Gujarat Road and Infrastructure Co.Ltd., Ahmedabad V. The Income tax Officer, GNR Ward-1, Gandhinagar

ITA 411/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 5918 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 16-06-2010
• Assessment Year: 2004-2005
• Appeal Filed On: 05-02-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B S GEHLOT
• Assessee Lawyers: DILIP LAKHANI
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BEFORE SHRI MUKUL SHRAWAT, JUDICIAL MEMBER AND SHRI N.S. SAINI, ACCOUNTANT MEMBER DATE OF HEARING : 16/06/2010 DRAFTED ON:16/06 /2010 ITA NO.411/AHD/2008 ASSESSMENT YEAR : 2004-05 GUJARAT ROAD AND INFRASTRUCTURE CO.LTD. ( FORMERLY KNOWN AS GUJARAT TOLL ROAD INVESTMENT CO.LTD. ) [SUCCESSOR OF VADODARA HALOL TOLL ROAD CO.LTD.] 301, SHAPATH, OPP. RAJPATH CLUB BODAKDEV,AHMEDABAD-380 015 VS. THE ITO GNR WARD NO.1 GANDHINAGAR PAN/GIR NO. : AABCG 2093 H (APPELLANT) .. (RESPONDENT) APPELLANT BY : SHRI DILIP LAKHANI RESPONDENT BY: SHRI B.S. GEHLOT, CIT-DR O R D E R PER SHRI MUKUL SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL AT THE BEHEST OF THE ASSESSEE WH ICH HAS EMANATED FROM THE ORDER OF LEARNED CIT(APPEALS)-GAN DHINAGAR DATED 01/11/2007 AND THE GROUNDS RAISED ARE AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE APP ELLANT SUBMIT THAT THE LEARNED COMMR. OF INCOME TAX (A) HAS ERRED IN R EJECTING THE STAND OF THE APPELLANT THAT THE ORDER PASSED BY THE LEARNED ASSESSING OFFICER IS BAD IN LAW AND AGAINST THE PRO VISIONS OF LAW. THE LEARNED ASSESSING OFFICER HAS PASSED THE ORDER AGAINST VADODARA HALOL TOLL ROAD COMPANY LIMITED EVEN THOUG H ON THE DATE OF PASSING THE ORDER THE SAID COMPANY CEASED T O EXIST AND MERGED WITH GUJARAT TOLL ROAD INVESTMENT CO.LTD. T HE APPELLANT ITA NO .411/AHD/2008 GUJARAT ROAD & INFRASTRUCTURE CO.LTD. VS. ITO ASST.YEAR 2004-05 - 2 - SUBMIT THAT THE ORDER PASSED BY THE LEARNED ASSESSI NG OFFICER AGAINST VADODARA HALOL TOLL ROAD COMPANY LIMITED MA Y BE TREATED AS ILLEGAL AND AGAINST THE PROVISIONS OF LAW. 2. THE LEARNED COMMR. OF INCOME TAX (A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST ON DEEP DISCOUNT BOND AMOUNTING TO RS.3,52,10,068/- BEING THE PROVISION FOR INTEREST O N DEEP DISCOUNT BONDS U/S.43B OF INCOME TAX ACT, 1961. ON THE FAC TS AND CIRCUMSTANCES OF THE CASE THE APPELLANT SUBMITS THA T THE DISALLOWANCE OF INTEREST IS NOT JUSTIFIED. 3. THE APPELLANT FURTHER SUBMITS THAT THE LEARNED ASSE SSING OFFICER HAS ERRED IN INVOKING PROVISIONS OF SECTION 43B OF INCO ME TAX ACT, 1961 IN RESPECT OF INTEREST ON DEEP DISCOUNT BOND. ON THE FACTS AND CIRCUMSTANCE OF THE CASE THE APPELLANT SUBMITS THAT PROVISIONS OF SECTION 43B ARE NOT APPLICABLE AND THE DISALLOWANCE MADE BY THE LEARNED ASSESSING OFFICER AND CONFIRMED BY THE LEAR NED COMMR. OF INCOME TAX (A) IS NOT JUSTIFIED. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE APP ELLANT SUBMITS THAT THE DISALLOWANCE OF RS.3,52,10,068/- IS NOT JU STIFIED AND BE DELETED. 2. AT THE OUTSET, LEARNED AUTHORISED REPRESENTATIV E OF THE ASSESSEE HAS CLARIFIED THAT THOUGH AS MANY AS FOUR GROUNDS H AVE BEEN RAISED, HOWEVER, THE ONLY ISSUE IS IN RESPECT OF THE CLAIM OF PROVISION OF INTEREST ON DEEP DISCOUNT BONDS (DDB) WHICH WAS DISALLOWED B Y INVOKING THE PROVISIONS OF SECTION 43B OF THE I.T. ACT, 1961. H E HAS ALSO STATED THAT IN ASSESSEES OWN CASE IN THE PAST FOR ASSESSMENT YEAR 2003-04 THIS ISSUE HAS ALREADY BEEN SETTLED IN ASSESSEES FAVOUR BY AN ORDER OF ITAT AHMEDABAD C BENCH BEARING ITA NO.2901/AHD/2006 DA TED 15/05/2009. IN THE LIGHT OF THE ABOVE STATEMENT, W E HAVE EXAMINED THE FACTS OF THE CASE IN BRIEF AS EMERGED FROM THE CORR ESPONDING ASSESSMENT ORDER PASSED U/S.143(3) OF THE I.T. ACT, 1961 DATED 15/11/2006. THE ASSESSING OFFICER HAS NOTED THAT THE PRESENT COMPAN Y HAD MERGED WITH ITA NO .411/AHD/2008 GUJARAT ROAD & INFRASTRUCTURE CO.LTD. VS. ITO ASST.YEAR 2004-05 - 3 - GUJARAT TOLL ROAD INVESTMENT CO.LTD. (GTRICL) WITH EFFECT FROM 01/10/2003 VIDE AN ORDER OF THE HIGH COURT DATED 11 /05/2005. DUE TO THIS REASON, THE ACCOUNTING PERIOD UNDER CONSIDERAT ION RELEVANT FOR ASSESSMENT YEAR 2004-05 WAS FROM 01/04/2003 TO 30/0 9/2003. IN RESPECT OF THE ABOVE GROUND, IT WAS NOTED BY THE AS SESSING OFFICER THAT THE INTEREST ON DEEP DISCOUNT BONDS SUBSCRIPTION AM OUNTING TO RS.3,52,10,068/- WAS NOT PAID BEFORE THE FILING OF THE RETURN, HOWEVER, DEBITED TO PROFIT & LOSS ACCOUNT ON ACCRUAL BASIS. DUE TO THIS REASON, IT WAS ASKED TO SHOW CAUSE AS TO WHY THE SAID SUM BE N OT DISALLOWED U/S.43B OF THE I.T. ACT, 1961. THE ASSESSING OFFIC ER HAS OBSERVED THAT FOR ASSESSMENT YEAR 2003-04 ON AN IDENTICAL GROUND AN ADDITION WAS MADE. FOLLOWING THE PAST HISTORY THE IMPUGNED DISAL LOWANCE WAS MADE FOR THE YEAR UNDER CONSIDERATION. 3. WHEN THE MATTER WAS REACHED BEFORE THE FIRST APP ELLATE AUTHORITY, IT WAS EXPLAINED THAT THE BONDS WERE ISSUED BY AN ERST WHILE COMPANY, I.E. M/S.VADODARA HALOL TOLL ROAD COMPANY LTD. (VHTRL) O N THE FACE VALUE OF RS.5,000/- IN THE YEAR-2000 AND AFTER THE PERIOD OF HOLDING OF 16 YEARS, ITS REDEEMED VALUE WAS AT RS.50,150/-. THE LIABILITY OF INTEREST WAS, THEREFORE, FOR A PERIOD OF 16 YEARS WHICH WAS WORKED OUT AT THE FIGURE OF RS.3,52,10,068/- ON THE TOTAL NUMBER OF 6 0000 BONDS. ABOUT THE INVOCATION OF THE PROVISION OF SECTION 43B OF T HE I.T. ACT, 1961, THE ARGUMENT WAS THAT THE IMPUGNED AMOUNT WAS PAYABLE A ND NOT TO BE PAID AS PER THE TERMS OF THE SAID ISSUE AND BECAUSE NO I NTEREST WAS MADE PHYSICALLY TO THE DEBENTURE-HOLDERS IN EACH YEAR, T HEREFORE THE LIABILITY WAS ACCRUING YEAR-AFTER-YEAR, HENCE, OUT OF THE AMB ITS OF THE PROVISIONS OF SECTION 43B OF THE I.T. ACT, 1961. THE LEARNED CIT(APPEALS) HAS ITA NO .411/AHD/2008 GUJARAT ROAD & INFRASTRUCTURE CO.LTD. VS. ITO ASST.YEAR 2004-05 - 4 - SIMPLY NOTED THAT ONCE THE SIMILAR ISSUE HAS ALREAD Y BEEN ARISEN FOR ASSESSMENT YEAR 2003-04 AND IN THAT YEAR, THE THEN LEARNED CIT(APPEALS) HAD UPHELD THE ACTION OF THE ASSESSING OFFICER AND CONFIRMED THE DISALLOWANCE, THEREFORE, ON IDENTICAL LINES, THE ADDITION WAS AFFIRMED. 4. ON HEARING THE RIVAL SUBMISSIONS AS WELL AS ON E XAMINATION OF THE FACTS OF THE CASE, IT IS TRUE THAT THE REVENUE AUTH ORITIES HAVE PRIMARILY FOLLOWED THE PAST HISTORY OF THE CASE. BECAUSE OF THIS REASON, ONCE THE REVENUE AUTHORITIES ARE FOLLOWING THE PAST RECOURS E TAKEN BY THE REVENUE AUTHORITIES, THEREFORE, APPLYING THE SAME A NALOGY WE HEREBY ALSO TAKE DUE COGNIZANCE OF THE ORDER OF THE RESPEC TED CO-ORDINATE BENCH PASSED FOR ASSESSMENT YEAR 2003-04 IN ASSESSE ES OWN CASE (SUPRA), WHEREIN VIDE PARAGRAPH NO.25, IT WAS HELD AS UNDER:- 25. WE HAVE HEARD THE RIVAL SUBMISSIONS AN D PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIALS O N RECORD. IN THIS CASE THE ASSESSEE IS A PUBLIC LIMITED COMPANY ENGAG ED IN THE BUSINESS OF PROVIDING INFRASTRUCTURE FACILITY. FORM ERLY THE ASSESSEE COMPANY WAS KNOWN AS VADODRA HALOL TOLL ROAD COMPAN Y LIMITED NOW MERGED WITH GUJARAT TOLL ROAD INVESTMEN T COMPANY LIMITED. ASSESSEE HAS ISSUED DEEP DISCOUNT BONDS OF RS30 CRORES IN THE YEAR 2000 WHICH WERE SUBSCRIBED BY THREE CLA SSES OF PERSONS NAMELY MUTUAL FUNDS, PUBLIC FINANCIAL INSTITUTIONS AND SCHEDULED BANKS. THE ASSESSEE HAS CLAIMED DEDUCTION OF RS.6,0 8,03,230/- AS INTEREST ACCRUED ON THE ABOVE BONDS FOR A.Y. 2003-0 4. THE ASSESSING OFFICER WAS OF THE VIEW THAT AS THIS INTE REST WAS PAYABLE ONLY ON COMPLETION OF FULL DURATION OF DEEP DISCOUN T BONDS AND AS NO INTEREST, IN FACT, WAS PAID DURING THE YEAR, THE REFORE PROVISIONS OF SECTION 43B OF THE I.T. ACT, 1961 WAS ATTRACTED IN THE INSTANT CASE AND IN THIS VIEW OF THE MATTER INTEREST OF RS .6,08,03,230/- CLAIMED BY THE ASSESSEE IS NOT ALLOWABLE U/S.43B OF THE INCOME TAX ITA NO .411/AHD/2008 GUJARAT ROAD & INFRASTRUCTURE CO.LTD. VS. ITO ASST.YEAR 2004-05 - 5 - ACT, 1961. THE LD. CIT(APPEALS) CONFIRMED THE AB OVE DISALLOWANCE, HOWEVER, ON A DIFFERENT GROUND, I.E. IN HIS OPINION, AS THE INTEREST WAS DUE FOR PAYMENT ONLY ON MATURIT Y OF THE BONDS, NO INTEREST EXPENDITURE ACCRUED DURING THE YEAR AND , THEREFORE, THE SAME IS NOT ALLOWABLE TO THE ASSESSEE. WE FIND TH AT IT IS NOT IN DISPUTE THAT THE ASSESSEE IS CONSISTENTLY FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THEREFORE, IN OUR CONSIDERE D OPINION, IF ANY EXPENDITURE HAS NOT FALLEN DUE FOR PAYMENT, BUT FOR WHICH A LIABILITY HAS BEEN ACCRUED IS TO BE ALLOWED IN COMP UTING THE INCOME OF THE ASSESSEE. IN THE INSTANT CASE, IT IS NOT IN DISPUTE THAT DEEP DISCOUNT BONDS WERE ISSUED FOR A PERIOD OF MOR E THAN ONE YEAR. THE DIFFERENCE AMOUNT PAYABLE ON MATURITY I S NOTHING BUT INTEREST FOR THE FULL PERIOD, I.E. FROM THE DATE O F THE ISSUE OF THE BOND TO THE DATE OF THE MATURITY OF THE BOND. AB OVE VIEW ALSO FINDS SUPPORT FROM THE VIEW EXPRESSED BY THE CBDT I N ITS CIRCULAR NO.2/2002 DATED 16/02/2002. THUS, IT CANNOT BE H ELD THAT NO INTEREST WAS ACCRUED FOR THE YEAR UNDER CONSIDERATI ON ON BONDS AS THE YEAR UNDER CONSIDERATION IS A YEAR BETWEEN THE DATE OF THE ISSUE OF THE BONDS AND THE DATE OF THE MATURITY OF THE BONDS. THUS, THE INTEREST WHICH HAS BEEN ACCRUED FOR THE Y EAR UNDER CONSIDERATION, EVEN THOUGH IS NOT PAYABLE DURING TH E YEAR UNDER CONSIDERATION, BUT IS PAYABLE ON SOME LATER DATE, B UT IS STILL ALLOWABLE TO THE ASSESSEE IN VIEW OF THE MERCANTILE SYSTEM OF ACCOUNTING FOLLOWED BY THE ASSESSEE. FURTHER, WE ALSO FIND THAT PROVISIONS OF SECTION 43B OF THE INCOME TAX ACT, 19 61 ARE NOT ATTRACTED IN THE INSTANCE CASE. FIRSTLY, SECTION 4 3B OF THE INCOME TAX ACT, 1961 IS NOT APPLICABLE IN THE CASE OF ANY INTEREST PAYABLE TO A MUTUAL FUND. FURTHER, IN CASE OF FINANCIAL IN STITUTION SECTION 43B (D) OF THE INCOME TAX ACT, 1961 GETS ATTRACTED ONLY WHEN SUCH INTEREST IS PAYABLE ON ANY LOANS OR BORROWINGS. I N THE INSTANT CASE, THE INTEREST IS PAYABLE IN RESPECT OF AMOUNTS DEPOSITED BY FINANCIAL INSTITUTIONS WITH THE ASSESSEE BY SUBSCRI BING TO THE BONDS ISSUED BY THE ASSESSEE. THE INTEREST IS PAYABLE IN RESPECT OF CERTAIN DEPOSITS RECEIVED BY THE ASSESSEE AND NOT IN RESPEC T OF ANY LOANS, ADVANCES OR BORROWINGS MADE BY THE ASSESSEE. FOR THE SAME REASON, CLAUSE(E) OF SECTION 43B RELATING TO LOANS AND ADVANCES FROM A SCHEDULED BANK IS ALSO NOT APPLICABLE IN THE INSTANCE CASE. IN THE ABOVE CIRCUMSTANCES, IN OUR CONSIDERED VIEW, NEITHER THE ASSESSING OFFICER WAS JUSTIFIED IN DISALLOWING THE DEDUCTION CLAIMED FOR PROVISION MADE IN RESPECT OF INTEREST A CCRUED, BUT NOT ITA NO .411/AHD/2008 GUJARAT ROAD & INFRASTRUCTURE CO.LTD. VS. ITO ASST.YEAR 2004-05 - 6 - DUE ON THE DEEP DISCOUNT BONDS ISSUED BY THE ASSESS EE NOR THE LD. CIT(APPEALS) WAS JUSTIFIED IN CONFIRMING SUCH DISAL LOWANCE. IT IS OBSERVED THAT THE AMOUNT OF PROVISION MADE BY THE A SSESSEE IN RESPECT OF INTEREST ACCRUED ON BONDS IS NOT IN DISP UTE AS EXCESSIVE OR NOT RELATING TO THE YEAR UNDER CONSIDERATION. WE, THEREFORE, DELETE THE DISALLOWANCE OF RS.6,08,03,230/- IN RESP ECT OF PROVISIONS MADE FOR INTEREST IN RESPECT OF DEEP DISCOUNT BONDS . HENCE, THESE GROUNDS OF APPEAL OF THE ASSESSEE ARE ALLOWED. 4.1. ONCE A VIEW HAS BEEN TAKEN ON THE QUESTION OF APPLICABILITY OF THE PROVISIONS OF SECTION 43B OF THE I.T. ACT, 1961 IN FAVOUR OF THE ASSESSEE, THEREFORE, CONSIDERING THE TOTALITY OF THE FACTS AN D CIRCUMSTANCES OF THE CASE FOR THIS YEAR AS WELL WE ALLOW THE GROUND OF T HE ASSESSEE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER SIGNED, DATED AND PRONOUNCED IN THE COURT ON 18/ 06 /2010. SD/- SD/- ( N.S. SAINI ) ( MUKUL SHRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 18 / 06 /2010 T.C. NAIR, SR. PS COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE LD. CIT(APPEALS)-GANDINAGAR 5. THE DR, AHMEDABAD BENCH 6. THE GUARD FILE. BY ORDER, //TRUE COPY// (DY./ASSTT.REGISTRAR), ITAT, AHMEDABAD