ITO, New Delhi V. M/s. Brahmaputra Capital & Financial Services Ltd., New Delhi

ITA 4792/DEL/2012

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3689 (ITAT-DELHI)
• Duration Of Justice: 5 year(s) 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-02-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 07-06-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 07-09-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

PAGE | 1 INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A : NEW DELHI BEFORE SHRI H.S.SIDHU , JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER ITA NO. 4791 & 4792 /DEL/2012 (ASSESSMENT YEAR: 2008 - 09 AND 2009 - 10 ) ITO, WAFD - 3(1), NEW DELHI VS. BRAHMAPUTRA CAPITAL & FINANCIAL SERVICES LTD, 28, NAJAFGARH ROAD, NEW DELHI PAN: AABCB8626K (APPELLANT) (RESPONDENT) REVENUE BY : SHRI ARUN KUMAR YADAV, SR. DR ASSESSEE BY: MS. TEJASVI JAIN, CA SHRI ROHIT JAIN, ADV DATE OF HEARING 16/11 /2017 DATE OF PRONOUNCEMENT 0 8 / 0 2 / 2018 O R D E R PER PRASHANT MAHARISHI , A. M. 1. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD CIT(A) - VI, NEW DELHI DATED 01.06.2012 FOR THE ASSESSMENT YEAR 2008 - 09 AND 2009 - 10. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL FOR ASSESSMENT YEAR 2008 - 09 : - 1. THE LD CIT(A) ERRED ON FACTS IN LAW ON DELETING THE ADDITION MADE ON ACCOUNT NON RECOGNITION OF INTEREST INCOME AMOUNTING TO RS. 21553470/ - . 3. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL FOR ASSESSMENT YEAR 2009 - 10 : - 1. THE LD CIT(A) ERRED ON FACTS IN LAW ON DELETING THE ADD ITION MADE ON ACCOUNT NON RECOGNITION OF INTEREST INCOME AMOUNTING TO RS. 21539222 / - . 4. BOTH THESE APPEALS INVOLVED THE IDENTICAL ISSUE FOR TWO ASSESSMENT YEAR REGARDING NON RECOGNITION OF INTEREST INCOME. THE FACT SHOWS THAT THE ASSESSEE IS A NON BANKIN G FINANCE COMPANY REGULARLY ASSESSED TO TAX. ITO VS. BRAHMAPUTRA CAPITAL & FINANCIAL SERVICES LTD, ITA NO. 4791 & 4792/DEL/2012 (ASSESSMENT YEAR: 2008 - 09 AND 2009 - 10) PAGE | 2 DURING THE COURSE OF ASSESSMENT PROCEEDINGS IT WAS NOTED BY THE LD AO THAT ASSESSEE HAS GIVEN LOANS AND ADVANCES TO VARIOUS PARTIES HOWEVER, AO NOTICED THAT ASSESSEE HAS NOT SHOWN ANY INTEREST INCOME FROM THE VA RIOUS LOANS. ON QUERY ASSESSEE SUBMITTED THAT THOUGH THERE IS STIPULATION FOR RECEIPT OF INTEREST AT AGREED RATE FROM THE ABOVE COMPANIES HOWEVER, THE AFORESAID COMPANIES ARE MAKING LOSSES AND FINANCIALLY WEAK AND DO NOT HAVE SUFFICIENT FUNDS. THEY ARE ALS O CONTINUOUSLY DEFAULTING IN PAYMENT OF INTEREST. THERE WAS NO CHANCE OF RECOVERY OF THE ABOVE INTEREST. HENCE, THE BOARD OF DIRECTORS VIDE MEETING DATED 03.04.2004 HAS DECIDED THAT NO INTEREST ON SUCH ADVANCES SHALL BE CHARGED ON THESE LOANS. HENCE, THE A SSESSEE HAS SAID THAT NO INTEREST HAS ACCRUED ON THIS FUND. THE LD ASSESSING OFFICER REJECTED THE CONTENTION OF THE ASSESSEE HOLDING THAT THERE WAS NO RESOLUTION TO FOREGO/ SURRENDER THE INTEREST INCOME AND THE RIGHT OF RECEIVING INTEREST HAS NOT EXTINGUIS HED. THEREFORE, HE MADE AN ADDITION OF RS. 21539222/ - FOR ASSESSMENT YEAR 2009 - 10 AND RS. 21553466/ - FOR ASSESSMENT YEAR 2008 - 09. CONSEQUENTLY, THE ORDERS U/S 143(3) OF THE ACT WERE PASSED FOR BOTH THE YEARS. 5. THE ASSESSEE CHALLENGED THE ORDER OF THE LD AS SESSING OFFICER BEFORE THE LD CIT(A), WHO ALLOWED THE APPEAL OF THE ASSESSEE RELYING ON THE DECISION OF THE COORDINATE BENCH FOR ASSESSMENT YEAR 2007 - 08 IN ASSESSEES OWN CASE AND DELETED THE ADDITION. THEREFORE, NOW REVENUE IS IN APPEAL BEFORE US. 6. THE LD DR SUBMITTED THAT ABOVE ISSUE IS NOW COVERED IN FAVOUR OF THE REVENUE BY THE DECISION OF THE HON'BLE DELHI HIGH COURT WHEREIN VIDE ORDER DATED 03.09.2012 IN ITA NO. 107/2012 THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. 7. THE LD AR MOVED AN APPLICATION FOR ADJOURNMENT STATING THAT AGAINST THE ORDER OF THE HIGH COURT THE ASSESSEE HAS PREFERRED AN SLP BEFORE THE HON'BLE SUPREME COURT WHICH HAS BEEN ADMITTED VIDE SLP NO. 4185/2013 DATED 04.02.2013 AND THEREFORE, THE TRIBUNAL S HOULD NOT HEAR THE MATTER ITO VS. BRAHMAPUTRA CAPITAL & FINANCIAL SERVICES LTD, ITA NO. 4791 & 4792/DEL/2012 (ASSESSMENT YEAR: 2008 - 09 AND 2009 - 10) PAGE | 3 AND KEEP THE ISSUE PENDING TILL THE ORDER OF THE HON'BLE SUPREME COURT . ON THE MERITS IT WAS SUBMITTED THAT THE ISSUE IS COVERED BY THE DECISION OF HON'BLE DELHI HIGH COURT AGAINST THE ASSESSEE. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTIONS AND ALSO PERUSED THE ORDERS OF THE LOWER AUTHORITIES. WE DO NOT INCLINED TO KEEP THE MATTER PENDING TILL THE DECISION OF HON'BLE SUPREME COURT AS NO APPLICATION HAS BEEN PREFERRED BY THE ASSESSEE U/S 158A OF THE ACT FOR BLOCKING OF THE A PPEAL. THEREFORE, WE ARE LEFT WITH ONLY ALTERNATIVE OF DECIDING THE ISSUE ON MERIT. ON MERIT THE ISSUE IS SQUARELY BY THE DECISION OF HON'BLE DELHI HIGH COURT IN ASSESSEES OWN CASE OF AY 2007 - 08 WHEREIN, IT IS HELD AS UNDER: - 2. THE ASSESSEE IS A NON - BAN KING FINANCE COMPANY REGISTERED WITH THE RESERVE BANK OF INDIA. IN THE RETURN OF INCOME FILED FOR THE ASSESSMENT YEAR 2007 - 08, IT CLAIMED THAT IT WAS NOT ASSESSABLE IN RESPECT OF ANY INTEREST ON THE LOANS ADVANCED BY IT IN THE PREVIOUS YEARS RELEVANT TO TH E ASSESSMENT YEARS 1996 - 97 AND 1998 - 99, ON ACCRUAL BASIS, SINCE THERE WAS A RESOLUTION OF THE BOARD OF DIRECTORS DATED 4TH MARCH, 2004 NOT TO CHARGE INTEREST IN RESPECT OF THOSE LOANS HAVING REGARD TO THE FINANCIAL DIFFICULTIES IN WHICH THE DEBTOR - COMPANIE S WERE PLACED. IT WAS ALSO CLAIMED BEFORE THE ASSESSING OFFICER THAT THE CLAIM OF THE ASSESSEE WAS ACCEPTED BY THE INCOME TAX APPELLATE TRIBUNAL (TRIBUNAL FOR SHORT) IN THE ASSESSMENT YEARS 2003 - 04 TO 2006 - 07. THE ASSESSING OFFICER EXAMINED THE FACTS FOR T HE YEAR UNDER APPEAL AND FOUND THAT THE CIT VS BRAHMAPUTRA CAPITAL & FINANCIAL ... ON 3 SEPTEMBER, 2012 COMPANIES TO WHOM THE ASSESSEE ADVANCED LOANS WERE FINANCIALLY WELL OFF. HE NOTICED FROM THE BALANCE SHEETS OF THE COMPANIES THAT THEY WERE MAKING PROF ITS FOR THE YEAR UNDER APPEAL AND, THEREFORE, THE ASSESSEE WAS NO LONGER JUSTIFIED IN NOT CHARGING INTEREST ON THE LOANS TO THEM. THE DETAILS OF THE LOANS AND THE AMOUNT OF INTEREST ON THEM FOR THE YEAR UNDER APPEAL ARE AS UNDER: - S.NO. NAME OF THE PARTY AMOUNT OF LOAN RATE OF AMOUNT OF INTEREST NOT DECLARED 1. JINDAL EQUIPMENT LEASING 7,32,72,000 16% 1,17,23,520 & CONSULTANCY SERVICESLTD. 2. MANSAROVAR INVESTMENT 5,10,17,630 16% 81,62,820 LTD. 3. GOSWAMIS CREDITS & INV. 1,14,97,427 14.5% 16,67,126 LTD. ITO VS. BRAHMAPUTRA CAPITAL & FINANCIAL SERVICES LTD, ITA NO. 4791 & 4792/DEL/2012 (ASSESSMENT YEAR: 2008 - 09 AND 2009 - 10) PAGE | 4 TOTAL INTEREST 2,15,53,466 IN THE AFORESAID VIEW OF THE MATTER, THE ASSESSING OFFICER ADDED THE SUM OF RS.2,15,53,466/ - AS INTEREST ON THE LOANS. 3. THE CIT(APPEALS), BEFORE WHOM THE ASSESSEE FILED AN APPEAL NOTICED THAT THE DEBTOR - COMPANIES WERE NOT LOSS MAKING COMPANIES IN THE RELEVANT PREVIOUS YEARS, THAT THEY WERE ACTUALLY MAKING PROFITS AND IN THIS VIEW OF THE MATTER, HE HELD THAT THE ASSESSING OFFICER WAS JUSTIFIED IN CHARGING INTEREST. HE ACCORDINGLY DISMISSED THE ASSESSEES APPEAL. IN HIS ORDER, THE CIT(APPEALS) ALSO NOTED THAT THE TRIBUNAL HAD DECIDED THE DISPUTE IN FAVOUR OF THE ASSESSEE FOR THE ASSESSMENT YEARS 1997 - 98 AND 1998 - 99 BECAUSE IN THOSE YEARS THE BORROWING COMPANIES WERE IN A BAD FINANCIAL POSITION MAKING IT IMPOSSIBLE TO REALIZE ANY INT EREST FROM THEM, WHEREAS THAT FACTSITUATION DOES NOT OBTAIN IN THE YEAR UNDER APPEAL IN WHICH THE BORROWING COMPANIES WERE MAKING HANDSOME PROFITS. HE NOTED THAT THE FOLLOWING ARE THE DETAILS OF THE PROFITS EARNED BY THE BORROWING COMPANIES IN THE YEAR END ED 31ST MARCH, 2007; (1) JINDAL EQUIPMENTS LEASING AND CONSULTANCY SERVICES LTD. RS. 8,92,006/ - (2) M/S MANSAROVAR INVESTMENT LTD. RS. 4,30,73,328/ - THESE COMPANIES ALSO HAD RESERVES AND SURPLUS AMOUNT TO RS. 73.23 CRORES AND RS.23.95 CRORES RESPECTIVELY AS ON 31ST MARCH, 2007. IN THIS VIEW OF THE MATTER, THE CIT(APPEALS) CONFIRMED THE ADDITION OF THE INTEREST AND DISMISSED THE APPEAL. 4. THE FURTHER APPEAL FILED BY THE ASSESSEE BEFORE THE TRIBUNAL WAS, HOWEVER, CIT VS BRAHMAPUTRA CAPITAL & FINANCIAL ... O N 3 SEPTEMBER, 2012 ALLOWED. THE TRIBUNAL REITERATED ITS EARLIER VIEW TAKEN IN RESPECT OF THE ASSESSMENT YEARS 2003 - 04 TO 2006 - 07. THE TRIBUNAL, IN DOING SO, ADVERTED TO THE CONTENTION OF THE REVENUE THAT THE FACTS FOR THE YEAR UNDER APPEAL WERE DISTINGUI SHABLE. NEVERTHELESS IT PROCEEDED TO OBSERVE THAT ' IT HAS NOT BEEN DISPUTED THAT THE FACTS AND CIRCUMSTANCES IN THE PRESENT YEAR AND EARLIER YEARS ARE SAME. IN VIEW THEREOF, WE ARE UNABLE TO ACCEPT THE PLEA OF THE LD. DR THAT FACTS ARE DISTINGUISHABLE IN THIS YEAR AND A VIEW DIFFERENT FROM THE ONE TAKEN BY THE HON'BLE DELHI HIGH COURT SHOULD BE ADOPTED. THE FACTS AND CIRCUMSTANCES BEING SIMILAR, HON'BLE DELHI HIGH COURT HAVING CLEARLY HELD THAT THE IMPUGNED INTEREST INCOME IN THIS CASE CANNOT BE RECOGNIZE D FOR THESE YEARS, RESPECTFULLY FOLLOWING AND THE ADDITION MADE ON THIS ACCOUNT IS DELETED.' IT MAY BE NOTED FROM THE ABOVE OBSERVATIONS OF THE TRIBUNAL THAT THE ORDER OF THE TRIBUNAL FOR THE EARLIER YEARS WAS CONFIRMED BY THE JUDGMENT OF THIS COURT DATED 18 TH MAY, 2011. ITO VS. BRAHMAPUTRA CAPITAL & FINANCIAL SERVICES LTD, ITA NO. 4791 & 4792/DEL/2012 (ASSESSMENT YEAR: 2008 - 09 AND 2009 - 10) PAGE | 5 5. THE REVENUE IS IN APPEAL BEFORE US TO CONTEND THAT THE TRIBUNAL OVERLOOKED THE CONTENTION OF THE DEPARTMENT THAT THE FACTS FOR THE YEAR UNDER APPEAL ARE DISTINGUISHABLE FROM THOSE OBTAINING IN THE YEARS IN WHICH THE HIGH COURT HAD HELD I N FAVOUR OF THE ASSESSEE. IT IS SUBMITTED BY MR.DEEPAK CHOPRA, THE LEARNED STANDING COUNSEL FOR THE REVENUE, THAT DESPITE ADVERTING TO THE SUBMISSION OF THE DEPARTMENT, THE TRIBUNAL ERRONEOUSLY PROCEEDED TO HOLD THAT THERE WAS NO DISPUTE THAT THE FACTS AND CIRCUMSTANCES IN THE PRESENT YEAR WERE THE SAME AS IN THE EARLIER YEARS. THIS OBSERVATION OF THE TRIBUNAL, ACCORDING TO MR.CHOPRA, VITIATED THE FINDING OF THE TRIBUNAL AND ITS DECISION IS LIABLE TO BE STRUCK DOWN AS PERVERSE. 6. THERE IS NO APPEARANCE ON BEHALF OF THE ASSESSEE, DESPITE SERVICE OF NOTICE. 7. THE POINT URGED BY THE REVENUE DESERVES TO BE ACCEPTED. THE ASSESSING OFFICER AS WELL AS THE CIT(APPEALS) HAVE BROUGHT ON RECORD THE FACTS TO SHOW THAT THE FINANCIAL CONDITION OF THE BORROWING COMPANIE S WAS SOUND WHICH WAS NOT THE CASE IN THE ASSESSMENT YEARS 2003 - 04 TO 2006 - 07 IN WHICH YEARS THE TRIBUNAL AND THE HIGH COURT HAD HELD THAT THE ASSESSEE WAS JUSTIFIED IN NOT TAKING CREDIT FOR ANY INTEREST FROM THESE COMPANIES, DESPITE FOLLOWING THE MERCANTI LE SYSTEM OF ACCOUNTING, BECAUSE OF THE POOR FINANCIAL POSITION OF THOSE COMPANIES. THE FACTUAL POSITION FOR THE YEAR UNDER APPEAL IS DIFFERENT AND THIS HAS BEEN BROUGHT OUT WELL BOTH IN THE ASSESSMENT ORDER AND IN THE FIRST APPELLATE ORDER. THE TRIBUNAL O UGHT TO HAVE PAUSED TO CONSIDER THE STATEMENT OF THE DEPARTMENT BEFORE IT TO THE EFFECT THAT THE FACTS FOR THE YEAR UNDER APPEAL WERE DISTINGUISHABLE AND, THEREFORE, THE EARLIER ORDERS OF THE TRIBUNAL AND THE JUDGMENT OF THE HIGH COURT, THOUGH IN THE ASSES SEES OWN CASE, CANNOT BE MECHANICALLY APPLIED. UNFORTUNATELY THIS ASPECT WAS COMPLETELY MISSED BY THE TRIBUNAL. WE, THEREFORE, ANSWER BOTH THE SUBSTANTIAL QUESTIONS OF LAW RAISED BY THE REVENUE IN THE AFFIRMATIVE AND IN ITS FAVOUR. THERE SHALL BE NO ORDER AS TO COSTS. 9. THE LD AR COULD NOT SHOW US ANY REASON TO KEEP THE APPEAL PENDING. IN VIEW OF THE ABOVE BINDING DECISION OF THE HON'BLE DELHI HIGH COURT IN ASSESSEES OWN CASE COVERING THE ISSUE BEFORE US IN FAVOUR OF THE REVENUE, WE ALLOW BOTH THE AP PEALS OF THE REVENUE ACCORDINGLY. 10. IN THE RESULT BOTH THE APPEALS FILED BY THE REVENUE ARE ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 0 8 / 0 2 / 2018 . - S D / - - S D / - ( H.S.SIDHU ) (PRASHANT MAHARISHI) JUDICIAL MEMBER ACCOUNTANT MEMBER ITO VS. BRAHMAPUTRA CAPITAL & FINANCIAL SERVICES LTD, ITA NO. 4791 & 4792/DEL/2012 (ASSESSMENT YEAR: 2008 - 09 AND 2009 - 10) PAGE | 6 DATED: 0 8 / 02 / 2018 A K KEOT COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI