STUP CONSULTANTS PVT. LTD., MUMBAI V. ADDL.C.I.T. RG.3(3), MUMBAI

ITA 5827/MUM/2012

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 0244 (ITAT-MUMBAI)
• Duration Of Justice: 6 year(s) 2 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-12-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 21-09-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D G PANSARIDR
• Assessee Lawyers: MAHESH MATHUR LD
• Keywords: Business expenditure
• Section: 143(3); 37(1); 37

Judgement Text

ITA NO. 5827/MUM/2012 STUP CONSULTANTS PRIVATE LIMITED ASSESSMENT YEAR-2009-10 1 IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI , , BEFORE HONBLE SHRI JOGINDER SINGH, VP AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM ./I.T.A. NO.5827/MUM/2012 ( / ASSESSMENT YEAR: 2009-10) STUP CONSULTANTS P VT. LTD. 1004-05, RAHEJA CHAMBERS, 213, FREE PRESS JOURNAL MARG, NARIMAN POINT MUMBAI-400 021 / VS. ADD ITION AL COMMISSIONER OF INCOME TAX-RANGE3(3) ROOM NO. 606,6 TH FLOOR AAYKAR BHAWAN M.K.ROAD, MUMBAI-400 020 ./ ./PAN/GIR NO. AABCS-1945-E ( /APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : SHRI MAHESH MATHUR, LD. AR REVENU E BY : SHRI D.G. PANSARI-DR / DATE OF HEARING : 23/10/2018 / DATE OF PRONOUNCEMENT : 11/12/2018 / O R D E R PER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1.1 AFORESAID APPEAL FOR ASSESSMENT YEAR [AY] 2009- 10 IS A RECALLED MATTER SINCE IT WAS DISPOSED-OFF ON 22/11/2017 EX-PARTE QUA THE ASSESSEE. SUBSEQUENTLY, IT HAS BEEN RECALLED UPON A SSESSEES ITA NO. 5827/MUM/2012 STUP CONSULTANTS PRIVATE LIMITED ASSESSMENT YEAR-2009-10 2 APPLICATION MA NO.193/MUM/2108 ORDER DATED 10/08/2018 . ACCORDINGLY, THE APPEAL HAS COME UP FOR FRESH HEARING BEFORE THE BENCH. 1.2 AGGRIEVED BY THE ORDER OF LD. COMMISSIONER OF I NCOME TAX (APPEALS)-7, MUMBAI, [CIT(A)], APPEAL NO. CIT(A)-7/ADDL.CIT-3(3)/IT- 137/11-12 DATED 07/05/2012, THE ASSESSEE IS UNDER APPEAL BEFO RE US WITH FOLLOWING EFFECTIVE GROUNDS OF APPEAL: - 1. THE ORDER U/S 250 DATED 7 TH MAY, 2012, PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-7, MUMBAI, IS BAD IN LAW, CONT RARY TO THE FACTS OF THE CASE AND EVIDENCE ON RECORD, TO THE EXTENT OF GROUN D NO.2. 2. THE LEARNED CIT (A) ERRED IN UPHOLDING THE DIS ALLOWANCE TO THE EXTENT OF RS.1,83,05,381 BEING INTEREST CHARGED U/S 234B; U/S 234C AND 234D, BEING COMPENSATORY IN NATURE FOR USE OF GOVERNMENT DUES, AS BUSINESS EXPENDITURE U/S 37 OF THE INCOME TAX ACT, 1961. GROUND NUMBER-2 IS A REVISED GROUND FILED BY THE AS SESSEE ON 26/09/2018. 2.1 BRIEFLY STATED, THE ASSESSEE BEING RESIDENT CORPORATE ENTITY ENGAGED IN THE BUSINESS OF CIVIL ENGINEERING & ARCHITECTURAL CONSULTANCY WAS ASSESSED FOR IMPUGNED AY IN SCRUTINY ASSESSMENT U/S 143(3) ON 30/11/2011 BY LD. ADDITIONAL COMMISSIONER OF INCOME TAX, RANGE 3( 3), MUMBAI, [AO] WHEREIN THE INCOME OF THE ASSESSEE WAS DETERMINED AT RS.25.71 CRORES AFTER CERTAIN ADDITIONS / DISALLOWA NCES AS AGAINST RETURNED INCOME OF RS.23.66 CRORES FILED BY THE ASS ESSEE ON 30/09/2009. AS EVIDENT FROM GROUNDS OF APPEAL, THE ONLY SUBJECT MATTER OF PRESENT APPEAL IS INTEREST DISALLOWANCE OF RS.18 4.25 LACS AS SUSTAINED BY LD. FIRST APPELLATE AUTHORITY. 2.2 DURING ASSESSMENT PROCEEDINGS, IT TRANSPIRED TH AT THE ASSESSEE DEBITED INTEREST EXPENDITURE OF RS.184.25 LACS IN T HE PROFIT & LOSS ACCOUNT WHICH COMPRISED-OFF OF THE FOLLOWING ITEMS: - ITA NO. 5827/MUM/2012 STUP CONSULTANTS PRIVATE LIMITED ASSESSMENT YEAR-2009-10 3 IT TRANSPIRED THAT CERTAIN ADDITIONS WERE MADE BY L D. AO IN QUANTUM ASSESSMENTS FOR AYS 2004-05 TO 2006-07 AND THE RESU LTANT DEMAND WAS PAID BY THE ASSESSEE. THIS DEMAND INCLUDED INTEREST U/S 234B, 234C & 234D, WHICH WAS PAID BY THE ASSESSEE DURING IMPUGNE D AY AND CLAIMED AS BUSINESS EXPENDITURE. THE LD. AO DISALLOWED THE SAME IN TERMS OF SECTION 40A(II) AND BY RELYING UPON VARIOUS JUDICIA L PRONOUNCEMENTS, WHICH HAVE ALREADY BEEN DISCUSSED IN PARA 7.1 OF THE QUANTUM ASSESSMENT ORDER. THE LD. CIT(A) HAS CONFIRMED THE SAME ON THE PREMISE THAT INTEREST ON TAX WAS NOT ALLOWABLE DEDU CTION U/S 37 AS IT WAS THE PART OF TAX ITSELF AND THE PAYMENT OF TAX AND I NTEREST THEREON WAS THE PERSONAL LIABILITY OF THE ASSESSEE. AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 3. THE LD. AUTHORIZED REPRESENTATIVE FOR ASSESSEE [AR], SHRI MAHESH MATHUR, DRAWING OUR ATTENTION TO THE DOCUMENTS PLACED IN TH E PAPER-BOOK SUBMITTED THAT THE ASSESSEE WAS FOLLOWING CASH METH OD OF ACCOUNTING FOR SEVERAL YEARS. HOWEVER, FOR AYS 2004-05 TO 2006 -07, THE REVENUE CHANGED THE METHOD TO MERCANTILE METHOD OF ACCOUNTI NG WHICH RESULTED INTO HIGHER TAX OUTGO FOR THE ASSESSEE AND CONSEQUE NTLY, HUGE INTEREST WAS PAID U/S 234B-C-D DURING IMPUGNED AY. OUR ATTEN TION IS DRAWN TO THE FACT THAT THE LEVY OF INTEREST WAS MANDATORY AN D AUTOMATIC AS PER AMENDMENT BROUGHT IN TO STATUTE W.E.F. 01/04/1989. THE NATURE OF THIS NO. PARTICULARS AMOUNT (RS.) 1. INTEREST PAID UNDER PROTEST FOR FY 2003-04 39,15 ,823/- 2. INTEREST PAID UNDER PROTEST FOR FY 2004-05 68,44 ,953/- 3. INTEREST PAID UNDER PROTEST FOR FY 2005-06 75,44 ,605/- 4. INTEREST ON FRINGE BENEFIT TAX 1,11,368/- 5. INTEREST ON LATE DEPOSIT OF TDS 9,128/- TOTAL 1,84,25,877/- ITA NO. 5827/MUM/2012 STUP CONSULTANTS PRIVATE LIMITED ASSESSMENT YEAR-2009-10 4 INTEREST, AS PER SEVERAL JUDICIAL PRONOUNCEMENTS, W AS COMPENSATORY IN NATURE AND NOT PENAL IN NATURE. OUR ATTENTION HAS F URTHER BEEN DRAWN TO THE FACT THAT, UPON FURTHER APPEAL FOR AYS 2004-05 TO 2006-07, LD. CIT(A) REVERSED THE STAND OF REVENUE WHICH WAS UPHELD BY T HE TRIBUNAL ON 09/09/2011 AND NOT FURTHER APPEAL/ REFERENCE AGAINS T THE SAME HAS BEEN FILED BY THE REVENUE AND THEREFORE, THE MATTER ATTA INED FINALITY IN ASSESSEES FAVOR FOR THOSE YEARS. RESULTANTLY, THE ADDITIONAL TAX PAYMENT INCLUDING IMPUGNED INTEREST PAID BY ASSESSEE WAS RE FUNDED DURING AY 2010-11 WHEREIN THE AFORESAID AMOUNT OF INTEREST WA S OFFERED FOR TAXATION. THEREFORE, IT WAS SUBMITTED NON-ALLOWANCE OF THE SAME IN THE IMPUGNED AY WOULD RESULT INTO DOUBLE TAXATION OF TH E SAME AMOUNT, WHICH WAS NOT JUSTIFIED. PER CONTRA , LD. DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT INTEREST WAS PART AND PARCEL OF TAX AND THE SAME BEING PERSONAL LIABILITY FOR THE ASSESSEE, THE DEDUCTION THEREOF COULD NOT BE ALLOWED TO THE ASSESSEE. 4.1 WE HAVE CAREFULLY HEARD THE RIVAL CONTENTIONS A ND PERUSED RELEVANT MATERIAL ON RECORD. SO FAR AS THE NATURE OF INTERES T PAYMENT U/S 234 IS CONCERNED, THERE COULD BE NO QUARREL AS TO THE NATU RE THEREOF SINCE IT IS SETTLED LEGAL POSITION THAT THE CHARACTER OF SUCH I NTEREST PAYMENT IS COMPENSATORY IN NATURE IN THE SENSE THAT IT IS PAYA BLE BY THE ASSESSEE TO THE REVENUE FOR DELAYED PAYMENT OF ITS DUES. THE SA ID PROPOSITION IS CLEARLY BORNE OUT OF THE FOLLOWING JUDICIAL PRONOUN CEMENTS: - NO. CASE TITLE JUDICIAL AUTHORITY CITATION 1. ANJUM M. H. GHASWALA & OTHERS HONBLE SUPREME CO URT 252 ITR 1 2. CIT VS KOTAK MAHINDRA FINANCE LTD. HONBLE BOMBA Y HIGH COURT 265 ITR 119 3. RAJU BHOJWANI VS CIT HONBLE DELHI HIGH COURT 13 TAXMAN 221 4. CIT VS ANAND PRAKASH HONBLE DELHI HIGH COURT 31 6 ITR 141 ITA NO. 5827/MUM/2012 STUP CONSULTANTS PRIVATE LIMITED ASSESSMENT YEAR-2009-10 5 4.2 PROCEEDINGS FURTHER, THE SUBMISSIONS OF LD. AR THAT THE DISALLOWANCE COULD NOT BE MADE U/S 40(A)(II) SINCE THE EXPRESSION TAX DID NOT INCLUDE INTEREST, IS ALSO TENABLE IN VIEW OF THE FOLLOWING JUDICIAL PRONOUNCEMENTS: - UPON PERUSAL, WE FIND THAT THE IN TERMS OF THE PROV ISIONS OF SECTION 40(A)(II), THE ASSESSEE IS NOT ENTITLED TO CLAIM AN Y DEDUCTION FOR ANY SUM PAID ON ACCOUNT OF ANY RATE OR TAX LEVIED . THE EXPRESSIONS TAX AS DEFINED U/S 2(43) MEANS INCOME TAX CHARGEABLE UNDER THE PRO VISIONS OF THIS ACT AND INCLUDES FRINGE BENEFIT TAX. THE EXPRESSION INTEREST AS DEFINED IN SECTION 2(28A) MEANS INTEREST PAYABLE IN ANY MANNER IN RESPECT OF MONEYS BORROWED OR DEBT INCURRED (INCLUDING A DEPOS IT, CLAIM OR OTHER SIMILAR RIGHT OR OBLIGATION) AND INCLUDES ANY SERVI CE FEE OR OTHER CHARGE IN RESPECT OF THE MONEY BORROWED OR DEBT INCURRED OR I N RESPECT OF ANY CREDIT FACILITY WHICH HAS NOT BEEN UTILIZED. THEREF ORE, TAX AND INTEREST HAS BEEN GIVEN SPECIFIC MEANING UNDER THE ACT AND THE P ROVISIONS OF SECTION 40(A)(II) REFERS ONLY TO ANY RATE OR TAX LEVIED WITHOUT INCLUDING THEREIN THE EXPRESSION INTEREST. THEREFORE, THE STAND OF LD. AO IN DISALLOWING THE SAME U/S 40(A)(II), IN OUR OPINION, WAS NOT JUSTIFI ED. 4.3 HOWEVER, AT THE SAME TIME, IT IS ALSO SETTLED P OSITION THAT THE PAYMENT OF INCOME TAX IS PERSONAL LIABILITY FOR THE ASSESSEE AND CONSEQUENTIAL INTEREST PAID THEREUPON FOR DELAY IS PART AND PARCEL OF THE AFORESAID PAYMENT ONLY AND RETAIN THE SAME COLOR & CHARACTER. THIS BEING THE CASE, THE DEDUCTION THEREOF U/S 37(1) COU LD NOT BE ALLOWED TO NO. CASE TITLE JUDICIAL AUTHORITY CITATION 1. HARSHAD SHANTILAL MEHTA VS CUSTODIAN & ORS. HON BLE SUPREME COURT 231 ITR 871 2. CIT VS MANOJ KUMAR BERIWAL HONBLE BOMBAY HIGH C OURT 217 CTR 407 ITA NO. 5827/MUM/2012 STUP CONSULTANTS PRIVATE LIMITED ASSESSMENT YEAR-2009-10 6 THE ASSESSEE SINCE IT WAS PERSONAL EXPENDITURE IN N ATURE AND THE SAME COULD NOT BE SAID TO HAVE BEEN EXPANDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSINESS SINCE PAYMENT OF TAX ES OR INTEREST COULD, BY NO STRETCH OF IMAGINATION, BE SAID TO BE THE ASSESSEES BUSINESS. FOR THE SAME REASON, THE DEDUCTION THEREO F COULD NOT BE ALLOWED TO ASSESSEE U/S 36(1)(III) ALSO WHICH ENVIS AGES AMOUNT OF INTEREST PAID IN RESPECT OF CAPITAL BORROWED FOR TH E PURPOSES OF BUSINESS OR PROFESSION, WHICH IS NOT THE CASE HERE. 4.4 PROCEEDING FURTHER, IT TRANSPIRES THE AS PER LD . ARS SUBMISSIONS, THE AFORESAID INTEREST WAS PAID DURING IMPUGNED AY UNDER PROTEST AND THE SAME WAS REFUNDED TO THE ASSESSEE IN AY 2010-11 PURSUANT TO THE DECISIONS OF APPELLATE AUTHORITIES WHEREIN ASSESSEE S STAND IN FOLLOWING CASH SYSTEM OF ACCOUNTING GOT VINDICATED AND THE SA ID AMOUNT WAS REFUNDED BACK TO THE ASSESSEE. THIS BEING THE CASE, WE ARE OF THE OPINION THAT THE AFORESAID INTEREST PAID BY THE ASS ESSEE UNDER PROTEST, WAS NOTHING BUT THE MONEY KEPT IN TRUST BEFORE THE REVENUE AND THE EXPENDITURE IN THAT RESPECT COULD NOT BE SAID TO HA VE EVEN CRYSTALLIZED DURING IMPUGNED AY AND THEREFORE, THERE COULD BE NO OCCASION TO CONSIDER THE QUESTION THAT WHETHER THE SAME WAS AN ADMISSIBLE EXPENDITURE DURING IMPUGNED AY. VIEWING FROM ANY AN GLE, THE DEDUCTION OF THIS EXPENDITURE EITHER U/S 37(1) OR 36(1)(III) COULD NOT BE ALLOWED TO THE ASSESSEE. WE ORDER SO. THE GROUNDS STAND DISMIS SED TO THAT EXTENT. 4.5 HAVING HELD SO, WE FIND SUBSTANTIAL FORCE IN TH E ARGUMENT THAT THE REFUND OF INTEREST AMOUNT AS RECEIVED BY ASSESSEE I N THE SUBSEQUENT AY AND OFFERED TO TAX, COULD NOT BE BROUGHT TO TAX IN THAT AY SINCE THE SAME WAS MERE REFUND OF THE MONEY KEPT UNDER TRUST AND P AID UNDER PROTEST ITA NO. 5827/MUM/2012 STUP CONSULTANTS PRIVATE LIMITED ASSESSMENT YEAR-2009-10 7 BY THE ASSESSEE. KEEPING IN VIEW THE SAME, LD. AO I S DIRECTED TO RECONSIDER THIS PLEA AS TO EXCLUSION OF INTEREST AM OUNT TO THE EXTENT OF RS.183.05 LACS FOR DETERMINING THE INCOME FOR AY 20 10-11 AFTER DUE VERIFICATION OF THE FACT THAT SAID AMOUNT WAS ALREA DY OFFERED TO TAX IN THAT AY. THE ASSESSEE IS DIRECTED TO PROVIDE REQUISITE D OCUMENTARY EVIDENCES, IN THIS REGARD, TO BOLSTER HIS CLAIM. TH E ASSESSEE SHALL GET CORRESPONDING CONSEQUENTIAL RELIEF IN OTHER AY. 5. FOR THE AFORESAID REASONS, INTEREST PAID ON ACCO UNT OF LATE PAYMENT OF FRINGE BENEFIT TAX COULD ALSO NOT BE ALLOWED TO THE ASSESSEE. HOWEVER, THE AMOUNT OF TAX DEDUCTION AT SOURCE [TDS] REPRESENTS THE AMOUNT OF INCOME TAX OF THE THIRD PARTIES PARTY ON WHOSE BEHA LF THE PAYMENT WAS DEDUCTED BY THE ASSESSEE & PAID TO THE GOVERNMENT E XCHEQUER. THEREFORE, TDS AMOUNT DO NOT REPRESENT THE TAX OF T HE ASSESSEE BUT IT IS THE TAX OF THE PARTY WHICH HAS BEEN PAID BY THE ASS ESSEE. THIS BEING THE CASE, ANY INTEREST PAID ON ACCOUNT OF LATE PAYMENT OF TDS COULD NOT BE LINKED TO THE INCOME TAX OF THE ASSESSEE AND THEREF ORE, THE DEDUCTION THEREOF WAS AVAILABLE TO THE ASSESSEE. HENCE, THE D EDUCTION OF RS.9,128/- AS CLAIMED BY THE ASSESSEE WOULD BE AN A LLOWABLE EXPENDITURE. WE ORDER SO. THE GROUNDS STAND ALLOWED TO THAT EXTENT. 6. FINALLY, THE APPEAL STANDS PARTLY ALLOWED IN TER MS OF OUR ABOVE ORDER. ORDER PRONOUNCED IN THE OPEN COURT ON 11 TH DECEMBER, 2018. SD/- SD/- (JOGINDER SINGH) (MANOJ KUMAR AGGARWAL) / VICE PRESIDENT / ACCOUNTANT MEMBER , MUMBAI; , DATED : 11/12/2018 JV, SR.PS. ITA NO. 5827/MUM/2012 STUP CONSULTANTS PRIVATE LIMITED ASSESSMENT YEAR-2009-10 8 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI