DCIT 13(1), MUMBAI V. NIMISH SYNTEX, MUMBAI

ITA 210/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83670 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-09-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 01-09-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 10-01-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S C TIWARI; NATASHA MANGAT
• Section: 143(3)

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B , BENCH MUMBAI , BEFORE : SHRI R.C.SHARMA , A M & SHRI AMIT SHUKLA , J M ITA NO. 210 / MUM/20 1 1 ( ASSESSMENT YEAR : 200 7 - 0 8 ) DCIT 13(1) , MUMBAI - 20 VS. M/S NIMISH SYNTEX, 72, NAKODA STREET, J.R.SHETTY BUILDING, 2 ND FLOOR, MUMBAI - 400 003 PAN/GIR NO. : A A CFN 7093 G ( APP ELLANT ) .. ( RESPONDENT ) /REVENUE BY : SHRI MAURYA PRATAP /ASSESSEE BY : SHRI S.C.TIWARI & NATASHA MANGAT DATE OF HEARING : 1 ST SEPT. 201 4 DATE OF PRONOUN CEMENT : 1 ST SEPT , 201 4 O R D E R PER R.C.SHARMA ( A .M.) : THIS IS AN APPEAL FILED BY REVENUE AGAINST THE ORDER CIT(A ) , DATED 22 - 10 - 2010 FOR ASSESSMENT YEAR 2007 - 08 , IN THE MATTER OF ORDER PASSED UNDER SECTION 143(3) OF THE ACT . 2 . IN THIS APPEAL, THE REVENUE IS AGGRIEVED FOR DELETING THE ADDITION OF RS. 20,95,055/ - MADE BY THE AO ON ACCOUNT OF ACCRUED INTEREST ON BANK FDR AND LOANS GIVEN TO VARIOUS PERSONS ON ACCRUAL BASIS. 3 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE AO MADE ADDITION WITH REGARD TO THE INTEREST ON FDRS, WHICH ACCRUED TO THE ASSESSEE AS ON 31 - 3 - 2007 . THE CONTENTION OF THE ASSESSEE BEFORE THE AO WAS THAT INTEREST INCOME WAS ITA NO. 210 /1 1 2 OFFERED TO TAX IN THE IMMEDIATELY NEXT YE AR WHEN THE FDR WAS MATURED AND PAID TO ASSESSEE ALONG WITH INTEREST. THE AO DID NOT ACCEPT ASSESSEES CONTENTION AND BY OBSERVING THAT ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNT ING , HE BROUGHT TO TAX NET THE INTEREST INCOME WHICH WAS ACCRUED BUT NOT DUE FOR PAYMENT AND WHICH WAS RECEIVED IN THE SUBSEQUENT YEAR. 4 . BY THE IMPUGNED ORDER, THE CIT(A) DELETED THE ADDITION AFTER HAVING THE FOLLOWING OBSERVATIONS : - V) IN THIS CONNECTION OUR CLIENT DRAWS YOUR KIND ATTENTION TO ITS LETTER DATED 22 ND FEB RUARY, 2010, ADDRESSED TO THE ADDITIONAL COMMISSIONER OF INCOME TAX 13 (1), WHEREIN IT HAS INFORMED THAT ON MATURITY OF ITS FIXED DEPOSITS IT HAS OFFERED INTEREST OF RS.17,97,843/ - AS ITS INCOME IN A.Y. 2008 - 09. FURTHER INTEREST OF RS.42,75,625/ - WAS OFFER ED AS INCOME IN A.Y. 2009 - 2010 WHICH INCLUDES INTEREST OF RS.40,95,870/ - ON FIXED DEPOSITS OF RS.3,25, 00 , 000/ - . AT THIS POINT PLEASE NOTE THAT IN A.Y. 2007 - 2008 AN ADDITION OF ONLY RS.17,72,942/ - WAS MADE ON ACCOUNT OF INTEREST ON FIXED DEPOSITS. THUS, THE INCOME FROM INTEREST ON FIXED DEPOSITS HAS BEEN FULLY OFFERED FOR TAX ON ACTUAL RECEIPT BASIS AND TAX ON THE SAME HAS BEEN PAID IN THOSE ASSESSMENT YEARS. THIS IS EVIDENT FROM THE STATEMENT OF INTEREST RECEIVED APPEARING ON PAGE NO.17C OF THE PAPER BOOK A ND COPY A PROFIT AND LOSS ACCOUNT ENCLOSED HEREWITH FOR A.Y. 2008 - 09 AND A.Y. 2009 - 2010 APPEARING ON PAGE NO.17D AND 17E RESPECTIVELY OF THE PAPER BOOK. IN THIS CONNECTION PLEASE NOTE THAT ADDITION OF INTEREST ACCRUED BUT NOT DUE IN THE INCOME OF A.Y. 2007 - 08 SHALL AMOUNT TO DOUBLE TAXATION. VI) IN CONNECTION WITH INTEREST ON VARIOUS LOANS OUR CLIENT BRINGS TO YOUR KIND NOTICE THAT NO INTEREST HAS BEEN RECEIVED OR IS DUE ON ADVANCE GIVEN TO ADARSH VEER JAIN; SARAF CHEMICALS; VIN SYNTEX AND SUYOG SYNTHETIC S. BESIDES OUR CLIENT ALSO BRINGS TO YOUR KIND NOTICE THAT OUTSTANDING DEBIT BALANCE RS.14,40,277/ - AND RS. 11 ,49,100/ - IN THE CASE OF M/S. DIAMOND THREADS AND MACHINES LTD. AS ON 31.03.2007 REPRESENT THE VALUE OF GOODS SOLD TO THAT PARTY PRIOR TO THAT DAT E AND IS NOT IN THE NATURE OF LOAN GIVEN TO THEM, A ND THEREFORE, NO INTEREST IS DUE OR RECEIVABLE FROM THEM. THEREFORE, ADDITION OF ALLEGED INTEREST OF RS.40,524 / - (I.E. 38,156.42 + 2,36 7 .58) DUE FROM THAT PARTY IS NOT JUSTIFIED IN FACT AND LAW. PLEASE NOT E THAT THE SAID DUES FOR GOODS SOLD HAVE BEEN FULL Y PAID BY THAT PARTY IN SUBSEQUENT YEARS AND NO INTEREST WAS RECEIVED FROM THAT PARTY . THIS ADDITION DESERVES TO BE FULLY DELETED. VII) THUS, OUT OF ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF IN TEREST ON LOANS AGGREGATING TO RS. 3,22,113/ - ; INTEREST OF RS.68,219 / - HAS BEEN OFFERED AS INCOME IN A.Y. 2007 - 2008 AND INTEREST OF RS. 1 ,63 , 397/ - HAS BEEN OFFERED AS INCOME IN A.Y. 2008 - ITA NO. 210 /1 1 3 2009 (KINDLY SEE PAGE 17G OF THE PAPER BOOK). THE BALANCE INTEREST OF RS.90,497/ - IS NEITHER DUE NOR RECEIVED BY OUR CLIENT. IT IS THE HUMBLE SUBMISSION OF OUR CLIENT THAT IN VIE W OF THE. AFORESAID FACTS THE ASSESSING OFFICER MAY KINDLY BE DIRECTED TO FULLY DELETE THE ADDITION OF RS.3,22,113/ - MADE IN THE ASSESSMENT ORDER. 2.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE LD. COUNSEL AND IT IS SEEN THAT THE RATIO OF THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF CIT VS FAL INDUSTRIES (2009) 314 ITR 47 AND CIT VS TAMILNADU MERCANTILE BANK LTD. (2007) 291 ITR 137 APPLI ES TO THE GIVEN FACTS OF .HIS CASE AND THE ADDITION OF RS. 20,95,055/ - MADE IS HEREBY DELETED. THIS GROUND OF APPEAL IS THEREF ORE ALLOWED. AGAINST THE ABOVE ORDER OF CIT(A), THE REVENUE IS IN FURTHER APPEAL BEFORE US. 5 . WE HAVE CONSIDERED RIVAL CONTEN TIONS , CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT ASSESSEE HAS OFFERED INTEREST ON FDR ON ACTUAL RECEIPT BASIS. THE INTEREST INCOME SO RECEIVED ON MATURITY OF FDR WAS OFFERED TO THE DEPARTMENT AND TAXES WERE ALSO PAID DURING THE YEAR OF RECEIPT WHICH WAS ASSESSMENT YEAR 2008 - 09 AND 2009 - 10. HOWEVER, AO DID NOT ACCEPT ASSESSEES CONTENTION AND BROUGHT TO TAX INTEREST INCOME ON ACCRUAL BASIS. THE CIT(A) RELYING ON THE PROPOSITION OF LAW LAID DOWN BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF FAL INDUSTRIES LTD., (2009) 314 ITR 47 , WHEREIN IT WAS HELD THAT RIGHT TO RECEIVE THE INTEREST HAD NOT ARISEN TO THE ASSESSEE AND THE INTEREST RECEIVABLE ONLY FROM THE 1 ST OF APRIL, THEREFORE, ACCRUED INTEREST IS NOT ASSESSABLE TO TAX IN TH E RELEVANT ASSESSMENT YEAR EVEN THOUGH ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNT. IN THE INSTANT CASE, WE FOUND THAT EVEN THOUGH THE INTEREST ON FDR WAS ACCRUED AS ON 31 - 3 - 2007 BUT THE SAME WAS NOT DUE FOR PAYMENT. INTEREST WAS DUE FOR PAYMENT ON MATURITY OF FDR. AS AND WHEN THE INTEREST WAS FALLEN DUE IN FAVOUR OF THE ASSESSEE, THE SAME WAS OFFERED TO TAX. THUS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING THE ADDITION MADE ON ACCOUNT OF INTEREST ITA NO. 210 /1 1 4 ACCRUED BUT NOT DUE ON THE FIXE D DEPOSIT WITH BANK. WITH RESPECT TO OTHER DEPOSITS ALSO THE CIT(A) HAD RECORDED A FINDING THAT ASSESSEE HAD OFFERED THE SAME IN THE YEAR OF RECEIPT, THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDING OF CIT(A) WHICH HAS NOT BEEN CONTROVERTE D BY DEPARTMENT BY BRINGING ANY MATERIAL ON RECORD. 6 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON THIS 01/09/ 201 4 . 01/09/ 2014 SD/ - SD/ - ( ) ( AMIT SHUKLA ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 0 2 /09 /2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//