Commissioner of Income Tax vs Punjab Agro Industries Corporation Ltd.

Jawahar Lal Gupta, J.—The Punjab Agro Industries Corporation Ltd., Chandigarh, filed its Income Tax return for the year 1988-89. It showed a loss of Rs. 69,34,140. The Assessing Officer made certain additions. One of these related to an amount of Rs. 24,67,864, which had been written off by the asses-see. Aggrieved by the order, the assessee filed an appeal. It was dismissed by the Commissioner of Income Tax (Appeals) vide order dated March 3, 1992. The assessee filed a second appeal before the Tribunal. Vide order dated June 29, 2000, the appeal was accepted. Aggrieved by the order of the Tribunal, the Revenue has filed the present appeal u/s 260A of the Income Tax Act, 1961. It maintains that the following question of law arises for consideration of this court :

"Whether, on the facts and in the circumstances of the case, the Income Tax Appellate Tribunal is right in law in allowing the claim of the assessee as interest receivable from sister concern and written off as irrecoverable being a sick unit without exhausting all efforts ?"

We have heard Mr. Sawhney, learned counsel for the Revenue. He contends that in the circumstances of the case, the Tribunal has erred in allowing the claim of the assessee. Is it so ?

A perusal of the order passed by the Tribunal shows that the respondent/ assessee had promoted a unit, viz., Agro Foods Punjab Ltd. in collaboration with Voltas Ltd. This unit had been set up to manufacture juice, concentrates, tomato paste, etc. It had suffered huge losses. A rehabilitation plan was prepared by the promoters of the company and the other financial institutions. The assessee had agreed to waive the interest on loans for the period from the years 1982-83 to 1985-86. This was done despite the fact that an amount of Rs. 24,64,888 had been credited to the profit and loss account of the assessee during the earlier years and had been offered for levy of tax. Still further, the other collaborator, viz., Voltas Ltd., had also advanced loan to the tune of Rs. 67 lakhs to the company. It had given additional advances of Rs. 51 lakhs. It had not debited any interest to the account of the company for the earlier years. As a result of the revival plan, the assessee had agreed to waive interest amounting to Rs. 24,64,888. Having waived the interest, the assessee had claimed a deduction of Rs. 24,64,888 during the assessment year 1988-89.

On a consideration of the matter, the Tribunal has found that if the assessee had not waived off the interest, it "could have lost the entire share capital of Rs. 48 lakhs and the principal amount of Rs. 67 lakhs". On this basis, it has come to a firm finding of fact that the decision to "waive the interest was taken by the assessee to safeguard its share capital of Rs. 48 lakhs and the loan of Rs. 67 lakhs, for which equal contribution was made by the assessee''s collaborators". On this basis, the deduction was allowed.

On a perusal of the findings recorded by the Tribunal, we hold that the deduction was rightly allowed.

Mr. Sawhney contends that there was no evidence before the Tribunal to support the abovenoted finding. However, despite being asked, learned counsel for the Revenue is unable to refer to even an averment in the petition of appeal that the Tribunal had recorded the abovenoted finding without any material on record. In this situation, the contention as raised by learned counsel cannot be accepted.

Mr. Sawhney relies upon the decision of their Lordships of the Supreme Court in Morvi Industries Ltd. Vs. Commissioner of Income Tax (Central) Calcutta, to contend that an accrued income cannot escape liability to pay tax.

There is no quarrel with the proposition. During the earlier assessment proceedings, the assessee had disclosed the amount of interest, which had accrued and subjected the amount to levy of tax. However, during the assessment year 1988-89, the assessee had waived the interest and thus claimed deduction. In the case of Morvi Industries Ltd. Vs. Commissioner of Income Tax (Central) Calcutta, , their Lordships of the Supreme Court had found that (headnote) ''''there was nothing to show that the amounts were relinquished for the purpose of the assessee''s business . . .". Thus, it was held that "the assessee was not entitled to claim deduction of the amounts as business expenditure u/s 10(2)(xv)". In the present case, the position is entirely different. The Tribunal has found as a fact that the assessee had waived the amount of Rs. 24,64,888 in order to secure its share capital of Rs. 48 lakhs and the loan of Rs. 67 lakhs. Thus, the deduction was a legitimate business expenditure and was rightly allowed by the Tribunal.

Mr. Sawhney has also referred to the decision in The Commissioner of Income Tax, Bihar and Orissa, Patna Vs. S.P. Jain, . This was a case relating to the transfer of shares, etc. On the facts, it was held by their Lordships that the finding of the Tribunal was unsustainable. In the present case, no facts have been placed on record or even pleaded in the petition of appeal which may indicate that the findings recorded by the Tribunal are not based on the evidence produced in the case.

No other point has been raised.

Before parting with the case, we may observe that the respondent-assessee is a Government company. As is usual, it has itself suffered losses. Despite that it has tried to help another company in the joint sector so as to secure its own interests. If it is subjected to unwarranted tax, even the assessee may go sick. It would not promote any public interest. Thus, even in equity we find no ground to interfere.

In view of the above, we find no merit in this appeal. Consequently, it is dismissed in limine.