TMI Blog2023 (5) TMI 786X X X X Extracts X X X X X X X X Extracts X X X X ..... ed from the members as the income of the assessee is self-contradictory since only when the deposits are considered as a loan, which was one of the allegations in the reasons recorded while reopening the assessment, the interest can be charged on it. Thus, when the assessee s business was considered to be in the nature of CIS, all the consequences in relation thereto must follow. Entries in the books of account are not decisive or determinative of the true nature of the entries. Therefore, the amount received by the assessee from its members, to the extent the same is treated as income in its books of account, is directed to be reduced while calculating the total income of the assessee, since the same is in the nature of capital receipt. NAC paid to the members also includes the repayment of membership amount collected from the members and the same has been claimed as a deduction by the assessee. Since the said repayment has already been claimed as a deduction, therefore the said amount need not be again reduced while calculating the total income of the assessee for the year under consideration. Accordingly, ground No. 4 raised in assessee s appeal is allowed. Disallowanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Assessee : Shri Hiro Rai For the Revenue : Smt. Riddhi Mishra a/w Smt. Mahita Nair ORDER The present batch of 8 appeals has been filed by the assessee challenging the separate impugned orders passed under section 250 of the Income Tax Act, 1961 ( the Act ) by the learned Commissioner of Income Tax (Appeals)-48, Mumbai [ learned CIT(A) ], for the assessment years 2009-10 to 2015-16. 2. Since the appeals pertain to the same assessee and the issues involved are also similar, therefore, as a matter of convenience, these appeals were heard together and are being disposed off by way of this consolidated order. Further, as the basic facts in all the appeals are the same, we have elaborately mentioned only the facts for the first assessment year (i.e., 2009-10) before us for the sake of brevity. However, if any particular issue is arising in any assessment year for the first time, facts pertaining to the same are discussed accordingly. 3. The assessee s appeals being ITAs No. 1425 to 1429/Mum./2018 are delayed by 2 days. In the affidavits sworn by the former Director of the assessee, it has been submitted that since the FIR was lodged against the company and its dire ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n-availing the eligible holidays. In addition to that, the members, at their absolute discretion, may exercise another option to go for premature encashment, termination of the membership right, and claim a refund of the amount, which is refundable to them in case of premature termination as prescribed in each scheme. The Securities and Exchange Board of India ( SEBI ) vide order dated 21/08/2015 held that schemes floated and operated by the assessee constitute Collective Investment Schemes ( CIS ) and operating such schemes without seeking registration is in violation of CIS Regulations. The SEBI, inter-alia, further directed the assessee to wind up the existing CIS and refund the money collected under the scheme to its investors within a period of 3 months from the date of the order. In an appeal against the aforesaid order passed by the SEBI, the Hon ble Securities Appellate Tribunal vide order dated 03/02/2016 dismissed the appeal filed by the assessee, however, granted 2 years to the assessee to refund the balance amount to its investors. In further appeal by the SEBI, the Hon ble Supreme Court vide order dated 18/07/2016 dismissed the appeal and clarified that the assessee sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... /05/2018, and properties of the assessee are also sold under the aegis of the Hon ble Supreme Court, therefore, there cannot be any dispute that the present case is not covered under the moratorium period, which commenced as per section 14 of the IBC, 2016 pursuant to the order passed by the Hon ble NCLT. 8. During the hearing, at the outset, the learned AR wishes to argue ground no.4 and submitted that once the relief is granted in respect of this ground, the other grounds raised in the appeal need not be gone into and can be kept open. The issue arising in ground no.4, raised in assessee s appeal, is pertaining to treating the deposits received from its members as non-taxable consistent with the Revenue s approach of treating the Non-Availing Compensation ( NAC ) paid by the assessee to its members as interest, which was disallowed under section 40(a)(ia) for non-deduction of tax under section 194A of the Act. 9. The brief facts of the case pertaining to this issue are: For the year under consideration, the assessee filed its return of income on 29/12/2010 declaring a total income of Rs.44,34,122. Pursuant to the search and seizure action conducted under section 132 of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oresaid order passed by the SEBI held that the assessee is engaged in the business of banking activity, wherein it is taking deposit from its clients and paying them the interest in the garb of various schemes of availing Hotel facilities or discounting the same. The AO further held that the amount paid or incurred by the assessee by way of entitlement for scheme benefits and facilities or discounts to the members, who are not availing of the hotelling facilities provided by the assessee, is in the nature of interest. Since the assessee did not deduct the TDS under section 194A on the said interest, the AO disallowed an amount of Rs.1,48,41,755 under section 40(a)(ia) of the Act. The AO excluded the return of the principal amount and interest amount below Rs.5000, while calculating the aforesaid disallowance. As regards the submission of the assessee that since part of deposits have been offered as income in the profit and loss account, therefore the same should be excluded from the income, the AO rejected the same on the basis that the assessee is simultaneously claiming the deduction on account of repayment of principal amount by debiting it under the head Non-Availing Compensati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee did not deduct tax under section 194A of the Act while making the aforesaid payment, disallowed the expenditure under section 40(a)(ia) of the Act after excluding the principal amount returned and the interest payment below Rs.5000. It is the plea of the assessee that since the business of the assessee is considered to be in the nature of CIS and the NAC paid by the assessee is treated as interest on deposits by members, therefore the amount received from the members cannot now be treated to be in the nature of income, since the same qualifies as capital receipt, and therefore, should accordingly be reduced while calculating the total income of the assessee. 12. During the hearing, the learned AR placed reliance upon the decision of the Hon ble Supreme Court in Peerless General Finance and Investment Company Limited vs CIT, [2019] 416 ITR 1(SC), wherein it was held that the subscription received from the public at large under a collective investment scheme is in the nature of capital receipt and not income. It is pertinent to note that in the facts of this case, the taxpayer had floated various schemes which require subscribers to deposit certain amounts by way of subsc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said repayment has already been claimed as a deduction, therefore the said amount need not be again reduced while calculating the total income of the assessee for the year under consideration. Accordingly, ground No. 4 raised in assessee s appeal is allowed. 14. Since the relief has been granted to the assessee in respect of ground no.4, in view of the submission of the learned AR, the other grounds raised in the present appeal are kept open. 15. In the result, the appeal by the assessee is allowed. ITA no.1426/Mum./2018 Assessee s Appeal - A.Y. 2010 11 16. In its appeal, the assessee has raised the following grounds: 1. The Ld. CIT (Appeals) erred in confirming the action of the Ld. D.C.1.T. of re-opening of assessment U/S 147/148 of Income Tax Act, 1961 without a valid reason for re- opening the assessment. 2. The Ld. C.I.T. (Appeals) erred in not directing to the Ld. D.C.I.T not to make provision of section 194A to non availing compensation. 3. The Ld. CIT (Appeals) erred in confirming the addition made by the Ld. D.C.I.T. Rs 18,74,87,000/- U/s 40(a)(ia) of the Income Tax Act, 1961 by treating the sale proceeds as deposits and further erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from sale proceeds and accordingly also erred in not directing the Ld. D.C.I.T. to reduce the income by the amount treated as Deposits which can not be treated as income if treated as deposit and can not be taxed. 5. The Ld. CIT (Appeals) erred in not directing the Ld. D.C.I.T. to follow the Mercantile system of accounting while treating part of the NAC as interest and Tax interest on accrual basis. The Appellant reserves the right to add, to alter and to amplify the Grounds of Appeal. 21. In this appeal also, the learned AR, at the outset, wishes to argue ground no.4 and submitted that once the relief is granted in respect of this ground, the other grounds raised in the appeal need not be gone into and can be kept open. In respect of ground no.4, the Learned AR adopted his arguments as were made in the appeal for the assessment year 2009-10. Since a similar issue has been decided in assessee s appeal for the assessment year 2009-10, the decision rendered therein shall apply mutatis mutandis. As a result, grounds no.4 raised in assessee s appeal is allowed. 22. Since the relief has been granted to the assessee in respect of ground no.4, in view of the submission of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he addition and principal amount repaid, and interest payment less than Rs.5000 has not been excluded. Since the issue requires verification, therefore we deem it appropriate to remand the same to the file of AO for de novo adjudication after necessary verification and to consider the correct amount. As a result, ground no.2.d is allowed for statistical purposes. 27. Since the relief has been granted to the assessee in respect of ground no.2.c, in view of the submission of the learned AR, the remaining grounds raised in the present appeal are kept open. 28. In the result, the appeal by the assessee is allowed for statistical purposes. ITA no.1013/Mum./2019 Assessee s Appeal - A.Y. 2013 14 29. In its appeal, the assessee has raised the following grounds: 1. The Ld. C.I.T. erred (Appeals) in confirming the action of the Ld. D.C.I.T. of re-opening of assessment U/S 147/148 of the Income Tax Act, 1961 without a valid reason for re-opening the assessment. 2.a The Ld. C.I.T. (Appeals) erred in not directing to the Ld. D.C.I.T not to make applicable the provision of section availing (NAC). 2.b The Ld. CIT (Appeals) erred in confirming the addition ma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessee s Appeal - A.Y. 2013 14 34. In its appeal, the assessee has raised following grounds: 1. The Ld. CIT(Appeals) erred in confirming the addition made by Ld. A.C.I.T. on account of disallowance of Rs. 2,59,40,898/- U/s14A r.w. Rule 8D. 2. The Ld. CIT (Appeals) erred in holding that expenses attributed towards earning exempt income even when there were no nexus. 3. The Ld. CIT (Appeals) erred in considering the facts that the major investments were made for acquiring strategic business stake. 4. The Appellant reserves the right to add, to alter and to amplify the Grounds of Appeal. 35. The only grievance of the assessee, in the present appeal, is pertaining to disallowance made under section 14A r/w Rule 8D of the Income Tax Rules, 1962. 36. The brief facts of the case pertaining to this issue are: For the year under consideration, the assessee filed its return of income on 03/04/2014 declaring a total income of Rs.6,83,32,200. During the assessment proceedings, it was observed that the assessee has earned a dividend income of Rs.5,25,985, which was claimed as exempt. It was also observed that the assessee in its profit and loss account has d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. D.C.I.T not to make provision of section 194A to non availing compensation. 2. The Ld. CIT (Appeals) erred in confirming the addition made by the Ld. D.C.I.T. Rs.148,01,76,202/- U/s 40(a)(ia) of the Income Tax Act, 1961 by treating the sale proceeds as deposits and further erred in confirming the treatment of the part of non availing compensation as interest. 3. The Ld. CIT (Appeals) erred in not directing the Ld. D.C.1.T. to remove such deemed deposits from sale proceeds and accordingly also erred in not directing the Ld. D.C.I.T. to reduce the income by the amount treated as Deposits which cannot be treated as income if treated as deposit and can not be taxed. 4. The Ld. CIT (Appeals) erred in not directing the Ld. D.C.I.T. to follow the Mercantile system of accounting while treating part of the NAC as interest and Tax interest on accrual basis. 5. The Ld. CIT(Appeals) erred in confirming the addition made by Ld. D.C.I.T. on account of disallowance of Rs. 5,90,62.655/- U/s. 14A r.w. Rule 8D. 6. The Ld. CIT (Appeals) erred in holding that expenses attributed towards earning exempt income even when there were no nexus. 7. The Ld. CIT (Appeals) erred ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce, Hon'ble CIT (Appeals) erred in confirming the which was amount wrongly considered by Ld. D.C.I.T. as additional amount of Non availing original amount excluding membership received Rs.477,37,39,847/- of as alleged interest instead of considering the amount Rs. 246,26,18,614/- correct of as claimed by the Appellant. 1.e The Ld. CIT (Appeals) erred in not directing the Ld. D.C.J.T. to Mercantile follow system the of accounting while treating part of the NAC as interest and Tax interest on accrual basis. 1.f The Ld. CIT (A) also erred in confirming the entire addition of Rs. 477,37,39,847/- for the purpose of disallowance U/s 40(a)(ia) of the Income Tax Act instead of considering only 30% of the total alleged interest (i.e. additional amount of NAC) as applicable for the assessment consideration. 2.a The Ld. CIT(Appeals) erred in confirming the addition made by Ld. D.C.I.T. on account of disallowance of Rs. 3,35,47,391/- U/s 14A r.w. Rule 8D. 2.b The Ld. CIT (Appeals) erred in holding that expenses attributed towards earning exempt income even when there were no nexus. 2.c The Ld. CIT (Appeals) erred in considering the facts that the major investments ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee s appeal is allowed. 50. As regards ground no.1.d, it is the plea of the assessee that the AO has considered the incorrect amount while making the addition and principal amount repaid, and interest payment less than Rs.5000 has not been excluded. Since the issue requires verification, therefore we deem it appropriate to remand the same to the file of AO for de novo adjudication after necessary verification and to consider the correct amount. As a result, ground no.1.d is allowed for statistical purposes. 51. The issue arising in ground no.1.f, raised in assessee s appeal, is pertaining to considering 30% of NAC for the purpose of disallowance under section 40(a)(ia) of the Act instead of the entire amount. 52. The learned CIT(A), vide impugned order, held that the amendment to section 40(a)(ia) of the Act by Finance (No.2) Act, 2014 is with effect from 01/04/2015 and since this is the substantive provision, therefore the amendment will come into force from the previous year starting on 01/04/2015 i.e. previous year 2015-16 and assessment year 2016-17. Accordingly, the learned CIT(A) dismissed the appeal filed by the assessee on this issue and held that the benefit of ..... X X X X Extracts X X X X X X X X Extracts X X X X
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