The Delhi High Court in a recent decision observed that no additional concession could be included in Board for Industrial and Financial Reconstruction (BIFR) Scheme by Income Tax Department without any extension or modification.
The Principal Director General of Income Tax [‘DGIT’] has filed the present petition impugning an order passed by the Board for Industrial and Financial Reconstruction (‘BIFR’) relating to respondent no.1 – M/s The Indian Plywood Mfg. Co. Pvt. Ltd. The Board for for Industrial and Financial Reconstruction had directed the Income Tax Authorities to comply with its earlier order dated 26.02.2013 within a period of 45 days.
The DGIT assailed the impugned order, essentially, on two fronts. First, that further concessions, as contemplated in the order, could not be granted as the Scheme had come to an end. According to the DGIT no further concessions could be considered or granted without extending the term of the Scheme.
Secondly, that in terms of the order, the Scheme was modified to require the Income Tax Department to consider the grant of further concessions as specified in the said order and there is no requirement to necessarily grant the same.
The Company had, in fact, sought modification of the Scheme by seeking that its term be extended. An extension of the period of the Scheme would entail substantially altering not only the assumptions on which the scheme rests but also its parameters. In terms of Section 18(5) of the Sick Industrial Companies (Special Provisions) Act, 1985 (SICA), the BIFR was empowered to review any sanctioned scheme or make any such modification as it deems fit by an order in writing as it deems fit.
Admittedly, the Company’s application seeking modification of the scheme by extending the term remained pending with the BIFR. In terms of Section 18(5) of SICA, it was open for the BIFR to modify the Scheme and extend its term if it considered it apposite. However, no such modification could be sanctioned without the consent from the said concerned government, banks, institutions or authorities if the modification of the Scheme entailed any concession or financial assistance from such persons.
A Division Bench of Justices Vibhu Bakhru and Amit Mahajan observed that “The measures mentioned in the Scheme were timebound measures and were required to be implemented within the given time frame stipulated, therein. In view of the above, there is merit in the DGIT’s contention that without extension or modification of the Scheme, no additional concessions could be included in the Scheme.”
“In view of the above, there is merit in the contention that the Scheme sanctioned by the BIFR had expired. The Scheme contemplated measures for exceeding the net worth within the period specified in the Scheme and in the manner as stipulated therein viz by settlement with banks and workmen, repayment of statutory dues in instalments over a specified period of time, and infusion of funds by the promoters and sale of certain assets, and other measures” the Court noted.
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