Shri Raghunandan Prabhakar, CHENNAI V. ACIT, CHENNAI

ITA 1421/CHNY/2003

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58086 (ITAT-CHENNAI)
• Duration Of Justice: 8 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2000-2001
• Appeal Filed On: 07-07-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: T BANUSEKAR
• Keywords: Reopening of assessment
• Section: 143(3); 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI BEFORE DR. O.K.NARAYANAN, VICE-PRESIDENT AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ITA NOS.1417, 1418, 1419, 1420 & 1421(MDS)/2003 ASSESSMENT YEARS : 1995-96, 1997-98 TO 2000-01 SHRI RAGHUNANDAN PRABHAKAR, 51, III MAIN RD., GANDHI NAGAR, ADYAR, CHENNAI-600 020. PAN/GIR 27772-R. VS. THE ASSISTANT COMMISSIONER OF INCOME-TAX, RANGE IV, CHENNAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI T.BANUSEKAR, C.A. RESPONDENT BY:SHRI SHAJI P JACOB, IRS, COMMI SSIONER OF IT DATE OF HEARING : 15 TH MARCH, 2012 DATE OF PRONOUNCEMENT : 16 TH MARCH, 2012 O R D E R PER DR.O.K.NARAYANAN, VICE-PRESIDENT: THIS IS A BUNCH OF FIVE APPEALS. ALL THE APPEALS ARE FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEARS ARE 1995-96, 1997-98, 1998-99, 1999-2000 AND 2000-01. ALL THESE APPEALS ARE DIRECTED AGAINST THE COMMON ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX(APPEALS)-VIII AT CHENNAI ON - - ITA 1417 TO 1421 OF 2003 2 27-5-2003 AND ARISE OUT OF THE ASSESSMENTS COMPLETE D UNDER SECTION 143(3) OF THE INCOME-TAX ACT, 1961. 2. THESE APPEALS WERE IN FACT ONCE CONSIDERED BY T HIS BENCH OF THE TRIBUNAL THROUGH THEIR ORDER DATED 14- 10-2003. THREE GROUNDS HAVE BEEN RAISED BEFORE THE TRIBUNAL. THE FIRST GROUND IS THAT THE REASSESSMENTS IN THESE CASES ARE NOT SUSTAINABLE IN LAW, AS NOTICES UNDER SECTION 148 HA VE BEEN ISSUED WITHOUT JURISDICTION. THE SECOND ISSUE IS T HAT THE ASSESSING OFFICER HAS ERRED IN ADOPTING THE HOUSE P ROPERTY INCOME OF THE ASSESSEE AT 50%, INSTEAD OF ONE-THIRD . THE THIRD ISSUE IS THAT THE ASSESSING OFFICER HAS ERRED IN DI SALLOWING A PART OF THE INTEREST, WHICH HAS BEEN CLAIMED BY THE ASSE SSEE AS DEDUCTION IN COMPUTING THE HOUSE PROPERTY INCOME. 3. IN THE ABOVE STATED ORDER, THE TRIBUNAL EARLIER ALLOWED THE CONTENTION OF THE ASSESSEE REGARDING TH E REOPENING OF ASSESSMENTS AND SET ASIDE THE INCOME-ESCAPING ASSESSMENTS. AS THE APPEALS WERE THUS DISPOSED OF, THE OTHER GROUNDS RAISED BY THE ASSESSEE ON MERITS, WERE NOT CONSIDERED. 4. THE REVENUE TOOK UP THE MATTER BEFORE THE HONB LE HIGH COURT OF MADRAS IN APPEALS. IN FACT, THE ASSE SSMENTS IN - - ITA 1417 TO 1421 OF 2003 3 THESE CASES WERE COMPLETED UNDER SECTION 143(1). T HEREFORE, RELYING ON THE JUDGMENT OF THE HONBLE SUPREME COUR T IN THE CASE OF ACIT VS. RAJESH JHAVERI STOCK BROKERS PVT. LTD., 291 ITR 500, THE HONBLE HIGH COURT REVERSED THE ORDER OF T HE TRIBUNAL AND UPHELD THE INCOME-ESCAPING ASSESSMENTS. THEREA FTER, THE HONBLE HIGH COURT REMANDED THE CASES BACK TO THE T RIBUNAL TO DISPOSE OF THE REMAINING GROUNDS ON MERITS. IT IS THUS THESE APPEALS HAVE BEEN PLACED BEFORE US FOR THE SECOND T IME. 5. AS SUCH, ONLY TWO ISSUES ARE TO BE CONSIDERED. THE FIRST ISSUE IS WHETHER THE ASSESSEE SHOULD BE ASSES SED FOR HALF SHARE OF THE INCOME OR ONE-THIRD SHARE OF THE INCOM E. THE SECOND ISSUE IS THAT WHETHER THE ASSESSEE SHOULD BE GIVEN DEDUCTION FOR THE ENTIRE AMOUNT OF INTEREST INCOME. 6. WE HEARD SHRI T.BANUSEKAR, THE LEARNED CHARTERE D ACCOUNTANT APPEARING FOR THE ASSESSEE, AND SHRI SHA JI P JACOB, THE LEARNED COMMISSIONER OF INCOME-TAX APPEARING FO R THE REVENUE. 7. AS FAR AS THE ISSUE OF THE CORRECT SHARE OF HOU SE PROPERTY INCOME ASSESSABLE IN THE HANDS OF THE ASSE SSEE IS CONCERNED, THE MATTER ALREADY STANDS CONCLUDED IN F AVOUR OF THE - - ITA 1417 TO 1421 OF 2003 4 ASSESSEE, IN VIEW OF THE COMMON ORDER PASSED BY THI S BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE, THROUGH THEIR ORDER DATED 25-5-2007. THEREFORE, WE DIRECT THE ASSESSING OFFI CER TO ADOPT ONE-THIRD SHARE AS THE PORTION ASSESSABLE IN THE HA NDS OF THE ASSESSEE. 8. THE SECOND GROUND IS REGARDING INTEREST. THE ASSESSEE HAD AVAILED LOANS FROM INDIAN BANK AND ANZ GRINDLAYS BANK TO FINANCE THE CONSTRUCTION OF THE H OUSE PROPERTY. AS THE ASSESSEE HAD MADE DEFAULT IN MAKING REGULAR REPAYMENTS OF LOANS, THE BANKS WERE CHARGING PENAL INTEREST NO T ONLY ON THE PRINCIPAL AMOUNT, BUT ALSO ON THE UNPAID PORTION OF THE INTEREST DUE THEREON. IT IS THE CASE OF THE REVENUE THAT IN TEREST ON INTEREST CANNOT BE ALLOWED AS A DEDUCTION. THE REV ENUE HAS RELIED ON THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF SHEW KISSEN BHATTER VS CIT, 89 ITR 61. IN THAT DECISION, THE COURT HAS HELD THAT WHERE THE ASSESSEE IS LIABLE TO PAY COMPOUND INTEREST, WHAT THE ASSESSEE IS ENTITLED TO DEDUCT IS THE INTEREST PAYABLE BY HIM ON THE CAPITAL CHARGE AND N OT THE ADDITIONAL INTEREST, WHICH, BECAUSE OF HIS FAILURE TO PAY THE - - ITA 1417 TO 1421 OF 2003 5 INTEREST ON THE DUE DATE, HAS TO BE CONSIDERED AS P ART OF THE PRINCIPAL. 9. ON THE OTHER HAND, THE ASSESSEE RELIES ON THE DECISION OF THE HONBLE MADRAS HIGH COURT IN THE CA SE OF VISWAPRIYA FINANCIAL SERVICES AND SECURITIES LTD. V S. CIT, 258 ITR 496. THE LEARNED CHARTERED ACCOUNTANT HAS POIN TED OUT THAT THE SUPREME COURT DECISION RELIED ON BY THE REVENUE WAS RENDERED IN THE CONTEXT OF THE INCOME-TAX ACT, 1922 , WHEREIN THE TERM INTEREST WAS NOT DEFINED. HE EXPLAINED THAT , ON THE OTHER HAND, THE TERM INTEREST HAS BEEN GIVEN A VERY WID E MEANING IN THE INCOME-TAX ACT, 1961, AS SEEN IN SECTION 2(28A) . 10. WE CONSIDERED THE MATTER IN DETAIL. THE DECIS ION OF THE HONBLE SUPREME COURT IN THE CASE OF SHEW KISSE N BHATTER VS. CIT, 89 ITR 61, WAS RENDERED IN THE CONTEXT OF THE INCOME- TAX ACT, 1922. THE HONBLE JURISDICTIONAL HIGH COU RT HAS THEREAFTER DECIDED THE SCOPE OF DEDUCTION AVAILABLE TOWARDS INTEREST, IN THE CONTEXT OF THE INCOME-TAX ACT, 196 1. THE DECISION HAS BEEN RENDERED IN THE CASE OF VISWAPRIYA FINANCI AL SERVICES AND SECURITIES LTD VS. CIT, 258 ITR 496. IN THE SA ID JUDGMENT, THE HONBLE MADRAS HIGH COURT HAS CONSIDERED THE SC OPE AND - - ITA 1417 TO 1421 OF 2003 6 EXTENT OF INTEREST DEFINED IN SECTION 2(28A) OF T HE INCOME-TAX ACT, 1961. THE COURT HELD THAT IT IS OF WIDE AMPLI TUDE. 11. THE TERM INTEREST IS DEFINED AS INTEREST PAY ABLE ON MONEYS BORROWED IN ANY MANNER OR INTEREST PAYABLE O N DEBT INCURRED. THE EXPRESSION MONEYS BORROWED OR DEBT INCURRED INCLUDES A DEPOSIT, CLAIM OR OTHER SIMILAR RIGHT OR OBLIGATION. IT ALSO INCLUDES ANY SERVICE FEE OR OTHER CHARGE IN RE SPECT OF MONEYS BORROWED OR DEBT INCURRED, WHICH ALSO INCLUD ES DEPOSIT OR CLAIM OR OTHER SIMILAR RIGHT OR OBLIGATION AND A LSO IN RESPECT OF ANY CREDIT FACILITY WHICH HAS NOT BEEN UTILIZED BY AN ASSESSEE. THIS WIDE RANGING DEFINITION GIVEN TO THE TERM INT EREST IN THE INCOME-TAX ACT, 1961 COVERS ALMOST ALL INTEREST AND OTHER FINANCE CHARGES PAYABLE BY AN ASSESSEE ON ACCOUNT OF MONETA RY AND FINANCIAL LIABILITIES INCURRED. THE HONBLE HIGH C OURT OBSERVED THAT THE ABOVE STATUTORY OBLIGATION REGARDS EVEN TH E AMOUNTS WHICH MAY NOT OTHERWISE BE REGARDED AS INTEREST AS INTEREST FOR THE PURPOSE OF THE ACT. EVEN AMOUNTS PAYABLE IN TR ANSACTIONS WHERE MONEY HAS NOT BEEN BORROWED OR DEBT HAS NOT B EEN INCURRED ARE ALSO BROUGHT WITHIN THE SCOPE OF THE D EFINITION AS IN THE CASE OF A SERVICE FEE PAID IN RESPECT OF A CR EDIT FACILITY - - ITA 1417 TO 1421 OF 2003 7 WHICH HAS NOT BEEN UTILIZED. EVEN IN A CASE WHERE THERE IS NO RELATIONSHIP OF DEBTOR AND CREDITOR OR BORROWER AND LENDER, IF THE PAYMENT IS MADE IN ANY MANNER IN RESPECT OF ANY MON EYS RECEIVED AS DEPOSITS OR ON MONEY CLAIMS OR RIGHTS O R OBLIGATIONS INCURRED IN RELATION TO MONEY, SUCH PAYMENT IS, BY THE STATUTORY DEFINITION REGARDED AS INTEREST. 12. ON GOING THROUGH THE JUDGMENT OF THE HONBLE MADRAS HIGH COURT, AS STATED ABOVE, THE EXTENDED SC OPE OF THE TERM INTEREST UNDER THE INCOME-TAX ACT, 1961 IS V ERY WIDE AND INCLUSIVE AND, THEREFORE, APPLIES EVEN TO THE INTER EST PAYABLE ON INTEREST. THIS IS BECAUSE ANY SORT OF OBLIGATION P ERTAINING TO THE MONETARY LIABILITY IS CONSIDERED AS INTEREST AS PRO VIDED IN SECTION 2(28A) OF THE INCOME-TAX ACT, 1961. 13. THEREFORE, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM OF DEDUCTION MADE BY THE ASSESSEE IN RESP ECT OF INTEREST. 14. IN RESULT, THESE APPEALS FILED BY THE ASSESSEE ARE ALLOWED TO THE ABOVE EXTENT. - - ITA 1417 TO 1421 OF 2003 8 ORDER PRONOUNCED ON FRIDAY, THE 16 TH OF MARCH, 2012 AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (DR. O.K.NARAYANAN) JUDICIAL MEMBER VICE-PRESIDENT CHENNAI, DATED THE 16 TH MARCH, 2012. V.A.P. COPY TO: APPELLANT/RESPONDENT/CIT/CIT (A)/DR/GF