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Income Tax Appellate Tribunal, MUMBAI BENCH “G” MUMBAI
Before: SHRI OM PRAKASH KANT & MS KAVITHA RAJAGOPAL
Commissioner of Income Commissioner of Income-tax (Appeals)-52, Mumbai, for assessment 52, Mumbai, for assessment years 2016-17; 2017 17; 2017-18 & 2018-19 respectively. In these appeals, 19 respectively. In these appeals, identical grounds have been raised except change of amount, identical grounds have been raised except change of amount, identical grounds have been raised except change of amount, therefore, these appeals these appeals were heard together and disposed off by heard together and disposed off by way of this consolidated order for convenience and avoid repetition y of this consolidated order for convenience and avoid repetition y of this consolidated order for convenience and avoid repetition of facts.
At the outset, the Ld. Departmental Representative (DR) At the outset, the Ld. Departmental Representative (DR) At the outset, the Ld. Departmental Representative (DR) pointed out that all these appeals have been filed with a delay of 122 pointed out that all these appeals have been filed with a delay of 122 pointed out that all these appeals have been filed with a delay of 122 days. The Ld. DR submitted that this period of de days. The Ld. DR submitted that this period of delay is covered by lay is covered by the decision of Hon’ble Supreme Court in the decision of Hon’ble Supreme Court in the decision of Hon’ble Supreme Court in Miscellaneous Application No. 665 of 2021 in SMW(C) No. 3 of 2020 Application No. 665 of 2021 in SMW(C) No. 3 of 2020 Application No. 665 of 2021 in SMW(C) No. 3 of 2020, wherein the period from 15.03.2020 till 28.02.2022 shall stands excluded for the period from 15.03.2020 till 28.02.2022 shall stands excluded for the period from 15.03.2020 till 28.02.2022 shall stands excluded for the purpose of limitation as may be prescribed under the purpose of limitation as may be prescribed under the purpose of limitation as may be prescribed under any general or special laws in respect of judicial or quasi judicial proceedings special laws in respect of judicial or quasi judicial proceedings special laws in respect of judicial or quasi judicial proceedings. Further, it is held that Further, it is held that in case where limitation would have would have expired during the period of 28.02.2022 during the period of 28.02.2022, notwithstanding , notwithstanding actual balance
M/s Shoppers Stop Limited M/s Shoppers Stop Limited 3 2509 & 2512/M/2021 ITA Nos. 2508, 2509 & 2512/M/2021 period of limitation remaining all period of limitation remaining all persons shall have limitation s shall have limitation period of 90 days from 01.03.2022 and in the event, the actual from 01.03.2022 and in the event, the actual from 01.03.2022 and in the event, the actual balance of limitation balance of limitation remaining w.e.f. 01.03.2022 is is greater than 90 days, that longer period shall apply. days, that longer period shall apply.
The Ld. AR did not object seriously to the application for The Ld. AR did not object seriously to the application for The Ld. AR did not object seriously to the application for condonation of the delay of the delay in filing the appeal by the Revenue. the Revenue.
We have heard rival submissions of the parties on the issue of We have heard rival submissions of the parties on the issue of We have heard rival submissions of the parties on the issue of condonation of the delay. In view the decision of the Hon’ble of the delay. In view the decision of the Hon’ble of the delay. In view the decision of the Hon’ble Supreme Court in Miscellaneous Application (supra), the appeal Supreme Court in Miscellaneous Application (supra), the appeal Supreme Court in Miscellaneous Application (supra), the appeal filed is within limitation and accordingly same is admitted for filed is within limitation and accordingly same is admitted for filed is within limitation and accordingly same is admitted for adjudication.
4.1 As identical grounds have been raised by the Revenue in all As identical grounds have been raised by the Revenue in all the As identical grounds have been raised by the Revenue in all three appeals, for brevity brevity, the grounds of appeal for assessment year , the grounds of appeal for assessment year 2016-17 are only reproduced as under : reproduced as under :
M/s Shoppers Stop Limited M/s Shoppers Stop Limited 4 2509 & 2512/M/2021 ITA Nos. 2508, 2509 & 2512/M/2021
"Whether, on the facts and circumstances of the case and in "Whether, on the facts and circumstances of the case and in "Whether, on the facts and circumstances of the case and in law, the Ld. CIT(A) has erred in restricting the disallowance us law, the Ld. CIT(A) has erred in restricting the disallowance us law, the Ld. CIT(A) has erred in restricting the disallowance us 14A of the IT Act 14A of the IT Act to the extent of exempt income received by the to the extent of exempt income received by the assessee during the year under consideration without assessee during the year under consideration without assessee during the year under consideration without appreciating the Circular No.S of 2014 dated 11.02.2014 of appreciating the Circular No.S of 2014 dated 11.02.2014 of appreciating the Circular No.S of 2014 dated 11.02.2014 of CBDT." CBDT." 2. "Whether, on the facts and circumstances of the case and in "Whether, on the facts and circumstances of the case and in "Whether, on the facts and circumstances of the case and in law, the Ld. CIT(A) is justif law, the Ld. CIT(A) is justified in deleting the addition of ied in deleting the addition of disallowance us 14A of the IT Act t the book profit of the disallowance us 14A of the IT Act t the book profit of the disallowance us 14A of the IT Act t the book profit of the assessee without appreciating the clause (f) of explanation 1 to assessee without appreciating the clause (f) of explanation 1 to assessee without appreciating the clause (f) of explanation 1 to section 115/8(2) of the Income Tax Act." section 115/8(2) of the Income Tax Act." 3. "Whether, on the facts and circumstances of the case and in "Whether, on the facts and circumstances of the case and in "Whether, on the facts and circumstances of the case and in law. Ld. the CIT(A), was justified in directing the AO to delete law. Ld. the CIT(A), was justified in directing the AO to delete law. Ld. the CIT(A), was justified in directing the AO to delete the addition of Rs.2,86,37,549 being income u/s 5 of the IT Act." the addition of Rs.2,86,37,549 being income u/s 5 of the IT Act." the addition of Rs.2,86,37,549 being income u/s 5 of the IT Act." 4. "Whether, on the facts and circumstances of the case and in "Whether, on the facts and circumstances of the case and in "Whether, on the facts and circumstances of the case and in law, the Ld. CIT(A), was justified in directing the AO to delete law, the Ld. CIT(A), was justified in directing the AO to delete law, the Ld. CIT(A), was justified in directing the AO to delete the addition of Rs.2,86,37,549 even when the assessee neither the addition of Rs.2,86,37,549 even when the assessee neither the addition of Rs.2,86,37,549 even when the assessee neither passed any resolution of non passed any resolution of non-charging of interest to the charging of interest to the borrower company but only passed the resolution for the borrower company but only passed the resolution for the borrower company but only passed the resolution for the provision for impairment of loan (i.e. Rs.2486.40 lacs) nor made provision for impairment of loan (i.e. Rs.2486.40 lacs) nor made provision for impairment of loan (i.e. Rs.2486.40 lacs) nor made any provision o any provision of bad debt in its financial statement. f bad debt in its financial statement. 5. "Whether, on the facts and circumstances of the case and in "Whether, on the facts and circumstances of the case and in "Whether, on the facts and circumstances of the case and in law, the Ld. CIT(A), was justified in directing the AO to delete law, the Ld. CIT(A), was justified in directing the AO to delete law, the Ld. CIT(A), was justified in directing the AO to delete the addition of Rs.2,86,37,549/ the addition of Rs.2,86,37,549/- on the basis of the resolution on the basis of the resolution passed by the assessee compa passed by the assessee company about non-charging of interest charging of interest on loan." on loan." 6. "Whether, on the facts and circumstances of the case and in "Whether, on the facts and circumstances of the case and in "Whether, on the facts and circumstances of the case and in law, the Ld. CIT(A) is justified in not taking the cognizance of law, the Ld. CIT(A) is justified in not taking the cognizance of law, the Ld. CIT(A) is justified in not taking the cognizance of M/s Shoppers Stop Limited M/s Shoppers Stop Limited 5 2509 & 2512/M/2021 ITA Nos. 2508, 2509 & 2512/M/2021 the fact that the borrowing company is 100% subsidiary of the the fact that the borrowing company is 100% subsidiary of the the fact that the borrowing company is 100% subsidiary of the assessee company and the assessee company and the principle of the arms length is not principle of the arms length is not followed." followed." 7. "Whether, on the facts and circumstances of the case and in "Whether, on the facts and circumstances of the case and in "Whether, on the facts and circumstances of the case and in law, the Ld. CIT(A) was justified in deleting the addition made law, the Ld. CIT(A) was justified in deleting the addition made law, the Ld. CIT(A) was justified in deleting the addition made u/s 5 of the Income tax act, in the computation of Book profits u/s 5 of the Income tax act, in the computation of Book profits u/s 5 of the Income tax act, in the computation of Book profits u/s 1151B of the Inco u/s 1151B of the Income tax act, 1961, while the profits me tax act, 1961, while the profits accrued to the assessee ought to be included in the computation accrued to the assessee ought to be included in the computation accrued to the assessee ought to be included in the computation of book profits u/s 1151B of the Income Tax act, 1961." of book profits u/s 1151B of the Income Tax act, 1961." of book profits u/s 1151B of the Income Tax act, 1961."
Briefly stated, facts of the case are that assessee is engaged in Briefly stated, facts of the case are that assessee is engaged in Briefly stated, facts of the case are that assessee is engaged in the business of retailing of va the business of retailing of variety of household and consumer riety of household and consumer products. In the case of the assessee, In the case of the assessee, a search was search was carried by the Investigation Wing of Income Investigation Wing of Income-tax Department on 30.11.2017 u/s on 30.11.2017 u/s 132 of the Income-tax Act, 1961 (in short ‘the Act’) along with other tax Act, 1961 (in short ‘the Act’) along with other tax Act, 1961 (in short ‘the Act’) along with other cases of ‘K Raheja Group K Raheja Group’, the assessment for assessment year 201 , the assessment for assessment year 2015- 16 and 2016-17 have been completed u/s 1 17 have been completed u/s 153A r.w.s. 143(3) of the 3A r.w.s. 143(3) of the Act on 23.12.2019 and 27.12.2019 respectively. The assessment for Act on 23.12.2019 and 27.12.2019 respectively. The assessment for Act on 23.12.2019 and 27.12.2019 respectively. The assessment for AY 2018-19 has been completed u/s 143(3) of the Act on 19 has been completed u/s 143(3) of the Act on 19 has been completed u/s 143(3) of the Act on 27.12.2019. In all the three 27.12.2019. In all the three assessments, one of the disallowance one of the disallowance made is u/s 14A of the Act. It was contested by the assessee that u/s 14A of the Act. It was contested by the assessee that u/s 14A of the Act. It was contested by the assessee that M/s Shoppers Stop Limited M/s Shoppers Stop Limited 6 2509 & 2512/M/2021 ITA Nos. 2508, 2509 & 2512/M/2021 there was no exempt income and therefore no disallowance should there was no exempt income and therefore no disallowance should there was no exempt income and therefore no disallowance should have been made in view of various judicial decisions relied by the have been made in view of various judicial decisions relied by the have been made in view of various judicial decisions relied by the assessee. However, th assessee. However, the Ld. Assessing Officer following Rule 8D of following Rule 8D of the Income-tax Rules, 1962 made the disallowance. The said tax Rules, 1962 made the disallowance. The said tax Rules, 1962 made the disallowance. The said disallowance have been deleted by the Ld. CIT(A) in all the three disallowance have been deleted by the Ld. CIT(A) in all the three disallowance have been deleted by the Ld. CIT(A) in all the three years.
5.1 In assessment year 2016 In assessment year 2016-17, the assessee challenged the 17, the assessee challenged the disallowance mainly on three grounds. Firstly, no satisfaction has no satisfaction has been recorded by the Ld. Assessing Officer. ed by the Ld. Assessing Officer. Secondly Secondly, merely because expenditure was debited to profit and loss account does not because expenditure was debited to profit and loss account does not because expenditure was debited to profit and loss account does not entitle for disallowance u/s 14 for disallowance u/s 14A. Thirdly, no disallowance u/s 14A , no disallowance u/s 14A of the Act should have been made hould have been made if no exempt income exempt income was earned. The Ld. CIT(A) in assessment year 2016 The Ld. CIT(A) in assessment year 2016-17 deleted the addition 17 deleted the addition observing as under :
“5.7 In view of the aforesaid decision of Hon'ble Madras High Court in 5.7 In view of the aforesaid decision of Hon'ble Madras High Court in 5.7 In view of the aforesaid decision of Hon'ble Madras High Court in the case of Chettinad Logistics P Ltd (supra) and the decision of the the case of Chettinad Logistics P Ltd (supra) and the decision of the the case of Chettinad Logistics P Ltd (supra) and the decision of the M/s Shoppers Stop Limited M/s Shoppers Stop Limited 7 2509 & 2512/M/2021 ITA Nos. 2508, 2509 & 2512/M/2021
Bombay High Court in the case of Nirved Traders, the disallowance Bombay High Court in the case of Nirved Traders, the disallowance Bombay High Court in the case of Nirved Traders, the disallowance made by the AO us 14A cannot exceed the tax made by the AO us 14A cannot exceed the tax-exempt income earned income earned during the relevant year. It is noted that the appellant has not earned during the relevant year. It is noted that the appellant has not earned during the relevant year. It is noted that the appellant has not earned any tax-exempt income during the year. As such, no disallowance exempt income during the year. As such, no disallowance exempt income during the year. As such, no disallowance could have been made under section 14A. It is also noted that the could have been made under section 14A. It is also noted that the could have been made under section 14A. It is also noted that the case of the assessee is also squarely c case of the assessee is also squarely covered by the decision of ITAT in overed by the decision of ITAT in its own case. The addition made by the A by resorting to Rule 8D is, its own case. The addition made by the A by resorting to Rule 8D is, its own case. The addition made by the A by resorting to Rule 8D is, therefore, directed to be deleted. therefore, directed to be deleted.” 5.2 Further, the Ld. CIT(A) held that since disallowance u/s 14A Further, the Ld. CIT(A) held that since disallowance u/s 14A Further, the Ld. CIT(A) held that since disallowance u/s 14A was deleted in respect of regular provisions and the was deleted in respect of regular provisions and the was deleted in respect of regular provisions and therefore, no adjustment was to be made u/s 11 adjustment was to be made u/s 115JB for computation of book JB for computation of book profit. The relevant finding of the Ld. CIT(A) is reproduced as under: profit. The relevant finding of the Ld. CIT(A) is reproduced as under: profit. The relevant finding of the Ld. CIT(A) is reproduced as under:
5.8 The adjustment made by the AO to the book profits The adjustment made by the AO to the book profits The adjustment made by the AO to the book profits computed u/s 115JB relying on computation u/s 14A does not computed u/s 115JB relying on computation u/s 14A does not computed u/s 115JB relying on computation u/s 14A does not survive once the computation of disallowance u/s 14A is deleted. survive once the computation of disallowance u/s 14A is deleted. survive once the computation of disallowance u/s 14A is deleted.
Before us, the Ld. Counsel of the assessee submitted that issue- Before us, the Ld. Counsel of the assessee submitted that issue Before us, the Ld. Counsel of the assessee submitted that issue in-dispute raised in ground No. 1 & 2 of the present appeals are raised in ground No. 1 & 2 of the present appeals are raised in ground No. 1 & 2 of the present appeals are covered in favour of the assessee by the order of the Tri covered in favour of the assessee by the order of the Tri covered in favour of the assessee by the order of the Tribunal in the case of the assessee for AY 2008 case of the assessee for AY 2008-09 and subsequent assessment 09 and subsequent assessment years. The relevant finding of the decision of the Hon’ble Tribunal in years. The relevant finding of the decision of the Hon’ble Tribunal in years. The relevant finding of the decision of the Hon’ble Tribunal in M/s Shoppers Stop Limited M/s Shoppers Stop Limited 8 2509 & 2512/M/2021 ITA Nos. 2508, 2509 & 2512/M/2021 the case of the assessee for 2008 the case of the assessee for 2008-09 in in ITA No. 1753/Mum/2012 is reproduced as under: reproduced as under:
“7.We have heard the ri 7.We have heard the rival submissions and perused the material val submissions and perused the material before us.We find that assessee had not claimed any deduction in before us.We find that assessee had not claimed any deduction in before us.We find that assessee had not claimed any deduction in respect of exempt income nor has it claimed any expenditure against respect of exempt income nor has it claimed any expenditure against respect of exempt income nor has it claimed any expenditure against the income which does not form part of the total income.Thus, both the income which does not form part of the total income.Thus, both the income which does not form part of the total income.Thus, both the basic ingre the basic ingredients for making a disallowance u/s.14A are dients for making a disallowance u/s.14A are missing.Secondly,the fund flow statement made available to the missing.Secondly,the fund flow statement made available to the missing.Secondly,the fund flow statement made available to the FAA,during the appellate proceedings,clearly show that it had FAA,during the appellate proceedings,clearly show that it had FAA,during the appellate proceedings,clearly show that it had sufficient own funds to make investments(Pg sufficient own funds to make investments(Pg-1 of the PB).The FAA 1 of the PB).The FAA has admitted that fun has admitted that funds available to the assessee were more than the ds available to the assessee were more than the investments made during the year under consideration. investments made during the year under consideration. Therefore, in Therefore, in our opinion there was no justification for making disallowance as per our opinion there was no justification for making disallowance as per our opinion there was no justification for making disallowance as per the provisions of section 14A r.w.r 8D of the Rules. Considering all the provisions of section 14A r.w.r 8D of the Rules. Considering all the provisions of section 14A r.w.r 8D of the Rules. Considering all these factors we are of the opinion that the FAA was not justified in hese factors we are of the opinion that the FAA was not justified in hese factors we are of the opinion that the FAA was not justified in upholding the order of the AO. Hence, reversing his order we decide upholding the order of the AO. Hence, reversing his order we decide upholding the order of the AO. Hence, reversing his order we decide the effective ground of a the effective ground of appeal in favour of the assessee.”
6.1 Further, the relevant para of the order of the Tribunal Further, the relevant para of the order of the Tribunal for AY Further, the relevant para of the order of the Tribunal 2014-15 is also reproduced as under : 15 is also reproduced as under :
“9. The assessee has raised identical ground of appeal as raised in The assessee has raised identical ground of appeal as raised in The assessee has raised identical ground of appeal as raised in appeal AY 2013 appeal AY 2013-14, which we have allowed. Therefore, following the 14, which we have allowed. Therefore, following the rule of consistency, the appeal for AY 2014 rule of consistency, the appeal for AY 2014-1 is allowed with similar 1 is allowed with similar direction. To make it more clear the Assessing Officer direction. To make it more clear the Assessing Officer direction. To make it more clear the Assessing Officer directed to M/s Shoppers Stop Limited M/s Shoppers Stop Limited 9 2509 & 2512/M/2021 ITA Nos. 2508, 2509 & 2512/M/2021 restrict the disallowance u/s 14A to suo restrict the disallowance u/s 14A to suo-moto disallowance of moto disallowance of ₹7,05,027/- offered by assessee. offered by assessee.” 6.2 Further, the Ld. Counsel of the assessee submitted that Hon’ble Further, the Ld. Counsel of the assessee submitted that Hon’ble Further, the Ld. Counsel of the assessee submitted that Hon’ble Delhi High Court in the case of Delhi High Court in the case of PCIT v. Era Infrastructure (India) Infrastructure (India) Ltd. & CM APPL. 31445/2022 204/2022 & CM APPL. 31445/2022 204/2022 & CM APPL. 31445/2022 has held that amendment made to Finance Act, 2022 to section 14A of the Act has amendment made to Finance Act, 2022 to section 14A of the Act has amendment made to Finance Act, 2022 to section 14A of the Act has been held prospective. been held prospective. For ready reference, relevant amendment to relevant amendment to section 14A of the Act is reproduced as below: section 14A of the Act is reproduced as below:
"Amendment of section 14A. "Amendment of section 14A. In section 14A of the Income ection 14A of the Income-tax Act. - (a) in sub-section (1), for the words "For the purposes of", the section (1), for the words "For the purposes of", the section (1), for the words "For the purposes of", the words "Notwithstanding anything to the contrary contained in words "Notwithstanding anything to the contrary contained in words "Notwithstanding anything to the contrary contained in this Act, for the purposes of" shall be substituted; this Act, for the purposes of" shall be substituted; (b) after the proviso, the following Expl (b) after the proviso, the following Explanation shall be inserted, anation shall be inserted, namely:- "[Explanation. "[Explanation.-For the removal of doubts, it is hereby clarified that For the removal of doubts, it is hereby clarified that notwithstanding anything to the contrary contained in this Act, notwithstanding anything to the contrary contained in this Act, notwithstanding anything to the contrary contained in this Act, the provisions of this section shall apply and shall be deemed to the provisions of this section shall apply and shall be deemed to the provisions of this section shall apply and shall be deemed to have always applied have always applied in a case where the income, not forming part in a case where the income, not forming part of the total income under this Act, has not accrued or arisen or has of the total income under this Act, has not accrued or arisen or has of the total income under this Act, has not accrued or arisen or has M/s Shoppers Stop Limited M/s Shoppers Stop Limited 10 2509 & 2512/M/2021 ITA Nos. 2508, 2509 & 2512/M/2021 not been received during the previous year relevant to an not been received during the previous year relevant to an not been received during the previous year relevant to an assessment year and the expenditure has been incurred during the assessment year and the expenditure has been incurred during the assessment year and the expenditure has been incurred during the said previous year said previous year in relation to such income not forming part of in relation to such income not forming part of the total income. the total income.”
6.3 The relevant finding of the Hon’ble Delhi High Court (supra) is The relevant finding of the Hon’ble Delhi High Court (supra) is The relevant finding of the Hon’ble Delhi High Court (supra) is reproduced as under: reproduced as under:
“8. Consequently, this Court is of the view that the amendment of Consequently, this Court is of the view that the amendment of Consequently, this Court is of the view that the amendment of Section14A. which is "for removal Section14A. which is "for removal of doubts" cannot be presumed to of doubts" cannot be presumed to be retrospective even where such language is used, if it alters or be retrospective even where such language is used, if it alters or be retrospective even where such language is used, if it alters or changes the law as it earlier stood. changes the law as it earlier stood.
Though the judgment of this Court has been challenged and is 9. Though the judgment of this Court has been challenged and is 9. Though the judgment of this Court has been challenged and is pending adjudication before the Supreme Court, yet ther pending adjudication before the Supreme Court, yet ther pending adjudication before the Supreme Court, yet there is no stay of the said judgment till date. Consequently, in view of the judgments of the said judgment till date. Consequently, in view of the judgments of the said judgment till date. Consequently, in view of the judgments passed by the Supreme Court in Kunhayammed and Others vs. State passed by the Supreme Court in Kunhayammed and Others vs. State passed by the Supreme Court in Kunhayammed and Others vs. State of Kerala and Another, (2000) 6 SCC 359 and Shree Chamundi of Kerala and Another, (2000) 6 SCC 359 and Shree Chamundi of Kerala and Another, (2000) 6 SCC 359 and Shree Chamundi Mopeds Lid. Vs. Church of South India Trust Assoc Mopeds Lid. Vs. Church of South India Trust Association CSI Cinod iation CSI Cinod Secretariat, Madras (1992) 3 Secretariat, Madras (1992) 3 SCC 1, the present appeal is dismissed SCC 1, the present appeal is dismissed being covered by the judgment passed by the learned predecessor being covered by the judgment passed by the learned predecessor being covered by the judgment passed by the learned predecessor Division Bench in PCIT vs. IL & FS vision Bench in PCIT vs. IL & FS Energy Development Company Ltd Energy Development Company Ltd (supra) and Cheminvest Limited vs. (supra) and Cheminvest Limited vs. Commissioner of Income Tax sioner of Income Tax-VI, (2015) 378 ITR 33. (2015) 378 ITR 33.
Accordingly, the appeal and application are dismissed. However, 10. Accordingly, the appeal and application are dismissed. However, 10. Accordingly, the appeal and application are dismissed. However, it is clarified that the order passed in the present appeal shall abide it is clarified that the order passed in the present appeal shall abide it is clarified that the order passed in the present appeal shall abide
M/s Shoppers Stop Limited M/s Shoppers Stop Limited 11 2509 & 2512/M/2021 ITA Nos. 2508, 2509 & 2512/M/2021 by the final decision of the Supreme Court in the SLP filed in the case by the final decision of the Supreme Court in the SLP filed in the case by the final decision of the Supreme Court in the SLP filed in the case of PCIT vs. IL & . IL & FS Energy Development Company Ltd (supra). FS Energy Development Company Ltd (supra).” 6.4 In view of the above discussion, respectfully following the In view of the above discussion, respectfully following the In view of the above discussion, respectfully following the finding of the Tribunal in the case of the assessee as well as finding finding of the Tribunal in the case of the assessee as well as finding finding of the Tribunal in the case of the assessee as well as finding of the Hon’ble Delhi High Court in the case of of the Hon’ble Delhi High Court in the case of Era Era Infrastructure (India) Ltd. (supra), w , we do not find any error in the order of the Ld. e do not find any error in the order of the Ld. CIT(A) on the issue-in in-dispute and accordingly, we uphold , we uphold the same. The ground No. 1 and 2 of the appeal in respect of all three appeals The ground No. 1 and 2 of the appeal in respect of all three appeals The ground No. 1 and 2 of the appeal in respect of all three appeals are dismissed.
6.5 The ground No. 3 to 7 The ground No. 3 to 7 relates to the addition of income u/s of income u/s 5 of the Act under regular provisions as well as under provisions of the Act under regular provisions as well as under provisions of the Act under regular provisions as well as under provisions of section 115JB of the Act. The facts in brief qua the issue section 115JB of the Act. The facts in brief qua the issue section 115JB of the Act. The facts in brief qua the issue-in-dispute are that the assessee company being a holding company advanced are that the assessee company being a holding company advanced are that the assessee company being a holding company advanced certain sum to its subsidiary ts subsidiary specifying rate of interest @ 12.5 per rate of interest @ 12.5 per cent per annum. However, the subsidiary went into deep losses and cent per annum. However, the subsidiary went into deep losses and cent per annum. However, the subsidiary went into deep losses and discontinued to pay the interest, accordingly, the assesee company discontinued to pay the interest, accordingly, the assesee company discontinued to pay the interest, accordingly, the assesee company
M/s Shoppers Stop Limited M/s Shoppers Stop Limited 12 2509 & 2512/M/2021 ITA Nos. 2508, 2509 & 2512/M/2021 also discontinued to credit accrual of interest on said advances, it also discontinued to credit accrual of interest on said advances, it also discontinued to credit accrual of interest on said advances, it was the contention of the assessee that net worth of the subsidiary as the contention of the assessee that net worth of the subsidiary as the contention of the assessee that net worth of the subsidiary company was negative negative and it was unable to pay back its liability and and it was unable to pay back its liability and therefore, assessee discontinued to accrue the interest on said therefore, assessee discontinued to accrue the interest on said therefore, assessee discontinued to accrue the interest on said advances. The Ld. AO reject the contention of the assess The Ld. AO reject the contention of the assess The Ld. AO reject the contention of the assessee and made addition of ₹2,86,37,549/ 2,86,37,549/- for AY 2016-17, observing as under: 17, observing as under:
“8.2.1 During the year under consideration, the assessee company has 8.2.1 During the year under consideration, the assessee company has 8.2.1 During the year under consideration, the assessee company has not charged interest on the Inter not charged interest on the Inter-corporate Deposit given by it to its corporate Deposit given by it to its subsidiary company. This decision of the assessee does indicate any subsidiary company. This decision of the assessee does indicate any subsidiary company. This decision of the assessee does indicate any business exigency. it gathered from the record th business exigency. it gathered from the record that the borrower at the borrower before passing the resolution of non before passing the resolution of non-payment of interest to its money payment of interest to its money lender i.e. the assessee in the instant case, didn't take any consent of lender i.e. the assessee in the instant case, didn't take any consent of lender i.e. the assessee in the instant case, didn't take any consent of the holding company i.e. the assessee in the instant case. Thus, the the holding company i.e. the assessee in the instant case. Thus, the the holding company i.e. the assessee in the instant case. Thus, the borrower unilaterally passed borrower unilaterally passed the resolution for nonpayment of the resolution for nonpayment of interest. The assessee claims that it passed a Board Resolution for not interest. The assessee claims that it passed a Board Resolution for not interest. The assessee claims that it passed a Board Resolution for not charging interest from 01/01/2009. However, in the resolution charging interest from 01/01/2009. However, in the resolution charging interest from 01/01/2009. However, in the resolution passed by the assessee, there is only mention of the closure of the passed by the assessee, there is only mention of the closure of the passed by the assessee, there is only mention of the closure of the borrower company but borrower company but there is no mention of non-charging the charging the interest. Moreover, before passing the resolution by the money interest. Moreover, before passing the resolution by the money interest. Moreover, before passing the resolution by the money lending company, the money borrowing company had already passed lending company, the money borrowing company had already passed lending company, the money borrowing company had already passed the resolution of not paying interest. This is also beyond imagination the resolution of not paying interest. This is also beyond imagination the resolution of not paying interest. This is also beyond imagination as to how a borro as to how a borrowing company can pass a resolution about not wing company can pass a resolution about not paying any interest when the terms and conditions for giving a loan paying any interest when the terms and conditions for giving a loan paying any interest when the terms and conditions for giving a loan
M/s Shoppers Stop Limited M/s Shoppers Stop Limited 13 2509 & 2512/M/2021 ITA Nos. 2508, 2509 & 2512/M/2021 is determined by a money lending company and not by a money is determined by a money lending company and not by a money is determined by a money lending company and not by a money borrowing company. If a money lending company passes a resolution borrowing company. If a money lending company passes a resolution borrowing company. If a money lending company passes a resolution about not chargin about not charging interest that makes sense but in the instant case g interest that makes sense but in the instant case borrowing company passed a resolution about not paying interest borrowing company passed a resolution about not paying interest borrowing company passed a resolution about not paying interest which does not make sense. which does not make sense.
8.2.2 Furthermore, this is not a case of commercial expediency or 8.2.2 Furthermore, this is not a case of commercial expediency or 8.2.2 Furthermore, this is not a case of commercial expediency or business exigency for not charging interest for business exigency for not charging interest for the year. The financial the year. The financial condition of the subsidiary company Gateway were clearly known to condition of the subsidiary company Gateway were clearly known to condition of the subsidiary company Gateway were clearly known to the assessee company, then this type of subsequent arrangement the assessee company, then this type of subsequent arrangement the assessee company, then this type of subsequent arrangement cannot absolve the assessee company to charge interest in its Profit cannot absolve the assessee company to charge interest in its Profit cannot absolve the assessee company to charge interest in its Profit and Loss A/c on account of such i and Loss A/c on account of such interest free advances. The initial nterest free advances. The initial intention of the company is important in deciding the issue. intention of the company is important in deciding the issue. intention of the company is important in deciding the issue.
8.2.3 It worth to mention here that merely insolvency of the borrower 8.2.3 It worth to mention here that merely insolvency of the borrower 8.2.3 It worth to mention here that merely insolvency of the borrower company would not entitle it not to pay any interest to the company company would not entitle it not to pay any interest to the company company would not entitle it not to pay any interest to the company it received loans and it received loans and advances. On the contrary, besides winding up, advances. On the contrary, besides winding up, the borrower company should repay all the loans owed by it. the borrower company should repay all the loans owed by it. the borrower company should repay all the loans owed by it.
8.2.4 Further, the borrower company didn't cite any reason for the 8.2.4 Further, the borrower company didn't cite any reason for the 8.2.4 Further, the borrower company didn't cite any reason for the resource crunch before winding itself even when its turnover was resource crunch before winding itself even when its turnover was resource crunch before winding itself even when its turnover was multiplying leaps multiplying leaps and bound year-by-year and its liabilities were year and its liabilities were decreasing accordingly. decreasing accordingly.
8.2.5 It is pertinent to mention here that if the assessee's intention 8.2.5 It is pertinent to mention here that if the assessee's intention 8.2.5 It is pertinent to mention here that if the assessee's intention was of non-charging of interest on its loans given, it could have made charging of interest on its loans given, it could have made charging of interest on its loans given, it could have made the provision for bad the provision for bad-debt in its financial statement which has not al statement which has not been done. Moreover, on the same issue in the assessee's case, the Ld. been done. Moreover, on the same issue in the assessee's case, the Ld. been done. Moreover, on the same issue in the assessee's case, the Ld. CIT(A) had dismissed the assessce's appeal for A.Y. 2009 CIT(A) had dismissed the assessce's appeal for A.Y. 2009-10. 10.
M/s Shoppers Stop Limited M/s Shoppers Stop Limited 14 2509 & 2512/M/2021 ITA Nos. 2508, 2509 & 2512/M/2021
8.2.6 If the assessee would not have advanced such loan, the assessee 8.2.6 If the assessee would not have advanced such loan, the assessee 8.2.6 If the assessee would not have advanced such loan, the assessee would have less liability o would have less liability of its own loan and that way also the f its own loan and that way also the assessee would have paid less amount of interest on its loan. This assessee would have paid less amount of interest on its loan. This assessee would have paid less amount of interest on its loan. This action of the assessee has direct bearing on its taxable income & tax action of the assessee has direct bearing on its taxable income & tax action of the assessee has direct bearing on its taxable income & tax thereof.
8.3 In view of the fact mentioned above, the submission of the 8.3 In view of the fact mentioned above, the submission of the 8.3 In view of the fact mentioned above, the submission of the assessee is not accepted. The average rate of ICD during FY 2015 s not accepted. The average rate of ICD during FY 2015-16 s not accepted. The average rate of ICD during FY 2015 is @ 12.50 %, the same interest rate would be applicable for current is @ 12.50 %, the same interest rate would be applicable for current is @ 12.50 %, the same interest rate would be applicable for current year. Accordingly, the interest that has been absolved would be taken year. Accordingly, the interest that has been absolved would be taken year. Accordingly, the interest that has been absolved would be taken in the term of the real income of the assessee and added to in the term of the real income of the assessee and added to in the term of the real income of the assessee and added to the total income of the assessee, such interest income of the assessee is income of the assessee, such interest income of the assessee is income of the assessee, such interest income of the assessee is computed as under: computed as under:-
Month Opening Opening Amount Closing Rate of Interest balance balance Received Balance Interest P.M. P.A. Apr-15 22,91,00,38 22,91,00,38 - 22,91,00,388 12.5 23,86,462 May-15 22,91,00,38 22,91,00,38 - 22,91,00,388 12.5 23,86,462 Jun-15 22,91,00,38 22,91,00,38 - 22,91,00,388 12.5 23,86,462 Jul-15 22,91,00,38 22,91,00,38 - 22,91,00,388 12.5 23,86,462 Aug-15 22,91,00,38 22,91,00,38 - 22,91,00,388 12.5 23,86,462 Sep-15 22,91,00,38 22,91,00,38 - 22,91,00,388 12.5 23,86,462 Oct-15 22,91,00,38 22,91,00,38 - 22,91,00,388 12.5 23,86,462 Nov-15 22,91,00,38 22,91,00,38 - 22,91,00,388 12.5 23,86,462 Dec-15 22,91,00,38 22,91,00,38 - 22,91,00,388 12.5 23,86,462 Jan-16 22,91,00,38 22,91,00,38 - 22,91,00,388 12.5 23,86,462 Feb-16 22,91,00,38 22,91,00,38 - 22,91,00,388 12.5 23,86,462 Mar-16 22,91,00,38 22,91,00,38 - 22,91,00,388 12.5 23,86,462 Total 2,86,37,549 Accordingly, an amount of Accordingly, an amount of ₹2,86,37,549/- is considered as real is considered as real income of the assessee within the provision of section 5 of Income Tax income of the assessee within the provision of section 5 of Income Tax income of the assessee within the provision of section 5 of Income Tax Act, 1961 and to the total income of the assessee. Act, 1961 and to the total income of the assessee.
M/s Shoppers Stop Limited M/s Shoppers Stop Limited 15 2509 & 2512/M/2021 ITA Nos. 2508, 2509 & 2512/M/2021 6.6 The Ld. CIT(A) in assessment year 2016 The Ld. CIT(A) in assessment year 2016-17 following the 17 following the decision of the Tribunal in earlier years decided the issue in favour decision of the Tribunal in earlier years decided the issue in favour decision of the Tribunal in earlier years decided the issue in favour of the assessee observing as under: of the assessee observing as under:
“6.3 The assessee has made elaborate submissions on the issue. The assessee has made elaborate submissions on the issue. The assessee has made elaborate submissions on the issue. However, it is noted that this However, it is noted that this is a repetitive issue and Hon'ble is a repetitive issue and Hon'ble Mumbal Tribunal has ordered the matter in favor of the of the Mumbal Tribunal has ordered the matter in favor of the of the Mumbal Tribunal has ordered the matter in favor of the of the appellant company for AY 2009 appellant company for AY 2009-10, AY 2010-11. AY 2012 11. AY 2012-13, AY 2013-14 & AY 2014 14 & AY 2014-15. The observations of the ITAT while dealing 15. The observations of the ITAT while dealing with the issue for AY 2014 with the issue for AY 2014-15 are reproduced below:
"14. We have considered the submission of both the parties "14. We have considered the submission of both the parties "14. We have considered the submission of both the parties and gone through the order of lower authorities. The and gone through the order of lower authorities. The and gone through the order of lower authorities. The Assessing Officer made addition on account of presumptive Assessing Officer made addition on account of presumptive Assessing Officer made addition on account of presumptive basis under section 5 on advances made by assessee to its basis under section 5 on advances made by assessee to its basis under section 5 on advances made by assessee to its subsidiar subsidiaries. ies. The The Assessing Assessing Officer Officer computed computed the the disallowance/addition of Rs. 2.86 crore. We have noted that disallowance/addition of Rs. 2.86 crore. We have noted that disallowance/addition of Rs. 2.86 crore. We have noted that the assessee advanced the money to its subsidiary, which falls the assessee advanced the money to its subsidiary, which falls the assessee advanced the money to its subsidiary, which falls under the business expediency. Therefore, in the present case under the business expediency. Therefore, in the present case under the business expediency. Therefore, in the present case that the assessee advances to i that the assessee advances to its subsidiary for business ts subsidiary for business requirements, which may have impact on the objectives of the requirements, which may have impact on the objectives of the requirements, which may have impact on the objectives of the assessee for earning future revenue to the assessee. When it assessee for earning future revenue to the assessee. When it assessee for earning future revenue to the assessee. When it made in relation to advances. Though, it is another fact that made in relation to advances. Though, it is another fact that made in relation to advances. Though, it is another fact that the business of such nature did not materiali the business of such nature did not materialized in positive zed in positive outcome and the subsidiary had to close such business outcome and the subsidiary had to close such business outcome and the subsidiary had to close such business operation. The Hon'ble Supreme Court in S.A. Builders operation. The Hon'ble Supreme Court in S.A. operation. The Hon'ble Supreme Court in S.A. (288/TR 1 SC) held that whether expenditure may not have (288/TR 1 SC) held that whether expenditure may not have (288/TR 1 SC) held that whether expenditure may not have M/s Shoppers Stop Limited M/s Shoppers Stop Limited 16 2509 & 2512/M/2021 ITA Nos. 2508, 2509 & 2512/M/2021 been incurred under any legal obligation, yet it is allowable as been incurred under any legal obligation, yet it is allowable as been incurred under any legal obligation, yet it is allowable as a business a business expenditure if it was incurred on grounds of expenditure if it was incurred on grounds of commercial expediency. The case of the assessee is that the commercial expediency. The case of the assessee is that the commercial expediency. The case of the assessee is that the assessee has made advances to its subsidiary for business assessee has made advances to its subsidiary for business assessee has made advances to its subsidiary for business expediency. Therefore, considering the decision of Hon'ble expediency. Therefore, considering the decision of Hon'ble expediency. Therefore, considering the decision of Hon'ble Supreme Court in SA Builder (supr Supreme Court in SA Builder (supra), we do not find any a), we do not find any infirmity in the order passed by Id. CIT(A). Even otherwise the infirmity in the order passed by Id. CIT(A). Even otherwise the infirmity in the order passed by Id. CIT(A). Even otherwise the Id. CIT(A) deleted the entire addition by following the decision Id. CIT(A) deleted the entire addition by following the decision Id. CIT(A) deleted the entire addition by following the decision of his predecessor in appeal for A. Y. of his predecessor in appeal for A. Y. 2010-11 & 2012 11 & 2012-13.
No contrary fact or law to take other view 15. No contrary fact or law to take other view is brought to is brought to our notice to take other view, nor any variations in facts our notice to take other view, nor any variations in facts our notice to take other view, nor any variations in facts brought to our notice. Therefore, we do not find any merit in brought to our notice. Therefore, we do not find any merit in brought to our notice. Therefore, we do not find any merit in the groun the grounds of appeal raised by revenue.” 6.7 Identical findings have been given Identical findings have been given by the Ld. CIT(A) in respect by the Ld. CIT(A) in respect of AY 2017-18 & 2018 18 & 2018-19 on the issue-in-dispute.
We have heard rival submissions of the parties on the issue-in- We have heard rival submissions of the parties on the issue We have heard rival submissions of the parties on the issue dispute and perused the relevant material on record. We note that dispute and perused the relevant material on record. We note that dispute and perused the relevant material on record. We note that the Ld. CIT(A) has adjudicated the issue following the binding the Ld. CIT(A) has adjudicated the issue following the binding the Ld. CIT(A) has adjudicated the issue following the binding precedent on the issue precedent on the issue-in-dispute and therefore we do not find any dispute and therefore we do not find any error in the order of the Ld. CIT(A) on the issue error in the order of the Ld. CIT(A) on the issue-in-dispute in all the dispute in all the M/s Shoppers Stop Limited M/s Shoppers Stop Limited 17 2509 & 2512/M/2021 ITA Nos. 2508, 2509 & 2512/M/2021 three assessment years involved. Accordingly, the grounds No. 3 to 7 three assessment years involved. Accordingly, the grounds No. 3 to 7 three assessment years involved. Accordingly, the grounds No. 3 to 7 raised in all the three appeals are dismissed. raised in all the three appeals are dismissed.
In the result, all In the result, all the three appeals of the Revenue are the three appeals of the Revenue are dismissed.