M.J. EXPORTS PVT. LTD., MUMBAI V. D.C.I.T.3(2), MUMBAI

ITA 4874/MUM/2012

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3883 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 9 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 29-07-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 26-07-2012
• Court: TRIBUNAL
• Assessee Lawyers: H N MOTIWALLA
• Keywords: Question of law
• Section: 43B; 37(1); 37

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES B, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI ASHWANI TANEJA, ACCOUNTANT MEMBER ITA NOS.4874 & 4937/MUM/2012 ASSESSMENT YEARS: 2007-08 & 2008-09 M/S M.J. EXPORTS PVT. LTD. C/O- H.N. MOTIWALLA & CO. 508 SHARDA CHAMBERS, 33, NEW MARINE LINES, MUMBAI-400020 / VS. DCIT-3(2), MUMBAI ( /ASSESSEE) ( ' / REVENUE ) PAN. NO. AADCM7712M / ASSESSEE BY SHRI H.N. MOTIWALLA ' / REVENUE BY SHRI RAJGURU-DR $ '% & ' / DATE OF HEARING : 28/04/2016 & ' / DATE OF ORDER: 17/05/2016 ITA NO.4874 & 4937/MUM/2012 M/S M.J. EXPORTS PVT. LTD. 2 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) BOTH APPEALS ARE BY THE ASSESSEE AGAINST THE IMPUGN ED ORDER BOTH DATED 23/05/2012 FOR A.Y. 2007-08 AND 20 08-09 OF THE FIRST APPELLATE AUTHORITY, MUMBAI. 2 FIRST WE SHALL TAKE UP THE APPEAL IN ITA NO. 4874/MUM/2012 FOR A.Y. 2007-08, WHEREIN FIRST GROUN D RAISED BY THE ASSESSEE PERTAINS TO CONFIRMING RENTA L INCOME OF RS.30,29,390/- FROM M/S. CHORADIA FASHIONS PVT. LTD ., IN RESPECT OF SHIV SAGAR ESTATE PARTICULARLY WHEN THAT INCOME WAS TAXED IN THE HANDS OF SHRI J M SHAH AS THE PROP ERTY WAS ALREADY TRANSFERRED BY THE ASSESSEE TO HIM ON 1 ST JAN. 2005 IN PURSUANCE OF PERMISSION OF THE APPROPRIATE AUTHO RITY UNDER SECTION 269UL(3) OF THE ACT DATED 4 TH MARCH 1995. 3. DURING HEARING OUR ATTENTION WAS INVITED BY THE LEARNED COUNSEL FOR THE ASSESSEE TO AN DECLARATION UNDER SE CTION 158A(1) OF THE INCOME TAX ACT, 1961 (HEREINAFTER TH E ACT) (FORM NO.8) CLAIMING THAT IDENTICAL QUESTION OF LAW IS PENDING BEFORE THE HONBLE HIGH COURT. THE LEARNED DR CONT ENDED ITA NO.4874 & 4937/MUM/2012 M/S M.J. EXPORTS PVT. LTD. 3 THAT THIS ISSUE HAS ALREADY BEEN DECIDED AGAINST TH E ASSESSEE BY THE TRIBUNAL. THE CLAIM OF THE LEARNED DR WAS C ONTENDED TO BE CORRECTED BY THE LEARNED COUNSEL FOR THE ASSE SSEE BY ADDING THAT WHATEVER WILL BE THE DECISION FROM THE HONBLE HIGH COURT WILL BE BINDING ON BOTH SIDES. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. IN VIEW OF THE AD MISSION OF SUBSTANTIAL QUESTION OF LAW ON THE ISSUE IN HAND, B Y THE HONBLE HIGH COURT WE ALLOW THE DECLARATION OF THE ASSESSEE FILED U/S. 158A(1) OF THE ACT AND DIRECT THAT WHATE VER WILL BE THE DECISION FROM THE HONBLE JURISDICTIONAL HIGH C OURT WILL BE BINDING UPON THE RESPECTIVE PARTIES. HOWEVER, S INCE THE ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE, FOR TH E TIME BEING (TILL THE OUTCOME FROM THE HONBLE HIGH COURT ) THE ISSUE IS DECIDED AGAINST THE ASSESSEE. 5. GROUND NOS. 2 TO 4 RAISED BY THE ASSESSEE PERTAI NS TO CONFIRMING IN RESPECT OF DISALLOWANCE OF INTEREST O N CUSTOMS DUTY AMOUNTING TO RS.3,88,04,315/- WITHOUT APPRECIA TING VARIOUS DECISIONS. MORE SPECIFICALLY WHEN THE ASSES SING ITA NO.4874 & 4937/MUM/2012 M/S M.J. EXPORTS PVT. LTD. 4 OFFICER ADMITTED THAT PAYMENT OF INTEREST ON CUSTOM DUTY WAS FOR DELAYED PAYMENT OF CUSTOM DUTY THEREFORE, THE S AME FORMS PART AND PARCEL OF LIABILITY OF CUSTOMS DUTY. THE LEARNED COUNSEL FOR THE ASSESSEE ADVANCED IDENTICAL ARGUMENTS BY PLACING RELIANCE UPON THE DECISION FRO M HONBLE APEX COURT IN MAHALAXMI SUGAR MILLS CO. VS. CIT (123 ITR 429) (SC). IT WAS ALSO PLEADED THAT THE D ECISION FROM HONBLE CALCUTTA HIGH COURT IN HINDUSTAN MOTOR S LTD. VS. CIT (1996)(218 ITR 450) (CAL) IS NOT APPLICABLE BEING ON DIFFERENT FACTS BY EXPLAINING THAT LIABILITY CRYSTA LLIZED IN A Y 2007-08 AND DEMAND WAS RAISED ON 18.09.2006. OUR ATTENTION WAS INVITED TO A CERTIFICATE FROM CANARA BANK DATED 20.09.1997 BY CLAIMING THAT EITHER THE SAME CAN BE ALLOWED U/S. 37 OF THE ACT FOR WHICH RELIANCE WAS PLACED UP ON THE DECISION IN 250 ITR 279 (MADRAS) OR ALTERNATIVELY U /S. 43B FOR WHICH RELIANCE WAS PLACED IN 203 ITR 375 (CAL.); 77 TAXMAN 628 (CAL). ON THE OTHER HAND, THE LEARNED DR DEFEN DED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER. 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PER USED THE MATERIAL AVAILABLE ON RECORD. THE FACTS IN BRI EF ARE THAT ITA NO.4874 & 4937/MUM/2012 M/S M.J. EXPORTS PVT. LTD. 5 THE COLLECTOR OF CUSTOMS LEVIED CUSTOMS DUTY AND PE NALTY ON THE GOODS IMPORTED BY THE ASSESSEE IN F.Y. 1988-89 VIDE ORDER DATED 28 TH JANUARY 1994 AND SUBSEQUENTLY, LEVIED INTEREST FOR NOT PAYING THE CUSTOMS DUTY AND PENALT Y IN TIME. THE ASSESSEE CHARGED RS.3,88,05,315/- AS INTEREST T O PROFIT AND LOSS ACCOUNT BY CLAIMING THAT THE LIABILITY CRY STALLIZED IN THE YEAR UNDER APPEAL SINCE THE PAYMENT OF INTEREST WAS MADE ON VARIOUS DATES BETWEEN 12.12.2006 TO 28.08.2 007. THE LEARNED ASSESSING OFFICER DISALLOWED THE AMOUNT OF RS.3,88,05,315/-, WHICH WAS PAID TO THE CUSTOMS AUT HORITIES, ON THE GROUND THAT THE INTEREST LIABILITY CRYSTALLI ZED IN F.Y. 2001-02. THE ASSESSEE DISPUTED THE LEVY OF CUSTOMS DUTY AND PENALTY. FINALLY, THE HONBLE APEX COURT UPHEL D THE LEVY OF CUSTOMS DUTY AND PENALTY VIDE ORDER DATED 14.08. 2001. IN VIEW OF THIS FACTUAL MATRIX THE LEARNED ASSESSING O FFICER HELD THAT LIABILITY OF PAYING INTEREST ALSO CRYSTALLIZED IN F.Y. 2001- 02 ITSELF AS PAYMENT OF INTEREST IS MANDATORY U/S. 28AA OF THE CUSTOMS ACT 1962. THE ASSESSEE DISPUTED THE LE VY OF INTEREST BEFORE THE HONBLE HIGH COURT. IT IS NOTE D THAT THE ASSESSEE CHALLENGED THE INTEREST PAYMENT BEFORE VAR IOUS ITA NO.4874 & 4937/MUM/2012 M/S M.J. EXPORTS PVT. LTD. 6 AUTHORITIES AND ULTIMATELY AGAINST THE INTEREST DEM AND A WRIT PETITION WAS FILED BEFORE THE HONBLE BOMBAY HIGH C OURT (WP NO. 338/2006) ORDER DATED 28 TH MARCH 2006 (PAGES 9 TO 23 OF THE PAPER-BOOK). THE STAND OF THE REVENUE IS THAT THE LEVY OF INTEREST IS APPLICABLE FROM THE DATE WHEN THE HONB LE APEX COURT CONFIRMED THE LIABILITY OF CUSTOMS DUTY AND P ENALTY. THE ISSUE BEFORE US WHETHER THE INTEREST ON DELAYED PAYMENT IS ALLOWABLE EXPENDITURE OR NOT. THERE IS NO DISPU TE TO THE FACT THAT THE ASSESSEE MADE THE PAYMENT OF THE INTE REST ALSO. IN SUCH A SITUATION, WE ARE OF THE VIEW THAT THE PA YMENT OF INTEREST IS AN ALLOWABLE DEDUCTION U/S. 37(1) OF TH E INCOME TAX ACT. THE HONBLE APEX COURT IN MAHALAXMI SUGAR MILLS CO. VS. CIT (1980) 123 ITR 429 (SC), REVERSING (197 2) 85 ITR 320 (DELHI) HELD THAT INTEREST PAID FOR DELAYED PAY MENT OF SUCH TAXES IS A DEDUCTIBLE ITEM OF EXPENDITURE. TH E RATIO LAID DOWN IN KAMLAPAT MOTILAL VS. CIT (104 ITR 783) (ALL AHABAD) AND RUSSEL PROPERTIES PVT. LTD. (1982) 137 ITR 358 (CAL). IN VIEW OF THE DECISION FROM HONBLE APEX COURT IN MAH ALAXMI SUGAR MILLS CASE (SUPRA), THE FOLLOWING DECISIONS W ERE IMPLIEDLY OVERRULED ON THE POINT:- ITA NO.4874 & 4937/MUM/2012 M/S M.J. EXPORTS PVT. LTD. 7 I) VISHNU SUGAR MILLS LTD. VS. CIT 113 ITR 583 (CAL ) II) SARAYA SUGAR MILLS P. LTD. VS. CIT 116 ITR 387 (ALLAHABAD) (FB) III) CIT VS. L H SUGAR FACTORIES & OIL MILLS PVT. L TD. (123 ITR 596) (ALLAHABAD) IV) CIT VS. LACHHMANDAS MATHURADAS 124 ITR 411 (ALLAHABAD) 7. ON THE ISSUE OF INTEREST FOR DELAYED PAYMENTS RE FERENCE MAY BE MADE TO TRIVENI ENGINEERING WORKS LTD. VS. C IT (1983) 144 ITR 732 (ALLAHABAD) (FB); CIT VS. LAXMID EVI SUGAR MILLS PVT. LTD. (2000) 241 ITR 131, 132 (ALLAHABAD) ; RAJ NARAYAN AGARWAL VS. CIT (2003) 259 ITR 720, 722 (DE L); CIT VS. DELHI AUTOMOBILES (2005) 272 ITR 381, 382 (DEL) WHEREIN INTEREST PAID ON DELAY IN PAYING SALES TAX WAS HELD TO BE DEDUCTIBLE. ADMITTEDLY, THERE ARE CONTRARY DECISION S ALSO WHEREIN IT WAS HELD THAT INTEREST ON DELAYED PAYMEN TS IS NOT AN ALLOWABLE DEDUCTION. THE RATIO LAID DOWN IN CIT VS. J K SYNTHETICS LTD. (2009) 309 ITR 371 (DEL) FURTHER SU PPORTS THE CASE OF THE ASSESSEE. 8. IF THIS ISSUE IS ANALYZED WITH RESPECT TO SECTIO N 43B OF THE ACT, THE SCOPE AND EFFECT OF THE AMENDMENT MADE IN THE ITA NO.4874 & 4937/MUM/2012 M/S M.J. EXPORTS PVT. LTD. 8 FIRST PROVISO TO SECTION 43B, BY THE FINANCE (NO.2) ACT 1998, HAVE BEEN ELABORATED IN DEPARTMENTAL CIRCULAR NO. 7 72 DATED 23 RD DECEMBER 1998, WHEREIN CERTAIN EXPENSES WERE HELD TO BE ALLOWABLE ONLY ON ACTUAL PAYMENT. THERE IS NO D ISPUTE, IN THE PRESENT APPEAL THAT INTEREST WAS PAID BY THE AS SESSEE. IT IS DIFFERENT MATTER THAT THE ASSESSEE CARRIED THE M ATTER IN APPEAL BEFORE THE HONBLE HIGH COURT OR BEFORE THE HONBLE APEX COURT AND CONTESTED A LEGAL BATTLE, THOUGH FAI LED, BUT FACT REMAINS THAT THE CUSTOMS DUTY AS WELL AS INTER EST ON DELAYED PAYMENTS WAS MADE BY THE ASSESSEE. DEMAND WAS RAISED BY THE DEPARTMENT ON 18.09.2006 THEREFORE LI ABILITY AROSE IN THE PRESENT ASSESSMENT YEAR. THUS, THE DE DUCTION HAS TO BE ALLOWED EITHER U/S. 37 OR U/S. 43B OF THE ACT. THEREFORE, THIS GROUND OF THE ASSESSEE IS ALLOWED. 9. THUS, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOW ED AND DISPOSED OFF IN TERMS INDICATED HEREINABOVE. 10. NOW WE SHALL TAKE UP THE APPEAL FOR A.Y. 2008-0 9 (ITA NO. 4937/MUM/2012), WHEREIN, THE ONLY GROUND RAISED PERTAINS TO CONFIRMING THE RENTAL INCOME OF RS.33,9 3,939/- ITA NO.4874 & 4937/MUM/2012 M/S M.J. EXPORTS PVT. LTD. 9 FROM M/S CHORADIA FASHIONS PVT. LTD, IN RESPECT OF SHIV SAGAR ESTATE WAS TAXED IN THE HANDS OF THE ASSESSEE AS THE PROPERTY HAD ALREADY TRANSFERRED. THE LD. COUNSEL F OR THE ASSESSEE ADVANCED ARGUMENTS, WHICH IS IDENTICAL TO THE GROUND RAISED. ON THE OTHER HAND, THE LD. DR DEFEND ED THE CONCLUSION ARRIVED AT IN THE IMPUGNED ORDER. HOWEVE R, IT WAS ALSO POINTED OUT THAT THE ASSESSEE HAS FILED DECLAR ATION U/S 158A(1) OF THE ACT, BY CLAIMING THAT IDENTICAL QUES TION OF LAW IS PENDING BEFORE THE HONBLE HIGH COURT. 10.1. CONSIDERING THE TOTALITY OF FACTS AND THE O RDER OF THE TRIBUNAL (GROUND NO.4)(ITA NO.6618/MUM/2009)(PA RA- 13), WE FIND THAT AN ELABORATE DISCUSSION HAS BEEN MADE BY THE TRIBUNAL AND FINALLY THE ORDER OF THE COMMISSIO NER OF INCOME TAX (APPEAL) WAS AFFIRMED, CONFIRMING THE RE NTAL RECEIPTS BY THE ASSESSEE AS ITS INCOME. THUS, THIS GROUND OF THE ASSESSEE IS DISMISSED. HOWEVER, IN VIEW OF THE APPLICATION/DECLARATION, FILED BY THE ASSESSEE, U/S 158A(1) OF THE ACT, THE OUTCOME FROM THE HONBLE HIGH COURT WI LL BE APPLICABLE ON BOTH THE PARTIES. ITA NO.4874 & 4937/MUM/2012 M/S M.J. EXPORTS PVT. LTD. 10 FINALLY, THE APPEAL OF THE ASSESSEE (ITA NO.4874/MUM/2012) IS PARTLY ALLOWED, WHEREAS, APPEA L IN (ITA NO.4937/MUM/2013) IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVE FROM BOTH SIDES AT T HE CONCLUSION OF THE HEARING ON 28/04/2016. SD/- SD/- ( ASHWANI TANEJA ) (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER $ % MUMBAI; ( DATED : 17/05/2016 F{X~{T? P.S/. . . %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. 0 0 $ 1 ( *+ ) / THE CIT, MUMBAI. 4. 0 0 $ 1 / CIT(A)- , MUMBAI 5. 2'3 . , 0 *+' * 4 , $ % / DR, ITAT, MUMBAI 6. 5 6% / GUARD FILE. / BY ORDER, /2+ . //TRUE COPY// / (DY./ASSTT. REGISTRAR) , $ % / ITAT, MUMBAI