Coimbatore Pioneer Mills Ltd. Vs. Commissioner of Income-tax - Court Judgment

Excerpt:
- securitisation & reconstruction of financial assets & enforcement of security interest act, 2002 [c.a. no. 54/2002]section 17; power of tribunal to impose condition relating to deposit for grant of stay of auction held, there is no specific provision made under section 17 of securitisation act or under any other provisions of the said act empowering the tribunal to pass any interim order. but under sub-section (12) of section 19 of the recovery of debts due to banks and financial institutions act, 1993, the tribunal has been empowered to pass various interim orders. if sub-section (7) of section 17 of securitisation act is read along with sub-section (12) of section 19 of recovery of debts due to bank is and financial institutions act, it would be clear that the tribunal also has jurisdiction to pass interim orders under section 17 of the securitisation act in appropriate cases. the tribunal is empowered to grant interim stay subject to such conditions as may be deemed proper including condition of deposit. even under section 69 of the transfer of property act, the only remedy of the borrower whose mortgage has invoked section 69 of the transfer of property act, is to file a civil suit and in such suit the court has power to grant injunction and to impose condition for the grant thereof--section 17; [a.p. shah c.j., f.m. ibrahim kalifulla & v. ramasubramanian, jj] proceedings under section 17 power of the tribunal to pass any interim order held, once the possession of the secured asset is taken, there would be no occasion for the tribunal to order redelivery of possession till final determination of the issue. in other words, it is only when the tribunal comes to the conclusion that any of the measures, referred to in section 13 (4) taken by the secured creditor are not in accordance with the provisions of the act and the rules made thereunder, then only the tribunal can restore possession of such secured assets to the borrower. by virtue of sub-section (7) of section 17 of the securitisation act read with section 19 (12) of the recovery of debts due to banks and financial institutions act the tribunal undoubtedly possess ancillary power to pass interim orders subject to the conditions as it may deems fit and proper to impose, but it does not in any way override the special provisions contained in section 17(3) of the securitisation act. the statutory scheme of the securitisation act is such that the borrower could take recourse to application under section 17 only if one or other measure is taken by the secured creditor, and the tribunal can restore the status quo ante only if it comes to the conclusion that any of the measure taken by the secured creditor is not in accordance with the provisions of the act. the scheme cannot be bypassed by issuing a mandatory order for redelivery of the possession before conclusion of the proceedings under section 17--sections 17, 13 (4); [a.p.shah, c.j., f.m. ibrahim kalifulia &v. ramasubramanian, jj] scope of enquiry under section 17 held, the main purpose of the securitisation act, and in particular section 13 thereof, is to enable and empower the secured creditors to take possession of their securities and to deal with them without the intervention of the court. therefore, in an application under section 17, the tribunal is concerned only with the validity of the acts of the secured creditor in taking possession of the securities and dealing with the same under section 13. all such grounds, which would render the action of the bank/financial institution illegal, can be raised before the tribunal in the proceedings under section 17. it is for the tribunal to decide in each case whether the action of the bank was in accordance with the provisions of the act and legally sustainable. however, while considering the question of validity of the action of the bank, it is not necessary for the tribunal to adjudicate the exact amount due to the secured creditors. in other words, the purpose of an application under section 17 is not the determination of the quantum of claim per se as the tribunal is concerned with the issue of the validity of the measures taken by the banks/financial institutions under section 13(4)--sections 17(4), 13(4) ; [a.p. shan c.j.,f.m.ibrahim kalifulla & v. ramasubramanian, jj] appeal right of bank held, the right of the bank is not automatically suspended upon filing of an appeal by borrower under section 17 of the securitisation act and the bank as secured creditor can proceed to auction secured asset where no stay is granted by the tribunal. there is nothing in section 17 of the securitisation act which would indicate that the legislature intended that there would be automatic stay of recovery proceedings by bank under section 13(4) on filing an appeal by borrower under section 17. use of the expressions if and then under section 17 would not mean that the bank can take one or more measures laid down under section 13(4) only if the tribunal declares that the action taken already is in accordance with the provisions of the securitisation act and the rules made thereunder. use of the word if does not connote a condition precedent. it is a recognised rule of interpretation of statutes that expressions used therein should ordinarily be understood in a sense in which they harmonized with the object of the statute and which effectuate the object of the legislature. the provisions of section 17 must, therefore, receive such construction at the hands of the court as would advance the object and at any event not thwart it. in other words, the principle of purposive interpretation should be applied while construing the said provisions. the securitisation act is enacted to provide a speedy and summary remedy for recovery of thousands of crores which were due to the banks and financial institutions. n.v. balasubramanian, j.1. at the instance of the assessee, the appellate tribunal has stated a case and referred the following question of law for the opinion of this court under section 256(1) of the income-tax act, 1961 :'whether, on the facts and in the circumstances of the case, the deferred interest payment relating to loan raised for purchase of machinery installed in 'textiles processing unit' was revenue in nature and does not form part of the actual cost of plant and machinery ?'2. the assessee is a public limited company engaged in manufacture and processing of textiles. the assessment year involved is 1979-80 and the relevant previous year ended on december 31, 1978. the assessee filed a return of income for the assessment year 1979-80 declaring a total income of rs. 19,08,600. the inspecting assistant commissioner of income-tax (assessment), range-ii, coimbatore, determined the total income of the assessee at rs. 34,96,070. the assessee during the course of the relevant previous year set up a new textile processing unit and installed certain plant and machinery. the assessee claimed that the deferred interest of rs. 1,64,355 relating to the money borrowed for the textile processing unit should be capitalised, and should be added to the cost of the machinery for the purpose of computation of its income. the result of such treatment of the amount would be that the assessee would claim depreciation on the amount capitalised and the assessee would also be entitled to higher deduction under section 80j of the act. the assessing officer, however, held that the deferred interest charges should be regarded only as a revenue expenditure and allowed the same following the decision of the supreme court in the case of bombay steam navigation co. (1953) (p.) ltd v. cit : [1965]56itr52(sc) wherein the supreme court has held that the deferred interest charges should be regarded as revenue in nature. the assessing officer also found that in respect of two other yarn units set up by the assessee in the earlier years, the deferred interest charges was treated as revenue expenditure. consequently, the assessing officer partially disallowed the claim of the assessee of depreciation allowance and relief under section 80j and completed the assessment.3. the assessee preferred an appeal before the commissioner of income-tax (appeals) against the order of the assessing officer holding that the deferred interest charges should be allowed as a revenue expenditure. the commissioner of income-tax (appeals) stated that the interest paid on the unpaid purchase money can be capitalised and it is at the option of the assessee to claim the same as revenue expenditure or as capital expenditure. the commissioner of income-tax (appeals) following the decision of the bombay high court in the case of ballarpur paper and straw board mills ltd. v. cit : [1979]118itr613(bom) held that the assessee had opted to capitalise the interest charges and, therefore, the assessee would be entitled to claim that the amount should be capitalised and the assessee would be entitled to claim depreciation on the interest amount paid on the deferred purchase consideration.4. the revenue preferred an appeal before the income-tax appellate tribunal. the appellate tribunal following the decision of the supreme court in the case of bombay steam navigation co. (1953) (p.) ltd. : [1965]56itr52(sc) and a decision of this court in the case of sivakami mills ltd. v. cit : [1979]120itr211(mad) held that the interest paid on the deferred purchase consideration should be regarded only as revenue expenditure, and it is not open to the assessee to claim it as a capital expenditure. it is this order of the appellate tribunal that is the subject-matter of the tax case reference.5. mr. p. p. s. janarthana raja, learned counsel appearing for the assessee, contended that on the basis of the decision of the bombay high court in the case of ballarpur paper and straw board mills ltd. v. cit : [1979]118itr613(bom) the interest paid on the purchase consideration should be capitalised and the appellate tribunal was not correct in holding that it should be regarded as revenue expenditure. he sought to distinguish the decision of this court in the case of sivakami mills ltd. v. cit : [1979]120itr211(mad) on the ground that the decision related to the question of payment of guarantee commission and that case was not a case dealing with interest payment.6. we are not able to accept the contention of learned counsel for the assessee due to the change in the statutory law. explanation 8 to section 43(1) of the income-tax act was introduced by the finance act, 1986, with retrospective effect from april 1, 1974, and under the said explanation it is declared that for the removal of doubts, where money is paid as interest in connection with the acquisition of an asset, so much of such amount as is relatable to any period after such asset is first put to use, shall not be included and shall be deemed never to have been included in the actual cost of such asset. explanation 8 to section 43(1) of the act makes it clear that the interest paid on the deferred purchase consideration cannot be included as part of the cost of the asset either for claiming depreciation or for claiming deduction under section 80j of the act. hence, on a different reasoning arrived at by us the view of the appellate tribunal that the interest paid in connection with the acquisition of an asset cannot be included as part of the actual cost of the asset is justified and is perfectly in order. hence, it is not necessary for us to go into the question that the decision of this court in the case of sivakami mills ltd. v. cit : [1979]120itr211(mad) would apply to the facts of this case. since on the basis of explanation 8 to section 43(1) of the act, which is admittedly applicable to the facts of the case, the interest paid cannot be added as part of the cost of the assets, the question referred to us is liable to be answered in the affirmative and against the assessee. accordingly, we answer the question of law referred to us in the affirmative and against the assessee. no costs.