I-T - In absence of production of rehabilitation scheme, assessee cannot be allowed benefit of Sick Industrial Companies Act: ITAT
By TIOL News Service
NEW DELHI, MAR 07, 2019: THE ISSUE IS - Whether in absence of production of rehabilitation scheme, assessee cannot be allowed the benefit of the Sick Industrial Companies Act. YES IS VERDICT.
Facts of the case
The assessee company filed return for relevant AY. During assessment the AO made addition of interest amounting to Rs. 1,75,73,101/- due to financial institution on term loans and cash credit accounts u/s 43B of the Act. The addition of Rs. 9, 13, 560/- was also made towards excise duty u/s 43B of the Act. Matter on appeal reached upto Tribunal. The Tribunal restored the matter back to AO based on the plea of the assessee that it had intimated about the applicability of the Sick Industrial Companies (special provision) Act, 1985 which was not considered in proper perspective by the lower authorities. In remand proceedings, the AO asked the assessee to provide a copy of the rehabilitation scheme/proposal prepared. The AO noted that no such scheme of rehabilitation scheme was made available to him. The scheme was not even made available before the CIT(A) in second round of appellate proceedings, and accordingly, upheld the finding of the AO. Aggrieved with the finding of the Ld. CIT(A), the assessee filed appeal before the Tribunal.
Tribunal held that,
++ the AO and the CIT(A) in the second round of the proceeding, asked the assessee to submit the comprehensive rehabilitation scheme submitted by the assessee and whether the same was considered in joint meeting. It is evident from the assessment order and impugned order of the CIT (A) that no such scheme was submitted before them. The Council of the assessee was asked specifically by the bench to provide such a copy of the scheme. However neither any such scheme nor any such order of the BIFR was produced. In case of JK Corporation Limited, High Court held that the Sick Industrial Companies (Special Provisions) Act, 1985, is a special act and the scheme framed thereunder is binding upon everyone, as it has assumed the character of conclusions by virtue of section 18(4) and also section 18(8) and once a scheme is framed by virtue of section 32(1), the scheme overrides all other provisions of the law including the Income Tax Act, 1961 and other instrument or document having effect by virtue of any law. It is evident that the schemes would override the provisions of the Income Tax Act. However no such scheme had been produced by the assessee either before the lower authorities or before us and thus the assessee cannot be allowed the benefit of the Sick Industrial Companies Act;
++ related to working capital loan interest not covered under the provisions of section 43B of the Act and written back of the interest liability under section 41(1) of the Act in AY 2008-09, had not been raised before the lower authorities and first-time these arguments have been made before the Tribunal. The provisions of section 43B during relevant period also contain the subsection (c), which includes interest in respect of the loans from financial institutions. Any working capital loan from such financial institution is also subject to the provisions of section 43B of the Act during relevant period. From the evidences containing balance sheets and profit and loss account etc presented by the counsel, it is not clear whether the interest on working capital loan was related to financial institutions covered by subsection (c) of 43B during relevant period or related to scheduled banks covered by subsection (d) of 43B during relevant period. In the year under consideration the dispute is in respect of allowabilty of claim of interest expenditure under the provisions of section 43B of the Act, which is allowed only on payment basis. The claim of interest expenditure written back under section 41(1) of the Act in subsequent years, were never raised or evidence in support thereof filed before the lower authorities. In the result, the appeal of the assessee dismissed.
(See 2019-TIOL-597-ITAT-DEL)
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