ITO(IT)-2(2)(1), MUMBAI, MUMBAI vs. PRIYA NIRANJAN HIRANANDANI, MUMBAI

The assessee has entered into a Business Association Agreement (BAA) dated 14.05.2006 with Mr. Niranjan Hiranandani along with Mr. Darshan Hiranandani. The BAA laid down that the parties intent to jointly enter the business of construction, development in the Indian Real Estate Market and set out the structure through which such opportunities could be pursued. Dispute arose between the parties on the terms of BAA and arbitration proceedings were initiated by the assessee against the other two parties to the BAA for breach of relevant clauses of the BAA in February 2010 and the arbitral tribunal in its final award of Priya Hiranandani & Anr.

The assessee did not offer the above tabulated amount to tax for the reason that the amount received are in the nature of capital receipts not chargeable to tax. Priya Hiranandani & Anr.

Aggrieved the assessee filed further appeal before the CIT(A). The CIT(A) held that the principal damages plus pre-award interest of Rs. 4,40,56,45,664 as capital receipt not chargeable to tax. The CIT(A) further held that the entire interest totalling to Rs.50,24,13,109 earned by the assessee as tabulated above as taxable in the AY 2019-20 and not as per the additions made by the AO across three AYs i.e. AY 2017-18, 2018-19 and 2019-20. Both the assessee and the revenue are in appeal before the Tribunal against the order of the CIT(A) contending the following issues – i. The appeal filed by the revenue for AY 2017-18 pertains to interest income added by the AO to the tune of Rs. 2,61,67,896/- which the CIT(A) has held as taxable in the year 2019-20. Priya Hiranandani & Anr.

At the outset the ld. AR submitted that the assessee has filed the relevant forms under Direct Tax Vivad se Viswas Scheme, 2024 (DTVSV) for all the years under consideration i.e. AY 2017-18, 2018-19 and 2019-20. The ld. AR further submitted that while submitting Form-1 for AY 2019-20 the assessee has considered the amount of principal and pre-award interest of Rs. 440,56,45,664/- and the entire interest of Rs. 50,24,13,109/- (Page No. 25 & 26 of PB) and that Form-2 determining the amount of tax paid/payable by the assessee has also been issued (page 27 of PB). The ld. AR also submitted that the assessee has discharged the tax liabilities to the tune of Rs. 79,03,72,831/- on the principal and pre-award interest (page 28 of PB) and the tax on the total interest amounting to Rs.18,02,65,824/- is discharged via withholding tax and regular assessment tax (page 29 to 46 of PB). Accordingly the ld AR submitted that the appeals of the revenue for AY 2017-18 and 2018-19 do not survive. The ld. AR further submitted since the assessee's application under DTVSV is accepted the appeal filed for AY 2019-20 by the assessee may be treated as withdrawn and the appeal of the revenue for AY 2019-20 would become infructuous. Priya Hiranandani & Anr.

We heard the parties and perused the material on record. The assessee disputed the addition made by the AO Principal damages plus pre-award interest amounting to Rs. 4,40,56,45,664 and interest totalling to Rs. 50,24,13,109/- across AYs 2017-18, 2018-19 & 2019-20. The CIT(A) deleted the addition made towards Principal damages plus pre-award interest and held that the entire interest is taxable in the year 2019-20. We notice that the assessee has filed Form-1 under DTVSV and Form-2 determining the tax paid / payable by the assessee is already issued for AY 2019-20. The relevant Form 2 towards discharge of taxes on both Principal damages plus pre-award interest of Rs. 4,40,56,45,664 and the interest of Rs. 50,24,13,109 is extracted below – Priya Hiranandani & Anr.

From the combined perusal of the above forms it is clear that the assessee has paid the tax on the principal and pre-award interest of Rs. 440,56,45,664/- amounting to Rs. 79,03,72,831/- as well as the tax on the total interest of Rs. 50,24,13,109/- amounting to Rs.18,02,65,824/-. Therefore based on the submissions of the ld AR and considering the above facts the appeal filed by the assessee for AY 2019-20 contending the interest addition of Rs. 50,24,13,109/- is dismissed as withdrawn. Further the appeal filed by the revenue contending the Priya Hiranandani & Anr.

The revenue preferred appeals for AY 2017-18 and 2018-19 contending the decision of the CIT(A) that the interest amount of Rs.2,61,67,896/- and Rs. 18,47,51,359/- added by the AO in these AYs respectively as taxable in the year 2019-20. The ld AR in this regard submitted that the said amounts are part of the total interest of Rs. 50,24,13,109/- declared under DTVSV and therefore the appeals of the revenue does not survive. The ld DR though did not dispute the said factual position submitted that the assessee has filed Form 1 for these two AYs and Form-2 has not yet been issued. Accordingly the ld DR submitted that the appeals cannot become infructuous since Form-1 filed by the assessee is pending disposal. The ld AR to counter the said arguments submitted that the time line for determining the tax payable by the authorities has expired as per section 92(1) of DTVSV and therefore the Form-1 filed is automatically become not accepted.

We notice that as per the provisions of section 92(1) of DTVSV as extracted below the time line for the designated authority is 15 days for determining the tax payable on the amount declared by the assessee under DTVSV – Time and manner of payment. 92. (1) The designated authority shall, within a period of fifteen days from the 40 date of receipt of the declaration, by order, determine the amount payable by the declarant in accordance with the provisions of this Scheme and grant a certificate to the declarant containing particulars of the tax arrear and the amount payable after such determination, in such form as may be prescribed. Priya Hiranandani & Anr.

In assessee's case, it is an undisputed fact that the interest additions made by the AO in AYs 2017-18 and 2018-19 are already included in the interest amount declared under Form 1 for AY 2019-20 and that the assessee has also paid the tax on the said amount as evidenced by the Form-2 as extracted in the earlier part of this order. Further the facts that Form-1 filed by the assessee for AYs 2017-18 & 2018-19 have not been processed by the designated authority within the time limit and that the tax on the amount declared is already paid in AY 2019-20 have not been controverted by the revenue before us. Therefore in our considered view, there is merit in the submission of the ld AR that the appeal filed by the revenue for AYs 2017-18 and 2018-19 do not survive and have become ifructuous. Accordingly the said appeals are dismissed accordingly.

In result, the appeals by the Revenue for AYs 2017-18, 2018-19 & 2019-20 are dismissed as infructuous and the appeal of the assessee for AY 2019-20 is dismissed as withdrawn.