ACIT, CHENNAI V. Tamil Nadu Water Investment Co. Ltd., CHENNAI

ITA 463/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 90286 (ITAT-CHENNAI)
• Duration Of Justice: 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 06-03-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N RANGARAJ IRS
• Assessee Lawyers: R VISWANATHAN

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI , . ! , ' #$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER & SHRI V. DURGA RAO, JUDICIAL MEMBER ./ I.T.A. NO.463/MDS/2015 & C.O.NO.33/MDS/2015 ( / ASSESSMENT YEAR : 2011-2012) THE ASSISTANT COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 3(1), CHENNAI 600 034. ( %& /APPELLANT) VS M/S. TAMIL NADU WATER INVESTMENT CO. LTD, 1 ST FLOOR, POLYHOSE TOWERS, NO.86, MOUNT ROAD, GUINDY, CHENNAI 600 032. [PAN:AABCT 8153B] ( '(%& /RESPONDENT/CROSS OBJECTOR) / APPELLANT BY : SHRI. N. RANGARAJ, IRS, CIT. / RESPONDENT BY : SHRI R. VISWANATHAN, C.A., /DATE OF HEARING : 08.04.2015 /DATE OF PRONOUNCEMENT : 08.04.2015 ) / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THE APPEAL BY REVENUE AND CROSS -OBJECTI ON BY ASSESSEE ARE DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOM E TAX (APPEALS)- I.T.A.NO.463/MDS/2015 & C.O.NO.33/MDS/2015 (IN ITA NO.463/MDS/2015) :- 2 -: III, CHENNAI DATED 20.10.2014. THE REVENUE HAS RAI SED THE FOLLOWING GROUND :- 2.1 THE LD. CIT(A) ERRED IN DELETING THE DISALLOWAN CE OF INTEREST PAYABLE CLAIMED TO THE TUNE OF B11,46,45,038/-. THE CROSS-OBJECTION FILED BY ASSESSEE IS IN SUPPOR T OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS). 2. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. A SIMILAR ISSUE WAS CONSIDERED BY THE TRIBU NAL IN ASSESSEES OWN CASE IN ITA NOS.236 & 237/MDS/2014 AND CROSS OB JECTION NOS. 25 & 26/MDS/2014 VIDE ORDER DATED 06.06.2014, WHEREIN THE TRIBUNAL HELD AS UNDER:- WE HAVE HEARD BOTH SIDES, PERUSED THE MATERIALS ON RECORD AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. THE STAND TAKEN BY THE REVENUE IS THAT THE INTEREST TO BE PAID BY THE ASSE SSEE HAD NOT BEEN CRYSTALLIZED IN THE YEAR UNDER CONSIDERATION. WE FI ND THAT THE ISSUE INVOLVED IN THIS APPEAL HAS ALREADY BEEN CONSIDERED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2008-09 AND PASSED A DETAILED ORDER IN I.T.A. NO. 1242/MDS/2012 VIDE ORD ER DATED 02.08.2012, WHEREIN THE TRIBUNAL HAS HELD AS UNDER: 4. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PER USING THE ORDERS OF THE LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD, WE FIND THAT SIMILAR ISSUE HAD ARISEN BEFORE THE TRIBUNAL I N ASSESSMENT YEAR 2003- 04 IN THE CASE OF ASSESSEE ITSELF AND TH E TRIBUNAL VIDE ITS ORDER DATED 20.11.2007 PASSED IN I.T.A.NOS.29/MDS/2 007 AND 2508/MDS/2007, HAD ALLOWED THE CLAIM FOR DEDUCTION OF INTEREST BY OBSERVING AS UNDER: I.T.A.NO.463/MDS/2015 & C.O.NO.33/MDS/2015 (IN ITA NO.463/MDS/2015) :- 3 -: 2.5 WE HAVE HEARD BOTH THE COUNSELS AND PERUSED TH E RELEVANT RECORDS. IT WILL BE WORTHWHILE HERE TO REF ER TO THE CLAUSE 1.2 OF ARTICLE I OF THE LOAN AGREEMENT WHICH IS RELEVANT TO THE ISSUE UNDER CONSIDERATION, AS UNDER: 'INTERE ST:- TWICL SHALL PAY TO GOTN AND IL&FS THE RESPECTIVE INTEREST ON THE PRINCIPAL AMOUNT OF THE TERM FINANCE AVAILED OF AND OUTSTANDING FROM TIME TO TIME AT THE RATE AS MENTIO NED IN THE SCHEDULE I HERETO AND PAYABLE ON THE INTEREST PAYME NT DATE. TWICL SHALL NOT BE REQUIRED TO PAY INTEREST UP TO T HE EXPIRY OF THE MORATORIUM PERIOD BEING 5 YEARS FROM THE OPE RATION DATE. 'INTEREST NOT PAID SHALL BE ACCRUED AS ARREAR S AND ADDED TO THE PRINCIPAL OUTSTANDING AT THE END OF EVERY CA LENDAR QUARTER. THE INTEREST SHALL BE CALCULATED ON THE BA SIS OF 365 DAYS A YEAR AND THE NUMBER OF DAYS ELAPSED WITH QUA RTERLY RESTS: (A) SUBSEQUENT TO THE END OF THE PERIOD STATED ABOV E, TWICL SHALL PAY TO GOTN AND IL&FS INTEREST ON THE RESPECT IVE PRINCIPAL AMOUNT OF THE TERM FINANCE OUTSTANDING FR OM TIME TO TIME QUARTERLY IN ARREARS IN EACH YEAR ON THE INTER EST PAYMENT DATE. 2.6 FROM A READING OF THE AFORESAID, IT IS QUITE AP PARENT THAT INTEREST HAS ACCRUED AND THE PAYMENT THEREOF HAS BE EN POSTPONED. IT IS ONLY UPON ACCRUAL THAT THIS INTERE ST IS BEING ADDED TO THE PRINCIPAL AND THE PRINCIPAL AMOUNT IS CONSEQUENTLY INCREASING. THE REFERENCE OF THE LEARNED COMMISSION ER OF INCOME TAX (APPEALS) TO PROVISIONS OF EXPLANATION 3 (C) OF SECTION 43B(D) OF THE ACT IS NOT RELEVANT. SECTION 43(B) WHICH DEALS WITH CERTAIN DEDUCTIONS TO BE ONLY ON ACTUAL PAYMENT INCLUDES VIDE CLAUSE (D), 'ANY SUM PAYABLE BY THE A SSESSEE AS INTEREST ON ANY LOAN OR BORROWING FROM ANY PUBLIC F INANCIAL INSTITUTION (OR A STATE FINANCIAL CORPORATION OR A STATE INDUSTRIAL INVESTMENT CORPORATION), IN ACCORDANCE W ITH THE TERMS AND CONDITIONS OF THE AGREEMENT GOVERNING SUC H LOAN OR BORROWING' EXPLANATION 3(C) IN THIS REGARD READS AS UNDER.- 'FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED T HAT A DEDUCTION OF ANY SUM, BEING INTEREST PAYABLE UNDER CLAUSE (D) OF THIS SECTION, SHALL BE ALLOWED IF SUCH INTEREST HAS BEEN I.T.A.NO.463/MDS/2015 & C.O.NO.33/MDS/2015 (IN ITA NO.463/MDS/2015) :- 4 -: ACTUALLY PAID AND ANY INTEREST REFERRED TO IN THAT CLAUSE WHICH HAS BEEN CONVERTED INTO A LOAN OR BORROWING SHALL N OT BE DEEMED TO HAVE BEEN ACTUALLY PAID.' 2.7 FROM A READING OF THE ABOVE, IT IS CLEAR THAT THE SAID CLAUSE PERTAINS TO SUM PAYABLE BY THE ASSESSEE AS INTEREST ON LOAN OR BORROWING FROM ANY PUBLIC FINANCIAL INSTITUTION. PU BLIC FINANCIAL INSTITUTION WHICH HAS BEEN REFERRED TO IN EXPLANATION (4) OF THE INCOME TAX ACT WHICH IS DEFINED IN SECTI ON 4A OF THE COMPANIES ACT, 1956 READ AS UNDER:- '(1) EACH OF THE FINANCIAL INSTITUTIONS SPECIFIED IN THIS SUBSECTION SHALL BE REGARDED FOR THE PURPOSES OF TH IS ACT, AS A PUBLIC FINANCIAL INSTITUTION, NAMELY:- (I) THE INDUSTRIAL CREDIT AND INVESTMENT CORPORATIO N OF INDIA LIMITED, A COMPANY FORMED AND REGISTERED UNDER THE INDIAN COMPANIES ACT, 1913 (7 OF 1913): (II) THE INDUSTRIAL FINANCE CORPORATION OF INDIA, E STABLISHED UNDER SECTION 3 OF THE INDUSTRIAL FINANCE CORPORATI ON ACT, 1948 (15 OF 1948); (III) THE INDUSTRIAL DEVELOPMENT BANK OF INDIA, EST ABLISHED UNDER SECTION 3 OF THE INDUSTRIAL DEVELOPMENT BANK OF INDIA ACT, 1964 (18 OF 1964); (IV) THE LIFE INSURANCE CORPORATION OF INDIA, ESTAB LISHED UNDER SECTION 3 OF THE LIFE INSURANCE CORPORATION A CT, 1956 (31 OF 1956); (V) THE UNIT TRUST OF INDIA, ESTABLISHED UNDER SECT ION 3 OF THE UNIT TRUST OF INDIA ACT, 1963 (52 OF 1963). (VI) THE INFRASTRUCTURE DEVELOPMENT FINANCE COMPANY LIMITED, A COMPANY FORMED AND REGISTERED UNDER THIS ACT.; (2) SUBJECT TO THE PROVISIONS OF SUB-SECTION (1), THE CENTRAL GOVERNMENT MAY, BY NOTIFICATION IN THE OFFICIAL GAZ ETTE, SPECIFY SUCH OTHER INSTITUTION AS IT MAY THINK FIT TO BE A PUBLIC FINANCIAL INSTITUTION: I.T.A.NO.463/MDS/2015 & C.O.NO.33/MDS/2015 (IN ITA NO.463/MDS/2015) :- 5 -: PROVIDED THAT NO INSTITUTION SHALL BE SO SPECIFIED UNLESS (I) IT HAS BEEN ESTABLISHED OR CONSTITUTED BY OR UN DER ANY CENTRAL ACT, OR (II) NOT LESS THAN FIFTY ONE PER CENT OF THE PAID U P SHARE CAPITAL OF SUCH INSTITUTION IS HELD OR CONTROLLED BY THE CE NTRAL GOVERNMENT. 2.8 ADMITTEDLY, NEITHER THE GOVERNMENT OF TAMIL NAD U NOR INFRASTRUCTURE LEASING & FINANCIAL SERVICES LTD. IL &FS FALL WITHIN THE DEFINITION OF PUBLIC FINANCIAL INSTITUTI ON. HENCE, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)S PREMISE THAT EXPLANATION 3(C) OF SECTION 43B(D) IS APPLICAB LE, IS ERRONEOUS. AS WE HAVE ALREADY HELD EARLIER THAT AS PER THE READING OF LOAN AGREEMENT, THE INTEREST AMOUNT HAS VERY MUCH ACCRUED AND THE LIABILITY HAS CRYSTALLIZED. IN THIS VIEW OF THE MATTER, WE HOLD THAT ORDER OF THE AUTHORITIES BELOW IS LIABLE TO BE SET ASIDE AND ASSESSEE'S CLAIM BE ALLOWED. 5. THE DR COULD NOT POINT OUT ANY DISTINGUISHABLE F EATURES IN THE ABOVE QUOTED ORDER OF THE TRIBUNAL AND NEITHER HE COULD B RING ANY MATERIAL ON RECORD TO SHOW THAT THE ABOVE ORDER OF THE TRIBU NAL WAS VARIED IN APPEAL BY ANY HIGHER FORUM. WE, THEREFORE, RESPECTF ULLY FOLLOWING THE ABOVE QUOTED ORDER OF THE TRIBUNAL, CONFIRM THE ORD ER OF THE CIT(A) AND DISMISS THE GROUNDS OF APPEAL OF THE REVENUE. 3. BEING SO, RESPECTIVELY FOLLOWING THE ABOVE ORDER OF THE TRIBUNAL, WE ARE INCLINED TO DISMISS THE APPEAL OF THE REVENU E FOR THIS ASSESSMENT YEAR ALSO. SO FAR AS, THE CROSS-OBJECTIO N IS CONCERNED, THIS IS IN SUPPORT OF THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS). SINCE WE HAVE CONFIRMED THE ORDER OF THE COMMISSIONER OF I.T.A.NO.463/MDS/2015 & C.O.NO.33/MDS/2015 (IN ITA NO.463/MDS/2015) :- 6 -: INCOME TAX (APPEALS), THE CROSS-OBJECTION FILED BY THE ASSESSEE IS DISMISSED AS INFRUCTUOUS. 4. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IN ITA NO.463/MDS/2015 AND CROSS OBJECTION NO.33/MDS/2015 ARE DISMISSED. ORDER PRONOUNCED ON WEDNESDAY, THE 8TH OF APRIL, 2 015, AT CHENNAI. SD/- SD/- ( . ! ) V. DURGA RAO ' / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER !' /CHENNAI. #$ /DATED:08.04.2015. KV $% &' (' /COPY TO: 1. ) APPELLANT 2. / RESPONDENT 3. * ( )/CIT(A) 4. * /CIT 5. '+, - /DR 6. ,. / /GF.