Delhi High Court
Commissioner Of Income Tax vs Goyal M G Gases Ltd. on 18 January, 2010
Author: Siddharth Mridul
* IN THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 18th January, 2010
+ ITA 829/2008
COMMISSIONER OF INCOME TAX ..... Appellant
versus
GOYAL M G GASES LTD. ..... Respondent
Advocates who appeared in this case:
For the Appellant : Ms P.L. Bansal with Ms Anshul Sharma.
For the Respondent : Mr C.S. Aggarwal, Sr. Advocate with Mr Prakash Kumar
CORAM:
HON'BLE MR JUSTICE BADAR DURREZ AHMED
HON'BLE MR JUSTICE SIDDHARTH MRIDUL
1. Whether reporters of local papers may be allowed
to see the judgment?
2. To be referred to the Reporter or not?
3. Whether the judgment should be reported in
the Digest? .
SIDDHARTH MRIDUL, J (ORAL)
1. This appeal by the Revenue is directed against the order dated 14 th
December, 2007 passed by the Income Tax Appellate Tribunal (ITAT) in
ITA No. 1729/Del/2007 in respect of the assessment year 2002-03.
2. The assessee had filed its return declaring income at nil on 31st
October, 2002. Since the income as per the normal provisions of the Income
Tax Act (hereinafter referred to as 'the Act') was computed at a loss of
Rs.1,46,90,960/-, the Assessing Officer computed book profit under Section
115JB of the Act at Rs.64,30,227/-
3. On examination of the assessment records, the Commissioner of
Income Tax (CIT) noticed that in the assessment order passed by the
Assessing Officer under Section 143(3) an amount of Rs.100 lacs received
by the assessee-company from Messer Griesheim Gmbh was not included in
the total income as per the provisions of Section 41(1) of the Act.
Accordingly, the CIT came to the conclusion that the order passed by the
Assessing Officer was erroneous, insofar as, it was prejudicial to the interest
of the Revenue. The CIT issued notice under Section 263 of the Act to the
assessee. The assessee contended that the said amount of Rs.100 lacs was
credited to the profit and loss account, and consequently to the book profit,
which was adjusted by the Assessing Officer in the assessment order and,
therefore, assessment order cannot be said to be erroneous. It was further
contended on behalf of the assessee that the provisions of Section 41(1) of
the Act were not attracted in the present case. The CIT disagreed with the
assessee and consequently set aside the assessment order and thereafter
remitted the same to the Assessing Officer for fresh assessment.
4. The assessee went in appeal before the ITAT against the order of the
CIT. It is seen that the ITAT examined the case at length and specifically
from the standpoint of the provisions of Section 41(1) of the Act and
observed as under:-
"5. We have considered rival submissions. In the original
Assessment Order which is now sought to be revised
under section 263, there is no discussion about write
back of liability. Though the assessee in the notes on
accounts appended to the balance sheet has made
proper disclosure about write back of the loan liability
and the circumstances in which the amount was
adjusted. However, the fact remains that what is
adjusted is part of the term loan received from Citi
Bank which was guaranteed and paid by the Creditor,
namely, Messer Griesheim Gmbh. The assessment is
framed by adopting the book profit under section
115JB as basis for computing the tax liability. In the
assessment so framed, the amount of Rs.100 lacs is
already included as credit to the P&L A/c. Since the
amount of write back of the loan liability already forms
part of book profit on which tax is levied, the
Assessment Order cannot be branded as erroneous in
so far as it is prejudicial to the interest of revenue.
There is no dispute about the fact that the sum of
Rs.100 lacs forms part of book profit computed under
section 115JB. Thus, the Assessment Order is not
amenable to revision under Section 263 of the Act.
6. It is to be noted that the loan liability was never
claimed or allowed as deduction by way of loss,
expenditure or trading liability. Thus, the amount
cannot be included as profit chargeable to tax under
section 41(1) of the Act. Section 41(1) will apply only
when the cessation of liability is in respect of such
liability which is allowed as deduction in any of the
preceding Assessment years. Thus, section 41(1) has
no application in the present case."
5. In Mahindra and Mahindra Ltd. vs. Commissioner of Income Tax,
261 ITR 501, the High Court of Judicature at Bombay had held that no
allowance or deduction having been allowed in respect of loan taken by
assessee for purchase of capital assets, Section 41(1) was not attracted to
remission of principal amount of loan.
6. In the present case, the assessee did not claim nor was allowed any
deduction or benefit of allowance by way of allowable expenditure and
trading liability, and the same being credited to the profit and loss account
had been subjected to tax as part of book profit under Section 115JB of the
Act. We are, therefore, of the opinion that the conclusions of the Tribunal
are based on a correct appreciation of law and, therefore, do not warrant any
interference by this Court.
7. Consequently, no substantial question of law arises for our
consideration. The appeal is dismissed.
SIDDHARTH MRIDUL, J
BADAR DURREZ AHMED, J
JANUARY 18, 2010
mk
