TMI Blog2016 (1) TMI 1449X X X X Extracts X X X X X X X X Extracts X X X X ..... fter considering the amount of TDS made on income assessed. Chargeability of interest u/s.234A, 234B and 234C - notified persons notified under the Special Court Act - AY 2008-09 - HELD THAT:- Respectfully following the decision of the Hon'ble Bombay High Court in the case of Divine Holdings Pvt. Ltd. [2012 (4) TMI 100 - BOMBAY HIGH COURT ] and in accordance with the ratio laid down in the Hon ble Apex Court s order in Anjum H. Ghaswala [2001 (10) TMI 4 - Supreme Court ] we hold that interest u/s. 234A, 234B and 234C of the Act is mandatorily chargeable in the case on hand eventhough it is a notified person . - ITA No. 3491/MUM/2014, ITA No. 3492/MUM/2014 - - - Dated:- 15-1-2016 - SHRI JASON P. BOAZ ACCOUNTANT MEMBER AND SHRI RAM LAL NEGI, JUDICIAL MEMBER For The Appellant : Shri Dharmesh Shah and Shri Dhaval Shah For The Respondent : Dr. P.Daniel ORDER PER JASON P. BOAZ, A.M: These appeals by the assessee are directed against the orders of the CIT(Appeals)-40, Mumbai for the assessment years 1992-93 and 2008-09 dated 02/12/2013 and 31/1/2014 respectively. These appeals having connected issues were heard together and are being dispose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act passed by the Ld. Commissioner of Income-tax (Appeals)-40, Mumbai. Following grounds of appeal are without prejudice to each other:- 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 expenses. 3. The Ld. Commissioner of Income-Tax (Appeals) has erred in law and in facts that in confirming the levy of interest u/s. 234A, 234B and 234C of the Act. 4. The Ld. Commissioner of Income-tax (Appeals) has erred in law and in facts in not appreciating that the income assessed. in the hands of the appellant were subjected to the provisions of TDS and hence on the said amount of tax no interest can be computed u/s. 234A, 234B and 234C of the Act. 5. The appellant craves le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. 6. Ground No.3 Charging of interest u/s 234C of the Act. 6.1 We have heard both the Ld. Representative for the assessee and the Ld. Special Counsel for the Revenue in the matter. It was fairly conceded by the Ld. Representative for the assessee that the issue of chargeability of interest u/s. 234A, 234B and 234C of the Act was considered by the Hon ble Bombay High Court in the case of Devine Holdings Pvt. Ltd. And their Lordships in their order dated 7/3/2012 have held that interest under section 234A, 234B and 234C of the Act is chargeable even in respect of notified persons notified under the Special Court Act. The relevant portion of the said High Court order at paras 9 to 14 thereof is extracted hereunder:- 9. The levy of intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by the Custodian in such manner as the Special Court may direct. Under Section 9A the Special Court can exercise all the jurisdiction, power and authority as were exercisable by a Civil Court in relation to any matter or claim relating to any property standing attached under Section 3(3). Under Section 11 (I) the Special Court is entrusted with the jurisdiction to make such orders as it may deem fit directing the Custodian in regard to the disposal of property under attachment. Section 11 (2) provides as follows: 11(2) The following liabilities shall be paid or discharged in full, as far as may be, in the order as under (a) All revenues, taxes, ceases and rates due from the persons notified by the Custodian under sub-section (2) of section 3 to the Central Government or any State Government or any local authority; (b) All amounts due from the person so notified by the Custodian to any bank or financial institution or mutual fund; (c) Any other liability as may be specified by the Special Court from time to time. Under Section 13 the provisions of the Act are to have effect notwithstanding anything inconsistent therewith contained in any other law f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t Act would prevail. In the Tax Recovery Officer v. Custodian (supra) the Custodian in exercise of powers under Section 3(2) notified Dhanraj Mills Private Limited as a notified person. The assets of the notified person stood attached. Killick Nixon Private Limited together with its group companies owed money to the notified person and the custodian filed suits for recovery. The suits were decreed by the Special Court. In execution, the Special Court appointed a Receiver for taking charge of the assets of Kiliick Nixon and its group companies and thereafter certain properties were put to auction and money was realized. The Tax Recovery Officer filed an application for intervention before the Special Court with a prayer that the Custodian be directed to consider a claim for the recovery of arrears of income tax from Killick Nixon on a priority basis before the distribution of the sale proceeds to any other creditor. The intervention applications were dismissed by the Special Court. The Supreme Court observed that under clause (a) of sub-section (1) of Section 9A on and from the commencement of the Special Court (Trial of offences relating to Transactions in Securities) Amendment Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee in the present case, is not without remedy since it is open to the assessee to take recourse to the remedy available under the direction dated 26 June 2006. We accordingly answer the question of law as framed in the negative. However, we clarify that it would be open to the notified person to seek a waiver or reduction by making an application to the Chief Commissioner of Income Tax in terms of the order dated 26 June 2006 of the Central Board of Direct Taxes. The appeal is accordingly disposed of. 6.2 Respectfully following the decision of the Hon ble Bombay High Court in the case of Divine Holdings Pvt. Ltd.,(supra) and in accordance with the ratio laid down in the Hon ble Apex Court s order in Anjum H. Ghaswala (252 ITR 1) we hold that interest u/s. 234A, 234B and 234C of the Act is mandatorily chargeable in the case on hand even though it is a notified person . Consequently, we uphold the order of the CIT(A) on this issue and dismiss Ground No.3 raised by the assessee. 7. Ground No.4: Charging of Interest u/s. 234A,234B and 234C of the Act without considering TDS on income assessed: 7.1 In this ground, the assessee contends that the impugned order of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng 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 of Motorola inc. v. DCIT [95 ITD 269 (Del.(SB)], Sedco Fores Drilling Co. Ltd. [264 ITR 320],NGC Network Asia LLC [313 ITR 187] ,Summit Bhatacharya [ 300 ITR (AT) 347 (Bom)(SB)], Vijal Gopal Jindal [ITA No. 4333/Del/2009] Emillo Ruiz Berdejo [320 ITR 190 (Bom)].DR relied upon the cases of Devine Holdings Pvt. Ltd. 3.1.We have heard the rival submissions and perused the material before us.We find that in the case of Devine Holdings Pvt. Ltd. Hon ble Bombay High Court has held that provisions of section 234A, 234B and 234C were applicable to the notified person also.Therefore, upholding the order of the FAA to that extent,we hold that provisions of section 234 of the Act are applicable.As far as calculation part is concerned,we find merits in the submission made by the assessee.Therefore, we are restoring back the issue to the file of the AO for fresh adjudication who would decide the issue after considering the amount taxed deductible at source on the income assessed and after affording a reasonable opportunity of hearing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal. 11. Ground No.1- 11.1 At the outset, the ld. AR for the assessee mentioned that the ground at Sl.No.1 is not pressed. After hearing the ld. Special Counsel, the Ground No.1 is dismissed as not pressed. 12. Ground No.2 Disallowance of Interest expenditure ₹ 2,50,18,362/- . 12.1 The ld. for the assessee submitted that an identical issue of disallowance of interest expenditure against interest income from investment etc. had come up for consideration before the co-ordinate Bench of the Tribunal in the case of Sri Hitesh Mehta in ITA Nos.7726 7727/Mum/2010 wherein the co-ordinate Bench vide order dated 26/04/2013 had set aside this issue afresh by adjudicating the respective ground relating to the rejection/reliability of the books of accounts. 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 ₹ 11,24,99,052/- and ₹ 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/reliab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 234C of the Act. 14.1 We have heard both the ld. AR for the assessee and the ld. Special Counsel for the Revenue in the matter. It was fairly conceded by the ld. AR for the assessee that the issue of chargeability of interest u/s.234A, 234B and 234C of the Act was considered by the Hon'ble Bombay High Court in the case of Divine Holdings Pvt. Ltd., dated 7/3/2012 and their Lordships in that order held that interest u/s. 234A, 234B and 234C of the Act is chargeable even in respect of notified persons, notified under the Special Court Act. The relevant portion of the said High Court order at para 9 to 14 thereof is extracted hereunder :- 9. The levy of interest under the provisions of Sections 234A 234B and 234C is mandatory in nature. The Constitution Bench of the Supreme Court in Commissioner of Income Tax v. Anjum M.H. Ghaswala held that the provision for the levy of interest contemplated under Sections 234A, 234B and 234C is mandatory in nature and a power of waiver or reduction has not been expressly conferred upon the Settlement Commission under Chapter XIX A of the Income Tax Act 1961. The Supreme, Court held that the Settlement Commission does not have the powe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 11(2) The following liabilities shall be paid or discharged in full, as far as may be, in the order as under (a) All revenues, taxes, ceases and rates due from the persons notified by the Custodian under sub-section (2) of section 3 to the Central Government or any State Government or any local authority; (b) All amounts due from the person so notified by the Custodian to any bank or financial institution or mutual fund; (c) Any other liability as may be specified by the Special Court from time to time. Under Section 13 the provisions of the Act are to have effect notwithstanding anything inconsistent therewith contained in any other law for the time being in force or in any instrument having effect by virtue of any law, other than the Act, or in any decree or order of any Court, tribunal or other authority. 12. In Commissioner of Income Tax v. A.K. Menon the Supreme Court held that the Special Court has no power to sit in appeal over or overrule the orders of the tax authorities, the Income Tax Appellate Tribunal or the Courts in regard to tax liabilities of notified persons. The only power of the Special Court is to determine the priorities in whi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd its group companies and thereafter certain properties were put to auction and money was realized. The Tax Recovery Officer filed an application for intervention before the Special Court with a prayer that the Custodian be directed to consider a claim for the recovery of arrears of income tax from Killick Nixon on a priority basis before the distribution of the sale proceeds to any other creditor. The intervention applications were dismissed by the Special Court. The Supreme Court observed that under clause (a) of sub-section (1) of Section 9A on and from the commencement of the Special Court (Trial of offences relating to Transactions in Securities) Amendment Act 1994, the Special Court shall exercise all such jurisdiction, powers and authority as were exercisable immediately before such commencement by any Civil Court in relation to any matter or claim relating to any property standing attached under sub- section (3) of Section 3. The Supreme Court held that the jurisdiction of the Special Court is confined to the property of the notified person which stands attached under section 3(3). In paragraph 14 of the judgment, the Supreme Court observed as follows: In Solidaire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.2 Respectfully following the decision of the Hon'ble Bombay High Court in the case of Divine Holdings Pvt. Ltd. 9supra), and in accordance with the ratio laid down in the Hon ble Apex Court s order in Anjum H. Ghaswala (252 ITR 1), we hold that interest u/s. 234A, 234B and 234C of the Act is mandatorily chargeable in the case on hand eventhough it is a notified person . Consequently, we uphold the order of the ld. CIT(A) on this issue and dismiss Ground No.4 raised by the assessee . 15. Ground No.5 Charge of Interest u/s. 234A, 234B and 234C of the Act without considering TDS income assessed. 15.1 In this ground the assessee contends that the impugned order of the ld. CIT(A) is erroneous in not considering that the income assessed in its hands were subjected to TDS and, therefore, on the said amount of tax, no interest u/s. 234a, 234B and 234C of the Act can be charged. In support of this proposition, the ld. AR for the assessee submitted that a co-ordinate bench of this Tribunal in the case of Eminent Holdings Pvt. Ltd. in ITA No.2139/Mum/2013 for the assessment year had considered this issue and restored the issue to the file of the Assessing Officer for fresh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erial before us.We find that in the case of Devine Holdings Pvt. Ltd. Hon ble Bombay High Court has held that provisions of section 234A, 234B and 234C were applicable to the notified person also.Therefore, upholding the order of the FAA to that extent,we hold that provisions of section 234 of the Act are applicable.As far as calculation part is concerned,we find merits in the submission made by the assessee.Therefore, we are restoring back the issue to the file of the AO for fresh adjudication who would decide the issue after considering the amount taxed deductible at source on the income assessed and after affording a reasonable opportunity of hearing to the assessee.Ground no.5 is allowed in part in favour of the assessee. 15.3.2 Following the decision of the co-ordinate Bench of the Tribunal in the case of Eminent Holdings Pvt. Ltd.; (supra), we restore the issue of computation of interest chargeable u/s. 234A, 234B and 234C of the Act to the file of the Assessing Officer for fresh examination and adjudication after considering the amount of TDS made on income assessed and after affording the assessee adequate opportunity of being heard and to file details/submissions in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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