ITO 1(3)(1), MUMBAI V. RIA HOLDGS LTD, MUMBAI

ITA 5004/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83948 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-10-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 02-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: HARESH G BUCH
• Keywords: Notional interest

Judgement Text

, ( ), IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES D, MUMBAI . . , , . . , '# $ BEFORE SHRI H L KARWA, PRESIDENT, & SHRI B R BASKAR AN, AM ./ITA NO.5004/MUM/2013 ( % & / ASSESSMENT YEAR : 2009-10) ITO 1(3)(1) MUMBAI VS. RIA HOLDINGS LTD. AGRIMA, 3 RD FLOOR, N K MEHTA INTERNATIONAL HOUSE, 178 BACKBAY RECLAMANTION, BABUBHAI CHINAI ROAD, MUMBAI- 400 020 PAN AAACR9841H ( '( /APPELLANT) ( )*'( / RESPONDENT) APPELLANT BY : SHRI NEIL PHILIP RESPONDENT BY : SHRI HARESH G BUCH DATE OF HEARING : 27.10.2014 DATE OF PRONOUNCEME NT : 27.10.2014 $'+ / O R D E R PER H L KARWA, PRESIDENT : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF THE CIT(A)- 20, MUMBAI, DATED 12.04.2013, FOR THE ASSESSMENT YE AR 2009-10. 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE IS AN INVESTMENT COMPANY. DURING THE FINANCIAL YEAR 1995-96, THE AS SESSEE HAD ADVANCED INTEREST BEARING DEPOSIT OF RS.92 LACS TO ONE M/S. SAMETA EX PORTS (P) LTD AT 18%. IT IS ALREADY ON RECORD THAT THE SAID COMPANY IS NOT AN A SSOCIATED COMPANY, EVEN THOUGH THAT PARTS ADDRESS IS IN THE SAME BUILDING. ASSES SEE ACCOUNTED AN AMOUNT OF RS.9,86,605/- UP TO THE PERIOD OF 30.06.1996 AS INT EREST AND ONLY AN AMOUNT OF RS.1,75,000/- WAS RECEIVED ON OR BEFORE 20.06.1998 AND THE BALANCE AMOUNT STILL 2 ITA NO.5004/MUM/2013 AY:2009-10 REMAINS TO BE RECEIVED. IT SEEMS, AS THE SAID COMP ANY M/S. SAMETA EXPORTS (P) LTD. HAD BEEN INCURRING HEAVY LOSSES AND WAS NOT IN A PO SITION TO PAY INTEREST, ASSESSEE WAS NOT ACCOUNTING ANY INTEREST ON THE SAID DEPOSIT IN THE BOOKS OF ACCOUNT FROM 1998-99 ONWARDS. IT IS THE CONTENTION OF THE AO TH AT SINCE THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING, THE INTEREST A CCRUES TO ASSESSEE AND AFTER OBSERVING THAT NO ATTEMPTS HAVE BEEN MADE TO RECOVE R THE INTEREST OR PRINCIPAL, AO MADE ADDITION OF RS.16,56,000/- AS ACCRUED INTEREST . 3. ON APPEAL, THE CIT(A), VIDE HIS ORDER DATED 12.0 4.2013, RELYING ON THE ORDER OF THE TRIBUNAL FOR EARLIER ASSESSMENT YEAR IN THE ASSESSEES OWN CASE, DELETED THE ADDITION OF RS.16,56,000/-, WHEREIN THE TRIBUNAL HA S OBSERVED AS UNDER: WE HAVE CONSIDERED THE ISSUE. AS FAR AS THE FACTS ARE CONCERNED, THERE IS NO DISPUTE THAT THE SAID SEPL IS AN UNRELA TED PARTY AND ALSO THERE IS NO DISPUTE THAT ASSESSEE HAS ADVANCED AN A MOUNT OF RS.90 LAKHS WAY BACK IN AUGUST-OCTOBER, 1995. THERE IS A LSO NO DISPUTE FROM THE REVENUE AND IN FACT ACKNOWLEDGED BY AO IN THE O RDER THAT THE INTEREST AT 18% WAS TAKEN AS ACCRUED UP TO 30.06.19 96 AND SUBSEQUENTLY NO AMOUNT WAS RECOGNIZED AS INCOME IN THE BOOKS OF ACCOUNT. IN THESE CIRCUMSTANCES, WE ARE UNABLE TO UNDERSTAND HOW THE INTEREST INCOME ACCRUED TO ASSESSEE IN THE YEAR UNDER CONSIDERATION. LEVY OR NON-LEVY OF INTEREST IS A C ONTRACTUAL OBLIGATION OF THE PARTIES AND THERE IS NO EVIDENCE ON RECORD T HAT THE SAID SEPL PROVIDED THE INTEREST IN ITS BOOKS, WHICH ASSESSEE HAS NOT ACCOUNTED FOR, AS ACCRUED. NEITHER PARTY HAS RECOGNIZED THE INCOME OR EXPENDITURE IN RESPECTIVE ACCOUNTS. IT IS ON RECOR D THAT THE SAID SEPL REQUESTED ASSESSEE NOT TO CHARGE INTEREST AND ACCOR DINGLY ASSESSEE HAS NOT PROVIDED THE INTEREST IN ITS BOOKS OF ACCOU NT. WHEN IN FACT THE PRINCIPAL ITSELF IS DOUBTFUL FOR RECOVERY, QUESTION OF ACCOUNTING INTEREST AS INCOME DOES NOT ARISE WHEN ASSESSEE HAVE RECOGNI ZED AN AMOUNT OF RS.9,86,605/- AS INTEREST EARLIER COULD ONLY RECOV ER AN AMOUNT OF RS.1,75,000/- IN THE PRESENT ASSESSEE CASE THERE IS UNCERTAINTY I N REALIZING THE PRINCIPLE ITSELF. THE PRINCIPLES LAID DOWN IN RECO GNIZING THE INCOME EQUALLY APPLIES TO THE FACTS OF THE CASE. FOR THE REASONS, WE ARE OF THE OPINION THAT NO NOTIONAL INTEREST CAN BE BROUGHT TO TAX. ACCORDINGLY GROUNDS RAISED ON THIS ISSUE ARE ALLOWED. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 3 ITA NO.5004/MUM/2013 AY:2009-10 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THE ISSUE IS SQU ARELY COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY THE ORDER OF TH E TRIBUNAL DATED 27.07.2012 IN THE ASSESSEES OWN CASE FOR A.YS. 2001-02 TO 2006-0 7 IN ITA NOS. 1119- 1124/MUM/2011. FACTS OF THE CASE FOR THE YEAR UNDE R CONSIDERATION ARE SIMILAR TO THAT OF THE EARLIER ASSESSMENT YEARS. RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL, WE DO NOT SEE ANY INFIRMITY IN THE ORDER OF THE CIT(A). IT IS ACCORDINGLY UPHELD. 5. IN THE RESULT, THE APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF OCTOBER, 2014. SD/- SD/- (B R BASKARAN) (H L KARWA) ACCOUNTANT MEMBER PRESIDENT MUMBAI, DT : 27 TH OCTOBER, 2014 SA COPY FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE C.I.T, CONCERNED 4. THE CIT (A)-CONCERNED 5. THE DR, MUMBAI D BENCH BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI