2012 (10) TMI 1132 - AT - Income Tax

Summary

Issues involved:
The issues involved in this case are:
1. Interpretation of the judgment of the Hon'ble Apex Court in the case of Goetze (India) vs. CIT regarding filing of revised returns.
2. Validity of deduction claimed in a revised return of income.
3. Treatment of loans waived by banks in a one-time settlement.
4. Application of judgments of the Hon'ble Apex Court and the Hon'ble Bombay High Court in specific cases.
5. Taxability of principal amounts of loans retained by the assessee.

Issue 1:
The appellant appealed against the order of the CIT(A) based on the interpretation of the judgment of the Hon'ble Apex Court in the case of Goetze (India) vs. CIT regarding the filing of revised returns. The appellant claimed that a fresh claim before the Assessing Officer can only be made by filing a revised return, not otherwise.

Issue 2:
The appellant contested the direction of the CIT(A) to allow the deduction claimed in the revised return of income, which was considered barred by limitation and hence not a valid return.

Issue 3:
The appellant challenged the deletion of the addition made on account of loans waived by banks in a one-time settlement amounting to Rs. 4,40,22,653 by the CIT(A).

Issue 4:
The appellant disputed the CIT(A)'s failure to appreciate the judgments of the Hon'ble Apex Court and the Hon'ble Bombay High Court in specific cases, regarding the treatment of certain claims made by the appellant.

Issue 5:
The appellant raised concerns about the tax treatment of the principal amounts of loans retained by the assessee, arguing that they constituted income as per Section 28(iv) of the Income Tax Act, 1961, though not u/s.41(1) of the Act.

The Appellate Tribunal, after considering the arguments presented, found that the original return of income declared a loss, while the revised return disclosed income from other sources due to a one-time settlement with two banks. The Tribunal noted that the principal amount of the loans waived by the banks was claimed to not form part of the income as it was never deducted in earlier years.

Upon reviewing the loan agreements, it was determined that the loan from ICICI Bank was for purchasing machinery, making it non-taxable, while the loan from ADCB was against hypothecation of stock, rendering it taxable. The waiver granted by ADCB was deemed taxable income, while the waived amount by ICICI Bank was excluded from taxable income.

The Tribunal clarified that the judgments of Goetze (India) Limited and Pruthvi Brokers & Shareholders P. Ltd. were not contradictory but supplementary. It was established that appellate authorities could admit legal claims if facts were available on record, as per the Hon'ble High Court of Bombay and the Hon'ble Supreme Court.

Considering the circumstances, including the status of the company as a BIFR company and the waiver of loans by banks, the Tribunal upheld the order of the CIT(A) as rational and in accordance with the provisions of the Act. The appeal filed by the AO was dismissed, and the order of the CIT(A) was upheld.