Imperial Consultants & Securities… vs DCIT | ITAT Mumbai 2019

Income Tax Appellate Tribunal, C Bench, Mumbai

Before: Shri A.D. Jain & Shri Rajesh Kumar

For Appellant: Shri Vijay Mehta

For Respondent: Shri Awungshi Gimson

Hearing: 25.09.2019Pronounced: 17.12.2019

These cross appeals filed by the assessee and Revenue are directed against the order of the CIT(A)-12, Mumbai dated 12.03.2018 and it relates to A.Y. 2012-13.

At the time of hearing the learned counsel for the assessee pressed only Ground No. 4(a) raised by the assessee and all other grounds, namely

Imperial Consultants & Securities Ltd./DCIT, Circle - 6(3)(1) Ground Nos. 1, 2, 3(a) & 3(b) are accordingly dismissed as not pressed. Ground No. 4(a) reads as under: - “4(a) On the facts and circumstances of the case and in law, the ld. CIT(A) ought to have allowed the deduction of interest incurred on zero coupon bonds of Rs.84,70,63,010/- (i.e., Rs. 143,30,28,279/- less Rs. 58,59,65,260/-) u/s 36(1)(iii) of the Act though claimed by the appellant u/s 57(iii) of the Act.

Brief facts of the case are that the assessee filed return of income on 30.09.2012 declaring loss of Rs. 1170,64,32,415/- other than the loss under long term capital gain which was Rs. 20,89,72,023/-. The return of income tax was later on revised on 29.03.2014 declaring total income at nil other than the loss of `66,38,62,883/- under the head of long term capital gain. Thereafter the case was selected under compulsory scrutiny and notices were issued and served upon the assessee. The assessee has made some borrowings and one of the major borrowings was on account of Zero Coupon Bonds issued by M/s. Essar House Ltd. Out of the borrowed fund, the assessee has advanced money through inter corporate deposits ( hereinafter referred to as ICD) to M/s. Essar Oil Ltd. The transactions of borrowing and lending were carried out during the financial years 2009- 10, 2010-11 and 2011-12. The transactions were carried out earlier by assessee’s predecessor M/s. Essar Investment Ltd. and after demerger of investment and finance division of Essar Investment Ltd. merged with the assessee w.e.f. 01.04.2010. In the return of income, the assessee declared interest income of `124.58 crores under Section 56 of the Act as income from other sources against which interest expenditure of `143.30 crores was claimed. According to the AO the assessee has not furnished complete particulars of the said claim as deduction under Section 57 of the Act can only be allowed when the expense is exclusively and wholly incurred for the purpose of earning that income and accordingly, the AO passed the assessment order wherein, inter alia, he disallowed the entire amount of interest of `143.30 crores claimed by the assessee under Section 57 of the Act by framing the assessment under Section 143(3) of the Act dated 31st March, 2015.

IMPERIAL CONSULTANTS & SECURITIES LTD. (FORMERLY KNOWN AS OMPERIAL CONSULTANTS & SECURITIES PVT. LTD.),MUMBAI vs. DCIT -6 (3)(1), MUMBAI

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