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Income Tax Appellate Tribunal, C Bench, Mumbai
Before: Shri Jason P. Boaz & Shri Ram Lal Negi
This appeal by the assessee is directed against the order of the CIT(A)- 52, Mumbai dated 14.01.2015 for A.Y. 2000-01 raising the following grounds: - “
1. The Ld. 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 Late Shri Harshad S. Mehta and hence the Income confirmed by the learned Commissioner of Income-Tax (Appeals) ought to have been taxed in the hands of Late Shri. Harshad S. Mehta and not in the hands of the appellant.
2. The Ld. Commissioner of Income-tax (Appeals) has erred in law and in facts in not appreciating that the profit on transfer of the residential flat at NCPA amounting to Rs.1,45,80,691/- ought to have been assessed as long term capital gain and not as short term capital gain.
3. The Ld. Commissioner of Income-tax (Appeals) has erred in law and in facts in not allowing the deduction on account of interest expenditure of Rs.2,80,50,000/-.
M/s. Pallavi Holdings P. Ltd.
The Ld. Commissioner of Income Tax (Appeals) has erred in law and in facts in not appreciating the interest charged u/s 234A, 234B and 234C of the Act are incorrect.
5. The Ld. Commissioner of Income Tax (Appeals) has erred in law and in facts in not appreciating that the income assessed in the hands of the appellant were 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.
The appellant craves leave of Your Honour to add to, alter, amend and/or delete all or any of the foregoing grounds of appeal
.”
2. Ground No. 1 2.1 At the outset of the hearing, the learned A.R. of the assessee submitted that ground No. 1 raised in this appeal (supra) is not being pressed by the assessee. Since ground No. 1 is not pressed, the same is rendered infructuous and is accordingly dismissed.
3. Ground No. 2 – Profit on sale of residential flat at NCPA 3.1 In this ground, the assessee assails the impugned order of the learned CIT(A) in bringing to tax the profit on sale of residential flat at NCPA as short term capital gains (STCG) instead of as long term capital gains (LTCG) as claimed by the assessee. According to the learned A.R. of the assessee the decision rendered by the learned CIT(A) that the profit on sale of residential apartment in NCPA, Nariman Point, Mumbai was to be assessed as STCG instead of as business income as held by the Assessing Officer (AO) or as LTCG as claimed by the assessee, was based on erroneous facts. It is contended that while the learned CIT(A) held that the assessee has claimed depreciation on the said flat in NCPA, which claim was disallowed by the AO, the fact is that the assessee had never claimed depreciation thereon, so there was no question of disallowance by the AO on this issue. To press home this argument, the learned A.R. drew the attention of the Bench to the paper book (pgs 1 to 25) containing copies of computation of total income, financial statements of the assessee for the relevant period, orders of assessment for assessment years 1998-99 to 1999-2000. It is prayed that in view of the above the assessee’s claim that the profit on sale of the flat at NCPA be taxed as LTCG.
M/s. Pallavi Holdings P. Ltd. 3.2 Per contra, the learned D.R. for Revenue supported the finding of the learned CIT(A) in holding that the profit on sale of flat in NCPA was to be taxed as STCG. It was, however, submitted that in view of the averments of the learned A.R. of the assessee that the assessee had never claimed depreciation on the said NCPA flat in the earlier assessment years 1998-99 to 1999-2000, as seen from the details filed in the paper book (pgs 1 to 25), this issue may be set aside to the file of the learned CIT(A) for re- examining the factual position in the matter and fresh adjudication thereon. 3.3.1 We have heard the rival contentions and perused and carefully considered the material on record. From the details on record it appears that the assessee did not file any return of income for A.Y. 2000-01; i.e. the year under consideration, either under section 139(1) of the Income Tax Act, 1961 (in short 'the Act') or as called for under section 142(1) of the Act and consequently the assessment was completed ex-parte under section 144 of the Act. 3.3.2 From the order of assessment, it is seen that in the absence of relevant details from the assessee of purchase, sale, etc. the AO treated the profit on sale of the said NCPA flat as business income. On appeal before the learned CIT(A), the assessee claimed that the said income/profit on sale of the said residential flat at NCPA, Mumbai had arisen from sale of a capital asset and therefore the income ought to have been taxed as LTCG. The learned CIT(A) observes that in remand proceedings, the AO in his report was of the view that the income on sale of the said flat at NCPA is exigible to as STCG on sale of this asset. In para 11 of the impugned order, the learned CIT(A) accepted the AO’s view that the income/profit on sale of the said flat at NCPA was to be taxed as STCG, inter alia, for the reasons that the assessee was also regularly claiming depreciation on the said flat at NCPA and the same has not been disallowed suo moto either in the computation of income of in the return of income filed for earlier assessment years 1998-99 and 1999-2000; which claims were disallowed by the AO. We have perused the assessee’s paper book (pgs. 1 to 25), M/s. Pallavi Holdings P. Ltd. which was also before the learned CIT(A), and find that as also agreed to by the counsels for both sides, that in both the computation of income and orders of assessment for both assessment years 1998-99 to 2000-01 the assessee has made suo moto disallowance of the depreciation on the said flat at NCPA and the AO has adopted the same in computing the assessee’s income in the orders of assessment for these years. In this factual matrix, as narrated above, we are of the opinion that there are some infirmities on proper appreciation of facts in the impugned order of the learned CIT(A) which are not clear and lead to confusion; i.e. as to whether or not the assessee claimed depreciation on the said flat at NCPA in these years and whether the assessee’s claim in this regard, if any, was considered and disallowed by the AO. A proper appreciation of the facts in this issue, in our considered view, could have a bearing on the exigibility to tax of the profit on sale of the capital asset, i.e. the said flat at NCPA; whether as STCG as held by Revenue or as LTCG as claimed by the assessee. 3.3.3 In this factual matrix of the case, as discussed above, we are of the view that in the interest of justice and equity, it would be in the fitness of things, that the finding of the learned CIT(A) on this issue be set aside and do so. We direct that this issue be re-examined and adjudicated afresh by the learned CIT(A) after affording both the assessee and AO adequate opportunity of being heard and to file details, submissions, rebuttals in this regard. We hold and direct accordingly. Consequently, ground No. 2 of assessee’s appeal is treated as allowed for statistical purposes.
4. Ground No. 3 – Disallowance of interest expenses of `2,80,50,000/- 4.1 In respect of this ground, the learned A.R. of the assessee submitted that this issue has been restored to the file of the learned CIT(A) by different Coordinate Bench of the Tribunal with a direction to adjudicate the same afresh in the assessee’s own case in assessment years 2004-05, 2005-06, 2007-08 and 2010-11. In that view of the matter, following the same, in this year also, this issue should be restored back to the file of the learned CIT(A). In this regard the learned A.R. placed on record a copy of M/s. Pallavi Holdings P. Ltd. the decision of the Coordinate Bench in the assessee’s own case for A.Y. 2010-11 in dated 29.07.2015. 4.2 The learned D.R. for Revenue also admitted that in the assessment years mentioned above, this issue has been restored to the file of the learned CIT(A) for fresh adjudication. 4.3.1 We have heard the rival contentions and perused and carefully considered the material on record. We find that the issue of disallowance of interest expenditure was recently considered by a Coordinate Bench of the Tribunal in the assessee’s own case for A.Y. 2010-11 and in its order in ITA No. 2898/Mum/2012 dated 29.07.2015 has held as under at para 5 thereof: - “5. After considering aforesaid contention, we find that the assessee had borrowed money from brokerage firms for making the investment in shares and securities prior to 08.06.1992. The assessee had claimed deduction on account of interest payable to these creditors and interest amount of Rs. 9,80,50,000/- was shown to these brokerage firm for the year under consideration. Out of the said amount, only Rs. 9,852/- was claimed as deduction and no claim was made on the balance amount. The Assessing Officer’s case was that the said claim of interest was mainly a contingent liability and there is no nexus of interest income with the interest expense. The Ld. CIT(A) following the earlier year’s order right from the AY 2004-05 to AY 2009-10 has decided the issue against the assessee. We find that in 6 years, the Tribunal after following various other decisions in the group concerns of the assessee has restored this issue to the file of the CIT(A) to be adjudicated afresh. Respectfully following the same, we restore this matter to the file of the CIT(A) to decide in view of direction given by the Tribunal in the earlier years. Accordingly, ground no. 3 is treated as allowed for statistical purposes.” 4.3.2 Following the aforesaid order of the Coordinate Bench in the assessee’s own case for A.Y. 2010-11 (supra), we restore this matter to the file of the learned CIT(A) to re-examine and adjudicate the matter afresh in line with the directions rendered in those years after affording both the assessee and the AO adequate opportunity of being heard. We hold and direct accordingly. Consequently, ground No. 3 of assessee’s appeal is allowed for statistical purposes.
M/s. Pallavi Holdings P. Ltd.
Grounds 4 & 5 – Charge of interest under section 234A, 234B & 234C of the Act 5.1 This ground deals with the issue of charging of interest under section 234A, 234B and 234C of the Act for A.Y. 2000-01. Both Counsels for the assessee and Revenue agreed that this issue is covered against the assessee by the decision of the Coordinate Bench of the Tribunal in the case of Smt. Pratima H. Mehta in dated 08.02.2017 for A.Y. 2004-05, wherein it followed the decision of the Coordinate Bench in that case for A.Y. 1996-97 in ITA No. 6632/Mum/ 2013 dated 18.05.2016 and for A.Y. 2009-10 in ITA No. 350/Mum/2013 dated 11.05.2013 in that case. In the cited orders for A.Y. 2004-05 (supra) at paras 4.1 and 4.2 thereof it has been held as under: - “4.1 These grounds deal with the issue of the charging of interest under section 234B and 234C of the Act for A.Y. 2004-05. Counsels for both Revenue and the assessee agreed that this issue is covered against the assessee by the decision of the Coordinate Bench of this Tribunal in the assessee’s own case for A.Y. 1996-97 wherein it followed the earlier decision of the Coordinate Bench for A.Y. 2009-10 in ITA No. 350/Mum/2013 dated 11.05.2013, wherein it was held as under at para 4 thereof: - 4.Ground no.3 and four deal with levy of interest u/s. 23B and 234C of the Act. The Representatives of both the sides agreed that the issue was decided in assessee’s own case, by the Tribunal, while adjudicating the appeal for the AY.2009- 10(ITA/350/Mum/2013 dtd. 11. 05.2015).We would like to reproduce the relevant portion of the order and same reads as under: “The next ground of appeal is about levy of interest u/s.234 of the Act. Before us, the AR stated that the assessee was a notified entity, thus the provisions of s.234A,234B and 234C of the Act deemed to have complied with, that the assets were already in attachment of the Custodian appointed under the provisions of 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 the provisions of section 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 thee 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 M/s. Pallavi Holdings P. Ltd. 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)], Sedco Fores Drilling Co. Ltd. [264 ITR 320], NGC Network Asia LLC [313 ITR 187], Summit Bhatacharys [300 ITR (AI) 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. 3.1 We have heard the rival submissions and perused the material before us. We find that in the false 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. As a result, appeal filed by the assessee for the A.Y. 2002-03 stands partly allowed. Respectfully, following the above we direct the AO to hear the assessee and decide the issue afresh.” 4.2 Following the decision of the Coordinate Bench in the assessee’s own case for A.Y. 1996-97 in dated 18.05.2016 we hold that the provisions of section 234 of the Act are applicable to the case on hand and restore this issue back to the file of the AO for deciding the issue afresh, in accordance with the findings rendered by the Coordinate Bench (extracted supra at para 4.1) after affording the assessee adequate opportunity of being heard.” 5.2 Following the decision of the Coordinate Bench of the Tribunal in the case of Smt. Pratima H. Mehta for A.Y. 1996-97 in ITA No. 6632/Mum/ 2013 dated 18.05.2016 and for A.Y. 2004-05 in ITA No. 1911/Mum/2015 dated 08.021.2017, we hold that the provisions of section 234 of the Act are applicable to the case on hand and restore this issue back to the file of the AO for deciding the issue afresh, in accordance with the findings of the Coordinate Bench (extracted supra at para 5.1) after affording the assessee adequate opportunity of being heard.