Modern Autotronix, New Delhi V. Jt. CIT Range-18, New Delhi

ITA 3974/DEL/2019

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 5470 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-12-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Assessment Year: 2014-2015
• Appeal Filed On: 02-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BIRENDER SINGH
• Section: 69; 27; 144

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘A’, NEW DELHI Before Ms. Suchitra Kamble, Judicial Member Dr. B. R. R. Kumar, Accountant Member (Through Video Conferencing) ITA No. 3974/Del/2019 : Asstt. Year : 2014-15 M/s Modern Autotronix, B-11, Diwan Shree Apartment, 30, Firozshah Road, New Delhi-110001 Vs JCIT, Range-18, New Delhi-110002 (APPELLANT) (RESPONDENT) PAN No. AARFM8678B Assessee by : Sh. A. K. Srivastava, CA Revenue by : Sh. Birender Singh, Sr. DR Date of Hearing: 29.09.2021 Date of Pronouncement: 29.12.2021 ORDER Per Dr. B. R. R. Kumar, Accountant Member: He ar d t he ar g u m e nt s o f bo t h t he par tie s an d pe r use d t he ma te r i a l ava i la b l e o n r e co r d. 2 . T he c ap t io ne d ap pe a l w as fi le d o n 0 3 .0 5 .2 0 1 9 a g ai ns t t he o r de r b y t he L e ar ne d C IT ( Ap pe a ls ) 3 6 , N e w De l hi , w ho v ide o r de r da te d 1 2 .0 2 .2 0 1 9 ha d co nf ir me d a n a dd i ti o n o f R s.3 ,1 4 ,0 1 ,7 8 6 / - o n acco u nt o f N o t io n a l In te r e s t , wh ic h is the o nl y gr o un d a ppe al . 3 . T he u nd is p ute d fac t s o f t he ca s e ar e th at the asse sse e fi le d r e tur n o f i nco me de c lar i ng an in co me o f R s.2 6,0 1 ,8 7 6 /- . Dur in g t he ye ar un de r co n si de r at io n, the a sse s se e fir m ha s ITA No. 3974/Del/2019 Modern Autotronix 2 e ar ne d i n te r e s t in co me o n u nse cur e d lo a ns ad v ance d to M/ s Im pe l A uto mo t iv e Pv t . L t d . T he Ap pe ll an t , a par tne rsh i p f ir m w as co ns t it u te d vi de par t ne r s h ip de e d d ate d 0 7 .0 4 .20 1 0 . 4 . An ad de n d um t o par tne r sh i p de e d w as e xe c ute d o n 1 6 .0 4 .2 0 1 0 by in cl us io n o f fo llo w i ng A d d it io na l Ma in O b je c t: Ad d i tio na l M ai n O bje c ts : 5 . T ha t t he fir m s ha l l w o r k an d a sso c i ate w i t h M /s Im pe l Au to mo t i ve Pr iv a te L i mi te d w ho h ave go t a ll I n di a dis tr i bu t io n / de a le r s hi p r i g ht o f JV C C ar Au d i o s / Ac ce sso r ie s b y pr o v i di n g the m f u nd s to w ar d the ir w o r ki ng ca pi t al r e qu i r e me n ts . T he fu nd s to be so pr o v i de d to t h e m w o ul d be u n- se c ur e d a nd in te r e s t s ha l l be char ge d o n t he fu nd s so pr o v ide d o n m u tu al l y agr e e d te r ms fr o m t ime to t i me . T he r ate o f ch ar g e ab le i n te r e s t w o u ld var y de pe nd i ng u po n t he pr o f i ts o f t he bo r r o we r , w h ic h ma y e ve n be N I L i n ca se o f in a de q ua te Pr o fi ts /L o s se s o f t he bo r r o w e r co m pa ny . Ac co r d i ng l y, t he f ir m s t ar t e d pr ov id i n g fu nd s to M /s I mpe l A uto mo t ive P vt . L t d. fr o m pr e v ious ye ar e nd i ng 3 1 .0 3 .2 0 1 1 . 6 . In te r e s t i nco me w as pr o v ide d i n t he bo o k s o f asse sse e fir m fo r F .Y . 2 0 1 0 -1 1 , 2 0 1 1 -1 2 a n d 2 0 1 2 -1 3 , r e le va nt to A Y 2 0 1 1 - 1 2 , 2 0 1 2 -1 3 a nd 2 0 1 3 - 1 4 and w as du ly de c lar e d i n the r e tur n o f in co me by t he fir m . 7 . T he bo r r o w e r co mp an y n ame ly , M/ s I mpe l Au to m o t ive P v t. L td . s uf fe r e d lo s se s d ur i n g F .Y . 2 0 1 2 -1 3 i.e . A .Y . 2 0 1 3 -1 4 an d i ts b u si ne s s o f s o le de ale r sh i p o f JV C C ar Au d io s ha d co me to clo sur e a nd the y ha d no o t he r bu s ine ss . ITA No. 3974/Del/2019 Modern Autotronix 3 8 . T he te r m s o f in t e r e st w e r e r e v is i te d d ur in g F .Y . 2 0 1 3 -1 4 i.e . A .Y . 2 0 1 4 -1 5 an d vi de co m mu n ica t io n / a gr e e me nt da te d 2 0 .0 1 .2 0 1 4 , the bo r r o w e r su b mi t te d th a t i n vie w o f t he pr e va i l in g si t ua t i o n, t he y w e r e i n no c ap ac i ty to pa y i n te r e s t o n lo a n w .e . f . 0 1 .0 4 .2 0 1 3 . I t w as al so s ta te d t ha t o n ac co un t o f T DS , a n a mo u n t o f R s .3 4 ,8 9 ,2 8 6 /- w as de po s i te d a n d t ha t in te r e s t to th at e xte n t o nl y co ul d be pa i d by t he bo r r o w e r . 9 . T he a cco un t in g e ntr ie s m ade b y t he bo r r o w e r in it s bo o ks o f acc o u nt up to O cto be r 2 0 1 3 w e r e r e ve r se d a nd the pr o v is io n alr e a d y ma de , i n e xce ss o f t he r e vi se d te r m s w a s r eve r se d by the bo r r o w e r . Fo r m 2 6 A S w as d u ly a me n de d. 1 0 . T he a cco un t in g e ntr ie s i n bo o ks o f bo r r o w e r fo r i nte r e st ap pe ar e d a s u nd e r : Interest initially provided as payable R s . I n t e r e s t p a y a b l e f o r A p r i l t o O c t o b e r , 2 0 1 3 3 , 4 8 , 9 0 , 8 7 2 / - L e s s : P r o v i s i o n r e v e r s e d p u r s u a n t t o m u t u a l s e t t l e m e n t d a t e d 2 0 . 0 1 . 2 0 1 4 3 , 1 4 , 0 1 , 7 8 6 / - N e t i n t e r e s t p r o v i d e d a s p a y a b l e f o r F . Y . 2 0 1 3 - 1 4 3 4 , 8 9 , 0 8 6 / - 1 1 . T ha t fo l lo w i ng e ntr ie s a ppe ar e d i n B o r r o w e r 's bo o k s o f acco u nt in F .Y .2 0 1 3 -1 4 . E n t r y - m a d e u p t o O c t o b e r 2 0 1 3 R s . a ) I n t e r e s t E x p e n s e D r . 3 , 4 8 , 9 2 , 8 7 2 / - T D S P a y a b l e C r . 3 4 , 8 9 , 0 8 6 / - I n t e r e s t P a y a b l e C r . 3 , 1 4 , 0 1 , 7 8 6 / - b ) R e v e r s a l E n t r y I n t e r e s t P a y a b l e ( R e v e r s e d ) D r . 3 , 1 4 , 0 1 , 7 8 6 / - I n t e r e s t E x p e n s e ( R e v e r s e d ) C r . 3 , 1 4 , 0 1 , 7 8 6 / - ITA No. 3974/Del/2019 Modern Autotronix 4 c ) N e t E f f e c t - o f e n t r i e s i n ( a ) & ( b ) a b o v e I n t e r e s t E x p e n s e D r . 3 4 , 8 9 , 0 8 6 / - T D S p a i d C r . 3 4 , 8 9 , 0 8 6 / - Accordingly following entries appeared in 26AS. a ) O r i g i n a l e n t r y I n t e r e s t E x p e n s e 3 , 4 8 , 9 2 , 8 7 2 / - T D S P a i d 3 4 , 8 9 , 0 8 6 / - b ) P u r s u a n t t o r e v e r s a l o f p a r t o f i n t e r e s t e x p e n s e e n t r y i n 2 6 A S s t o o d r e c t i f i e d / r e v i s e d a s b e l o w I n t e r e s t E x p e n s e 3 4 , 8 9 , 8 6 0 / - T D S P a i d 3 4 , 8 9 , 8 6 0 / - 1 2 . C o py o f a cco un t o f t he as se ss e e in the bo o k s o f the bo r r o w e r fo r t he pe r io d 0 1 .0 4 .2 0 1 4 to 3 1 .0 3 .2 0 1 6 , wa s su bm i t te d v ide l e tte r d ate d 3 1 .0 8 .2 0 1 6 , w h ic h s ho w s t ha t no in te r e s t w a s pr o vi de d e ve n d ur i ng th at pe r io d . T he fo l lo w i ng acco u nt i ng e n tr y w as p asse d i n the bo o ks o f t he as se sse e fo r the ye ar e nd i ng 3 1 .0 3 .2 0 1 4 A .Y . 2 0 1 4 -1 5 . R s . T D S p a i d D r . 3 4 , 8 9 , 8 6 0 / - I n t e r e s t i n c o m e C r . 3 4 , 8 9 , 8 6 0 / - 1 3 . T he AO d i d no t agr e e w i th t he asse sse e a n d tr e ate d the in te r e s t o r i gi na l l y s ta te d i n Fo r m 2 6 A S , as i n te r e st i nco me o f the a sse s se e , ig n o r in g t he r e ve r s a l o f e n tr ie s t he re i n. 1 4 . T he asse sse e e xp la i ne d the fa ct s i n a ppe a l b e for e l d. C IT ( A ) a nd co n te nde d t ha t o nl y r e al in co me co u l d be ta xe d an d fo r t hi s p ur po se an d a lso r e l ie d u po n the v ar io u s ju d gme n ts b y ITA No. 3974/Del/2019 Modern Autotronix 5 the Ho n’ ble H ig h C o ur ts as w e l l as by t he Ho n ’b le Su pr e me C o ur t. 1 5 . T he ld . C IT ( A) d i d n o t ac ce p t t he a sse s se e 's conte n t io n th a t r e v ise d f ig u r e s ap pe ar i ng i n Fo r m 2 6 A S s ho u l d be a cce p te d an d co n f ir me d t h e ad d i tio n o f N o t i o na l i nte r e st . 1 6 . T he bo r r o w e r c l ai me d i n te r e s t o f o n l y R s .3 4 ,8 9 ,8 6 0 / - as e xpe nse fo r A .Y . 2 0 1 4 -1 5 a nd w as d u ly a l lo w e d i n asse ss me nt u/ s 1 4 3 (3 ) . C o py o f o r de r w as su pp l ie d d ur i n g the he ar in g . W e fi n d th at t he a sse s se e 's ca se is s qu ar e l y co v e r e d by the ju d gme n ts o f H o n’b le S u pr e me C o ur t / Ho n ’b le j ur is di c tio na l Hi g h C o ur t a n d o r de r s o f IT AT .  E. D. S as so n & C o . L t d. & O the r s vs . C IT (1 9 5 4 ) 2 6 IT R 0 0 2 7 ( SC ) It w as he ld t ha t r i gh t to r e ce i ve co m m iss io n w o ul d ar i se an d in co me w o u l d a ccr ue o n l y a t t he e n d o f t he ca len dar ye ar . I nco me a ccr ue s w he n as se sse e ac qu ir e s r i gh t to r e ce i ve i n co me o n cr e at io n o f d e bt i n h is fa vo u r . It w as fur the r he ld th at ... .. A de b t m us t ha ve co me in to e xiste nce an d he m us t ha v e ac qu ir e d a r i gh t to r e ce i ve t he payme nt . Un le s s a n d u n t i l h i s co n tr i b ut io n a nd par e n t ho o d i s e ffe c t ive in br i n gi n g i nto e x i ste nce a de bt o r a r ig ht to r e ce i ve t he pay me n t o r in o t h e r w o r ds a de bi t um i n pr ase n t iso lve nd u m i n f u tur o i t can no t be sa id th a t an y in co me h as acc r ue d to h im . T he me r e e x pr e ss io n "e arne d" in t he se nse o f r e nde r in g the se r vi ce s e tc . b y it self is o f no ava i l .  C IT vs . Pr a fu l la K um ar Ma l ik A IR 1 9 6 9 O r r i sa 1 8 7 ITA No. 3974/Del/2019 Modern Autotronix 6 It w as he l d t h at i t i s a n e le me n tar y pr in c ip le o f inc o me t ax law t ha t a ma n is taxe d o n ly o n the pr o fi t s he ac tua ll y r e ce i ve s an d no t o n pr o f it s he mi g ht h ave , b u t h as no t r e ce i ve d .  Hi g hw a ys C o ns tr uc t io n C o . P . L td . v s . C IT (1 9 9 3 ) 1 99 IT R 0 7 0 2 (G au ha t i ) It w as he l d th at i n a bse nce o f an y fi nd i ng t ha t in te r e st w as ac tu al l y r e ce ive d / co l le cte d , in co me c an no t be i nclu de d o n no t io na l b as is .  C IT v s. S h iv Pr a kas h Ja na k R a j & C o . ( P) L t d . (1 9 9 6) 2 2 2 IT R 0 5 8 3 (S C ) It w as he ld t ha t the In te r e s t d id no t ac cr ue fo r a fi na nc i al ye ar to t he e xt e nt i n te r e s t i nc o me is w a i ve d o ff i n t he r e le v an t ac co u n ti ng ye ar .  C IT vs . Ex ce l I n d us tr ie s L t d . (2 0 1 3 ) 3 5 8 IT R 0 2 9 5 (S C ) It w a s he ld t ha t in co me a ccr ue s w he n it be co me s due bu t i t m us t al so be a cco mp an ie d b y c o r r e spo nd i ng l ia b i li t ie s o f the o t he r par t y to pa y , o nl y t he n ca n i t be sa id t ha t in co me w a s no t h ypo t he t ic a l a n d i t r e al l y accr ue d.  R e d Fo r t S h ah ja h an Pr o pe r t ie s Pv t . L t d . v s. AC IT - IT A N o . 7 4 2 /De l/2 0 2 0 - O r de r da te d 2 0 .0 8 .2 0 2 0 – W he n r e a l is a tio n o f e ve n t he p r in c ip al amo un t w as in je o p ar d y the r e fo r e , t he r e c an no t be a ny r e al ac cr ual o f in co me by w a y o f i n te r e s t.  DC IT v s . M /s Ju b i la nt En pr o Pv t . L t d . - IT A N o . 8 2 8 /De l. /2 0 1 6 - O r de r da te d 1 1 . 0 8 .2 0 2 0 - R ig ht to ITA No. 3974/Del/2019 Modern Autotronix 7 r e ce i ve i s a p r e -co nd i t io n e v e n w he r e ac co un ts ar e ma in t ai ne d o n ac cr ua l b as is .  C IT vs . S ho o r j i V al la b hd as & C o . ( 1 9 6 2 ) 4 6 IT R 1 4 4 ( SC ) "In co me - ta x i s a le v y o n in co m e . N o do u b t , t h e IT Ac t ta ke s in to a cco u nt tw o po i n ts o f t ime a t w hi ch t h e li ab i l it y to t ax i s a ttr ac t e d, v iz . , t he acc r ua l o f t he i nco me o r it s r e ce i pt ; bu t the su bs ta nce o f t he ma tte r is t he i n co me . I f in co me do e s no t r e su l t a t a l l , t h e r e can no t be a tax, e ve n tho u gh i n bo o k -ke e p in g, a n e ntr y is ma de abo ut a "hy po the t ic al in co me " , w h i ch do e s no t m ate r ia l iz e . T he r e fo r e no in co me r e s ul t s a t al l, if t he r e is ne ithe r accr ua l no r r e ce i pt o f i nc o me , e ve n t ho ug h o n e ntr y to th a t e ffe c t m ig h t, i n ce r ta i n cir cu ms t a nce s , ha ve be e n ma de in the bo o ks o f a cc o un t . 1 7 . T he co r e po in t in th is case is th a t the a sse s see le n t mo n ie s to a co m pa ny w h ic h du l y p a id i nte r e st fo r t hr e e ye ar s . T he in te r e s t r e ce ive d as du ly o ffe r e d by t he as se s se e to ta xa t io n. I n the s ub se q ue nt ye ar , o w i ng to t he s h ut do w n o f bu si ne s s , the r e ce i ve r o f t he m o nie s d i d no t pa y t he in te r e s t to the as se sse e . T he as se s se e i s st i ll to r e ce i v e a ma jo r par t o f t he lo a n e xte nde d e ve n t o da y. He n ce , w e ho ld t ha t the i nte r est w h ic h w as no t r e ce ive d by the a sse s s e e canno t be de e me d to have r e ce i ve d o n no t io n a l bas i s a n d br o ug h t to ta x at io n o n r e a l te r m s. ITA No. 3974/Del/2019 Modern Autotronix 8 1 8 . In t he r e su l t , the a ppe a l o f the as se sse e i s allo w e d . O r de r Pr o no u nce d i n the O pe n C o ur t o n 2 9 /1 2 /2 0 2 1 . Sd / - Sd / - (Suchitra Kamble) (Dr. B. R. R. Kumar) Judicial Member Accountant Member Dated: 29/12/2021 *Subodh* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR