Dismissed

The Commissioner v. M/S Innvol Medical India

Madras HC3 Sept 2013TCA/504/2013

Case brief

AI extract

What is this about?

The Madras High Court dismissed the Income Tax Department's appeal challenging the Income Tax Appellate Tribunal's order. The Court held the matter was squarely covered by the precedential decision of Iskraemeco Rent Limited Vs CIT, finding no question of law arose regarding the taxability of waived debt from a one-time settlement.

What did the court decide?

The Tax Case Appeal against the order of the Income Tax Appellate Tribunal stands dismissed. No costs.

The Commissioner Vs M/S Innvol Medical India — Income Tax | Madras HC (2013)

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IN THE HIGH COURT OF JUDICATURE AT MADRAS

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Dated : 03.09.2013

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Coram

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The Honourable Mrs.Justice CHITRA VENKATARAMAN and

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The Honourable Mr.Justice T.S.SIVAGNANAM

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Tax Case (Appeal) No.504 of 2013

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The Commissioner of Income Tax Chennai

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... Appellant

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-vs-

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M/s.Innvol Medical India Limited No.387, Walajah Road, Kunnam Village Sriperumpudur Taluk, Chennai-631 604 ... Respondent

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Tax Case Appeal filed under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal, Madras 'A' Bench, Chennai dated 14.02.2013 passed in I.T.A.No.2099/Mds/2012 for the assessment year 2006-07. Appeal against the order dated 29.8.2012 in Appeal No.586/11-12, on the file of the Commissioner of Income Tax (Appeals)-1, Coimbatore, against the order dated 23.12.2011 in G.R.No.AAA CI2101H for the assessment year 2006-2007 on the file of the Assistant Commissioner of Income-Tax company circle II(3), Chennai-034.

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For appellant : Mr.Arun Kurian Joseph Standing Counsel for Income Tax Dept.

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(The Judgment of the Court was made by T.S.SIVAGNANAM, J.)

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This Tax Case (Appeal) filed by the Revenue seeking admission is directed against the order of the Income Tax Appellate Tribunal dated 14.02.2013 relating to the assessment year 2006-07 raising the following questions of law :-

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"1. Whether on the facts and in the circumstances of the case the Tribunal was right in holding that the addition made on account of cessation of liability u/s.41(1) of the I.T.Act is not proper ?

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Whether on the facts and in the circumstances of the case the Tribunal was right in upholding the order of CIT(A) who held that cessation of liability on account of one time settlement with IFCI and other creditors amounting to Rs.4.93 crores cannot be subjected to tax under Section 28(iv) or under Section 41(1) of the I.T.Act ?"

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The respondent/assessee is engaged in the manufacture of medical devices. On 02.02.2007, the assessee filed its return of income disclosing its income as 'Nil'. Thereafter, summary assessment followed by scrutiny assessment was finalized on 19.12.2008 under Section 143(3) of the Income Tax Act, 1961 (hereinafter called as the "Act"). On 15.03.2011, the Commissioner of Income Tax-I directed the Assessing Officer to decide about the taxability of Rs.4,93,97,793/in the light of Section 41(1) read with Section 28(iv) of the Act. The Assessing Officer noticed from the assessee's annual report that the company operations were suspended during May 2002 and the factory was taken over by IFCI for unpaid dues; who sold its equity shares of Rs.61,20,478/-, which were pledged by the share holders; thereafter, the assessee opted for one time settlement and settled for Rs.185 lakhs against outstanding balance of Rs.564.29 lakhs. Thereafter, the assessee wrote back an amount of Rs.9,93,97,793/- in its notes on account under the head 'debtors and creditors, loan balances and others'. The assessee had also adjusted the amount of Rs.4.93 crores against current year expenditure. The assessee explained to the Assessing Officer that the provisions of Section 28(iv) and Section 41(1) of the Act are not attracted. The contention raised by the assessee was rejected by the Assessing Officer and therefore, he made addition of the above said amount in assessee's total income. Aggrieved by the same, the assessee filed appeal before the Commissioner of Income Tax (Appeals), who deleted the addition.

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Challenging the same, the Revenue preferred appeal before the Income Tax Appellate Tribunal. The Income Tax Appellate Tribunal, after considering the entire facts as well as the grounds raised before it, in paragraph 8, held that Rs.4.93 crores stand waived off in furtherance to One Time Settlement resulting in cessation of liability could not be treated as revenue receipt under Section 41(1) of the Act; in the absence of any factual dispute and noting that the assessee not disputed regarding the factual position, the Income Tax Appellate Tribunal took note of decision of this Court in the case of Iskraemeco Rent Limited Vs CIT reported in (2011) 331 ITR 317 (Mad), wherein, it was held that the assessee had taken loan for purchase of capital asset and later on the loan was waived off by the Bank, it does not amount to a benefit arising out of business and it is also not even remission of the liability, which could attract Section 41 (1) of the Act.

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In the light of the above finding, we find that the issue involved herein is squarely covered by the decision in the case of Iskraemeco Rent Limited Vs CIT reported in (2011) 331 ITR 317 (Mad)

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and we find no question of law arising in this Tax Case (Appeal). Accordingly, the Tax Case (Appeal) stands dismissed. No costs.

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Sd/-
Assistant Registrar
/True Copy/
Sub Assistant Registrar
nvsri
To
1. The Commissioner of Income Tax, Chennai.
2. The Commissioner of Income Tax (Appeals-I) Coimbatore
3. The Income Tax Appellate Tribunal, Chennai Bench 'A'.
4. The Assistant Commissioner of Income Tax
Company Circle II(3),
Chennai-34.
+1 CC to Mr.T.Ravikumar, Advocate Sr.No.46561
Tax Case (Appeal) No.504 of 2013
SS1(CO)
DRL : 14/09/2013

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The Commissioner v. M/S Innvol Medical India

Case brief

What is this about?

What did the court decide?

The Commissioner v. M/S Innvol Medical India

Case brief

What is this about?

What did the court decide?

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