ITO 2(2)(3), MUMBAI V. MATHAKIA INVESWTMENTS P.LTD, MUMBAI

ITA 5259/MUM/2015

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 8501 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2017
• Appeal Filed By: Department
• Bench Allotted: SMC
• Next Hearing Date: 07-02-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 06-11-2015
• Court: TRIBUNAL
• Assessee Lawyers: KAMAL OZA
• Keywords: Notional interest

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ITA NO.5259/M/2015 (AY 2006 - 2007) ITO - 2(2)(3), R.NO.542, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. / VS. M/S. MATHAKIA INVESTMENT PVT LTD, 7 TH FLOOR, INDIAN GLOBE CHAMBERS, 142 W.H. MARG, V.T., MUMBAI 400001. ./ PAN : AAACM5656K ( / APPELLANT) .. ( / RESPONDENT) / APPELLANT BY : NONE / RESPONDENT BY : SHRI KAMAL OZA, AR / DATE OF HEARING : 07.02.2017 /DATE OF PRONOUNCEMENT : 07 .02.2017 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE REVENUE ON 06.11.2015 IS AGAINST THE ORDER OF THE CIT (A) - 5, MUMBAI DATED 10.8.2015 FOR THE ASSESSMENT YEAR 2006 - 2007. IN THIS APPEAL, REVENUE RAISED THE FOLLOWING GROUNDS WHICH READ AS UNDER: - 1. WHETHER O N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT ( A ) ERRED IN DELETING THE ADDITION ON ACCOUNT OF INTEREST OF RS. 41,29,054 / - ACCRUED ON OUTSTANDING DEBT, WITHOUT APPRECIATING THAT THE ASSESSEE ACQUIRED THE RIGHT OF SUIT AS PER ASSIGNMENT DEED AND WAS ENTITLED TO RECOVER THE DEBT ALONG WITH INTEREST AND C OST OF SUIT AS PER THE DEED OF ASSIGNMENT OF RIGHT. 2. WHETHER O N THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN DELETING THE ADDITION ON ACCOUNT OF INTEREST OF ACCRUED ON OUTSTANDING DEBT, WITHOUT APPRECIATING THAT INTE REST ON DEBT WHICH WAS R ECEIVABLE BY BANK OF BARODA, IS NOW RECEIVABLE TO THE ASSESSEE AND AS THE ASSESSEE IS FOLLOWING THE MERCANTILE SYSTEM OF ACCOUNTING THE ASSESSEE WAS REQUIRED TO OFFER INTEREST INCOME ON DEBTS ON ACCRUAL BASIS. 2. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THIS APPEAL IS A PART OF GROUP OF APPEALS, WHEREIN THE PRESENT ONE IS SKIPPED OUT OF THE GROUP OF 14 APPEALS. THE SOLITARY ISSUE RAISED IN THIS APPEAL RELATES TO RECOGNIZING THE NOTIONAL INTEREST INCOME ON OUTSTANDING DEBTS WHEN THE INTEREST IS THE SUBJECT MATTER OF A DECREE BEFORE THE COURT . THIS ISSUE IS IDENTICAL IN ALL THE APPEALS OF SAID GROUP DECIDED BY THE TRIBUNAL IN ITA NOS. 7392 TO 7398/M/2013 AND OTHERS VIDE ITS ORDER 2 DATED 16.12.2016. IN THE SAID ORDER, TRIBUNAL DISMISSED ALL THE APPEALS OF THE ASSESSEE AS WELL AS THE CROSS OBJECTIONS OF THE REVENUE. IN THIS REGARD, LD COUNSEL FOR THE ASSESSEE PRAYED FOR DECIDING THE PRESENT APPEAL IN THE LINE OF GROUP OF APPEALS DECIDED BY THE TRIBU NAL (SUPRA). 3. DURING THE PROCEEDINGS BEFORE ME, NONE APPEARED ON BEHALF OF THE REVENUE. CONSIDERING THE COVERED NATURE OF THE ISSUE, I PROCEED TO ADJUDICATE THIS APPEAL WITH THE HELP OF THE LD AR. AFTER HEARING THE LD AR AND ON PERUSAL OF THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS CITED DECISION OF THE TRIBUNAL (SUPRA), WHEREIN THE UNDERSIGNED IS A PARTY TO THE SAID ORDER, I FIND, THE PRESENT APPEAL PERTAINS TO THE GROUP OF APPEALS (14) DECIDED BY THE TRIBUNAL (SUPRA). C ONSIDERING THE COMMONALITY OF THE ISSUE RAISED IN THE PRESENT APPEAL AS WELL AS THE APPEALS DECIDED BY THE TRIBUNAL VIDE ITS ORDER DATED 16.12.2016 (SUPRA), OUR DECISION GIVEN THEREIN SQUARELY APPLIES TO THE INSTANT APPEAL TOO. FOR THE SAKE OF COMPLETENESS OF THIS ORDER, RELEVANT PARAS FROM THE SAID TRIBUNALS ORDER (SUPRA) ARE EXTRACTED AS UNDER: - 11. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE PAPER BOOKS FILED BEFORE US. ON HEARING BOTH THE PARTIES AND ON PERUSAL OF THE RELE VANT MATERIAL PLACED BEFORE US, WE FIND, THERE IS NO DISPUTE ON THE FACTS ABOUT THE ASSESSEE ACQUIRING THE DEBTS FROM THE BANK OF BARODA FOR A SUM OF RS. 84,97,400/ - WITH THE BORROWED FUNDS, THE LOAN CREDITORS HAVE NOT PAID INTEREST INCOME TO EITHER BANK O R TO THE ASSESSEE, ASSESSEE HAS NOT RECOGNISED THE INCOME FOR ALL THE ASSESSMENT YEARS UNDER CONSIDERATION ETC. THE LEGAL ISSUE IE TO BE DECIDED ON THE RIGHT TO RECOVER THE INTEREST INCOME BY THE ASSESSEE DURING THE PENDENCY OF SUIT (NO. 105 OF 1986) IN BOMBAY CITY CIVIL COURT. IN THIS REGARD, WE HAVE PERUSED THE PROVISIONS OF THE SAID SECTION 34 OF THE CPC AND THE SAME READS AS UNDER: - 34. INTEREST : - (1) WHERE AND IN SO FAR AS A DECREE IS FOR THE PAYMENT OF MONEY, THE COURT MAY, IN THE DECREE, ORDER INTEREST AT SUCH RATE AS THE COURT DEEMS REASONABLE TO BE PAID ON THE PRINCIPAL SUM ADJUDGED, FROM THE DATE OF THE SUIT TO THE DATE OF THE DECREE, IN ADDITION TO ANY INTEREST ADJUDGED ON SUCH PRINCIPAL SUM FOR ANY PERIOD PRIOR TO THE INSTITUTION OF THE SUI T, [ WITH FURTHER INTEREST AT SUCH RATE NOT EXCEEDING SIX PER CENT PER ANNUM, AS THE COURT DEEMS REASONABLE ON SUCH PRINCIPAL SUM], FROM THE DATE OF THE DECREE TO THE DATE OF PAYMENT, OR TO SUCH EARLIER DATE AS THE COURT THINKS FIT. [PROVIDED THAT WHERE TH E LIABILITY IN RELATION TO THE SUM SO ADJUDGED HAD ARISEN OUT OF A COMMERCIAL TRANSACTION, THE RATE OF SUCH FURTHER INTEREST MAY EXCEED SIX PER CENT PER ANNUM, BUT SHALL NOT EXCEED THE CONTRACTUAL RATE OF INTEREST OR WHERE THERE IS NO CONTRACTUAL RATE, THE RATE AT WHICH MONEYS ARE LENT OR ADVANCED BY NATIONALISED BANKS IN RELATION TO COMMERCIAL TRANSACTIONS. EXPLANATION I. - IN THIS SUB - SECTION, NATIONAL BANK MEANS A CORRESPONDING NEW BANK AS DEFINED IN THE BANKING COMPANIES (ACQUISITION AND TRANSFER OF UN DERTAKINGS) ACT, 1970 (5 OF 1970). EXPLANATION II. - FOR THE PURPOSES OF THIS SECTION, A TRANSACTION IS A COMMERCIAL TRANSACTION, IF IT IS CONNECTED WITH THE INDUSTRY, TRADE OR BUSINESS OF THE PARTY INCURRING THE LIABILITY.] (2) WHERE SUCH A DECREE IS SILEN T WITH RESPECT TO THE PAYMENT OF FURTHER INTEREST [ON SUCH PRINCIPAL SUM] FROM THE DATE OF DECREE TO THE DATE OF PAYMENT OR OTHER EARLIER DATE, THE COURT SHALL BE DEEMED TO HAVE REFUSED SUCH INTEREST, AND A SEPARATE SUIT THEREFOR SHALL NOT LIE. 12. WE HA VE ALSO EXAMINED THE INTERPRETATION OF THE SAID SECTION AND THE RELEVANT EXPLANATION IS ALREADY INCORPORATED IN THE ABOVE PARAS OF THIS ORDER. WE HAVE CONSIDERED THE CITED JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE 3 CASE OF MAHARASHTRA STATE FINANCIAL CORPORATION LTD (SUPRA). FURTHER, WE HAVE ALSO CONSIDERED THE REASONING GIVEN BY THE CIT (A) IN PARAS 4.1.4 AND 4.1.5 OF HIS ORDER. CONSIDERING THE ABOVE, WE ARE OF THE OPINION, THE CONCLUSION DRAWN BY THE CIT (A) IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. ACCORDINGLY, RELEVANT GROUNDS RAISED BY THE REVENUE IN ALL THE FOUR APPEALS ARE DISMISSED. 4. R ESPECTFULLY FOLLOWING THE ABOVE DECISION OF THE TRIBUNAL ON IDENTICAL ISSUE AS WELL AS FOLLOWING THE PRINCIPLES OF CONSIS TENCY, THE GROUNDS RAISED BY THE REVENUE ARE REQUIRED TO BE DISMISSED. ACCORDINGLY I ORDER. 5. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUN CED IN THE OPEN COURT ON 0 7 T H FEBRUARY, 2017. S D / - (D. KARUNAKARA RAO) ACCOUNTANT MEMBER MUMBAI ; 07.02.2017 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI