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TMI Blog2009 (5) TMI 562X X X X Extracts X X X X X X X X Extracts X X X X ..... the same will not come under the sweep of s. 41(1) Interest - The provisions of s. 234D are substantive and these provisions will have application only w.e.f. asst. yr. 2004-05 - Adhering to the doctrine of stare decisis – Appeal is partly allowed - - - - - Dated:- 29-5-2009 - Member(s) : SHAMIM YAHYA., VIJAY PAL RAO. ORDER-SHAMIM YAHYA, A.M.: This appeal by the assessee is directed against the order of CIT(A)-V, Chennai, dt. 24th Dec., 2008 and pertains to asst. yr. 2001-02. 2. The issue raised is that the CIT(A) erred in confirming the addition of a sum of Rs. 1,88,04,422 under s. 41(1) being interest waived by Canara Bank under one time settlement scheme. 2.1 In this case, the assessee company derives income from leasing properties. During the course of assessment, the AO inter alia brought to lax interest waived by Canara Bank amounting to Rs 3.81 crores as income chargeable to tax in terms of the provisions of s. 41 (1) of the Act. On appeal, the CIT(A) gave part relief on account of deemed income by way of interest waiver to the extent of Rs. 1,42,47,567 and confirmed the balance disallowance on this account amounting to Rs. 2,43,62,803. On further appeal f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed CIT(A) was of the opinion that AO's order was to be confirmed as the waiver of interest by the Canara Bank would constitute a benefit in respect of such trading liability by way of remission or cessation thereof. 2.5 The learned CIT(A), while concluding has held as under: "In the facts of the present case, the exact figures of deduction claimed in the earlier years were available with the Department and had not been sought from the assessee company. The fact that such interest cost had been claimed in the P L a/c, which had been enclosed with the relevant returns of income, has been accepted by the assessee company itself. Even if the concerned returns were lodged, being defective, such returns in law do not become mere scraps of paper. They remain relevant material available with the Department and a record of what the assessee itself considered as representing its true income." Against this order assessee is in appeal before us. 2.6 We have heard both the counsel and perused the relevant records. It has been submitted by the learned counsel of the assessee that the CIT(A) erred in holding that the claim of interest cost in the books of accounts for the asst. yrs. 1994- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of which loss or expenditure was incurred by the first-mentioned person or some benefit in respect of the trading liability referred to in cl. (a) by way of remission or cessation thereof, the amount obtained by the successor in business or the value of benefit accruing to the successor in business shall be deemed to be profits and gains of the business or profession, and accordingly chargeable to income-tax as the income of that previous year." 2.10 We can also gainfully reproduce the concluding portion in the Tribunal order in ITA No. 103/Mad/2005 for asst. yr. 2001-02 in the first round vide order dt. 26th April, 2007 as under: "We have heard the rival submissions. It was submitted that in the returns where assessee did claim interest were' treated as non est returns. Ex consequenti, there was no assessment. Learned counsel for the assessee relied on the decision of the Hon'ble jurisdictional High Court rendered in the case of Narayanan Chettiar Industries vs. ITO (2005) 199 CTR (Mad) 148 : (2005) 277 ITR 426 (Mad). In this case Hon'ble High Court has held that in respect of remission of liability no addition can be made unless an allowance or deduction is allowed to the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... unal in their earlier order, the returns where assessee claimed interest were treated as non est returns. Hence, assessee had relied upon Hon'ble Madras High Court in the Narayanan Chettiar Industries case cited above. In this case the Hon'ble High Court was of the opinion that in respect of remission of liability, no admission can be made unless an allowance or deduction is allowed to the assessee in the previous year. After noting these facts the Tribunal had noted that, from the records it was not clear whether any allowance or deduction was allowed to the assessee in the previous year. Hence, the issue was remitted to be examined by the AO. 2.15 Now, in the matter pertaining to the sum of Rs. 2,43,62,803 which was again confirmed by the AO, the assessee did not file any appeal against the addition of an amount of Rs. 55,58,381 relating to waiver of interest which had been claimed as deduction during the period relevant to asst. yrs. 1988-89 to 1993-94 wherein assessments had been completed and such interest cost has been allowed in those assessments. Balance amounting to Rs. 1,88,04,422 pertained to asst. yrs. 1994-95 to 1998-99 for which the returns have been found to be def ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation in pursuance of an order or appeal under s. 150. 2.19 Now, none of the prescribed modes of intimation/assessment contemplates any type of inference to be attached to an 'invalid' return. The term "invalid" has been defined in the Oxford English Dictionary as meaning "not legally recognised because contravening a regulation or law". Sec. 139(9) itself says that in case of such an invalid return, the meaning of such an invalid return will be that assessee had failed to furnish the return. Now, when the assessee has been treated as having failed to file the return, the assessment is also not made under s. 144, the inference drawn by the authorities below that such an invalid return will signify that allowance claimed by the assessee has been allowed, is devoid of cogency. Under such circumstances, the ratio emanating from Hon'ble Madras High Court decision in the case of Narayanan Chettiar Industries case does clearly apply that, unless an allowance or deduction has been made in an earlier year in respect of loss, expenditure or trading liability, their can be no addition under s. 41(1). 2.20 Further, the ratio of Hon'ble Kerala High Court in the case of CIT vs. Ancherry Pav ..... X X X X Extracts X X X X X X X X Extracts X X X X
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