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Income Tax Appellate Tribunal, “A” BENCH, MUMBAI
Before: SHRI G.S.PANNU, AM & SHRI RAVISH SOOD, JM
आदेश / O R D E R
PER RAVISH SOOD, JUDICIAL MEMBER:
The present appeal filed by the revenue is directed against the order passed by the CIT-(LTU), Mumbai, dated 16.03.2011, which in itself arises from the order passed by the A.O under Sec.143(3) of the Income Tax Act, 1961 (for short ‘Act’), dated 03.06.2010. The revenue assailing the order of the CIT(A) had raised before us the following grounds of appeal :
P a g e | ACIT-LTU Vs. Lupin Ltd. “1. On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing A.O to allow set off interest on income tax refund received from interest on income tax paid. 2. The appellant prays that the order of the ld. CIT(A) on the above ground be set aside and that of the Assessing Officer restored. 3. The Appellant craves leave to amend or alter any ground or add a new ground which may be necessary.”
Briefly stated, the facts of the case are that assessee which is engaged in the business of manufacturing and sale of pharmaceutical products and API etc. had e-filed its return of income for A.Y. 2007-08 on 30.10.2007, declaring total income of Rs.252,00,29,460/- as per the normal provisions and a ‘book profit’ of Rs.305,22,12,660/- as per the provisions of Sec.115JB of the Act. The case of the assessee was taken up for scrutiny assessment under Sec. 143(2) of the Act.
The assessee company which was during the year under consideration in receipt of interest on income tax refunds amounting to Rs.2,64,12,688/- for various assessment years, had claimed set off of the same against the interest of Rs.3,67,73,753/- that was paid to the income tax department for late payment of tax for various years. However, the claim of set off was declined by A.O, for the reason that the interest paid did not have a nexus with the interest received by the assessee. On appeal, the CIT(A) did find favour with the contentions advanced by the assessee in context of the issue under consideration and allowed its aforesaid claim of setting off of interest income. Aggrieved, the revenue carried the matter in appeal before the Tribunal, which vide its order dated 17.02.2016, being of the view that netting of interest, if any, should be allowed only for the interest paid and received pertaining to the same period, restored the order of the A.O and allowed the appeal of the revenue in context of the issue under consideration. On a miscellaneous application preferred by the assessee, the Tribunal vide its order dated 17.02.2016 recalled its order. 4. The ld. Authorized Representative (for short ‘A.R’) for the assessee at the very outset of the hearing of the appeal submitted that the issue P a g e | ACIT-LTU Vs. Lupin Ltd. involved in the present appeal was squarely covered by the judgment of the Hon’ble High Court of Bombay in the case of DIT Vs. Bank of America NT & S.A [ITA No. 177 of 2012, dated 03.07.2014] (copy placed on record). It was submitted by the ld. A.R that the High Court approving the view taken by the Tribunal, had observed that where the assessee had received interest on refund of taxes paid and had also paid interest on the taxes which were payable, it would be entitled to set off the interest received against the interest paid and offer the net interest received for tax. It was further submitted by the ld. A.R that a coordinate bench of the Tribunal viz. ITAT ‘K’ bench, Mumbai in the assessees own case for AY. 2005-06 i.e. Lupin Ltd. Vs. Asst. Commissioner of Income Tax (LTU), Mumbai [ITA No. 7487/Mum/2013, dated 27.04.2018] following the aforesaid judgment of the Hon’ble High Court of Bombay in the case of DIT Vs. Bank of America NT & SA [ITA No. 177 of 2012, dated 03.07.2014] had allowed the netting of the interest received on the refund against the interest paid on the taxes by the assessee to the department. The ld. A.R in order to fortify his aforesaid contention, took us through the aforesaid order of the Tribunal passed in assessees own case for A.Y 2005-06. It was further submitted by the ld. A.R that a similar view was also taken by the coordinate benches of ITAT, Mumbai in the case of Cynamid India Ltd. Vs. IAC [ITA No. 4561(Bom)/1982] and Kvaerner Power Gas India Ltd. Vs. Addl. CIT [ITA No. 8914/Mum/2004, dated 10.08.2007]. On the basis of his aforesaid contentions, it was submitted by the ld. A.R that now when the issue involved in the present appeal was squarely covered by the order of the Hon’ble High Court of jurisdiction, therefore, the setting off the interest received by the assessee on the income tax refunds against the interest paid on the taxes to the department, was well in order. Per contra, the ld. Departmental Representative (for short ‘D.R’) relied on the order passed by the A.O.
We have heard the authorized representatives for both the parties, perused the orders of the lower authorities and the material available on record. We find that the issue that an assessee is well within his right to set P a g e | ACIT-LTU Vs. Lupin Ltd. off the interest received on the income tax refund against the interest paid on the taxes to the income tax department, is squarely covered by the judgment of the Hon’ble High Court of Bombay in the case of DIT Vs. Bank of America NT & SA [ITA No. 177 of 2012, dated 03.07.2014]. We find that the High Court after deliberating at length on the issue under consideration, had observed as under:-
“3. Even with regard to the question No. 2 we do not find that it is a substantial question of law. The Tribunal found that the assessee Bank received interest on refund of taxes paid. It also paid interest on the taxes which were payable. The Assessee sought to set off the interest paid against the interest received and offered the net interest received to tax. We do not see that such findings of the Tribunal are vitiated in law. All that the Tribunal has done earlier and now is that in the case of this Assessee simply because the exercise out by it does not result in loss of revenue and there could not be any prohibition f or the same, allowed it. That is how the Assessing officer’s order is set aside. We do not see how any larger controversy or question arises for our consideration. Mr. Pinto would refer to Section 57 of the Income Tax Act, 1961 in that regard and submit that this course would be adopted by other Assessees as well and in that even the order passed by this Court would come in the way of the revenue in investigating and probing such exercise by other assessees.
We do not see how this order can be cited as precedent inasmuch as the Assessee before the Tribunal and before us paid interest to the Income Tax Department amounting to Rs.10,26,906/-. The Assessee claimed that this was business expenditure and this should have been allowed. The Assessee has received the interest of Rs.1,07,57,930/-. It was submitted that the amount of interest paid by the Assessee should have been allowed to be set off against the interest deposited with the Department and taxed in the hands of the Assessee. The argument was that the interest paid to and received from is the same party i.e. Government of India and therefore, both transactions should be taken together.”
We thus, being of the considered view that as the issue involved in the appeal before us is squarely covered by the aforesaid judgment of the Hon’ble High Court of Bombay, therefore, respectfully follow the same. On the basis of our aforesaid observations, the A.O is directed to allow the claim of the assessee for setting off the interest on income tax refund of Rs. 2,64,12,688/- against the interest of Rs. 3,67,73,753/- paid to the income tax department on late payment of tax for various years.
P a g e | ACIT-LTU Vs. Lupin Ltd.