2018 (5) TMI 1077 - AT - Income Tax

Additions of interest waiver by National Textile Corporation Ltd. and interest on raw material as chargeable to tax u/s 41(1) - cessation of liability in proceedings u/s 143(3) - Held that - No merit in the instant argument as section 19(2) of the SICA Act makes it clear that a deemed consent can very well be assumed in case no consent is received qua the DRS in question from the parties concerned. This is not the Revenue s case that it had not received a copy of the DRS in question as per the provision of SICA Act. Hon ble Delhi High Court s decision in Government of India, Department of Revenue vs. Appellate Authority for Industrial & Financial Reconstruction 2011 (9) TMI 1166 - DELHI HIGH COURT considers all the CBDT s circulars in this issue as issued from time to time and holds that deemed consent can very well be inferred in case no objection is received within the specified period of 60 days of the date of circulation of the DRS in question. We therefore conclude that both the learned lower authorities have erred in law as well as on facts in making the two additions u/s 41(1). The same are accordingly deleted. - Decided in favour of assessee.

Summary

Issues:
1. Delay in filing the appeal.
2. Addition of interest waiver by National Textile Corporation Ltd. and interest on raw material as chargeable to tax u/s 41(1) of the Income Tax Act.

Analysis:
1. Delay in filing the appeal:
The appellant's appeal for the assessment year 2004-05 was delayed by 97 days. The appellant attributed the delay to the authorized person being on foreign visits for official purposes. The Tribunal condoned the delay as it was beyond the appellant's control. The appeal was then taken up for adjudication on merits.

2. Addition of interest waiver and interest on raw material:
The appellant challenged the Assessing Officer's action of making additions of interest waiver by National Textile Corporation Ltd. and interest on raw material as chargeable to tax under section 41(1) of the Income Tax Act. The appellant contended that these amounts represented cessation of past liabilities and should not be treated as income under section 41(1).

3. The appellant, a Public Sector Undertaking, approached the Board for Industrial and Financial Reconstruction (BIFR) for revival under the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA). The BIFR proposed exemption from section 41(1) of the Act, but no response was received from the Ministry of Finance or CBDT. The Assessing Officer and CIT(A) invoked section 41(1) despite the appellant's argument of deemed consent due to lack of response from the concerned parties.

4. The Tribunal considered the argument of deemed consent in the context of SICA law. Section 19(2) of the SICA Act allows for deemed consent if no response is received regarding the Draft Rehabilitation Scheme (DRS). Referring to a Delhi High Court decision, the Tribunal concluded that deemed consent can be inferred if no objection is received within the specified period. The Tribunal held that the lower authorities erred in making additions under section 41(1) and deleted the same.

5. In conclusion, the Tribunal allowed the appellant's appeal, ruling in favor of the appellant regarding the additions of interest waiver and interest on raw material. The order was pronounced in the open court on 11/05/2018.