HARSH ESTATES PVT LTD,MUMBAI vs. CENTRAL CIRCLE-4(3), MUMBAI, MUMBAI

ITA number 382 0/M/2022 is filed for assessment year 1999 – 2000 by Harsha estate private limited, Mumbai (the assessee/appellant)against the appellate order passed by the Commissioner of income tax, appeals – 52, Mumbai (the learned CIT – A) dated 31/8/2023 wherein

The assessee is aggrieved and has preferred this appeal raising the solitary ground of appeal which is pressed before us states that the learned CIT – A has erred in law and on facts in not allowing the deduction of interest expenditure claimed by the appellant amounting to Rs. 32,795,923/– and restricting the deduction only to the tune of Rs. 3,520,886/–.

Ground no 2 is the grievance. Briefly stated the fact shows that :-

Therefore, the assessee is in appeal before us and according to the assessee the total amount of interest of Rs. 327,95,923 should have been allowed to the assessee as deduction and the action of the learned CIT (A) of allowing only Rs. 3,520,886/- is erroneous.

The learned authorized representative filed 2 paper books before us. The first paper book contains 66 pages wherein the orders passed by the coordinate benches are placed. In the second paper book also containing 65 pages the decision of the coordinate benches in case of assessee for assessment year 2013 – 14, 2014 – 15 and 2015 – 16 dated 15/9/2020, the order of the coordinate bench in case of family member of the assessee in ITA number 6228 and 5839/M/2018 dated 27/11/2019 and the coordinate bench decision in case of Grow more leasing and investment Ltd and others in ITA number

The learned authorized representative specifically referred to the decision of the coordinate bench in assessee’s own case in ITA number 6957, 6958 and 6959/MUL/2018 dated 15/9/2020. He submits that according to paragraph number nine of that order the issue was decided by following the decision of Grow more leasing and investment Ltd and in the case of Mr. Sudhir H Mehta ITA number 5799/M/2014. He further referred to paragraph number 13 wherein following the decision ofcascade Holdings private limited relief was allowed to the assessee in earlier years. He further referred to the decision of the coordinate bench in case of Pratima H Mehta by the dated 27/11/2019stating that identical issue arose in that case where also the coordinate bench has allowed the deduction of interest expenditure on identical facts and circumstances. He further referred to the decision of the coordinate bench in case of Growmore leasing and investments Ltd dated 27/12/2017 wherein also identical deduction was allowed. It was specifically referred that in paragraph number 14 of that, issue was raised about the Nexus of interest expenses with the interest income. It was stated therein that the liability in that case was accrued on account of purchase of shares and securities by the assessee which were sold in terms of the directions of the special court in subsequent years and the sale proceeds were received were invested in term deposits with the bank and accordingly the assessee has claimed

The learned departmental representative vehemently supported the order of the learned lower authorities. It was stated that the assessee has claimed the interest expenditure of Rs. 3.27 crores whereas it has earned only the deposit interest of Rs. 41 lakhs. The learned CIT – A accordingly has granted proportionate deduction of interest expenditure to the assessee. He submitted that according to the provisions of section 57 of the income tax act only the expenditure incurred by the assessee wholly and exclusively for the purpose of earning of the fixed deposit interest is only allowable to the assessee as deduction. He further referred to the order of the learned CIT – A where the assessee has failed to give any details of the interest expenditure incurred. Accordingly, he submitted that the learned CIT – A is gracious enough to allow the assessee the deduction of Rs. 3,520,000/–. Therefore, the assessee’s appeal requires to be dismissed.

We have carefully considered the rival contention and perused the orders of the lower authorities. Undoubtedly the assessee has earned bank interest of Rs. 41 lakhs. According to section 57 of the income tax act, assessee is

Ground number 3 is with respect to the charge of interest under section 234B of the act. We find that the learned CIT – A has given a detailed finding in paragraph number 7 regarding chargeability of the same. However it is apparent that the proviso to section 209 (1) has been

Before us the assessee has raised an additional ground of appeal

In the result appeal of the assessee for assessment year 1999 – 2000 is partly allowed.

Ground number 3 of the appeal is with respect to the chargeability of interest under section 234B on income on which tax is deductible, is identical to ground number three of the appeal of the assessee for assessment year 99 – 2000, which we have restored back to the file of the learned assessing officer, for similar reasons we also restore this ground of appeal for this year.

In the result ITA number 3819/M/2023 for assessment year 2005 – 06 of the appeal of the assessee is partly allowed.

ITA number 3818/M/2023 is filed by the assessee for assessment year 2006 – 07 against the appellate order passed on 31/8/2023 by the learned CIT – A.

Ground number 2 of the appeal is with respect to the proportionate disallowance of interest expenditure claimed by the assessee. Assessee has claimed interest expenditure of ₹ 32,795,923/–, the learned CIT – A has restricted allowance to the extent of ₹ 4,546,900. This ground is identical to the ground number 2 of the appeal for assessment year 99 – 2000 wherein, respectfully following the decision of the coordinate benches in assessee's own case for subsequent years, we have directed the learned AO to delete the disallowance in toto. Accordingly we direct the learned AO to delete the disallowance for this year also. Ground number 2 of the appeal is allowed.

Ground number 3 is with respect to the chargeability of the interest under section 234B of the act with respect to the income included in the total income on which tax is deductible. This ground is identical to ground number 3 of the appeal for assessment year 99 – 2000. We have directed the learned assessing officer to compute the interest under section 234B of the act in terms of provisions of the act as applicable for that assessment year. Therefore, it similar reasons we also restore this ground of appeal to the file of the AO with similar direction.

In the result, appeal for assessment year 2006 – 07 is partly allowed.