TMI Blog2021 (3) TMI 1030X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome Tax (Appeals) had recorded a finding that investments made during the aforesaid Assessment Year including investments in A.N.Coffeeday as on 31.03.2009 were made out of the funds of the assessee, with reference to claim of disallowance under Section 14A read with Rule 8D(ii)of the Rules and therefore, the same conclusion ought to have been applied to Section 36(1)(iii) as well. Therefore, in the fact situation of the case, the remand by the tribunal to the Assessing Officer to examine whether the investments were made out of the funds of the assessee or from borrowed funds, is not warranted as the Assessing Officer for the Assessment Year 2009 10, the Assessing Officer on examination of the details furnished by the assessee had accepted the contention that investment was made by the assessee out of the funds owned by it. The Supreme Court in RADHASOAMI SATSANG Vs. COMMISSIONER OF INCOME-TAX [ 1991 (11) TMI 2 - SUPREME COURT] has held that even though principles of res judicata do not apply to income tax proceedings, but where a fundamental aspect permeating through the different Assessment Years has been found as the fact one way or the other and the parties have all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 017 passed by the tribunal, we find that the tribunal has invoked the jurisdiction to rectify the error apparent on the face of the record. - Decided in favour of assessee. - I.T.A. NO.315 OF 2018 C/W I.T.A. NO.388 OF 2018 I.T.A. NO.313 OF 2018 - - - Dated:- 12-3-2021 - HON BLE MR. JUSTICE ALOK ARADHE AND HON BLE MR. JUSTICE ASHOK S. KINAGI APPELLANT (BY SRI. SURYANARAYANA T, ADV.,) RESPONDENTS (BY SRI. T.N.C. SRIDHAR, ADV.) COMMON JUDGMENT ALOK ARADHE J., These appeals under Section 260A of the Income Tax Act, 1961 (hereinafter referred to as the Act for short) have been filed by the assessee as well as the revenue. I.T.A.No.313/2018 and I.T.A.No.315/2018 have been filed by the assessee whereas, I.T.A.No.388/2018 has been filed by the revenue. preferred by the assessee. Since, the appeal pertain to the same Assessment year 2010-11 and arise out of the common order dated 21.06.2017 and order dated 06.12.2017, passed by the Income Tax Appellate Tribunal (hereinafter referred to as 'the tribunal' for short), they were heard together and are being decided by this common judgment. The appeals were admitted by a bench of this Court on the foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee. (i) disallowance of claim under Section 14A of the Act for a sum of ₹ 77,72,330/-. (ii) disallowance of interest of ₹ 1,90,81,831/- on borrowed capital as having been utilized for share application money to a foreign company A.N.Coffeeday International Ltd. ( AN Coffeeday for short and as such warranting capitalization; (iii) disallowance of interest of ₹ 7,97,70,326/- on borrowed capital as having been utilized towards capital work-in-capital has having been utilized towards capital work-in-progress and as such warranting capitalization; and (iv) disallowance of expenditure of ₹ 9,77,23,650/- incurred towards processing and other charges for raising loans and compulsorily convertible debentures on the ground that the same ought to have been capitalized. The assessee thereupon filed an appeal before the Commissioner of Income Tax (Appeals) who by an order dated 14.08.2013 disposed of the appeal holding as follows: (i) the disallowance under Section 14A of the Act, to the extent of ₹ 7,35,920/- under Rule 8D(2)(iii) was upheld and to the extent of the balance of ₹ 70,36,410/- under Rule 8D(2)(ii), was delet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rectification was rejected. (iii) The claim for loan processing and other charges, the order of the Commissioner of Income Tax (Appeals) directing deletion of disallowance was upheld. In the aforesaid factual background, these appeals have been filed. 5. Learned counsel for the assessee submitted that the assessee had made investments by way of share application money in one of its foreign subsidiary viz., A.N.Coffeeday for an amount of ₹ 17,47,54,752/-, whereas, the assessee's own fund were to the extent of ₹ 386,91,31,076/- which were far in excess of the investment made in A.N.Coffeeday. Therefore, the tribunal ought to have appreciated that there was a presumption that the investments were made out of non interest bearing funds and the burden was on the revenue to prove that investments were made out of borrowed funds which was not discharged by the revenue by adducing any evidence. It is also pointed out that the remand by the tribunal following its earlier order for the Assessment Year 2009-10 was wholly unnecessary as for the Assessment Year 2009-10 itself the Commissioner of Income Tax (Appeals) had returned the finding that investments in A. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .COM 236 (SC). 7. On the other hand, learned counsel for the revenue while inviting the attention of this court to Section 254(2) of the Act submitted that the tribunal has the power to rectify the mistake apparent on record. However, the tribunal in the instant case, has reviewed the order passed by it which is per se without jurisdiction. It is submitted that in the guise of rectification the entire order is reviewed. While referring to order dated 21.06.2017, it is pointed out that the tribunal had recorded the findings of fact on merits and for the limited purpose the mater was remitted. However, while passing the order dated 06.12.2017, the matter has been reviewed on merits and the finding recorded with regard to Section 36(1)(iii) is a pure finding of fact. 8. We have considered the submissions made by learned counsel for the parties and have perused the record. Twin issues arise for consideration in the appeal preferred by the assessee viz., disallowance of interest on borrowed capital insofar as it pertains to investment made in the foreign subsidiary of the assessee and disallowance of interest under Section 36 and disallowance of interest under Section 36(1)(iii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0. The Supreme Court in RADHASOAMI SATSANG Vs. COMMISSIONER OF INCOME-TAX (1992) 60 TAXMAN 248 (SC) has held that even though principles of res judicata do not apply to income tax proceedings, but where a fundamental aspect permeating through the different Assessment Years has been found as the fact one way or the other and the parties have allowed the position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in subsequent year. For the aforementioned reasons, the substantial question of law No.1 is answered in the negative and in favour of the assessee. 11. Now we may advert to the claim of the assessee in respect of upholding the disallowance of ₹ 7,97,70,326/- as interest on capital attributable to capital work in progress relying on proviso Section 36(1)(iii) of the Act. The assessee is in the business of manufacture and trade in coffee and allied products. It has more than 1000 coffee shops with brand name 'Caf Coffee Day'. The assessee had capital work in progress of ₹ 59,41,92,500/- as on 31.03.2010 which represented various coffee shops being set up which were in different stage ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to Section 36(1)(iii) (prior to its amendment in the year 2015), the legislature has employed the expression 'extension'. Therefore, prior to its amendment the extension of business was covered under Section 36(1)(iii) of the Act and not the expansion of business. In the instant case, the assessee has set up new coffee shops, which amounts to expansion of business and therefore, the bar under the proviso Section 36(1)(iii) is not applicable. It is only after the amendment of Section 36(1)(iii) of the Act with effect from 01.04.2016 the proviso can be attracted to the case of expansion of business which is not applicable to the facts of the case as the case of the assessee pertains to Assessment Year 2010-11. 14. For the subsequent Assessment Years i.e., 2011-12, 2012-13 and 2013-14, the Commissioner of Income Tax (Appeals) had granted relief to the assessee and had accepted the stand of the assessee that the setting up of new shops is a case of expansion of existing business and not extension of the same. However, on an appeal being preferred by the revenue, the tribunal though noted that a similar issue was decided in favour of the assessee in another assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
