INCOME TAX OFFICER 2(2)(3), MUMBAI vs. MATHAKIA INVESTMENT PRIVATE LIMITED, MUMBAI

These appeals in 976/Mum/2018 for A.Y.2013-14 & 2014-15 arise out of the order by the ld. Commissioner of Income Tax (Appeals)-5, Mumbai in appeal No.CIT(A)-5/ITO- 2(2)(3)/IT-89/2016-17 dated 22/11/2017 (ld. CIT(A) in short) against the order of assessment passed u/s.143(3)of the Income Tax Act, 1961 (hereinafter referred to as Act) dated 22/03/2016 by the ld. Income Tax Officer – 2(2)(3), Mumbai (hereinafter referred to as ld. AO). Since identical issues are involved in these appeals, they were heard together 2 976/Mum/2018 M/s. Mathakia Investment P. Ltd., and are being disposed off by this consolidate order, for the sake of convenience. The facts of A.Y.2013-14 are taken up for adjudication and the decision rendered thereon would apply with equal force for A.Y.2014-15 also except with variance in figures.

The first common issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in deleting addition made on account of interest accrued on outstanding debt in the sum of Rs.1,31,53,000/- in the facts and circumstances of the case.

We have heard the rival submissions and also perused the material on record in the light of the contentions of the parties. As pointed out by the Ld. counsel, the coordinate Bench has decided the identical issue in favour of the assessee in the assesee’s own case for the A.Y. 2011-12. We further notice that the coordinate Bench has decided the identical issue in favour of the assessee by following the decision of the Mumbai Bench pertaining to the earlier assessment year in assessee’s own case 7398/M/2013. The findings of the coordinate Bench in the said appeals reads as under:- “11. We have heard both the parties and perused the orders of the Revenue Authorities as well as the paper books filed before us. On hearing both the parties and on perusal of the relevant material placed before us, we find, there is no dispute on the facts about the assessee acquiring the debts from the Bank of Baroda for a sum of Rs. 84,97,400/- with the borrowed funds, the loan creditors have not paid interest income to the either bank or to the assessee, assessee has not recognized the income for all the assessment years under consideration etc. The legal issue i.e. to be decided on the right to recover the interest income by the assessee during the pendency of suit (No. 105 of 1986) in Bombay City Civil Court. In this regard, we have perused the provisions of the said section 34 of the CPC and the same reads as under:

Interest:(1) where and in so far as a decree is for the payment of money, the Court may, in the decree, order interest at such rate as the court deems reasonable to be paid on the principal sum adjudged, from the date of the suit to the date of the decree, in addition to any interest adjudged on such principal sum for any period prior to the institution of the suit, [with further interest at such rate not exceeding six per cent per annum, as the Court deems reasonable on such principal sum], from the date of decree to the date of payment, or the such earlier date as the court thinks fit. [Provided that where the liability in relation to the sum so adjudged had arisen out of a commercial transaction, the rate of such further interest may exceed six per cent per annum, but shall not exceed the contractual rate of interest or where there is no contractual rate, the rate at which moneys are lent or advanced by nationalized banks in relation to commercial transactions. Explanation I :- In this sub-section, “national bank” means a corresponding new bank as defined in the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 ( 5 of 1970). Explanation II: For the purposes of this section, a transaction is a commercial transaction, if it is connected with the industry, trade or business of the party incurring the liability.] (2) Where such a decree is silent with respect to the payment of further interest [on such principal sum] from the date of decree to the date of payment or other earlier date, the Court shall be deemed to have refused such interest and a separate suit therefore shall not lie”. 12. We have also examined the interpretation of the said section and the relevant explanation is already incorporated in the above paras of this order. We have considered the cited judgment of the Hon’ble Jurisdictional High Court in the case of Maharashtra State Financial Corporation Ltd. (supra). Further, we have also considered the reasoning given by the CIT (A) in paras 4.1.4 and 4.1.5 of his order. Considering the above, we are of the opinion, the conclusion drawn by the CIT (A) is fair and reasonable and it does not call for any interference. Accordingly, relevant grounds raised

The last common issue to be decided in this appeal is as to whether the ld. CIT(A) was justified in deleting the addition made on account of disallowance u/s.14A of the Act r.w.r. 8D of the rules in the facts and circumstances of the case. 3.1. The brief facts of this issue are that the assessee during the A.Y.2013-14 claimed exempt dividend income of Rs.37,960/- and had disallowed the sum of Rs.17,563/- voluntarily u/s.14A of the Act in the Memo of income. The ld. AO concluded that the working of the disallowance given by the assessee was incorrect and accordingly, proceeded to invoke computation mechanism provided in rule 8D(2) of the rules. Accordingly, he made disallowance of Rs.30,274/- under first limb of rule 8D(2) and Rs.1,560/- under third limb of rule 8D(2). The total disallowance under rule 8D worked out by the ld. AO was Rs.31,834/- and after reducing the amount already disallowed in the sum of Rs.17,563/-, the ld. AO made disallowance of Rs.14,271/- u/s.14A of the Act for the A.Y.2013-14. The ld. CIT(A) by placing reliance on the decision of this Tribunal in assessee’s own case vide order dated 16/12/2016 deleted the disallowance u/s.14A of the Act made by the ld. AO. 3.2. Aggrieved, the revenue is in appeal before us. 3.3. We have heard the rival submissions. We find that this issue has already been dealt by this Tribunal in assessee’s own case vide order dated 16/02/2016 wherein, it was held that amount already disallowed 5 976/Mum/2018 M/s. Mathakia Investment P. Ltd., by the assessee is fair and reasonable and the ld. AO without recording any satisfaction as to why the disallowance made by the assessee is incorrect cannot automatically proceed to make disallowance by applying the computation mechanism under rule 8D(2) of the rules. Respectfully following the same, we find no infirmity in the order of ld. CIT(A). Accordingly, ground No.3 raised by the revenue for both the years are dismissed.

In the result, both the appeals of the revenue are dismissed.