ITO 5(2)(3), MUMBAI V. LITLOIER PROPERTIES P. LTD, MUMBAI

ITA 4067/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 59870 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 27-10-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 19-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Assessee Lawyers: PANKAJ TOPRANI; KEYURI DESAI
• Keywords: Rule of consistency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI RAJENDRA SINGH, A.M. AND SHRI VIJAY PAL RAO, J.M. ITA NO. : 1278/MUM/2010 ASSESSMENT YEAR : 2006-07 M/S. LITOLIER PROPERTIES PVT. LTD. ABHAY CHAMBERS, 131 AUGUST KRANTI MARG, KEMPS CORNER MUMBAI-400 036. PAN NO: AAACL 0610 N INCOME TAX OFFICER WARD 5(2)(3) ROOM NO.566, 5 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. (APPELLANT) VS. (RESPONDENT) ITA NO. : 1697/MUM/2010 ASSESSMENT YEAR : 2006-07 INCOME TAX OFFICER WARD 5(2)(3) ROOM NO.566, 5 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. M/S. LITOLIER PROPERTIES PVT. LTD. ABHAY CHAMBERS, 131 AUGUST KRANTI MARG, KEMPS CORNER MUMBAI-400 036. PAN NO: AAACL 0610 N (APPELLANT) VS. (RESPONDENT) ITA NO. : 3980/MUM/2010 ASSESSMENT YEAR : 2007-08 M/S. LITOLIER PROPERTIES PVT. LTD. ABHAY CHAMBERS, 131 AUGUST KRANTI MARG, KEMPS CORNER MUMBAI-400 036. PAN NO: AAACL 0610 N INCOME TAX OFFICER WARD 5(2)(3) ROOM NO.566, 5 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. (APPELLANT) VS. (RESPONDENT) ITA NO. 1278,1697,4067 &39 80/M/10 A.Y.06-07 & 07-08 2 ITA NO. : 4067/MUM/2010 ASSESSMENT YEAR : 2007-08 INCOME TAX OFFICER WARD 5(2)(3) ROOM NO.566, 5 TH FLOOR AAYAKAR BHAVAN M.K. ROAD MUMBAI-400 020. M/S. LITOLIER PROPERTIES PVT. LTD. ABHAY CHAMBERS, 131 AUGUST KRANTI MARG, KEMPS CORNER MUMBAI-400 036. PAN NO: AAACL 0610 N (APPELLANT) VS. (RESPONDENT) ASSESSEE BY : SHRI PANKAJ TOPRANI AND MISS KEYURI DESAI DEPARTMENT BY : SHRI C.G.K. NAIR DATE OF HEARING : 27.2.2012 DATE OF PRONOUNCEMENT : 07.03.2012 O R D E R PER RAJENDRA SINGH (AM) THESE CROSS APPEAL ARE DIRECTED AGAINST DIFFERENT ORDERS D ATED 21.12.2009 AND 5.2.2010 OF CIT(A) FOR THE ASSESSMENT YE ARS 2006-07 AND 2007-08. AS DISPUTE RAISED IS COMMON, THESE CROSS APPE ALS ARE BEING DISPOSED OF BY A SINGLE CONSOLIDATED ORDER FOR T HE SAKE OF CONVENIENCE. 2. THE COMMON DISPUTE IN ALL THESE APPEALS IS REGARDING ALLOWABILITY OF DISCOUNT CHARGES IN RESPECT OF DEBENTURES ISSUED BY THE ASSESSEE ITA NO. 1278,1697,4067 &39 80/M/10 A.Y.06-07 & 07-08 3 WHILE COMPUTING INCOME FROM HOUSE PROPERTY. THE ASSESSEE DURING THE RELEVANT YEARS HAD RECEIVED RENTAL INCOME FROM HOU SE PROPERTY WHICH HAD BEEN CONSTRUCTED FROM BORROWED FUNDS. THE HOU SE PROPERTY HAD BEEN CONSTRUCTED IN THE EARLIER YEAR. HOWEVER, THE OUTSTANDING LOANS WERE CONVERTED INTO DEEP DISCOUNT DEBENTURES IN ASSE SSMENT YEAR 2001-02. THE DEBENTURE HAD BEEN ISSUED TO SHRI ASHOK MITTAL THE DIRECTOR OF THE ASSESSEE COMPANY FROM WHOM THE LOANS HAD B EEN TAKEN EARLIER. THE ASSESSEE HAD ISSUED FOUR LAKH DEEP D ISCOUNT DEBENTURES OF THE FACE VALUE OF RS.400/- ON ISSUE PRICE OF RS.100/- PER DEBENTURE WITH REDEMPTION PERIOD OF 9 YEARS. THE ASSESSEE CLAIMED DISCOUNTING CHARGES ON THE DEBENTURES AMOUNTING T O RS .1,24,72,500/- AND RS.1,47,98,800/- AS DEDUCTION UNDER SECTION 24(B) FOR ASSESSMENT YEARS 2006-07 AND 2007-08 RESPECTIVEL Y. UNDER THE PROVISIONS OF SECTION 24(B), INTEREST PAYABLE ON CA PITAL BORROWED FOR THE PURPOSE OF ACQUISITION/CONSTRUCTION OF HOUSE PROP ERTY IS ALLOWABLE AS DEDUCTION. THE AO OBSERVED THAT SHRI A SHOK MITTAL TO WHOM DEBENTURES HAD BEEN ISSUED WAS NOT CREDITING ANY IN COME ON ACCOUNT OF INTEREST WHICH WAS CONTRARY TO THE CBDT CIRCULAR MAKING IT CLEAR THAT THE PERSON HOLDING DEEP DISCOUNT BONDS SHALL CREDIT INCOME ON YEAR TO YEAR BASIS ON ACCRUAL BASIS. THE AO THEREFO RE CONCLUDED THAT THE ASSESSEE COMPANY AND DIRECTOR SHRI ASHOK MITTAL HAD MADE ARRANGEMENT TO AVOID TAX LIABILITY IN BOTH HANDS; T HE ASSESSEE BY WAY ITA NO. 1278,1697,4067 &39 80/M/10 A.Y.06-07 & 07-08 4 OF REDUCING THE TAX LIABILITY BY CLAIMING DEDUCTION O N ACCOUNT OF DISCOUNT ON DEBENTURE AND DIRECTOR NOT DECLARING INTERE ST INCOME FOR TAXES. IT WAS THEREFORE A COLOURABLE DEVICE. MOREOVER , THE AO FURTHER OBSERVED THAT NO INTEREST LIABILITY HAD ACCRUED TO THE ASSESSEE AS THE LIABILITY ON ACCOUNT OF INTEREST WOULD ARISE ONLY ON MA TURITY OF DEEP DISCOUNT DEBENTURES. HE THEREFORE HELD THAT THE CLAIM OF DEDUCTION UNDER SECTION 24(B) WAS NOT ALLOWABLE AND ACCORDINGLY HE DISALLOWED THE CLAIM IN BOTH THE YEARS WHICH WAS DISPUTED BY THE ASSE SSEE. 3. THE ASSESSEE SUBMITTED BEFORE CITA) THAT DEEP DISCOUNT DEBENTURES HAD BEEN ISSUED IN ASSESSMENT YEAR 2001-02 IN W HICH YEAR AS WELL AS IN SUBSEQUENT YEARS THE CLAIM HAD BEEN ALLOWED BOTH BY CIT(A) AND ITAT. CIT(A) HOWEVER OBSERVED THAT DISCOUN TING CHARGES ALSO INCLUDED INTEREST ON INTEREST WHICH COULD NOT BE ALL OWED AS, UNDER SECTION 24(B), ONLY THE INTEREST ON BORROWED CAPITAL COU LD BE ALLOWED AS DEDUCTION. CIT(A) REFERRED TO THE JUDGMENT OF HON' BLE SUPREME COURT IN THE CASE OF SHEW KISSEN BHATTER VS. CIT (89 ITR 61), IN WHICH IT WAS HELD THAT INTEREST ON INTEREST WAS NOT ALLOWABLE AS DEDUCTION. THE ASSESSEE SUBMITTED THAT THE CASE OF SHEW KISSEN BHATTER (SUPRA), WAS DISTINGUISHABLE AS IN THAT CASE THE INTEREST WHICH HAD BECOME DUE ON THE PRINCIPAL HAD NOT BEEN PAID BY THE ASSESSEE AND THEREFORE, IT HAD TO PAY INTEREST ON INTEREST WHICH WAS HELD NOT ALLO WABLE AS DEDUCTION. IN THE PRESENT CASE, NO INTEREST WAS PAYABLE FROM YEAR TO ITA NO. 1278,1697,4067 &39 80/M/10 A.Y.06-07 & 07-08 5 YEAR AND THEREFORE, THERE WAS NO QUESTION OF DEFAULT IN PAYMENT OF INTEREST AND CONSEQUENTIAL PAYMENT OF INTEREST ON INTER EST. THE MATURITY VALUE WAS PAYABLE AT THE END OF REDEMPTION . IT WAS THE DIFFERENCE BETWEEN ISSUE PRICE AND REDEMPTION PRICE WHICH WAS CLAIMED AS DEDUCTION FROM YEAR TO YEAR BASIS. THE SAID DIFFERENCE WAS ALLOWABLE AS DEDUCTION IN VIEW OF THE JUDGMENT OF TH E HONBLE APEX COURT IN THE CASE OF MADRAS INDUSTRIAL FINANCE CORPN. LT D. VS. CIT (225 ITR 802). THEREFORE, THERE THUS WAS NO QUESTION OF PAYING INTEREST ON INTEREST. THE INTERNAL RATE OF INTEREST ( IRI), HAD BEEN ADOPTED ONLY TO COMPUTE THE MATURITY VALUE AND NO AN NUAL INTEREST WAS PAYABLE TO THE ASSESSEE. THE ASSESSEE ALSO POINTED OUT TH AT, IN ASSESSMENT YEAR 2001-02, THE CLAIM HAD BEEN ALLOWED BY I TAT AND THEREFORE ORDER WAS BINDING ON THE LOWER AUTHORITIE S. 3.1 CIT(A) HOWEVER, DID NOT ACCEPT THE CONTENTIONS RAISE D. IT WAS OBSERVED BY HIM THAT THE RATE OF INTEREST ON THE BORR OWINGS WAS 15% WHEREAS THE RATE OF INTEREST ON THE BASIS OF CLAIM MADE BY THE ASSESSEE WORKED OUT TO BE 31.18%. CIT(A) ALSO OBSERVED T HAT THE DISCOUNTING CHARGES ALSO INCLUDED INTEREST ON ACCRUED INTERE ST WHICH COULD NOT BE ALLOWED IN VIEW OF THE JUDGMENT OF THE HON'BLE SUPREME COURT IN THE CASE OF SHEW KISSEN BHATTER (SUPRA). CIT(A ) FURTHER HELD THAT THE PRINCIPLE OF RES-JUDICATA WAS NOT APPLICABLE I N INCOME TAX ITA NO. 1278,1697,4067 &39 80/M/10 A.Y.06-07 & 07-08 6 PROCEEDINGS AND THEREFORE THE AO WAS NOT BOUND BY THE DECISION TAKEN IN ASSESSMENT YEAR 2001-02. CIT(A), THEREFORE, ALLOWED DEDUCTION UNDER SECTION 24(B) @ 15% ON BORROWED CAPITAL WHICH CAME TO RS.60.00 LACS AND EXCESS AMOUNTS CLAIMED BY THE ASSESSEE WERE HELD NOT ALLOWABLE IN BOTH THE YEARS. AGGRIEVED BY THE DE CISION OF CIT(A) BOTH PARTIES ARE IN APPEAL. THE ASSESSEE HAS CHALLENGED THE PART DISALLOWANCE OF INTEREST WHEREAS THE REVENUE HAS CHALLENG ED THE RELIEF ALLOWED BY CIT(A). 4. BEFORE US, THE LD. AUTHORISED REPRESENTATIVE FOR T HE ASSESSEE REITERATED THE SUBMISSIONS MADE BEFORE THE LOWER AUTHOR ITIES THAT DEEP DISCOUNT DEBENTURES HAD BEEN ISSUED IN LIEU OF THE LOANS TAKEN FROM THE DIRECTOR FOR CONSTRUCTION OF HOUSE PROPERTY AND THE REFORE, THE DISCOUNTING CHARGES PAYABLE HAVE TO BE ALLOWED AS DEDUC TION UNDER SECTION 24(B). IT WAS POINTED OUT THAT THE JUDGMENT O F HON'BLE SUPREME COURT IN THE CASE OF SHEW KISSEN BHATTER (SUPRA) , WAS DISTINGUISHABLE AS THE SAME WAS IN RELATION TO INTEREST ON MORTGAGE. MOREOVER, IT WAS FURTHER POINTED OUT THAT THE SAID JU DGMENT WAS UNDER THE OLD INCOME TAX ACT OF 1922 IN WHICH INTEREST HAD N OT BEEN DEFINED. HOWEVER UNDER THE NEW INCOME TAX ACT OF 1961, THE WORD INTEREST HAS BEEN DEFINED UNDER SECTION 2(28A) TO MEAN INTEREST PAY ABLE IN ANY MANNER IN RESPECT OF ANY MONEYS BORROWED OR DEBT INCURR ED AND INCLUDES ANY SERVICE FEE OR OTHER CHARGE IN RESPECT OF MON EYS ITA NO. 1278,1697,4067 &39 80/M/10 A.Y.06-07 & 07-08 7 BORROWED OR DEBT INCURRED OR IN RESPECT OF ANY CREDIT FACILITY WHICH HAD BEEN UTILIZED. THE DEFINITION OF INTEREST WAS THE REFORE OF WIDE IMPORT AND WOULD ALSO INCLUDE ANY OTHER CHARGES IN RESP ECT OF MONEY BORROWED OR DEBT INCURRED. HE REFERRED TO THE JUDGME NT OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. VIJAY SHIP BR EAKING CORPORATION (261 ITR 113), IN WHICH IT HAS BEEN HELD THAT THE AMOUNT PAYABLE ON UNPAID PURCHASE PRICE WILL ALSO BE OF THE NA TURE OF INTEREST. 4.1 IT WAS ALSO SUBMITTED THAT ALLOWABILITY OF DISCOUNT CHARGES WAS COVERED BY THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF MADRAS INDUSTRIAL FINANCE CORPN. LTD. VS. CIT (225 ITR 802). FURTHER IT WAS ALSO ARGUED THAT NON DECLARATION OF INCOME FROM YEAR TO YEAR BY THE DIRECTOR WILL HAVE NO IMPACT REGARDING ALLOWABIL ITY OF CLAIM IN CASE OF THE ASSESSEE WHICH WAS SETTLED BY THE JUDGMENT OF HON BLE APEX COURT. LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT THESE ASPECTS HAD BEEN DULY CONSIDERED BY THE TRIBUNAL IN ASSESSMENT YEAR 2001-02 IN ITA NO.5223/M/2003 IN WHICH YEAR THE TRIBUNAL ALLOWED THE CLAIM OF THE ASSESSEE AND THE SAID DECISION OF THE TRIBUNAL HAS BECOME FINAL AS THE APPEAL FILED BY THE DEPARTMENT HAS BEEN DISMISSED BY THE HONBLE HIGH COURT BEING BARRED BY LIMI TATION. THE LD. AR ALSO SUBMITTED THAT IN ASSESSMENT YEAR 2002-03, TH E AO HAD HIMSELF ALLOWED THE CLAIM AND IN ASSESSMENT YEARS 2003-04 AND 2005- 06 THE TRIBUNAL HAD AGAIN ALLOWED THE CLAIM. FURTHER , THE HONBLE ITA NO. 1278,1697,4067 &39 80/M/10 A.Y.06-07 & 07-08 8 BOMBAY HIGH COURT IN ASSESSMENT YEAR 2005-06 HAS DISMISSED THE APPEAL FILED BY THE DEPARTMENT IN WHICH THE HONBLE HI GH COURT OBSERVED THAT SIMILAR CLAIM HAD BEEN ALLOWED BY THE TR IBUNAL IN ASSESSMENT YEAR 2003-04 AND 2004-05 AND NO CASE WAS MADE F OR ANY CONTRARY VIEW. IT WAS ACCORDINGLY URGED THAT THE CLAIM SHOULD BE ALLOWED IN THESE YEARS ALSO. 5. THE LD. DR ON THE OTHER HAND STRONGLY SUPPORTED TH E ORDER OF THE AO. IT WAS ARGUED THAT NO INTEREST INCOME HAD ACCRUED TO THE ASSESSEE FROM YEAR TO YEAR AND THEREFORE, DISALLOWANCE OF ENTIRE CLAIM BY AO WAS JUSTIFIED. MOREOVER, IT WAS ALSO POINTED OUT THAT THE CLAIM ALSO INCLUDED INTEREST ON INTEREST WHICH COULD NOT BE AL LOWED IN VIEW OF THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF SHEW KISSEN BHATTER (SUPRA). 6. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE RIVAL CONTENTIONS CAREFULLY. THE DISPUTE IS REGARDING ALLOWA BILITY OF DEDUCTION UNDER SECTION 24(B) ON ACCOUNT OF DISCOUNTING CH ARGES RELATING TO DEEP DISCOUNT DEBENTURES ISSUED BY THE ASSESS EE. THERE IS NO DISPUTE THAT THE ASSESSEE HAD BORROWED MONEY FROM TH E DIRECTOR SHRI ASHOK MITTAL FOR CONSTRUCTION OF HOUSE PROPERTY AND THAT IN LIEU OF THE SAID LOAN, THE ASSESSEE HAD ISSUED DEEP DISCOUNT DEBENT URES OF THE FACE VALUE OF RS.400 PER DEBENTURE AGAINST THE ISSUE PRI CE OF RS.100 ITA NO. 1278,1697,4067 &39 80/M/10 A.Y.06-07 & 07-08 9 PER DEBENTURE WITH THE REDEMPTION PERIOD OF 9 YEA RS. UNDER THE PROVISIONS OF SECTION 24(B), INTEREST PAYABLE ON MONEY B ORROWED FOR ACQUISITION OR CONSTRUCTION OF HOUSE PROPERTY IS ALLOWABL E AS DEDUCTION WHILE COMPUTING INCOME FROM HOUSE PROPERTY. IT HAS BE EN CLARIFIED BY CBDT IN CIRCULAR NO.28[F 8/8/69-IT(A-I)] DATED 20.8. 1969 A COPY OF WHICH HAS BEEN PLACED BY THE ASSESSEE AT PAGE 46 OF THE PA PER BOOK THAT FRESH LOAN RAISED TO REPAY THE ORIGINAL LOAN USE D FOR CONSTRUCTION OF HOUSE PROPERTY WILL BE ELIGIBLE FOR DEDUCTION UNDE R SECTION 24(VI) WHICH CORRESPONDS WITH PRESENT SECTION 24(B). THEREFORE A NY INTEREST PAYABLE IN RESPECT OF DEEP DISCOUNT DEBENTURES WILL BE A LLOWABLE AS DEDUCTION UNDER SECTION 24(B) OF THE ACT. THE ISSUE IS WH ETHER ANY AMOUNT ON ACCOUNT OF INTEREST CAN BE ALLOWED FROM YEAR TO YEAR WHEN THE MATURITY VALUE OF DEBENTURE IS PAYABLE ONLY AT T HE END OF 9 YEARS AND NO ANNUAL INTEREST IS PAYABLE FROM YEAR TO YEAR. THIS ASPECT HAS ALREADY BEEN CONSIDERED BY THE HON'BLE SUPREME COUR T IN THE CASE OF MADRAS INDUSTRIAL FINANCE CORPN. LTD. VS. CIT (SUPRA ), IN WHICH THE HON'BLE SUPREME COURT OBSERVED THAT THOUGH THE ASSESSEE I NCURS THE LIABILITY TO PAY DISCOUNT IN THE YEAR OF ISSUE OF DEBE NTURE, THE PAYMENT IS TO SECURE BENEFIT OVER A NUMBER OF YEARS. IT WAS ACCORD INGLY HELD BY THE HONBLE APEX COURT THAT THE LIABILITY SHOULD BE S PREAD OVER THE DEBENTURE HOLDING PERIOD, OTHERWISE IT WOULD GIVE DI STORTED PICTURE OF PROFIT OF A PARTICULAR YEAR. THEREFORE, IN TERMS OF SAID JUDGMENT, THE ITA NO. 1278,1697,4067 &39 80/M/10 A.Y.06-07 & 07-08 10 EXCESS AMOUNT PAYABLE ON MATURITY HAS TO BE SPREAD OVER THE DEBENTURE HOLDING PERIOD AND PROPORTIONATE AMOUNT H AS TO BE ALLOWED FROM YEAR TO YEAR. 6.1 THE DEPARTMENT HAS RELIED ON THE JUDGMENT OF HON BLE APEX COURT IN THE CASE OF SHEW KISSEN BHATTER (SUPRA), TO ARG UE THAT THE PROPORTIONATE AMOUNT PAYABLE ALSO INCLUDES INTEREST O N INTEREST WHICH CAN NOT BE ALLOWED IN TERMS OF SAID JUDGMENT. HOWEVER, WE AGREE WITH THE ARGUMENT OF THE LD. AR THAT THE SAID JUDGM ENT IS DISTINGUISHABLE AS IN THAT CASE INTEREST WHICH HAD BECOME D UE HAD NOT BEEN PAID BY THE ASSESSEE AND DUE TO THIS DEFAULT, THE ASSESSEE HAD TO PAY INTEREST ON INTEREST AND THEREFORE, IT WAS NOT HELD AS ALLOWABLE DEDUCTION WHILE COMPUTING INCOME FROM HOUSE PROPERTY. IN THE PRESENT CASE, THERE IS NO INTEREST PAYABLE FROM YEAR TO YEAR. THEREFORE IT CAN NOT BE SAID THAT THE ASSESSEE HAD TO PAY INTEREST O N INTEREST DUE TO SOME DEFAULT. THE DEEP DISCOUNT DEBENTURE IS STRUCTUR ED LOAN WHERE THE ASSESSEE HAS TO PAY MATURITY VALUE ONLY AT THE END O F REDEMPTION PERIOD AND THERE IS NO INTEREST PAYABLE FROM YEAR TO YEAR. THE DIFFERENCE BETWEEN MATURITY VALUE AND ISSUE PRICE IN VI EW OF THE JUDGMENT OF HONBLE APEX COURT IN CASE OF MADRAS INDUSTR IAL FINANCE CORPN. LTD. VS. CIT (SUPRA), IS REQUIRED TO BE SPREAD OVER DEBENTURE HOLDING PERIOD AND HAS TO BE ALLOWED PROPORTIONATELY FROM YEAR TO YEAR. THIS ANNUAL PROPORTIONATE AMOUNT PAYABLE HAS T O BE TREATED AS ITA NO. 1278,1697,4067 &39 80/M/10 A.Y.06-07 & 07-08 11 INTEREST IN VIEW OF DEFINITION OF INTEREST UNDER SECTIO N 2(28A) AS PER WHICH THE INTEREST IS AMOUNT PAYABLE IN ANY MANNER IN RESPECT OF ANY MONEYS BORROWED OR DEBT INCURRED AND INCLUDES ANY SERVI CE FEE OR OTHER CHARGES IN RESPECT OF MONEYS BORROWED OR DEBT IN CURRED. THEREFORE, ANNUAL PROPORTIONATE AMOUNT PAYABLE IN R ESPECT OF DEBENTURE WHICH IS A DEBT HAS TO BE CONSIDERED AS INTEREST WHICH IS TO BE ALLOWED UNDER SECTION 24(B). 6.2 THE AUTHORITIES BELOW HAVE POINTED OUT THAT RAT E OF INTEREST ON WHICH LOAN WAS TAKEN WAS 15% BUT ANNUAL INTEREST CAME TO 31.18% IF THE DIFFERENCE BETWEEN THE ISSUE PRICE AND MATURITY VAL UE IS SPREAD OVER THE ENTIRE PERIOD. THIS IS EASILY EXPLAINED BY T HE FACT THAT INTEREST OF 15% IS PAYABLE FROM YEAR TO YEAR WHEN IN CASE OF DI SCOUNT DEBENTURES ONLY THE MATURITY VALUE IS PAYABLE AFTER 9 YEARS AND THEREFORE, ANNUAL RATE HAS TO BE HIGHER. THE AUTHOR ITIES HAVE ALSO RAISED AN ARGUMENT THAT IN CASE OF ASHOK MITTAL, THE DI RECTOR, NO INTEREST INCOME IS BEING DECLARED FROM YEAR TO YEAR. THIS ASPECT HAS ALREADY BEEN DEALT WITH BY THE TRIBUNAL IN ASSESSMENT YEAR 2001-02 (SUPRA), IN WHICH THE TRIBUNAL OBSERVED THAT TREATMENT OF RECEIPT IN THE HANDS OF RECIPIENT WOULD NOT HAVE DETRIMENTAL EFFECT O N ALLOWABILITY OR OTHERWISE OF CLAIM IN THE HANDS OF THE PERSON MAKING TH E PAYMENT. THEREFORE, MERELY BECAUSE THE DIRECTOR ACCOUNTED THE INCO ME IN THE YEAR OF MATURITY WILL NOT IN ANY WAY AFFECT THE LIAB ILITY TO PAY AND CLAIM ITA NO. 1278,1697,4067 &39 80/M/10 A.Y.06-07 & 07-08 12 DEDUCTION ON ACCOUNT OF DEDUCTION IN CASE PF THE PAYEE. MOREOVER, IT IS FOR THE DEPARTMENT TO ENSURE THAT THE DIRECTOR PAYS TAX ON INTEREST INCOME FROM YEAR TO YEAR AS IT HAS POWER TO ENFORCE COM PLIANCE AND ASSESSEE CAN NOT BE PENALIZED FOR THE FAILURE OF THE DEP ARTMENT TO TAKE ACTION IN CASE OF THE DIRECTOR. 6.3 FURTHER, WE ALSO NOTE THAT THE CLAIM HAS ALREADY BEEN ALLOWED BY THE TRIBUNAL IN THE INITIAL YEAR I.E., ASSESSMENT YEAR 2001-02 AND APPEAL FILED BY THE DEPARTMENT HAS BEEN DISMISSED BY T HE HONBLE HIGH COURT. IN SUBSEQUENT YEARS ALSO, TILL ASSESSMENT YEAR 2005 -06, THE CLAIM HAS BEEN ALLOWED AND IN ASSESSMENT YEAR 2005-06, AP PEAL OF THE DEPARTMENT HAS AGAIN BEEN DISMISSED BY THE HONBLE HIGH C OURT. THEREFORE, THE RULE OF CONSISTENCY IS ALSO IN FAVOUR OF T HE ASSESSEE AS PER WHICH THERE HAS TO BE CONSISTENCY IN DECISION MAKING ON IDENTICAL FACTS. THOUGH, THE PRINCIPLE OF RE-JUDICATA IS NOT APP LICABLE IN CASE OF INCOME TAX PROCEEDINGS, THE RULE OF CONSISTENCY HAS TO BE FOLLOWED WHEN THERE IS NO CHANGE IN LEGAL AND FACTUAL POSITION. IN RELATION TO THE SAME DEBENTURES, THE CLAIM HAS BEEN ALLOWED IN THE EA RLIER YEARS, AND THEREFORE, IT CAN NOT BE DISALLOWED IN SUBSEQUENT YEAR S WHEN THE LAW REMAINS THE SAME. HOWEVER, WE MAY POINT OUT HERE THAT IN VIEW OF THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF M ADRAS INDUSTRIAL FINANCE CORPN. LTD. (SUPRA), THE DIFFERENCE BETWEEN THE ISSUE PRICE AND MATURITY VALUE HAS TO BE SPREAD OVER THE DEBENTURE ITA NO. 1278,1697,4067 &39 80/M/10 A.Y.06-07 & 07-08 13 HOLDING PERIOD AND ONLY PROPORTIONATE AMOUNT CAN BE ALLOWED AS DEDUCTION IN A PARTICULAR YEAR. WE THEREFORE, SET ASID E THE ORDER OF CIT(A) AND DIRECT THE AO TO ALLOW THE DEDUCTION PROPO RTIONATELY IN THE LIGHT OF THE SUPREME COURT JUDGMENT (SUPRA). 7. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED AND THOSE BY THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07.03.2012 SD/- SD/- (VIJAY PAL RAO) JUDICIAL MEMBER (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 7.3.2012. JV. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.