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TMI Blog2016 (1) TMI 1449X X X X Extracts X X X X X X X X Extracts X X X X ..... for the delay in filing those appeals before the Tribunal and praying for condonation of delay at para 2 & 3 thereof, which are extracted hereunder:- "2. I say that moreover, the appeal fees released by the Custodian was received on 03.05.2014. Your Honours would observe that the applicant took the initiative to address letters and reminders to the Custodian for the release of the appeal fee for filing the appeal; and that immediately upon receipt of the counterfoil of the paid challan, the appeal was submitted before Your Honours. Thus, so far as the applicant was concerned, we were very much diligent and anxious about discharging our obligation. The delay was only for the reasons, which were beyond the control of the applicant. As a result of the above, the appeal was filed on 15.05.2014, i.e. late by 16 days 3. I state I was prevented by a reasonable cause in not having preferred the appeal for A.Y.1992-93 in time and there was no deliberate or malafide intention on my part." A similar prayer has been put forth by the assesee in its Affidavit filed for assessment year 2008-09 seeking the delay of 52 days in filing the appeal before the Tribunal. 2.2 Considering the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come up for consideration before the Coordinate Bench of this Tribunal in the case of Shri Hitesh S. Mehta in ITA Nos. 7726 & 7727/Mum/2010, wherein the Co-ordinate bench vide order dated 26/04/2013 had set aside the issue to the file of the CIT(A) adjudication of the issue afresh by adjudicating the respective ground relating to the rejection/reliability of the books of account. At para-5 of the aforesaid order, it is held as under:- " 5. Ground No.4 relates to the action of the Ld. CIT(A) in confirming the liabilities amounting to Rs. 11,24,99,052/- and Rs. 12,61,36,245/- respectively for the A.Ys 2005-06 and 2006-07 towards interest expenditure claimed by the assessee. It is pertinent to note that the findings given in para 3.3 above in respect of rejection/liability of the books of accounts and the proposed adjudication of the Ld. CIT(A) in view of the said direction may have direct impact on the issue of the impugned liability, we set aside this issue also to the files of the Ld. CIT(A) to adjudicate afresh along with the adjudication of the respective ground pertaining to the rejection/liability of the books of accounts." 5.2 Per contra, the Ld. Special Counsel for the R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pt to the extent of granting relief under the circulars issued by the Board under Section 119. Section 119, statutorily confers a power upon the Board to issue general. or specific orders, inter alia in respect of any class of income or class of cases, where it considers it is necessary or expedient to do so for the proper and efficient management of assessment and collection of revenue, on the guidelines, principles or procedures to be followed by other income tax authorities whether by way of realization of the provisions of Section 234A, 234B, 234C or otherwise. It is in pursuance of this power that the Central Board of Direct Taxes has issued its direction dated 23 June 2006 in which power has been specifically conferred upon the Chief Commissioner / Director General in the circumstances set out in paragraph 2 of the direction. 10. The submission which has been urged on behalf of the Respondent, however, is that the provisions of the Special Court Act, would override those of the Income Tax Act, 1961 and that consequently the provisions of Sections 234A, 234B and 234C would not be attracted. 11. In order to consider this submission, a brief reference to the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l Court Act which governs the determination of tax liabilities. The determination of tax liabilities under the Income Tax Act, 1961 is not governed by the provisions of the Special Court Act. Section 11 of the Special Court Act provides for the discharge of liabilities and empowers the Special Court to make such order as it may deem fit directing the custodian in regard to the disposal of the property under attachment. Sub-section (2) of Section 11 provides for the liabilities which shall be paid or discharged in full. The Supreme Court has held that the expression 'tax' in clause (a) of sub-section (2) of Section 11 would not include penalty or interest. The expression "any other liability as may be specified by the Special Court from time to time" in clause (c) of sub-section (2) has been dealt with by the Supreme Court in Harshad Shantilal Mehta (supra), where the Court held that the Special Court would have the full discretion to decide as to whether such claim for penalty or interest should be paid out of any surplus in the hands of the Custodian. In other words, it is evident that the jurisdiction of the Special Court under Section 11 (2) (c) is to determine if and if ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons in Securities) Act, 1992 and Section 32 of the Sick Industrial Companies (Special Provisions) Act 1985 were examined and it was held that both these Acts are special Acts and in such an event it is the later Act, namely, the Special Courts (Trial of Offences Relating to Transactions in Securities) Act, 1992 which must prevail. Thus there can be no manner of doubt that the provisions of the Special Courts Act, wherever they are applicable, shall prevail over the provisions of the Income Tax Act." The Supreme Court held that the Special Court could not have entertained the application moved by the Income Tax Department under Section 26(4) of the Income Tax Act, 1961 for the realization of its income tax dues from Killick Nixon Private Limited which was not a notified party. 14. In paragraph 14 of the judgment, extracted above, the Supreme Court has held that the provisions of the Special Court Act, wherever they are applicable shall prevail over the provisions of the Income Tax Act, 1961. The words "wherever they are applicable" are crucial. The Special Court Act makes no provision in regard to the determination of the liability to pay interest under the Income Tax Act, 1961. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee. 7.2 Per contra, the Ld. Special Counsel for the Revenue placed strong reliance on the decision of the Hon'ble Bombay High Court in the case of Devine Holdings Pvt. Ltd. 7.3.1 We have heard the rival contentions and perused and carefully considered the material on record. We find that this issue i.e. chargeability of Interest u/s. 234A, 234B and 234C of the Act on 'notified persons', and the issue of chargeability of the same interest in respect of TDS made on assessed income has been considered and adjudicated upon by a company-ordinate Bench of the Tribunal in the case of Eminent Holdings Pvt. Ltd. in its order in ITA No.2139/Mum/2013 dated 18/6/2014; for the assessment year 2002- 03, holding as under at paras 3 and 3.1 thereof: "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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d No.4 is allowed for statistical purposes only. 8. Ground No.5- is general in nature and therefore, no adjudication is called for thereon. 9. In the result, the assessee 's appeal for assessment year 1992-93 is partly allowed for statistical purposes. ORDER ITA No.3492/M/2014 (Assessment Year 2008-09) : 10. In this appeal, the assessee has raised the following grounds:- 1. " The Ld. 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 Ld. Commissioner of Income-Tax (Appeals) has erred in law and in facts in confirming the disallowance of interest expenditure amounting to Rs. 2,5O,18,362/- . 3. The Ld. Commissioner of Income-tax (Appeals) has erred in law and in facts in confirming calculation of book profit u/s.115JB at Rs. 2,10,39,882/-. 4. The Ld. Commissioner of Income-Tax (Appeals) has erred in law and in fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity or not is linked to the issue of rejection of books of account as the books of account are the basis for computation of 'book profits' u/s. 115JB of the Act. This issue was set aside to the file of the ld. CIT(A) for fresh adjudication. Following the aforesaid order of the co -ordinate Bench of this Tribunal in the case of Hitesh S. Mehta (supra), we are of the considered opinion that the issue of disallowance of interest expenditure is to be set aside to the file of the ld. CIT(A) for fresh adjudication after affording the assessee reasonable opportunity of being heard and to file details/ submissions required in this regard and considering the discussion in the case of Hitesh S. Mehta (supra), we hold and direct accordingly. 13. Ground No.3 - Computation of Book profit u/s. 115JB at Rs. 2,10,39,882/-. 13.1 In this ground it is contented that the ld. CIT(A) had erred in confirming the calculation of book profits u/s. 115JB of the Act at Rs. 2,10,39,882/-. It was submitted by the ld. AR for the assessee that this ground is consequential to the decision taken in Ground No.2 of this appeal. Since we have restored this issue of disallowance of interest expenditure to the file ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 2006 in which power has been specifically conferred upon the Chief Commissioner / Director General in the circumstances set out in paragraph 2 of the direction. 10. The submission which has been urged on behalf of the Respondent, however, is that the provisions of the Special Court Act, would override those of the Income Tax Act, 1961 and that consequently the provisions of Sections 234A, 234B and 234C would not be attracted. 11. In order to consider this submission, a brief reference to the provisions of the Special Court Act would be in order. Under Section 3(2) the Custodian is empowered, on being satisfied on information received that any person has been involved in any offence relating to transactions in securities after 1 April 1991 and on or before 6 June 1992 to notify the name of such person in the official gazette. Under sub section (3) of Section 3 with effect from the notification under sub section (2) any property belonging to a person notified shall stand attached simultaneously with the issuance of the notification. The property attached is thereafter required to be dealt with by the Custodian in such manner as the Special Court may direct. Under Section 9A t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on "any other liability as may be specified by the Special Court from time to time" in clause (c) of sub-section (2) has been dealt with by the Supreme Court in Harshad Shantilal Mehta (supra), where the Court held that the Special Court would have the full discretion to decide as to whether such claim for penalty or interest should be paid out of any surplus in the hands of the Custodian. In other words, it is evident that the jurisdiction of the Special Court under Section 11 (2) (c) is to determine if and if so, the extent of which the liability on account of penalty or interest should be paid out of any surplus funds in the hands of the Custodian. The determination of the liability to pay penalty or interest under the Income Tax Act, 1961 does not fall within the domain of the Special Court. 13. In the judgment of the Supreme Court in Solidaire India limited (supra), the Supreme Court held that both the Special Court Act and the Sick Industrial Companies (Special Provisions) Act 1985 are special Acts and in the event of a conflict, the later Act namely the Special Court Act would prevail. In the Tax Recovery Officer v. Custodian (supra) the Custodian in exercise of powers un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the realization of its income tax dues from Killick Nixon Private Limited which was not a notified party. 14. In paragraph 14 of the judgment, extracted above, the Supreme Court has held that the provisions of the Special Court Act, wherever they are applicable shall prevail over the provisions of the Income Tax Act, 1961. The words "wherever they are applicable" are crucial. The Special Court Act makes no provision in regard to the determination of the liability to pay interest under the Income Tax Act, 1961. That liability is clearly referable to the provisions embodied in Sections 234A, 234B and 234C. In the circumstances, the Tribunal, in our view, was in error in coming to the conclusion that interest under Sections 234A, 234B and 234C cannot be levied on an assessee who is a notified party under the Special Court Act. By the circular which has been issued by the Board, the power to grant such a waiver or remission has been vested with the Chief Commissioner. In terms of the judgment of the Supreme Court in Harshad Shantilal Mehta (supra) the notified person, the assessee in the present case, is not without remedy since it is open to the assessee to take recourse to the rem ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2002-03, holding as under at para 3 and 3.1 thereof: "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 t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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