TMI Blog2019 (4) TMI 1897X X X X Extracts X X X X X X X X Extracts X X X X ..... 34B and 234C - HELD THAT:- Set aside the said issue to the file of AO for re-computation after reducing the amount of tax deductible at source on the income earned and since there is no material change in the facts of the case, there is no reason to take a different view other than the view already taken in the similar matter. Non granting capitalization of interest expenses attributable to share and securities as not allowable u/s 57 (ii iii) - HELD THAT:- As decided in case of Sudhir MehtaI [ 2017 (12) TMI 1668 - ITAT MUMBAI] Tribunal has granted capitalization of interest expenses disallowed in the hands of the assessee and directed the Assessing Officer to add the same to the cost of shares and securities - we respectfully following the decision of the coordinate Bench allow this ground of appeal of the assessee and direct the AO to at the same to the cost of shares and securities. - ITA No.937/MUM/2017 & ITA No.938/MUM/2017 - - - Dated:- 4-4-2019 - SHRI RAJESH KUMAR (AM) AND SHRI RAM LAL NEGI (JM) For the Assessee : Shri Dharmesh Shah/Dhawal Shah (AR) For the Revenue : Dr. P. Daniel (DR) ORDER PER RAM LAL NEGI, JM These are the two appeal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... diture claimed by the appellant. 3. The assessee has raised the following effective grounds of appeal against the impugned order passed by the Ld. CIT (A):- 1. The learned 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 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 learned Commissioner of Income Tax (Appeals) has erred in law and in facts in not granting relief of liability amounting to ₹ 3,72,82,860/- towards interest expenditure claimed by the appellant. The Ld. Commissioner of Income Tax (Appeals) ought to have been allowed interest expense to the extent of income earned (assessed income) i.e. ₹ 29,23,610/-. 3. The learned Commissioner of Income-Tax (Appeals) has erred in law and in facts in confirming interest charged u/s 234A, 234B and 234C of the Act. 4. The learned Commissioner of Income Tax (Appeals) has erred in law and in facts in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning appeal filing fees from the custodian. The Ld. counsel further invited out attention to the action taken by the assessee in obtaining the appeal filing fees. 6. The Ld. Departmental Representative (DR) on the other hand opposed the application filed by the assessee for condonation of delay basically on the ground that the delay is inordinate and the same cannot be condoned. 7. We have perused the material on record including the cases relied upon by the assessee. We notice that the coordinate Bench has condoned the delay of 760 days in filing appeal the similar set off facts in the case of M/s Velvet Holdings Pvt. Ltd. vs. ACIT ITA No. 1216/Mum/2017, delay of 760 days in the case of M/s Eminent Holdings Pvt. Ltd. and Ors. Vs. ACIT ITA No. 1215/Mum/2017 and delay of 749 days in the case of Fortune Holdings Pvt. Ltd. vs. ACIT ITA No. 939/Mum/2017. 8. Sub-section 5 of section 253 of the Income Tax Act provides that the Tribunal may admit appeal or permit filing of memorandum of cross-objection of respondent after expiry of relevant period of limitation referred to in sub-section 3 and 4 section 253, if it is satisfied that there was sufficient cause for not presenting it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e on merits. Vide Ground No.1, the assessee has contended that since the assets under consideration and the consequential income belong to Sh. Harshad S Mehta, the AO ought to have taxed in the hands of Harshad Mehta. The Ld. counsel submitted that the assessee does not want to press this ground of appeal. Hence, we dismiss Ground No. 1 of the appeal as not pressed. 10. Vide Ground No.2, the assessee has challenged the action of the Ld. CIT (A) in not granting relief of liability amounting to ₹ 3,72,82,860/- towards interest expenditure claimed by the appellant. The Ld. counsel submitted that the Mumbai Tribunal has dealt with the identical issue in the case of Sudhir Mehta vs. DCIT and others ITA No. 5799/Mum/2015 for the A.Y. 2009-10. The Tribunal has allowed the claim of interest expenditure and set aside the issue to the file of AO for verification of calculation of disallowance u/s 14A of the Act. The Ld. counsel further pointed out that in the present case the assessee had not earned any exempt income during the year under consideration. The income by way of dividend and long term capital gain earned during the year were taxable as per the law prevailing in the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ears 2010-11 and 2011-12, where we noted that this issue of taxability of interest income of the assessee and other parties has specifically been dealt with by the CIT(A) and accordingly interest income of ₹ 10,68,83,732/- was brought to tax. In view of this fact it is apparent that the assessee is liable to pay interest on the amount outstanding. Therefore the liability towards interest got accrued. Under the mercantile system of accounting interest is deductible when it has accrued. This also proves that there was an agreement, may be oral, to pay the interest on the borrowed funds by the assessee to the other family members. We, therefore, reject the plea of the learned D.R. that no liability towards interest has accrued but it was merely a contingent liability. We noted that section 4 of the Special Court Act empowers the custodian and the court to cancel any contract or agreement in relation to the property of a person notified under that Act provided they have entered into fraudulently. In this case no cogent material or evidence has been brought to our knowledge or placed before us which may prove that the custodian under Section 4(1) of the Special Court Act has taken ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 14. Coming to the objection of the Revenue that interest cannot be allowed as deduction has not been shown by recipients in their income. As has been discussed by us in the preceding paragraphs the interest has been shown as income by Mr. Ashwin S. Mehta in assessment years 2010- 11 and 2011-12. We also noted that Late Shri Harshad Mehta has been offering his income on cash basis and the method of accounting has been duly upheld by the Tribunal in his case for A.Y. 1989-90. Even otherwise disallowance of interest claimed by the assessee cannot be made merely because in the opinion of the AO the corresponding interest income has not been offered by the recipients. The interest can be allowed on the basis of method of accounting followed by the assessee. We noted that similar issue when arose in the case of M/s. Growmore Leasing Investment Ltd. vs. CIT in ITA No. 51354 5136/Mum/2012 wherein the Coordinate Bench of this Tribunal while setting aside the issue to the file of the CIT(A) directed him to tax the income in the hands of recipient family members in accordance with the method of accounting followed by them. We find force in the submission of the learned A.R. that since the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urred by the appellant, and the interest income earned from these assets. However, this matter being sub-judice before the Hon'ble Special Court, no finding can be given on these matters. 15. Similar issue has arisen in the case of Shri Hitesh S. Mehta for A.Y. 2005-06 wherein the CIT(A) vide his order dated 31.08.2010 approved the nexus between borrowed funds and the investment in term deposit which has been followed by the CIT(A) even in the case of the assessee for A.Y. 2006-07 dated 27.09.2013. We do not agree with the submission of the learned D.R. that interest expenses cannot be allowed till the Hon'ble Special Court decides the issue. The allowance or disallowance of the expenditure depends on the accrual of expenditure. Even no dispute has been raised in respect of interest on such credit balances before the Special Court. Even on this basis, following the principle of consistency, as the interest has been allowed as deduction in the A.Y. 2006-07 and there is no change in the facts, the deduction in respect of the interest expenditure has to be allowed. Our aforesaid view is supported by the following decisions: The Supreme Court in the case of Radha soami Sats ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aforesaid dictum of law was reiterated recently by the Supreme Court in CIT vs. Excel Industries Ltd.: 358 ITR 295. It appears from the record that in several assessment years, the Revenue accepted the order of the Tribunal in favour of the Assessee and did not pursue the matter any further but in respect of some assessment years the matter was taken up in appeal before the Bombay High Court but without any success. That being so, the Revenue cannot be allowed to flip-flop on the issue and it ought let the matter rest rather spend the tax payers money in pursuing litigation for the sake of it. 16. In view of our aforesaid discussion we set aside the order of the CIT(A) and direct the AO to allow deduction in respect of said interest accrued and calculated at 12% per annum amounting to ₹ 2,64,72,208/- after disallowing proportionate interest in respect of the investment in shares amounting to ₹ 3,51,176/- after verifying the calculation of the interest quantification. 13. The facts of the present case are similar to the facts of the case of Sudhir Mehta vs. DCIT, discussed above and the issues involved in both the cases are identical. Since, the coordinate Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said issue held 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8377; 93,38,776/-. The AO passed the assessment order u/s 143 (3) of the Act determining the total loss at Rs. (-) 88,93,956/- under the normal provisions of the Act and similar amount under section 115JB of the Act. The assessee challenged the assessment order before the Ld.CIT (A). The Ld. CIT (A) after hearing the assessee dismissed the appeal of the assessee. The assessee is in appeal against the said order passed by the Ld. CIT (A). 2. The assessee has raised the following effective grounds of appeal against the impugned order passed by the Ld. CIT (A):- 1. The learned 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 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 learned Commissioner of Income Tax (Appeals) has erred in law and in facts in not granting relief of liability amounting to ₹ 4,44,820/- towards interest expenditure claimed by the appellant. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing capitalization of interest expenses attributable to share and securities which is not allowable u/s 57 (ii iii) of the Act. The Ld. counsel for the assessee submitted that the ITAT Mumbai has decided the identical issue in the case of Sudhir Mehta vs. DCIT (supra) and the Tribunal has granted capitalization of interest expenses disallowed in the hands of the assessee and directed the Assessing Officer to add the same to the cost of shares and securities. 8. On the other hand, the Ld. DR did not controvert the fact that the Tribunal has dealt with the identical issue in a related case, however the Ld. DR supported the findings of the Ld. CIT (A). 9. We have perused the relevant material in the light of the submissions made by the assessee. As pointed out by the Ld. counsel, the coordinate Bench has allowed this ground of appeal and directed the AO to do the needful holding as under:- 17. Now coming to the additional ground raised with respect to capitalization of interest we are of the view that to the extent the interest relate to the investment, i.e. being disallowable under Section 57 will become part of cost of acquisition of shares and therefore the AO is direct ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
