TMI Blog2020 (6) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... or coming to such a conclusion, we rely upon the decision of the Coordinate Bench of the Mumbai Tribunal in the case of DCIT vs. JSW Limited [ 2020 (5) TMI 359 - ITAT MUMBAI ] - I.T.A. No.3442/Mum/2017 - - - Dated:- 26-5-2020 - Shri Saktijit Dey, JM And Shri Manoj Kumar Aggarwal, AM For the Appellant : S/Shri Vijay Mehta And Anuj Kisnadwala-Ld. ARs For the Respondent : Ms. Kavita P. Kaushik Shri Amit Pratap Singh - Ld. DRs ORDER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1.1 Aforesaid appeal by assessee for Assessment Year [in short referred to as AY ] 2011-12 contest the order of Ld. Commissioner of Income-Tax (Appeals)-52, Mumbai, [in short referred to as CIT(A) ],Appeal No. CIT(A)- 52/IT/DCIT-CC-7(3)/296/2016-17 dated 02/03/2017 on following grounds of appeal: - 1. On the facts of the case and in law, the CIT(A) erred in confirming the disallowance of interest expenses of ₹ 5,01,43,016/- u/s.36(1)(iii) on the ground that it was not incurred for business purposes. 1.2 The assessee has also raised an additional ground of appeal on 26/09/2018 which reads as under: - The Learned Commissioner of Income-Tax (Appeals) ought to have he ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No. Particulars Amount (Rs.) 1. Interest on Debentures 444,86,11,700/- 2. Interest on late payment of TDS 4,737/- 3. Professional fees- finance 17,65,348/- 4. Reimbursement of finance cost given to holding company 41,64,847/- Total 445,45,46,632/- 5. Less: Interest Income on loans given 429,11,89,321/- Net Interest Finance Charges 16,33,57,311/- 2.4 The other major expenditure debited to Profit Loss Account include misc. expenditure written-off for ₹ 1618.48 Lacs which represent amortization of debenture discount debenture issue expenses. The assessee has reflected loss of ₹ 3229.45 Lacs in its Profit Loss Account. However, in the computation of income, it has made various adjustments to the said losses and arrived at loss of ₹ 480.62 L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... penditure, the assessee reflected receipt of ₹ 36.20 Lacs under the headother income. The assessee, while computing its taxable income, made disallowance to the extent of ₹ 2750.62 Lacs u/s 36. During the course of assessment proceedings, the assessee was show-caused to explain the nature of interest expenditure as well as misc. expenditure written-off and explain the business need for the same. 3.2 As per assessee s submissions, it earned interest income of ₹ 42911.89 Lacs @37.93% and against the same, it claimed total interest expenditure of ₹ 44545.46 Lacs. The difference of the two i.e. ₹ 1633.57 Lacs was claimed as interest expenditure during the year. 3.3 However, not convinced, it was noted by Ld. AO that the assessee was in the business of real estate development and no business activity was carried out by the assessee during the year under consideration. The assessee simply borrowed money by way of debentures to the extent of ₹ 161800 Lacs and invested / advanced the same to group concerns. The assessee was forwarding loans at the same effective rate at which it was paying interest for the debentures and it incurred losses only ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... same, quite clearly the suo-moto disallowance of ₹ 2750.62 Lacs is nothing but interest disallowance, computed @37.93% on interest free investments of ₹ 7251.85 Lacs. Proceedings before Ld. CIT(A) 4.1 Aggrieved, the assessee contested the said disallowance before Ld. CIT(A) vide impugned order dated 02/03/2017. However, during appellate proceedings, the assessee took a different stand in its submissions which are extracted on page no. 4 of the impugned order. It was submitted that out of net finance expenses of ₹ 1633.57 Lacs, an amount of ₹ 1132.14 Lacs i.e. total suo-moto disallowance of ₹ 2750.62 Lacs Less ₹ 1618.48 Lacs (misc. expenditure) was incurred in relation to exempt income and the same has already been disallowed. It was further claimed that the remaining interest of ₹ 501.43 Lacs was claimed as deduction u/s 36(1)(iii) since the same were incurred for business purposes. 4.2 Therefore, it could be noted that two different stands were taken by the assessee during the course of assessment proceedings and the appellate proceedings. On the basis of the same, a conclusion could be drawn that the correct factual matrix could not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ul consideration of factual matrix as enumerated by is in preceding paragraphs, the bench formed an opinion that the correct facts need to be ascertained and brought on record in view of our observations in paras 3.4 4.2. Therefore, we are left with no option but to set-aside the impugned order and remit the issue back to the file of Ld.AO for adjudication de-novo. The Ld. AO is directed to reappreciate assessee s claim in the light of our observations in paras 3.4 4.2. The assessee, in turn, is directed to substantiate its claim. All the issues are kept open. Reasons for delay in pronouncement of order 7.1 Before parting, we would like to enumerate the circumstances which have led to delay in pronouncement of this order. The hearing of the matter was concluded on 07/02/2020 and in terms of Rule 34(5) of Income Tax (Appellate Tribunal) Rules, 1963, the matter was required to be pronounced within a total period of 90 days. As per sub-clause (c) of Rule 34(5), every endeavor was to be made to pronounce the order within 60 days after conclusion of hearing. However, where it is not practicable to do so on the ground of exceptional and extraordinary circumstances, the benc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nclusion of the hearing, the Bench shall give a date for pronouncement. (c) In a case where no date of pronouncement is given by the Bench, every endeavour shall be made by the Bench to pronounce the order within 60 days from the date on which the hearing of the case was concluded but, where it is not practicable so to do on the ground of exceptional and extraordinary circumstances of the case, the Bench shall fix a future day for pronouncement of the order, and such date shall not ordinarily (emphasis supplied by us now) be a day beyond a further period of 30 days and due notice of the day so fixed shall be given on the notice board. 8. Quite clearly, ordinarily the order on an appeal should be pronounced by the bench within no more than 90 days from the date of concluding the hearing. It is, however, important to note that the expression ordinarily has been used in the said rule itself. This rule was inserted as a result of directions of Hon ble jurisdictional High Court in the case of Shivsagar Veg Restaurant Vs ACIT [(2009) 317 ITR 433 (Bom)] wherein Their Lordships had, inter alia, directed that We, therefore, direct the President of the Appellate Tribunal to frame ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ause of action arises shall be extended for a period of 15 days after the lifting of lockdown . Hon ble Bombay High Court, in an order dated 15th April 2020, has, besides extending the validity of all interim orders, has also observed that, It is also clarified that while calculating time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly , and also observed that arrangement continued by an order dated 26th March 2020 till 30th April 2020 shall continue further till 15th June 2020 . It has been an unprecedented situation not only in India but all over the world. Government of India has, vide notification dated 19th February 2020, taken the stand that, the coronavirus should be considered a case of natural calamity and FMC (i.e. force majeure clause) maybe invoked, wherever considered appropriate, following the due procedure . The term force majeure has been defined in Black s Law Dictionary, as an event or effect that can be neither anticipated nor controlled When such is the position, and it is officially so notified by the Government of In ..... X X X X Extracts X X X X X X X X Extracts X X X X
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