Tamil Nadu Water Investment Co Ltd., CHENNAI V. ACIT, CHENNAI

CO 26/CHNY/2014

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9664 (ITAT-CHENNAI)
• Duration Of Justice: 3 month(s) 7 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 06-06-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 29-05-2014
• Assessment Year: 2010-2011
• Appeal Filed On: 27-02-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: R VISWANATHAN C A

Judgement Text

, , IN THE INCOME-TAX APPELLATE TRIBUNAL A BENCH, CH ENNAI. . , . !' !' !' !' , # # # # $ $ $ $ BEFORE SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI V. DURGA RAO, JUDICIAL MEMBER ./ I.T.A.NO.236 & 237/MDS/2014 # ' %' / ASSESSMENT YEAR :2009-10 & 2010-11 & C.O. NOS. 25 & 26/MDS/2014[IN I.T.A.NO.236 & 237/MDS/2014] THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE III(1), CHENNAI 600 034. VS. M/S. TAMILNADU WATER INVESTMENT CO. LTD., ANURAG, NO. 86, 1 ST FLOOR, POLYHOSE TOWERS, MOUNT ROAD, GUINDY, CHENNAI 600 032. [PAN : AABCT8153B] ( APPELLANT ) ( RESPONDENT/CROSS OBJECTOR ) DEPARTMENT BY : SHRI SHAJI P. JACOB, ADDL. CIT ASSESSEE BY : SHRI R. VISWANATHAN, C.A. & ' / DATE OF HEARING : 29.05.2014 (% & ' /DATE OF PRONOUNCEMENT : 06.06.2014 ) ) ) ) / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER : BOTH THE APPEALS FILED BY THE REVENUE AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DIRECTED AGAINST THE SEPARATE O RDERS OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) III, CHENNAI, BOTH DATED 09.10.2013 RELEVANT TO THE ASSESSMENT YEARS 2009-10 AND 2010-1 1. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE I S AN INVESTMENT COMPANY IN WATER RELATED PROJECTS PROMOTED JOINTLY BY THE GOVERNMENT OF I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .236 236236 236- -- -237 237237 237/M/ /M/ /M/ /M/1 11 14 44 4 & && & C.O. NOS. 25 & 26/M/14 C.O. NOS. 25 & 26/M/14 C.O. NOS. 25 & 26/M/14 C.O. NOS. 25 & 26/M/14 2 TAMIL NADU AND M/S. INFRASTRUCTURE LEASING AND FINA NCIAL SERVICES LIMITED. THE ASSESSEE HAD FILED ITS E-RETURN OF INCOME. IN T HE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2009-10, THE ASSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS BOOKED A SUM OF ` .9,54,29,996/- AS INTEREST AND FINANCE CHARGES IN THE PROFIT AND LOSS ACCOUNT AND ALSO CON FIRMED THAT IT HAD NOT PAID ANY INTEREST DURING THE FINANCIAL YEAR 2008-09. ACC ORDING TO THE TERMS OF LOAN, THE ASSESSEE HAD A MORATORIUM PERIOD OF FIVE YEARS FOR PAYING THE INTEREST. SO, THE SUM OF ` .9,54,29,996/- WAS HELD AS INTEREST PAYABLE, WHICH WAS NOT PAID DURING THE YEAR. ACCORDINGLY, THE ASSE SSING OFFICER DISALLOWED A SUM OF ` .9,54,29,996/- BY INVOKING SECTION 43B(D) OF THE IN COME TAX ACT. 3. WHEN THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LD. CIT(APPEALS), THE LD. CIT(APPEALS), BY FOLLOWING TH E ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 2004-0 5 TO 2008-09, ALLOWED THE APPEAL FILED BY THE ASSESSEE. 4. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 5. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ISSUED INVOLVED IN THIS APPEAL IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 IN I.T.A. NO. 1242/MDS/2012 VIDE ORDER DATE D 02.08.2012. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .236 236236 236- -- -237 237237 237/M/ /M/ /M/ /M/1 11 14 44 4 & && & C.O. NOS. 25 & 26/M/14 C.O. NOS. 25 & 26/M/14 C.O. NOS. 25 & 26/M/14 C.O. NOS. 25 & 26/M/14 3 6. ON THE OTHER HAND, THE LD. DR HAS DUTIFULLY SUP PORTED THE ORDER PASSED BY THE ASSESSING OFFICER. 7. WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE STAND TAKEN BY THE REVENUE IS THAT THE INTEREST TO BE PAID BY THE ASSESSEE HAD NO T BEEN CRYSTALLIZED IN THE YEAR UNDER CONSIDERATION. WE FIND THAT THE ISSUE IN VOLVED IN THIS APPEAL HAS ALREADY BEEN CONSIDERED BY THE TRIBUNAL IN ASSESSEE S OWN CASE FOR THE ASSESSMENT YEAR 2008-09 AND PASSED A DETAILED ORDER IN I.T.A. NO. 1242/MDS/2012 VIDE ORDER DATED 02.08.2012, WHEREIN THE TRIBUNAL HAS HELD AS UNDER: 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RE CORD, WE FIND THAT SIMILAR ISSUE HAD ARISEN BEFORE THE TRIBUNAL IN ASS ESSMENT YEAR 2003- 04 IN THE CASE OF ASSESSEE ITSELF AND THE TRIBUNAL VIDE ITS ORDER DATED 20.11.2007 PASSED IN I.T.A.NOS.29/MDS/2007 AND 2508 /MDS/2007, HAD ALLOWED THE CLAIM FOR DEDUCTION OF INTEREST BY OBSE RVING AS UNDER: 2.5 WE HAVE HEARD BOTH THE COUNSELS AND PERUSED THE RELEVANT RECORDS . IT WILL BE WORTHWHILE HERE TO REFER TO THE CLAUSE 1 . 2 OF ARTICLE I OF THE LOAN AGREEMENT WHICH IS RELEVANT T O THE ISSUE UNDER CONSIDERATION, AS UNDER : 'INTEREST:- TWICL SHALL PAY TO GOTN AND IL&FS THE RESPECTIVE INTEREST ON THE PRINC IPAL AMOUNT OF THE TERM FINANCE AVAILED OF AND OUTSTANDI NG FROM TIME TO TIME AT THE RATE AS MENTIONED IN THE SCHEDU LE I HERETO AND PAYABLE ON THE INTEREST PAYMENT DATE. TWICL SHA LL NOT BE REQUIRED TO PAY INTEREST UP TO THE EXPIRY OF THE MO RATORIUM PERIOD BEING 5 YEARS FROM THE OPERATION DATE. 'INTE REST NOT PAID SHALL BE ACCRUED AS ARREARS AND ADDED TO THE PRINCI PAL OUTSTANDING AT THE END OF EVERY CALENDAR QUARTER . THE INTEREST SHALL BE CALCULATED ON THE BASIS OF 365 DAYS A YEAR AND THE NUMBER OF DAYS ELAPSED WITH QUARTERLY RESTS: I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .236 236236 236- -- -237 237237 237/M/ /M/ /M/ /M/1 11 14 44 4 & && & C.O. NOS. 25 & 26/M/14 C.O. NOS. 25 & 26/M/14 C.O. NOS. 25 & 26/M/14 C.O. NOS. 25 & 26/M/14 4 (A) SUBSEQUENT TO THE END OF THE PERIOD STATED ABOV E, TWICL SHALL PAY TO GOTN AND IL&FS INTEREST ON THE RESPECT IVE PRINCIPAL AMOUNT OF THE TERM FINANCE OUTSTANDING FR OM TIME TO TIME QUARTERLY IN ARREARS IN EACH YEAR ON THE INTER EST PAYMENT DATE. 2.6 FROM A READING OF THE AFORESAID, IT IS QUITE AP PARENT THAT INTEREST HAS ACCRUED AND THE PAYMENT THEREOF HAS BE EN POSTPONED. IT IS ONLY UPON ACCRUAL THAT THIS INTEREST IS BEING ADDED TO THE PRINCIPAL AND THE PRINCIPAL AMOUNT IS CONSEQUENTLY INCREASING. THE REFERENCE OF THE LEARNED COMMISSION ER OF INCOME TAX (APPEALS) TO PROVISIONS OF EXPLANATION 3 (C) OF SECTION 43B(D) OF THE ACT IS NOT RELEVANT. SECTION 43(B) WHICH DEALS WITH CERTAIN DEDUCTIONS T O BE ONLY ON ACTUAL PAYMENT INCLUDES VIDE CLAUSE (D), 'ANY SUM PAYABLE BY THE ASSESSEE AS INTEREST ON ANY LOAN OR BORROWING FROM ANY PUBLIC FINANCIAL INSTITUTION (OR A STATE FINANCIAL CORPORATION OR A STATE INDUSTRIAL INVESTM ENT CORPORATION), IN ACCORDANCE WITH THE TERMS AND COND ITIONS OF THE AGREEMENT GOVERNING SUCH LOAN OR BORROWING' EXPLANATION 3(C) IN THIS REGARD READS AS UNDER.- 'FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED T HAT A DEDUCTION OF ANY SUM, BEING INTEREST PAYABLE UNDER CLAUSE (D) OF THIS SECTION, SHALL BE ALLOWED IF SUCH INTEREST HAS BEEN ACTUALLY PAID AND ANY INTEREST REFERRED TO IN THAT CLAUSE WH ICH HAS BEEN CONVERTED INTO A LOAN OR BORROWING SHALL NOT BE DEE MED TO HAVE BEEN ACTUALLY PAID.' 2.7 FROM A READING OF THE ABOVE, IT IS CLEAR THAT T HE SAID CLAUSE PERTAINS TO SUM PAYABLE BY THE ASSESSEE AS INTEREST ON LOAN OR BORROWING FROM ANY PUBLIC FINANCIAL INSTITUTION. PU BLIC FINANCIAL INSTITUTION WHICH HAS BEEN REFERRED TO IN EXPLANATION (4) OF THE INCOME TAX ACT WHICH IS DEFINED IN SECTI ON 4A OF THE COMPANIES ACT, 1956 READ AS UNDER:- '(1) EACH OF THE FINANCIAL INSTITUTIONS SPECIFIED I N THIS SUBSECTION SHALL BE REGARDED FOR THE PURPOSES OF THIS ACT, AS A PUBLIC FINANCIAL INSTITUTION, NAMELY:- I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .236 236236 236- -- -237 237237 237/M/ /M/ /M/ /M/1 11 14 44 4 & && & C.O. NOS. 25 & 26/M/14 C.O. NOS. 25 & 26/M/14 C.O. NOS. 25 & 26/M/14 C.O. NOS. 25 & 26/M/14 5 (I) THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATIO N OF INDIA LIMITED, A COMPANY FORMED AND REGISTERED UNDER THE INDIAN COMPANIES ACT, 1913 (7 OF 1913): (II) THE INDUSTRIAL FINANCE CORPORATION OF INDIA, E STABLISHED UNDER SECTION 3 OF THE INDUSTRIAL FINANCE CORPORATI ON ACT, 1948 (15 OF 1948); (III) THE INDUSTRIAL DEVELOPMENT BANK OF INDIA, EST ABLISHED UNDER SECTION 3 OF THE INDUSTRIAL DEVELOPMENT BANK OF INDIA ACT, 1964 (18 OF 1964); (IV) THE LIFE INSURANCE CORPORATION OF INDIA, ESTAB LISHED UNDER SECTION 3 OF THE LIFE INSURANCE CORPORATION ACT, 19 56 (31 OF 1956); (V) THE UNIT TRUST OF INDIA, ESTABLISHED UNDER SECT ION 3 OF THE UNIT TRUST OF INDIA ACT, 1963 (52 OF 1963). (VI) THE INFRASTRUCTURE DEVELOPMENT FINANCE COMPANY LIMITED, A COMPANY FORMED AND REGISTERED UNDER THIS ACT.; (2) SUBJECT TO THE PROVISIONS OF SUB-SECTION (1), T HE CENTRAL GOVERNMENT MAY, BY NOTIFICATION IN THE OFFICIAL GAZ ETTE, SPECIFY SUCH OTHER INSTITUTION AS IT MAY THINK FIT TO BE A PUBLIC FINANCIAL INSTITUTION: PROVIDED THAT NO INSTITUTION SHALL BE SO SPECIFIED UNLESS (I) IT HAS BEEN ESTABLISHED OR CONSTITUTED BY OR UN DER ANY CENTRAL ACT, OR (II) NOT LESS THAN FIFTY ONE PER CENT OF THE PAID U P SHARE CAPITAL OF SUCH INSTITUTION IS HELD OR CONTROLLED BY THE CENTR AL GOVERNMENT. 2.8 ADMITTEDLY, NEITHER THE GOVERNMENT OF TAMIL NAD U NOR INFRASTRUCTURE LEASING & FINANCIAL SERVICES LTD. IL &FS FALL WITHIN THE DEFINITION OF PUBLIC FINANCIAL INSTITUTI ON. HENCE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)S PREM ISE THAT EXPLANATION 3(C) OF SECTION 43B(D) IS APPLICABLE, I S ERRONEOUS. AS WE HAVE ALREADY HELD EARLIER THAT AS PER THE REA DING OF LOAN AGREEMENT, THE INTEREST AMOUNT HAS VERY MUCH ACCRUE D AND THE LIABILITY HAS CRYSTALLIZED. IN THIS VIEW OF THE MAT TER, WE HOLD THAT I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .236 236236 236- -- -237 237237 237/M/ /M/ /M/ /M/1 11 14 44 4 & && & C.O. NOS. 25 & 26/M/14 C.O. NOS. 25 & 26/M/14 C.O. NOS. 25 & 26/M/14 C.O. NOS. 25 & 26/M/14 6 ORDER OF THE AUTHORITIES BELOW IS LIABLE TO BE SET ASIDE AND ASSESSEE'S CLAIM BE ALLOWED. 5. THE DR COULD NOT POINT OUT ANY DISTINGUISHABLE FEATURES IN THE ABOVE QUOTED ORDER OF THE TRIBUNAL AND NEITHER HE C OULD BRING ANY MATERIAL ON RECORD TO SHOW THAT THE ABOVE ORDER OF THE TRIBUNAL WAS VARIED IN APPEAL BY ANY HIGHER FORUM. WE, THEREFORE , RESPECTFULLY FOLLOWING THE ABOVE QUOTED ORDER OF THE TRIBUNAL, C ONFIRM THE ORDER OF THE CIT(A) AND DISMISS THE GROUNDS OF APPEAL OF THE REVENUE. 8. THE DR COULD NOT CONTROVERT THE ABOVE FINDINGS OF THE TRIBUNAL AND HE COULD NOT BRING ANY MATERIAL ON RECORD TO SHOW THAT THE ABOVE ORDER OF THE TRIBUNAL WAS VARIED IN APPEAL BY ANY HIGHER FORUM. WE, THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE QUOTED ORDER OF TH E TRIBUNAL, CONFIRM THE ORDER OF THE CIT(A) AND DISMISS THE GROUNDS OF APPE AL OF THE REVENUE. 9. IN THE APPEAL FILED BY THE REVENUE FOR THE ASSE SSMENT YEAR 2010-11 ALSO, THE ISSUE RAISED BY THE REVENUE IS SIMILAR AN D THE FACTS ARE IDENTICAL AS RAISED IN THE ASSESSMENT YEAR 2009-10. HENCE, BY FO LLOWING OUR ABOVE DECISION IN THE ASSESSMENT YEAR 2009-10, THE APPEAL FILED BY THE REVENUE FOR THE ASSESSMENT YEAR 2010-11 ALSO STANDS DISMISS ED. 10. SO FAR AS CROSS OBJECTIONS FILED BY THE ASSESS EE FOR BOTH THE ASSESSMENT YEARS IS CONCERNED, THEY ARE IN SUPPORT OF THE ORDER PASSED BY THE LD. CIT(APPEALS) AND NO NEW ISSUE HAS BEEN RAIS ED BY THE ASSESSEE. SINCE WE HAVE CONFIRMED THE ORDER PASSED BY THE LD. CIT(APPEALS), BOTH THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSE D AS INFRUCTUOUS. I.T.A. I.T.A. I.T.A. I.T.A. NO NONO NOS SS S. .. .236 236236 236- -- -237 237237 237/M/ /M/ /M/ /M/1 11 14 44 4 & && & C.O. NOS. 25 & 26/M/14 C.O. NOS. 25 & 26/M/14 C.O. NOS. 25 & 26/M/14 C.O. NOS. 25 & 26/M/14 7 11. IN THE RESULT, BOTH THE APPEALS FILED BY THE R EVENUE AND THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 6 TH OF JUNE, 2014 AT CHENNAI. SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (V. DURGA RAO) JUDICIAL MEMBER CHENNAI, DATED, THE 06.06.2014 VM/- TO: THE ASSESSEE/A.O./CIT(A)/CIT/D.R.