TMI Blog2003 (2) TMI 511X X X X Extracts X X X X X X X X Extracts X X X X ..... tems Ltd. There was another company under the name and style of Andhra Pradesh Rayons Ltd., which was incorporated in 1975 and it carried on business of rayon grade, wood pulp. Pursuant to another company, M/s. WIMCO Ltd. selling its shares in A R Bilt Packaging Systems Ltd. to M/s. Ballarpur Industries Ltd., a company belonging to what is popularly known as Thapar Group, A R Bilt Packaging Systems Ltd. became a subsidiary of Ballarpur Industries Ltd. (BILT). By its order dated 7-2-1995, Board for Industrial Financial Reconstruction (BIFR) sanctioned the amalgamation or merger of A R Bilt Packaging Systems Ltd. with M/s. Andhra Pradesh Rayons Ltd. and consequently the amalgamating company, i.e., A.R. Bilt Packaging Systems Ltd. lost its identity. 4. Andhra Pradesh Rayons Ltd., subsequently changed its name to APR Ltd., vide fresh certificate of incorporation dated 28-8-1995. That is how in the present appeal, which was filed in May, 1998, the appellant is shown as APR Ltd., and not Andhra Pradesh Rayons Ltd. The APR Ltd., again changed its name to BILT Paper Holdings Ltd., vide fresh certificate of incorporation dated 12-1-2001 apparently because of the interests of the Ballar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as Bilt Paper Holdings Ltd. . The learned counsel for the assessee has also clarified that the name of the assessee is shown by the learned Commissioner in his impugned order under section 263 as A.P. Rayons Ltd., which is a mistake, and it should have been correctly shown as APR Ltd. , because, as on the date of the order, i.e., 25-3-1998, A.P. Rayons Ltd., which apparently stood for Andhra Pradesh Rayons Ltd., changed its name to APR Ltd. 5. Now, we may turn to the issue on hand. The facts of the case lie in a narrow compass. Swedish company, M/s. Akarlund Rausing AB was one of the promoters of the AP Packaging Systems Ltd. vide agreement dated 23-4-1991, a copy of which may be seen at pages 33-34 of the appellant s paper-book filed before us, the Swedish company agreed to lend 7-Million Rupees to the promotee company. The said loan was unsecured and did not carry any interest. Relevant clauses and recital of the said agreement read as under- ..... Whereas, the Lender being one of the Promoters of the borrower company vide their letter dated 22-10-1990 have agreed to grant to the borrower an interest free unsecured loan in Swedish Kronor equivalent to ₹ 7.00 M ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by a Certificate of Foreign Inland Remittance given by Andhra Bank, dated 3-8-1991 to M/s. A.R. Packaging Systems Ltd. A copy of this certificate may be seen at page-40 of the assessee s paper-book. Subsequently, the loan was increased to ₹ 70,54,725, and this enhancement was approved by the Ministry of Finance of Government of India, vide its letter dated 8-10-1991. A copy of this letter is filed at page 37 of the assessee s paper-book. Receipt of this unsecured interest free loan of ₹ 70,54,725 has been reflected in the Balance-Sheet of the assessee-company as on 31-3-1992 in Schedule-C thereunder. 6. Vide letter dated 22-3-1993 addressed by the Swedish Company to M/s. Ballarpur Industries Ltd. the former sold its shareholding in A R Bilt Packaging Ltd. for a nominal purchase price of ₹ 1 enblock to M/s. Ballarpur Industries Ltd. The Swedish company also agreed inter alia to renounce the loan of ₹ 70,54,725 given by it to M/s. A R Bilt Packaging Ltd. Clause-4 of the said letter, which is relevant for our purpose reads as under- 4. As at 31-3-1992 the Company, A R Bilt Packagings Ltd. was in debted for the following secured loan funds- (a)Term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Industries Ltd. shall continue the negotiations with Financial Institutions and Banks under the rehabilitation Scheme aiming at a final agreement and settlement. AB Akerlund Rausing shall not bear any responsibility for the outcome of such negotiations. In consideration of AB Akerlund Rausing renouncing any claim for repayment of aforementioned sum of ₹ 70,54,725 Ballarpur Industries Ltd. shall hold AB Akerlund Rausing harmless and indemnified against any further financial liability that may be imposed upon AB Akerlund Rausing on account of it being a shareholder of the Company. This indemnity shall survive the termination of this agreement in case this agreement is not given effect to in view of any reasons set out in sections 3 5 hereof. Apart from the renunciation of the loan, the Swedish company also renounced the amounts due to it for the royalty payment of ₹ 13,93,470 and also certain other payments due to it for sale of machinery etc. 7. With the above background in mind, we may not turn to the issue on hand, for the assessment year 1994-95, M/s. APR Ltd., M/s. Andhra Pradesh Rayon Ltd. as the assessee was then styled, filed a return on 28- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sense view of the matter were taken, the assessee, because of the trading operation, had become richer by the amount which it transferred to its profit and loss account. The money had arisen out of ordinary trading transaction. Although the amounts received originally were not of income nature, the amounts remained with the assessee for a long period unclaimed by the trade parties. By lapse of time, the claim of the deposit became time-barred and the amount attained a totally different quality. It became a definite trade surplus. In the instant case, the assessee received the amount as a secured loan and in exercise of the contractual right, the Swedish Company waived repayment of the same. In such an event, the amount which was waived should be treated as income of the assessee. 8. The above order of the Commissioner has been assailed before us. Some of the grounds taken before us in this appeal read as under- 4. It is contended that the transaction of obtaining loan is not a trading transaction and, therefore, the same cannot be considered as income exigible to income-tax and thus the order under section 263 is wrong, invalid and without jurisdiction. 5. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se of a trading transaction, and their Lordships held that even though it is not taxable in the year of receipt as being of revenue character, the receipt changes its character subsequently, when it becomes assessee s own money for specified reason. For the said decision of the Apex Court to be applicable, the learned counsel for the assessee pleaded, the amount should be or should have been received in the course of a trading transaction. This is the crux of the matter, and on this point, it is claimed that the facts of the assessee s case are totally different. The loan of ₹ 70,54,725 was not received in the course of a trading transaction. It was received as a loan, and was reflected as a loan in the books of the assessee. When the loan is renounced by the Swedish company, it did not change its character, but remained a capital receipt, notwithstanding its transfer to the credit of the Profit Loss Account in the books of the assessee. In this context, reliance is placed upon the decision of the Apex Court in the case of K.M.S. Lakshmanier Sons v. CIT [1953] 23 ITR 202, wherein a distinction was made between advances of monies received towards purchase price and other s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee- company. It is totally different from an amount received in the course of a trading transaction. The fact that there is a difference between an amount received in the course of a trading transaction and other deposit or loan is evident from the decision of the Apex Court in the case of K.M.S. Lakshmanier Sons (supra), where trade advances were not treated as loans, whereas security deposits were treated as loans. The Apex Court also had occasion to discuss a decision of the English Court of Appeal and the relevant portion of the discussion reads as under- On the other hand, a more recent decision of the English Court of Appeal in Davies v. The Shell Company of China-(22 ITR Suppl.1), which Mr. Pathak brought to our notice, is more in point. A British company, which sold petroleum products in China through Chinese agents, required the latter to deposit with the company a sum of money in Chinese dollars to be held as security against possible default by the agents in payment for the products consigned to them and to be rapaid when the agency came to an end. These deposits were, during the war, transferred to the United Kingdom for reasons of safety and were there held in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ITR 158 1 wherein it was held that earnest money and advance received from the vendee by a vendor of rubber trees being relatable to the sale of capital assets, had not become revenue receipts in the hands of the vendor, even after their forfeiture in terms of the contract of conveyance. If the expression amount received in the course of a trading transaction included all receipts, as contended by the learned Departmental Representative, the earnest money and advance for the sale of the rubber trees should be revenue receipts when forfeited and that was not the case. In this view of the matter, the contentions of the learned Departmental Representative on this aspect are liable to be rejected. 13. Even on the aspect of jurisdiction, we find merit in the contentions of the learned counsel for the assessee. In the case of Gabriel India Ltd. (supra), Hon ble Bombay High Court held that the Commissioner cannot revise assessment order merely because he disagrees with the conclusion arrived at by the Assessing Officer. In the case of Malabar Industrial Co. Ltd. (supra), the Apex Court laid down that, where two views are possible, and the Income-tax Officer has taken one such view w ..... X X X X Extracts X X X X X X X X Extracts X X X X
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