Appeal details
Counselvise Citation
184522514 RSA 2013
Assessee PAN
Bench
Appeal Number
Duration Of Justice
7 month(s) 17 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
13-08-2014
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Assessment Year
2008-2009
Appeal Filed On
27-12-2013
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER ITA.NO.1839/HYD/2013 ASSESSMENT YEAR 2008-09 DCIT, C.C. 9 HYDERABAD VS. M/S. HAKRA AGRO FARMS P. LTD. HYDERABAD 500 038. PAN AABCH-9531-R (APPELLANT) (RESPONDENT) ITA.NO.1840/HYD/2013 ASSESSMENT YEAR 2008-09 DCIT, C.C. 9 HYDERABAD VS. M/S. BAHUDANYA AGRO FARMS P. LTD., HYDERABAD 500 038. PAN AADCB-3016-F (APPELLANT) (RESPONDENT) ITA.NO.1841/HYD/2013 ASSESSMENT YEAR 2008-09 DCIT, C.C. 9 HYDERABAD VS. M/S. BALAGHAT GREENFIELDS P. LTD., HYDERABAD 500 038. PAN AADCB-0292-R (APPELLANT) (RESPONDENT) ITA.NO.1842/HYD/2013 ASSESSMENT YEAR 2008-09 DCIT, C.C. 9 HYDERABAD VS. M/ S. MAHAKALI GREENFIELDS P. LTD., HYDERABAD 500 038 PAN AAECM-8682-P (APPELLANT) (RESPONDENT) 2 ITA.NO.1839 TO 1845/HYD/2013 M/S. HAKRA AGRO FARMS (P) LTD., AND OTHERS HYDERABAD. ITA.NO.1843/HYD/2013 ASSESSMENT YEAR 2008-09 DCIT, C.C. 9 HYDERABAD VS. M/S. SURASA GREENFIELDS P. LTD., HYDERABAD 500 038. PAN AAKCS-2496-K (APPELLA NT) (RESPONDENT) ITA.NO.1844/HYD/2013 ASSESSMENT YEAR 2008-09 DCIT, C.C. 9 HYDERABAD VS. M/S. ATREYEE AGRO FARMS P. LTD., HYDERABAD 500 038. PAN AAGCA-7006-B (APPELLANT) (RESPONDENT) ITA.NO.1845/HYD/2013 ASSESSMENT YEAR 2008-09 DCIT, C.C. 9 HYDERABAD VS. M/S. NETRAVATI GREENFIELDS P. LTD., HYDERABAD 500 038. PAN AACCN-4101-C (APPELLANT) (RESPONDENT) FOR REVENUE MR. KIRAN KATTA FOR ASSESSEE MR. K.C. DEVDAS DATE OF HEARING 04 .0 8 .2014 DATE OF PRONOUNCEMENT 13 .0 8 .2014 ORDER PER BENCH THESE APPEALS PREFERRED BY THE REVENUE ARE DIRECT ED AGAINST THE COMMON ORDER OF THE CIT(A)-VII, HYDERAB AD DATED 30.09.2013 FOR THE ASSESSMENT YEAR 2008-2009. SINCE THE FACTS 3 ITA.NO.1839 TO 1845/HYD/2013 M/S. HAKRA AGRO FARMS (P) LTD., AND OTHERS HYDERABAD. ARE COMMON, THE APPEALS ARE CLUBBED AND HEARD TOGET HER AND ARE BEING DISPOSED OF BY THIS CONSOLIDATED ORDER. 2. THE ONLY ISSUE INVOLVED IN THESE APPEALS RELATE S TO ASSESSMENT OF ACCRUED INTEREST BROUGHT TO TAX BY TH E A.O. IN THE HANDS OF THESE ASSESSEES. 2.1. BRIEFLY STATED, THE FACTS OF THE CASE ARE THA T THE ASSESSEE COMPANIES ARE AMONG THE 37 COMPANIES UNDER THE CONTROL OF MR. B. RAMALINGA RAJU AND HIS FAMILY MEM BERS AND HAD TRANSACTIONS WITH M/S. SATYAM COMPUTER SERVICES LIMITED (IN SHORT SCSL). MR. RAMALINGA RAJU LIFTED THE VE IL OF SECRECY AND ON 07.01.2009 MADE A CONFESSIONAL STATEMENT IN WHICH ADDRESSED TO VARIOUS AUTHORITIES LIKE SEBI AND STOC K EXCHANGES. IN THIS STATEMENT, A KEY ITEM WAS REGARDING THE BAL ANCE SHEET OF THE COMPANY AS ON 30.09.2008 HAVING AN UNDERSTATED LIABILITY OF RS.1230 CRORES ON ACCOUNT OF THE FUNDS ARRANGED BY HIM. IT WAS STATED THAT THIS AMOUNT OF RS. 1230 CRORES WAS ARRA NGED TO M/S. SCSL (NOT REFLECTED IN THE BOOKS) TO KEEP THE OPERA TIONS GOING ON BY RESORTING TO PLEDGING OF ALL THE PROMOTERS SHARE S AND RAISING FUNDS FROM NBFCS ETC., HE HAD ALSO ENCLOSED TO HIS CONFESSIONAL STATEMENT BY WAY OF ANNEXURE, A STATEMENT SHOWING T HE AMOUNTS GIVEN TO M/S. SCSL BY THESE 37 COMPANIES. TAKING NO TE OF THE AMOUNTS GIVEN BY THE ASSESSEE COMPANIES INVOLVED IN THESE APPEALS, THE A.O. CALCULATED INTEREST ON THESE ADVA NCES GIVEN FOR THE YEAR ON THE NUMBER OF DAYS FOR WHICH THE TEMPOR ARY ADVANCE WAS GIVEN AND BROUGHT SUCH AMOUNTS TO TAX ON ACCRUA L BASIS. THE A.O. COMPUTED INTEREST ON THESE ADVANCES AT 18% BEC AUSE THE COMPANY MADE A CLAIM ON M/S. SCSL FOR REPAYMENT OF THESE 4 ITA.NO.1839 TO 1845/HYD/2013 M/S. HAKRA AGRO FARMS (P) LTD., AND OTHERS HYDERABAD. ADVANCES ALONG WITH DAMAGES CLAIMED AT 18% P.A. FRO M THE DATE OF ADVANCE. THE AMOUNTS OF SUCH INTEREST BROUGHT TO TAX IN THE HANDS OF EACH OF THESE ASSESSEES IS TABULATED HEREU NDER : SL. NO. NAME OF THE COMPANY ACCRUED INTEREST BROUGHT TO TAX RS. 1. M/S. HAKRA AGRO FARMS PVT. LTD., HYDERABAD. 71,26,027 2. BAHUDHANYA AGRO FARMS P. LTD., HYDERABAD 71,75,342 3. BALAGHAT GREENFIELDS P.LTD., HYDERABAD 3,14,96,606 4. MAHANKALI GREENFILEDS PVT. LTD. 3,70,11,945 5. SURASA GREENF IELDS PVT. LTD. 3,53,66,264 6. ATREYEE AGRO FARMS PVT. LTD., HYDERABAD. 71,75,342 7. NETRAVATI GREENFIELDS PVT. LTD., HYDERABAD. 3,34,77,879 3. ON APPEAL, THE LD. CIT(A) AFTER DETAILED CONSID ERATION OF THE SUBMISSIONS OF THE ASSESSEE HELD THAT ONE CA NNOT CONCLUDE THAT INTEREST INCOME HAS DEFINITELY ACCRUED AND ARI SEN TO THE ASSESSEE AT THE RATE OF 18% AS HELD BY THE A.O. ACC ORDINGLY, THE LD. CIT(A) DELETED THE ABOVE ADDITIONS MADE BY THE A.O. ON ACCOUNT OF ACCRUED INTEREST. AGGRIEVED, REVENUE PRE FERRED THE PRESENT APPEALS. 5 ITA.NO.1839 TO 1845/HYD/2013 M/S. HAKRA AGRO FARMS (P) LTD., AND OTHERS HYDERABAD. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT HAS B EEN BROUGHT TO OUR NOTICE BY THE PARTIES THAT IDENTICAL ISSUE HAS COME UP FOR CONSIDERATION BEFORE THIS TRIBUNAL IN ASSESSEES OW N GROUP OF CASES FOR THE A.Y. 2010-2011 IN ITA.NO.71/HYD/2014 ETC., DATED 28.05.2014 WHEREIN THE TRIBUNAL DECIDED THE ISSUE I N FAVOUR OF THE ASSESSEE VIDE ITS PARAS 16 AND 17 WHICH READ AS UNDER : 16. APPLYING THESE PRINCIPLES TO THE FACTS OF THE CASES BEFORE US, WE FIND THAT THE ASSESSEES HAVE STATED BEFORE THE C IT(A) THAT THE AMOUNTS ADVANCED ARE FROM OUT OF THE SHARE APPLICAT ION MONIES AND TEMPORARY ADVANCES. IT IS SO STATED ON THE BASIS OF ENTRIES IN THE BALANCE SHEET AND THE PROFIT & LOSS ACCOUNTS OF TH E RESPECTIVE ASSESSEES FILED ALONG WITH THEIR RETURNS OF INCOME. IN THE ABSENCE OF ANY CONTRACT BETWEEN THE ASSESSEE COMPANIES AND M/S . SCSL FOR CHARGING OF INTEREST ON THE ADVANCES, THE ASSESSEES ARE NOT ENTITLED TO RECEIVE ANY INTEREST INCOME ON SUCH ADVANCES. T HEREFORE, MERELY BECAUSE THE ASSESSEE IS FOLLOWING MERCANTILE IS SYS TEM OF ACCOUNTING, IT CANNOT BE SAID THAT THE INTEREST HAS ACCRUED TO THE ASSESSEES. FURTHER, MERELY BECAUSE THE ASSESSEES HAVE CLAIMED INTEREST AT THE RATE OF 18% PER ANNUM IN THE SUITS FILED FOR RECOVE RY OF ADVANCES, IT CANNOT BE SAID THAT THE SAID RATE OF INTEREST IS AP PLICABLE AS M/S. SCSL HAS NOT ADMITTED THE LIABILITY OF EVEN THE AMO UNTS OF ADVANCE. AS SUCH, WE FIND THAT THERE IS NO CERTAINTY WITH RE GARD TO THE SAID RATE OF INTEREST. THEREFORE, IT CANNOT BE PRESUMED THAT THE INTEREST ACCRUED TO THE ASSESSEE AT THE RATE OF 18% P.A. AS CLAIMED BY THE ASSESSEES IN THE SUITS FILED FOR RECOVERY OF ADVANC ES. THE CIVIL COURTS WOULD CONSIDER AND DECIDE THE LIABILITY OF M/S. SCS L TO REPAY THE AMOUNTS OF ADVANCES AND WOULD ALSO CONSIDER THE LIA BILITY OF M/S. SCSL TO PAY INTEREST THEREON AND THE RATE OF INTERE ST AT WHICH THE ADVANCES SHOULD BE REPAID. THEREFORE, UNLESS AND UN TIL THE LIABILITY TO PAY THE ADVANCES AND THE RATE OF INTEREST AT WHICH THE TEMPORARY ADVANCES ARE TO BE REPAID IS DETERMINED BY THE CIVI L COURT, IT CANNOT BE SAID THAT THE SAME HAS ACCRUED OR ARISEN TO THE ASSESSEES. HOWEVER, IF THE ASSESSEES HAD ADVANCED INTEREST BEA RING FUNDS AS INTEREST FREE ADVANCES, THE INTEREST PAID BY THE AS SESSEES TOWARDS SUCH BORROWED FUNDS WOULD HAVE TO BE DISALLOWED AND TREATED AS THE INCOME OF THE RESPECTIVE ASSESSEES. THE HONBLE PUN JAB AND HARYANA HIGH COURT IN THE CASE OF ABHISHEK INDUSTRIES (SUPR A) HAS HELD THAT THE NEXUS BETWEEN THE INTEREST BEARING FUNDS AND TH E INTEREST FREE ADVANCES WILL HAVE TO BE PROVED BEFORE MAKING THE D ISALLOWANCE OF INTEREST AND BRINGING IT TO TAX. WE FIND THAT NEITH ER THE ASSESSING 6 ITA.NO.1839 TO 1845/HYD/2013 M/S. HAKRA AGRO FARMS (P) LTD., AND OTHERS HYDERABAD. OFFICER NOR THE CIT(A) HAS EXAMINED THE ISSUE FROM THIS ANGLE. THEREFORE, THE ORDERS OF THE CIT(A) AND THE ASSESSI NG OFFICERS ARE SET ASIDE AND THE ISSUE IS REMITTED TO THE FILE OF THE ASSESSING OFFICER OF THE RESPECTIVE ASSESSEES FOR DE NOVO CONSIDERATION IN THE LIGHT OF OUR OBSERVATIONS ABOVE. FURTHER, WE HOLD THAT IF THE AM OUNTS ADVANCED TO M/S. SCSL BY THE RESPECTIVE ASSESSEES ARE FROM THEI R OWN FUNDS, THEN THE INTEREST EXPENDITURE CANNOT BE DISALLOWED AND BROUGHT TO TAX. NEEDLESS TO MENTION THAT THE ASSESSING OFFICER SHALL GIVE FAIR OPPORTUNITY OF HEARING TO THE ASSESSEES BEFORE PASS ING ANY ORDERS IN THE LIGHT OF OUR ABOVE OBSERVATIONS AND IN ACCORDAN CE WITH LAW. 17. FURTHER, SAME VIEW WAS TAKEN BY THIS TRIBUNAL I N THE CASE OF OTHER ASSESSEES VIZ., M/S. BANGANGA AGRO FARMS P VT. LTD., & OTHERS IN ITA NOS. 1852 TO 1855/HYD/2013. ACCORDIN GLY, ON SIMILAR LINES, WE ARE INCLINED TO REMIT THE ISSUE BACK TO T HE FILE OF THE AO FOR FRESH CONSIDERATION. 5. THE IMPUGNED ORDERS OF THE LD. CIT(A) ARE IN CONSONANCE WITH THE CONSISTENT VIEW OF THE TRIBUNAL IN SIMILAR MATTERS NOTED ABOVE. THEREFORE, RESPECTFULLY FOLLOW ING THE CONSISTENT VIEW TAKEN BY THE TRIBUNAL IN SIMILAR MA TTERS, WE UPHOLD THE IMPUGNED ORDERS OF THE LD. CIT(A) REJECT ING THE GROUNDS OF THE REVENUE IN THESE APPEALS. 6. IN THE RESULT, APPEALS OF THE REVENUE ARE DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13.08.2014. SD/- SD/- (B.RAMAKOTAIAH) (ASHA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 13 TH AUGUST, 2014 VBP/- 7 ITA.NO.1839 TO 1845/HYD/2013 M/S. HAKRA AGRO FARMS (P) LTD., AND OTHERS HYDERABAD. COPY TO 1. DCIT, CENTRAL CIRCLE - 9, 8 TH FLOOR, AAYAK AR BHAVAN, BASHEERBAGH, HYDERABAD 500 004. 2. M/S. HAKRA AGRO FARMS P. LTD., H - 17, FLAT NO.201 TULSI APARTMENT, MADHURA NAGAR, S.R. NAGAR, HYDERABAD-38. 3. M/S. BAHUDHANYA AGRO FARMS P. LTD., H - 17, FLAT NO.201, TULSI APARTMENT, MADHURA NAGAR, S.R. NAGAR, HYDERABAD-38. 4. M/S. BALAGHAT GREENFIELDS P. LTD., B - 79, MADHURA NAGAR, HYDERABAD 38. 5 . M/S. MAHAKALI GREENFIELDS P. LTD., H - 17, FLAT NO.201, TULSI APARTMENT, MADHURA NAGAR, S.R. NAGAR, HYDERABAD 38. 6. M/S. SURASA GREENFIELDS P. LTD., H - 17, FLAT NO.201, TULSI APARTMENT, MADHURA NAGAR, S.R. NAGAR, HYDERABAD 38. 7. M/S. ATREYEE AGRO FARMS P. LTD., H - 17, FLAT NO.201, TULSI APARTMENT, MADHURA NAGAR, S.R. NAGAR, HYDERABAD 38. 8. M/S. NETRAVATI GREENFIELDS P. LTD., H - 17, FLAT NO.201, TULSI APARTMENT, MADHURA NAGAR, S.R. NAGAR, HYDERABAD 38. 9. CIT(A) - VII, HYDERABAD + 8 COPIES. 10. CIT (CENTRAL), HYDERABAD 11. D.R. ITAT A BENCH, HYDERABAD.
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