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TMI Blog2016 (1) TMI 1023X X X X Extracts X X X X X X X X Extracts X X X X ..... years. From the statement showing the computation of income for the year ended 31st March, 1999, we find that the net loss for the year ended 31st March, 1999, as per the Profit & Loss Account was (Rs.1,27,03,833) from which the assessee has reduced the disallowance under S.43B of interest of ₹ 51,08,897 payable to IDBI on term loan, interest of ₹ 1,11,933 on term payable to Bank of India, ₹ 7,16,716 as interest payable on debentures to RCTC, thereby reducing the net loss. From the statement showing computation of income for the accounting year ended on 31st March, 2000, we find that while the assessee has made the disallowance under S.43B and has reduced the same from the net loss, claimed the amounts disallowed under S.43B in the earlier years as deduction on payment basis, which included interest on IDBI term loan of ₹ 51,08,897, interest on Bank of India term loan of Rs,1,11,933, interest payable to RCTC of ₹ 4,25,000. Similarly, statement showing computation of income for the year ended 31st March, 2003, we find that the loss for the year ended on 31.3.2003 as per Profit & Loss Account was (Rs.5,24,55,821), which has been reduced by the disallo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Commissioner of Income-tax under S.263 of the Act, directing the Assessing Officer to bring to tax a sum of ₹ 61,45,830 under S.41(1) of the Income Tax Act. 2. Brief facts of the case are that the assessee company, which is engaged in the business of manufacture and sale of specialty chemicals, filed its return of income for the assessment year 2007-08 on 28.10.2007, declaring total income of Rs.NIL. Subsequently, the assessment was reopened under S.147 of the Act on the ground that on examination of accounts, the Assessing Officer has found that the assessee was allowed remission of loan liabilities to the tune of ₹ 23 crores and that the assessee has deducted ₹ 7.27 crores from the taxable income, claiming the same to be capital receipts. The Assessing Officer observed that this is cessation of liability and hence, the amounts claimed to be capital receipts need to be brought to tax. Accordingly, a notice under S.148 was issued to the assessee on 8.6.2010, in reply to which, the assessee vide a letter submitted that the return filed on 31.10.2007 may be treated as the return filed in response to notice under S.148 of the Act. Subsequently, the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he details of the interest payments claimed in the subsequent years in the computation of income in the assessment years 2000-01 and 2004-05. He held that the Assessing Officer has not gone through the actual computation of income for those years, which are enclosed to the statement filed by the assessee, which has resulted in an erroneous order of the Assessing Officer, as a result of which the Revenue is losing the tax lawfully payable by the assessee. He held that the Assessing Officer was also guilty of non-application of mind and improper appreciation of facts, resulting in his order being erroneous as well as prejudicial to the interests of the Revenue. He accordingly, set aside the assessment order and directed the Assessing Officer to modify the assessment order by bringing to tax ₹ 61,45,830 under S.41(1) of the Income-tax Act. 4. Aggrieved by this order of the Commissioner under S.263 of the Act, assessee is in appeal before us. 5. Learned counsel for the assessee, Shri Murali Mohan Rao, while reiterating the submissions made before the Commissioner in response to the notice under S.263 of the Act, submitted that the Assessing Officer, while completing the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Commissioner under S.263 is not sustainable. 7. The Learned Departmental Representative, on the other hand, supported the order of the Commissioner and submitted that the assessment order passed under S.143(3) read with S.147 was factually incorrect in so far as the observations of the Assessing Officer that the assessee has during the year, offered to tax the remission of interest on term loan, working capital, debentures, etc. by treating them as revenue receipts. He, therefore, submitted that the assessment order is erroneous and prejudicial to the interests of the Revenue and the order of the Commissioner is to be upheld. 8. Having regard to the rival contentions and the material on record, we find that the assessee had taken loans from various banks, such as IDBI Bank, Bank of India, SBI etc. and has also issued debentures to RCTC. The interest on these term loans and debentures was payable by the assessee and it has accordingly debited the same to the Profit Loss Account on accrual basis. While computing the taxable income of the assessee, the assessee had made disallowance of interest payable to these institutions under S.43B of the Act and thus offered it as in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clear that the assessee has, though accounted for the interest payable during the relevant assessment years and has made the disallowance of the same under S.43B, and offered the income for taxation during the relevant assessment years. However, on making the payment of interest in the subsequent years, the assessee has claimed the same on payment basis. It is undisputed fact that the remission of liability would be only of the amount payable and not of the amounts paid by the assessee. These amounts cannot be brought to tax, as the remission of liability, as there is no remission of liability of the amount already paid by the assessee. Therefore, we do not find any factual mistake in the order of the Assessing Officer passed under S.143(3) read with S.147 of the Act. Further, the learned counsel for the assessee has also drawn our attention to the chart drawn up by the CIT(A) in his impugned order, wherein the liability for the assessment year 2004-05 has not been considered by the Commissioner. Further, he has also filed a statement showing the interest claimed in computation on payment basis to demonstrate his point. We find that the Commissioner has not taken into consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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