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Facts
The assessee, a Cyprus-incorporated company, invested in Compulsorily Convertible Debentures (CCDs) and earned interest income. For AY 2012-2013, the assessee offered interest income of INR 15,65,78,250/- and claimed TDS credit. However, the processing under Section 143(1) denied TDS credit of INR 35,35,638/-, and a rectification application under Section 154 was rejected.
Held
The Tribunal held that the same income cannot be taxed twice. It directed the Assessing Officer to verify if the income reflected in Form 26AS for AY 2010-2011 and 2011-2012 was offered to tax. If confirmed, the AO was to recompute the taxable income for AY 2012-2013 by reducing the already offered interest income and grant corresponding TDS credit.
Key Issues
Whether the interest income offered on receipt basis for AY 2012-2013, which was already offered on accrual basis for earlier years, amounts to double taxation, and if TDS credit should be granted for the same.
Sections Cited
250, 154, 234B, 234C, 143(1), 114
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, G’ BENCH, MUMBAI
IN THE INCOME TAX APPELLATE TRIBUNAL "G’ BENCH, MUMBAI SHRI NARENDRA KUMAR BILLAIYA, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER Xenok Limited C/o. Ernst and Young LLP 14th Floor, The Ruby, 29 Senapati Bapat Marg, Dadar West, Mumbai – 400 028, Maharashtra. [PAN:AAACX0799A] …………. Appellant Vs Commissioner of Income Tax (Appeals)-58, Mumbai Room No.515, 5th Floor, Earnest House, NCPA Road, Nariman Point, Mumbai – 400021, Maharashtra. …………. Respondent Appearance For the Appellant/Assessee : Shri Hiten Thakkar For the Respondent/Department : Shri Suresh Gaikwad Date Conclusion of hearing : 27.11.2024 Pronouncement of order : 20.02.2025 O R D E R [ Per Rahul Chaudhary, Judicial Member:
1. 1. The present appeal has been preferred by the Assessee against the order, dated 18/03/2024, passed by the Commissioner of Income Tax (Appeal)-58, Mumbai [hereinafter referred to as the ‘CIT’] under Section 250 of the Income Tax Act, 1961 [hereinafter referred to as ‘the Act’] whereby the Ld. CIT(A) had partly allowed the appeal against the Rectification Order dated 08/02/2023, passed under Section 154 of the Act for the Assessment Year 2012-2013.
2. The Appellant has raised following grounds of appeal : Assessment Year 2012-2013 “1. The learned CIT(A) has erred in taxing the same interest income twice i.e. in AY 2010-11 and AY 2011-12 (on accrual basis) as well as AY 2012-13 (on receipt basis) despite acknowledging the fact that the Appellant had erroneously offered the same income to tax twice on the grounds that the Appellant had failed to file a revised return for AY 2010-11, AY 2011-12 and AY 2012-13.
The learned CIT(A) has erred in not granting the TDS credit of INR.35,35,638/- on the basis that the Appellant has failed to file a revised return for AY 2010-11, AY 2011-12 and AY 2012- 13 despite knowing the fact that the time limit for revising the return of income had elapsed and hence the Appellant was prevented from filing a revised return for the aforementioned years.
3. The Learned Assessing Officer has erred in levying consequential interest under section 234B and 234C of the Act.”
The relevant facts in brief are that the Appellant, a company incorporated under the laws of Cyprus and carrying out activity of making investment securities, had made investment in Compulsorily Convertible Debentures (CCDs) issued by Max Financial Services Limited. On perusal of record, we find that the CCDs held by the Appellant during period spanning over three previous years relevant to Assessment Years 2010-2011, 2011-2012 and 2012-2013. During the aforesaid period of holding of CCDs, the Appellant had earned interest income on CCDs on which tax was deducted at source by Max Financial Services Limited. The Appellant offered income of INR.3,53,56,379/- to tax for the Assessment Year 2010-2011 and claimed credit of corresponding Tax Deducted at Source (TDS) of INR.35,35,638/-. For the Assessment Year Appellant offered income of INR.62,63,13,000/- to tax for the Assessment Year 2011-2012 and claimed credit of corresponding TDS of INR.6,26,31,300/-. The return of income filed by the Appellant, for the Assessment Years 2010-2011 and 2011-2012 were accepted without any variation.
2 Assessment Year 2012-2013
The present appeal pertains to Assessment Year 2012-2013. In the return of income for the Assessment Year 2012-2013, the Appellant offered to tax interest income of INR.15,65,78,250/- and claimed credit of TDS amounting to INR.1,56,57,825/-. The return of income filed by the Appellant, for the Assessment Years 2012-2013 was processed under Section 143(1) of the Act and credit of TDS of INR.35,35,638/- was denied to the Assessee. The rectification application filed by the Appellant before the Assessing Officer under Section 154 of the Act was rejected vide, order dated 08/02/2023. The Appeal preferred before the CIT(A) against the aforesaid rejection order was also dismissed by the CIT(A), vide order dated 19/02/2024. Therefore, the Appellant has preferred the present appeal before the Tribunal.
We have head both the sides, perused the material on record and examined the position in law in view of the submissions advanced.
On perusal orders passed by the authorities below and on perusal of the material on record, we find that the Appellant had itself offered to tax income of INR.15,65,78,250/- which exceeded the income of INR.12,12,21,871/- by INR.3,53,56,379/-. The explanation offered by the Appellant is that the Appellant had offered interest income to tax for the Assessment Year 2010-2011 on accrual basis though the Appellant was following cash basis of accounting. For the Assessment Year 2011-2012, the interest income received was same as interest income that accrued and therefore, there was no net impact on the interest income offered to tax. However, for the Assessment Year the amount of interest income received exceeded the interest income of INR.12,12,21,871/- accruing during the relevant previous year (as reflected in Form 26AS) by INR.3,53,56,379/-. The Appellant offered to tax additional income of INR.3,53,56,379/- and also claimed corresponding TDS credit. As per Form 26AS TDS credit 3 Assessment Year 2012-2013 corresponding to income of INR..12,12,21,871/- was available and therefore, demand was raised on the Appellant for the differential credit claimed by the Appellant along with interest.
The case of the Appellant is that interest income was only source of income for the Appellant and from the returns filed by the Appellant it was clear that entire interest income had been offered to tax. Though the Appellant has incorrectly offered to tax income of INR.3,53,56,379/- twice, once on accrual basis in the preceding assessment year and then again on cash basis in the Assessment Year 2012-2013, it is settled legal position that there cannot be double taxation of same income in the hands of the same assessee. Per contra, the stand taken by the Assessing Officer and the CIT(A) is that the Appellant had itself offered to tax income of INR.3,53,56,379/- in the return of income. Since the Appellant had not filed revised return, the intimation issued under Section 143(1) of the Act on processing return of income does not suffer from any infirmity. Further, the credit of TDS as reflected in Form 26AS has already been granted. Since no further TDS credit is available as per records, Appellant’s alternative claim for credit of TDS is without merit.
We have given thoughtful consideration to the rival submissions. In the present case the contention of the Appellant is that interest income to the extent of INR.3,53,56,379/- has been offered to tax on receipt basis by the Appellant though the same interest income had already been offered to tax earlier on accrual basis. The contention of the Revenue is that the intimation under Section 143(1) of the Act was processed as per the details/information stated in the return of income for the Assessment Year 2012-2013 and the details of TDS available in form 26AS. Therefore, there was no mistake apparent on record. It is settled legal position that same income cannot be taxed 4 Assessment Year 2012-2013 twice in the hands of the Assessee, once on accrual basis and then again on receipt. In our view that given the peculiar facts and circumstances of the present case, the technicalities ought not to obscure justice. The purpose of the assessment proceedings before the taxing authorities is to assess correctly the tax liability of an assessee in accordance with law. Assessing Officer must not take advantage of ignorance of the assessee as to his rights [Circular No. 114 XL-35 of 1955 issued by the Central Board of Direct Taxes, dated 11/04/1955]. Accordingly, we direct the Assessing Officer to verify that the income as reflected in form 26AS for the Assessment Year 2010-2011 and 2011-2012 has been offered to tax as income for the Assessment Year 2010-2011 and 2011-2012, respectively. In case the on verification, the aforesaid is found to be correct, the Assessing Officer is directed to recomputed the taxable income of the Appellant for the Assessment Year 2012-2013 by reducing from the aggregate interest income earned by the Appellant on CCDs for the Assessment Years 2010-2011, 2011-2012 and 2012-13 the amount of interest income already offered to tax for the Assessment Years 2010-2011 and 2011-12. The Assessing Officer is also directed to grant credit of TDS corresponding to the aforesaid income. In terms of the aforesaid, Ground No. 1 raised by the Appellant is allowed for statistical purposes and Ground No. 2 and 3 are dismissed as having been rendered infructuous and therefore, not pressed.
In result appeal preferred by the Assessee is partly allowed.