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Income Tax Appellate Tribunal, BENCH “B” MUMBAI
Before: SHRI D.T.GARASIA, JM & SHRI RAJESH KUMAR, AM
सुनवाई की तारीख /Date of Hearing : 14.2.2017 घोषणा की तारीख /Date of Pronouncement : 11.5.2017 आदेश / O R D E R PER RAJESH KUMAR, A. M: This is an appeal filed by the assessee against the order dated 17.1.2012 passed by the ld.CIT(A)-5, Mumbai, for the assessment year 2007-08.
Grounds of appeal
taken by the assessee are as under :
1. In the facts and circumstances of the case and in law the Learned Commissioner of Income Tax Appeals 5, Mumbai [lithe CIT (A)"] erred in upholding the action of the Income Tax Officer 2(2) (3), Mumbai ["The A.O."] in making an addition of Rs 1,79,53,595 being sundry credit balances of Kolkata branch u/s 41(1) of the Income Tax Act, 1961. ["the Act"].
2. In the facts and circumstances of the case and in law the Learned Commissioner of Income Tax Appeals 5, Mumbai ["the CIT (At] erred in rejecting the claim of the appellant that the A.O. having chosen to make an addition of Rs 1.79,53,595 ought to have allowed corresponding deduction for unrecovered debtors of Rs 1,80,72,562.
3. In the facts and circumstances of the case and in law the CIT (A) erred in upholding the action of the A.O. in making an addition of advances from customers Rs 1,02,99,091 and Rs 43,89,471 being amount held on behalf of principal u/s 28(iv) of the Act. 4. In the facts and circumstances of the case and in law the CIT (A) erred in upholding the action of the A.O in making an addition of Rs.1,66,212 being monies received from Kenyan Government u/s 28(iv) of the Act”
Brief facts of the case are that the assessee was engaged in the business of shipping agents, carries on the activities like overseas recruitment, management, pension, gratuity fund for foreign shipping companies for which staff was recruited from India beside doing travel agency and cargo handling etc. During the year, the assessee filed its return of income at NIL on 31.10.2007, which was processed under section 143(1) of the Act on 14.8.2008. The case of the assessee was selected for scrutiny and the statutory notices u/s 143(2) and 142(1) were issued and served on the assessee. The company has accumulated losses of almost 6.00 crores. The company had incurred huge losses year after year due to unfavourable business conditions. During the course of assessment proceedings, the AO observed from perusal of note No.4(vii) which is an extract of Audit report and reads as under :
3 “Note No.4(vii) non availability of confirmations in respect of balances of secured and unsecured loans, debtors, certain bank balances, deposits, and creditors appearing in schedule 3,7,8,9 and 10 of the accounts respectively (Refer Note no.10 in schedule 19)” On the basis of above note, the AO called upon the assessee to file particulars of persons and details thereof qua various liabilities in respect of sundry creditors, advances from customers and amounts held for principals as appearing in schedule 10 of the annexure to audited accounts. The assessee furnished all the details as called for by the AO in respect of all branches except Calcutta Branch which could not be filed due to outbreak of fire on 17.11.1998 in the business premises in the Calcutta Branch. The assessee also tried to reconstruct the records but could not do so due to the constraint of manpower as most of the employees were terminated after blaze broke out and the position further deteriorated due to heavy downpour in Mumbai on 26.7.2005 and the said fact duly stated in Note no.12 of Schedule 19 (Note to balance sheet and profit and loss account) which is reproduced below:
“The company‟s old records were destroyed owing to heavy rains which took place in Mumbai on 26.7.2005 resulting in seepage in premises where the records were kept. The company is in process of reconstructing records to the extent possible” The said fact was further brought out by giving public notice in the news paper about the destruction of documents in devastating floods on 5.8.2005 in Mumbai. Having dwelt upon the brief background now we will deal with the appeal ground-wise as under :
Grounds no.1 and 2 are interconnected and against the confirmation of addition of Rs 1,79,53,595 by the ld.CIT(A) as made by the AO towards sundry creditors‟ balances of Calcutta Branch and the issue in ground no.2 is against the non allowance and non adjustment of loss on account of sundry debtors of Rs.1,80,72,562, the details whereof were not available. The AO made the addition in respect of outstanding sundry credit balances to the total income of the assessee u/s 41(1) of the Act on the ground that these creditors have remained unpaid for long time and these were not written back despite the facts that the assessee was not knowing even the names of the said creditors to whom the payments to be made.
In the appellate proceedings, the ld. CIT(A) confirmed the addition on the ground that the assessee was not in a position to furnish the details of sundry creditors by rejecting the contentions of the assessee that records were not possible to be produced on account of the destruction of records in the fire and the termination of staff of Calcutta Branch after the outbreak of fire in the office. The ld. CIT(A) further observed that these creditors‟ advances were lying outstanding for so many years despite the fact that the assessee did not know the details of these creditors in view of the fact that a note by the auditor of the company stating that according to the information and in the opinion of the statutory auditor of the company these amounts should be written back. The ld. CIT(A) after considering the arguments of the “ 3.5. i. I have considered the submission of the AR and perused the assessment order and remand report of the AO. During the assessment proceedings on a specific query of the AO, the appellant failed to furnish names of the creditors, their addresses, details of outstanding dues, confirmed copy of accounts, etc. The submission made before the AO were reiterated before me during the appellant proceedings. Even during the appellate proceedings, the appellant has failed to give basic detail regarding shown creditors in the balance sheet which are lying for so many years. It is also not plea of the appellant that any amount of interest is being paid to the said creditors. No prudent businessman will leave any amount with anybody without any interest or without making any recovery of the same during the passage of time. It is rather surprising that tile appellant has not been able to furnish even the name of the said creditors. In view of these facts and circumstances of the case and for the reasons as given by the AO in assessment order and remand report, the AO is justified in making addition of RS.1 ,79,53,595/- to the income of the appellant. [3.5.ii. The claim of the appellant by filing the additional ground for the corresponding deduction of unrecovered debtors of the amount of RS.1,80,72,562/-, is not correct in view of the provision of the I.T.Act any unrecoverable amount of debtors can be claimed as bad debts after actually writing off in the books of account u/s.36(vii) of the 1.T.Act. Therefore. the claim of the appellant deserves to be rejected and additional ground is accordingly dismissed”
The ld. AR submitted before us that addition by AO u/s 41(1) of the Act in respect of sundry creditors as confirmed by the ld.CIT(A) were appearing in the company accounts for many years and these creditors related to Calcutta Branch. He further submitted that in the devastating fire which broke out in Calcutta on 7.11.1998, these records and documents of the assessee were burnt following which the office had to be closed and the employees of the 6 company were also terminated. The assessee company tried itself to recover, retrieve and reconstruct the details of these papers and details of the creditors. However, the efforts of the company were also hampered because of the heavy downpour and flood in Mumbai on 26.7.2005. The company also tried to extract the details from auditors of the company that also proved futile and even details of the company was not able to furnish the details. The ld. AR further argued that non-filing of details qua sundry creditors did not in any manner prove that the liability/sundry creditors become non-existent or ceased to exist. So much so that the sundry debtors‟ details and addresses were also not found following which the company could not file any suit against the debtors or in some cases the following the suits against the debtors would be uneconomical, keeping in view precarious financial position of the company. The ld. AR also stated that year after year the company was filing its return of income submitting annual accounts before all the authorities including Company Law Board. While making the addition the authorities below have relied upon the two decisions which were clearly distinguishable as under : i) Solid Containers Ltd V/s DCIT (308 ITR 417) (Bom), wherein the Hon‟ble Bombay High Court has held that loan taken for trading activities ultimately, upon waiver the amount was retained in business by the Assessee. The income has become assessee‟s income and was assessable to tax whereas in the present case the amount continued to be reflected in the liability and therefore squarely distinguishable. ii) In the case of CIT V/s T V Sundaram Iyengar and Sons Ltd reported at 222 ITR 344 (SC). In this case, the assessee who had written off the 7 credits and had credited the amount to the profit and loss account but while filing the return that was not shown as income by pleading that the receipt was of capital in nature and should not be treated as revenue expenditure without being written back. The Hon‟ble Supreme Court has held that by lapse of time the nature of amount attained a totally different character quality and became a definite trade surplus particularly because assessee itself had treated the money as its own money and taken the amount to its profit and loss account. Whereas the facts in the present case were totally different. The assessee had not obtained waiver of these creditor and the creditors have no in no way given up their rights on these amount. The ld. AR further argued that merely because these creditors were very old would not be justification to treat as income.
In defence of his arguments the ld.AR heavily relied upon the following case laws: i) CIT V/s Sugauli Sugar Works (P) Ltd (236 ITR 518)(SC) ii) New Commercial Mills Co Ltd V/s DCIT 73 TTJ 893(Ahd) iii) CIT V/s Vardhman Overseas Ltd reported at 343 ITR 408 (Del) The ld.AR finally prayed that it was unequivocally clear that the in the balance sheet these amounts were outstanding for many years and therefore cannot be treated as ceased liability under the provisions of section 41(1) of the Act specially when the assessee was the corporate entity acknowledging these credits by showing the same in the balance sheet and thus conclusion drawn by the ld. CIT(A) was totally wrong and unwarranted in these view of the facts and should be reversed. In the alternative, the ld.AR submitted that the addition of Rs.1,79,53,595/- was made under section 41(1) on the ground that the balances were old and the assessee was not in a position to furnish any details The same was the position with respect to sundry debtors of Kolkata branch amounting to Rs.1,80,72,562/-. The ld. AR submitted that the assessee has 8 ITA No.2392/M/2012 made counter claim before the AO and ld.CIT(A) on same analogy that the amount of sundry debtors should be allowed to be adjusted against the amount of sundry creditors. However, the same was not allowed on the ground that the assessee‟s claim of outstanding debts could not be considered for want of compliance under section 36(1)(iv) of the Act. The ld.AR submitted that the part of the total creditors represented the money payable by the assessee to its member from the money receivable from the client for the services rendered by the assessee. The ld. AR further argued that the condition of section 36(1)(vii) were not required to be fulfilled because whole amount has not gone to credit of profit and loss account. It was the business loss and should be allowed u/s 37 of the Act and therefore the assessee should be allowed reduction and adjustment of the amounts of sundry debtors against the amount of sundry debtors.
On the other hand, the ld.DR vehemently opposed the arguments of the ld.AR by submitting that the credit balances were 10 to 15 days old for which the assessee was not having any details and addresses. The ld. DR argued that no efforts were made by the assessee-company to find out the addresses and details of these creditors and the ld.DR prayed that the matter be restored to the file of the AO so that the exact position could be found out in this regard.
We have carefully considered the rival contentions and perused the material placed before us including the orders of authorities below and case laws relied upon by the parties. The undisputed facts of the case are that the fire broke out in the office premises of the assessee at Calcutta on 7.11.1998 and the entire records were burnt following which its office of the Calcutta Branch was closed down and employees there were also terminated. The company‟s effort to reconstruct its record and registers of details of sundry creditors and sundry debtors were also proved futile due to heavy downpour in Mumbai on 26.7.2005 and the company did not have any records to be furnished before the lower authorities. The addition made by the AO in the assessment proceedings qua these sundry credit balances were further confirmed by the ld.CIT(A). The assessee has been showing all these sundry creditors and sundry debtors in its balance sheet from 10 to 14 years which were filed before the various authorities and was also suffering losses year after year and as a result accumulated loss over the years were to the tune of Rs.6.00 crores. Now, the issue before us whether the sundry creditors of Rs.1,79,53,595/- which were continued to be shown as payable in the accounts of the company in respect of its Calcutta Branch could be added u/s 41(1) of the Act primarily for the reasons that the assessee failed to furnish details, addresses and confirmations of the said creditors whereas the company has filed all the details in respect of all other branches before the lower authorities.
In the case of Sugauli Sugar Works (P) Ltd (supra), the Honble Supreme held as under: “that the mere fact that the assessee has made entry of transfer in his accounts unilaterally will not enable the department to say that section 41 would apply and the amount should be included in the total income of the assessee. Just because an assessee made an entry in his books of account unilaterally, he cannot get rid of his liability. The question whether the liability is actually barred by limitation, is not a matter which could be decided by considering the assessee's case alone but it is a matter which has to be decided only if the creditor is before the concerned authority. In the absence of the creditor, it is not possible for the authority to come to a conclusion that the debt was barred and had become unenforceable. There may be circumstances which may enable the creditor to come with a proceeding for enforcement of the debt even after expiry of the normal period of limitation as provided in the Limitation Act. The principle that expiry of period of limitation prescribed under the Limiation Act cannot extinguish the debt but it will only prevent the creditor from enforcing the debt is well-settled. If that principle is applied, it is clear that mere entry in the books of account of the debtor made unilaterally without any act on the part of the creditor will not enable the debtor to say that the liability has come to an end. Apart from that, that will not by itself confer any benefit on the debtor as contemplated by the section. In the appellant‟s, case amount of liability continues as i is. It is not even transferred to capital reserve account. The Hon‟ble Supreme Court also makes it clear that even the Limitation may not Apply in such cases.” In the case of New Commercial Mills Co. Ltd (supra) wherein it has been held by the Ahmedabad Bench of the Tribunal as under :
11 “The Assessing Officer had admitted the fact that these liabilities were carried forward from the last 10 to 15 years, then why the year under consideration had been chosen to tax those liabilities. There were no cogent reasons and material evidence to support that these liabilities had been ceased in the year under consideration in the orders of revenue authorities. With this fact, it was very difficult to agree with the revenue authorities to tax such liabilities under section 41(1) in the year under consideration. Apart from this, generally income-tax is levied on taxable income earned by the assessee in financial year, where necessary, the Legislature has made an exception. An instance is to be found in section 41(1). At the relevant time, inter alia, provide that where an allowance or deduction has been made in the assessment for the year in respect of loss, expenditure or trading liability incurred by the assessee and subsequently during any previous year, the assessee has obtained whether in cash or in any other manner whatsoever any amount in respect of such loss or expenditure or some benefit in respect of such trading liability by way of remission or cessation thereof, the amount obtained by him or value of benefit accruing to him, shall be deemed to be profits and gains of business of profession and, accordingly, chargeable to income-tax as the income of that previous year. Thus, wherever there is remission of an amount or cessation of a trading liability, the amount received in the previous year can become assessable to tax. Hence the important words are „remission and cessation‟. „Remission‟ has to be granted by the creditors and the cessation of the liability may occur either by reason of the operation of law, that is, on the liability becoming unenforceable in law by the creditor and the debtor declaring unequivocally his intention not to honour his liability when payment is demanded by the creditor or contract between the parties or by discharge of the debt, the debtor making payment thereof to his creditor. In the year under consideration, no onus has been discharged by the revenue in providing that the impugned liabilities have been ceased in the year under consideration. In view of the totality of facts and the circumstances of the case and in view of the above discussion and observations, the orders of revenue authorities are set aside and the additions made under s.41(1) is deleted”., In the case of Vardhman Overseas Ltd, (supra) the Hon‟ble Delhi High Court has held as under :
12 “16. In our opinion, the judgment of the Supreme Court in Sugauli Sugar Works (P.) Ltd. (supra ) is a complete answer to the contention of the learned standing counsel. In the case before the Supreme Court for a period of almost 20 years the liability remained unpaid and this fact formed the basis of the contention of the revenue before the Supreme Court to the effect that having regard to the long lapse of time and in the absence of any steps taken by the creditors to recover the amount, it must be held that there was a cessation of the debts bringing the case within the scope of Section 41(1). In the case before us, the identical contention has been taken on behalf of the revenue, though the period for which the amount remained unpaid to the creditors is much less. It was held by the Supreme Court that a unilateral action cannot bring about a cessation or remission of the liability because a remission can be granted only by the creditor and a cessation of the liability can only occur either by reason of operation of law or the debtor unequivocally declaring his intention not to honour his liability when payment is demanded by the creditor, or by a contract between the parties, or by discharge of the debt.
17. In the case before us, as rightly pointed out by the Tribunal, the assessee has not transferred the said amount from the creditors' account to its profit and loss account. The liability was shown in the balance sheet as on 31st March, 2002. The assessee being a limited company, this amounted to acknowledging the debts in favour of the creditors. Section 18 of the Limitation Act, 1963 provides for effect of acknowledgement in writing. It says where before the expiration of the prescribed period for a suit in respect of any property or right, an acknowledgement of liability in respect of such property or right has been made in writing signed by the party against whom such property or right is claimed, a fresh period of limitation shall commence from the time when the acknowledgement was so signed. In an early case, in England, in Jones v. Bellgrove Properties [1949] 2KB 700, it was held that a statement in a balance sheet of a company presented to a creditor- share holder of the company and duly signed by the directors constitutes an acknowledgement of the debt. In Mahabir Cold Storage v. CIT [1991] 188 ITR 91/56 Taxman 4ZF , the Supreme Court held: "The entries in the books of accounts of the appellant would amount to an acknowledgement of the liability to Messrs. Prayagchand Hanumanmal within the meaning of Section 18 of the Limitation Act, 1963, and extend the period of limitation for the discharge of the liability as debt."
Upon perusal of the above decisions, it is clear that mere outstanding balances for many years would not justify the conclusion that there was cessation of liability u/s 41(1) of the Act. The appellant has also acknowledged the credits and shown them in the balance sheet. In our opinion, the ratio laid down in the above decisions squarely covers the case of the assessee. Whereas, the cases relied upon by the revenue in the case of Solid Containers Ltd (supra) and T V Sundaram Iyengar and Sons Ltd(supra) are clearly distinguishable on facts. In view of this discussion hereinabove and in the light of ratio laid down in the various decisions supra, we set aside the order of the ld.CIT(A) and direct the AO to delete the amount of Rs.1,79,53,595/-. Ground No.1 is decided in favour of the assessee.
Since we have decided ground no.1 of this appeal in favour of the assessee, there is no need to decide ground No.2 hence dismissed.
Grounds of appeal no.3 and 4 are against the confirmation of addition of Rs.1,02,99,091/- being advances received from the customers Rs.43,89,471/- an amount held on behalf of principal and Rs.1,66,212/- being monies received from Kenyan Government u/s 28(iv) of the Act.
13. The AO on perusal of the balance sheet of the assessee found that the advances from the customers, amounts held on behalf of principles and money held on behalf of Kenyan Government amounting to Rs.1,02,99,901/-, 14 Rs.43,89,471/- and Rs.1,66,212/- respectively , were outstanding for the last so many years and hence the AO issued notice to the assessee as to why these amounts should not be brought to tax as being time barred and unexplained which was replied by the assessee vide letters dated 28.10.2009, 23.11.2009 and 25.11.2009. The AO not convinced with the submissions of the AR, came to the conclusion that even balances outstanding for more than 10 years and assessee was not able to provide details, names and addresses and confirmations from the parties qua these outstanding amounts by citing the reasons that the record of the Calcutta Branch was completely destroyed in fire and was not traceable. The AO rejected these contentions and accordingly added the same to the total income of the assessee u/s 28(iv) of the Act by following the ratio laid down in the cases of T V Sundaram Iyengar and Sons Ltd(supra) and M/s Solid Containers Ltd (supra). Aggrieved by the decision of the AO, assessee preferred appeal on this issue before the ld.CIT(A) who also dismissed the claim of the assessee by observing holding as under( para 4.6):.
4.6 I have considered the submission and assessment order in regards to ground No.2 and ground NO.3. The AO made addition on tile basis of remarks made by the auditors of the appellant company and for the reason that the appellant failed to produce basic details. of these credits. Further, the AO placed reliance on Hon'ble Bombay High Court decision in the case of Solid Containers Ltd. (308 ITR 417) and Hon'ble Supreme Court in the case of TV. Sundaram Iyengar & Sons Ltd ... (222 ITR 344 (Se)) The position remains the same even before me. The appellant failed to produce details of the said parties who as per claim of the appellant deposited such a huge sum with the appellant. Further, it seems no 15 interest has been paid, and admittedly no portion of amount is returned to the said depositors. In view of the above reasons and fact and circumstances of the case position of law, the addition made by the AO is confirmed. These grounds are accordingly dismissed.”
The ld. AR vehemently submitted before us that the ld.CIT(A) confirmed the order of the AO by observing that the assessee could not furnish the details of these amounts upholding by invoking the provisions of section 28(iv) of the Act. The ld. AR submitted that the provisions of section 28(iv) of the Act were not applicable to the transactions involving the monies and that only applicable to the benefits and perquisites and not the money received by the assessee in the normal course of business. In defence of his arguments the ld.AR relied upon the following case law: i) CIT V/s Alchemic Pvt Ltd reported in 130 ITR 168 (Guj); ii) Iskraemeco Regent Ltd (196 Taxman 103) (Mad High Court); iii) Ravinder Singh and Amptjer V/s CIT (205 ITR 353) (Delhi High Court); iv) ITO V/s Ahuja Graphic Machinery (P) Ltd (109) ITD 71 (Mum)(TM). The ld. AR submitted that the provisions of section 28(iv) of the Act provides for the assessment of the value of any benefit or perquisite arising from the business or the exercise of a profession as income of the assessee and these provisions do not deal with actual receipt of money which has been held in the aforesaid judgements issued by the various High Courts and the Tribunal that sundry creditors balance do not fall within the purview of section 28(iv) of the Income Tax Act, 1961 and they involve actual money/financial transactions.
The ld. AR further submitted that the genuineness of the liability under various heads was enquired into by the revenue authorities in the scrutiny assessment for the assessment year 2003-04 by referring to the assessment orders filed at pages 66 to 70 of the paper book. The ld.AR submitted that that the claim of the assessee was accepted by the department and the position remained unchanged in subsequent years, when the assessments were made u/s 143(3) of the Act for the assessment years 2004-05 and 2005-06 as placed at pages 71 to 78 of the paper books. The ld. AR further stated that similar qualifying notes were given in the balance sheet in last several years including balance sheet for assessment year 2003-04, 2004-05 and 2005-06 as placed at pages 1 to 6, 14 to 19 and 27 to 32 of the paper book respectively and such notes only bring to the attention of the management the need necessity to take only necessary action against the outstanding balances of the certain companies. The Auditors have not expressed any opinion that these amounts should be written back and therefore the action of the ld. CIT(A) is not justified in upholding the order of the AO that these liabilities have ceased. The ld. AR, therefore, argued that there has been no inquiry and no subsequent development which required different stand therefore the principle of resjudicatta, the additions u/s 41(1) were unwarranted. The ld. AR relied upon the following decision CIT V/s Excel Industries Ltd (358 ITR 295), Radhasoamy Satsang V/s CIT (193 ITR 321 (SC), CIT V/s Gopal Purohit (34 17 DTR 52). The ld. AR submitted that these credit balances have been existing for several preceding years and after making due inquiries the revenue has accepted in assessment year 2003-04 and subsequent years. Since there was no development in the current assessment year and therefore the addition u/s 28(iv) was wholly unjustified and should be reversed.
The ld. DR on the other hand heavily relied upon the orders of authorities below and submitted that authorities below have rightly sustained the addition as made by the AO as the assessee could not submit the necessary details qua the addresses and PAN and confirmations thereof and therefore the liabilities which were outstanding for more than 10 years could not to be said to be existing for which the assessee has nothing to say as to whom to be paid and how much to be paid. The ld. DR prayed before the Bench that the order of the ld. CIT(A) should be upheld.
We have carefully considered the rival contentions and perused the material placed before us including the orders of authorities below. The undisputed facts are that the assessee received advances from the customers, amounts held from principals and amounts held on behalf of Kenyan Government amounting to Rs 1,02,99,091,Rs 43,89,471/- and Rs.1,66,212/- respectively. The authorities below have added the same as income u/s 28(iv) by relying on the decision in the case of Solid Containers Ltd (supra) and T V Sundaram Iyengar and Sons Ltd (supra), whereas as a matter of fact under 18 ITA No.2392/M/2012 section 28(iv) the taxation of benefit and perquisites are dealt with. For the sake of convenience, the provisions of section 28(iv) are reproduced below: “Profits and gains of business or profession.
The following income shall be chargeable to income-tax under the head "Profits and gains of business or profession",— (i); (ii) (iiia) (iv) the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession; The perusal of the aforesaid provision reveals that the section applies for the value of any benefit or perquisite. We therefore find merits in the argument of the ld.AR that where money received or held from the creditors the provisions of section 28(iv) cannot be invoked. The case of the assessee is supported by following decisions: In the case of Alchemic Pvt Ltd(supra), the Hon‟ble Gujarat High Court has held as under : “7. So far as the question of section 28(iv) of the Act is concerned, section 28(iv) provides that that income falling under clause (iv) of section 28 shall be chargeable to income-tax under the head "Profits and gains of business or profession". Clause (iv) provides:
the value of any benefit or perquisite, whether convertible into money or not, arising from business or the exercise of a profession.
It is obvious that if what is received either by way of benefit or perquisite is money, there is no question of considering the value of such monetary 19 benefit or perquisite under clause (iv) and including the value of such benefit or perquisite under the head "Profits and gains of business or profession". It is only if the benefit or the perquisite is not in cash or money but is non-monetary benefit or non-monetary perquisite that the question of including the value of such benefit or perquisite would ever arise. Under these circumstances the Tribunal was right in rejecting the contention urged on behalf of the revenue that the amount of Rs. 15,964 should be brought to tax as value of any benefit or perquisite within the meaning of section 28 (iv). The Tribunal doubted whether the amount of Rs. 15 964 was any benefit—" It may or may not be a benefit". Another question is whether the phrase "whether convertible into money or not" would normally mean something else than money. In our opinion, the conclusion of the Tribunal that section 28(iv) would not apply when the amount received is cash or is considered in terms of money, is correct, and the provisions of s 28 (iv) can never be made applicable to the facts of the present case, where excise refund was received by the assessee. In the case of Iskraemeco Regent Ltd (supra), the Hon‟ble Madra High Court has held as under: “27.1 Even though the learned Senior Standing Counsel appearing for the revenue submitted that Section 28(iv) and Section 41(1)(a) of the Income-tax Act do not apply to the facts of the case, we deem it fit to consider the same inasmuch as the authorities below have considered the scope of Section 28(iv) based upon which the decision has been made. Section 28(iv) of the Income-tax Act speaks about the benefit or perquisite received in kind. Such a benefit or perquisite received in kind other than in cash would be an income as defined under Section 2(24) of the Income-tax Act. In other words, to any transaction which involves money, Section 28(iv) has got no application. Hence, we are of the view that Section 28(iv) has no application whatsoever, as admittedly even by the learned senior standing counsel for the revenue to the present case on hand. We do not agree with the stand taken by the learned senior standing counsel for the revenue that section 28(iv) of the Act is not the basis upon which the decision has been arrived at by the authorities below, in as much as the orders passed by them would clearly reveal the above said fact……
Therefore, the transaction in the present case being a loan transaction having no application with respect to Section 28(iv) of the Income-tax Act, the same cannot be termed as an income within the purview of Section 2(24) of the said Act. In other words, inasmuch as Section 28(iv) is not applicable to the transactions on hand, it cannot be termed as income which can be made taxable as receipt. Hence, such a receipt which does not have any character of an income being that of a loan cannot be made exigible to tax. In the case of Ahuja Graphic Machinery (P) Ltd, the Mumbai Bench of the Tribunal has held as under : “6. I have carefully considered the contents of the submission made by the CIT(DR) as also the arguments of the learned counsel for the assessee. I have carefully perused the dissenting order as also the facts of the case which are brought on record in all these orders. On the facts of the case there appears to be absolutely no difference between the members who constituted a Division Bench. Now the only questions whether the amounts in question can be brought to tax under section 28(iv) or under section 41(1) of the Act. Section 28 of the Act gives the items of income that are chargeable to income-tax under the head „Profits and gains of business or profession‟ : Sub-section (iv ) of section 28 which has been taken in aid by the revenue to bring the amount in question to tax as business income reads as under:
In other words,to apply these provisions the assessee should have appropriated the sums in question to its profit and loss account. Here is a case where the assessee has not appropriated any sums to its profit and loss account. In other words, the sum does not represent income not credited to the profit and loss account in the earlier years which the Hon‟ble Bombay High Court was concerned with. It is a case of sale of somebody‟s asset and not even a part of its regular business receipts. The question of its appropriation in the manner aforesaid has not also taken place. Therefore, it is difficult to apply the provisions of section 28(iv) to the facts of the case when the assessee has been acknowledging this outstanding amount as liabilities to its principal from year to year in its balance sheet.”
We find that the case of the assessee is squarely covered by the ratio laid down by the above mentioned three decisions. Moreover, that these amounts have been verified in the assessment years 2003-04, 2004-05 and 2005-06 by the department in the proceedings under section 143(3) of the Act. The assessee filed returns of income which were accepted by the revenue as is clear from the assessment orders placed by the assessee at pages 66 to 70- AY- 2003-04, pages 71 to 78 for the assessment year 2004-05 and 2005-06. We also find that in the facts of assessee there was no new development which warranted to the tax authorities to take different view than the view so taken by the authorities in earlier years. We find support from the decision of the Hon‟ble Supreme Court in the case of Excel Industries Ltd(supra), wherein it has been held as under : “28. Secondly, as noted by the Tribunal, a consistent view has been taken in favour of the assessee on the questions raised, starting with the assessment year 1992-93, that the benefits under the advance licences or under the duty entitlement pass book do not represent the real income of the assessee. Consequently, there is no reason for us to take a different view unless there are very convincing reasons, none of which have been pointed out by the learned counsel for the Revenue”.
In the case of Radhasoamy Satsang (supra), the Hon‟ble Suprme Court has held as under : “Each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assess ment years has been found as a fact one way or the other and parties have allowed that position to be sustained In the case of Gopal Purohi(supra), the Hon‟ble Jurisdictional High Court has held as under : “Tribunal having entered a pure finding of facts that the assessee is engaged in to different types of transactions namely, investment in shares and dealing in shares for the purposes of business and held that delivery based transaction are to be tread as investment transaction and the profit received there from is to be treated as short term or long-term capital gain depending on the period of holding of shares and that there ought to be uniformity in treatment and consistency in various years when the facts and circumstances are identical, no substantial question of law arises”
In view of th above discussion and the ratio laid down in the decisions referred to above, we are inclined to set aside the order of ld.CIT(A) and direct the AO to delete the additions.
In the result, the appeal of the assessee is allowed. Order pronounced in the open court on 11th May, 2017. Sd sd (D.T.GARASIA) (RAJESH KUMAR) Judicial Member Accountant Member म ुंबई Mumbai; ददन ुंक Dated :11.5.2017 Sr.PS:SRL: