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Income Tax Appellate Tribunal, MUMBAI BENCHES “C”, MUMBAI
Before: SHRI RAJESH KUMAR (AM) & SHRI RAM LAL NEGI (JM)
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES “C”, MUMBAI BEFORE SHRI RAJESH KUMAR (AM) AND SHRI RAM LAL NEGI (JM) Assessment Year: 2003-2004 M/s Cascade Holdings Pvt. Ltd., The ACIT- Central Circle 4(3), 32, Madhuli, 3rd Floor, R. No. 413, Aaykar Bhavan, Dr. Annie Besant Road, Worli, M.K. Road, Mumbai - 400018 Vs. Mumbai - 400020 PAN: AAACC5768N (Appellant) (Respondent) & Assessment Year: 2011-2012 M/s Cascade Holdings Pvt. Ltd., The Assistant Commissioner of 32, Madhuli, 3rd Floor, Income Tax, Dr. Annie Besant Road, Worli, Central Circle – 31, Mumbai - 400018 Vs. R. No. 413, Aaykar Bhavan, PAN: AAACC5768N Mumbai - 400020 (Appellant) (Respondent)
Assessee by : Shri Dharmesh Shah/ Dhawal Shah (AR) Revenue by : Dr. P. Daniel (DR) Date of Hearing: 08/01/2019 Date of Pronouncement: 04/04/2019
O R D E R PER RAM LAL NEGI, JM These are the two appeals filed by the assessee one against the order dated 14.10.2015 passed by the Ld. Commissioner of Income Tax (Appeals)-52, Mumbai, for the assessment years 2003-04 whereby the Ld. Commissioner has partly allowed the appeal filed by the assessee against assessment order Assessment Years: 2003-2004 and 2011-12
passed u/s 144 of the Act and the second appeal against the order dated 20.10.2014 passed by the Commissioner of Income Tax (Appeals)-40, Mumbai pertaining to the A.Y. 2011-12, whereby the Ld. CIT (A) has dismissed the appeal filed by the assessee against assessment order passed u/s 143 (3) of the Income Tax Act, 1961 (for short ‘the Act’).Since, both the appeals pertain to the same assessee, these appeals were clubbed, heard together and are being disposed of by this common and consolidated order for the sake of convenience. 2. Brief facts of the case are that the assessee is a notified person under the Special Court (Trial of offences relating to transactions in securities) Act, 1992. Since, the assessee’s assets including the bank account were attached, the assessee did not file return of income even after the due date. The AO issued notice u/s 142 (1) and served upon the assessee. However, no response was received on the part of the assessee. Notice u/s 142 (1) was again served upon the assessee. In response thereof the authorized representative appeared, however submitted that assessee had not received the relevant details from the custodian. The AO granted two-three more opportunities to present its case, however, none appeared on behalf of the assessee. The AO obtained bank statements of assessee’s accounts maintained with State Bank of Mysore from the custodian. The assessee was also served with the show cause notice as to why the income should not be estimated on the basis of available data. However, again the assessee did not respond. The AO accordingly determined the total income of the assessee at Rs. 1,44,00,000/- determining the interest income at Rs. 1,40,00,000/- other income amounting to Rs. 1,00,000/- and dividend income amounting to Rs. 3,00,000/-. The assessee challenged the assessment order before the CIT (A). The Ld. CIT (A) after hearing the authorized representative of the assessee partly allowed the appeal, however Assessment Years: 2003-2004 and 2011-12
sustained the liability amounting to Rs. 3,72,82,860/- towards interest expenditure claimed by the appellant. 3. The assessee has raised the following effective grounds of appeal against the impugned order passed by the Ld. CIT (A):- 1. “The learned Commissioner of Income Tax (Appeals) ought to have appreciated that as per the decision of Hon’ble Special Court dated 30.04.2010 in MP No. 41 of 1999, the assets under consideration and the consequential income belongs to Shri Harshad S. Mehta and hence the income assessed by the Assessing Officer ought to have been taxed in the hands of Shri Harshad S. Mehta and not in the hands of the appellant.
The learned Commissioner of Income Tax (Appeals) has erred in law and in facts in not granting relief of liability amounting to Rs. 3,72,82,860/- towards interest expenditure claimed by the appellant. The Ld. Commissioner of Income Tax (Appeals) ought to have been allowed interest expense to the extent of income earned (assessed income) i.e. Rs. 29,23,610/-.
The learned Commissioner of Income-Tax (Appeals) has erred in law and in facts in confirming interest charged u/s 234A, 234B and 234C of the Act. 4. The learned Commissioner of Income Tax (Appeals) has erred in law and in facts in the hands of the appellant was subjected to the provisions of TDS and hence on the said amount of tax no interest can be computed u/s 234B and 234C of the Act.”
Since, there is a delay of 661 days in filing the present appeal, the assessee has filed an application for condonation of delay. In the light of the application, the Ld. counsel for the assessee submitted that the assessee applicant is a notified entity under the provisions of Special Court (trial of offence relating to transactions in securities) Act, 1992 and as per the notification issued by the Special Court all the properties of the applicant are under the control and management of the custodian. Since, the bank account of the assessee had been seized by the CBI, the applicant had to approach the Assessment Years: 2003-2004 and 2011-12
Special Court for issuing direction to the custodian for release of appeal fees, therefore, the delay in the present case is on account of the inordinate delay on the part of the custodian and the banks in releasing the appeal fees. The Ld. counsel further pointed out that Tribunal has allowed the application for condoned the delay on the identical ground in the following cases:- i Orion Travels Pvt. Ltd. v. DCIT [ITA No. 1005/Mum.2017] dated 11.09.2017. ii Eminent Holdings Pvt. Ltd. v DCIT [ITA No. 1215/Mum/2017] dated 11.09.2017. iii Harsh Estate Pvt. Ltd. v. DCIT [ITA No. 1221/Mum/2017] dated 11.09.2017 iv Aatur Holdings Pvt. Ltd. v. DCIT [ITA No. 1223/Mum/2017] dated 11.09.2017. v Fortune Holdings Pvt. Ltd. v. DCIT [ITA No. 939/Mum/2017] dated 11.09.2017. vi Gromore Leasing & Investment Pvt. Ltd. v. DCIT [ITA No. 1219/Mum/2017] dated 27.12.2017 vii Harsh Estate Pvt. Ltd. v. DCIT [ITA No. 3596/Mum/2013] dated 05.05.2015. viii Harsh Estate Pvt. Ltd. v. DCIT [ITA No. 3464/Mum/2013] dated 08.10.2014. ix Rasila Mehta v. DCIT [ITA No. 3890/Mum/2012] dated 20.07.2016. x Growmore Exports Pvt. Ltd. v. DCIT ITA No. 4358/Mum/2013] dated 08.02.2016. xi Growmore Exports Pvt. Ltd. v. DCIT [ITA No. 3491-3492/Mum/2014 dated 15.01.2016. xii Growmore Exports Pvt. Ltd. v. DCIT & Ors. [ITA No. 4015- 4019/Mum/2011] dated 20.11.2013. xiii Rina Mehta v. DCIT & Ors. [ITA No. 3047/Mum/2006] dated 11.12.2007”. 5. The Ld. counsel further invited our attention to the chronology of events furnished by the assessee in order to establish that the delay was caused in the process of obtaining appeal filing fees from the custodian. The Ld. counsel further invited out attention to the action taken by the assessee in obtaining the appeal filing fees. Assessment Years: 2003-2004 and 2011-12
The Ld. Departmental Representative (DR) on the other hand opposed the application filed by the assessee for condonation of delay basically on the ground that the delay is inordinate and the same cannot be condoned. 7. We have perused the material on record including the cases relied upon by the assessee. We notice that the coordinate Bench has condoned the delay of 760 days in filing appeal the similar set off facts in the case of M/s Velvet Holdings Pvt. Ltd. vs. ACIT ITA No. 1216/Mum/2017, delay of 760 days in the case of M/s Eminent Holdings Pvt. Ltd. and Ors. Vs. ACIT ITA No. 1215/Mum/2017 and delay of 749 days in the case of Fortune Holdings Pvt. Ltd. vs. ACIT ITA No. 939/Mum/2017. 8. Sub-section 5 of section 253 of the Income Tax Act provides that the Tribunal may admit appeal or permit filing of memorandum of cross-objection of respondent after expiry of relevant period of limitation referred to in sub- section 3 and 4 section 253, if it is satisfied that there was sufficient cause for not presenting it within that period. Expression “sufficient cause” employed in this section has also been used in section 5 of Indian Limitation Act, 1961. This expression has come for consideration before the Hon’ble High Courts as well as before the Hon’ble Supreme Court, and the Hon’ble Courts are unanimous in observing that whenever such issue come for consideration before adjudicating authority, then alleged “sufficient cause” is to be considered with justice oriented approach. We deem it appropriate to make reference to the decision of Hon’ble Supreme Court in the case of Collector Land Acquisition Vs. Mst. Katiji & Others, 1987 AIR 1353. The relevant part of the judgment reads as under: “1. Ordinarily a litigant does not stand to benefit by lodging an appeal late. 2. Refusing to condone delay can result in a meritorious matter being thrown out at the very threshold and cause of justice being defeated. As against this when delay is condoned the highest that can happen is that a cause would be decided on merits after hearing the parties. Assessment Years: 2003-2004 and 2011-12
"Every day's delay must be explained" does not mean that a pedantic approach should be made. Why not every hour's delay, every second's delay? The doctrine must be applied in a rational common sense pragmatic manner. 4. When substantial justice and technical considerations are pitted against each other, cause of substantial justice deserves to be preferred for the other side cannot claim to have vested right in injustice being done because of a non-deliberate delay. 5. There is no presumption that delay is occasioned deliberately, or on account of culpable negligence, or on account of mala fides. A litigant does not stand to benefit by resorting to delay. In fact he runs a serious risk. 6. It must be grasped that judiciary is respected not on account of its power to legalize injustice on technical grounds but because it is capable of removing injustice and is expected to do so.”
Hence, in the light of the facts of the case and the decision of the coordinate Benches discussed above and in the light of the decision of the Hon’ble Supreme Court, we are of the considered view that the assessee had sufficient reasons for not filing the appeal within the prescribed period. Hence, we condoned the delay of 661 days in filing the present appeal and permitted the Ld. counsel to argue the case of the assessee on merits. Vide Ground No.1, the assessee has contended that since the assets under consideration and the consequential income belong to Sh. Harshad S Mehta, the AO ought to have taxed in the hands of Harshad Mehta. The Ld. counsel submitted that the assessee does not want to press this ground of appeal. Hence, we dismiss Ground No. 1 of the appeal as not pressed. 10. Vide Ground No.2, the assessee has challenged the action of the Ld. CIT
(A) in not granting relief of liability amounting to Rs. 3,72,82,860/- towards interest expenditure claimed by the appellant. The Ld. counsel submitted that the Mumbai Tribunal has dealt with the identical issue in the case of Sudhir Mehta vs. DCIT and others ITA No. 5799/Mum/2015 for the A.Y. 2009-10. The Tribunal has allowed the claim of interest expenditure and set aside the issue to the file of AO for verification of calculation of disallowance u/s 14A of the Assessment Years: 2003-2004 and 2011-12
Act. The Ld. counsel further pointed out that in the present case the assessee had not earned any exempt income during the year under consideration. The income by way of dividend and long term capital gain earned during the year were taxable as per the law prevailing in the relevant assessment year. Since, the assessee had not earned any exempt income no disallowance u/s 14A is required in the present case. 11. On the other hand, the Ld. Departmental Representative (DR) did no controvert the facts stated by the Ld. counsel for the assessee, however supported the order passed by the Ld. CIT (A). 12. We have perused the material on record in the light of the rival submissions of the parties. As pointed out by the Ld. counsel for the assessee the coordinate Bench has allowed the claim of interest expenditure in the case of Sudhir Mehta vs. DCIT ITA No 5799/ Mum/2015 ( a related entity) vide order dated 27.12.2017 for the A.Y.2009-10. The relevant paras of the said order read as under:- “12. We heard the rival submissions and carefully considered the same along with the orders of the Tax Authorities below. We have also gone through the case law as has been cited before us the relevant provisions of the Special Court Act which has been referred to before us during the course of hearing. This is an undisputed fact which we noted that the assessee is a notified person from 08.06.1992 under Section 3(2) of the Special Court Act. As per the provisions of the Special Court Act contract entered into by a notified person prior to notification made under Section 3(2) are not affected by the notification. Section 4(1) of the Special Court Act empowers the custodian to cancel any contract or agreement entered into between 01.04.1991 to 06.06.1992 if the custodian finds that these contracts have been entered into fraudulently or to defeat the provisions of the Special Court Act. In A.Y. 1990-91, the AO in the assessment order passed under Section 143(3) dated 26.03.1993 allowed the interest expenses to the assessee to the extent of `5,86,404/-. From page 75 of the paper book which contains the computation of income for A.Y. 1990-91, we noted that the assessee has disclosed the loan taken for the purchase of Assessment Years: 2003-2004 and 2011-12
investment. The assessee is consistently following mercantile system of accounting which is apparent even from the assessment order of A.Y. 1990-91 as well as from the impugned assessment year. The order for A.Y. 1990-91 in fact has been passed by the AO after the date of notification and the enactment of the Special Court Act. We have gone through the order passed by the CIT(A) in the case of Shri Ashwin S. Mehta assessment years 2010-11 and 2011-12, where we noted that this issue of taxability of interest income of the assessee and other parties has specifically been dealt with by the CIT(A) and accordingly interest income of `10,68,83,732/- was brought to tax. In view of this fact it is apparent that the assessee is liable to pay interest on the amount outstanding. Therefore the liability towards interest got accrued. Under the mercantile system of accounting interest is deductible when it has accrued. This also proves that there was an agreement, may be oral, to pay the interest on the borrowed funds by the assessee to the other family members. We, therefore, reject the plea of the learned D.R. that no liability towards interest has accrued but it was merely a contingent liability. We noted that section 4 of the Special Court Act empowers the custodian and the court to cancel any contract or agreement in relation to the property of a person notified under that Act provided they have entered into fraudulently. In this case no cogent material or evidence has been brought to our knowledge or placed before us which may prove that the custodian under Section 4(1) of the Special Court Act has taken any action to cancel the terms relating to payment of interest. Rather we have noted from the affidavit of the custodian dated 01.03.2006 in M.P. No. 41 of 1999 that the custodian seeking to levy interest @ 15% to 18% per annum. Therefore the interest on outstanding credit balance of the brokerage firm has accrued as actual liability. The issue with regard to contract for payment of interest has been raised by the AO and the CIT(A) in the case of other notified entities duly approve the existence of liability. We noted that in the case of Growmore Leasing & Finance Ltd. for A.Y. 2007-08 by order dated 26.06.2014 the CIT(A) followed the finding in the case of other group concerns, i.e. Eminent Holding Pvt. Ltd. by observing as under: - Assessment Years: 2003-2004 and 2011-12
“6.3 I have gone through the submissions of the Ld. AR. I find that though there is no express document evidencing payment of interest to the brokerage firms, the intentions of the parties were always so, this is evident from the fact that identical claim was also made during A.Y. 1990-91 and the same was allowed to the appellant and other concerns. The claim made in the affidavit of Custodian in MP No. 41 of 1999 also supports this claim. I also agree with the appellant that there need not be any written agreement and that the oral agreement coupled with the actions and intentions of the parties is sufficient to prove the existence of the liability.” 13. Similar issue was involved in the case of other family member, i.e. Shri Hitesh S. Mehta for A.Y. 2005-06 where also the AO has disputed the very existence of liability towards interest to creditors. The CIT(A) vide his order dated 31.08.2010 confirmed and approved the claim of the assessee that there was no need for any written agreement and that the oral agreement coupled with action and intentions of the parties is sufficient to prove the existence of liability. This order of the CIT(A) was followed by him in the case of the assessee while adjudicating the ground relating to the interest expenses for A.Y. 2006-07 vide order dated 27.09.2013 under para 6 which has been reproduced under para 18 of the order of the assessee. These finding and observation in the above orders of the CIT(A) has not been disputed by the Revenue by filing an appeal. In view of this finding becoming final, in our view, the existence of liability for payment of interest cannot be disputed. 14. Coming to the objection of the Revenue that interest cannot be allowed as deduction has not been shown by recipients in their income. As has been discussed by us in the preceding paragraphs the interest has been shown as income by Mr. Ashwin S. Mehta in assessment years 2010- 11 and 2011-12. We also noted that Late Shri Harshad Mehta has been offering his income on cash basis and the method of accounting has been duly upheld by the Tribunal in his case for A.Y. 1989-90. Even otherwise disallowance of interest claimed by the assessee cannot be made merely because in the opinion of the AO the corresponding interest income has not been offered by the recipients. The interest can be allowed on the basis of method of accounting followed by the assessee. We Assessment Years: 2003-2004 and 2011-12
noted that similar issue when arose in the case of M/s. Growmore Leasing & Investment Ltd. vs. CIT in ITA No. 51354 & 5136/Mum/2012 wherein the Coordinate Bench of this Tribunal while setting aside the issue to the file of the CIT(A) directed him to tax the income in the hands of recipient family members in accordance with the method of accounting followed by them. We find force in the submission of the learned A.R. that since the assessee as well as the recipients are notified entities under the Special Court Act unless the Court directs for distribution of the assets towards existing liabilities under Section 11(2) of the Special Court Act, the assessee cannot make the payment to these creditors. Even otherwise since the existence of liability towards interest has accrued especially when the assessee is following the mercantile system of accounting the interest is to be allowed. During the course of hearing we raised a query about the nexus of interest expenses with the interest income. The learned A.R. pointed out that the liability in the present case was accrued on account of purchases of shares and securities by the assessee which were sold in terms of the directions of the Hon'ble Special Court in subsequent years and the sale proceeds so received were invested in term deposits with the banks and accordingly the assessee has claimed interest expenditure against the interest earned on term deposits. No contrary evidences or material were brought to our knowledge to contradict this fact. In view of this fact we find that there is a nexus between borrowed funds and investments in term deposits. Therefore, the interest paid on the borrowed funds has to be allowed out of the interest earned by the assessee on term deposits. We noted that identical issue was raised in the case of M/s. Growmore Leasing & Investment Ltd. in A.Y. 2007-08. The CIT(A) in his order dated 26.02.2012 considered the issue of nexus of interest expenditure with interest income, following his own finding in the case of another notified entity, i.e. Eminent Holding Pvt. Ltd. for A.Y. 2007-08 which are reproduced as under: - "As regards the nexus of the interest expenditure with the interest income, I find that the Balance Sheet of the appellant and the affidavit filed by the custodian before the Hon'ble Special Court supports the fact that the funds borrowed from Shri Harshad S. Assessment Years: 2003-2004 and 2011-12
Mehta were deployed by the appellant in various assets like shares and securities, properties, etc. These funds generated income in the form of dividend and interest income. After being notified, such shares and securities got converted into Fixed Deposits with various banks. These fixed deposits generated interest income which is offered to tax. Hence, a reasonable nexus can be said to exist between the interest liability incurred by the appellant, and the interest income earned from these assets. However, this matter being sub-judice before the Hon'ble Special Court, no finding can be given on these matters." 15. Similar issue has arisen in the case of Shri Hitesh S. Mehta for A.Y. 2005-06 wherein the CIT(A) vide his order dated 31.08.2010 approved the nexus between borrowed funds and the investment in term deposit which has been followed by the CIT(A) even in the case of the assessee for A.Y. 2006-07 dated 27.09.2013. We do not agree with the submission of the learned D.R. that interest expenses cannot be allowed till the Hon'ble Special Court decides the issue. The allowance or disallowance of the expenditure depends on the accrual of expenditure. Even no dispute has been raised in respect of interest on such credit balances before the Special Court. Even on this basis, following the principle of consistency, as the interest has been allowed as deduction in the A.Y. 2006-07 and there is no change in the facts, the deduction in respect of the interest expenditure has to be allowed. Our aforesaid view is supported by the following decisions: The Supreme Court in the case of Radha soami Satsang Saomi Bagh vs. CIT 193 ITR 321 referred to the following passage from Hoystead v Commissioner of Taxation 1926 AC 155 (PC), wherein it was observed (page 328): “Parties are not permitted to begin fresh litigation because of new view they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted, litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted and there is abundant authority reiterating that principle. Thirdly, the same principle, namely, that of setting to rest rights of litigants, applies to the case where a point, fundamental to the Assessment Years: 2003-2004 and 2011-12
decision, taken or assumed by the Plaintiff and traversable by the Defendant, has not been traversed. In that case also a Defendant is bound by the judgment, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken.” At pg 329 of the judgment, Their Lordships observed as under: “We are aware of the fact that strictly speaking res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating though the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. 19. On these reasonings in the absence of any material change justifying the Revenue to take a different view of the matter and if there was not change it was in support of the assesses – we do not think the question should have been reopened and contrary to what had been decided by the Commission of Income-Tax in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under Sections 11 and 12 of the Income Tax Act of 1961.” The aforesaid dictum of law was reiterated recently by the Supreme Court in CIT vs. Excel Industries Ltd.: 358 ITR 295. “It appears from the record that in several assessment years, the Revenue accepted the order of the Tribunal in favour of the Assessee and did not pursue the matter any further but in respect of some assessment years the matter was taken up in appeal before the Bombay High Court but without any success. That being so, the Revenue cannot be allowed to flip-flop on the issue and it ought let the matter rest rather spend the tax payers money in pursuing litigation for the sake of it.” 16. In view of our aforesaid discussion we set aside the order of the CIT(A) and direct the AO to allow deduction in respect of said Assessment Years: 2003-2004 and 2011-12
interest accrued and calculated at 12% per annum amounting to `2,64,72,208/- after disallowing proportionate interest in respect of the investment in shares amounting to `3,51,176/- after verifying the calculation of the interest quantification.
The facts of the present case are similar to the facts of the case of Sudhir Mehta vs. DCIT, discussed above and the issues involved in both the cases are identical. Since, the coordinate Bench of the Tribunal has dealt with the identical issue in the aforesaid case and directed the AO to allow deduction in respect of interest accrued and calculate @ 12% per annum after disallowing proportionate interest in respect of investment in shares after verifying calculation of the interest quantification, we respectfully following the decision of the coordinate Bench, set aside the findings of the Ld. CIT(A) allow this ground of appeal. Since the assessee had not earned any exempt income during the year relevant to the assessment year under consideration, we direct the AO to allow the deduction in respect of interest accrued and calculate @ 12% per annum in terms of the order passed by the coordinate Bench in the case of Sudhir Mehta vs. DCIT.(supra). 14. Vide Ground No. 3 and 4, the assessee has challenged the action of the Ld. CIT (A) in confirming interest charged u/s 234A, 234B and 234C of the Act. Ignoring the fact that the assessee was subjected to the provisions of TDS and hence all the said amount of tax no interest can be computed u/s 234B and 234C of the Act. 15. The Ld. counsel pointed out that the ITAT, Mumbai has dealt with the identical issue in the related case of Sudhir Mehta vs. DCIT and Ors. ITA No. 5799/Mum/2015 and Ors and the Tribunal has set aside the issue to the file of Assessing Officer for calculating the quantum of interest u/s 234B and 234C of the Act after reducing the amount of tax deductable at source. 16. On the other hand, the Ld. DR did not controvert the facts submitted before the Tribunal by the Ld. counsel, however, supported the order of the Ld. CIT (A). Assessment Years: 2003-2004 and 2011-12
We have perused the relevant material on record in the light of the rival submissions of the parties including the case relied upon by the assessee. The coordinate Bench has set aside the issue to the file of AO with the direction to re-compute the interest liability after reducing the amount of tax deductible at source on the income earned. The relevant paras of the order passed by the coordinate Bench are reproduced as under:-
Ground Nos. 3 & 4 relate to levy or interest under Section 234A, 234B and 234C as well as calculation of the said interest. We find that the said issue has been decided by the Coordinate Bench in the case of Eminent Holding P. Ltd. in ITA No. 2139/Mum/2013 for A.Y. 2002-03 in which this Tribunal while dealing with the said issue held as under: - “3.Next ground of appeal is about levy of interest u/s. 234 of the Act. Before us, AR stated that the assessee was a notified entity that the provisions of s. 234A, 234B and 234C of the Act were deemed to have complied with, that the assets were already in attachment of the Custodian appointed under the provisions of the Special Courts Act, that the Tribunal in the case of the appellant and several other entities had held the view in favour of the appellant, that the Hon'ble Bombay High Court in the case of Divine Holdings Pvt. Ltd. and Cascade Holdings Pvt. Ltd. had held that the provisions of sections 234A,234B and 234C of the Act were mandatory and were applicable to the notified entities also, that the assessee was in the-process of filing an appeal against the said order before the Hon'ble Supreme Court, that the income earned in the year under consideration was subjected to provisions of TDS, that the changeability of the section 234A, 234B and 234C of the Act should be after considering the amount of tax deductible at source on the income assessed. The appellant relies in this regard on the following decisions. He relied upon the cases of Motorola inc. v. DCIT [95 ITD 269 (Del.) (SB)], SedcoFores Drilling Co. Ltd. [264 ITR 320], NGC Network Asia LLC [313 ITR 187], Summit Bhatacharya [300 ITR (AT) 347 (Bom)(SB)], Vijal Gopal Jindal [ITA No. 4333/Del/2009] &Emillo Ruiz Berdejo [320 ITR 190 (Bom)]. DR relied upon the cases of Devine Holdings Pvt. Ltd. Assessment Years: 2003-2004 and 2011-12
3.1.We have heard the rival submissions and perused the material before us. We find that in the case of Devine Holdings Pvt. Ltd. Hon'ble Bombay High Court has held that provisions of section 234A, 234B and 234C were applicable to the notified person also. Therefore, upholding the order of the FAA to that extent, we hold that provisions of section 234 of the Act are applicable. As far as calculation part is concerned, we find merits in the submission made by the assessee. Therefore, we are restoring back the issue to the file of the AO for fresh adjudication who would decide the issue after considering the amount taxed deductible at source on the income assessed and after affording a reasonable opportunity of hearing to the assessee. Ground no.5 is allowed in part in favour of the assessee.” Respectfully following the said order of the Tribunal in the case of Eminent Holding P. Ltd. (supra) we direct the AO to re-computed the interest liability after reducing the amount of tax deductible at source on the income earned. Thus, ground No. 3 stand dismissed while ground No. 4 stand partly allowed.”
Since, the coordinate Bench has dealt with the identical issue and set aside the said issue to the file of AO for re-computation after reducing the amount of tax deductible at source on the income earned and since there is no material change in the facts of the case, there is no reason to take a different view other than the view already taken in the similar matter. Hence, respectfully following the decision of the coordinate Bench, we set aside this issue to the file of AO for re-computing the amount after reducing the amount of tax deductible at source. Hence, this ground of appeal is allowed for statistical purposes. The facts of the present case and the issue involved are identical to the facts of the case and issue involved in the case of the assessee for the A.Y. 2003-04 aforesaid. In the present case, the assessee filed its return of income declaring the total loss of Rs. 93,38,776/-. The AO passed the assessment Assessment Years: 2003-2004 and 2011-12
order u/s 143 (3) of the Act determining the total loss at Rs. (-) 88,93,956/- under the normal provisions of the Act and similar amount under section 115JB of the Act. The assessee challenged the assessment order before the Ld.CIT (A). The Ld. CIT (A) after hearing the assessee dismissed the appeal of the assessee. The assessee is in appeal against the said order passed by the Ld. CIT (A). 2. The assessee has raised the following effective grounds of appeal against the impugned order passed by the Ld. CIT (A):- 1. “The learned Commissioner of Income Tax (Appeals) ought to have appreciated that as per the decision of Hon’ble Special Court dated 30.04.2010 in MP No. 41 of 1999, the assets under consideration and the consequential income belongs to Shri Harshad S. Mehta and hence the income assessed by the Assessing Officer ought to have been taxed in the hands of Shri Harshad S. Mehta and not in the hands of the appellant. 2. The learned Commissioner of Income Tax (Appeals) has erred in law and in facts in not granting relief of liability amounting to Rs. 4,44,820/- towards interest expenditure claimed by the appellant. The Ld. Commissioner of Income Tax (Appeals) ought to have been allowed interest expense to the extent of income earned (assessed income) i.e. Rs. 29,23,610/-. 3. The learned Commissioner of Income-Tax (Appeals) has erred in law and in facts in confirming interest charged u/s 234A, 234B and 234C of the Act. 4. The learned Commissioner of Income Tax (Appeals) has erred in law and in facts in the hands of the appellant was subjected to the provisions of TDS and hence on the said amount of tax no interest can be computed u/s 234B and 234C of the Act.”
Since, there is a delay of 746 days in filing the appeal, the Ld. counsel for the assessee submitted that the application for condonation of delay filed by the assessee may be allowed and the assessee may be permitted to argue the case on merits. We notice that the assessee has taken the identical ground for condonation of delay which has been taken in the assesse’s own case for the Assessment Years: 2003-2004 and 2011-12
A.Y. 2003-04. Since, we have allowed the application and condoned the delay of 661 days in the assessee’s own case for the A.Y. 2003-04, we allow the application for condonation of delay in the present case for the same reasons. Accordingly, we allowe the Ld. counsel for the assessee to argue the case on merits. 4. Before us, the ld. counsel for the assessee submitted that the assessee does not want to press Ground No. 1 of the appeal. We accordingly dismiss Ground No. 1 of the appeal as not pressed.
So far as Ground No. 2 of the appeal is concerned, this ground is identical to the ground No.2 of appeal in the assessee’s own case for the A.Y. 2003-04. Since, we have allowed the identical ground in the assessee’s own case for the A.Y.2003-04, consistent with our findings, we allow this ground of appeal for the same reasons. 6. Ground No. 3 and 4 pertain to the levy of interest u/s 234A, 234B and 234C of the Act. Since, we have set aside the issue to the file of AO for calculating the quantum of interest u/s 234B and 234C of the Act after reducing the tax deductible at source in the assessee’s own case for the A.Y. 2003-04, consistent with our findings, we set aside this issue in the present case to the file of AO for re-computing the quantum of interest u/s 234B and 234C after reducing the amount of tax deductible at source.
Vide additional ground, the assessee has challenged the action of AO in not granting capitalization of interest expenses attributable to share and securities which is not allowable u/s 57 (ii & iii) of the Act. The Ld. counsel for the assessee submitted that the ITAT Mumbai has decided the identical issue in the case of Sudhir Mehta vs. DCIT (supra) and the Tribunal has granted capitalization of interest expenses disallowed in the hands of the assessee and Assessment Years: 2003-2004 and 2011-12
directed the Assessing Officer to add the same to the cost of shares and securities. 8. On the other hand, the Ld. DR did not controvert the fact that the Tribunal has dealt with the identical issue in a related case, however the Ld. DR supported the findings of the Ld. CIT (A).
We have perused the relevant material in the light of the submissions made by the assessee. As pointed out by the Ld. counsel, the coordinate Bench has allowed this ground of appeal and directed the AO to do the needful holding as under:- “17. Now coming to the additional ground raised with respect to capitalization of interest we are of the view that to the extent the interest relate to the investment, i.e. being disallowable under Section 57 will become part of cost of acquisition of shares and therefore the AO is directed to take it as part of the cost of shares for determining profit on sale of the shares. Thus, the additional ground stands allowed to that extent.”
Since, the coordinate Bench has decided the identical issue in favour of the assessee in a related case discussed above, we respectfully following the decision of the coordinate Bench allow this ground of appeal of the assessee and direct the AO to at the same to the cost of shares and securities. In the result, both the appeals filed by the assessee for assessment years 2003-2004 and 2011-12 are partly allowed. Order pronounced in the open court on 4th.April, 2019. (RAJESH KUMAR) JUDICIAL MEMBER म ुंबई Mumbai; दिन ुंक Dated: 04/04/2019 Alindra PS Assessment Years: 2003-2004 and 2011-12
आदेश प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त(अपील) / The CIT(A)- 4. आयकर आय क्त / CIT 5. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file.
आदेशानुसार/ BY ORDER, सत्य दपि प्रदि //// उि/सहायक िंजीकार (Dy./Asstt.