TMI Blog2019 (12) TMI 575X X X X Extracts X X X X X X X X Extracts X X X X ..... ich was certainly warranted based on facts and circumstances of this case before allowing entire capital work in progress existing upto ay: 2002-03 as Revenue expenses in this year viz. ay: 2003-04 is clearly erroneous and prejudicial to the interest of Revenue and learned CIT rightly interfered by invoking his revisionary powers u/s 263 of the 1961 Act. The AO simply accepted the contentions of the assessee that the assessee has made claim of deduction of lower interest but has not directed its enquiry as to whether any benefit or cessation or remission of liability has taken place which is required to be brought to tax u/s 41(1) or Section 28(iv) or any other relevant section of the 1961 Act. Thus, under these circumstances, the assessment order passed by AO is erroneous so far as is prejudicial to the interest of Revenue and the learned CIT rightly invoked its revisionary powers u/s 263 of the 1961 Act, which action of learned CIT we upheld/confirms. We order accordingy. Appeal of the assessee dismissed. - ITA No.937/Chny/2008 - - - Dated:- 12-12-2019 - Shri N.R.S. Ganesan, Judicial Member And Shri Ramit Kochar, Accountant Member For the Appe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng to ₹ 88.57 lakhs. 4. The Commissioner of Income Tax also erred in directing the assessing officer to disallow the proportionate interest on the interest credit of ₹ 139.96 lakhs and ₹ 16.78 crores given to an Associate Company, viz. SPEL Semi Conductor Ltd. in the light of the law laid down by the Apex Court in the case of S.A. Builders vs. CIT and others (288 ITR 1 (SC)). 4.1. The Commissioner of Income Tax has erred in directing the assessing officer to examine the fact whether the Inter Corporate Deposit (ICD) of ₹ 675 Lakhs made by the Appellants during the year 1999 were made out of their own funds or borrowed funds and decide the question of allowability of interest on such ICDs. This will amount to revision / reopening of earlier year's assessment. 4.2. Without prejudice, the Commissioner of Income Tax ought to have considered the fact that the Appellants have sufficient general reserve during the relevant period of investment. The Commissioner of Income Tax ought to have further considered that the Appellants have reported a profit of ₹ 2837.26 lakhs for the assessment year 2000-20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Fluoride. b) SMO, EHVT Division- Execution of turnkey projects and execution of electrification works contract. c) Pharma Division- Manufacture of bulk drugs and formulations including PEN-G ; and d) Bio-tech Division- Production of tissue culture plants, enzymes and export of cut flowers. 3.2 The assessee filed its return of income with Revenue for impugned assessment year viz. ay: 2003-04 on 23.10.2003 declaring loss of ₹ 403,84,01,506/-. The said return of income was processed by Revenue u/s 143(1) of the 1961 Act on 12.03.2004. The assessee also filed revised return of income on 30.03.2004 declaring loss of ₹ 298,10,70,500/- . In this revised return of income filed on 30.03.2004 , the assessee offered interest income of ₹ 105.73 crores. The case of the assessee was selected for framing scrutiny assessment by AO u/s 143(3) read with Section 143(2) of the 1961 Act. The AO issued statutory notices u/s 143(2) and 142(1) of the 1961 Act to the assessee and finally scrutiny assessment was framed by AO u/s 143(3) of the 1961 Act, vide assessment order dated 30.03.2006 passed by AO u/s 143(3) of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the AO, while completing the assessment which is erroneous. You have claimed write off in respect of Diesel Generator Set amounting to ₹ 202.42 lakhs and AO has allowed in the assessment. The DG set (Pharma Division) had already been included in the Block of assets and insurance amount of ₹ 88,57,620/- had been deducted from the (block Plant Machinery) opening WDV and still closing WDV remains to be carried forward. The sum of ₹ 202.42 lakhs representing loss of depreciable assets was only capital in nature and could not be allowed as revenue expenditure. It is seen from the annual account 2002-03 Schedule 14, interest income financial charges that income on deposits etc. amounting to ₹ 139.96 lakhs has been set off against the total interest payment of ₹ 17942.64 lakhs and net interest payment of ₹ 17802.62 lakhs. While completing the disallowance of interest on borrowed funds a sum of ₹ 17802.62 lakhs have been adopted as against ₹ 17942.64 lakhs which represents interest liability towards secured/unsecured loans and disallowance requires rectification. You have invested ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g, 121 Nungambakkam High Road, Chennai-34 either in person or through a duly authorised representative along with the written submissions, if any, in the above matter. 4.3 The assessee in response to aforesaid SCN dated 24.10.2017 issued by learned CIT proposing to revise assessment by invoking its revisionary powers u/s 263 of the 1961 Act , submitted its reply before learned CIT during revisionary proceedings held by learned CIT , which reply filed by assessee is reproduced hereunder WRITTEN SUBMISSION TO THE NOTICE DATED 24.10.2007 ISSUED BY THE COMMISSIONER OF INCOME TAX U/S 263 OF THE INCOME TAX ACT 1961 With reference to the Revision Notice dated 24.10.2007 issued by the Learned Commissioner of Income Tax-Chennai-lll, u/s 263 of the Income Tax Act 1961, our written submissions are as follows: 1. Interest and Exchange fluctuations on Floating Rate Notes (FRNs) -₹ 116.28 crores It has been observed by the Learned Commissioner of Income Tax, Chennai-III in the Revision Notice that the interest of ₹ 7760.49 lakhs and an exchange fluctuations (net) of ₹ 3867.35 lakhs c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount during the relevant assessment years was ₹ 2753.64 lakhs. The balance exchange fluctuation amounting to ₹ 5139.17 lakhs was carried in the capital work in progress account for the purpose of capitalisation as and when FRN funds were utilised for the purpose of purchase of capital goods/expansion schemes. Out of ₹ 5139.17 lakhs, the Company had capitalised the exchange loss of ₹ 74.63 lakhs during the assessment year 2002-2003 and the balance exchange loss of ₹ 5064.54 iakhs was carried in the capital work in progress account. During the assessment year 2003- 2004, an exchange gain of ₹ 1008.55 lakhs was adjusted against the carried forward exchange loss of ₹ 5064.54 lakhs and a sum of ₹ 188.64 lakhs was further capitalised out of the balance, by which unallocated foreign exchange fluctuation carried in the capital work in progress account was reduced to ₹ 3867.35 lakhs as at the end of the assessment year 2003-2004. Likewise, the total interest paid by the Company on the above unsecured loan during the assessment years 1997-1998 to 2000- 2001 was ₹ 20905.10 lakhs. Out of the :abov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment years 1997-98 to 2003-2004 are enclosed as Annexure-l, II and III, for your kind perusal. The relevant details were already furnished to the assessing officer by the assessee Company during the assessment proceedings vide its letter dated 5.7.2006. The assessing officer after examining all the materials facts on record has come to the conclusion that the amount of ₹ 11627.84 lakhs represents the cost of projects given up by the assessee Company and allowed the expenditure since it consists of only interest and exchange fluctuation. The assessing officer has come to this above conclusion in line with the decision of the Madras High Court in the case of P. Nagireddy Vs Commissioner of Income Tax reported in 199 1TR - Page 451 wherein it was held that the cost of project given up is an allowable expenditure. In the above circumstances, the view taken by the assessing officer is in accordance with the principle laid by the Madras High Court and cannot be considered by the Learned Commissioner of Income Tax as erroneous. Therefore, no revision is warranted in this connection. 2) Assets Written off - ₹ 202.42 lakhs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he advances made by the assessee Company to its subsidiary/group companies may be allowed as a business expenditure, since such advances were made by the assessee Company only out of commercial expediency. The above submissions are made by the assessee Company against your proposal to add ₹ 139.96 lakhs being the set off claimed by the Assessee Company towards interest income and the disallowance of proportionate interest on borrowed capital of ₹ 16.78 crores given to the associate company, viz. SPEL Semi Conductor Ltd. Since the entire interest on the advances given to subsidiary/ group companies is an allowable expenditure, the question of disallowance of prorated interest on the interest credit of ₹ 139.96 lakhs and disallowance of interest on borrowed capital of ₹ 16.78 crores given to the associate company, viz. SPEL, Semi Conductor Ltd. does not arise. Further, we request you to furnish the schedule reference number of the audited annual report wherein, the borrowed capital of ₹ 16.78 crores was referred to, for our reference and suitable comments. 4) Proportionate disallowance on Inter Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . The workings relating to the interest savings of ₹ 4110.36 lakhs for the purpose of disclosure in the Notes on Accounts is also enclosed vide Annexure-V for your kind perusal. Further, the statutory auditors of the assessee Company vide Item No. 12 of Notes on accounts annexed with the audited accounts for the year 2003-04 (assessment year 2004-05) have also observed as follows: 'The restructuring of the Debt Portfolio under the Corporate Debt Restructuring Mechanism [CDR) has been implemented during the year. Consequent to this, interest relief availed from various Banks and Financial institutions under the CDR Scheme or otherwise includes ₹ 1827.88 lakhs (including ₹ 943.90 lakhs for the year) availed from two lenders who are yet to confirm their consent for reduction in the interest rate. The balances of loans/interest accrued to some of the lenders are also subject to confirmation . This disclosure was also made only for statistical purpose, since the interest expenditure of the relevant assessment year was accounted in the Books of Account of the assessee Company only at the reduced rate of intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 Asst. Commissioner of Income Tax, Company Circle - V(1), Aayakkar Bhavan, 121 Nungambakkam High Road, CHENNAI-600 034 Dear Sir, Sub: SPIC Ltd. - Income Tax assessment for the year 2003-04 - interest and Foreign Exchange fluctuations of ₹ 11627.84 lakhs (Interest ₹ 7760.50 lakhs + ₹ 3867.35 lakhs) - Certain further particulars called for. We solicit kind reference to our letter dated 9.3.2006 wherein the details relating to the borrowal of US$ 120 million against unsecured Floating Rate Notes (FRNs) during the year 1996 and interest and exchange fluctuation's amounting to ₹ 116.28 crores charged to the Profit and Loss Account during the assessment year 2003-2004 were furnished. As desired by your goodself, a copy of the offer document dated 11.1.96 (Annexure-l) is enclosed for your kind perusal. As seen from Page No.20 of the Offer document, the net proceeds of the issue was expected around US$ 118.06 million after expenses and the same will be applied by the assessee company towards financing the impor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation carried in the capital work in progress account was reduced to ₹ 3867.35 lakhs as at the end of the assessment year 2003- 2004. Likewise, the total interest paid by the Company on the above unsecured loan during the assessment years 1997-1998 to 2000-2001 was ₹ 20905.10 lakhs. Out of the above, interest amounting to ₹ 3195.63 lakhs was capitalised during the relevant assessment years and interest amounting to ₹ 9948.98 lakhs was charged to Profit and Loss account. The balance interest of ₹ 7760.49 lakhs was carried in the capital work in progress account, in order to capitalise the same in the future projects/expansion schemes. The Company envisaged certain future projects and desired to capitalise the interest and exchange fluctuation carried in the capital work in progress account. The total amount carried by the Company in the capital work in progress account at the end of the assessment year 2003-2004 was ₹ 11627.35 lakhs (Interest ₹ 7760.50 lakhs + Exchange fluctuation ₹ 3867.35 lakhs), which related to the assessment years 1997-98 to 2000-2001. As no furth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xpenditure. The aforesaid reply was accepted by the AO and no additions were made to the income of the assessee while framing assessment u/s 143(3) of the 1961 Act. 4.5 The learned CIT after considering replies of the assessee filed in response to the SCN issued by learned CIT u/s 263 of the 1961 Act during the course of revisionary proceedings u/s 263 of the 1961 Act and on perusal of the records rejected the contentions of the assessee and held that assessment order dated 30.03.2006 passed by AO as erroneous so far as prejudicial to the interest of Revenue, by holding as under vide revisionary order dated 05.02.2008 passed by learned CIT u/s 263 of the 1961 Act (issue wise decision of learned CIT in its revisionary order dated 05.02.2008 is reproduced hereunder): I) Claim of Write off of Interest and Foreign Exchange Fluctuation Loss on FRN of US $ 120 Millions issued by assessee in the year 1996-Decision of learned CIT u/s 263 of the 1961 Act 2.2 On careful consideration of the above submissions and perusal of the records and report of the AO, I find that even though all the materials delineated above we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly to be profitable he gave it up in order that he was freed from his efforts from the production of two films and the assessee can concentrate on making of better and more profitable ventures in film making. The High Court therefore allowed it as revenue expenditure. Thus, the facts and circumstances of the case relied on are quite different from the facts in the instant case and therefore this decision is of no help to the assessee being clearly distinguishable. Hence, in view of the above reasons, I hereby direct the AO to modify the assessment by disallowing the interest-and exchange fluctuation loss of ₹ 11627.84 lakhs in question. II) Claim of Write off of ₹ 202.42 lacs of DG Set-Decision of learned CIT u/s 263 of the 1961 Act 3.2 I have carefully considered the above submissions. As per section 32(1)(iii) if any machinery or plant on which depreciation had been allowed is destroyed in the previous year then the amount by which the insurance payable falls short of the WDV thereof shall be allowed as a deduction provided such deficiency is actually written off in the books of accounts. It is seen from the Annexure 5 to IT d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al of ₹ 16.78 crores given by the assessee to its associated company in the light of the law laid down by the Apex Court in the case of S.A.Builders Ltd., referred to above. In other words the AO should examine whether the amounts were advanced to the sister concerns by the assessee as a measure of commercial expediency or not and decide the issue accordingly. 5. The next issue is regarding the interest income on deposits, etc. Amounting to ₹ 139.96 lakhs that has been set off against the gross interest payment of ₹ 17942.66 lakhs and whether the disallowance of proportionate interest on loan to sister concern should not be based on the gross interest liability. This issue has been covered in the previous paragraph and the directions given therein hold good. V) Interest Disallowance on ICD of ₹ 675 lacs and decision of learned CIT u/s 263 of the 1961 Act 6. Regarding the proportionate interest disallowance on inter corporate deposits of ₹ 675 lakhs made by the assessee, the assessee stated that these deposits were placed by the assesseee during the year 1999-2000 and that as seen from the aud ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ital purposes . The assessee has added interest paid and foreign exchange loss on the date of Balance Sheet to Capital Assets in those cases where funds were applied for acquisition of capital assets/projects and in case if the funds are applied for working capital , then the said interest / foreign exchange losses were charged to Profit and Loss Account as Revenue Expenses. It was submitted that so far as unallocated funds are concerned, the interest and foreign exchange fluctuation loss on these FRN were debited to capital work in progress from year to year until ay: 2002-03 and in this year under consideration before the Bench viz. ay: 2003-04 as it was envisaged that no project is to be undertaken , entire outstanding balance in capital work in progress was charged to P L account as Revenue Expenses. Thus , capital work in progress accumulated since 1996 onwards until ay: 2002-03 wrt to unappropriated funds were charged off to P L Account in the year under consideration viz. ay: 2003-04 . It was stated that projects envisaged to be set up were shelved and amount standing in capital work in progress was written off to Profit and Loss as Revenue Expenses. Our ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the 1961 Act , as advances made to this company namely SPEL Semiconductor Limited was not brought within in ambit of disallowance by the AO and it is only for the first time learned CIT brought this associate company of the assessee namely SPEL Semiconductors Limited within ambit of disallowance by invoking revisionary powers u/s 263 of the 1961 Act with respect to interest free advances made to the said associate/group company. It was fairly admitted that issue before learned CIT(A) was not with respect to advances made by assessee to its associate/group company namely SPEL Semi Conductors Limited and learned CIT(A) was seized of other advances made by assessee to other group company for which interest was disallowed by the AO which later was allowed by learned CIT(A). It was submitted that later this advance to SPEL Semi Conductor Limited was converted into equity. It was claimed that these advances were made owing to commercial expediency . 5.1.4 With respect to next effective issue of ICD placed to the tune of ₹ 675 lacs on which no income was received, it was submitted by learned counsel for the assessee that the assessee has its own funds which are suf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee as learned CIT directed AO to look into the issues and examine the same on merits. Thus , in nutshell , the learned CIT DR would pray for confirming and sustaining the revisionary order dated 05.02.2008 passed by learned CIT u/s 263 of the 1961 Act . 5.3 In rejoinder, the learned counsel for the assessee submitted that DG set can be an separate undertaking . 6. We have considered rival contentions and perused the material on record including orders of authorities below and cited case laws. We have observed that the assessee is engaged in the business of Fertilizers, Pharma , Bio-tech and Engineering Services. It is observed that the assessee is dealing in :- a) Tuticorn Factory- Manufacturing and sale of Urea , DAP , Aluminum and Fluoride. b) SMO, EHVT Division- Execution of turnkey projects and execution of electrification works contract. c) Pharma Division- Manufacture of bulk drugs and formulations including PEN-G ; and d) Bio-tech Division- Production of tissue culture plants, enzymes and export of cut flowers. The assessee had filed its return of income wit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d both the parties and perused entire material on record including orders of authorities below and cited case laws before us. We will now proceed to adjudicate all the six issues/grounds which led learned CIT to invoke its extraordinary powers as are contained in Section 263 of the 1961 Act to declare assessment order passed by AO u/s 143(3) of the 1961 Act to be erroneous so far as prejudicial to the interest of Revenue . The factual matrix of the case before us is undisputed and only it is to be tested whether decision of learned CIT in invoking revisionary powers u/s 263 of the 1961 Act on undisputed facts before us was valid and sustainable in the eyes of law keeping in view powers vested in learned CIT by virtue of Section 263 of the 1961 Act. We will now proceed issue wise taking one by one all the six issues/grounds which led learned CIT to invoke its extraordinary revisionary powers u/s 263 of the 1961 Act:- I) Claim of Write off of Interest and Foreign Exchange Fluctuation Loss on FRN of US $ 120 Millions issued by assessee in the year 1996:- The assessee raised Floating Rate Note(FRN) to the tune of US$ 120 Millions i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... emption in 2003 and we are seized of previous year 2002-03 relevant to ay: 2003-04 ,and 2003 is the year of maturity and repayment of these FRN as these FRN s are due for repayment in 2003. The assessee has claimed that it has unallocated funds remaining out of proceeds of FRN raised in 1996 which are so far not allocated for any usages. The assessee has debited interest as well foreign exchange fluctuation loss on these unallocated funds out of FRN raised in 1996 to capital work-inprogress from year to year since 1996 till the end of preceding ay: 2002-03 and no claim of deduction of Revenue Expenses or by way of benefit of Depreciation is claimed till ay: 2002-03 on this capital work in progress was claimed by assessee from Revenue. Thus, no prejudice was caused to Revenue until ay: 2002-03 as no benefit of any deduction/expenses either by way of Revenue Expenses or Depreciation was claimed by assessee until ay: 2002-03 on these un-allocable funds out of proceeds of FRN raised in as far as back in 1996 while computing income chargeable to income-tax , but in the year under consideration viz. previous year relevant to ay: 2003-04, the assessee has claimed that it is decided that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d before AO during assessment proceedings, learned CIT during revisionary proceedings u/s 263 and even before us. The assessee has relied upon certain judicial precedents which we have cited in contentions of the assessee at para 5 of this order but we are afraid whence no details are forthcoming from the assessee as detailed above, we fail to understand how these judgments can be applied to the benefit of the assessee. The learned AO merely accepted the contention of the assessee that projects are abandoned or it is no more envisaged that any projects will be undertaken and the entire capital work in progress as was accumulated since 1996 until ay: 2002-03 was allowed by AO as Revenue Expenses while computing income of the assessee for ay: 2003-04. The assessee has completely failed to discharge its onus and the AO clearly erred in accepting the bald statement made by the assessee without conducting any enquiry and certainly the action of the AO in accepting these capital work in progress accumulated over years as Revenue expenses in the year under consideration while computing income of the assessee chargeable to tax without making any enquiry which was certainly warranted based ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT invoked revisionary powers u/s 263 of the 1961 Act and directions were issued by learned CIT to AO to carry out fresh examination of the aforesaid claim preferred by assessee. It was observed by learned CIT that crankshaft was part of the DG Set and the said wdv of crankshaft was part of the Block of Asset and the block has not ceased to exist even after taking into effect insurance claim received by the assessee, as the end of the previous year . The impugned ay: 2003-04 is before us and there is a concept of Block of Asset for providing depreciation u/s 32 of the 1961 Act which was applicable for impugned ay under consideration and Section 50 will come into play under the specified circumstances mentioned in Section 50 . In this case, there is an observation by learned CIT that the block of asset has not ceased to exist and there is a balance in the Block of Asset even at year end after adjusting the insurance claim received by assessee on crank shaft. Block of Asset is defined u/s 2(11) of the 1961 Act . There is no doubt that there is a different scheme of providing deprecation on undertaking engaged in generation or generation and distribution of power u/s 32(1)(i) read w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... le framing assessment and no disallowance was made by the AO. Thus, there was complete lack of enquiry by the AO with respect to these interest free advances made by assessee to its associated/group concern SPEL Semi conductor Limited. The assessee has pleaded before learned CIT , commercial expediency in granting of these interest free advances to SPEL Semi Conductor Limited and reliance was placed on decision of Hon ble Supreme Court in the case of S.A.Builders Limited(supra). The learned CIT in exercise of its revisionary powers has only directed AO to examine the claim as to commercial expediency in grant of these interest free advances to said associated/group company namely SPEL Semi Conductor Limited. The assessee on its part is claiming huge interest expenditure on borrowings, thus it was incumbent on the AO to see whether the interest bearing funds are utilized for business purposes keeping in view commercial expediency before allowing these expenses as business expenses and there is no diversion of funds for non-business purposes. Since there was complete lack of enquiry by AO wrt to interest free advance of ₹ 16.78 crores made by assessee to SPEL S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1] 249 ITR 552 (Mad). Hence, in our opinion, the concept of merger with the appellate order cannot be applied; therefore, Ld. CIT is well within his power in exercising revisional jurisdiction on this issue. This ground of assessee is rejected. With respect to the netting off of interest income earned by assessee with interest expenses incurred and considering of net interest expenses for disallowance of proportionate interest expenses , we have observed that net interest expenses were considered for disallowance of interest expenses after adjusting interest income received by assessee with interest expenses. We have observed that Chennai-tribunal in assessee s own case in ITA no. 961 962/Mds/2011 for ay: 2005-06 and 2006-07 , vide common order dated 09.02.2017 at para 10 page 17 , has held as as under: 10. We have heard both the parties and perused the material on record. Admittedly the interest paid by the assessee on borrowings used for the purpose of the business to be allowed as deduction while computing the income of assessee. The interest received by the assessee cannot be set off against the interest paid by the assessee. The interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed CIT has directed to examine the claim of the assessee that these ICD s were placed out of internal accrual and in case interest bearing borrowings were used, then principles of commercial expediency be applied as laid down by Hon ble Supreme Court in the case of S.A.Builders(Supra) and then to allow or disallow the claim of the assessee. We uphold revisionary order passed by learned CIT . We order accordingly. VI) Interest Waiver of ₹ 883.93 lacs in CDR:- The learned CIT observed from notes to accounts forming part of the audited financial statement that consequent to Corporate Debt Restructuring (CDR) undertaken by Banks/FI of the assessee, an amount of ₹ 4110.36 lacs has been considered as interest relief for the year ending 31.03.2003. The learned CIT observed that in the annual report for ay: 2004-05 , interest relief availed from various banks and financial institutions included ₹ 1827.88 lacs ( including ₹ 943.90 lacs for the year 2003-04) . Thus , balance amount of ₹ 883.98 lacs pertained to earlier year 2002-03 ( ay: 2003-04) which has been omitted to be brought to tax for ay: 2003-04. The learned CIT ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... again as there was no proper enquiry conducted by the AO which he ought to have conducted owing to interest relief and other relief s granted by lenders i.e. banks/FI s to the assessee under CDR package which was approved on 19.03.2003 and their taxability in the year under consideration . We are concerned with ay: 2003-04. The AO simply accepted the contentions of the assessee that the assessee has made claim of deduction of lower interest but has not directed its enquiry as to whether any benefit or cessation or remission of liability has taken place which is required to be brought to tax u/s 41(1) or Section 28(iv) or any other relevant section of the 1961 Act. Thus, under these circumstances, the assessment order passed by AO is erroneous so far as is prejudicial to the interest of Revenue and the learned CIT rightly invoked its revisionary powers u/s 263 of the 1961 Act, which action of learned CIT we upheld/confirms. We order accordingy. 7. In the result, the appeal filed by the assessee in ITA No.937/Chny/2008 for ay: 2003-04 is dismissed. Order pronounced on the 12th day of December, 2019 in Chennai. - - TaxTMI ..... X X X X Extracts X X X X X X X X Extracts X X X X
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