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2016 (1) TMI 1023 - ITAT HYDERABAD

2016 (1) TMI 1023 - ITAT HYDERABAD - TMI - Revision u/s 263 - CIT(A) directing AO to bring to tax a sum of under S.41(1) - interest payable to the institutions under S.43B - Held that:- The assessee had taken loans from various banks, such as IDBI Bank, Bank of India, SBI etc. and has also issued debentures to RCTC. The interest on these term loans and debentures was payable by the assessee and it has accordingly debited the same to the Profit & Loss Account on accrual basis. While computing the .....

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00-01. The assessee has filed the returns of income and the computation of income for all the relevant years.

From the statement showing the computation of income for the year ended 31st March, 1999, we find that the net loss for the year ended 31st March, 1999, as per the Profit & Loss Account was (Rs.1,27,03,833) from which the assessee has reduced the disallowance under S.43B of interest of ₹ 51,08,897 payable to IDBI on term loan, interest of ₹ 1,11,933 on term payable .....

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of India term loan of Rs,1,11,933, interest payable to RCTC of ₹ 4,25,000. Similarly, statement showing computation of income for the year ended 31st March, 2003, we find that the loss for the year ended on 31.3.2003 as per Profit & Loss Account was (Rs.5,24,55,821), which has been reduced by the disallowances under S.43B, being interest on term loan payable to IDBI of ₹ 2,26,38,281. From page 35 of the paper-book, which is the statement showing computation of income for the subseque .....

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aking the payment of interest in the subsequent years, the assessee has claimed the same on payment basis.

It is undisputed fact that the remission of liability would be only of the amount payable and not of the amounts paid by the assessee. These amounts cannot be brought to tax, as the remission of liability, as there is no remission of liability of the amount already paid by the assessee. Therefore, we do not find any factual mistake in the order of the Assessing Officer passed un .....

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IDBI, Bank of India land RCTC for the assessment year 2004-05. From these facts, it is clear that the assessment order is neither erroneous nor prejudicial to the interests of the Revenue. We, therefore, quash the revision order under S.263 passed by the Commissioner. - Decided in favour of assessee. - ITA No.749/Hyd/2014 - Dated:- 4-11-2015 - SMT P.MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S.RIFAUR RAHMAN, ACCOUNTANT MEMBER For The Appellant : Shri P.Murali Mohan Rao For The Respondent : Shri Moha .....

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its return of income for the assessment year 2007-08 on 28.10.2007, declaring total income of Rs.NIL. Subsequently, the assessment was reopened under S.147 of the Act on the ground that on examination of accounts, the Assessing Officer has found that the assessee was allowed remission of loan liabilities to the tune of ₹ 23 crores and that the assessee has deducted ₹ 7.27 crores from the taxable income, claiming the same to be capital receipts. The Assessing Officer observed that thi .....

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ore the Assessing Officer, the Assessing Officer observed that the assessee has received a remission of ₹ 26,97,75,012 from various financial institutions and banks, out of which the assessee has reduced an amount of ₹ 7,17,21,692, claiming it to be capital receipts, i.e. principal amounts of term loans written back. The assessee also explained as to why the same was treated as capital receipts in its letter dated 30.11.2011, stating that the term loan availed by it from three banks .....

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ions for the purpose of acquiring assets and therefore, the remission of the principal amount of the loan as capital receipt is acceptable. He further observed that the interest paid in the previous years wherein the assessee has claimed interest on the loans, which has been treated as revenue receipt and was offered to tax during the year. In view of the same, the income returned by the assessee was accepted by the Assessing Officer and tax computed accordingly. 3. Subsequently, the Commissione .....

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ee to explain as to how the assessment order is not prejudicial to the interest of the Revenue. The assessee submitted its written submissions on 22.10.2014. The Commissioner however, was not convinced with the assessee s contentions and held that the assessee has not furnished the details of the interest payments claimed in the subsequent years in the computation of income in the assessment years 2000-01 and 2004-05. He held that the Assessing Officer has not gone through the actual computation .....

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irected the Assessing Officer to modify the assessment order by bringing to tax ₹ 61,45,830 under S.41(1) of the Income-tax Act. 4. Aggrieved by this order of the Commissioner under S.263 of the Act, assessee is in appeal before us. 5. Learned counsel for the assessee, Shri Murali Mohan Rao, while reiterating the submissions made before the Commissioner in response to the notice under S.263 of the Act, submitted that the Assessing Officer, while completing the assessment under S.143(3) rea .....

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der to be erroneous and prejudicial to the interests of the Revenue. He submitted that the Commissioner has come to the conclusion that the assessment order is erroneous and prejudicial to the interests of the Revenue only on the ground that the assessee has not offered the remission of liability as income under S.41(1) of the Act, whereas the said assumption is incorrect. He has drawn our attention to the computation of income for the assessment years 1999-2000 to 2007-08 to demonstrate that th .....

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amounts paid by the assessee and claimed as liability in the subsequent years, could not be brought to tax in this year. 6. The learned counsel for the assessee has also relied upon the judgment of the jurisdictional High Court in the case of Spectra Shares and Scrips (P) Ltd. V/s. CIT (2013) 36 taxmann.com.348(Andhra Pradesh), (in support of his contention) wherein it was held that the Commissioner, merely because he entertains a different opinion in the matter, cannot invoke his powers under S .....

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order of the Commissioner and submitted that the assessment order passed under S.143(3) read with S.147 was factually incorrect in so far as the observations of the Assessing Officer that the assessee has during the year, offered to tax the remission of interest on term loan, working capital, debentures, etc. by treating them as revenue receipts. He, therefore, submitted that the assessment order is erroneous and prejudicial to the interests of the Revenue and the order of the Commissioner is t .....

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e to these institutions under S.43B of the Act and thus offered it as income. The four amounts which have been brought to tax by the Commissioner under S.263 are ₹ 51,08,857 being remission of interest payable to IDBI in assessment year 2000-01; ₹ 5 lakhs being remission of interest payable to IDBI during the assessment year 2004-05; ₹ 1,11,939 being remission of interest liability payable to Bank Of India during the assessment year 2000-01; and ₹ 4,25,000 being remission .....

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d the disallowance under S.43B of interest of ₹ 51,08,897 payable to IDBI on term loan, interest of ₹ 1,11,933 on term payable to Bank of India, ₹ 7,16,716 as interest payable on debentures to RCTC, thereby reducing the net loss. From the statement showing computation of income for the accounting year ended on 31st March, 2000, which is placed at page 43 of the paperbook, we find that while the assessee has made the disallowance under S.43B and has reduced the same from the net .....

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21), which has been reduced by the disallowances under S.43B, being interest on term loan payable to IDBI of ₹ 2,26,38,281. From page 35 of the paper-book, which is the statement showing computation of income for the subsequent assessment year, i.e. assessment year 2004-05, we find that the assessee has claimed the said amount of ₹ 5 lakhs as amount disallowed under S.43B in the earlier years and now claimed as deduction on payment basis. From these details, it is clear that the asse .....

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