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    Rieter India P. Ltd.-HC-Bombay

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    Niilesh

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    © All Rights Reserved
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    of 10
    903 ITXA 477-15=.doe IN THE HIGH COURT OF JUDICATURE AT BOMBAY ORDINARY ORIGINAL CIVIL JURISDICTION INCOME TAX APPEAL NO. 477 OF 2015 The Commissioner of Income Tax-3, Pune «+. Appellant Ws. Rieter India Pvt. Ltd. «+. Respondent Mr. Sham Walve for the Appellant. Mr. Jas Sanghvi a/w Ms. Jasmin Amalsadvala i/b PDS Legal for the Respondent. CORAM : S.C.DHARMADHIKARI & SMT. VIBHA KANKANWADI, JJ. DATE: 18" AUGUST, 2017 BC.: Having heard both sides and after perusal of the order of the Tribunal, we do not think that the Appeal raises any substantial question of law. 2 The Tribunal passed an order for assessment year 2003-2004 on 25% July 2014. 3 As far as the issue at hand is concerned, the waiver of Rs.29,63,27,000/- of a principal amount of loan, the only argument was that this constitutes a trading liability. The provisions in question, Section 28(iv) and Section 41(1) clause (a) of the Income Tax Act, 1961 are attracted. Sneha Chavan V/s 1s Uploaded on - 2208/2017 #5 Downloeded on - 24/06/2022 11:00:02 ee 138° -* 18\6 (232-mv4x08) 3) Te No. : BESS Tei No. : (022) 24135057 pravinkenase_2007@yahoo ce in P.D. KANASE & CO.)\0 54 e00972 ENGINEERS, CONTRACTORS & L1CENCED PLUMBERS 418, Big No 7-48, Shiv Sadan CHS Lid Praiisia Negar, Sion Kolivada, MUMBIA)-400 222 Rane Date Ref, No. :20"(4¥of%pd Date: ane 21, 2014, 1.9 AUG 20% INVOICE To Sire Loca Te. ‘Aor Hidg Dost Asers lavous Doot Reahy Le | Dost: Acres Bly ‘J Dosti Acres S, M. Road SoM. Road Wacsla | antap Hill, Wadela, Mumbai No. 200037, _ [se] Survive Destription Re No. Taterual line ikh Hafizudding, 1, ) Being the service Charges for che Drainage Compt building proposal (BP) °E’ Ward, M.C.G.M. of ee ‘ : Teall, avatled as per the requirements with lisison & following the BP. office, at proposed the development residential bldg, known as Dosti | Acres tag “3° plot bearing C.S. No. 354-8, 355. of Matunge divi & of salt pan divi S. M. Rd Wadala (E) Mumbai No, 400 037 Ref BRATIMITNVA Dated 11.02.2014, | 13,0000 | T Biave value ofservioes Rs. p00 | Services Tix at (2% on above 1,560.00 ‘Ada: Education Css 2% on ST 1.00. Ags: Education Goss (§ & H)@i19% on ST 16.00 Tavoiee Value —_ lis 00 Rs. in Words (Rupees Fourteen Thousand Six Hundred Only) Siauatory Requirement: SERVIES TAX No. ASRPKG734°S1001, PAN No, AIRPK6734F yr "Tix Category; Erection Commissioning and Instalistion Bo 7140 _|2als! for P.D. KANASE & CO. ye CHECKED >) Proprietor a OFFICE Se 868% oy [insu ay Ge te RE aul meres SGC Age: 903 ITXA 477-15=,doc 4 The Tribunal heard both sides extensively on this point and held as under: 13. In this context, we find that the assessee company had obtained the term loan from DEG, Germany in the course of the financial years 1994-95 and 1995-96. The term loan from DEG, Germany has been approved by the Reserve Bank of India vide a communication dated 05" June, 1995, a copy of which has been placed at pages 75 to 79 of the Paper Book. A perusal of the said RBI approval reveals that the assessee was permitted to raise foreign currency loan from DEG, Germany for financing the import of capital equipments for manufacturing of textile spinning machinery and components. Further even the loan agreement with DEG, Germany reflects financing of the project undertaken by the assessee of manufacturing textile spinning machinery and components thereof. The said agreement also shows that the loan raised from DEG, Germany was a long term means of finance for the purposes of funding assessee's project of manufacturing textile spinning machinery and components for textile industries. At pages 80 to 82 of the Paper Book, assessee has placed the list of machineries which have been acquired from Spindle Fabrik Suessen, Germany and the respective invoices thereof. It is noticeable from the financial statements of the assessee as on 31.03.1995 that a liability of Rs.32.75 crores was outstanding as a part of current liabilities of Rs.42.60 crores against the name of Spindle Fabrik Suessen, Germany, against the machineries acquired. The aforesaid position is not disputed by the Revenue inasmuch as the same is also emerging from the relevant portion of the Balance Sheet incorporated by CIT(A) in his order at page 7. The loan from DEG, Germany was received on 30.09.1995 and was utilized for payment of the outstanding liability towards acquisition of fixed assets of Sneha Chavan ws Uploaded on - 22/08/2017 1! Downloaded on ~ 24/08/2022 11:00:02 =: pu ayyy oo 0 oe Mobile No. : 9833988677 Tel No, (022) 24139087 pravinkanase 2007 @yahco cn in ‘ _. P.D. KANASE & CO. ENGINEERS, CONTRACTORS & LICENCED PLUMBERS 415, Bkig. No. 7-49, Shiv Sadan CHS Lid, Pratikshe Nager, Sion Kollwada, MUMBAI-400 022. Ret A No. 6L/E3/0fpd Date: Main, 2014 oifoGtrey Adc Ne wvles fom Sperm vente Driv jIVOIcET. te Lecition Areas j [To Dosti Aces Acres proposed 33 KV Receivi | Dosti Rent Lea, on Bus Stition, Sulabh Shauchalnya & Poice | Dost Acres 8. M: Road ky. Wadals(E) Mumba. | Antop Hill, Wadala, Mumbai No. 400 037, Dy Ch BISWA IOPECIPRY Dated; 69.2014, | | Me Favviee Deseripiion i Na, - if 1 | Bein the Servios charges forthe Appraval tothe NALLA Remark To Lay out Storm Weter Drainege of SWD. depatmen MCGM. Enginecsing Hub | | + | building Dr, Moses road Worti resis/NO.C. avsiled a3 oer the requiements | | ‘with lsison & Following Muwnicigl office at proposed 33 KV Receiving Sub ~ | station, Bus Station, Su'abh Stauchalaya end Police Chowky on plot bearing C $8 Nov 2337 - B for the develogment for Tee propecy om SM Rond Sele Pan | Dosti cers Macungs Division Ariop (ill Wadala Fe North Ward Mur Ref: Approval Play No, #8/6753/FN/A/Dwed: 3171072013. sso0a.00! [= Tose vale of services 5000.00) "> 1 Tseevices Te 1 12% = 6,500.00) ‘ed: Education Cessi T 132.06 ‘Aad: Education Cess (5 & H)G@ 1% on ST 66,00 {arta Vane _ | Canaps.60 Rs. In Words ( Rupees Sixty One Seven Thousand Ninety Bight Only ) . [eh Stary Rulon Lien! SERVIBS TAX No. AIRPKG734FSTOOI “ ewher? |= PANN AIRPK6734F eit ! Seryjces Tax Csegary; Erection Commisioning nd Insattaion — ESAS > ‘ for P. D. KANASE & CO, i : “ co o> grts8, 0° Proprietor step teathmventarenarthdandysertn 903 ITXA.477-15=.doc Rs.32.75 crores, apart from meeting other liabilities. Be that as it may, factually speaking, it is not in dispute that assessee has utilized the loan raised from DEG, Germany for payment of Rs.32.75 crores to Spindle Fabrik Suessen, Germany, which was a lability outstanding against acquisition of fixed assets from the said concern. The Revenue contends that discharge of such liability of Spindle Fabrik Suessen, Germany cannot be treated as utilization of term loan from DEG, Germany for acquisition of fixed assets, because the assets already stood acquired prior to that date. So however, it is undisputable that the liability towards payment for acquisition of assets was outstanding and assessee has util ed the loan from DEG, Germany to pay-off such liability. In our considered opinion, factually speaking, the payment made by the assessee to Spindle Fabrik Suessen, Germany towards outstanding liability against acquisition of fixed assets of Rs.32.75 crores, which is out of the loan funds from DEG, Germany is to be understood as utilization of loan funds towards acquisition of capital assets. The inference of the CIT (A) to the contrary, in our view, is on account of misplaced appreciation of the facts. The CIT (A) is correct in saying that the “loan was utilized for repayment of existing current liabilities”, so however, it is abundantly clear that the repayment to the extent of Rs.32.75 crores was for liquidating a liability which had arisen on account of acquisition of capital assets from Spindle Fabrik Suessen, Germany. Therefore, it has to be understood that the loan availed from DEG, Germany was utilized for the purposes of acquisition of capital assets, to the above extent. The subsequent waiver of such an amount, in our view, cannot be said to be waiver of a loan raised for trading activity. In this view of the matter, we therefore, hold that the waiver of Sneha Chavan 3/5 Uploaded on - 22/08/2017 1! Downloaded on - 2406/2022 11:09:02 varey tasger S189 Vendse tm Aptton / Pesky S828 eabte La ts, exoatt tn ‘Cate aasgneneis neeen, e1n2 s3/bA¢ot/es seaate.ee Ben te sen ae orem, eine sarnaiotzpa sespianeen — saetesany Fes vie bo Blanes lessen Countian ees D-p701y rweek, ean eennevotina faeae 330.98 er Bede tneee Tea es.ee er —— Tee ae For, P.D. KANASE 6532-5. g e “proprietor Paw - ATR PKETOY FE OF DE RSE RTP ‘Scanned wit Cemscenner 903 ITXA 477-15=.doc the principal amount of term loan granted by DEG, Germany of Rs.29,63,27,000/- was with respect to a loan which was granted as well as utilized for purchase of capital assets, namely, plant & machinery. 14. Considered in the aforesaid factual backdrop, the waiver of Rs.29,63,27,000/- represents waiver of the principal amount of loan utilized for acquisition of capital assets and not for the purposes of trading activity and accordingly the issue is covered in favour of the assessee by the judgment of the Hon'ble Bombay High Court in the case of Mahindra and Mahindra Ltd. (supra). Following the ratio of the Hon'ble Bombay High Court in the case of Mahindra and Mahindra Ltd. (supra), it has to be held that the waiver of the principal amount of loan granted by the DEG, Germany to the extent of Rs.29,63,27,000/- in terms of OTS Scheme is in the nature of capital receipt not chargeable to tax. 5 From a perusal of these factual findings, we find the same to be in consonance with the principle of law laid down by the Division Bench of this Court in the case of Mahendra & Mahendra Ltd. V/s. CIT, (2003) 261 ITR 501. 6 Mr. Walve appearing on behalf of the Revenue in support of the appeal, however, would urge that the Tribunal ignored the law laid down in another Judgment reported in Solid Containers Ltd. V/s. DCIT, 308 ITR 417. We do not think that the facts and circumstances involved in the present case were identical Sneha Chavan, 4s 1 Uploaded on - 220872017 Downloaded on = 24/06/2022 11:09:02 Pa uote - gens Facey taser Versor decanted {include “persion Summary? 1 AeeLL 28 40 30 maen 8 pew ae eae ot Woe Mane cevecipeton / Pasty uit Soebbe da Ae, Erect An RA Lane Un Re, pee vb mamnae 4 co e1-go-2088 eureh. BHT S8/23708/0 sus-00 cr ot viet 108,339.00 eF er-ae7014 een, BLL) 61/13/0879 wtyeesass.o0 cr AIEeas.00 ce pi-oe-2616 seas, ero6-ze14 Ov-04-3054 ruren. SLL ee/Lavor“ew oM,oe a. OB er Aa-c60re Hore nant Peenre ts) Hare we a 26-06-00 HOR Beak once 4.225.08 €¢ Ba7ee/30 be 1090 BHOeHON NORE Beek sence 52,303.08 seroerse Ho 1088 2eoer014 HORE nae 10 Lt 446.00 68 rected ware nant oa.e9.29 son.ae 64 peroerne ao 1081 ocen, 1a 20/14 708Fe8 14,601.00 erepset.eb ee sob w/a 1aass06 cinta ce Proressiimnt cranes) ost-2014 HOHE ban 2 Lane Baroe/ie ee e790 rouiezeve aver, aan c@viesorseD 40,450.00 For ula. s ees e0 as.00 cr Coceennee ens er1-20L4 ee cant 34,804.00 sat ee er baytayie mo 098387 aianane avc.etreae, 00 eter Stoneaels fees. BUit LODdiELot pt yaw te couse rats1 ‘Sanna wh Camscanner 136 903 ITKA 477-15=

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