ASST CIT 17(2), MUMBAI V. JECHAND JASRAJ VORA, MUMBAI

ITA 2587/MUM/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0256 (ITAT-MUMBAI)
• Duration Of Justice: 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 13-06-2017
• Assessment Year: 2007-2008
• Appeal Filed On: 10-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAMTA PARMAR
• Assessee Lawyers: B S BIST

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH SMC, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER ITA NO.2587/M/2017 ASSESSMENT YEAR: 2007-08 ACIT 17(2), ROOM NO.134, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 009 VS. M/S. JECHAND JASRAJ VORA, 5, KESHAVJI NAYAK ROAD, MUMBAI 400 009 PAN: AAAFJ5102G (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : SHRI B.S. BIST, A.R. REVENUE BY : SHRI MAMTA PARMAR, D.R. DATE OF HEARING : 13.06.2017 DATE OF PRONOUNCEMENT : 29.06.2017 O R D E R PER D.T. GARASIA, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVEN UE AGAINST THE ORDER DATED 27.01.2017 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO ASSESSMENT Y EAR 2007-08. 2. THE SHORT FACTS OF THE CASE ARE AS UNDER: THE ASSESSEE HAS FILED THE RETURN OF INCOME ON 30. 10.07 AND DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER (HEREI NAFTER REFERRED TO AS THE AO) HAS FOUND THAT ASSESSEE IS ENGAGED IN THE BUSIN ESS OF TRADING AND EXPORT OF DIAMONDS AND HE FOUND THAT ASSESSEE HAS ALLOWED THE INTEREST EXPENDITURE OF RS.32,94,267/-. THERE WAS AN AUDIT QUERY. THEREFO RE, ASSESSEE WAS GIVEN SHOW CAUSE NOTICE AND AO HAS DISALLOWED THE INTERES T EXPENDITURE OF RS.32,94,267/- ON THE GROUND THAT THE INTEREST DOES NOT BELONG TO PREVIOUS YEAR 2006-07, HENCE THE DEDUCTION IS NOT ALLOWABLE IN 20 07-08. THEREFORE, THE AO DISALLOWED THE SAME. ITA NO.2587/M/2017 M/S. JECHAND JASRAJ VORA 2 3. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CIT (A) ALLOWED THE APPEAL OF THE ASSESSEE BY OBSERVING AS UNDER: 8. CONSIDERING THE DETAILS FILED AS ABOVE, THE ASS ESSING OFFICER HAS CONSIDERED THE BILL DISCOUNTING EXPENDITURE ON PROPORTIONATE BASIS. COPY OF INVOICES OF BANK FILED SHOWS THE PAYMENTS A RE TERMED BY BANK AS INTEREST. IN ESSENCE, THE AMOUNT IS ONLY THE VALUE REALIZED AGAINST THE SALE. THE HON'BLE SUPREME COURT HAS UPHELD THE SAME IN TH E DECISION OF CIT, DELHI-1 VS. CARGIL GLOBAL TRADING I.P.LTD. (SUPRA). IN THE DECISION OF TVS FINANCE & SERVICES LTD. VS. JCIT 318 ITR 435, THE HON'BLE MADRAS HIGH COURT HELD THAT THE INCOME FROM BILL DISCOUNTING AC CRUES ON THE DATE OF DISCOUNT AND CANNOT BE SPREAD OVER. THOUGH THE ISSU E IN THE PRESENT CASE IS DIFFERENT, THE DECISION OF THE HON'BLE COURT IS IMPORTANT THAT THERE WAS NO RELEVANCE OF THE PERIOD INVOLVED. THE DECISI ON OF HON'BLE KOLKATA TRIBUNAL IN CASE OF ITO VS M.K.J. ENTERPRISES LTD. ITA NO.729/KOL/2011 THE TRIBUNAL HELD THAT FOR THE AMOUNT TO BE TERMED AS I NTEREST THERE SHOULD BE A PRE- EXISTING DEBT AND A DEBTOR CREDITOR RELATIONSHIP. 9. IN THE LIGHT OF ABOVE DECISIONS, THE DISCOUNTING CHARGES CANNOT BE TREATED AS INTEREST. HOWEVER, SINCE THE SAME IS IN THE NATURE OF EXPENSES INCURRED FOR THE REALIZATION OF THE VALUE, THE SAME IS LIABLE TO BE ALLOWED ON ACTUAL BASIS. 10. THE AUTHORISED REPRESENTATIVE HAS MADE AN ALTER NATE CLAIM ULS.4313. HOWEVER, AS THE PRESENT ISSUE IS RESTRICT ED TO THE DISALLOWANCE MADE ON ACCOUNT OF THE PAYMENT BEING H ELD AS INTEREST BY ASSESSING OFFICER, THE APPEAL IS LIMITED TO THAT ISSUE ONLY. 11. IN LIGHT OF THE ABOVE FACTS AND JUDICIAL PRONOU NCEMENTS, THE DISALLOWANCE MADE OUT OF DISCOUNTING CHARGES IS DIR ECTED TO BE DELETED. GROUND OF APPEAL NO.1 IS ALLOWED. 4. I HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. I FIND THAT AO HAS CONSIDERED BILL DISCOUNTING EXPENDITURE ON PROPORTI ONATE BASIS. THE LD. CIT(A) HAS VERIFIED THE INVOICES OF BANK FILE WHICH SHOW THAT THE PAYMENTS WERE TERMED BY BANK AS INTEREST. IN THE DECISION O F HONBLE MADRAS HIGH COURT IN THE CASE OF TVS FINANCE & SERVICES LTD. VS . JCIT 318 ITR 435 IT HAS BEEN HELD THAT THE DISCOUNTING CHARGES CANNOT BE TR EATED AS INTEREST. HOWEVER, SINCE THE SAME IS IN THE NATURE OF EXPENSES INCURRE D FOR REALIZATION OF THE VALUE, THE SAME IS LIABLE TO BE ALLOWED ON ACTUAL BASIS. THEREFORE, FOLLOWING THE DECISION OF HONBLE MADRAS HIGH COURT IN THE CASE O F TVS FINANCE & SERVICES ITA NO.2587/M/2017 M/S. JECHAND JASRAJ VORA 3 LTD. (SUPRA), THE LD. CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE AND OUR INTERFERENCE IS NOT REQUIRED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.06.2017. SD/- (D.T. GARASIA) JUDICIAL MEMB ER MUMBAI, DATED: 29.06.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.