Dy.CIT., Central Circle-9, Hyderabad V. M/s Teepa Agro Farms Private Limited, Hyderabad

ITA 1846/HYD/2013

• Counselvise Citation: 184622514 RSA 2013
• Duration Of Justice: 8 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2014
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 27-12-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA.NO. A.Y. APPELLANT RESPONDENT 1846/H/2013 2008-09 DCIT, CENTRAL CIRCLE-9, HYDERABAD M/S. TEEPA AGRO FARMS P. LTD., HYDERABAD-45 PAN AACCT-5342-B 1847/H/2013 2008-09 M/S. BILIGIRI AGRO FARMS P. LTD. HYDERABAD-45 PAN AADCB-3655-N 1848/H/2013 2008-09 M/S. KAILASH GREENFIELDS P. LTD., HYDERABAD-45 PAN AACCK-9191-R 1849/H/2013 2008-09 M/S. MEGHANA AGRO FARMS P. LTD., HYDERABAD-45 PAN AAECM-8681-Q 1850/H/2013 2008-09 M/S. HIMAVAT GREENFIELDS P. LTD., HYDERABAD-45 PAN AABCH-7661-J 1855/H/2013 2008-09 M/S. KOEL AGRO FARMS P. LTD., HYDERABAD-72 PAN AACCK-9656-M 1856/H/2013 2008-09 M/S. AHAR GREENFIELDS FARMS P. LTD., HYDERABAD-72 PAN AAGCA-0705-M 1857/H/2013 2008-09 M/S. SARAVATI GREENLANDS P. LTD., HYDERABAD-72 PAN AAKCS-4594-C 2 ITA.NO.1846 TO 1850/HYD/2013 AND ITA.NO.1855 TO 1857/HYD/2013 M/S.TEEPA AGRO FARMS (P) LTD., AND OTHERS HYDERABAD. FOR REVENUE NONE FOR ASSESSEE MR. K.C. DEVDAS DATE OF HEARING 19.08.2014 DATE OF PRONOUNCEMENT 28.08.2014 ORDER PER BENCH. THESE APPEALS PREFERRED BY REVENUE ARE DIRECTED AGAINST THE ORDERS OF THE CIT(A)-VII, HYDERABAD DA TED 30.09.2013 FOR THE ASSESSMENT YEAR 2008-2009. SINCE THE FACTS ARE COMMON, THE APPEALS ARE CLUBBED AND HEARD TOGETHER 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 LIM ITED (IN SHORT SCSL). MR. RAMALINGA RAJU LIFTED THE VEIL O F SECRECY AND ON 07.01.2009 MADE A CONFESSIONAL STATEMENT IN WHICH H E ADDRESSED VARIOUS AUTHORITIES LIKE SEBI AND STOCK EXCHANGES. IN THIS STATEMENT, A KEY ITEM WAS REGARDING THE BALANCE SHE ET OF THE COMPANY AS ON 30.09.2008 HAVING AN UNDERSTATED LIAB ILITY 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 3 ITA.NO.1846 TO 1850/HYD/2013 AND ITA.NO.1855 TO 1857/HYD/2013 M/S.TEEPA AGRO FARMS (P) LTD., AND OTHERS HYDERABAD. 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 ADVANCES ALONG WITH DAMAGES CLAIMED AT 18% P.A. FRO M THE DATE OF ADVANCE. THE AMOUNTS OF SUCH INTEREST BROUGHT TO TA X 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. TEEPA AGRO FARMS P. LTD., HYDERABAD. 3,35,54,318 2. M/S. BILIGIRI AGRO FARMS P. LTD. HYDERABAD 16,27,397 3. M/S. KAILASH GREENFIELDS P. LTD., HYDERABAD 3,62,67,534 4. M/S. MEGHANA AGRO FARMS P. LTD., HYDERABAD 3,71,82,329 5. M/S. HIMAVAT GREENFIELDS P. LTD., HYDERABAD 3,80,14,274 6. M/S. KOEL AGRO FARMS P. LTD., HYDERABAD 3,15,08,181 7. M/S. AHAR GREENFIELDS FARMS P. LTD., HYDERABAD 3,23,69,109 8. M/S. SARAVATI GREENLANDS P. LTD., HYDERABAD 3,16,01,464 4 ITA.NO.1846 TO 1850/HYD/2013 AND ITA.NO.1855 TO 1857/HYD/2013 M/S.TEEPA AGRO FARMS (P) LTD., AND OTHERS HYDERABAD. 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. HE FURTHER HELD THAT AS AND WHEN THE COURT FINALISES THE SUIT, THE INTEREST RATE MENTIONED THERE IN CAN BE RECKONED AND INCOME CAN B E TAXED IN THE YEAR IN WHICH THE COURT PRONOUNCES ITS ORDER ON THE CIVIL SUIT PENDING BEFORE IT. ACCORDINGLY, THE LD. CIT(A) DELE TED THE ABOVE ADDITIONS MADE BY THE A.O. ON ACCOUNT OF ACCRUED IN TEREST. AGGRIEVED, REVENUE PREFERRED THE PRESENT APPEALS. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT HAS B EEN BROUGHT TO OUR NOTICE BY THE ASSESSEE COUNSEL THAT IDENTICAL I SSUE HAS COME UP FOR CONSIDERATION BEFORE THIS TRIBUNAL IN ASSESS EES OWN GROUP OF CASES FOR THE A.Y. 2010-2011 IN ITA.NO.71/HYD/20 14 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 UND ER : 16. APPLYING THESE PRINCIPLES TO THE FACTS OF THE CASES BEFORE US, WE FIND THAT THE ASSESSEES HAVE STATED B EFORE THE CIT(A) THAT THE AMOUNTS ADVANCED ARE FROM OUT OF TH E SHARE APPLICATION MONIES AND TEMPORARY ADVANCES. IT IS SO STATED ON THE BASIS OF ENTRIES IN THE BALANCE SHEET AND THE PROFIT & LOSS ACCOUNTS OF THE RESPECTIVE ASSESSEES FILED ALONG WI TH THEIR RETURNS OF INCOME. IN THE ABSENCE OF ANY CONTRACT B ETWEEN THE ASSESSEE COMPANIES AND M/S. SCSL FOR CHARGING OF IN TEREST ON THE ADVANCES, THE ASSESSEES ARE NOT ENTITLED TO REC EIVE ANY INTEREST INCOME ON SUCH ADVANCES. THEREFORE, MEREL Y BECAUSE THE ASSESSEE IS FOLLOWING MERCANTILE IS SYSTEM OF A CCOUNTING, 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 RE COVERY OF ADVANCES, IT CANNOT BE SAID THAT THE SAID RATE OF I NTEREST IS APPLICABLE AS M/S. SCSL HAS NOT ADMITTED THE LIABIL ITY OF EVEN THE AMOUNTS OF ADVANCE. AS SUCH, WE FIND THAT THERE IS NO CERTAINTY WITH REGARD TO THE SAID RATE OF INTEREST. THEREFORE, IT 5 ITA.NO.1846 TO 1850/HYD/2013 AND ITA.NO.1855 TO 1857/HYD/2013 M/S.TEEPA AGRO FARMS (P) LTD., AND OTHERS HYDERABAD. CANNOT BE PRESUMED THAT THE INTEREST ACCRUED TO TH E ASSESSEE AT THE RATE OF 18% P.A. AS CLAIMED BY THE ASSESSEES IN THE SUITS FILED FOR RECOVERY OF ADVANCES. THE CIVIL COURTS WO ULD CONSIDER AND DECIDE THE LIABILITY OF M/S. SCSL TO REPAY THE AMOUNTS OF ADVANCES AND WOULD ALSO CONSIDER THE LIABILITY OF M /S. SCSL TO PAY INTEREST THEREON AND THE RATE OF INTEREST AT WH ICH THE ADVANCES SHOULD BE REPAID. THEREFORE, UNLESS AND UN TIL THE LIABILITY TO PAY THE ADVANCES AND THE RATE OF INTER EST AT WHICH THE TEMPORARY ADVANCES ARE TO BE REPAID IS DETERMIN ED BY THE CIVIL COURT, IT CANNOT BE SAID THAT THE SAME HAS AC CRUED OR ARISEN TO THE ASSESSEES. HOWEVER, IF THE ASSESSEES HAD ADVANCED INTEREST BEARING FUNDS AS INTEREST FREE AD VANCES, THE INTEREST PAID BY THE ASSESSEES TOWARDS SUCH BORROWE D FUNDS WOULD HAVE TO BE DISALLOWED AND TREATED AS THE INCO ME OF THE RESPECTIVE ASSESSEES. THE HONBLE PUNJAB AND HARYAN A HIGH COURT IN THE CASE OF ABHISHEK INDUSTRIES (SUPRA) HA S HELD THAT THE NEXUS BETWEEN THE INTEREST BEARING FUNDS AND TH E INTEREST FREE ADVANCES WILL HAVE TO BE PROVED BEFORE MAKING THE DISALLOWANCE OF INTEREST AND BRINGING IT TO TAX. WE FIND THAT NEITHER THE ASSESSING OFFICER NOR THE CIT(A) HAS EX AMINED THE ISSUE FROM THIS ANGLE. THEREFORE, THE ORDERS OF THE CIT(A) AND THE ASSESSING OFFICERS ARE SET ASIDE AND THE ISSUE IS R EMITTED TO THE FILE OF THE ASSESSING OFFICER OF THE RESPECTIVE ASS ESSEES FOR DE NOVO CONSIDERATION IN THE LIGHT OF OUR OBSERVATIONS ABOVE. FURTHER, WE HOLD THAT IF THE AMOUNTS ADVANCED TO M/ S. SCSL BY THE RESPECTIVE ASSESSEES ARE FROM THEIR OWN FUNDS, THEN THE INTEREST EXPENDITURE CANNOT BE DISALLOWED AND BROUG HT TO TAX. NEEDLESS TO MENTION THAT THE ASSESSING OFFICER SHAL L GIVE FAIR OPPORTUNITY OF HEARING TO THE ASSESSEES BEFORE PASS ING ANY ORDERS IN THE LIGHT OF OUR ABOVE OBSERVATIONS AND I N ACCORDANCE WITH LAW. 17. FURTHER, SAME VIEW WAS TAKEN BY THIS TRIBUNAL I N THE CASE OF OTHER ASSESSEES VIZ., M/S. BANGANGA AGRO FA RMS PVT. LTD., & OTHERS IN ITA NOS. 1852 TO 1855/HYD/2013. ACCORDINGLY, ON SIMILAR LINES, WE ARE INCLINED TO R EMIT THE ISSUE BACK TO THE FILE OF THE AO FOR FRESH CONSIDERATION. 5. AS FACTS ARE IDENTICAL AND ISSUES RAISED ARE MA TERIALLY SAME, RESPECTFULLY FOLLOWING THE AFORESAID ORDER OF THE COORDINATE BENCH, WE REMIT THE MATTER BACK TO THE FILE OF THE A.O. TO DECIDE IT DENOVO IN TERMS WITH THE DIRECTIONS OF THE COORDINA TE BENCH IN ITA.NO.71/HYD/2014 ETC., DATED 28.05.2014 (SUPRA). 6 ITA.NO.1846 TO 1850/HYD/2013 AND ITA.NO.1855 TO 1857/HYD/2013 M/S.TEEPA AGRO FARMS (P) LTD., AND OTHERS HYDERABAD. 6. IN THE RESULT, APPEALS OF THE REVENUE ARE ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 28.08.2014. SD/- SD/- (SAKTIJIT DEY) (B. RAMAKOTAIAH ) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 28 TH AUGUST, 2014 VBP/- COPY TO 1. DCIT, CENTRAL CIRCLE-9, 8 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD 500 004. 2. M/S. TEEPA AGRO FARMS P. LTD., FLAT NO.102, DHANUNJAYA NAGAR, RAJIV NAGAR, YOSUFGUDA, HYDERABAD-500 045. 3. M/S. BILIGIRI AGRO FARMS P. LTD., FLAT NO.102, DHANUNJAYA NAGAR, RAJIV NAGAR, YOSUFGUDA, HYDERABAD-500 045. 4. M/S. KAILASH GREENFIELDS P. LTD., FLAT NO.102, DHANUNJAYA NAGAR, RAJIV NAGAR, YOSUFGUDA, HYDERABAD-500 045. 5. M/S. MEGHANA AGRO FARMS P. LTD., FLAT NO.102, DHANUNJAYA NAGAR, RAJIV NAGAR, YOSUFGUDA, HYDERABAD-500 045. 6. M/S. HIMAVAT GREENFIELDS P. LTD., FLAT NO.102, DHANUNJAYA NAGAR, RAJIV NAGAR, YOSUFGUDA, HYDERABAD-500 045. 7. M/S. KOEL AGRO FARMS P. LTD., H.NO.EWS 1040, III PHASE, KPHB COLONY, KUKATPALLY, HYDERABAD 500 072. 8. M/S. AHAR GREENFIELDS FARMS P. LTD., H.NO.EWS 10 40, III PHASE, KPHB COLONY, KUKATPALLY, HYDERABAD 500 072. 9. M/S. SARAVATI GREENLANDS P. LTD., H.NO.EWS 1040, III PHASE, KPHB COLONY, KUKATPALLY, HYDERABAD 500 072. 10. CIT(A)-VII, HYDERABAD + 8 COPIES. 11. CIT (CENTRAL), HYDERABAD 12. D.R. ITAT B BENCH, HYDERABAD.