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Commissioner of Income Tax, Chennai v/s M/s. Tamilnadu Industrial Investment Corporation Ltd., Chennai


Company & Directors' Information:- TAMILNADU INDUSTRIAL INVESTMENT CORPORATION LIMITED [Active] CIN = U93090TN1949SGC001458

Company & Directors' Information:- P V T INVESTMENT LIMITED [Amalgamated] CIN = U74899DL1988PLC121600

Company & Directors' Information:- P V T INVESTMENT LTD [Not available for efiling] CIN = U67120PB1988PLC008068

Company & Directors' Information:- S T INVESTMENT PRIVATE LIMITED [Amalgamated] CIN = U65993WB1990PTC050032

Company & Directors' Information:- H. L. INVESTMENT COMPANY LIMITED [Amalgamated] CIN = U65990WB1975PLC128186

Company & Directors' Information:- M M INVESTMENT PRIVATE LIMITED [Converted to LLP] CIN = U65921CT2008PTC020533

Company & Directors' Information:- G. N. G. INVESTMENT LIMITED [Active] CIN = U65910GJ1981PLC004128

Company & Directors' Information:- A S G S INVESTMENT PRIVATE LIMITED [Active] CIN = U74120DL2008PTC173938

Company & Directors' Information:- G L INVESTMENT PVT LTD [Active] CIN = U65993WB1991PTC051072

Company & Directors' Information:- C & C INVESTMENT LTD [Active] CIN = U67120AS1976PLC001654

Company & Directors' Information:- S M S INVESTMENT CORPORATION PRIVATE LIMITED [Active] CIN = U74899DL1963PTC003988

Company & Directors' Information:- V R V INVESTMENT PRIVATE LIMITED [Active] CIN = U67120WB1985PTC039793

Company & Directors' Information:- S P INVESTMENT PVT LTD [Active] CIN = U70109WB1961PTC025099

Company & Directors' Information:- R H INVESTMENT PRIVATE LIMITED [Active] CIN = U99999MH1978PTC020633

Company & Directors' Information:- T N B INVESTMENT PRIVATE LIMITED [Active] CIN = U74899DL1986PTC025590

Company & Directors' Information:- A R S INVESTMENT PVT LTD [Active] CIN = U65993WB1990PTC048513

Company & Directors' Information:- V P INVESTMENT PRIVATE LIMITED [Active] CIN = U74899DL1983PTC015714

Company & Directors' Information:- S M D INVESTMENT LIMITED [Strike Off] CIN = U65993TN1995PLC033139

Company & Directors' Information:- G R D INVESTMENT PVT LTD [Amalgamated] CIN = U67120WB1980PTC032727

Company & Directors' Information:- C AND N INVESTMENT PRIVATE LIMITED [Active] CIN = U74899DL1983PTC015710

Company & Directors' Information:- R INVESTMENT PRIVATE LIMITED [Strike Off] CIN = U65993TZ1988PTC002181

Company & Directors' Information:- H N G L INVESTMENT PRIVATE LIMITED [Active] CIN = U74899DL1995PTC066774

Company & Directors' Information:- K M S INVESTMENT PRIVATE LIMITED [Active] CIN = U67120UP1993PTC015287

Company & Directors' Information:- U M INVESTMENT PVT LTD [Active] CIN = U70101WB1979PTC032160

Company & Directors' Information:- A S T INVESTMENT PRIVATE LIMITED [Strike Off] CIN = U67120DL1996PTC082812

Company & Directors' Information:- B N E INVESTMENT LTD [Not available for efiling] CIN = U67120WB1974PLC029360

Company & Directors' Information:- K S J INVESTMENT COMPANY PRIVATE LIMITED [Strike Off] CIN = U74899DL1994PTC061335

Company & Directors' Information:- M G INVESTMENT AND INDUSTRIAL CO LTD [Not available for efiling] CIN = U99999MH1947PTC007551

Company & Directors' Information:- P T INVESTMENT PVT LTD [Strike Off] CIN = U65999WB1995PTC067065

Company & Directors' Information:- K. S. R. INVESTMENT LIMITED [Strike Off] CIN = U65992UP1988PLC010253

Company & Directors' Information:- J T INVESTMENT PVT LTD [Strike Off] CIN = U65923WB1979PTC032344

Company & Directors' Information:- R K INVESTMENT LTD [Strike Off] CIN = U65993WB1969PLC027398

Company & Directors' Information:- N M G C INVESTMENT PRIVATE LIMITED [Strike Off] CIN = U74899DL1982PTC014603

Company & Directors' Information:- T M INVESTMENT CO PVT LTD [Active] CIN = U67120WB1971PTC028172

Company & Directors' Information:- S. A. F. INVESTMENT LIMITED [Active] CIN = U67120DL1997PLC088611

Company & Directors' Information:- H K (INVESTMENT) COMPANY PRIVATE LIMITED [Active] CIN = U65990GJ1950PTC000511

Company & Directors' Information:- P N INVESTMENT PRIVATE LIMITED [Under Liquidation] CIN = U65910GJ1988PTC010715

Company & Directors' Information:- INVESTMENT CORPORATION LIMITED [Under Liquidation] CIN = U65993KL1942PLC000449

Company & Directors' Information:- S R M INVESTMENT PVT LTD [Strike Off] CIN = U67120WB1979PTC031888

Company & Directors' Information:- A TO Z INVESTMENT PVT LTD [Dissolved] CIN = U67120WB1988PTC044464

Company & Directors' Information:- R J INVESTMENT PRIVATE LIMITED [Active] CIN = U67120MH1976PTC018954

Company & Directors' Information:- B N K INVESTMENT CO PVT LTD [Active] CIN = U65993WB1971PTC028169

Company & Directors' Information:- A D INVESTMENT CO PVT LTD [Active] CIN = U67120WB1971PTC028170

Company & Directors' Information:- T D INVESTMENT CO PVT LTD [Strike Off] CIN = U65921CH1987PTC007637

Company & Directors' Information:- C G K INVESTMENT P LTD [Strike Off] CIN = U65910AP1986PTC006088

Company & Directors' Information:- L D INVESTMENT COMPANY PVT LTD [Strike Off] CIN = U65921HP1988PTC008425

Company & Directors' Information:- G K INVESTMENT PRIVATE LIMITED [Active] CIN = U65993TZ1987PTC001919

Company & Directors' Information:- G V INVESTMENT PRIVATE LIMITED [Active] CIN = U65993TZ1987PTC001920

Company & Directors' Information:- B C K H INVESTMENT CO PVT LTD [Active] CIN = U67120MH1982PTC026819

Company & Directors' Information:- H V INVESTMENT PRIVATE LIMITED [Active] CIN = U67120MH1997PTC107686

Company & Directors' Information:- M L INVESTMENT PVT LTD [Strike Off] CIN = U67120WB1979PTC032180

Company & Directors' Information:- S & G INVESTMENT COMPANY PRIVATE LIMITED [Active] CIN = U65100DL2012PTC244271

Company & Directors' Information:- S B INVESTMENT PVT LTD [Liquidated] CIN = U99999RJ1959PTC001090

Company & Directors' Information:- R AND P INVESTMENT PVT LTD [Strike Off] CIN = U67120PB1995PTC016124

Company & Directors' Information:- M M B INVESTMENT PRIVATE LIMITED [Active] CIN = U65993RJ1996PTC012698

Company & Directors' Information:- M G A INVESTMENT COMPANY PRIVATE LIMITED [Strike Off] CIN = U99999MH1980PTC022406

Company & Directors' Information:- D S N INVESTMENT PVT LTD [Strike Off] CIN = U65993TG1988PTC008554

Company & Directors' Information:- V. I INVESTMENT PVT LTD [Strike Off] CIN = U67120HR1988PTC030206

Company & Directors' Information:- R J P INVESTMENT PRIVATE LIMITED [Strike Off] CIN = U65993GJ1981PTC004678

Company & Directors' Information:- D D P INVESTMENT PRIVATE LIMITED [Strike Off] CIN = U65910GJ1981PTC004695

Company & Directors' Information:- C J P INVESTMENT PVT LTD [Strike Off] CIN = U99999GJ1981PTC004662

Company & Directors' Information:- M P INVESTMENT CO PRIVATE LIMITED [Under Process of Striking Off] CIN = U65993KA1974PTC002646

Company & Directors' Information:- INVESTMENT COMPANY PRIVATE LIMITED [Dissolved] CIN = U65990KL1946PTC000461

Company & Directors' Information:- INVESTMENT CORPORATION LIMITED [Not available for efiling] CIN = U99999MH1943PLC007730

    Tax Case (Appeal) No. 272 of 2009

    Decided On, 13 November 2018

    At, High Court of Judicature at Madras

    By, THE HONOURABLE MR. JUSTICE T.S. SIVAGNANAM & THE HONOURABLE MR. JUSTICE N. SATHISH KUMAR

    For the Appellant: M. Swaminathan, Senior Standing Counsel, M/s. S. Premalatha, Junior Standing Counsel. For the Respondent: Vijayaraghavan, R. Venkata Narayanan for M/s. Subbaraya Aiyar, Padmanaban, Advocates.



Judgment Text

(Prayer: Tax Case (Appeal) filed under Section 260-A of the Income Tax Act, 1961 against the order of the Income-tax Appellate Tribunal, 'C' Bench, Chennai, dated 12.09.2008 in I.T.A.No.1167/Mds/2007 for the assessment year 2003-04.)

T.S. Sivagnanam, J.

1. This appeal by the appellant/Revenue under Section 260A of the Income-tax Act, 1961 (hereinafter referred to as 'the Act' ), is directed against the order passed by the Income-tax Appellate Tribunal 'C' Bench, Chennai dated 12.09.2008, for the assessment year 2003- 04.

2. The appeal was admitted on 27.04.2009, on the following substantial question of law:-

'Whether on the facts and circumstances of the case, the Tribunal was right in holding that the assessee is entitled to deduction of provision made in respect of doubtful and loss assets under Section 36(1)(viia)(c) in terms of the proviso to that section, even though the assessee did not have any positive profits to set it off from?'

3. Heard Mr.M.Swaminathan, learned Senior Standing Counsel for the appellant/Revenue and Mr.Vijayaraghavan, learned counsel for the respondent/assessee.

4. The assessee is a wholly owned Government of Tamil Nadu company. For the assessment year under consideration, viz., 2003-04, the assessee filed return of income declaring a loss of Rs.27,52,31,850/-, which was subsequently revised declaring a net loss of Rs.54,68,55,640/-. During the course of assessment proceedings, the Assessing Officer noticed that the assessee has claimed deduction under proviso to Section 36(1)(viia)(c) to the extent of Rs.28,39,31,639/-. The Assessing Officer opined that the said deduction is allowable only if the assessee has got any positive income before allowing any deduction under the said Clause and under chapter VIA of the Act. He further opined that the assessee had returned a loss in the original as well as in the revised return and therefore, deduction under Section 36(1)(viia)(c) is not allowable.

5. The assessee filed appeal before the Commissioner of Incometax (Appeals)-III ('the CIT(A)' for brevity). The Commissioner, by order dated 02.02.2007, accepted the case of the assessee and allowed the appeal. Challenging the same, the Revenue preferred appeal to the Tribunal, which concurred the finding rendered by the CIT(A) and dismissed the Revenue's appeal. Aggrieved by the same, the Revenue is before us by way of this appeal.

6. It is the submission of Mr.M.Swaminathan, learned Senior Standing Counsel that the proviso to sub-Clause (c) in Section 36(1)(viia), which was inserted by Finance Act, 2002 with effect from 01.04.2003 is dependent upon sub-Clause (c) and in sub-Clause (c), it has been clearly stated that a public financial institution or a State financial corporation like the assessee is entitled to make provision for bad and doubtful debts by an amount not exceeding 5% of the total income computed before making any deduction under the said Clause or under Chapter VI-A.

7. It is the further submission of the learned counsel that unless there is a positive income, the question of applying sub-Clause (c) in Section 36(1)(viia) does not arise and the proviso cannot be read independently.

8. We are unable to accept the stand taken by the Revenue for the reason that the proviso to sub-Clause (c) in Section 36(1)(viia) uses the word 'at its option'. The proviso provided that a public financial institution or a State financial corporation or a State industrial investment corporation referred to in sub-Clause (c) in Section 36(1)(viia) shall, at its option, be allowed in any of the two consecutive assessment years commencing on or after 1st April 2003 and ending before 1st April 2005, deduction in respect of any provision made by it for any assets classified as doubtful assets or loss assets in accordance with the guidelines issued by it in this behalf, of an amount exceeding ten per cent of the amount of such assets shown in the books of account of such institution or corporation, as the case may be, on the last day of the previous year. Thus, in our view, the proviso carves out an exception from the stipulation in sub-Clause (c) otherwise, the use of the expression 'at its option' would loose its significance.

9. It is noteworthy to point out at this juncture that the amendment was brought into the Act by inserting the said proviso with effect from 01.04.2003 and this was with an object of granting incentive for debt/capital market and financial sector by which, the Central Government directed fiscal incentive for provisioning in respect of bad and doubtful debts in the case of banks and financial institutions. Therefore, the proper method of interpreting the proviso is to give life to the proviso and the intention behind the insertion of the proviso.

10. It is pointed out that a similar proviso is contained under sub-Clause (a) of Section 36(1)(viia) which apply to schedule bank and non-schedule bank and this proviso was inserted with effect from 01.04.2000. Thus, the Central Government proposes the amendment to give a retrieve for State industrial corporation, public financial institution and State financial Corporation giving them an option to claim deduction in respect of any provision made by it for any

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assets classified by the Reserve Bank of India as doubtful assets or loss assets. 11. The proviso also place another condition that those assets should be classified by the Reserve Bank of India as doubtful assets or loss assets in accordance with the guidelines issued by the Reserve Bank of India. 12. Thus, in our considered view, the interpretation given by the CIT(A) and the Tribunal is perfectly valid. Thus, for the above reasons, the appeal filed by the Revenue, is dismissed and the substantial question of law is answered in favour of the assessee. No costs.
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