Taparia Tools Ltd., Nashik V. ACIT Cir.1, Nashik

ITA 409/PUN/2005

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49846 (ITAT-PUNE)
• Duration Of Justice: 6 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-06-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 18-04-2011
• Assessment Year: 2001-2002
• Appeal Filed On: 11-02-2005
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: HARESHWAR SHARMA
• Assessee Lawyers: SUNIL PATHAK NIKHIL PATHAK
• Keywords: Period of limitation; Time period of passing order
• Section: 244A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE SHRI I.C. SUDHIR (JM) AND SHRI D. KARUNAKARA RAO (AM) ITA NO. 409 /PN/ 20 05 ( ASSTT. YEAR : 200 1 - 02 ) T APARIA TOOLS LTD., 52, MIDC, SATPUR NASHIK - 7. PAN: AAA C T4 711A .. APP ELLANT V. ACIT CIRCLE - 1, NASHIK . RESPONDENT ITA NO. 595 /PN/ 2009 (ASSTT. YEAR : 2001 - 02 ) ACIT CIRCLE - 1, NASHIK . APPELLANT V. TAPARIA TOOLS LTD., RESPONDENT 52, MIDC, SATP UR NASHIK - 7. PAN: AAACT4711A A SSESSEE BY : S/ SHRI SUNIL PATHAK / NIKHIL PATHAK DEPARTMENT BY : SHRI. HARESHWAR SHARMA ORDER PER I.C. SU DHIR, JM ITA NO.409/PN/2005 THE ASSESSEE HAS IMPUGNED FIRST APPELLATE ORDER ON THE FOLLOWING GROUNDS : 1 . THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF THE DEDUCTION OF RS.1,06,35,750/ - CALCULATED @ 18% ON THE DEBENTURE ISSUED BY THE APPELLANT TO M/S. MALIRAM MAKHARIA STOCK BROKER P.LTD. AND SHARP KNIFE P.LTD. 2. THE LEARNED CIT (A) FAILED T O APPRECIATE THAT A) THE CLAIM OF THE APPELLANT WAS BASED ON THE DECISION OF THE A.O IN THE ASSESSMENTS IN THE PAST YEARS WHEREIN HE HELD THAT THE APPELLANT WAS ENTITLED TO INTEREST @ 18% ITA . NO 409/PN/2005 & ITA NO.595/PN/2009 TAPARIA TOOLS LTD... A. Y 2001 - 02 PAGE OF 9 2 P.A. ON THE DEBENTURES OVER A PERIOD OF FIVE YEARS BECAUSE THE CL AIM OF THE UPFRONT FEE PAID IN THE VERY FIRST YEAR OF ISSUE OF THE DEBENTURES WAS NOT ACCEPTED AND IF THE SAME WAS PAYABLE OVER A PERIOD OF FIVE YEARS, THE PAYEES WOULD HAVE DEMANDED INTEREST @ 18%. B) THE STAND OF THE ASSESSING OFFICER AFFIRMED BY HIM IS CONTRARY TO THE DECISION OF ITAT AND HONBLE H.C. IN RESPECT OF THE MANNER OF ALLOWABILITY OF THE DEDUCTION OF THE UPFRONT FEE PAID ON THE SAME DEBENTURESS. C) REJECTION OF THE APPELLANTS CLAIM HAS RESULTED IN THE CIT(A) NOT FOLLOWING THE DECISION OF BOM BAY H.C. IN THE CASE OF BANK OF BARODA 256 ITR 385 AND ALSO BOMBAY H.C. DECISION IN THE CASE OF SHRI H.A. SHAH 30 ITR 618 RESULTING IN CONTEMPT ON HIS PART. D) THE REVENUE HAVING TAKEN A PARTICULAR VIEW REGARDING THE VERY TRANSACTION UNDER CONSIDERATION C OULD NOT BE PERMITTED IN SUBSEQUENT YEARS WHEN DEDUCTION FOR INTEREST IS CLAIMED TO RESILE FROM WHAT WAS DONE IN THE EARLIER YEARS. 3. WITHOUT PREJUDICE TO THE ABOVE GROUNDS, THE APPELLANT SUBMITS THAT THE LEARNED CIT(A) ERRED IN NOT ALLOWING THE DEDUCTI ON OF THE UPFRONT FEE TO THE EXTENT OF RS.65,45,000/ - WHICH REPRESENTED 1/5 TH OF THE TOTAL UPFRONT FEE ON THE DEBENTURES ISSUED TO THE ABOVE TWO PARTIES. 3A. THE REASONING GIVEN BY THE LEARNED CIT(A) THAT THE INTEREST OF A HIGHER AMOUNT WAS ALLOWED IN THE PAST YEARS AS A DEDUCTION AND THEREFORE, NO INTEREST WAS ALLOWABLE IN THIS YEAR IS TOTALLY MISCONCEIVED, ILLEGAL AND AGAINST THE NORMAL PRINCIPLES OF LAW. 4. THE CHARGE OF INTEREST U/S. 234B, 234D & 244A AS UNDER, IS ILLEGAL. A) 234 B RS.18,82,130/ - B) 234 D RS. 1,84,250/ - C) 244 A RS. 4,88,562/ - TOTAL RS.25,54,942/ - GROUND NO. 1 & 2 ITA . NO 409/PN/2005 & ITA NO.595/PN/2009 TAPARIA TOOLS LTD... A. Y 2001 - 02 PAGE OF 9 3 2. THE ISSUE RAISED IN GROUND NOS. 1 & 2 IS AS TO WHETHER THE LD CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF THE DEDUCTION OF RS.1,06,35,750/ - CALCULATED AT THE RATE OF 18% ON THE DEBENTURES ISSUED BY THE APPELLANT TO MALIRAM MAKHARIA STOCK BROKER P. LTD. AND SHARP KNIFE P. LTD. 3. THE RELEVANT AND UNDISPUTED FACTS AS PER PARA NO. 3.2 AND 3.3 OF THE FIRST APPELLATE ORDER ARE AS UNDER : 3.2 IN F.Y. 1995 - 96 AND 96 - 97 THE APPELLANT HAD ISSUED DEBENTURES AND GAVE AN OPTION TO THE PAYEES EITHER TO OPT FOR UP FRONT FEE OF RS. 55/ - PER DEBENTURE OF EVEN VALUE OF RS. 100/ - TO BE PAID IMMEDIATELY ON ALLOTMENT OR TO OPT FOR TH E INTEREST @ 18% ON THE DEBENTURES PAYABLE OVER A PERIOD OF 5 YEARS. THE ABOVE REFERRED TWO PARTIES OPTED FOR THE UP FRONT FEE AND ACCORDINGLY, THE APPELLANT COMPANY CLAIMED THE DEDUCTION OF THE ABOVE PAYMENT OF UP FRONT FEE IN THE VERY FIRST YEAR OF THE ISSUE OF THE DEBENTURES. HOWEVER, THE A.O. DID NOT ALLOW THE ABOVE CLAIM. IN THE ASSESSMENTS FOR PAST YEARS, THE A.O HAS ALLOWED THE DEDUCTION OF INTEREST @ 18% P.A. ON THE DEBENTURES VERY YEAR. THE PRINCIPLE OF SPREAD OVER OF INTEREST EXPENDITURE INST EAD OF ASSESSEES CLAIM OF ALLOWING THE TOTAL UPFRONT FEE OF RS. 55/ - WAS UPHELD BY THE ITAT AS WELL AS THE HONBLE HIGH COURT. 3.3 DURING ASSESSMENT PROCEEDINGS FOR THE YEAR UNDER CONSIDERATION, THE APPELLANT HAS AGAIN CLAIMED DEDUCTION IN RESPECT OF I NTEREST ON DEBENTURES @ 18% RELYING ON THE DECISION OF THE HON. HIGH COURT AND THE TRIBUNAL, AND ALSO THE FINDINGS OF THE A.O. IN EARLIER YEARS. HOWEVER, THE A.O. DID NOT ACCEPT THE CLAIM OF THE APPELLANT IN THIS REGARD ON THE GROUND THAT THE APPELLANT HAS CLAIMED HIGHER DEDUCTION THAN WHAT ACTUALLY IS BEING PAID BY WAY OF INTEREST. IT WAS ARGUED BY THE APPELLANT BEFORE THE A.O THAT IF THE DEDUCTION OF THE UP FRONT FEE WAS NOT ALLOWED IN THE FIRST YEAR AND WAS DECIDED TO BE ALLOWED OVER A PERIOD OF 5 YEAR S, SAME HAD TO BE ALLOWED @ 18% P.A. ITA . NO 409/PN/2005 & ITA NO.595/PN/2009 TAPARIA TOOLS LTD... A. Y 2001 - 02 PAGE OF 9 4 AGGRIEVED BY THE DECISION OF THE A.O. IN THIS REGARD, THE APPELLANT HAS PREFERRED THIS APPEAL AGAINST THE DECISION OF THE A.O. REQUESTING TO ALLOW THE DEDUCTION INACCORDANCE WITH THE DECISION OF ITAT AND HON. HIGH COUR T IN RESPECT OF ASSESSEES OWN CASE FOR PAST YEARS. ALTERNATIVELY, WITHOUT PREJUDICE TO THE ORIGINAL CLAIM, IT HAS BEEN SUBMITTED THAT THE CLAIM OF THE INTEREST TO THE EXTENT 1/5 TH OF THE UP FRONT FEE PAID TO THE ABOVE REFERRED TWO PARTIES HAS TO BE ALL OWED IN THIS YEARS AS DEDUCTION, BECAUSE ACCORDING TO A.O., THE SAME PERTAINS TO THIS YEAR. THE A.O. DID NOT ACCEPT THE CLAIM OF THE ASSESSEE SINCE HE REMAINED OF THE VIEW THAT THE CLAIM IS NOT TEN ABLE IN VIEW OF THE PROVISIONS OF LAW. HE NOTED FURTHER THAT THE DECISION OF HONBLE HIGH COURT IN THE CASE OF ASSESSEE ITSELF IS NOT ACCEPTABLE TO THE DEPARTMENT AND DEPARTMENT HAS PREFERRED A S.L.P BEFORE THE HONBLE SUPREME COURT AGAINST THE SAID DECISION OF HONBLE HIGH COURT FOR A.Y. 1996 - 97, 1997 - 98AND 1998 - 99. 4. BEFORE US, THE LD. A.R. SUBMITTED THAT THE CLAIM OF THE ASSESSEE IS BASED UPON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF ASSESSEE ITSELF ON IDENTI CAL ISSUE UNDER THE SIMILAR FACTS AND CIRCUMSTANCES REPORTED IN 260 ITR 102(BOM) . HE SUBMITTED FURTHER THAT THERE IS NO DISPUTE THAT REVENUE HAS PREFERRED S.L.P. AGAINST THE SAID JUDGMENT OF HONBLE HIGH COURT BUT HONBLE SUPREME COURT HAS NOT STAYED THE OPERATION OF THE JUDGMENT OF THE HONBLE HIGH COURT DURING THE PENDENCY OF THE S.L.P. BEFORE IT. THE REVENUE WAS THUS OUGHT TO HAVE FOLLOWED THE DECISION OF HONBLE BOMBAY HIGH COURT IN THIS REGARD IN THE CASE OF ASSESSEE ITSELF. 5. THE LD. D.R., ON THE OTHER HAND, TRIED TO JUSTIFY THE ORDERS OF THE AUTHORITIES BELOW WITH THIS SUBM ISSION THAT IF THE CLAIMED DEDUCTION OF ITA . NO 409/PN/2005 & ITA NO.595/PN/2009 TAPARIA TOOLS LTD... A. Y 2001 - 02 PAGE OF 9 5 INTEREST AT THE RATE OF 18% P.A. OVER 5 YEARS IS ALLOWED, IT WOULD LEAD TO DEDUCTION OF RS. 90/ - PER DEBENTURE WHICH IS MORE THAN RS. 55/ - AS UP FRONT FEES PAID. THE AUTHORITIES BELOW ARE THUS JUSTIFIED IN NOT FOLLO WING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THIS REGARD WITH DUE RESPECT THAT REVENUE HAS PREFERRED S.L.P AGAINST THE SAID ORDER OF THE HONBLE HIGH COURT BEFORE THE HONBLE SUPREME COURT. 6. CONSIDERING THE ABOVE SUBMISSIONS, ESPECIALLY THAT T HERE IS NO DISPUTE THAT THE ASSESSEE HAD CLAIMED INTEREST AT THE RATE OF 18% P.A. OF THE FACE VALUE OF THE DEBENTURES ISSUED BY IT ON THE BASIS OF THE DECISION OF THE TRIBUNAL IN THE CASE OF THE ASSESSEE ( 18 ITD 508) UPHELD BY THE HONBLE JURISDICTIONA L HIGH COURT, WE ARE OF THE VIEW THAT THE AUTHORITIES BELOW ARE NOT JUSTIFIED IN DENYING SUCH CLAIM OF THE ASSESSEE KEEPING IN VIEW THAT THERE IS NO ORDER OF THE HONBLE SUPREME COURT STAYING THE OPERATION OF THE DECISION OF HONBLE HIGH COURT ON THE IS SUE PENDING ADJUDICATION IN S.L.P BEFORE THE HONBLE SUPREME COURT. WE, THUS, WHILE SETTING ASIDE THE ORDERS OF THE AUTHORITIES BELOW ON THE ISSUE, DIRECT THE A.O TO DECIDE THE ISSUE AFRESH RESPECTFULLY FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COUR T IN THE CASE OF ASSESSEE ITSELF REPORTED IN (2003) 260 ITR 102 (BOM.). OF COURSE, THIS DECISION OF THE A.O WILL BE SUBJECT TO THE OUTCOME OF THE S.L.P PENDING IN THIS REGARD BEFORE THE HONBLE SUPREME COURT. THE ISSUE IS THUS DECIDED IN FAVOUR OF THE AS SESSEE. CONSEQUENTLY, GROUND NOS. 1 & 2 ARE ALLOWED. GROUND NO. 3 & 3A. 7. THESE ARE ALTERNATIVE GROUNDS WITHOUT PREJUDICE TO THE ISSUE RAISED IN GROUND NO. 1 & 2. SINCE GROUND NOS. 1 AND 2 HAVE BEEN ITA . NO 409/PN/2005 & ITA NO.595/PN/2009 TAPARIA TOOLS LTD... A. Y 2001 - 02 PAGE OF 9 6 DECIDED IN FAVOUR OF THE ASSESSEE, THE ALTERNATI VE GROUNDS 3 & 3A DO NOT SURVIVE. THESE ARE ACCORDINGLY REJECTED. GROUND NO. 4 8. IT IS CONSEQUENTIAL IN NATURE AS IN THIS GROUND, INTEREST CHARGED U/S. 234B, 234D AND 244A HAS BEEN QUESTIONED. THE GROUND NO. 4, THUS, DOES NOT NEED INDEPENDENT ADJUDICAT ION. 9. IN RESULT, APPEAL IS ALLOWED. ITA NO. 595/PN/2009 10. IN THIS APPEAL, REVENUE HAS QUESTIONED ACTION OF THE LD CIT(A) IN DELETING THE PENALTY LEVIED U/S. 271(1)(C ) OF THE ACT ON DIFFERENT GROUNDS. 11. HAVING GONE THROUGH THE FIRST APPELLATE ORD ER, WE FIND THAT LD CIT(A) HAS DELETED THE PENALTY LEVIED U/S. 271(1)(C ) OF THE ACT MAINLY ON TWO GROUNDS. FIRSTLY THE ISSUE RAISED IN THE QUANTUM REGARDING THE ALLOWABILITY OF THE CLAIMED INTEREST AT THE RATE OF 18% P.A. OF THE FACE VALUE OF THE DEB ENTURES IS DEBATABLE IN NATURE AND SECONDLY, THE PENALTY ORDER PASSED BY THE A.O IS BARRED BY LIMITATION U/S. 275(1)(A) OF THE ACT . 12. THE CONTENTION OF THE LD. D.R. IN SUPPORT OF THE GROUNDS REMAINED THAT THE ASSESSEE HAD CONCEALED PARTICULARS OF INCO ME AND FURNISHED INACCURATE PARTICULARS THEREOF WHILE CLAIMING DEDUCTION ON PAYMENT OF INTEREST AT THE RATE 18% P.A. OF THE FACE VALUE OF THE DEBENTURES ISSUED BY IT , AS BY ALLOWING THE CLAIMED DEDUCTION OVER 5 YEARS WOULD LEAD TO DEDUCTION OF RS. 90/ - P ER DEBENTURE WHICH IS MORE ITA . NO 409/PN/2005 & ITA NO.595/PN/2009 TAPARIA TOOLS LTD... A. Y 2001 - 02 PAGE OF 9 7 THAN RS.55/ - AS UP FRONT FEES PAID. WITHOUT APPRECIATING THIS FACT, THE LD CIT(A) HAS TREATED THE ISSUE AS DEBATABLE AND HAS DELETED THE PENALTY ON THAT BASIS. THE LD CIT(A) HAS ALSO FAILED TO APPRECIATE THAT FIRST APPELLATE AU THORITY HAS PASSED APPELLATE ORDER IN QUANTUM ON 30 TH NOVEMBER 2004 AND THE SUB - SECTION (1A) TO SECTION 275 WAS INTRODUCED BY THE FINANCE ACT, 2006 W.E.F. 13.7.2006, THEREFORE, AT THE TIME OF PASSING OF THE FIRST APPELLATE ORDER, SECTION 275(1)(A) OF THE ACT WAS INTO OPERATION. THUS, THE A.O HAS PASSED THE PENALTY ORDER U/S. 271(1)(C ) WELL WITHIN THE TIME ALSO BECAUSE PROVISO TO SECTION 275(1)(A) IS NOT APPLICABLE TO THE CASES WHERE FURTHER APPEAL TO THE TRIBUNAL HAS BEEN PREFERRED BY THE ASSESSEE AGAI NST THE FIRST APPELLATE ORDER AND IN SUCH AN EVENT, THE LIMITATION PERIOD FOR LEVY OF PENALTY WILL BE 6 MONTHS FROM THE END OF THE MONTH IN WHICH THE ORDER OF THE TRIBUNAL IS RECEIVED BY CCIT OR CIT. 13. CONSIDERING THE ABOVE SUBMISSIONS, WE DO NOT FIND INFIRMITY IN THE FIRST APPELLATE ORDER IN QUESTION WHEREBY THE LD CIT(A) HAS DELETED THE PENALTY LEVIED U/S. 271(1)(C ) OF THE ACT ON THE DENIAL OF CLAIMED DEDUCTION OF INTEREST AT THE RATE OF 18% P.A. OF THE FACE VALUE OF DEBENTURES ISSUED BY THE ASSESSEE SINCE UNDISPUTEDLY, THE SAID CLAIM WAS MADE BY THE ASSESSEE IN VIEW OF THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF ASSESSEE ITSELF FOR EARLIER A.YS. THE AUTHORITIES BELOW HAVE DENIED THE CLAIMED DEDUCTION OF THE ASSESSEE DURING THE YEAR ON THE BASIS THAT THE REVENUE HAS NOT ACCEPTED THE SAID DECISION OF HONBLE JURISDICTIONAL HIGH COURT ON THE ISSUE IN THE CASE OF ASSESSEE FOR A.YS. 1996 - 97 TO 1998 - 99 AND HAS PREFERRED S.L.P BEFORE THE HONBLE SUPREME COURT AGAINST THE SAID DECISION WHICH IS PENDING ADJUDICATION. THE ASSESSEE HAD PREFERRED APPEAL AGAINST THE SAID FIRST APPELLATE ORDER AFFIRMING THE DENIAL OF DEDUCTION BY THE A.O. ITA . NO 409/PN/2005 & ITA NO.595/PN/2009 TAPARIA TOOLS LTD... A. Y 2001 - 02 PAGE OF 9 8 DURING THE YEAR WHICH HAS BEEN ALLOWED BY THE TRIBUNAL WITH DIRECTION TO THE A.O TO ALLOW THE CLAIMED DEDUCTION RESPECTFULLY FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THIS REGARD, SINCE ADMITTEDLY, THE HONBLE SUPREME COURT WHILE ENTERTAINING THE S.L.P HAS NOT GRANTED ANY INTERIM STAY AGAINST THE OPERATION OF THE DECISION OF HONBLE BOMBAY HIGH COURT ON THE ISSUE. IN VIEW OF THIS FINDING OF THE TRIBUNAL, IN THE APPEAL FOR QUANTUM , ON THE BASIS OF WHICH PRESENT PENALTY IN QUESTION WAS LEVIED AND HAS BEEN DELETED BY THE LD CIT(A), THE ACTION OF FIRST APPELLATE AUTHORITY IS ALSO JUSTIFIED. WE, THUS, UPHO LD THE FIRST APPELLATE ORDER IN QUESTION. IN VIEW OF THIS FINDING ON MERITS OF THE LEVY OF PENALTY, THE SECOND ISSUE AS TO WHETHER PENALTY ORDER WAS BARRED BY TIME LIMIT OR NOT HAS BECOME ACADEMIC ONLY. WE, HOWEVER, DO NOT FIND INFIRMITY IN THE FIRST APPE LLATE ORDER IN THIS REGARD ALSO SINCE PENALTY HAS BEEN LEVIED ON THE BASIS OF FIRST APPELLATE ORDER PASSED ON 30 TH NOVEMBER 2004. THUS, THE LIMITATION PROVIDED U/S. 275(1)(A) IN OPERATION DURING THE PERIOD WILL BE APPLICABLE FOR COMPUTATION OF THE LIMITAT ION. AS PER THIS PROVISION U/S. 275(1)(A), THE PROVISO INSERTED BY THE FINANCE ACT 2003 W.E.F. 1.6.2003, THE PENALTY ORDER IS TO BE PASSED WITHIN ONE YEAR FROM THE END OF THE FINANCIAL YEAR IN WHICH THE ORDER OF THE COMMISSIONER (APPEALS) IS RECEIVED BY TH E CHIEF COMMISSIONER OR COMMISSIONER, OR BEFORE THE EXPIRY OF FINANCIAL YEAR IN WHICH THE PROCEEDINGS IN THE COURSE OF WHICH ACTION FOR IMPOSITION OF PENALTY HAS BEEN INITIATED OR COMPLETED, WHICHEVER IS LATER. IN THE PRESENT CASE, THE PENALTY ORDER HAS B EEN PASSED FROM 31 ST MARCH 2008 WHICH IS OBVIOUSLY BARRED BY LIMITATION. THE FIRST APPELLATE ORDER IN THIS REGARD IS THUS UPHELD. THE ISSUE IS THUS DECIDED AGAINST THE REVENUE. 14. IN RESULT, APPEAL IS DISMISSED. ITA . NO 409/PN/2005 & ITA NO.595/PN/2009 TAPARIA TOOLS LTD... A. Y 2001 - 02 PAGE OF 9 9 15. IN SUMMARY, OF ITA NO. 409/PN/ 2005 IS ALLOWED AND ITA 595/PN/2009 IS DISMISSED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 15 TH JUNE 2011. SD/ - SD/ - ( D.KARUNAKARA RAO ) ACCOUNTANT MEMBER ( I.C. SUDHIR ) JUDICIAL MEMBER PUNE , DATED THE 15 T H JUNE , 20 1 1 US COPY OF THE ORDER IS FORWARDED TO : 1. THE A PP ELLA NT 2. THE RESPONDENT 3. THE CIT I , NASHIK 4. THE CIT(A) - I , NASHIK 5. THE D.R. B BENCH, PUNE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE