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Income Tax Appellate Tribunal, MUMBAI BENCHES “I”, MUMBAI
Before: SHRI SHAMIM YAHYA (AM) & SHRI RAM LAL NEGI (JM)
O R D E R
PER RAM LAL NEGI, JM
This appeal has been filed by the revenue against the order dated 16.12.2016 passed by the Commissioner of Income Tax (Appeals)-5 (for short ‘the CIT(A), Mumbai, for the assessment year 2012-13, whereby the Ld. CIT(A) has allowed the appeal filed by the assessee against the assessment order passed by AO u/s 143 (3) of the Income Tax Act, 1961 (for short the ‘Act’).
Brief facts of the case are that the assessee company engaged in the business of investment in share and other immovable properties, filed its return of income for the assessment year under consideration declaring the total loss of Rs. 9,94,362/-. Since, the case was selected for scrutiny, notice u/s 143 (2) and 142 (1) of the Act was issued. In response to the said notices, the authorized representative (AR) of the assessee attended and filed the details called for by the AO. Since, the assessee company had acquired right to recover Assessment Year: 2012-13 the debts alongwith interest from the defaulters as per the deed of assignment entered with the Bank of Baroda, the AO made an addition of Rs. 1,11,46,609/- being interest due on accumulated sum of Rs. 6,19,25,610/- treating as income from other sources. The assessee challenged the assessment order before the Ld. CIT (A). The Ld. CIT (A) after hearing the assessee deleted the addition by following the decision of the CIT (A) in the assessee’s own case for the assessment year 2011-12.
Aggrieved by the order of Ld. CIT (Appeals), the revenue has preferred this appeal before the Tribunal on the following effective grounds:-
1. “Whether on the facts and to circumstances of the case and in law, the Ld. CIT (A) erred in deleting the addition on account of interest of Rs. 1,11,46,609/- accrued on outstanding debt, without appreciating the fact that the assessee acquired the right of suit as per assignment deed was entitled to recover the debt along with interest and cost of suit as per deed of assigned right:.
2. Whether on the facts and in the circumstances of the case and in law, the Ld. CIT (A) erred in deleting the addition on account of interest of Rs. 1,11,46,409/- accrued on outstanding debt, without appreciating the fact that interest on debt which was receivable by the Bank of Baroda, was now receivable to the assessee and as the assessee is following mercantile system of accounting the assessee was required to offer interest income on debt on accrual basis.” 4. At the outset, the Ld. counsel for the assessee submitted that the said issue is covered in favour of assessee by the order of the Tribunal passed in the assessee’s own cases for the earlier years. Since, the order of the Ld. CIT(A) has decided the issue in question by following the decision of the ITAT, there is no merit in the appeal of the revenue. Assessment Year: 2012-13
On the other hand, the Ld departmental representative (DR) relying on the assessment order passed by the AO submitted that the Ld. CIT (A) has wrongly deleted the addition without taking into consideration the fact that assessee has acquired the right of suit as per assignment deed and is entitled to recover the debt along with interest and cost of the suit. In other words, the interest on debts which was recoverable by the Bank of Baroda was recoverable by the assessee, therefore, the Ld. CIT (A) has wrongly deleted the addition.
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 assesse’s own case ITA No. 7392-7398/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: Assessment Year: 2012-13
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”.
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 Assessment Year: 2012-13 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 by the Revenue in all the four appeals are dismissed.”
Since, the identical issue has been decided by the coordinate Bench in favour of the assessee in assessee’s own case by following the earlier orders passed by the Mumbai ITAT in the assessee’s appeal, ITA No. 7392-7398/M/2013 and since there is no change of facts in the present case, we respectfully following the decision of the coordinate Bench and dismiss the sole ground of appeal of the revenue.
In the result, appeal filed by the revenue for assessment year 2012-2013 is dismissed. Order pronounced in the open court on 28th.September 2018. (SHAMIM YAHYA) JUDICIAL MEMBER म ुंबई Mumbai; दिन ुंक Dated: 28/09/2018 Alindra, PS 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 Assessment Year: 2012-13