Brahmputra Capital and Financial Services ltd., New Delhi V. ITO, WARD- 5(2), New Delhi

ITA 3704/DEL/2018

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 9615 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 17-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SATPAL GULATI
• Assessee Lawyers: ROHIT JAIN AD V MS SOUMYA JAIN
• Keywords: Question of law; Notional interest

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI A BEN CH, NEW DELHI [THROUGH VIDEO CONFERENCE] BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER, AND SHRI K.N. CHARY, JUDICIAL MEMBE R ITA NO. 3704/DEL/2018 [A.Y 2010-11] BRAHMAPUTRA CAPITAL AND VS. THE ADDL. C.I.T FINANCIAL SERVICES WARD -5(2) 28, NAJAFGARH ROAD NEW DELHI NEW DELHI PAN: AABCB 8626 K [APPELLANT] [RESPONDENT] ASSESSEE BY : SHRI ROHIT JAIN, AD V MS. SOUMYA JAIN, ADV REVENUE BY : SHRI SATPAL GULATI, CIT- DR DATE OF HEARING : 26.07.2021 DATE OF PRONOUNCEMENT : 26.07.2021 ORDER PER N.K. BILLAIYA, ACCOUNTANT MEMBER, THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE CIT(A) 2, NEW DELHI, DATED 19.02.2018 PERTAINING TO A.Y 2010-11. 2 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE AS SESSEE IS THAT THE LD. CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 66,73,286/-, ALLEGED TO BE INTEREST INCOME OF THE APPELLANT. 3. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSE SSEE STATED THAT THE IMPUGNED ISSUE HAS BEEN DECIDED IN FAVOUR OF TH E ASSESSEE AND AGAINST THE REVENUE BY THE HON'BLE JURISDICTIONAL H IGH COURT OF DELHI FOR A.YS 2003-04 TO 2006-07. THE LD. COUNSEL FOR T HE ASSESSEE FURTHER STATED THAT THE HON'BLE SUPREME COURT IN A CONSOLID ATED ORDER COVERING C.A NO. 998/2013 [BEING ASSESSEES APPEAL] HAVE UPH ELD THE FINDINGS OF THE HON'BLE DELHI HIGH COURT. THE LD. COUNSEL FOR THE ASSESSEE FURTHER BROUGHT TO OUR NOTICE THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR A.YS 2008-09 AND 2009-10 WHEREIN THE TRIBU NAL HAS CONSIDERED ALL THE JUDGMENTS RELATING TO THE IMPUGNED ISSUE. 4. THE LD. DR FAIRLY CONCEDED TO THIS. 5. WE HAVE CAREFULLY CONSIDERED THE ORDERS OF THE A UTHORITIES BELOW AND HAVE ALSO PERUSED THE DECISIONS BROUGHT TO OUR NOTICE. WE FIND FORCE IN THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE. THE HON'BLE HIGH COURT OF DELHI IN 335 ITR 182 HAS DECI DED THIS ISSUE FOR 3 A.YS 2003-04 TO 2006-07 WHICH HAS BEEN UPHELD BY TH E HON'BLE SUPREME COURT IN A BUNCH OF APPEALS COVERING C.A NO 998/2013 [BELONGING TO THE ASSESSEE] AND THE TRIBUNAL IN ITA NO. 4791/DEL/2012 FOR A.Y 2008-09 AND 4792/DEL/2012 FOR A.Y 2009-10 H AS CONSIDERED THE QUARREL AND FOLLOWED THE FINDINGS OF THE HON'BLE HI GH COURT [SUPRA]. THE RELEVANT FINDINGS READ AS UNDER: 9. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. WE FIND FORCE IN THE CONTENT ION OF THE LD. COUNSEL IDENTICAL ADDITIONS WERE MADE IN A. Y. 2003 -04 TO 2006-07 AND THE MATTER TRAVELLED UP TO THE HONBLE DELHI HI GH COURT AND THE HONBLE DELHI HIGH COURT FRAMED THE FOLLOWING Q UESTION OF LAW PROPOSED BY REVENUE. 9. WHETHER INCOME TAX APPELLATE TRIBUNAL WAS CORRECT IN LAW IN DELETING THE ADDITIONS OF RS.21553466/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST ACCRUED TO THE ASSES SEE AS PER MERCANTILE SYSTEM OF ACCOUNTING ? 10. THE HONBLE HIGH COURT OBSERVED AS UNDER :- 5. IDENTICAL ISSUE CAME UP BEFORE THIS COURT IN BATCH OF APPEALS LEADING CASE BEING CIT V. VASISTH CHAY VYAPAR LTD. [2011] 196 TAXMAN 169/ 8 TAXMANN.COM 145. THIS THEORY OF 'REAL INCOME' WAS DISCUSSED IN DETAIL. THAT WAS ALSO A CASE OF NBFC W HERE LOAN/ADVANCE GIVEN BY THE SAID ASSESSEE HAD BECOME NPA AND 4 KEEPING IN VIEW THE GUIDELINES OF RBI INTEREST WAS NOT TREATED AS ACCRUED. AFTER TAKING NOTE OF VARIOUS JUDGMENTS ON THE SUBJECT, THE QUESTION WAS ANSWERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE LEGAL POSITION IS SUMMARIZED IN PA RA 17 OF THE SAID JUDGMENT WHICH READS AS UNDER 'IN THIS SCENARIO, WE HAVE TO EXAMINE THE STRENGTH IN THE SUBMISSION OF LEARNED C OUNSEL FOR THE REVENUE THAT WHETHER IT CAN STILL BE HELD THAT INCO ME IN THE FORM OF INTEREST THOUGH NOT RECEIVED HAD STILL ACCRUED T O THE ASSESSEE UNDER THE PROVISIONS OF INCOME-TAX ACT AND WAS, THE REFORE, EXIGIBLE TO TAX. OUR ANSWER IS IN THE NEGATIVE AND WE GIVE THE FOLLOWING REASONS IN SUPPORT: (1) FIRST OF ALL WE WOULD DISCUSS THE MATTER IN THE LIG HT OF THE PROVISIONS OF INCOME-TAX ACT AND TO EXAMINE AS TO W HETHER IN THE GIVEN CIRCUMSTANCES, INTEREST INCOME HAS ACCRUED TO THE ASSESSEE. IT IS STATED AT THE COST OF REPETITION THAT ADMITTE D POSITION IS THAT THE ASSESSEE HAD NOT RECEIVED ANY INTEREST ON THE S AID ICD PLACED WITH SHAW WALLAEE SINCE THE ASSESSMENT YEAR 1996-97 AS IT HAD BECOME NPAS IN ACCORDANCE WITH THE PRUDENTIAL NORMS WHICH WAS ENTERED IN THE BOOKS OF ACCOUNT AS WELL. THE ASSESS EE HAS FURTHER SUCCESSFULLY DEMONSTRATED THAT EVEN IN THE SUCCEEDI NG ASSESSMENT YEARS, NO INTEREST WAS RECEIVED AND THE POSITION RE MAINED THE SAME UNTIL THE ASSESSMENT YEAR 2006-07. REASON WAS ADVER SE FINANCIAL CIRCUMSTANCES AND THE FINANCIAL CRUNCH FACED BY SHA W WALLACE. SO MUCH SO, IT WAS FACING WINDING UP PETITIONS WHICH W ERE FILED BY MANY CREDITORS. THESE CIRCUMSTANCES, LED TO AN UNCE RTAINTY INSOFAR AS RECOVERY OF INTEREST WAS CONCERNED, AS A RESULT OF THE AFORESAID PRECARIOUS FINANCIAL POSITION OF SHAW WALLACE. WHAT TO TALK OF 5 INTEREST, EVEN THE PRINCIPAL AMOUNT ITSELF HAD BECO ME DOUBTFUL TO RECOVER. IN THIS SCENARIO IT WAS LEGITIMATE MOVE TO INFER THAT INTEREST INCOME THEREUPON HAS NOT 'ACCRUED'. WE ARE IN AGREEMENT WITH THE SUBMISSION OF MR. VOHRA ON THIS COUNT, SUP PORTED BY VARIOUS DECISIONS OF DIFFERENT HIGH COURTS INCLUDIN G THIS COURT WHICH HAS ALREADY BEEN REFERRED TO ABOVE. (2) IN THE INSTANT CASE, THE ASSESSEE COMPANY BEING NBF C IS GOVERNED BY THE PROVISIONS OF RBI ACT. IN SUCH A CA SE, INTEREST INCOME CANNOT BE SAID TO HAVE ACCRUED TO THE ASSESS EE HAVING REGARD TO THE PROVISIONS OF SECTION 45Q OF THE RBI AND PRUDENTIAL NORMS ISSUED BY THE RBI IN EXERCISE OF ITS STATUTOR Y POWERS. AS PER THESE NORMS, THE ICD HAD BECOME NPA AND ON SUCH NPA WHERE THE INTEREST WAS NOT RECEIVED AND POSSIBILITY OF RE COVERY WAS ALMOST NIL, IT COULD NOT BE TREATED TO HAVE BEEN ACCRUED IN FAV OUR OF THE ASSESSEE.' 6. THE AFORESAID JUDGMENT CLEARLY APPLIES TO THE PRESE NT CASE AS WELL. FOLLOWING THAT JUDGMENT, WE ARE OF THE VIEW T HAT NO SUBSTANTIAL QUESTION OF LAW ARISES IN THESE APPEALS AND ARE ACCORDINGLY DISMISSED. 6 11. SIMILARLY IN A. Y. 2007-08 THE MATTER TRAVELLED UP TO THE HONBLE HIGH COURT THE RELEVANT FINDINGS OF THE HON BLE HIGH COURT READ : - 12. ITA 107/2012 ADMIT. THE FOLLOWING QUESTION OF LAW ARISES FOR CON SIDERATION : DID THE INCOME TAX APPELLATE TRIBUNAL (ITAT) FALL INTO ERROR IN HOLDING THAT THE SUM OF RS.2,53,15,466/- BROUGHT TO TAX ON ACCOUNT OF NOTIONAL INTEREST WAS NOT JUSTIFIED. ISSUE NOTICE. MR. SANJAY KUMAR, JR. STANDING COUNSE L ACCEPTS NOTICE. LIST ON 26 TH APRIL, 2018. THE COURT IS OF THE OPINION THAT FACIALLY THE APPEA L IS COVERED AGAINST THE REVENUE BY THE DECISION OF THE DIVISION BENCH OF THIS COURT REPORTED AS COMMISSIONER OF INCOME TAX VS. VA SISTH CHAY VYAPAR LTD, (2011) 196 TAXMAN 169 (DELHI) : 330 ITR 440 (DELHI). 13. RESPECTFULLY FOLLOWING THE DECISION OF THE HON BLE JURISDICTIONAL HIGH COURT IN ASSESSES OWN CASE WE D ECLINE TO INTERFERE WITH THE FINDING WITH THE FINDING OF THE CIT (A). 7 6. AS NO DISTINGUISHING DECISION HAS BEEN BROUGHT TO OUR NOTICE, RESPECTFULLY FOLLOWING THE ORDER OF THE HON'BLE SUP REME COURT, HON'BLE JURISDICTIONAL HIGH COURT AND THIS TRIBUNAL, THE AP PEAL OF THE ASSESSEE IS ALLOWED. THE ASSESSING OFFICER IS DIRECTED TO D ELETE THE IMPUGNED ADDITION. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO. 3704/DEL/2018 IS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT IN THE PR ESENCE OF BOTH THE RIVAL REPRESENTATIVE ON 26.07.2021. SD/- SD/- [ K.N. CHARY ] [N.K. BILLAIYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 26 TH JULY, 2021 VL/ COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI 8 DATE OF DICTATION ATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS /PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P S/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER