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Income Tax Appellate Tribunal, “E”
Before: SHRI C. N. PRASAD, JM& SHRI S. RIFAUR RAHMAN, AM
M/s Tata Realty & ACIT 2(3), Infrastructure Ltd. R. No. 552, 5TH floor, बिधम/ Elphinstone Bldg, 2nd floor, Aayakar Bhavan, M. K. Vs. 10 Veer Nariman Road, Road, Mumbai-400 020 Mumbai-400 001 स्थायीलेखासं./जीआइआरसं./PAN No. AACCT6242L (अपीलाथी/Appellant) (प्रत्यथी / Respondent) : अपीलाथीकीओरसे/ Appellant : Shri R. Manjunatha Swamy, DR by प्रत्यथीकीओरसे/Respondentby : Ms. Aarti Vissanji, AR सुनवाईकीतारीख/ : 31.01.2020 Date of Hearing घोषणाकीतारीख / : 26.06.2020 Date of Pronouncement आदेश / O R D E R
Per S. Rifaur Rahman, Accountant Member:
1. The present Appeal has been filed by the revenue against the order of Ld. Commissioner of Income Tax (Appeals) – 6 in short referred as ‘Ld. CIT(A)’, Mumbai, dated 14.03.13 for Assessment Year (in short AY) 2008-09. M/s Tata Realty & Infrastructure Ltd 2. The brief facts of the case are that assessee company filed its return of income for the year under consideration on 26.09.2008, declaring total loss of Rs. 10,35,67,182/- The case was selected for scrutiny and after serving statutory notices, AR of the assessee attend from time to time and filed the relevant details. After considering the submission of the assessee, AO has passed an order u/s 143(3) of the Act by making disallowance and also penalty proceeding u/s 271(1)(c) was initiated to the assessee.
3. Aggrieved with the above order, assessee preferred appeal before Ld. CIT(A) and Ld. CIT(A), after considering the submission of the assessee, deleted the disallowance made by AO and partly allowed the appeal of the assessee with the following observations:-
1.4.2 The appellant company paid Rs. 1700 crores on 10.10.2007 to Unitech Ltd and land measuring 49.16 acres was agreed at Rs. 692.04 Crores and on the balance amount, interest was negotiated between the assessee and Unitech and was finally settled at 18.5% from 06.04.2004 onwards. The appellant has considered interest @ 18.5% amounting to Rs. M/s Tata Realty & Infrastructure Ltd 159,39,46,798/-(159.39 crores) from 06.04.2008 to 31.03.2009 as income and was offered to tax for AY 2009-10. The interest is part of 'other income' of P & L account for the year ended 31.03.2009(Paper Book Page 163) as per Schedule 13 ( Paper Book Page 164) and the breakup is given at Paper Book Page 165 which shows interest from Unitech Ltd. at Rs. 1,593,946,798/-. The computation of total income for AY 2009-10 is at Paper Book 166 which start from Net Profit as per P & L account (before tax) and after adjustments, total income is declared at Rs. 1,621,384,330/- in the return of income,the copy of which is at Page 167 of the Paper Book. In view of the MOU dated 09.10.2007, amended by MOU dated 26.04.2008 and settlement of payment of interest @18.5% to run from 06.04.2008, no interest income accrued on the advance of Rs. 1700 Crores up to 06.04.2008. The AO has made various comments and the appellant has refuted the same but as the same are not material to the assessment of income, on the facts of the case, the same do not require adjudication in the Income-tax Appeal Proceedings. As the appellant has shown the interest of Rs. 159.39 Crores, received and receivable, in the AY 2009-10, the AO's action to assess not accrued interest @ 12% for the period 09.10.2007 to 31.03.2008, is not valid. The addition of Rs. 97,80,82,190/- is therefore, deleted.
M/s Tata Realty & Infrastructure Ltd
Aggrieved with the above order, revenue has preferred the appeal before us on the ground mentioned herein below:-
The order of the CIT(A) is opposed to law and facts of the case.
On the facts and circumstances of the case and in law, the Ld. CIT(A) erred in holding that interest of assessee has accrued for F.Y. 2008-09 ignoring that fact the funds were lent by the assessee to M/s United Ltd. in October 2007 and therefore, interest income was taxable in the previous year 2007-08.
For these and other grounds that may be urged at the time of hearing, the decision of the CIT(A) may be set aside and that of the AO restored.
Before us, Ld. DR submitted that assessee had paid to its sister’s concern to buy lands on behalf of assessee and made a huge payment of advance to the extent of Rs. 1700 crores and looking at the transaction and the utilization of the fund by the Unitech group, clearly indicates that the transaction is not genuine and made to believe and assessee has not filed any evidence before the AO and substantial amount paid to the other M/s Tata Realty & Infrastructure Ltd party without making any due diligence report and it is not believable and not the action of prudent businessman, therefore he supported the order of AO and also relied on following judgments :- i) Rajasthan Art Emporium Vs. DCIT 82 taxman.com 127 (Raj) ii) Elmer Hawell Electrics Vs. CIT 277 ITR 549(Delhi)
On the other hand, Ld. AR submitted that it is genuine transaction and initially the MOU entered into by the assessee clearly indicates that assessee intended to buy substantial land and the funds were transferred to them with a clear condition that it has to possess due diligence certificate and in case of failure, it will be charged penalty interest. It is worth to notice that assessee has entered into second MOU on the backdrop of failure on the part of the other party to possess due diligence report and assessee proposed to acquire land in which due diligence report has to be clear. Since there is failure on the part of Unitec, accordingly, the terms were re-negotiated and from the date of second MOU, assessee has claimed the penalty interest @ 18.5%.
M/s Tata Realty & Infrastructure Ltd Even though as per the findings of AO, the current market rate only 12% and the assessee has claimed 18.5%, therefore this transaction is genuine and assessee has earned the interest income diligently in the next assessment year as per the re- negotiation with the parties. The assessee cannot take any interest income without ensuring the reasonableness and certainty of receipt of above interest. Therefore, these transactions entered by the assessee are genuine and reasonable.
7. Considered the rival submissions and material placed on record, we notice from the record that the assessee entered into agreement with M/s Unitec to acquire 49.16 acres of land and accordingly paid Rs.1700 crores on 10.10.2007. The Unitech Group owned the above said land and it had to facilitate the due diligence to complete the transaction. But the Unitec Group could manage to complete the due diligence only to the extent of the land worth of Rs.600 crores. It is fact that Unitec Group is subsidiary of TATA Group companies and the group entered into an agreement with Unitec group to acquire the shares and Land in their possession. It had arranged funds through issue of rights shares etc. These funds were made available to the assessee.
M/s Tata Realty & Infrastructure Ltd From the records we notice that it was submitted before CIT(A) that the funds were arranged by TATA sons and no interest bearing funds were utlilized to advance. In order to facilitate the transfer of lands from Unitec Group to the assessee, it was agreed to conduct due diligence and accordingly MOU was entered. We notice that AO observed that these funds were utilized to acquire the UAS License and it is only make to believe transaction. We do not agree with the AO that how the funds were utilized by Unitec group is irrelevant and what is relevant is, whether Unitec held the lands as per MOU on the date of transaction and whether due diligence activities were carried on or not. In the records, we found that there is evidence of existence of above said conditions and no contrary evidence was brought on record by revenue. In our view, the transaction entered by the assessee seems to be genuine and within the business dealings. It is also relevant to note that as soon as the period given for carrying out due diligence over, Assessee modified the MOU entered and accordingly purchased only those lands which are as per agreement terms and for the balance advanced amount claimed interest @18.5%.
M/s Tata Realty & Infrastructure Ltd 8 We notice that AO has calculated the interest from the date of entering the agreement (MOU) and date of payment on 10.10.2007. But, it is natural for the assessee to allow time to the other party to carry out due diligence as per terms of MOU. It is between the parties to decide, how much time to allow in the execution of contract. Therefore, assessee has given time up to 05.04.2008. Beyond that, assessee has claimed penal interest and declared the same in its financial statement in the subsequent assessment year. In our view, the action of the assessee in this transaction is within the business acceptable practices. Therefore, we are inclined to accept the findings of Ld. CIT(A).
9. With regard to case law relied by Ld DR, in Elmer Havell Electrics (supra), the assessee in this case had borrowed interest bearing loans from Market and same time, it advanced interest free loan to its sister concern. In the given case, the funds were advanced for purchase of land and not financed interest free. Therefore, it is not financial transaction and distinguishable on facts. With regard to case Rajasthan Art Emporium (supra), the payment related its sister concern on account of receipt of services and it is disallowed due to failure on the part of the M/s Tata Realty & Infrastructure Ltd assessee to prove the receipt of services even though there existed an agreement. In the given case, the payment was relating to purchase of land and it is not proved by AO that the lands were not belongs to Unitec group and the Unitec has not carried out any due diligence as per MOU. The AO doubted the utilization of the funds by Unitec and had no opportunity to doubt the existence of ownership of land and process of due diligence. Therefore, the facts are distinguishable to the present case. Accordingly rejected for consideration.
10. In the net result, the appeal filed by the revenue stands dismissed.
It is pertinent to mention here that this order is pronounced after a period of 90 days from the date of conclusion of the hearing. In this regard, we place reliance on the decision of co- ordinate bench of this Tribunal in the case of JSW Ltd in & 6103/Mum/2018 dated 14.5.2020, wherein this issue has been addressed in detail allowing time to pronounce the order beyond 90 days from the date of conclusion of hearing by excluding the days for which the lockdown announced by the M/s Tata Realty & Infrastructure Ltd Government was in force. The relevant observations of this tribunal in the said binding precedent are as under:-
However, before we part with the matter, we must deal with one procedural issue as well. While hearing of these appeals was concluded on 7th January 2020, this order thereon is being pronounced today on 14th day of May, 2020, much after the expiry of 90 days from the date of conclusion of hearing. We are also alive to the fact that rule 34(5) of the Income Tax Appellate Tribunal Rules 1963, which deals with pronouncement of orders, provides as follows:
(5) The pronouncement may be in any of the following manners:— (a) The Bench may pronounce the order immediately upon the conclusion of thehearing. (b) In case where the order is not pronounced immediately on the conclusion of the hearing, the Bench shall give a date forpronouncement.
(c ) In a case where no date of pronouncement is given by the Bench, every endeavour shall be made by the Bench to pronounce the order within 60 days from the date on which the hearing of the case was concluded but, where it is not practicable so to do on the ground of exceptional and extraordinary circumstances of the case, the Bench shall fix a future day for pronouncement of the order, and such date shall notordinarily(emphasis supplied by us now) be a day beyond a further period of 30 days and due notice of the day so fixed shall be given on the noticeboard.
Quite clearly, “ordinarily” the order on an appeal should be pronounced by the bench within no more than 90 days from the date of concluding the hearing. It is, however, important to note that the expression “ordinarily” has been used in the said rule itself. This rule was inserted as a result of directions of Hon’ble jurisdictional High Court in the case of Shivsagar Veg M/s Tata Realty & Infrastructure Ltd Restaurant Vs ACIT [(2009) 317 ITR 433 (Bom)] wherein Their Lordships had, inter alia, directed that “We, therefore, direct the President of the Appellate Tribunal to frame and lay down the guidelines in the similar lines as are laid down by the Apex Court in the case of Anil Rai (supra) and to issue appropriate administrative directions to all the benches of the Tribunal in that behalf. We hope and trust that suitable guidelines shall be framed and issued by the President of the Appellate Tribunal within shortest reasonable time and followed strictly by all the Benches of the Tribunal. In the meanwhile (emphasis, by underlining, supplied by us now), all the revisional and appellate authorities under the Income-tax Act are directed to decide matters heard by them within a period of three months from the date case is closed for judgment”. In the ruled so framed, as a result of these directions, the expression “ordinarily” has been inserted in the requirement to pronounce the order within a period of 90 days. The question then arises whether the passing of this order, beyond ninety days, was necessitated by any “extraordinary” circumstances.
Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon’ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid 19 epidemic, and this lockdown was extended from time to time. As a matter of fact, even before this formal nationwide lockdown, the functioning of the Income Tax Appellate Tribunal at Mumbai was severely restricted on account of lockdown by the Maharashtra Government, and on account of strict enforcement of health advisories with a view of checking spread of Covid 19. The epidemic situation in Mumbai being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruption of judicial wok all over the country. As a matter of fact, it has been such an unprecedented situation, causing disruption in the functioning of judicial machinery, that Hon’ble Supreme Court of India, in an unprecedented order in the history of India and vide order dated 6.5.2020 read with order dated 23.3.2020, extended the limitation to exclude not only this lockdown period but also a few more days prior to, and after, the lockdown by observing that “In case the limitationhas expired after 15.03.2020 then the period from 15.03.2020 till the date on which the lockdown is lifted in the jurisdictional area where the dispute lies or where the cause of action arises shall be extended for a period of 15 days after the lifting of lockdown”. Hon’ble M/s Tata Realty & Infrastructure Ltd Bombay High Court, in an order dated 15th April 2020, has, besides extending the validity of all interim orders, has also observed that, “It is also clarified that while calculating time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly”, and also observed that “arrangement continued by an order dated 26th March 2020 till 30th April 2020 shall continue further till 15th June 2020”. It has been an unprecedented situation not only in India but all over the world. Government of India has, vide notification dated 19th February 2020, taken the stand that, the coronavirus “should be considered a case of natural calamity and FMC (i.e. force majeure clause) maybe invoked, wherever considered appropriate, following the due procedure…”. The term ‘force majeure’ has been defined in Black’s Law Dictionary, as ‘an event or effect that can be neither anticipated nor controlled’ When such is the position, and it is officially so notified by the Government of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an “ordinary”period.
10.In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only in consonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of Otters Club Vs DIT [(2017) 392 ITR 244 (Bom)], Hon’ble Bombay High Court did not approve an order being passed by the Tribunal beyond a period of 90 days, but then in the present situation Hon’ble Bombay High Court itself has, vide judgment dated 15th April 2020, held that directed “while calculating the time for disposal of matters M/s Tata Realty & Infrastructure Ltd made time- bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly”. The extraordinary steps taken suomotu by Hon’ble jurisdictional High Court and Hon’ble Supreme Court also indicate that this period of lockdown cannot be treated as an ordinary period during which the normal time limits are to remain in force. In our considered view, even without the words “ordinarily”,inthelightoftheaboveanalysisofthelegalposition, theperiodduringwhich lockout was in force is to excluded for the purpose of time limits set out in rule 34(5) of the Appellate Tribunal Rules, 1963. Viewed thus, the exception, to 90-day time-limit for pronouncement of orders, inherent in rule 34(5)(c), with respect to the pronouncement of orders within ninety days, clearly comes into play in the present case. Of course, there is no, and there cannot be any, bar on the discretion of the benches to refix the matters for clarifications because of considerable time lag between the point of time when the hearing is concluded and the point of time when the order thereon is being finalized, but then, in our considered view, no such exercise was required to be carried out on the facts of this case.
To sum up, the appeal of the assessee is allowed, and appeal of the Assessing Officer is dismissed. Order pronounced under rule 34(4) of the Income Tax (Appellate Tribunal) Rules, 1962, by placing the details on the notice board.
11. Respectfully following the aforesaid judicial precedent, we proceed to pronounce this order beyond a period of 90 days from the date of conclusion of hearing.
12 Order pronounced as per Rule 34(5) of ITAT Rules and by placing the pronouncement list in the notice board on _______.