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Income Tax Appellate Tribunal, DELHI BENCH “B”, NEW DELHI
Before: SHRI S.V. MEHROTRA & SHRI RAJPAL YADAV
O R D E R PER S.V. MEHROTRA, A.M :
Both the captioned appeals, preferred by the same assessee, were heard together and are being disposed of by this consolidated order for the sake of convenience.
The appeal, filed by the assessee vide for assessment year 2006-07 is against the order dated 05.08.2013, passed by the Commissioner of Income Tax (Appeals)-VI, New Delhi, u/s 147/143(3) of the Income Tax Act, 1961 (in short “the Act”) and the appeal filed by the assessee vide 2007-08 is against the order dated 03.01.2013, passed by the Commissioner of Income Tax (Appeals)-VIII, New Delhi, u/s 143(3) of the Act.
Facts as regards addition u/s 41(1) are identical for both the years and, therefore, we refer to facts obtaining in assessment year 2006-07.
Brief facts of the case are that assessee had filed return of income declaring a loss of Rs.3,80,21,811/-. The case was selected for scrutiny and the assessment was completed u/s 143(3) of the Act on 21.10.2008 at a loss of Rs.3,17,55,150/-. Thereafter, notice u/s 148 dated 21.04.2010 was issued, inter-alia, for following two reasons :-
“(ii) Assessee had claimed exemption from the provisions of section 41(1) on a sum of Rs.935,37,76,000/- by relying upon the order of BIFR. However, the matter had not attained finality therefore, such claim was not maintainable under law. In view of the same such exemption from provisions of section 41(1) was wrongly claimed. (iv) Prior period expenses amounting to Rs.8,09,14,000/- were claimed by the assessee.”
The assessment was completed at total income of Rs.885,00,87,850/- after making both the above additions. Ld. CIT(A), while partly allowing the assessee’s appeal, confirmed both these additions. Being aggrieved, the assessee is in appeal before us and has taken following grounds of appeal in :-
“1) The order of the Learned Commissioner of Income Tax (Appeals)- VI- New Delhi is bad in law and should be quashed. 2) The Learned Commissioner of Income Tax (Appeals) erred in ignoring the submission that the view of the Income Tax Department has been considered by the Hon'ble BIFR while framing the Sanctioned Scheme. 3) The Learned Commissioner of Income Tax (Appeals) erred having not considered the Hon'ble BIFR order dated 03.05.2006, where view of the Income Tax Department has been considered. 4) The Income Tax Department has written a letter to Hon'ble BIFR that since considerable time was involved in working out the exact quantum and period of relief and concession, therefore it was requested that the DRS (Draft Rehabilitation Scheme) may be sanctioned with the words to consider with respect to the reliefs and concessions. 5) The final scheme has been sanctioned by the Hon'ble BIFR vide its order dated 03.05.2006 incorporating the view of The Income Tax Department in clause 9 under heading Reliefs & Concessions sub heading 9.8 (a) Central Board of Direct Taxes at page 26 of the sanctioned scheme stating this to consider providing exemption to CCI under section 41(1) of Income Tax Act. 6) The Learned Commissioner of Income Tax (Appeals) erred in disallowing Rs.883,94,96,000/- out of the exempt income on the ground that the DRS (Draft Rehabilitation Scheme) has not been considered by the CBDT. 7) The Learned Commissioner of Income Tax (Appeals) ought to have allowed the whole exempt income as per relief given by the Hon'ble BIFR in the sectioned scheme U/s 41(1) of Income Tax Act. 8) The Learned Commissioner of Income Tax (Appeals) erred in disallowing the prior period expenditure whereas prior period income has been taken into consideration. 9) Submission before the Learned Commissioner of Income Tax (Appeals) on the same issue decided by the Hon'ble High Court of Delhi in the case of CIT vs. Exxon Mobil Lubricants Pvt. Ltd. Not accepted.
10) The Learned Commissioner of Income Tax (Appeals) ought to have allowed the prior period expenditure based on the Delhi High Court decision. 11) The Appellant craves leave for reserving the right to ammend, modify, alter, add or forgo any grounds of appeal.”
The assessee in has taken following grounds of appeal :-
“i) That on the facts and in the circumstances of the case, the Commissioner of Income Tax (Appeals)-VI, New Delhi (CIT (A) for short) erred in holding that the Assessing Officer was justified in initiating proceedings u/s 147/148 of the Income Tax Act, 1961 (Act for short). ii) That on the facts and in the circumstances of the case, CIT(A) erred in confirming the action of the AO in deeming an income of Rs. 883,94,96,000/- as income u/s 41(1) of the Act. iii) That on the facts and in the circumstances of the case, CIT(A) erred in confirming the action of the AO in disallowing prior period expenses of Rs. 3,37,39,000/-. iv) That the appellant company craves liberty to add, alter, vary or amend any ground of appeal.”
7. Ld. counsel for the assessee, Shri G. N. Gupta, submitted that assessee is a Government of India Undertaking and was engaged in the manufacture and sale of cement. However, the assessee was declared sick Undertaking by BIFR on 08.08.1996. Subsequently, a scheme was approved by BIFR, vide its order dated 03.05.2006, which is under implementation. Ld. counsel for the assessee pointed out that the Assessing Officer erred in disallowing Rs.883,94,96,000/- out of exempt income on account of withdrawal of interest liability and, thereby, withdrew relief given by the BIFR in the sanctioned scheme treating Rs.883,94,96,000/- as deemed income u/s 41(1) of the Act. He pointed out that the ld. CIT(A) dismissed the assessee’s appeal, inter-alia, observing that there was no evidence on record to show that the income which has been claimed to be exempt by the assessee had been considered and accepted by the CBDT.
Ld. counsel referred to page 61 of Paper Book wherein the order of BIFR dated 05.12.2005 is contained. Ld. counsel pointed out that para 4 of the said order reads as under :-
“BOARD FOR INDUSTRIAL AND FINANCIAL RECONSTRUCTION CASE NO.501/96 RE.: CEMENT CORPORATION OF INDIA LTD. BENCH-I ORDER ……….
4. The Central/State Govt. concerned may, where required, seek requisite/additional information from the company immediately and would ensure to indicate within the specified time, their specific decision in terms of Section 19(2) of the Act otherwise it shall be deemed that consent has been given as the Board might not be able to establish the viability of the rehabilitation scheme under consideration expeditiously if the consent or objections are not received within the stipulated time limit. Further, at the hearing to consider objections/suggestions to the DRS, the officer attending must be fully briefed of the policy of the Central/State Govt. and would indicate whether consent was being given and if not, the reasons thereof why consent was not being given. He should also carry with him a copy of the policy guidelines of the State/Central Govt. The above would be equally applicable, mutatis mutandis, to all those who are to extend their consent in terms of Section 19 of the Act. Sd/- Sd/- (A.K. Goswami) (Ravindra Gupta) Member Chairman New Delhi Dated : 05.12.2005
Ld. counsel referred to approved rehabilitation scheme, the para 9.8 of which reads as under :-
“9.8 CENTRAL BOARD OF DIRECT TAXES (a) To consider providing exemption to CCI under Section 41(1) of Income Tax Act. (b) To consider exempting CCI from Section 72 of Income Tax Act to carry forward the accumulated losses beyond a period of 8 years. (c) To consider exempting CCI from Capital Gain Tax on sale of its seven non-operating units i.e. Mandhar, Kurkunta, Akaltara, Adilabad, Nayagaon, Charkhi Dadri and Delhi Grinding Unit/ Bhatinda Unit. (d) To consider waiving of penalties, surcharges, etc. if any levied in the past.”
Ld. counsel for the assessee pointed out that as far as assessment year 2006-07 is concerned, nothing had happened because the scheme itself was sanctioned on 03.05.2006. He, further, pointed out that as far as assessment year 2007-08 is concerned, the entire addition is subject to CBDT’s approval. He, therefore, submitted that the matter can be restored back to the file of the Assessing Officer for passing the order in terms of sanctioned scheme after considering the CBDT approval.
We have considered the submissions of both the parties and have perused the record of the case. In the assessment order, the Assessing Officer has pointed out that the report of DIT(R) in this regard was still awaited and, therefore, the benefit of exemption from the provisions of section 41(1) had not been provided, inter-alia, observing that the claim of the assessee was premature. These observations itself make it clear that the addition had not been made on any concrete basis. In our opinion, considering the terms of approved rehabilitation scheme, it would be proper to set-aside the matter for both the assessment years under consideration to the file of the Assessing Officer to make the addition only in line with the directions of BIFR after considering the CBDT’s directions in this regard.
The next issue in assessment year 2006-07 is in regard to prior period expenses. Ld. counsel pointed out that neither prior period income nor prior period expenses can be taken into consideration. In this regard, he relied on the decision of the Hon’ble Delhi High Court in the case of CIT vs. Exxon Mobil Lubricants Pvt. Ltd. in order dated 08.09.2010.
Ld. DR submitted that if the matter is going back on first issue to the file of Assessing Officer, therefore, this may also be restored back to the file of Assessing Officer. After considering the submissions of both the parties, we restore this issue also to the file of Assessing Officer to examine the issue afresh in the light of decision of Hon’ble Delhi High Court in the case of
In the result, both the captioned appeals of the assessee are allowed for statistical purposes. Order pronounced in the open court on this 23rd day of December, 2016.