TATA INVESTMENT CORPORATION LTD, MUMBAI V. DCIT 2(3), MUMBAI

ITA 3098/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71827 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 19-11-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 07-05-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M L PERUMAI
• Assessee Lawyers: BURZIS TARAPOREVALA
• Keywords: Depreciation; Rule of consistency
• Section: 115JB; 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ./I.T.A. NO.3098/M/2012 (AY: 2008 - 2009) TATA INVESTMENT CORPORATION LTD, ELPHINSTONE BLDHG, 2 ND FLOOR, 10 VEER NARIMAN ROAD, MUMBAI 400 001. / VS. DCIT 2(3), R.NO.552, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. ./ PAN : AAACT 4120 F ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI BURZIS TARAPOREVALA / RESPONDENT BY : SHRI M.L. PERUMAI, DR / DATE OF HEARING : 19.11.2013 / DATE OF PRONOUNCEMENT : 06 .12.2013 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 7.5.2012 IS AGAINST THE ORDER OF THE CIT (A) - 6, MUMBAI DATED 6.3.2012 FOR THE ASSESSMENT YEAR 2008 - 2009. 2. IN THIS APPEAL, ASSESSEE RAISED THE ONLY EFFECTIVE GROUND WHICH READS AS UNDER: 1 . LOSS ON EXCHANGE RS. 1,82,000/ - THE CIT (A) ERRED IN NOT ALLOWING THE DEDUCTION OF RS. 1,82,000/ - BEING THE LOSS FOR AY 2008 - 2009 ON ACCOUNT OF DEPRECIATION OF SRI LANKA RUPEES, HELD AS A CURRENT ASSET BY THE APPELLANT. 2. INCOME UNDER SECTION 115JB IN CREASED BY RS. 4,82,000/ - THE CIT (A) ERRED IN ALLOWING THE INCREASE IN THE INCOME U/S 115JB OF THE INCOME TAX ACT, 1961 (MAT) BY AN AMOUNT OF RS. 4,82,000/ - (BEING DIVIDEND RECEIVED ON SHARES, SOLD EARLIER, REFUNDABLE TO THE PURCHASERS RS. 3,00,000/ - 3 . BEFORE US, AT THE OUTSET, SHRI BURZIS TARAPOREVALA, LD COUNSEL FOR THE ASSESSEE SUBMITTED A CHART SHOWING THE DETAILS OF GROUNDS WITH ITS REMARKS AND MENTIONED THAT THE ABOVE SAID GROUNDS ARE SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL IN ASSESSEES 2 OW N CASE FOR THE AY 2007 - 2008 VIDE ITA NO. 6115/M/2011 DATED 31.7.2012. THE GROUND WISE DISCUSSION AND DECISION IS GIVEN AS UNDER: 4. REFERRING TO GROUND NO.1, WHICH RELATES TO DISALLOWANCE OF DEDUCTION OF RS. 1,82,000/ - ON ACCOUNT OF DEPRECIATION OF SRI LANKA RUPEE, LD COUNSEL MENTIONED THAT AN IDENTICAL ISSUE WAS ADJUDICATED BY THE TRIBUNAL FOR THE AY 2007 - 2008 (SUPRA) AND READ OUT THE RELEVANT PARAS FROM 2 TO 2.5, WHEREIN THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ISSUE. 5. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 6. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORI TIES AS WELL AS THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE AY 2007 - 08. ON THE PERUSAL OF THE SAID ORDER OF THE TRIBUNAL, WE FIND THAT THE TRIBUNAL HAS ADJUDICATED THE SIMILAR ISSUE IN THE AY 2007 - 08, WHICH IS EXACTLY IDENTICAL WITH THAT OF TH E PRESENT ISSUE UNDER CONSIDERATION AND PARA 2.5 OF THE SAID ORDER OF THE TRIBUNAL IS RELEVANT HERE AND THE SAME IS REPRODUCED AS UNDER: 2.5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS IN THE LIGHT OF THE MATERIAL PLACED BEFORE US. THE FACTS MENTIONED ABOV E ARE NOT CONTROVERTED BY THE REVENUE. WHEN THE ASSESSEE SOLD THE SHARES THE CAPITAL GAIN WAS DECLARED IN AY 1999 - 2000 AND NO PART OF THE SHARES IS BEING HELD BY THE ASSESSEE. IT IS ONLY A PART OF SALE PROCEEDS OF THOSE SHARES WHICH COULD NOT BE REPATRIA TED BY THE ASSESSEE WHICH WERE KEPT IN SRI LANKA IN BLOCKED ACCOUNT FOR WHICH THE PERMISSION IS YET TO BE OBTAINED BY THE ASSESSEE. ACCORDING TO AFOREMENTIONED DECISION OF THE COORDINATE BENCH IN THE CASE OF RELIANCE ENE RGY LTD VS. DCIT (SUPRA) THE LOSS O N FOREIGN CURRENCY CANNOT SAID TO HAVE CONNECTION WHATSOEVER WITH CAPITAL LOSS BY SIMPLY FOR THE REASON THAT THE PROCEEDS BELONG TO SHARES WHICH WERE HELD BY THE ASSESSEE AS INVESTMENT. AFTER SALE THE CHARACTER OF THE AMOUNT RECEIVED BY THE ASSESSEE HAD C HANGED AND IT BECAME CURRENT OR CIRCULATING ASSET WHICH CAN BE UTILIZED BY THE ASSESSEE IN ITS BUSINESS PROVIDED THE ASSESSEE HAD GOD THE PERMISSION FROM THE CENTRAL BANK OF SRI LANKA FOR WHICH THE ASSESSEE IS PURSUING AND A COPY OF LETTER HAS BE E N FILED B EFORE US TO SHOW THAT ON 12.6.2012 THE ASSESSEE HAS WRITTEN TO THE CONTROLLER TO EXCHANGE, EXCHANGE CONTROL DEPARTMENT, CENTRAL BANK OF SRI LANKA, COLOMBO FOR THE RELEASE OF THE FUND STATING THEREIN THE ENTIRE HISTORY, FROM WHERE THE ABOVE FACTS HAVE BEEN TAKEN. WHEN IT IS HELD THAT THE SALE PROCEEDS OF SHARE HAVE LOST THE CHARACTER OF INVESTMENT WHEN THE SALE PRICE WAS REALIZED AND IT BECOME CIRCULATING CAPITAL OR ASSET. THE CASE LAW RELIED UPON BY THE LD AR WILL BE APPLICABLE AND IT WOULD BE HELD THAT L OSS SUFFERED BY THE ASSESSEE ON ACCOUNT OF EXCHANGE DIFFERENCE AS ON THE DATE OF BALANCE SHEET IS AN ITEM OF EXPENDITURE ALLOWABLE UNDER SECTION 37(1) OF THE ACT. IT IS NOT NOTIONAL AND AS PER AS - 11, IF THE ACCOUNTS ARE MAINTAINED ON MERCANTILE BASIS THE LOSS IS ALLOWABLE. IN VIEW OF THE ABOVE DISCUSSIONS, GROUND NO.1 OF THE ASSESSEE IS ALLOWED. 3 7. CONSIDERING THE ABOVE SETTLED POSITION OF THE ISSUE, WE ARE OF THE OPINION THAT THE GROUND NO.1 RAISED BY THE ASSESSEE SHOULD BE ALLOWED IN FAVOUR OF THE ASSE SSEE. ACCORDINGLY, GROUND NO.1 IS ALLOWED. 8. REFERRING TO GROUND NO.2, LD COUNSEL MENTIONED THAT THE ISSUE RAISED IN THIS GROUND RELATES TO INCREASE IN THE INCOME U/S 115JB OF THE ACT QUA THE PERMISSION FOR REFUNDABLE DIVIDEND . IN THIS REGARD, LD COUNSEL SUBMITTED THAT THE AN IDENTICAL ISSUE WAS DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE AY 2007 - 2008 AND READ OUT THE RELEVANT PARA 4 OF THE SAID ORDER OF THE TRIBUNAL IN THIS REGARD. 9. ON THE OTHER HAND, LD DR RELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE ORDER OF THE TRIBUNAL VIDE ITS ORDER DATED 31.7.2012 IN ASSESSEES OWN CASE (SUPRA). ON PERUSAL OF THE SAID ORDER OF THE TRIBUNAL, WE FIND THAT THE SIMILAR ISSUE WAS DECIDED BY THE TRIBUNAL FOR THE AY 2007 - 2008 AND PARA 4 OF THE SAID ORDER OF THE TRIBUNAL IS RELEVANT IN THIS REGARD, WHICH READS AS UNDER: 4. NOW COMING TO GROUND NO.3 THE PROVISION FOR REFUNDABLE DIVIDEND HAS BEEN CONSI DERED BEING UNASCERTAINED LIABILITY AS ACCORDING TO DEPARTMENT THE ASSESSEE DOES NOT KNOW HOW MUCH DIVIDEND WOULD BE CLAIMED BY THE PERSONS WITH RESPECT TO SHARES EARLIER OWNED BY THE ASSESSEE. AS AGAINST THAT IT IS THE CASE OF THE ASSESSEE THAT IT RECEIVE D DIVIDEND ON SHARES WHICH WERE SOLD BY IT. IN EARLIER YEARS BUT WHICH ARE NOT STILL TRANSFERRED IN THE NAME OF ITS PURCHASERS IN THE RECORDS OF THE INVESTOR COMPANY. THE ASSESSEE IS CREDITING SUCH DIVIDEND IN SUNDRY CREDITOR ACCOUNT AND IF THE SAID DIVIDE ND IS NOT CLAIMED BY THE RIGHTFUL OWNER UP TO A PERIOD OF 5 YEARS THE SAME IS CREDITED TO MISCELLANEOUS INCOME AND OFFERED TO TAX. FT IS THE CLAIM OF THE ASSESSEE THAT LIABILITY IS ASCERTAINED AND KNOWN TO THE ASSESSEE RIGHT FROM THY DATE OF RECEIPT OF DIV IDEND AND THE SAME IS ACCOUNTED FOR UNDER THE HEAD CURRENT LIABILITIES AND IS NOT ACCOUNTED FOR BY THE ASSESSEE AS PROVISIONS IT IS ALSO THE CASE OF THE ASSESSEE THAT SIMILAR ISSUE CAME INTO CONSIDERATION BEFORE THE TRIBUNAL IN THE CASE OF ASSESSEE ITSE LF FOR A.Y 2006 - 07) WHERE SUCH CLAIM OF THE ASSESSEE WAS ACCEPTED BY THE TRIBUNAL AND REFERENCE WAS MADE TO ORDER DA TED 15/7/2011 IN ITA NO.4448/M/ 10, COPY OF WHICH IS PLACED AT PAGES 48 TO 56 OF THE PAPER BOOK, WHEREIN THE DEPARTMENT HAS AGITATED SIMILAR DELETION OF RS. 14 , 33,000/ - ON THE GROUND THAT THE EXCESS DIVIDEND RECOVERED BY THE ASSESSEE DURING THE YEAR WHICH WAS NOT REFUNDED TO RIGHTFUL OWNERS HAS WRONGLY BEEN DELETED. REFERENCE WAS MADE TO FOLLOWING OBSERVATION OF THE SAID DECISION OF THE TRIBUNA L: 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AT THE OUTSET WE HAVE TO REJECT THE ARGUMENT OF THE LEARNED D.R. THAT THE CHARACTER OF THE SUM IN DISPUTE HAS NOT BEEN ESTABLISHED BY THE ASSESSEE TO BE A DIVIDEND PAID ON SHARES WHICH IT HAD TRANSFERRED AN D THAT THE DIVIDENDS HAVE TO BE REFUNDED TO THE RIGHTFUL CUSTOMERS. IN THIS REGARD, NEITHER THE AO NOR THE CIT (A) DISPUTED FACTS REGARDING THE CLAIM OF THE ASSESSEE IN THIS REGARD, IT IS NOT OPEN TO THE REVENUE FOR THE FIRST TIME IN AN APPEAL BEFORE 4 THE T RIBUNAL TO RAISE SUCH AN ISSUE. IT WAS SUBMITTED BY THE LEARNED D.R. THAT THE FACT THAT THE A.O MADE THE IMPUGNED ADDITION BY ITSELF SHOWS THAT HE HAD DISPUTED THE CLAIM OF THE ASSESSEE. IN THIS REGARD WE NOTICE THAT THE A.O NEVER CALLED UPON THE ASSESSEE TO FURNISH DETAILS IN THIS REGARD. EVEN BEFORE CIT (A) THE A.O HAS NOT RAISED ANY ISSUES ON THIS ASPECT. THE CASE OF THE A.O BEFORE TRIBUNAL PROCEEDS ON THE FOOTING THAT IT IS ONLY WHEN REFUND OF DIVIDEND IS MADE TO THE RIGHTFUL OWNER OF THE DIVIDEND, CAN THE ASSESSEE SAY THAT THE RECEIPT IS NOT ITS INCOME, WE THEREFORE DO NOT FIND ANY MERIT IN THE ARGUMENT RAISED BY THE LEARNED D.R. IN THIS REGARD BEFORE US AND WE PROCEED THE EXAMINE THE ISSUE ON THE PREMISE THAT THE CLAIM OF THE ASSESSEE THAT THE RECEIPTS IN QUESTION WERE DIVIDEND WHICH ARE LAWFULLY PAYABLE TO THIS TRANSFEREES OF SHARES BY THE ASSESSEE IS CORRECT. 8. THE LAW IS WELL SETTLED THAT ALL RECEIPTS ARE NOT INCOME. ONLY THOSE RECEIPTS WHICH ARE IN THE CHARACTER OF INCOME CAN BE ASSESSED TO TAX. T HE DEFINITION OF INCOME AS GIVEN IN THE ACT, U/S.2(24) IS AN INCLUSIVE DEFINITION. ANYTHING WHICH CAN PROPERLY BE DESCRIBED AS INCOME, IS TAXABLE UNDER THE ACT UNLESS EXPRESSLY EXEMPTED. THE EXPRESSION INCOME HAS TO BE UNDERSTOOD IN ITS NATURAL MEANING . ITS NATURAL MEANING EMBRACES ANY PROFIT OR GAIN, WHICH IS ACTUALLY RECEIVED. THE IDEA BEHIND PROVIDING AN INCLUSIVE DEFINITION IN SECTION 2(24) IS NOT TO LIMIT ITS MEANING BUT TO WIDEN ITS NET THE CHARGING SECTION VIZ., SECTION - 4 OF THE ACT, REFERS TO T HE CHARGE OF INCOME TAX BEING ON THE TOTAL INCOME OF THE PREVIOUS YEAR OF EVERY PERSON. SECTION 5 DEFINES SCOPE OF TOTAL INCOME AND IT ITALICS OF INCOME FROM WHATEVER SOURCE DERIVED WHICH IS RECEIVED OR DEEMED TO BE RECEIVED IN MEDIA OR WHICH ACCRUES OR AR ISES OR IS DEEMED TO ACCRUE OR ARISE IN INDIA. THE INCOME BEARS ITS QUALITY AS INCOME ONLY IF IT IS RECEIVED BY THE ASSESSEE, OR IT HAS ACCRUED OR HAS ARISEN TO THE ASSESSEE, OR AT LEAST FUNCTIONALLY DEEMED TO BE RECEIVED BY OR IS DEEMED TO HAVE ACCRUED OR ARISEN TO HIM. IF NOT IN FACT RECEIVED, THE ASSESSEE SHOULD AT LEAST BE ENTITLED TO RECEIVE IT. TO CALL SOMETHING INCOME, WITHOUT THERE BEING AN ACTUAL RECEIPT, THERE MUST AT LEAST BE A DEBT OWNED BY A THIRD PARTY TO THE ASSESSEE. IT WOULD BE EQUALLY TRUE TO SAY THAT EVEN WHEN A PERSON RECEIVES SOMETHING, THE SAME WILL ASSUME THE CHARACTER OF INCOMES IN THE HANDS OF THE RECIPIENT ONLY WHEN HE HAS A LEGAL RIGHT TO THE SUM RECEIVED. OTHERWISE, THE RECIPIENT WOULD ONLY BE HOLDING THE MONEY SO RECEIVED IN TRUS T FOR THE LAWFUL OWNER OF THE MONEY. THE ASSESSEE HAS RECEIVED DIVIDEND ON SHARES WHICH IT HAD ALREADY TRANSFERRED AND THE RIGHT TO RECEIVE DIVIDEND VESTS WITH THE TRANSFEREE. NEVERTHELESS, THE ASSESSEE RECEIVED THE SUMS IN QUESTION BECAUSE IT WAS SHOWN AS THE REGISTERED OWNER OF THE SHARES IN THE REGISTER OF MEMBERS OF THE COMPANY. SEC. 72 OF THE INDIAN CONTRACT ACT, 1872 1AYS DOWN A PERSON TO WHOM MONEY HAS BEEN PAID, OR ANYTHING DELIVERED, BY MISTAKE OR UNDER COERCION, MUST REPAY OR RETURN IT. IT IS THU S, CLEAR THAT IT IS ONLY WHEN THERE IS A RIGHT TO RECEIVE INCOME, INCOME CAN BE SAID TO HAVE ACCRUED. WITHOUT LEGALLY ENFORCEABLE RIGHT THERE CAN BE NO ACCRUAL OF INCOME. WE ARE OF THE VIEW THAT THE ASSESSEE HAS NO LAWFUL RIGHT TO THE RECEIPT IN QUESTION N OR HAS IT CLAIMED SUCH A RIGHT. IN SUCH CIRCUMSTANCES, THE RECEIPT WILL NOT ASSUME THE CHARACTER OF INCOME IN THE HANDS OF THE ASSESSEE. ON THIS GROUND ITSELF, THE APPEAL OF THE REVENUE DESERVES TO BE DISMISSED. 9. WE ALSO FIND THAT THE ASSESSES HAS BEEN FOLLOWING CONSISTENTLY THE METHOD OF ACCOUNTING WHEREBY THE DIVIDENDS RECEIVED BY THE ASSESSEE WHICH ARE TO BE REFUNDED TO THE RIGHTFUL OWNER, IF THE SAME IS NOT CLAIMED FOR A PERIOD OF 5 YEARS FROM THE DATE OF RECEIPT OF THE DIVIDEND BY THE ASSESSEE, IS T REATED AS INCOME AND OFFERED TO TAX BY THE ASSESSES. THIS METHOD OF ACCOUNTING HAS BEEN ACCEPTED BI THE REVENUE. IN SUCH CIRCUMSTANCES, WE FAILED TO SEE AS TO HOW THE REVENUE WILL BE PREJUDICED. IN OUR VIEW THE METHOD OF ACCOUNTING ADOPTED BY THE ASSESSEE IS VERY REASONABLE. IN OUR VIEW THE CIT (A) WAS, THEREFORE, JUSTIFIED IN DELETING THE ADDITION MADE BY THE AO. 10. WITH REGARD TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CHOWRANGHEE SALES BUREAU LTD. (SUPRA) WE ARE OF THE VIEW THAT THE SAID DECISION IS NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN THE SAID CASE THE ASSESSEE COLLECTED SALES TAX FROM THE CUSTOMERS AND TOOK A STAND THAT THE SAME IS NOT PAYABLE TO THE STATE EXCHEQUER. IN THE PRESENT CASE THE ASSESSEE HAS ALWAYS MAINTAI NED THAT THE DIVIDEND RECEIVED BY IT WHICH WERE LAWFULLY PAYABLE TO THE TRANSFEREE OF SHARES WERE NOT ITS MONEY. IN SUCH CIRCUMSTANCES WE ARE OF THE VIEW THAT THE DECISION IN THE CASE OF CHOWRANGHEE SALES BUREAU LTD. (SUPRA) WILL NOT BE APPLICABLE. FURTHER THE DIVIDENDS WERE RECEIVED ON SHARES WHICH WERE HELD AS INVESTMENTS. AT THE TIME OF RECEIPT OF THE DIVIDENDS, THE SHARES DID NOT FORM PART OF THE INVESTMENT PORTFOLIO OF THE ASSESSEE AND, THEREFORE, IT CANNOT BE SAID THAT IT WAS RECEIVED BY THE ASSESAEE IN ITS CHARACTER AS AN INVESTOR. WE, THEREFORE, FIND NO INFIRMITY IN THE ORDER OF THE CIT (A). CONSEQUENTLY, THE APPEAL OF THE REVENUE IS DISMISSED. 5 11. IN THE RESULT, THE APPEAL BY THE REVENUE IS DISMISSED. 4.1 IN THIS VIEW OF THE SITUATION, AFTER HEARIN G BOTH THE PARTIES, WE FOUND THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE AFOREMENTIONED DECISION OF THE TRIBUNAL AND IT IS HELD THAT THE SAID AMOUNT COULD NOT BE ADDED TO THE INCOME OF THE ASSESSEE. ACCORDINGLY THIS GROUND IS ALLOWED. 11. THE ISSUE RELATES TO ALLOWABILITY OF THE PROVISION OF RS. 3 LAKHS. SUCH PROVISION IS HELD ALLOWABLE IN THE AY 2007 - 2008 (SUPRA). CONSIDERING THE ABOVE SETTLED NATURE OF THE ISSUE AND FOLLOWING THE PRINCIPLE OF CONSISTENCY, WE ARE OF THE OPINION THAT THE ISSUE RAISED BY THE ASSESSEE SHOULD BE ALLOWED IN FAVOUR OF THE ASSESSEE. ACCORDINGLY, GROUND NO.2 IS ALLOWED. 12. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONO UNCED IN THE OPEN COURT ON 6 T H DECEMBER, 2013. S D / - S D / - (SANJAY GARG) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 6 .12 .2013 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI