIFR) as per the said Act for its revival. The BIFR framed its Draft Rehabilitation Scheme (DRS). The same was put to circulation as per A.Y. 2004-05 M/s National Textile Corpn. Ltd. Vs. CIT-XII, Kol. Page 3 law. Page 90 of the paper book makes it clear that the BIFR proposed the Ministry of Finance / CBDT to exempt the assessee from provision of section 41(1) of the Act. No response came from any of the said two parties. The said scheme therefore stood finalized as per BIFR order dated 21.03.2002 involving these two impugned interest amounts. The Assessing Officer as well as the CIT(A) invoke section 41(1) of the Act qua these two interest amounts after rejecting assessee’s plea that once the CBDT’s or the Ministry of Finance’s refusal had not come before the BIFR, it was a case of deemed consent. The instant appeal therefore raises a short question as to whether it could be assumed that the Ministry of Finance or the CBDT had given deemed consent or not in the given instant facts and circumstances of the case.

We have given our thoughtful consideration to rival contentions reiterating both parties’ respective stands. Learned CIT DR appearing at Revenue’s behest vehemently contends during the course of hearing that deemed consent could not be assumed in SICA law so as to be having overriding effect over and above the provision of income tax law. We find no merit in the instant argument as section 19(2) of the SICA Act makes it clear that a deemed consent can very well be assumed in case no consent is received qua the “DRS” in question from the parties concerned. This is not the Revenue’s case that it had not received a copy of the “DRS” in question as per the provision of SICA Act. Hon'ble Delhi High Court’s decision in Civil Writ Petition No.7592 of 2009 Government of India, Department of Revenue vs. Appellate Authority for Industrial & Financial Reconstruction considers all the CBDT’s circulars in this issue as issued from time to time and holds that deemed consent can very well be inferred in case no objection is received within the A.Y. 2004-05 M/s National Textile Corpn. Ltd. Vs. CIT-XII, Kol. Page 4 specified period of 60 days of the date of circulation of the “DRS” in question. We therefore conclude that both the learned lower authorities have erred in law as well as on facts in making the two additions u/s. 41(1) of the Act. The same are accordingly deleted.