KEWAL KIRAN FINANCE PRIVATE LIMITED, MUMBAI V. INCOME TAX OFFICER W-12(3)(2), MUMBAI

ITA 5961/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 7915 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 18-09-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SMITA VERMA
• Keywords: Notional interest; Set aside

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH SMC, MUMBAI BEFORE SHRI SAKTIJIT DEY, JUDICIAL MEMBER AND SHRI RAJESH KUMAR, ACCOUNTANT MEMBER ITA NO.5961/M/2019 ASSESSMENT YEAR: 2014-15 M/S. KEWAL KIRAN FINANCE PVT. LTD., 460/7, KEWAL KIRAN ESTATE, 1-B, PATEL ROAD, GOREGAON EAST, MUMBAI 400 063 PAN: AADCJ 2902P VS. INCOME TAX OFFICER, W-12(3)(2), AAYAKAR BHAVAN, NARIMAN POINT, MUMBAI - 400021 (APPELLANT) (RE SPONDENT) PRESENT FOR: ASSESSEE BY : SHRI RONAK DOSHI, A.R. REVENUE BY : MS. SMITA VERMA, D.R. DATE OF HEARING : 22.06.2021 DATE OF PRONOUNCEMENT : 22.06.2021 O R D E R PER RAJESH KUMAR, ACCOUNTANT MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 24.06.2019 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2014-15. 2. THE ONLY ISSUE RAISED BY THE ASSESSEE IN THE VAR IOUS GROUNDS OF APPEAL IS AGAINST THE CONFIRMATION OF RS .4,50,000/- BY LD. CIT(A) AS MADE BY THE AO ON ACCOUNT OF NOTIO NAL INTEREST ON LOAN GIVEN TO SHRINGAR DEVELOPERS PVT. LTD. BY T HE ASSESSEE IN THE EARLIER ASSESSMENT YEAR 2012-13. ITA NO.5961/M/2019 M/S. KEWAL KIRAN FINANCE PVT. LTD. 2 3. THE FACTS IN BRIEF ARE THAT THE AO NOTED DURING THE ASSESSMENT PROCEEDINGS THAT ASSESSEE HAD GIVEN LOAN TO SHRINGAR DEVELOPERS PVT. LTD. OF RS.50 LAKHS IN A.Y . 2012-13 AND ASSESSEE HAS NOT CHARGED ANY INTEREST ON THE SA ID LOAN IN THAT ASSESSMENT YEAR. THE AO NOTED THAT ASSESSEE H AS NOT CHARGED ANY INTEREST FROM SHRINGAR DEVELOPERS PVT. LTD. AND CONSEQUENTLY AN ADDITION OF 9% WAS MADE TO THE INCO ME OF THE ASSESSEE TOWARDS NOTIONAL INTEREST WHICH WORKED OUT AT RS.4,12,500/- IN AY 2012-13. SIMILARLY, IN THE CUR RENT YEAR THE AO APPLIED A RATE OF 9% AND MADE A NOTIONAL ADDITI ON OF RS.4,50,000/- TO THE INCOME OF THE ASSESSEE ON ACCO UNT OF INTEREST IN THE ASSESSMENT FRAMED UNDER SECTION 143 (3) OF THE ACT DATED 30.06.2013. 4. IN THE APPELLATE PROCEEDINGS ALSO THE ADDITION W AS AFFIRMED BY THE LD. CIT(A) ON THE GROUND THAT ISSUE IS RECUR RING IN NATURE AND IN A.Y. 2012-13 THE PREDECESSOR CIT(A) HAS MADE THE SIMILAR ADDITION @ 9% TOWARDS NOTIONAL INTEREST. 5. THE LD. COUNSEL, AT THE OUTSET, SUBMITTED THAT T HE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE IN ASSES SEES OWN CASE IN A.Y. 2012-13 AS THE CO-ORDINATE BENCH OF TH E TRIBUNAL HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE IN ITA NO.1850/M/2017 A.Y. 2012-13 VIDE ORDER DATED 28.05. 2019. THE LD. A.R. THEREFORE PRAYED THAT SINCE IN THE CUR RENT YEAR THE SAME ISSUE ON THE SAME LOAN IS INVOLVED, THEREFORE, THE ADDITION AS SUSTAINED BY LD. CIT(A) MAY KINDLY BE DELETED BY FOLLOWING THE ORDER OF CO-ORDINATE BENCH OF THE TRIBUNAL. ITA NO.5961/M/2019 M/S. KEWAL KIRAN FINANCE PVT. LTD. 3 6. THE LD. D.R., ON THE OTHER HAND, RELIED ON THE O RDER OF AUTHORITIES BELOW. 7. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL ON RECORD AND ALSO THE DECISION OF THE CO-ORDINATE BEN CH OF THE TRIBUNAL IN ITA NO.1850/M/2017 A.Y. 2012-13 (SUPRA) , WE FIND THAT THE IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE CO-ORDINATE BENCH OF THE TRIBUNAL W HEREIN IT HAS BEEN HELD THAT IT IS A SETTLED LAW THAT IT IS THE R EAL INCOME AND NOT THE HYPOTHETICAL INCOME WHICH IS TO BE ASSESSED . THE RELEVANT OPERATIVE PORTION IS REPRODUCED BELOW: 9. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIALS ON RECORD. IT IS A SETTLED LAW THAT IT IS THE REAL INC OME AND NOT THE HYPOTHETICAL INCOME WHICH IS TO BE TAXED. IN THE CASE OF KOLKATA METROP OLITAN DEVELOPMENT AUTHORITY (SUPRA), IT IS HELD THAT WHEN PRINCIPAL AMOUNT ITS ELF IS UNRECOVERED AND PRACTICALLY UNRECOVERABLE, DEEMED ACCRUED INTEREST ON SUCH LOAN S AND ADVANCES CANNOT BE BROUGHT TO TAX. IN THE CASE OF UCO BANK (SUPRA), IT IS HELD THAT I NTEREST ON A LOAN WHOSE RECOVERY IS DOUBTFUL AND WHICH HAS NOT BEEN RECOVER ED BY THE ASSESSEE-BANK FOR THE LAST THREE YEARS BUT HAS BEEN KEPT IN A SUSPENS E A/C AND HAS NOT BEEN BROUGHT TO THE P&L A/C OF THE ASSESSEE, COULD NOT BE INCLUD ED IN THE INCOME OF THE ASSESSEE FOR THE ASSESSMENT ON THE BASIS OF CIRCULAR NO. F.2 01/21/84 TTA-II, DT. 9TH OCT, 1984, WHICH WAS APPLICABLE AT THE RELEVANT TIME AND WAS BINDING ON THE DEPARTMENT. THE RATIO LAID DOWN IN THE ABOVE CASES IS APPLICABL E TO THE INSTANT CASE. FOLLOWING THE SAME, WE DELETE THE ADDITION OF RS.4, 12,500/- MADE BY THE AO AS DEEMED INTEREST. 10. IN THE RESULT, THE APPEAL FILE D BY THE ASSESSEE IS ALLOWED. SINCE THE ISSUE BEFORE US IS IDENTICAL TO ONE AS D ECIDED BY THE CO-ORDINATE BENCH OF THE TRIBUNAL IN A.Y. 2012- 13, WE ARE THEREFORE INCLINED TO SET ASIDE THE ORDER OF LD. CI T(A) AND DIRECT THE AO TO DELETE THE ADDITION. ITA NO.5961/M/2019 M/S. KEWAL KIRAN FINANCE PVT. LTD. 4 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22.06.2021. SD/- SD/- (SAKTIJIT DEY) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 22.06.2021. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY /ASSTT. REGISTRAR, ITAT, MUMBAI.