ABDUL RASOOL VIRJI, MUMBAI V. Income Tax Department, MUMBAI

ITA 2142/MUM/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3509 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-12-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 19-04-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 06-04-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S B SINGH
• Assessee Lawyers: A V SONDE
• Keywords: Set aside
• Section: 80HHC; 264; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A : MUMBAI BEFORE SHRI D. MANMOHAN, VICE PRESIDENT AND PRAMOD KUMAR, ACCOUNTANT MEMBER ITA. NO. 2142/MUM/2009 ASSESSMENT YEAR 2004-2005 ABDUL RASOOL VIRJI CARE; REGAL SHOES, 10/12B ANJIR WADI ESTATE, MOUNT ROAD, MAZAGAON, MUMBAI 400 010 PAN AABPV2219H VS. ACIT 17 (3) INCOME TAX OFFICE, PIRAMAL CHAMBERS, PAREL, MUMBAI 012. (APPELLANT) (RESPONDENT) FOR APPELLANT : SHRI A.V. SONDE FOR RESPONDENT : SHRI S.B. SINGH ORDER PER D. MANMOHAN, V.P. 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX UNDER SECT ION 263 OF THE INCOME TAX ACT, 1961 AND IT PERTAINS TO THE ASSESSM ENT YEAR 2004- 2005. 2. THE ASSESSEE IS A WHOLESALER IN FOOTWEAR AND LE ATHER GOODS. IN RESPECT OF THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2004-2005 THE ASSESSEE DECLARED TOTAL INCOME OF RS. 15,12,186/- WHICH WAS ORIGINALLY PROCESSED UNDER SECTION 143 (1 ) OF THE ACT BUT THEREAFTER, TAKEN-UP FOR SCRUTINY. PERUSAL OF RETUR N OF INCOME SHOWED THAT THE ASSESSEE CLAIMED INCOME OF RS.48,59456/- A S EXEMPT, REFERABLE TO THE INTEREST AWARDED BY THE COURT IN A DECREE AGAINST THE DDA. ASSESSEE PLACED RELIANCE UPON THE DECISION OF THE HONBLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. B.RAI (2003) 264 ITR 617. ITA. NO. 2142/M/09 ABDUL RASOOL VIRJI 2 3. AS REGARDS THE QUERIES WITH REGARD TO EXPORT SA LES, DEDUCTION UNDER SECTION 80HHC ETC., ASSESSEE FURNIS HED DETAILS AND FINALLY THE ASSESSMENT WAS COMPLETED BY DETERMINING THE TAXABLE INCOME AT RS.15,12,186/- AND LONG TERM CAPITAL LOSS TO BE CARRIED FORWARD WAS DETERMINED AT RS.1,50,35,292/-. 4. ASSESSEE HAD PURCHASED A PROPERTY IN DELHI AND IN ORDER TO GET IT TRANSFERRED IN HIS NAME, ASSESSEE WAS ASK ED BY DDA TO PAY A CERTAIN SUM. CONSEQUENTLY, ASSESSEE PAID AN AMOUNT OF RS.1,49,72,225/- TO DDA, PURSUANT TO THE ORDER OF T HE HONBLE DELHI HIGH COURT. HOWEVER, ACCORDING TO THE ASSESSEE, PAY MENT AS DETERMINED BY HONBLE DELHI HIGH COURT IS NOT IN AC CORDANCE WITH LAW AND HENCE, THE ISSUE WAS CONTESTED BEFORE THE APEX COURT WHICH WAS PLEASED TO DIRECT THE DDA TO REFUND AN AMOUNT OF RS .70,94,451/- ALONG WITH INTEREST OF RS.48,59,456/-. SUBSEQUENTLY , THE SAME PROPERTY WAS SOLD AND THE ASSESSEE COMPUTED LONG TE RM CAPITAL LOSS AT RS.2.02 CRORES, WITHOUT REDUCING THE COST OF ACQUIS ITION OF THE PROPERTY BY AN AMOUNT OF RS.48,59,456/-. IF THE INT EREST RECEIVED IS REDUCED FROM RS.2.20 CRORES IT WORKS OUT TO RS.1,53 ,58,858/-. HOWEVER, THE ASSESSING OFFICER WRONGLY CALCULATED T HE AMOUNT AND ARRIVED AT CAPITAL LOSS OF RS.1,50,35,292/- WHICH M AY BE PREJUDICIAL TO THE INTERESTS OF THE ASSESSEE SINCE THE DIFFERENTIA L AMOUNT IS NOT PERMITTED TO BE CARRIED FORWARD. 5. ON SCRUTINY OF THE RECORD, THE REVISIONAL AUTHO RITY WAS OF THE OPINION THAT ALLOWING WRONG CARRIED FORWARD LOS S WAS ONE OF THE MISTAKES BY WHICH THE ORDER PASSED BY THE ASSESSING OFFICER IS ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF THE R EVENUE, APART FROM THE FACT THAT THE INTEREST AWARDED BY THE COURT IN DECREE IS A STATUTORY INTEREST AND SUCH INTEREST OUGHT TO HAVE BEEN BROUG HT TO TAX AND TO THAT EXTENT THE ASSESSMENT ORDER IS ERRONEOUS AND P REJUDICIAL TO THE INTERESTS OF THE REVENUE. ITA. NO. 2142/M/09 ABDUL RASOOL VIRJI 3 6. IN RESPONSE TO THE SHOW-CAUSE NOTICE THE ASSESS EE SUBMITTED THAT IN THE LIGHT OF DECISION OF THE HON BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF B.RAI (SUPRA), IN TEREST AWARDED BY A COURT IS DISCRETIONARY AND HENCE IT IS NOT ASSESS ABLE UNDER THE HEAD INCOME FROM OTHER SOURCES. THEREFORE, IT IS EXEMPT FROM LEVY OF TAX. SINCE THE ASSESSING OFFICER HAS TAKEN NOTE OF THE AFORECITED DECISION WHILE PASSING THE SCRUTINY ASSESSMENT ORDE R, THE CONCLUSION REACHED BY HIM CANNOT BE SAID TO BE ERRONEOUS OR PR EJUDICIAL TO THE INTERESTS OF THE REVENUE IN THE LIGHT OF PRINCIPLES LAID DOWN BY THE APEX COURT IN THE CASE OF MALABAR INDUSTRIES LTD. 2 43 ITR 83. 7. THE REVISIONAL AUTHORITY WAS HOWEVER OF THE OPI NION THAT THE DECISION OF HONBLE PUNJAB & HARYANA HIGH COURT IS NOT APPLICABLE TO THE CASE ON HAND SINCE THE HONBLE HIGH COURT HA S DEALT WITH THE CASE OF SALARY ARREARS WHEREAS IN THE INSTANT CASE COMPENSATION PAYABLE BY DDA IS GUIDED BY STATUTORY PROVISIONS. H E THUS SET ASIDE THE ORDER OF THE ASSESSING OFFICER AND DIRECTED HIM TO RE-DO THE SAME AS PER LAW. 8. AGGRIEVED, ASSESSEE IS IN APPEAL BEFORE US. LEA RNED COUNSEL SUBMITTED THAT THE INTEREST AWARDED BY THE COURT IS NOT A STATUTORY INTEREST AND IT IS UNDER THE DISCRETIONAR Y POWERS OF A JUDICIAL AUTHORITY AND THUS IT CANNOT BE TREATED AS INCOME FOR THE PURPOSE OF INCOME TAX ACT. HE HAS ALSO REFERRED TO THE ORDER OF THE APEX COURT TO HIGHLIGHT THAT GRANT OF INTEREST IS A DISCRETIONARY REMEDY (PAGE 35 OF THE ORDER IN CIVIL APPEAL NO. 1781 AND 1782/2000); IF IT IS A STATUTORY INTEREST OR THE INTEREST UNDER CONTRACT , IT WOULD HAVE BEEN A FIXED SUM. IN THE INSTANT CASE, THE RATE OF INTER EST WAS SUBSTANTIALLY REDUCED FROM 18% TO 9% WHICH IN ITSELF SHOWS THAT I T WAS DISCRETIONARY IN CHARACTER AND PLACING RELIANCE UPO N THE DECISION OF THE PUNJAB AND HARYANA HIGH COURT (SUPRA) IT WAS CO NTENDED THAT THE PRINCIPLE LAID DOWN THEREIN IS EQUALLY APPLICABLE T O THE INTEREST PAID BY THE COURTS ON COMPENSATION AMOUNT PAYABLE AND, AT A NY RATE, THE ASSESSING OFFICER HAVING APPLIED HIS MIND TO THE IS SUE ON HAND IT HAD ITA. NO. 2142/M/09 ABDUL RASOOL VIRJI 4 TAKEN ONE PLAUSIBLE VIEW OF THE MATTER. IN THE LIGH T OF DECISION OF THE APEX COURT IN THE CASE OF MALABAR INDUSTRIES (SUPRA ), THE ORDER OF THE ASSESSING OFFICER CANNOT BE SAID TO BE UNSUSTAINABL E IN LAW AND THUS IT IS NOT AMENABLE TO REVISIONAL JURISDICTION UNDER SECTION 263 OF THE ACT. IN OTHERWORDS, THE CASE OF THE LEARNED COUNSEL IS THAT THE ISSUE AS TO WHETHER INTEREST DETERMINED BY THE COURT IS T AXABLE OR NOT IS DEBATABLE IN WHICH EVENT ORDER PASSED BY THE ASSESS ING OFFICER CANNOT BE SAID TO BE ERRONEOUS OR PREJUDICIAL TO THE INTER ESTS OF THE REVENUE. 9. ON THE OTHER HAND, LEARNED DR STRONGLY RELIED U PON THE ORDER PASSED BY THE LEARNED COMMISSIONER AND SUBMIT TED THAT THE GRANT OF INTEREST IN PRINCIPLE IS MANDATORY WHEREAS THE RATE OF INTEREST MAY VARY AND THUS IT HAS TO BE TREATED AS A STATUTO RY INTEREST. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISS IONS AND PERUSED THE RECORD. A CAREFUL PERUSAL OF THE ORDER OF THE APEX COURT INDICATE THAT FIXATION OF RATE OF INTEREST IS A DIS CRETIONARY POWER IN WHICH EVENT IT CANNOT BE SAID THAT SUCH INTEREST IS PAYABLE UNDER A STATUTORY PRESCRIPTION. HAVING REGARD TO THE CIRCUM STANCES, THE ASSESSEE RELIED UPON THE DECISION OF THE HONBLE PU NJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS. B.RAI (SUPRA) WHE REIN THE COURT OBSERVED THAT INTEREST PAID BY A COURT, BY EXERCISI NG ITS DISCRETION, SHOULD NOT BE TREATED AS AN INCOME OF THE ASSESSEE FOR THE PURPOSE OF INCOME TAX ACT. WITHOUT GOING INTO THE MERITS OF TH E ISSUE, IT CAN BE SAID THAT THE ASSESSING OFFICER HAS TAKEN ONE PLAUS IBLE VIEW OF THE MATTER AND THUS HIS ORDER CANNOT BE SAID TO BE ERRO NEOUS AND PREJUDICIAL TO THE INTERESTS OF THE REVENUE IN THE LIGHT OF THE DECISION OF APEX COURT IN THE CASE OF MALABAR INDUSTRIES LTD . (SUPRA). WE, THEREFORE, ACCEPT THE PLEA OF THE ASSESSEE AND SET ASIDE THE ORDER OF THE REVISIONAL AUTHORITY. 11. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ITA. NO. 2142/M/09 ABDUL RASOOL VIRJI 5 ORDER PRONOUNCED IN THE OPEN COURT, ON THIS THE 3 1 ST DAY OF DECEMBER, 2010. SD/- SD/- (PRAMOD KUMAR) (D.MANMOHAN) ACCOUNTANT MEMBER VICE PRESIDENT MUMBAI, DATE 31 ST DECEMBER, 2010 VBP/- COPY TO 1. ABDUL RASOOL VIRJI, CARE; REGAL SHOES, 10/12B AN JIR WADI ESTATE, MOUNT ROAD, MAZAGAON, MUMBAI 400 010 PAN AABPV2219H 2. ACIT 17 (3), INCOME TAX OFFICE, PIRAMAL CHAMBERS , PAREL, MUMBAI 012. 3. CIT-17, R.NO.414, 4 TH FLOOR, PIRAMAL CHAMBERS, PAREL, MUMBAI 4. ADDL.CIT, RANGE 17 (3), MUMBAI 5. DR A BENCH 6. GUARD FILE (TRUE COPY) BY ORDER ASST. REGISTRAR, ITAT, MUMBAI BENCHES MUMBAI.