High Court Of Madras
CIT vs. Peria Karamalai Tea And Produce Co. Ltd.
Assessment Year : 1992-93
Section : 5
Mrs. Chitra Venkataraman And M. Jaichandren, JJ.
T.C.(A) No. 276 Of 2005
September 12, 2011
JUDGMENT
Mrs. Chitra Venkataraman, J. – The Revenue is on appeal as against the order of the Tribunal for the assessment year 1992-93. The following substantial question of law was raised for consideration :
“Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in holding that even though the assessee-company has not treated the principal as irrecoverable, the interest accrued on the loan advanced to another public limited company need not be included in the total income for the assessment year 1992-93 ?”
2. The assessee follows the mercantile system of accounting. While completing the assessment, the officer found that as in the assessment year 1991-92, the assessee had not included the accrued interest for the loan advanced to M/s. Bowreah Cotton Mills on the ground that the said company had become a sick company and its case was referred to the BIFR. The officer found that the assessee treated the loan amount as good account. However, as regards the interest accrued thereon, the assessee did not offer it for assessment. The officer pointed out that in respect of the assessment years 1990-91 and 1991-92, a part of it had been allowed in favour of the assessee in the appeal filed before the Commissioner of Income-tax (Appeals). Deducting the amount added for the assessment year 1991-92, the Assessing Officer added the balance amount to the total income for the assessment year to the tune of Rs. 13,72,000.
3. Aggrieved by the same, the assessee went on appeal before the Commissioner of Income-tax (Appeals), contending therein that the debtor company was declared as a sick company by proceedings of the BIFR. As such, no interest could be said to have accrued for offering the same for assessment. The Commissioner of Income-tax (Appeals) allowed the assessee’s appeal based on the earlier order, thereby deleted the assessment. The Revenue preferred an appeal before the Income-tax Appellate Tribunal, which affirmed the view of the Commissioner of Income-tax (Appeals) by referring to the order of the Cochin Bench of the Income-tax Appellate Tribunal in I. T. A. Nos. 291 and 379/Coch/93, dated September 27, 2000 passed in the case of the same assessee. Thus, the Tribunal rejected the Revenue’s appeal. Aggrieved by the same, the Revenue is on appeal before this court.
4. Learned standing counsel for the Revenue submitted that when the assessee had admitted the principal amount as good for recovery, the Tribunal should have considered the same yardstick, while considering the claim of the interest accruing to be assessed as an income of the year under consideration. Thus, when the principal amount is treated as good for recovery, there was no justification in excluding the accrued interest from assessing the said income for the year under consideration.
5. Learned counsel for the assessee, however, placed before us the orders of the Calcutta High Court on the reference made by the BIFR for winding up of the company. A perusal of the order dated May 16, 2003, placed before us shows that the company court therein ordered winding up of the company based on the recommendation of the BIFR. However, the debtor company went on appeal before the Division Bench, wherein it was contended that the order of winding up based on the recommendation of the BIFR was bad in law. Admitting the appeal, the Division Bench of the Calcutta High Court granted stay of further proceedings too. In the background of the said facts and circumstances of the case, learned counsel for the assessee submitted that no exception could be taken to the order of the Tribunal in accepting the case of the assessee in not offering the interest for assessment.
6. Heard learned standing counsel for the Revenue as well as learned counsel for the assessee and perused the materials on record.
7. As already pointed out, a perusal of the order of the Calcutta High Court shows the stand of the debtor company that for the purpose of considering the winding up, the company court should have considered the claim of the debtor company independent of the recommendations of the BIFR. The debtor company contended that there could be no automatic winding up of the company just based on the order of the BIFR. A reading of the order of the Calcutta High Court thus shows that contrary to the assertion of the assessee that the debtor company could not make the amount on account of its difficult financial position, on the reference to the BIFR, the debtor company had taken a stand as to the solvency position. In that event, in the absence of any material to substantiate that the interest on the borrowed amount could not be recovered and, hence, had not accrued, it is difficult to accept the case of the assessee that on the mere score of reference to the BIFR, the recovery of interest or accruing of interest on the debtor company had become too difficult and bad to be realised. Though learned counsel for the assessee pointed out that the order passed by the Cochin Bench of the Income-tax Appellate Tribunal in I. T. A. Nos. 291 and 379/Coch/93 in the case of the same assessee dated September 27, 2000, had become final, yet, we do not think, the said fact should tie our hands for considering the case of the Revenue. In the background of the facts narrated above, as regards the status of the debtor company, we have no hesitation in rejecting the assessee’s case as regards the interest income that had accrued to the assessee.
8. In the circumstances, we accept the contention of the Revenue that the assessee should have offered its interest income for assessment for the year under consideration. Consequently, the order of the Tribunal is set aside and the question of law raised is answered in favour of the Revenue. No costs.
[Citation : 353 ITR 22]
