TMI Blog2019 (1) TMI 1626X X X X Extracts X X X X X X X X Extracts X X X X ..... ee regarding furnishing of all the material facts necessary for assessment, reopening of assessment u/s. 147 of the Act is bad in law and liable to be quashed. Applicability of provisions of Section 115JB of the Act to the banking companies - HELD THAT:- As relying own case [ 2018 (11) TMI 1171 - ITAT MUMBAI] Provisions of Section 115JB shall not be applicable to assessee. Adjustment made towards disallowance of Broken Period Interest to book profits computed u/s. 115JB - We are of the considered view that there is no error in the findings recorded by the Ld. CIT(A) in directing the AO to delete the adjustment made towards disallowance of Broken Period Interest to book profits computed u/s. 115JB of the Act. Hence, we are inclined to uphold the findings of Ld. CIT(A) and reject the grounds raised by Revenue. Computation of interest payable u/s. 244A of the Act on refund arising out of the order - HELD THAT:- . We find that this issue is also covered in favour of assessee by the decision of ITAT, Mumbai in assessee s own case for the AYs. 2007-08 2009-10, where the Co-ordinate Bench by following its earlier order for the AY. 2005-06, restored the issue to the file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts and in the circumstances of the case and in law, assuming without accepting that Your Honours is of the view that broken period interest of ₹ 80,79,79,711 paid on purchase of securities during FY 2006-07 and held as stock-in-trade as on March 31, 2007 is not an allowable deduction in the year of purchase of such securities, in such case, the learned ACIT be directed to allow such deduction in the subsequent year, i.e. FY 2007-08 relevant to AY 2008-09, being the year in which the corresponding interest received on such securities is offered to tax. 2B Without prejudice to Ground nos. 2 2A above, on the facts and in the circumstances of the case and in law, assuming without accepting that Your Honours is of the view that broken period interest of ₹ 80,79,79,711 paid on purchase of securities during FY 2006-07 and held as stock-in-trade as on March 31, 2007 is not an allowable deduction in the year of purchase of such securities or in the subsequent year, in such case, the learned ACIT be directed to decrease / increase the profits / (loss), respectively, on sale or maturity or redemption or transfer in any manner, as the case may be, of such sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment proceedings, AO called upon the assessee to explain as to why Broken Period Interest paid on securities held as stock in trade shall not be disallowed? In response, assessee has filed detailed submissions along with certain judicial precedents, including decision of the Hon'ble Bombay High Court in the case of America Express International Banking Corporation Vs. CIT (2002) [258 ITR 601] (Bom) to argue that Broken Period Interest paid on securities is an allowable deduction. The AO after considering the submissions of assessee held that Broken Period Interest paid by the assessee is nothing but the part of price paid for the securities for acquiring the said securities. Whatever be the reason that prompted the assessee to purchase the securities, the price paid for them is in the nature of capital outlay. No part of it can be set-off as expenditure against interest accrued on these securities. Accordingly, he disallowed the Broken Period Interest paid for ₹ 80,79,79,711/-. 4.1. Aggrieved by the assessment order, assessee preferred an appeal before the CIT(A). 5. Before the CIT(A), assessee has challenged re-opening of the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... allowance of Broken Period Interest. 7. Similarly, the issue of computation of interest due to the assessee u/s. 244A of the Act, the Ld. CIT(A) by following the Tribunal s order in assessee s own case for the AY. 2004-05, restored the matter back to the file of AO for fresh consideration. 7.1. Aggrieved by the order of Ld. CIT(A), assessee as well as the Revenue have filed appeals before us. 8. The first issue that came up for our consideration in assessee s appeal is validity of re-opening of assessment u/s. 147 of the Act. Ld. AR for the assessee submitted that the assessment has been reopened on mere change of opinion without there being any fresh material in the possession of the AO, which suggest escapement of income, within the meaning of Section 147(b) of the Act, which is evident from the reasons recorded by the AO, as per which the AO is referring to the return of income filed by the assessee to form a reasonable belief of escapement of income. Ld. AR further submitted that in this case, the assessment for the impugned year has been completed u/s. 143(3) of the Act. The assessment has been re-opened after a period of f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ll the material facts necessary for completion of assessment. Unless there is an allegation by the AO on the part of the assessee to disclose necessary facts for completion of assessment, the assessment cannot be re-opened u/s. 147 of the Act. In this case, on perusal of reasons recorded by the AO, we find that there is no finding from the AO that there is failure on the part of assessee to disclose fully and truly all the material facts necessary for completion of assessment. We further noticed that the AO has recorded reasons on the basis of return of income filed by the assessee, without there being any fresh material in his possession to form a reasonable belief of escapement of income. Further, the issue of deductibility of Broken Period Interest is a subject matter of consideration by the AO during assessment proceedings, where the AO has issued a specific question for which the assessee has filed complete details. The AO being satisfied with the explanation filed by the assessee, completed the assessment. Therefore, we are of the considered view that it is a clear case of change of opinion without there being any material in the possession of AO to form a reasonable belief ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s mandatorily required to prepare profit loss account in accordance with the provisions of Part II III of Schedule VI of the Companies Act, 1956, for Income Tax purposes . 2. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in holding that the amendment to section 115JB of the Income Tax Act, 1961, to bring all the companies (including companies to whom proviso to sub-section (2) of section 211 of the Companies Act, 1956, applies is not applicable in the assessment year under consideration without appreciating that the said amendment is clarificatory in nature and, thus, retrospective in effect . 3. On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in holding that the interest portion of the refund issued earlier has to be ignored for the purpose of calculating interest u/s 244A of the income Tax Act, 1961, payable to the assessee, on refund arising out of the order giving effect to order of appellate authority. 4. On the facts and in the circumstances o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 01.04.2013 which was held to be not applicable to the assessment year under consideration before the tribunal viz. AY 2001- 02 in ITA no. 1498/Mum/2011. The impugned assessment year before us is AY 2007-08 which is also prior to amendment in Section 115JB by Finance Act, 2012 w.e.f. 01.04.2013. Similar view was taken by the tribunal for AY 2005-06 in ITA no. 3002/Mum/2014 in favour of the assessee vide orders dated 03.08.2016 in assessee s own case, wherein tribunal followed its own decision for AY 2006-07. Similar view as to non applicability of minimum alternate tax (MAT) on book profits computed u/s 115JB of the 1961 Act was taken by Kolkatta-tribunal in ITA No. 1768/Kol/2009 for AY 2002-03 in UCO Bank v. DCIT , vide orders dated 27.11.2015, wherein the Kolkatta tribunal concluded that amendment brought in by Finance Act, 2012 in Section 115JB read with Explanation 3 thereon is prospective in nature and shall be applicable from AY 2013-14 onwards in line with Notes to Clauses of Finance Act, 2012. One of us namely Hon'ble Judicial Member was part of the Division Bench who passed the appellate order in the case of UCO Bank(supra). We have also observed th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... set aside the order passed by Ld CIT(A) on this issue and hold that the provisions of sec. 115JB shall not be applicable for both the years under consideration. Respectfully following the aforesaid decision of Mumbai-tribunal for AY 2005-06 in assessee s own case which followed the decision of Mumbai-tribunal for AY 2006-07 in assessee s own case , we hold that provisions of Section 115JB shall not be applicable to the assessee bank for the impugned assessment year under consideration viz. AY 2007-08. The ground no. 1 and 2 are decided in favour of the assessee. The appeal of the Revenue on these ground no. 1 and 2 stood dismissed. We order accordingly . 15.1. In this view of this matter and consistent with the view taken by the Co-ordinate Bench, we are of the considered view that there is no error in the findings recorded by the Ld. CIT(A) in directing the AO to delete the adjustment made towards disallowance of Broken Period Interest to book profits computed u/s. 115JB of the Act. Hence, we are inclined to uphold the findings of Ld. CIT(A) and reject the grounds raised by Revenue. These two grounds of Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of eligible amount of interest u/s 244A of the Act, we are of the view that this issue requires fresh examination at the end of the AO. In the decisions relied upon by the assessee, the Tribunal has followed the decision rendered by Hon ble Delhi High Court in the case of India Trade Promotion Organisation Vs. CIT (361 ITR 646) and accordingly given direction to the AO to follow the said decision. Consisted with the view taken by the Tribunal, we restore this issue to his file with the direction to examine this issue afresh by following the decision rendered in the case of India Trade Promotion organisation (supra). Respectfully following the decision of the tribunal in assessee s own case for AY 2005-06, we restore this issue to the file of the AO with similar directions as were given by tribunal for AY 2005-06 in ITA no. 3002/Mum/2014 more particularly in the light of decision of Hon'ble Delhi High Court in the case of India Trade Promotion Organisation (supa), vide orders dated 03.08.2016. The ground no. 3 and 4 raised by Revenue are allowed for statistical purposes. We order accordingly . 16.1. In th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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