VADINAR POWER COMPANY LTD, MUMBAI V. DCIT CIR 5(3), MUMBAI

ITA 1829/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56163 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Next Hearing Date: 27-09-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 08-03-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHANTAM BOSE
• Keywords: Proportionate interest; Revised return

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES F , MUMBAI BEFORE SHIRI R. S. PADVEKAR, J.M. AND SHRI RAJENDRA SINGH, A.M. ITA NO. : 1829/MUM/2010 ASSESSMENT YEAR : 2006-07 M/S. VADINAR POWER COMPANY LIMITED ESSAR HOUSE, 11, KESHAVRAO, KHADYE MARG, MAHALAXMI, MUMBAI-400 034 PAN NO: AAACV 5226 C VS. ACIT, CIRCLE - 5(3), AAYKAR BHAVAN, MUMBAI-400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIJAY MEHTA RESPONDENT BY : SHRI S HANTAM BOSE DATE OF HEARING : 12 .1 2 .2011 DATE OF PRONOUNCEMENT : 23.12.2011 ORDER PER RAJENDRA SINGH (AM) : THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 07.01.2010 OF THE LD. CIT(A)-9, MUMBAI FOR THE ASSE SSMENT YEAR 2006- 07. THE ONLY DISPUTE RAISED IN THIS APPEAL IS REGAR DING DEDUCTION ON ACCOUNT OF INTEREST WHILE COMPUTING THE INCOME FROM OTHER SOURCES. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE IN THE RETURN OF INCOME HAD SHOWN INTEREST INCOME OF `. 79,39,285/-. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSEE CLAIMED DEDUCTION ON ACCO UNT OF INTEREST PAID AGAINST THE INTEREST INCOME, ON THE BASIS OF A VERAGE RATE OF ITA NO : 1829/MUM/2010 M/S. VADINAR POWER COMPANY LTD. 2 BORROWING AMOUNTING TO `. 55,87,997/-. THE ASSESSEE EXPLAINED DURING THE ASSESSMENT PROCEEDINGS THAT IT WAS CONSTRUCTING A POWER PLANT, WHICH WAS NOT YET COMPLETED. THE ASSESSEE HAD RECEI VED INTEREST INCOME ON FIXED DEPOSIT, WHICH HAD BEEN REDUCED FRO M THE WORK-IN- PROGRESS. THE ASSESSEE AGREED THAT INTEREST INCOME WAS ASSESSABLE AS INCOME FROM OTHER SOURCES. HOWEVER, IT WAS SUBMITTE D THAT THE ASSESSEE HAD PAID INTEREST ON BORROWED FUND OF `. 292.00 CRORES AMOUNTING TO `. 11.79 CRORES. THE ASSESSEE ALSO HAD OWN FUNDS OF `. 66.65 CRORES. THE ASSESSEE, THEREFORE, CLAIMED PROP ORTIONATE INTEREST EXPENDITURE ON THE AVERAGE RATE OF INTEREST OF 3.29 %, WHICH CAME TO `. 55.87 LAKHS. THE ASSESSEEE POINTED OUT THAT SIMILAR CLAIM OF DEDUCTION ON ACCOUNT OF INTEREST ON PROPORTIONATE B ASIS HAD BEEN ALLOWED IN CASE OF ESSAR POWER LTD. BY THE TRIBUNAL . 2.1 THE AO, HOWEVER, DID NOT ACCEPT THE CONTENTIONS RAISED. IT WAS OBSERVED BY HIM THAT THE ASSESSEE COULD MAKE FRESH CLAIM ONLY BY WAY OF REVISED RETURN IN VIEW OF THE JUDGMENT OF HON'BL E SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. VS. CIT (195 TAXMAN 228). HE, THEREFORE, REJECTED THE CLAIM. IN APPEAL, CIT(A) OBSERVED THAT THE ASSESSEE HAD FIXED DEPOSIT OF `. 6.45 CRORES, WHICH WAS WELL WITHIN THE AMOUNT OF OWN FUNDS OF `. 66.65 CRORES. HE REFERRED TO THE JUDGMENT OF THE HO N'BLE HIGH COURT OF BOMBAY IN THE CASE OF RELIANCE UTILIT IES AND POWER LTD. (178 TAXMAN 135), IN WHICH IT WAS HELD THAT WHEN OW N AND BORROWED FUNDS WERE MIXED UP AND THE OWN FUNDS WERE MORE THA N THE INVESTMENT MADE, NO PRESUMPTION COULD BE RAISED THA T THE INVESTMENTS WERE MADE OUT OF BORROWED FUNDS. HE ALS O OBSERVED THAT THE ASSESSEE HAD NOT MADE ANY CLAIM BY WAY OF REVIS ED RETURN. HE, THEREFORE, DISMISSED THE CLAIM OF THE ASSESSEE AND UPHELD THE ADDITION MADE BY THE AO, AGGRIEVED BY WHICH THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. ITA NO : 1829/MUM/2010 M/S. VADINAR POWER COMPANY LTD. 3 3. BEFORE US, THE LD. AR FOR THE ASSESSEE SUBMITTED THAT THE AO HAD NOT EXAMINED THE CLAIM ON MERIT AND HAD REJECTE D THE SAME ONLY ON THE GROUND THAT CLAIM WAS NOT MADE BY WAY OF REV ISED RETURN. IT WAS ALSO SUBMITTED THAT IN THE ASSESSMENT YEAR 2007 -08, THE AO HAD ALLOWED THE CLAIM OF THE ASSESSEE OF PROPORTIONATE INTEREST ON AVERAGE RATE IN THE ASSESSMENT MADE U/S.143(3). IT WAS ACCO RDINGLY, SUBMITTED THAT THE CLAIM OF THE ASSESSEE SHOULD BE ALLOWED. T HE LD. AR ALSO SUBMITTED THAT HE HAS NO OBJECTION, IF THE MATTER I S SENT TO THE FILE OF AO FOR FRESH EXAMINATION FOR FINDING ON MERIT. THE LD. DR PLACED RELIANCE ON THE ORDER OF THE CIT(A). 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE M ATTER CAREFULLY. THE DISPUTE IS REGARDING THE ALLOWABILIT Y OF DEDUCTION ON ACCOUNT OF INTEREST AGAINST THE INTEREST INCOME FRO M FIXED DEPOSIT. THE INTEREST INCOME HAD BEEN OFFERED AND ASSESSED AS IN COME FROM OTHER SOURCES AND, THEREFORE, ANY INTEREST EXPENDITURE HA VING NEXUS WITH EARNING OF INCOME, HAS TO BE ALLOWED AS DEDUCTION U /S.57(III). IN THIS CASE, THE ASSESSEE HAD NOT MADE THE CLAIM IN THE RE TURN OF THE INCOME AND THE CLAIM WAS MADE ONLY DURING THE COURSE OF AS SESSMENT PROCEEDINGS, WITHOUT REVISING RETURN. THE AO REJECT ED THE CLAIM FOLLOWING THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF GOETZE (INDIA) LTD. VS. CIT (SUPRA), IN WHICH IT WA S HELD THAT ANY FRESH CLAIM BEFORE THE AO COULD BE MADE ONLY BY REVISING THE RETURN OF INCOME. HOWEVER, IN THE SAID JUDGMENT HON'BLE SUPRE ME COURT ALSO MADE IT CLEAR THAT IT WOULD NOT APPLY TO THE TRIBUN AL WHICH CAN ALWAYS ADMIT THE CLAIM USING THE APPELLATE POWER. THERE CA NNOT BE ANY DISPUTE THAT ANY EXPENDITURE INCURRED FOR EARNING I NCOME FROM OTHER SOURCES HAS TO BE ALLOWED AS DEDUCTION. THEREFORE, IN OUR VIEW, CLAIM OF THE ASSESSEE CANNOT BE REJECTED. HOWEVER, SINCE THE AO HAS NOT GIVEN ANY FINDING ON MERIT, IN OUR VIEW, THE MATTER REQUIRES FRESH ITA NO : 1829/MUM/2010 M/S. VADINAR POWER COMPANY LTD. 4 EXAMINATION. THE LD. AR HAS ALSO POINTED OUT THAT S IMILAR CLAIM HAS BEEN ALLOWED BY THE AO IN THE ASSESSMENT YEAR 2007- 08. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) AND RE STORE THE MATTER TO THE FILE OF THE AO FOR PASSING A FRESH ORDER IN ACC ORDANCE WITH LAW AFTER ALLOWING NECESSARY OPPORTUNITY OF HEARING TO THE AS SESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 23 RD DAY OF DECEMBER, 2011. S D/ - S D/ - ( R. S. PADVEKAR ) ( RAJENDRA SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT: 23.12.2011 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, F - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI