TMI Blog2020 (11) TMI 495X X X X Extracts X X X X X X X X Extracts X X X X ..... est accrued and calculated at 12% per annum after disallowing proportionate interest in respect of the investment in shares. Disallowance u/s 14A - Capitalization of interest expenditure - Deduction on account of interest expenditure - HELD THAT:- ITAT in assessee s own case [ 2017 (12) TMI 1668 - ITAT MUMBAI ] held 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 directed to take it as part of the cost of shares for determining profit on sale of the shares. Thus, the additional ground stands allowed to that extent. Addition of personal house hold expenses u/s. 69C - HELD THAT:- Addition made by the AO as well as sustained by the CIT(A) are though on ad-hoc basis, but same was done because no details of expenditures was filed by the appellant. Before us, the Ld. Counsel has submitted that, most of the expenses have been incurred by Dr. Hitesh S. Mehta and other family members living in a Joint family set-up. Further other members have contributed for household expenses and that some of the additions have been confirmed on account of personal household ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e is no specific order from the Court, this claim was rejected. Accordingly, AO rejected the contention of the assessee and passed assessment order u/s 143(3) of the Act by making disallowances on account of interest expenses on loans and personal household expenses. 4. Aggrieved with the above order, assessee preferred the appeal before Ld. CIT(A) and Ld. CIT(A) after considering the submission of assessee, partly allowed the appeal of the assessee. 5. Aggrieved with the above order, assessee is in appeal before us by filing the revised grounds of appeal, which are reproduced below: - 1. The Ld. Commissioner of Income-tax (Appeals) has erred in law and in facts in confirming disallowance of interest expenditure amounting to ₹ 2,20,45,030/-. The Commissioner of Income-Tax (Appeals) ought to have allowed deduction on account of interest expenditure atleast to the extent of ₹ 23,95,370/- i.e. gross assessed income. 3. The Ld. Commissioner of Income Tax (Appeals) ought to have capitalized the interest expenditure to the extent disallowed u/s. 14A of the Act. 4. The Ld. Commissioner of Income Tax (Appeals) has erred in law and in facts in confirmin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsh Estates Pvt. Ltd. v. DOT for A.Y. 2013-14 to 2015-16 in ITA Nos. 6957 6959/Mum/2018 dated 15.09.2020 e). Orion Travels Pvt. Ltd. v. DCIT for A.Y. 2013-14 to 2015-16 in ITA No. 6960 6962/Mum/2018 dated 23.09.2020. 7. On the other hand Ld. DR relied upon the orders passed by the revenue authorities, however he conceded that this ground is covered by the order of Coordinate Bench of ITAT. 8. Considered the rival submissions and material placed on record. It is noticed from the record that an identical ground raised in the present appeal has already been decided by the Coordinate Benches of ITAT in assessee s own case as well as others on merits. For the sake of clarity, which is reproduced below:- 12. We heard the rival submissions and carefully considered the same along with the orders of the Tax Authorities below. We have also gone through the case law as has been cited before us the relevant provisions of the Special Court Act which has been referred to before us during the course of hearing. This is an undisputed fact which we noted that the assessee is a notified person from 08.06.1992 under Section 3(2) of the Special Court Act. As per the provisions of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any action to cancel the terms relating to payment of interest. Rather we have noted from the affidavit of the custodian dated 01.03.2006 in M.P. No. 41 of 1999 that the custodian seeking to levy interest @ 15% to 18% per annum. Therefore the interest on outstanding credit balance of the brokerage firm has accrued as actual liability. The issue with regard to contract for payment of interest has been raised by the AO and the CIT(A) in the case of other notified entities duly approve the existence of liability. We noted that in the case of Growmore Leasing Finance Ltd. for A.Y. 2007-08 by order dated 26.06.2014 the CIT(A) followed the finding in the case of other group concerns, i.e. Eminent Holding Pvt. Ltd. by observing as under: - 6.3 I have gone through the submissions of the Ld. AR. I find that though there is no express document evidencing payment of interest to the brokerage firms, the intentions of the parties were always so, this is evident from the fact that identical claim was also made during A.Y. 1990-91 and the same was allowed to the appellant and other concerns. The claim made in the affidavit of Custodian in MP No. 41 of 1999 also supports this cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A.R. that since the assessee as well as the recipients are notified entities under the Special Court Act unless the Court directs for distribution of the assets towards existing liabilities under Section 11(2) of the Special Court Act, the assessee cannot make the payment to these creditors. Even otherwise since the existence of liability towards interest has accrued especially when the assessee is following the mercantile system of accounting the interest is to be allowed. During the course of hearing we raised a query about the nexus of interest expenses with the interest income. The learned A.R. pointed out that the liability in the present case was accrued on account of purchases of shares and securities by the assessee which were sold in terms of the directions of the Hon'ble Special Court in subsequent years and the sale proceeds so received were invested in term deposits with the banks and accordingly the assessee has claimed interest expenditure against the interest earned on term deposits. No contrary evidences or material were brought to our knowledge to contradict this fact. In view of this fact we find that there is a nexus between borrowed funds and investments in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t in the case of Radhasoami Satsang Saomi Bagh vs. CIT 193 ITR 321 referred to the following passage from Hoystead v Commissioner of Taxation 1926 AC 155 (PC), wherein it was observed (page 328): Parties are not permitted to begin fresh litigation because of new view they may entertain of the law of the case, or new versions which they present as to what should be a proper apprehension by the court of the legal result either of the construction of the documents or the weight of certain circumstances. If this were permitted, litigation would have no end, except when legal ingenuity is exhausted. It is a principle of law that this cannot be permitted and there is abundant authority reiterating that principle. Thirdly, the same principle, namely, that of setting to rest rights of litigants, applies to the case where a point, fundamental to the decision, taken or assumed by the Plaintiff and traversable by the Defendant, has not been traversed. In that case also a Defendant is bound by the judgement, although it may be true enough that subsequent light or ingenuity might suggest some traverse which had not been taken. At pg 329 of the judgement, Their Lordships observed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he submission of Ld. AR. Accordingly, the ground raised by the assessee stands allowed. 10. With regard to ground no. 2 on account of capitalization of interest expenditure, Ld. AR brought to our notice para no. 5.5 of the order of Ld. CIT(A) and relied on the order of assessee s own case for A.Y. 2009-10, 2010-11 2011-12 in ITA No. 5799 to 5801/Mum/2015 dated 27.12.2017 at para no. 17 of the said Common Order, wherein the amount of interest disallowance u/s. 14A be held to be capitalized to the cost of shares. Ld. AR further submitted that in the following cases, the Hon ble Tribunal has directed the assessing officer to treat the proportionate interest expense disallowed to be part of the cost of acquisition of shares and securities, which are as under:- a.) DCIT v. Cascade Holdings Pvt. Ltd. for A.Y. 2012-13, 2013-14 2015-16 in ITA Nos. 6768, 6769 6771/Mum/2018 dated 16.03.2020 b.) DCIT v. Cascade Holdings Pvt. Ltd. for A.Y. 2014-15 in ITA No. 6770/Mum/2018 dated 23.09.2020 c.) DCIT v. Harsh Estates Pvt. Ltd. for A.Y. 2013-14 to 2015-16 in ITA Nos. 6765-6767/Mum/2C18 dated 15.09.2020. 11. On the other hand Ld. DR relied upon the orders passed by the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed by the Coordinate Benches of ITAT in assessee s own case as well as others on merits. For the sake of clarity, which is reproduced below:- 18. Ground No. 2 Relates to sustenance of the addition on account of personal household expenses by the CIT(A) to the extent of ₹ 6,00,000/-. The facts relating to this issue are that the AO made an addition on estimate basis on account of the personal household expenses at ₹ 12,00,000/- by applying provisions of Section 69C. When the assessee went in appeal before the CIT(A), the CIT(A), following his own order in the case of other family members, viz. Smt. Deepika A. Mehta and Smt. Rasila S. Mehta for A.Y. 2006-07 reduced the disallowance by 50% thus sustaining the addition to the extent of ₹ 6,00,000/-. 19. We have gone through the order of this Tribunal in the case of Shri Ashwin S. Mehta for A.Y. 2006-07 in ITA No. 6596/Mum/2013 and for A.Y. 2007-08 in ITA No. 6597/Mum/2013 dated 18.04.2016 and also in the case of Ms. Deepika A. Mehta for A.Y. 2006-07 in ITA No. 5487/Mum/2011 and others dated 31.05.2006, we noted that the Tribunal further reduced the addition sustained by the CIT(A) by 50% by observing as unde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... val submissions and on perusal of the relevant finding in the impugned order, we find that the addition made by the AO as well as sustained by the CIT(A) are though on ad-hoc basis, but same was done because no details of expenditures was filed by the appellant. Before us, the Ld. Counsel has submitted that, most of the expenses have been incurred by Dr. Hitesh S. Mehta and other family members living in a Joint family set-up. Further other members have contributed for household expenses and that some of the additions have been confirmed on account of personal household expenses by the Department. On these facts and circumstances, we are inclined to scale down the additions to ₹ 3 lakhs. Accordingly, addition sustained on account of personal household expenses would be ₹ 3 lakhs. Accordingly, the ground No.5 of the appellant is partly allowed. Respectfully following the said order of the Tribunal we reduce the disallowance sustained by the CIT(A) by 50%, i.e. ₹ 3,00,000/-. Thus, ground No. 2 is partly allowed. 17. Therefore, respectfully following the above decisions which are applicable mutatis mutandis in the present case, I am inclined to accept the s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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