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*IN THE HIGH COURT OF DELHI AT NEW DELHI
+ WRIT PETITION(CIVIL) NO. 448/2011
ARCOTECH LTD. ..... Petitioner
Through Mr. Sandeep Sethi, Sr.
Advocate with Mr. Siddharth Bhatnagar,
Ms. Sonia Dube, Mr. S. Chakraborty &
Ms. Kanchan Yadav, Advocates.
versus
DIRECTOR OF INCOME TAX (RECOVERY) & ORS.
..... Respondents
Through Mr. D.R. Jain & Mr. Sanjeev
Sabharwal, Sr. Standing Counsel.
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE R.V.EASWAR
ORDER
% 01.11.2011
Arcotech Limited, earlier known as SKS Limited, has filed
the present writ petition, inter alia, praying for following reliefs:-
“(a) Issue a Writ of and/or in the nature of
Mandamus directing the Respondents each
of them to comply with order dated
18.11.2004 and 24.06.2009 passed by BIFR,
inter alia, by granting following reliefs and
concessions:
i) Business losses be allowed to carry forward
under Section 72 of Income Tax Act, 1961
for a period of 8 years from the cut off date
i.e. 01.10.2004.
ii) No interest and/or penalty be levied.
iii) Condone the delay in filing of Income Tax
Return for the AY 2005-06 under Section
W.P. (C) No. 448/2011 Page 1 of 8
139 read with the section 80 of the Income
Tax Act, 1961.
iv) The provisions of Section 115JB should not
be applicable until such time net worth of the
company exceeds Rs.63.71 Crores.
(b) In the alternative, issue a Writ of and/or
in the nature of Mandamus directing the
Respondents to consider and grant
reliefs/exemptions and concessions as have
been granted by them to other similarly
placed sick industrial companies and in
particulars the recommendations by the
Income Tax Department dated 02.01.2010
after giving a notice and opportunity of
hearing to the Petitioner Company, ignoring
the letter dated 19.01.2010 and pass a
reasoned order.
(c) Pass such further or other order or orders
as may be deemed fit and proper in the facts
and circumstances of the case.”
2. During the course of arguments, it is stated that the
petitioner is not disputing the applicability and application of
Section 115JB of the Income Tax Act, 1961 (Act, for short), but
the petitioner claims that in case benefit under Section 72 is
granted to the petitioner, then the said benefit should be
available to the petitioner in terms of sub-section 3 to Section
115JB of the Act. The aforesaid statement made on behalf of
the petitioner is taken on record.
3. By the impugned order dated 19th January, 2010, the relief
W.P. (C) No. 448/2011 Page 2 of 8
prayed for by the petitioner under Section 72 of the Act has been
rejected for the following reasons:
“4. Relief u/s. 72:- Initially the company
has asked for this relief in its
correspondence. However, later on this
section has been omitted from the request
letter dated 17.07.2009. The company vide
its letter dated 15.10.2009 has also given the
details of brought forward business loss
since AY 98-99 which can be carried forward
till AY 2006-07. The Company’s net worth
became positive in Y 2005-06 as per SOP
dated 24.06.2009. In this light also no relief
has been considered u/s. 72 of the IT Act
beyond its provisions.”
4. It is apparent from the said order that the Director of
Income Tax (Recovery) has held that the petitioner had given up
their request for relief under Section 72 as the said Section was
omitted from the request letter dated 17th July, 2009. There is
merit in the contention of the petitioner that the aforesaid
authority has misunderstood the stand of the petitioner and the
aforesaid letter. We have also examined the letter dated 17th
July, 2009. The said letter refers to several sections of the Act
and concessions are prayed for, but it is stated that similar
reliefs and concessions, which have been granted to others,
should be sanctioned and granted to the petitioner company.
Moreover, the petitioner in their earlier letter dated 20th
W.P. (C) No. 448/2011 Page 3 of 8
November, 2008 had specifically mentioned and asked for relief
and concession under Section 72 of the Act. In their subsequent
correspondence dated 4th August, 2009 reference was made to
relief and concession under Section 72 of the Act. The
respondent authority had thereafter written a letter dated 10th
August, 2009 asking for various details to examine and decide,
whether claim for concessions or reliefs could be granted to the
petitioner. In response to this letter, the petitioner had submitted
details vide letter dated 15th October, 2009. It was stated in this
letter that the scheme for rehabilitation was sanctioned by BIFR
on 18th November, 2004 and the share capital of the company
was de-rated to 20% and accordingly 80% of the share capital
along with reserves and surpluses to the tune of Rs.41.69 crores
were adjusted against accumulated losses. Further, the
company had arranged for funds by selling for their assets and
from sale of personal assets of the promoter and infusion of
funds by the promoter to the extent of Rs.18.30 crores for
relocating the machinery, construction of the factory building at
the new plant site, de-commissioning of the plant and to
augment the working capital. Along with this letter, the petitioner
had enclosed projected cash flow statement, the then situation
W.P. (C) No. 448/2011 Page 4 of 8
of cash availability etc. It is the contention of the petitioner that
the cash flow statement was enclosed with the sanctioned
scheme. Learned counsel for the petitioner has drawn our
attention to the projected profitability statement enclosed at page
74 of the paper book as per which till the year ending 31st
March, 2009, it was projected that the petitioner company would
not be liable to pay any taxes.
5. We have highlighted the said aspects as it is the
contention of the petitioner that these aspects have not been
considered and examined by the respondent authorities while
recording the second reason for rejecting the request for relief
under Section 72 of the Act as it is stated that the petitioner
company’s net worth became positive in the year 2005-06 as per
the statement of profit dated 24th June, 2009. Another
contention raised by the petitioner is that the entire business and
operations of the petitioner company remained suspended
between the period 1996-2006 as the matter was pending
before BIFR and the petitioner company had been declared a
sick company. Thus, the petitioner could not claim benefit of
carried forward losses as the matter was sub-judiced.
6. Learned counsel appearing for the respondent authorities
W.P. (C) No. 448/2011 Page 5 of 8
has submitted that no direction was issued by the BIFR to grant
concession or relief under Section 72 of the Act. In fact, no
concession of this nature was envisaged in the draft scheme or
stated in the sanction order. He has further submitted that once
the petitioner company is earning profits since the assessment
year 2005-06, no relief under Section 72 of the Act should be
granted. It is further submitted that the company did not file any
details to support their contention for relief or concession under
Section 72 of the Act.
7. The draft scheme, as is placed on record, envisaged that
the Central Government would consider waiver of income tax
demand/interest and carry forward of business losses and
depreciation and set off against future profit, if any, beyond nine
years. The sanctioned scheme envisaged that the Central
Government shall consider grant of usual tax and other reliefs
and concessions to the petitioner company. Order dated 24th
June, 2009 passed by the BIFR further records that the Bench
had reiterated and directed the income tax authority and DGFT
to implement the provisions of SS-04 with regard to relief and
concessions as envisaged in paragraph E-IV(i) and (ii) on page
9 of SS-04. SS-04 refers to the sanctioned scheme and paragraph
W.P. (C) No. 448/2011 Page 6 of 8
E-IV(i) relates to the request to the Central Government to
consider grant of usual tax and other reliefs and concessions.
8. It may be clarified that we are not issuing any mandamus
or direction to the respondent authorities to grant concession
under Section 72 of the Act. What is required is that the
respondent authorities must consider the request of the
petitioner for grant of concession/relief under Section 72 of the
Act in view of their contentions, the statement of profit and the
cash flow statement. The respondent authorities while doing so
should act objectively and fairly as is required and is expected
from a statutory authority. As noticed above, the request has
been wrongly rejected by recording that no prayer was made
and the factual aspect has not been considered. We need not
say any more on this aspect.
9. In view of the aforesaid discussion, we set aside the order
passed by the respondent authority dated 19th January, 2010 to
the extent relief to the petitioner under Section 72 of the Act has
been denied. The said aspect will be reconsidered on the basis
of details already submitted by the petitioner. Liberty is also
granted to the petitioner to submit another representation within
a period of fifteen days from today. It will be also open to the
W.P. (C) No. 448/2011 Page 7 of 8
authorities to call for further details or information, if it is felt that
this is necessary. It is clarified that this Court has not expressed
any opinion on the question whether or not relief/concession
under Section 72 of the Act should be granted to the petitioner
as it falls exclusively within the domain of the respondent
authorities. The respondent authorities will pass an order
expeditiously and preferably within a period of four months from
today. While examining the question of concession/relief under
Section 72, the question of delay in filing of return and in case
benefit under Section 72 is granted to the petitioner, whether the
said benefit will be also available to the petitioner assessee in
terms of sub-section 3 to Section 115JB of the Act, will be
examined.
10. The writ petition and all pending applications are disposed
of.
DASTI.
SANJIV KHANNA, J.
R.V. EASWAR, J.
NOVEMBER 01, 2011
VKR
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