ACIT, Circle-16(2), Hyd, Hyderabad V. Maruti Securities Ltd., Hyd, Secunderabad

ITA 1263/HYD/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 98795 (ITAT-HYDERABAD)
• Duration Of Justice: 1 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 04-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B KURMI NAIDU
• Assessee Lawyers: K A SAI PRASAD
• Keywords: Notional interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SHRI D.MANMOHAN, VICE PRESIDENT AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO.1263/HYD/2015 : ASSESSMENT YEARS 2011- 12 ASST. COMMISSIONER OF INCOME - TAX CIRCLE 16(2), HYDERABAD V/S M/S. MARUTI SECURITIES LTD., HYDERABAD (PAN - AABCM 3651 M) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI B.KURMI NAIDU DR RESPONDENT BY : SHRI K.A.SAI PRASAD DATE OF HEARING 17.12.2015 DATE OF PRONOUNCEMENT 17.12.2015 O R D E R PER D.MANMOHAN, VICE PRESIDENT : THIS APPEAL IS FILED AT THE INSTANCE OF THE REVEN UE AND IT PERTAINS TO ASSESSMENT YEAR 2011-12. 2. THE ONLY GROUND URGED BY THE REVENUE READS AS U NDER- 1. .. 2. THAT THE LD. CIT(A)-4 ERRED IN DELETING THE INT EREST OF RS.96,46,509 AND RS.30,20,400 ON LOANS AND ADVANCES MADE BY THE ASSESSEE. 3 . 3. AS COULD BE NOTICED FROM THE ORDER PASSED BY T HE CIT(A), THE ASSESSING OFFICER ADDED AN AMOUNT OF RS.96,46,5 09 BEING NOTIONAL INTEREST ON ADVANCES GIVEN TO THIRD PARTIES. CASE OF THE ASSESSEE WAS THAT THOUGH THE ASSESSEE ENTERED INTO AN AGREEMENT FOR CHARGING INTEREST AT 8% IN RESPECT OF ADVANCES MADE TO SUCH PARTIES, IN VIEW OF THE FINANCIAL CONDITION OF THE BORROWERS, THE ASSES SEE COMPANY AGREED TO WAIVE THE INTEREST AND ACCORDINGLY ENTERED INTO FRESH LOAN DOCUMENTATION DATED 1.4.2009, WHEREBY NO INTEREST W AS CHARGED. THOUGH COPIES OF THOSE AGREEMENTS WERE SUBMITTED BE FORE THE ITA NO.1263/HYD/2015 M/S. MARUTI SECURITIES LTD., HYDERABAD 2 ASSESSING OFFICER, ASSESSING OFFICER DISREGARDED T HE AGREEMENTS AND SOUGHT TO ADD THE NOTIONAL INTEREST TO THE RETURNED LOSS. HE IGNORED THE SUBSEQUENT AGREEMENT ENTERED INTO ON 1.4.2009, WHICH IS APPLICABLE TO THE ASSESSMENT YEAR UNDER CONSIDERAT ION. 4. SIMILARLY, ASSESSING OFFICER ADDED AN AMOUNT O F RS.30,20,400 BEING NOTIONAL INTEREST AT 8%, ON ADVA NCES MADE BY THE ASSESSEE COMPANY TO THIRD PARTIES. CASE OF THE AS SESSEE WAS THAT THE ADVANCES ARE GIVEN DURING THE COURSE OF ITS BUSINES S AND THERE IS NO AGREEMENT BETWEEN THE PARTIES FOR CHARGING OF INTER EST ON SUCH ADVANCES. THE ASSESSING OFFICER REJECTED THE CONTE NTION OF THE ASSESSEE AND SOUGHT TO BRING TO TAX THE NOTIONAL IN TEREST OF RS.30,20,400. 5. THE CIT(A) OBSERVED THAT UNDER IDENTICAL CIRCU MSTANCES THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES , IN ASSESSEES OWN CASE FOR THE EARLIER YEARS, SET ASIDE THE ADDIT ION, AND ACCORDINGLY DELETED THE IMPUGNED ADDITIONS. 6. AGGRIEVED BY THE ORDER PASSED BY THE CIT(A), R EVENUE IS IN APPEAL BEFORE US. 7. AT THE TIME OF HEARING, THE LEARNED COUNSEL FO R THE ASSESSEE PLACED BEFORE US COPIES OF THE ORDER OF TH E TRIBUNAL IN ASSESSEES OWN CASE DATED 5.9.2014, FOR THE ASSESSM ENT YEARS 2005- 06 AND 2006-07 (ITA NOS.468/HYD/2009 AND OTHERS), T O SUBMIT THAT THE ADVANCES COMPRISED OF LOANS WHICH ARE REPAYABLE ON DEMAND AND SHORT TERM ADVANCES, ON WHICH THERE WAS NO AGREEMEN T TO CHARGE INTEREST, IN WHICH EVENT, NOTIONAL INTEREST CANNOT BE BROUGHT TO TAX. HE ALSO ADVERTED OUR ATTENTION TO THE ORDER OF TRIB UNAL IN ASSESSEES ITA NO.1263/HYD/2015 M/S. MARUTI SECURITIES LTD., HYDERABAD 3 OWN CASE DATED 3.12.2014 FOR THE ASSESSMENT YEARS 2 007-08 AND 2008-09(ITA NOS.841 AND 1176/HYD/2012), TO SUBMIT T HAT EVEN THE PENALTY LEVIED UNDER IDENTICAL CIRCUMSTANCES WAS CA NCELLED BY THE TRIBUNAL. HE FURTHER SUBMITTED THAT THE FACT THAT AN AGREEMENT WAS ENTERED INTO BETWEEN THE PARTIES FOR NON-CHARGING O F INTEREST WAS NOT DISPUTED BY THE ASSESSING OFFICER. 8. ON THE OTHER HAND, LEARNED DEPARTMENTAL REPRES ENTATIVE RELIED UPON THE GROUND URGED BEFORE US AND SUBMITTE D THAT THE MANAGING DIRECTOR OF THE ASSESSEE COMPANY, IN HIS S OWN STATEMENT, ACCEPTED THAT THE ASSESSEE COMPANY HAS ADVANCED LOA NS FOR EARNING INTEREST INCOME AND ALSO OFFERED IT TO TAX IN ASSES SMENT YEAR 2006-07. HOWEVER, HE WAS UNABLE TO PROVE THAT THE SUBSEQUENT AGREEMENT, ENTERED INTO BETWEEN THE PARTIES, WITH EFFECT FROM 1.4.2009, WITH REGARD TO NON-CHARGING OF INTEREST, IS ILLEGAL OR N OT VALID. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND P ERUSED THE RECORD. IT IS WELL SETTLED THAT THERE IS NO PROVIS ION UNDER THE ACT TO BRING TO TAX NOTIONAL INTEREST, UNLESS THE INTEREST ACCRUES ON THE BASIS OF AN AGREEMENT EITHER ORAL OR IN WRITING. IN THE INSTANT CASE, THE ASSESSEE CATEGORICALLY SUBMITS THAT WITH EFFECT FRO M 1.4.2009, THERE WAS AN AGREEMENT NOT TO CHARGE INTEREST. SIMILARLY, WITH REGARD TO THE BUSINESS LOANS/ADVANCES GIVEN, THE COMPANY HAD ALWA YS STATED THAT THEY WERE SHORT-TERM LOANS ON WHICH INTEREST WAS NE VER CHARGED. THE CLAIM OF THE ASSESSEE WAS NOT CONTROVERTED BY THE R EVENUE BY BRINGING ON RECORD ANY EVIDENCE TO PROVE THAT THE THIRD PA RTIES HAVE PROVIDED FOR INTEREST OR PAID INTEREST ON SUCH SHORT-TERM AD VANCES. IT ALSO DESERVES TO BE NOTICED THAT UNDER IDENTICAL CIRCUMS TANCES, THE HYDERABAD BENCHES OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE EARLIER YEARS HELD THAT NOTIONAL INTEREST CANNOT BE BROUGHT TO TAX. ITA NO.1263/HYD/2015 M/S. MARUTI SECURITIES LTD., HYDERABAD 4 HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE, WE ARE OF THE VIEW THAT THE ORDER PASSED BY THE CIT(A) WHICH IS IN CO NSONANCE WITH THE VIEW TAKEN BY THE ITAT IN ASSESSEES OWN CASE FOR E ARLIER YEARS, DOES NOT CALL FOR ANY INTERFERENCE. WE, THEREFORE, UPHOL D THE ORDER PASSED BY THE CIT(A) AND DISMISS THE APPEAL FILED BY THE R EVENUE. PRONOUNCED ACCORDINGLY IN THE OPEN COURT. SD/- SD/- (INTURI RAMA RAO) (D.MANMOHAN) ACCOUNTANT MEMBER. VICE PRESIDENT DT/- 17 TH DECEMBER, 2015 COPY FORWARDED TO: 1. M/S. MARUTI SECURITIES LTD., PLOT NO.66, GROUND FLOOR, PARK VIEW ENCLAVE, MANOVIKAS NAGAR, SECUNDERABAD. 2. ASST. COMMISSIONER OF INCOME - TAX CIRCLE 16(2), HYDERABAD 3. 4. COMMISSIONER OF INCOME-TAX(APPEALS) IV, HYDERABAD PR. COMMISSIONER OF INCOME - TAX 4, HYDERABAD 5. DEPARTMENTAL REPRESENTATIVE ITAT, HYDERABAD B.V.S.