GROWMORE EXPORTS LTD, MUMBAI V. ASST CIT CEN CIR 31 CEN RG 7, MUMBAI

ITA 1220/MUM/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5819 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 21-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P DANIEL
• Keywords: Revised return
• Section: 234B; 115JB; 139(5)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE S/ SHRI B.R.BASKARAN (AM) & AMARJIT SINGH (JM) I.T.A. NO. 1220 /MUM /20 1 7 (ASSESSMENT YEAR 20 11 - 12 ) GROWMORE EXPORTS LIMITED 32, MADHULI DR. ANNIE BESANT ROAD MUMBAI - 400 018. PAN : AAACG4939P VS. ACIT CC - 31 CENTRAL RANGE - 7 NOW DCIT, CC - 4(3) ROOM NO. 1921 AIR INDIA BUILDING NAIRMAN POINT MUMBAI - 400 021. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI DHARMESH SHAH & SHRI DHAVAL SHAH DEPARTMENT BY DR. P. DANIEL DATE OF HEARING 28 . 6 . 2 01 8 DATE OF PRONOUNCEMENT 06 . 7 . 201 8 O R D E R PER B.R. BASKARAN (A M) : - THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 2.12.2015 PASSED BY THE LEARNED CIT(A) - 52, MUMBAI AND IT RELATES TO A.Y. 2011 - 12. 2. THE APPEAL IS BARRED BY LIMITATION BY 338 DAYS. LEARNED AR SUBMITTED THAT THE ASSESSEE IS A NOTIFIED ENTITY BELONGING TO HARSHAD MEHTA GROUP AND ALL ITS ACCOUNTS WERE BROUGHT UNDER CONTROL OF C USTODIAN APPOINTED UNDER CONTROL OF SPECIAL COURT (TRIAL OF O FFENCES RELATING TO TRANSACTIONS IN SECURITIES ) ACT, 1992. HENCE, FOR REMITTING TH E FILING FEES, THE ASSESSEE HAD TO MOVE THE CUSTODIAN TO RELEASE THE FUND S . SINCE THERE WAS DELAY IN RELEASING THE FUNDS FOR REMITTING FILING FEES, THE RE WAS CONSEQUENTIAL DELAY IN FILING AP PEAL BEFORE THE TRIBUNAL. THE LEARNED AR SUBMITTED THAT THE DELAY HAS OCCURRED FOR REASONS BEYOND THE CONTROL OF THE ASSESSEE AND ACCORDINGLY PRAYED THAT THE DELAY BE CONDONED. HE SUBMITTED THAT DELAY HAS OCCURRED IN FILING APPEALS BEFORE THE TRIBUNAL IN OTHER GROUP CASES ALSO FOR IDENTICAL REASONS . HE SUBMITTED THAT THE GROWMORE EXPORTS LIMITED 2 SMC BENCH OF THE TRIBUNAL HAS CONDONED THE DELAY, VIDE ITS ORDER DATED 1005 /MUM/2017 AND OTHERS PASSED IN THE CASE OF ORION TRAVELS PVT. LTD. AND OTHERS. HE SUBMITTED THAT THE DIVISION BEN CH OF THE ITAT HAS ALSO CONDONED THE DELAY IN THE CASE OF FORTUNE HOLDINGS PVT. LTD. (ITA NO. 939/MUM/2017 DATED 11.10.2017). 3. ON THE CONTRARY, THE LEARNED STANDING COUNSEL STRONGLY OPPOSED THE PLEA OF THE ASSESSEE. HE SUBMITTED THAT THESE ASSESSEE IS WELL AWARE OF DISRUPTION AND DIFFICULTIES SINCE THE DAY THEIR BUSINESS GOT SUSPENDED IN 1992. HE SUBMITTED THAT THE ASSESSEE SHOULD HAVE TAKEN ENOUGH PRECAUTION TO GET FUNDS FOR FILING THE APPEAL WELL IN ADVANCE. ACCORDINGLY, HE OPPOSED THE PETITION FILED BY THE ASSESSEE. 4. HAVING HEARD THE RIVAL SUBMISSIONS AND UPON CONSIDERING THE DECISION RENDERED BY THE COORDINATE BENCH IN ASSESSEES GROUP CASES, WE ARE OF THE VIEW THAT THE DELAY IN FILING APPEAL HAS OCCURRED FOR THE REASONS BEYOND THE CONTROL OF TH E ASSESSEE. ACCORDINGLY, WE CONDONE THE DELAY IN FILING THIS APPEAL AND PROCEED TO DISPOSE IT OFF ON MERIT S . 5. THE ASSESSEE HAS MOVED AN ADDITIONAL GROUND, WHEREIN THE ASSESSEE HAS REQUESTED FOR CAPITALIZATION OF INTEREST EXPENSES ATTRIBUTABLE TO SHARES AND SECURITIES, WHICH WAS NOT ALLOW ED AS DEDUCTION U/S. 57(III) OF THE ACT. THE ASSESSEE HAS MOVED AN APPLICATION, WHEREIN IT DID NOT PRESS THE ADDITIONAL GROUND. ACCORDINGLY, ADDITIONAL GROUND IS DISMISSED AS NOT PRESSED. 6. FIRST ISSUE RELATES TO DISALL OWANCE OF INTEREST EXPENDITURE AMOUNTING TO ` 146.74 LAKHS. WE HAVE NOTICED EARLIER THAT T HE ASSESSEE BELONGS TO HAR SHAD MEHTA GROUP OF CASES AND IT IS ONE OF THE NOTIFIED ENTIT IES UNDER THE ACT REFERRED ABOVE. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION DECLARING A TOTAL INCOME OF ` 99.47 LAKHS. THE ASSESSEE HAD DEBITED INTEREST EXPENDITURE OF ` 248.43 LAKHS WHICH CONSISTS OF INTEREST ON LOAN TAKEN FOR INVESTMENT OF ` 101.68 LAKHS AND INTEREST ON LOAN FOR TERM DEPOSITS OF ` 1 46.74 LA KHS. IN THE COMPUTATION OF INCOME, THE ASSESSEE HAD GROWMORE EXPORTS LIMITED 3 DISALLOWED INTEREST EXPENDITURE OF RS.248.43 LAKHS, REFERRED ABOVE. BEFORE THE ASSESS ING OFFICER, THE ASSESSEE PUT A CLAIM THAT THE INTEREST ON LOAN FOR TERM DEPOSITS OF ` 101.68 LAKHS SHOULD BE ALLOWED AS DEDUCTION AGAINST INTEREST INCOME OF ` 99.70 LAKHS OFFERED UNDER INCOME FROM OTHER SOURCES. THEREAFTER, THE ASSESSEE FILED A REVISED RETURN OF INCOME ON 10.12.2013, WHEREIN THE ASSESSEE CLAIMED DEDUCTION OF ` 146.74 LAKHS ON ACCOUNT OF INTER EST ON LOAN FOR TERM DEPOSITS AGAINST INTEREST INCOME SHOWN UNDER INCOME FROM OTHER SOURCES. THE ASSESSING OFFICER HAS ALSO HELD THAT REVISED RETURN OF INCOME FILED BY THE ASSESSEE IS BEYOND THE PERIOD PRESCRIBED UNDER SECTION 139(5) OF THE ACT ACCORDIN GLY, DID NOT RECOGNIZE THE SAME. THE ASSESSING OFFICER ACCORDINGLY REJECTED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE DECISION RENDERED BY HON'BLE SUPREME COURT IN THE CASE OF GOETZ INDIA LTD. (284 ITR 323), WHEREIN THE HONBLE APEX COURT HAS HELD THAT TH E NEW CLAIMS CAN BE MADE BY THE ASSESSEES THROUGH REVISED RETURN OF INCOME ONLY. IN THE INSTANT CASE, THOUGH THE CLAIM FOR DEDUCTION WAS MADE THROUGH A REVISED RETURN, YET IT WAS FILED BEYOND THE TIME LIMIT PRESCRIBED U/S 139(5) OF THE ACT AND HENCE THE A O HELD IT TO BE NOT VALID RETURN. IN THE APPELLATE PROCEEDINGS, THE LEARNED CIT(A) UPHELD THE VIEW TAKEN BY THE ASSESSING OFFICER IN NOT ADMITTING THE ADDITIONAL CLAIM FOR DEDUCTION OF INTEREST EXPENDITURE . THE LEARNED CIT(A), HOWEVER, ALSO PROCEEDED TO A DJUDICATE THE CLAIM OF INTEREST EXPENDITURE OF ` 146.74 LAKHS ON MERITS. THE LEARNED CIT(A) HELD THAT THERE IS NO DIRECT NEXUS BETWEEN THE LOAN TAKEN FOR INVESTMENT IN SHARES AND INVESTMENT MADE IN FDRS/TERM DEPOSITS. ACCORDINGLY, THE LEARNED CIT(A) REJECT ED THE CLAIM ON MERIT S ALSO. 7. THE LEARNED AR SUBMITTED THAT THE ASSESSEE HAD TAKEN LOAN FOR PURCHASE OF SHARES AND AFTER BECOMING THE NOTIFIED ENTITY, THE CUSTODIAN HAS DEPOSITED SALE PROCEEDS REALIZED ON SALE OF SHARES INTO FIXED DEPOSITS. ACCORDINGLY , HE SUBMITTED THAT THERE IS DIRECT NEXUS BETWEEN LOAN TAKEN AND DEPOSITS MADE. ACCORDINGLY, HE SUBMITTED THAT INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE SHOULD BE ALLOWED. THE LEARNED AR FURTHER SUBMITTED THAT SIMILAR GROWMORE EXPORTS LIMITED 4 CLAIM WAS MADE IN ALL GROUP CASES A ND THE TRIBUNAL IS RESTORING THE MATTER TO THE FILE OF THE LEARNED CIT(A) FOR EXAMINING IT AFRESH. 8. THE LEARNED AR FURTHER SUBMITTED THAT THE CO - ORDINATE BENCH OF TRIBUNAL HAS TAKEN A DIFFERENT VIEW IN THE ORDER PASSED IN THE CASE OF GROWMORE LEASING AN D INVESTMENTS LTD. AND OTHER (ITA NO. 1219/MUM/2017 AND OTHERS DATED 27.12.2017) , WHEREIN THE TRIBUNAL HAS ALLOWED THE CLAIM F OR DEDUCTION OF INTEREST EXPENDITURE AGAINST INTEREST INCOME EARNED FROM FIXED DEPOSITS. ACCORDINGLY, HE PRAYED THAT INTEREST EXPE NDITURE CLAIMED BY THE ASSESSEE MAY BE ALLOWED BY FOLLOWING THE ABOVE SAID DECISION OF THE TRIBUNAL. 9. ON THE CONTRARY, LEARNED DR SUBMITTED THAT THERE IS NO BASIS OR WRITTEN CONTRACT TO SUPPORT THE LIABILITY TO PAY INTEREST TO THE CREDITORS . HE FURTHER SUBMITTED THAT THE ASSESSEE HAS NOT PAID INTEREST TILL DATE AND IT IS ALSO NOT KNOWN AS TO WHETHER THE RECIPIENTS HAVE OFFERED INTEREST INCOME IN THEIR HANDS. FURTHER THE ASSESSEE HAS FAILED TO ESTABLISH NEXUS BETWEEN THE LOAN TAKEN AND DEPOSITS MADE. ACCO RDINGLY, LEARNED DR SUB MITTED THAT THE INTEREST CLAIM MADE BY THE ASSESSEE IS MERE A CONTINGENT LIABILITY AND HENCE THE SAME CANNOT BE ALLOWED AS DEDUCTION. 10. HAVING HEARD THE RIVAL CONTENTION ON THIS ISSUE, WE NOTICED THAT VARIOUS GROUP CONCERNS OF THE ASSESSEE HAVE ALSO MADE IDENTICAL CLAIM AND THE TRIBUNAL HAS RESTORED THE ISSUE TO THE FILE OF THE LEARNED CIT(A). IT IS THE CONTENTION OF THE ASSESSEE THAT THE CO - ORDINATE BENCH OF TRIBUNAL HAS ALLOWED THE CLAIM OF THE ASSESSEE IN THE CASE OF GROWMORE LE ASING AND INVESTMENTS LTD. (SUPRA), VIDE ITS ORDER DATED 27.12.2017 PASSED IN ITA NO. 1219/MUM/2017). 11. SINCE THE TRIBUNAL HAS BEEN RESTORING THE ISSUE TO THE FILE OF THE LEARNED CIT(A), WE PREFER TO RESTORE THIS ISSUE TO THE FILE OF THE LEARNED CIT(A) FOR ADJUDICATING IT AFRESH. WHILE ADJUDICATING THIS ISSUE , T HE LEARNED CIT(A) SHALL TAKE INTO ACCOUNT THE DECISION RENDERED BY THE COORDINATE BENCH OF THE GROWMORE EXPORTS LIMITED 5 TRIBUNAL IN THE CASE OF GROWMORE LEASING AND INVESTMENTS LTD. (SUPRA) AND TAKE APPROPRIATE DECISION IN ACCORDANCE WITH THE LAW. 12. THE NEXT ISSUE RELATES TO REJECTION OF REVISED RETURN OF INCOME AND FINANCIAL STATEMENT WHILE DETERMINING BOOK PROFIT U/S. 115JB OF THE ACT. IN THE PRECEDING PARAGRAPH, WE HAVE RESTORED THE ISSUE OF CLAIM FOR DEDUCTION OF INTEREST EXPENDITURE TO THE FILE OF THE LEARNED CIT(A). THE ABOVE SAID CLAIM WAS ALSO A NEW CLAIM MADE BY THE ASSESSEE ON THE BASIS OF REVISED FINANCIAL STATEMENTS FILED BY IT. ACCORDINGLY, WE ARE OF THE VIEW THAT THIS GROUND OF THE ASSESSEE ALSO NEEDS TO BE SET ASIDE TO THE FILE OF THE LEARNED CIT(A). ACCORDINGLY, WE RESTORE THIS ISSUE TO THE FILE OF THE LEARNED CIT(A) FOR ADJUDICATING IT AFRESH. 13. LAST ISSUE RELATES TO CHARGING OF INTEREST U/S. 234A, 234B & 234C OF THE ACT. IDENTICAL ISSUE HAS BEEN C ONSIDERED IN THE CASE OF ORION TRAVELS PVT. LTD. (REFERRED SUPRA) AND THE TRIBUNAL HAS RESTORED THE ISSUE TO THE FILE OF THE ASSESSING OFFICER BY FOLLOWING THE DECISION RENDERED BY THE DIVISION BENCH OF THE TRIBUNAL IN THE CASE OF FORTUNE HOLDINGS PVT. LTD . (ITA NO. 1462/MUM/201 1 AND OTHERS DATED 25.8.2015). F OR THE SAKE OF CONVENIENCE, WE EXTRACT BELOW THE ORDER PASSED BY THE TRIBUNAL IN THE CASE OF ORION TRAVELS PVT. LTD. (SUPRA): 9. THE NEXT COMMON ISSUE RELATES TO CHARGING OF INTEREST U/S 234A, 234B AND 234C OF THE ACT. IDENTICAL ISSUE HAS BEEN ADJUDICATED BY THE DIVISION BENCH IN THE CASE OF FORTUNE HOLDINGS P LTD (SUPRA) AND FOR THE SAKE OF CONVENIENCE, I EXTRACT BELOW THE RELEVANT OBSERVATIONS MADE IN THAT CASE: - 10. WITH REGARD TO THE SECOND LI MB, THE LD A.R SUBMITTED THAT THE INTEREST U/S 234B AND 234C OF THE ACT SHOULD BE COMPUTED, AFTER DEDUCTING THE TAX DEDUCTIBLE AT SOURCE FROM THE INCOME OF THE ASSESSEE. IN SUPPORT OF THIS CONTENTION, HE INVITED OUR ATTENTION TO THE DECISION RENDERED BY TH E CO - ORDINATE BENCH OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR AY 2001 - 02 TO 2003 - 04 (SUPRA). A PERUSAL OF THE ABOVE ORDER OF THE TRIBUNAL, WE NOTICE THAT THIS ISSUE HAS BEEN DISPOSED OF WITH THE FOLLOWING OBSERVATIONS: 8. APROPOS GROUND NO.4 OF ALL THE THREE APPEALS, THIS ISSUE WAS STATED TO BE COVERED BY THE DECISION OF TRIBUNAL IN GROUP CASE GROWMORE EXPORTS LIMITED 6 NAMELY M/S.TOPAZ HOLDING PVT. LTD. VS. ACIT, COPY OF THIS DECISION IS FILED AT PAGE 11 TO 13 OF THE PAPER BOOK. THIS ISSUE IS DECIDED VIDE PARA 3 TO 3.1 AND T HE SAME IS REPRODUCED AS UNDER: 3. NEXT GROUND OF APPEAL IS ABOUT LEVY OF INTEREST U/S. 234 OF THE ACT. BEFORE US, AR STATED THAT THE ASSESSEE WAS A NOTIFIED ENTITY, THAT THE PROVISIONS OF S. 234A, 234B AND 234C OF THE ACT WERE DEEMED TO HAVE COMPLIED W ITH, THAT THE ASSETS WERE ALREADY IN ATTACHMENT OF THE CUSTODIAN APPOINTED UNDER THE PROVISIONS OF THE SPECIAL COURTS ACT, THAT THE TRIBUNAL IN THE CASE OF THE APPELLANT AND SEVERAL OTHER ENTITIES 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 HONBLE 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. [26 4 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. HONBLE BOMBAY HIGH COURT HAS HELD THAT PROVISIONS OF SECTION 234A, 234B AND 234C WERE APPLICABLE TO THE NOTIFIED PERSON ALSO. THEREFORE, UPHOL DING 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 FI LE 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. GROWMORE EXPORTS LIMITED 7 8.1 IN THIS VIEW OF THE SITUATION, AFTER HEARING BOTH THE PARTIES THE ISSUE RAISED IN GROUND NO.4 FOR ALL THE THREE APPEALS IS RESTORED BACK TO THE FILE OF AO FOR FRESH ADJUDICATION IN THE MANNER AS DIRECTED IN THE AFOREMENTIONED CASE. WE DIRECT ACCORDINGLY. THIS GROUND IS ALLOWED IN PART IN FAVOUR OF THE ASSESSEE. BY FOLLOWING THE ABOVE SAID DECISIONS OF TRIBUNAL, WE SET ASIDE THE MATTER OF COMPUTATION OF INTEREST U/S 234A, 234B AND 234C TO THE FILE OF THE AO WITH SIMILAR DIRECTIONS. 14. CONSISTENT WITH THE VIEW TAKEN IN THE ABOVE SAID CASE, WE SET ASIDE THE MATTER OF COMPUTATION OF INTEREST U/S. 234A, 234B & 234C OF THE ACT TO THE FILE OF THE ASSESSING OFFICER WITH SIMILAR DIRECTION. 15. IN THE RESULT, APPEAL OF THE ASSESSEE IS TRE ATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER HAS BE E N PRONOUNCED IN THE COURT ON 6 . 7 .201 8 . SD/ - SD/ - (AMARJIT SINGH ) ( B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT ME MBER MUMBAI ; DATED : 6 / 7 / 20 1 8 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( SEN IOR PRIVATE SECRETARY ) PS ITAT, MUMBAI