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Income Tax Appellate Tribunal, “E” BENCH, MUMBAI
Before: SHRI D. KARUNAKARA RAO & SHRI C.N. PRASAD
सुनवाई की तायीख / Date of Hearing : 07.11.2016 घोषणा की तायीख /Date of Pronouncement : 18.11.2016 आदेश / O R D E R
PER D. KARUNAKARA RAO, AM:
This appeal filed by the assessee on 11.4.2014 is against the order of the CIT (A)-40, Mumbai dated 31.1.2014 for the assessment year 1995-96. In this appeal, assessee raised the following grounds which read as under:- “1. The Ld CIT (A) ought to have appreciated that as per the decision of Hon’ble Special Court dated 30.4.2010 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 Ld CIT (A) has erred in law and in facts in confirming the disallowance of interest expenses amounting to Rs. 14,13,72,594/-.
3. The Ld CIT (A) has erred in law and in facts that in confirming the levy of interest u/s 234A, 234B and 234C of the Act.
4. The Ld CIT (A) 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 234A, 234B and 234C of the Act.”
2. At the outset, Ld Counsel for the assessee brought our attention to the above grounds and mentioned that Ground no.1 is not pressed. After hearing the Ld DR, the said Ground no.1 is dismissed as not pressed.
3. Referring to the Ground no.2, Ld Counsel for the assessee submitted that the issue raised in this ground relates to the disallowance of interest expenses amounting to Rs. 14,13,72,594/-. In this regard, Ld Counsel for the assessee submitted that an identical issue came up for adjudication in the assessee’s own case for the AYs 2004-05 to 2006-07 vide to 6835/Mum/2013, dated 11.12.2015 and the matter was remanded to the file of the AO for fresh consideration. It is the submission of the Ld AR that considering the said decision of the Tribunal (supra), the issue involved in the present appeal may also be remanded. After hearing the Ld Representatives of both the parties and on perusal of the said Tribunal’s order (supra) dated 11.12.2015, we find, paras 4 and 5 are relevant in this regard. Considering the significance of the said paras and for the sake of completeness of this order, the said paras are extracted as under:- “4. The third ground relates to disallowance of interest expenditure amounting to Rs.8,02,13,642/-.
Facts of the issue are that the assessee is a notified person under the Special Court (Trial of Offences relating to transactions in Securities) Act, 1992 and all its assets including bank accounts were attached and vested in the hands of the Custodian appointed under the said Act.
The assessee claimed interest payable of Rs.8,02,13,642/-. The AO, for want of details thereof disallowed the same. Aggrieved by this, the assessee preferred appeal before the ld.CIT(A), who also confirmed the action of the AO on the ground that the matter is pending before the Hon'ble Special Court. Aggrieved by this decision, the assessee is in appeal before us.
During the course of hearing, both the parties submitted that an identical issue had come up before the Tribunal in the case of M/s. Aatur Holdings Pvt. Ltd. V/s DCIT in ITA No.4627 & 4628/Mum/2011 (AY-2004-05 and 2005-06) dated 4.9.2015 and the Tribunal vide para No.2 has restored this issue to the file of AO for fresh adjudication.
On perusal of the order we find that a similar issue has been decided by the Tribunal. The relevant part of the above said order, for the sake of convenience, is reproduced as under: “2.During the course of hearing before us, Representatives of both the sides agreed that the issue has arisen in the Harshad S. Mehta(HSM) group on many occasions and the Tribunal has decided the identical issue in the cases of the individual of the group as well as the corporate entities of the group. We find that the Tribunal has restored back the issue to the file of the AO in all such cases. We would like to reproduce the relevant portion of the case of Pratima H Mehta, one of the members of the HSM group to which one of us was party (ITA/350/Mum/2013 (AY-2009-10 dt. 11.5.2015).In that matter the third ground of appeal
read as under : "The learned Commissioner of Income tax(Appeals) has erred in law and in facts in not granting deduction of liability amounting to Rs.9,3587628/- towards interest expenditure claimed by the appellant." The Tribunal decided the case as under :
2. Ground No.1 & 2were not pressed. Ground No.3 was stated to be covered by the earlier decision of the Tribunal in group case. Reference was made to the decision dated 5/3/2015 passed in ITA No. 5135& 5136/Mum/2012 & ITA Nos.2151/Mum/2013 in the case of Growmore Leasing & Inv. Ltd. and reference was made to the following observations:
"3. Ground No. 4 relates to the disallowance of interest expense. The Ld. Counsel for the assessee brought to our notice that the decision relied upon by the Ld. CIT(A) while disposing this ground has been set aside by the Tribunal to the file of the Ld. CIT(A).
4. The Ld. Departmental Representative could not bring any distinguishing decision in favour of the Revenue.
5. We have carefully perused the orders of the authorities below. While disposing the ground relating to the disallowance of interest, we find that the Ld. CIT(A) has followed the findings given in the case of Eminent Holdings Pvt. Ltd. We find that the Tribunal in the case of Eminent Holdings in 2140 and 2141/Mum/2013 have followed the decision of the Tribunal given in common group case of Hitesh S. Mehta at para 2.3 of the order and restored the matter to the file of the Ld. CIT(A) for fresh adjudication. Respectfully following the findings of the Co ordinate Bench, we restore this issue to the files of the Ld. CIT(A) for fresh adjudication after giving reasonable opportunity of being heard to the assessee.
6. Before closing this issue, the Ld. Counsel for the assessee pointed out that the Ld. CIT(A) has held that the issue of interest expenditure is pending before the Hon'ble Special Court. It is the say of the Ld. Counsel that the proceedings in which the said issue of interest was issued by the custodian have been already concluded which fact has already been recorded by the Ld. CIT(A) in the impugned order. We, therefore, direct the Ld. CIT(A) to consider this fact while deciding the issue afresh. The Ld. CIT(A) may also direct for the taxing of income in the hands of the recipient (family members) in accordance with the method of accounting followed by them and as per the provisions of the law. Ground No. 4 is treated as allowed for statistical purpose."
Ld. Special Counsel did not controvert to such contention of Ld. AR that the issue is covered by the aforementioned decision.
In view of the situation, after hearing both the parties, we pass similar order and this ground is considered to be allowed for statistical purposes in the manner aforesaid." Following the above, we pass similar order. Ground No.4 is allowed for statistical purposes for both the years. As a result, appeals filed by the assessee for both the AYs stand allowed for statistical purposes.” Accordingly, respectfully following the order of the Tribunal in the above mentioned case, we restore this issue to the file of the Assessing Officer for fresh consideration. This ground is allowed for statistical purposes.”
4. Considering the above settled nature of the issue, Ground no.2 raised by the assessee in this appeal is allowed for statistical purposes.
5. Grounds no.3 and 4 relates to the levy of interest u/s 234A, 234B & 234C and the manner of computation of such interest qua the TDS issues. In this regard, Ld Representatives of both the parties submitted that Ground no.3 is required to be dismissed, in principle. After hearing both the parties, ground no.3 raised by the assessee is dismissed, in principle.
5.1. Regarding Ground no.4, which relates to the calculation of the said interest expenditure, Ld Counsel for the assessee submitted that this issue has to be decided in line with the decision of the Tribunal in the assessee’s own case for the AYs 2004-05 to 2006-07 (supra). After hearing both the parties on the issue raised in ground 4 and on perusal of the said order of the Tribunal (supra), we find, paras 9 to 13 of the said Tribunal’s order are relevant in this regard. Considering the importance of the said paras and for the sake of completeness of this order, the said relevant paras are extracted as under:-
“9. The fourth ground relates to levy of interest u/s 234A, 234B and 234C of the Act.
During the course of hearing, the learned counsel for the assessee submitted that an identical issue has been decided by the co-ordinate bench of the Mumbai Tribunal in the case of M/s. Topaz Holdings Pvt. Ltd.(ITA No.2146/Mum/2013, AY.2001-02, dated 18.06.2014) and the Tribunal has given part relief therein.
The learned DR did not controvert the submissions of the learned.AR.
On perusal of the record and Tribunal order relied upon by the assessee, we find that the issue raised in this appeal stands covered in favour of the assessee. For the sake of convenience, we reproduce the relevant portion of the order 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)], Sedco Fores 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. 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.”
13. Respectfully following the above said order, we direct the Assessing Officer to give relief as per above order. This ground is partly allowed.”
6. Considering the above settled nature of the issue Ground no.4 is allowed for statistical purposes.