The Kolkata Bench of Income Tax Appellate Tribunal ( ITAT ) in M/s. National Textile Corporation Ltd. vs. Commissioner of Income Tax (Appeals) (CIT(A)) held that the Deemed Consent could very well be inferred in case no objection is received within the specified period of 60 days of the date of circulation of the Draft Rehabilitation Scheme (DRS).
The assessee, a Public Sector Undertaking wholly owned by a subsidiary of National Textile Corporation Ltd is a sick company as per Sick Industrial Companies (Special Provisions) Act (SICA), 1985. The assessee approached Board for Industrial and Financial Reconstruction (BIFR) as per the said Act for its revival. The BIFR framed its Draft Rehabilitation Scheme (DRS). The same was put to circulation as per law. The BIFR proposed the Ministry of Finance / Central Board of Direct Taxes (CBDT) to exempt the assessee from the provision of section 41(1) of the Income Tax Act, 1961. No response came from any of the said two parties. The said scheme, therefore, stood finalized as per BIFR order involving those two impugned interest amounts.
The Assessing Officer (A.O.) had made additions of interest waiver by National Textile Corporation Ltd. of Rs. 383,63,20,000/- and interest on raw material to the tune of Rs. 29,68,63,000/- as chargeable to tax under section 41(1) of the Act in the nature of cessation of liability, in proceedings under section 143(3) of the Income Tax Act, 1961. The Commissioner of Income Tax (Appeals) (CIT(A)) confirmed the additions made by the A.O. The appeal was referred to the ITAT.
The issue before the Tribunal was whether it could be assumed that the Ministry of Finance or the CBDT had given deemed consent or not in the given instant facts and circumstances of the case.
The Bench comprising of Judicial Member S.S. Godara & Accountant Member Dr. A.L. Saini observed that Section 19(2) of the SICA makes it clear that a deemed consent can very well be assumed in case no consent is received qua the “DRS” in question from the parties concerned. Relying on the decision of the Delhi High Court in Government of India, Department of Revenue vs. Appellate Authority for Industrial & Financial Reconstruction wherein it was held that deemed consent can very well be inferred in case no objection is received within specified period of 60 days of the date of circulation of the “DRS” in question, the bench allowed the appeal.
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