ACIT, CHENNAI V. M/s. Tamilnadu Water Investment Co.Ltd., CHENNAI

ITA 1242/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64097 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-08-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 01-06-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: R VISWANATHAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI [BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND SHRI SATBEER SINGH GODARA, JUDICIAL MEMBER] I.T.A.NO.1242/MDS/2012 ASSESSMENT YEAR : 2008-09 THE ACIT CIRCLE III(1) CHENNAI VS M/S TAMILNADU WATER INVESTMENT CO. LTD ANURAG 15, MURRAYS GATE ROAD ALWARPET, CHENNAI 600 018 [PAN AABCT 8153B] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SHAJI P. JACOB, ADDL. CIT RESPONDENT BY : SHRI R.VISWANATHAN DATE OF HEARING : 02-08-2012 DATE OF PRONOUNCEMENT : 02-08-2012 O R D E R PER N.S. SAINI, ACCOUNTANT MEMBER THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE CIT(A)-III, CHENNAI, DATED 24.02.2012. 2. THE DR SUBMITTED THAT THE REVENUE HAS TAKEN THREE G ROUNDS OF APPEAL. THE ONLY ISSUE INVOLVED IN THIS APPEAL IS THAT THE CIT(A) HAS ERRED IN DELETING THE INTEREST PAYABLE ON LOANS WHI CH HAD NOT CRYSTALLIZED NOR ASCERTAINED. HE SUBMITTED THAT THE ASSESSEE HAD DEBITED A SUM OF ` 8,87,04,686/- AS INTEREST ON LOAN IN THE PROFIT & I.T.A.NO.1242/12 :- 2 -: LOSS ACCOUNT. DURING THE COURSE OF ASSESSMENT PROC EEDINGS, IT WAS STATED THAT THIS WAS THE INTEREST PAYABLE TO THE GO VERNMENT OF TAMILNADU AND M/S INFRASTRUCTURE LEASING AND FINANC IAL SERVICES. THE ASSESSEE CLAIMED THAT IT HAD REPAID AN AMOUNT OF ` 4,44,46,377/-. IT WAS ALSO SUBMITTED THAT ACCORDING TO THE TERM OF LO AN, THE ASSESSEE HAS A MORATORIUM PERIOD OF FIVE YEARS FOR PAYING T HE INTEREST, BUT THE ASSESSEE HAS CLAIMED THE ENTIRE AMOUNT OF INTEREST OF ` 8,87,04,686/- . THE ASSESSING OFFICER, AFTER GIVING CREDIT TO THE A MOUNT OF ` 4,44,46,377/- ACTUALLY PAID, DISALLOWED THE BALANCE AMOUNT OF ` 4,42,53,309/- BY INVOKING SECTION 43B(D) OF THE ACT . HE SUBMITTED THAT THE CIT(A) HAS DELETED THE ADDITION BY FOLLOWI NG THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEA R 2003-04 IN I.T.A.NOS.29/MDS/2007 AND 2508/MDS/2007, DATED 20 .11.2007. HE SUPPORTED THE ORDER OF THE ASSESSING OFFICER. 3. ON THE OTHER HAND, THE A.R OF THE ASSESSEE FILED B EFORE US A COPY OF THE ORDER OF THE TRIBUNAL IN ASSESSMENT YEA R 2003-04 IN I.T.A.NOS.29/MDS/2007 AND 2508/MDS/2007 AND SUBMITT ED THAT THE CIT(A) HAS DELETED THE ADDITION BY FOLLOWING THE SA ID ORDER IN ASSESSEES OWN CASE, THEREFORE, THE ORDER OF THE CI T(A) SHOULD BE CONFIRMED AND THE APPEAL OF THE REVENUE SHOULD BE D ISMISSED. 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSI NG THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAIL ABLE ON RECORD, WE FIND THAT SIMILAR ISSUE HAD ARISEN BEFORE THE TRIBU NAL IN ASSESSMENT I.T.A.NO.1242/12 :- 3 -: YEAR 2003-04 IN THE CASE OF ASSESSEE ITSELF AND TH E TRIBUNAL VIDE ITS ORDER DATED 20.11.2007 PASSED IN I.T.A.NOS.29/MDS/2 007 AND 2508/MDS/2007, HAD ALLOWED THE CLAIM FOR DEDUCTION OF INTEREST BY OBSERVING AS UNDER: 2.5 WE HAVE HEARD BOTH THE COUNSELS AND PERUSED TH E RELEVANT RECORDS . IT WILL BE WORTHWHILE HERE TO REFER TO THE CLAUSE 1 . 2 OF ARTICLE I OF THE LOAN AGREEMENT WHICH IS RELE VANT TO THE ISSUE UNDER CONSIDERATION, AS UNDER : 'INTEREST:- TWICL SHALL PAY TO GOTN AND IL&FS THE R ESPECTIVE INTEREST ON THE PRINCIPAL AMOUNT OF THE TERM FINAN CE AVAILED OF AND OUTSTANDING FROM TIME TO TIME AT THE RATE AS M ENTIONED IN THE SCHEDULE I HERETO AND PAYABLE ON THE INTEREST PAYM ENT DATE. TWICL SHALL NOT BE REQUIRED TO PAY INTEREST UP TO T HE EXPIRY OF THE MORATORIUM PERIOD BEING 5 YEARS FROM THE OPERATION DATE. 'INTEREST NOT PAID SHALL BE ACCRUED AS ARREARS AND ADDED TO THE PRINCIPAL OUTSTANDING AT THE END OF EVERY CALENDAR QUARTER . THE INTEREST SHALL BE CALCULATED ON THE BASIS OF 365 D AYS A YEAR AND THE NUMBER OF DAYS ELAPSED WITH QUARTERLY RESTS: (A) SUBSEQUENT TO THE END OF THE PERIOD STATED ABO VE, 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 APPARENT THAT INTEREST HAS ACCRUED AND THE PAYMENT THEREOF HAS B EEN 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 INSTIT UTION (OR A STATE FINANCIAL CORPORATION OR A STATE INDUST RIAL INVESTMENT CORPORATION), IN ACCORDANCE WITH THE TER MS AND CONDITIONS OF THE AGREEMENT GOVERNING SUCH LOAN OR BORROWING' I.T.A.NO.1242/12 :- 4 -: 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 INTE REST HAS BEEN ACTUALLY PAID AND ANY INTEREST REFERRED TO IN THAT CLAUSE WHICH HAS BEEN CONVERTED INTO A LOAN OR BORR OWING SHALL NOT BE DEEMED 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 INST ITUTION. PUBLIC FINANCIAL INSTITUTION WHICH HAS BEEN REFERRE D TO IN EXPLANATION (4) OF THE INCOME TAX ACT WHICH IS DEFI NED IN SECTION 4A OF THE COMPANIES ACT, 1956 READ AS UNDE R:- '(1) EACH OF THE FINANCIAL INSTITUTIONS SPECIFIED I N THIS SUB- SECTION SHALL BE REGARDED FOR THE PURPOSES OF THIS ACT, AS A PUBLIC FINANCIAL INSTITUTION, NAMELY:- (I) THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATION OF INDIA LIMITED, A COMPANY FORMED AND REGISTERED UNDER THE INDIAN COMPANIES ACT, 1913 (7 OF 1913): (II) THE INDUSTRIAL FINANCE CORPORATION OF INDIA, ESTABLISHED UNDER SECTION 3 OF THE INDUSTRIAL FINANCE CORPORAT ION ACT, 1948 (15 OF 1948); (III) THE INDUSTRIAL DEVELOPMENT BANK OF INDIA, ES TABLISHED UNDER SECTION 3 OF THE INDUSTRIAL DEVELOPMENT BANK OF INDIA ACT, 1964 (18 OF 1964); (IV) THE LIFE INSURANCE CORPORATION OF INDIA, ESTA BLISHED UNDER SECTION 3 OF THE LIFE INSURANCE CORPORATION A CT, 1956 (31 OF 1956); (V) THE UNIT TRUST OF INDIA, ESTABLISHED UNDER SEC TION 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 THI S ACT.; (2) SUBJECT TO THE PROVISIONS OF SUB-SECTION (1), THE 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.T.A.NO.1242/12 :- 5 -: (I) IT HAS BEEN ESTABLISHED OR CONSTITUTED BY OR U NDER 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 CE NTRAL 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 INSTITUTION. HE NCE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)S PREMISE THAT EXPLANATION 3(C) OF SECTION 43B(D) IS APPLICABLE, IS ERRONEOUS. AS WE HAVE ALREADY HELD EARLIER THAT AS PER THE READIN G OF LOAN AGREEMENT, THE INTEREST AMOUNT HAS VERY MUCH ACCRUE D AND THE LIABILITY HAS CRYSTALLIZED. IN THIS VIEW OF THE MA TTER, WE HOLD THAT 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 FEA TURES IN THE ABOVE QUOTED ORDER OF THE TRIBUNAL AND NEITHER HE COULD BRING ANY MATERIAL ON RECORD TO SHOW THAT THE ABOVE ORDER OF THE TRIBUNAL WAS VARIED IN APPEAL BY ANY HIGHER FORUM. WE, THEREFOR E, 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. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING ON THURSDAY, THE 02 ND OF AUGUST, 2012, AT CHENNAI. SD/- SD/- (SATBEER SINGH GODARA) JUDICIAL MEMBER (N.S.SAINI) ACCOUNTANT MEMBER DATED: 02 ND AUGUST, 2012 RD COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR