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Income Tax Appellate Tribunal, “C” BENCH, MUMBAI
Before: SHRI D. KARUNAKARA RAO, A.M. & SHRI AMARJIT SINGH, J.M.
आदेश / O R D E R PER D. KARUNAKARA RAO, A. M: These are cross appeals filed by the assessee and the revenue against the order of the CIT(A) -17 dated 19.11.2012.
GROUNDS OF APPEAL 1. “On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in deleting the net disallowance of interest of Rs.36,11,458/- without appreciating that the borrowed funds have been utilized for the repayment of loans pertaining to the discontinued business and thus as the interest was not paid for the purpose of business, deduction thereof claimed by the assessee is not allowable u/s 36(1)(iii).”
2. This is an appeal is filed by the Revenue with a solitary issue relating to allowability of interest expenditure of Rs.36,11,458/- in the rate of income. Assessee claimed the above expenditure as business expenditure. However, in the assessment, the AO disallowed the same as was done in the earlier assessment years i.e. 2008-09. During the first appellate proceedings, the CIT(A) deleted the above addition relied on his proceeding order for the AY. 2008-09.The case of the assessee is that the said interest expenditure was incurred in connection with the borrowed loans, which was taken for repayment of high-interest bearing-loans taken in the past. The AO is of opinion that such expenditure does not constitute expenditure incurred for business purposes of the assessee. With factual matrix, the ld. Counsel for the assessee brought our attention to the order of the Tribunal for the AY 2008-09, where on the same facts the Tribunal allowed the claim of deduction of interest u/s 36(1)(iii) of the Act. Vide paragraph 2.5 of the order of the Tribunal in the assessee’s own case for the AY 2008-09 (ITA 3230/Mum/12 and 2439/Mum/12), the claim of the assessee was found allowable. After hearing both the parties, we perused the said order of the Tribunal in general, the contents of paragraph 2.5, in particular. We find the claim of the assessee was allowed in the past and the ratio is relevant for adjudication of the present issue in favour of the assessee. For the sake of completeness we extracted the said paragraph 2.5 of the order of the Tribunal the same is as under. “We have perused the records and considered the matter carefully. The dispute is regarding allowability of interest in respect of bonds issued by the assessee. These bonds were issued is assessment year 2007-08 to repay the loans taken in the earlier years. In the earlier years when the loans were taken, interest had been allowed as deduction which means the department accepted the claim that the borrowings were for the purpose of business. In assessment year 2007-08, the same borrowings were replaced by bonds, therefore, the nature of borrowings remained the same in assessment year 2007-08. Thought the car rental business and BPO business has been transferred, assessee continued to do the business and the income has been assessed by AO under the head “business”. Therefore, even if part of the business has been transferred, borrowings made earlier for the purpose of business continued to remain for the purpose of business and claim of deduction has to be allowed. In fact in assessment year 2007-08 the AO has himself have allowed interest on account of bonds issued and, therefore, the facts remaining the same this year, the disallowance cannot be justified. However, the assessee has made substantial investments in shares income from which is exempt. Therefore the disallowance of interest u/s 14 A is upheld. Subject to above the order of CIT(A) on this issue is confirmed.”
Further, we also perused the order of the Tribunal in the AY 2010-11 (ITA No.6479/Mum/13) in the assessee’s own case where one of us (AM is a party). Identical decision was taken in the favour of the assessee relied on the contents of the paragraph 2.5 of the order.
3. Considering the above, we find the grounds raised by the revenue is required to be dismissed and uphold the conclusions of CIT(A) on this issue. Accordingly, the ground raised by the revenue is dismissed.
In the result, the revenue’s appeal is dismissed.
On the facts and circumstances of the case the Commr. Of Income Tax (A) erred in confirming the computation of book profit at Rs.2,47,91,106/- u/s 115JB of Income Tax Act, 1961. The determination of the total book profit at Rs. 2,47,91,106/- is not justified.
On the facts and circumstances of the case the Learned Commr. Of Income Tax (A) erred in confirming the addition of Rs.66,84,106/-, being the disallowance u/s 14 A, while computing the book profit 115JB of Income Tax Act, 1961. The appellant prays that addition is not justified and be deleted. 3. The Learned Commr. Of Income Tax (A) erred in confirming levy of interest u/s 234 B. The appellant denies the liability of payment of interest u/s 234B. On the facts and circumstances of the case the appellant submit that they are not liable to pay interest u/s 234 B. 2. This is the assessee’s appeal, the solitary issue raised in the grounds relates to the applicability of provisions of u/s14A to the computation of total income for arriving at the “book profits” u/s 115JB of the Act. And the quantification of disallowable expenditure u/s14A of the Act. Referring to the order of the Tribunal in the AY 2008-09 (supra), the Counsel submitted that in the said order, the decision was taken in favour of the assessee on the issue of non-applicability of the u/s14A while computing the book profits u/s 115 JB of the Act. The contents of the para 4.2 of the order of the Tribunal for the AY 2008-09 are relevant. However, the ld. Counsel submitted the said ratio underwent change and as per the existing judgments on this issue, there is need for complying the provisions of the u/s14A even for the purpose of computing the “book profits” u/s 115 JB of the Act. Further, he submitted for the purpose of applying the said law and also for quantification of disallowable expenditure u/s14A, there is requirement of remanding this issue to the file of the AO for the adjudication of these issues after giving opportunity to the assesse.
After hearing both the parties, accordingly we remand this issue to the file of the AO for fresh adjudication. Thus, the AO was directed to apply the relevant law and decide the issue afresh. Accordingly, the grounds raised by the assessee are allowed for statistical purposes.
In the result, the appeal of the assessee is allowed for the statistical purposes.
Order pronounced in the open court on 11th December, 2015
Sd/- Sd/- (Amarjit Singh ) (D. Karunakara RAO) �या�यक सद�य / Judicial Member लेखा सद�य / Accountant Member मुंबई Mumbai; �दनांक Dated : 11.12.2015 Ps. Ashwini Gajakosh आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent 3. आयकर आयु�त(अपील) / The CIT(A) 4. आयकर आयु�त / CIT - concerned 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, मुंबई / DR, ITAT, Mumbai 6. गाड� फाईल / Guard File आदेशानुसार/ BY ORDER,