M/S. GROWMORE LEASING & INV LTD., MUMBAI V. DCIT, CENTRAL CIRCLE-31, MUMBAI

ITA 6412/MUM/2008

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 2686 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-12-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: G
• Next Hearing Date: 15-12-2009
• Assessment Year: 2004-2005
• Appeal Filed On: 04-11-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: DANIAL
• Keywords: Business expenditure
• Section: 143(3); 234B; 147

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI. BEFORE SHRI R.V.EASWAR, SR.V.P. AND SHRI J. SUDHAK AR REDDY, AM I T A NO: 6412/MUM /2008 (ASSESSMENT YEAR: 2 004-05) M/S. GROWMORE LEASING & INV. LTD. 32, MADHULI, 3 RD FLOOR, DR. ANNIE BESANT ROAD, NEHRU CENTRE, WORLI, MUMBAI 400 018 PAN: AAACG 4937 D VS. THE DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE- 31, MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : MR. VIJAY MEHTA RESPONDENT BY : MR. DANIAL, DR O R D E R PER R.V.EASWAR, SENIOR VICE PRESIDENT: THIS APPEAL BY THE ASSESSEE RELATES TO THE ASSESSMENT YEAR 2004-05 AND ARISES OUT OF THE ASSESSMENT ORDER DATED 24.12.2007 PASSED UND ER SECTION 143(3) READ WITH SECTION 147 OF THE INCOME TAX ACT. 2. THE ASSESSEE IS A COMPANY ENGAGED IN THE TRADING AND INVESTMENT IN SECURITIES. IT FOLLOWS THE MERCANTILE SYSTEM OF ACCOUNTING. IT IS A NOTIFIED PERSON UNDER THE SPECI AL COURT (TRIAL OF OFFENCES RELATING TO TRANSACTIONS IN SECURITIES) ACT, 1992 AND ALL ITS ASSETS INCLUDING BANK ACCOUNTS WERE ATTACHE D AND VESTED IN THE HANDS OF THE CUSTODIAN APPOINTED UNDER THE S AID ACT. 3. THE FIRST THREE GROUNDS WHICH QUESTIONED THE VAL IDITY OF THE ASSESSMENT ORDER WERE NOT PRESSED AND ARE DISMI SSED AS SUCH. ITA NO.6412/MUM/08 2 4. GROUND NOS. 4 TO 6 ARE AS BELOW:- 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING DISALLOWANCE ON ACCOUNT OF INTEREST EXPENSE AMOUNTING TO RS.3,47,72,937/-. 5. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING CALCULATION OF BOOK PROFIT U/S.115JB AMOUNTING TO RS.2,35,25,817/-. 6. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN NOT APPRECIATING THAT THE INTEREST CHARGED U/S.234A, 234B AND 234C OF THE ACT ARE INCORRECT. 5. SO FAR AS GROUND NO.4 IS CONCERNED, IT WAS STATE D ON BEHALF OF THE ASSESSEE THAT THE GROUND STANDS COVER ED BY THE ORDER OF THE TRIBUNAL IN THE CONNECTED CASE OF ORIO N TRAVELS PVT. LTD. VS. DCIT IN ITA NO.6888/MUM/2008 (ASSESSMENT Y EARS 2004-05 & 2005-06) DATED 9 TH OCTOBER, 2009. A COPY OF THE SAID ORDER HAS BEEN FILED. THE ISSUE RELATING TO THE ALL OWABILITY OF THE INTEREST AS LEGITIMATE BUSINESS EXPENDITURE AROSE I N SIMILAR CIRCUMSTANCES IN THE CASE OF ORION TRAVELS PVT. LTD . WHICH IS ALSO THE NOTIFIED PERSON UNDER THE SPECIAL COURT (T RIAL OF OFFENCES RELATING TO TRANSACTIONS IN SECURITIES) AC T. THE TRIBUNAL, FOLLOWING ITS ORDER IN ANOTHER GROUP CONC ERN BY NAME M/S. AATUR HOLDINGS PVT. LTD. VS. DCIT, WHICH WAS ALSO A NOTIFIED PERSON, IN ITA NO.147/MUM/2008 (ASSESSMENT YEAR 2000-01), HELD THAT THE MATTER SHOULD BE REMANDED T O THE CIT(A) FOR FRESH CONSIDERATION AFTER PROVIDING THE ASSESSEE OPPORTUNITY TO SUBSTANTIATE ITS CLAIM THAT THE INTE REST EXPENSES RELATE TO THE FINANCIAL YEAR IN QUESTION AND IS A L EGITIMATE BUSINESS EXPENDITURE. BOTH PARTIES BEFORE US ARE AG REED THAT THE FACTS OF THE PRESENT CASE ARE IDENTICAL WITH THE FA CTS IN THE AFORESAID CASES DECIDED BY THE TRIBUNAL. THEREFORE, RESPECTFULLY FOLLOWING THE ORDERS OF THE COORDINATE BENCHES, WE RESTORE THE ITA NO.6412/MUM/08 3 MATTER TO THE CIT(A) WITH THE SAME DIRECTIONS GIVEN IN THE ABOVE ORDERS OF THE TRIBUNAL. 6. AS REGARDS GROUND NO.5, IT IS STATED ON BEHALF O F THE ASSESSEE THAT IT IS CONSEQUENTIAL TO THE DECISION I N GROUND NO.4. IT IS ALSO STATED THAT THE INCOME OF THE ASSESSEE H AS BEEN COMPUTED BY THE ASSESSING OFFICER UNDER SECTION 115 JB OF THE ACT. THE LEARNED SPECIAL COUNSEL FOR THE INCOME-TAX DEPARTMENT DOES NOT DISPUTE THESE STATEMENTS MADE ON BEHALF OF THE ASSESSEE. THEREFORE THE ISSUE RAISED IN GROUND NO.5 , NAMELY THE COMPUTATION OF THE BOOK PROFIT UNDER SECTION 115JB, IS ALSO RESTORED TO THE CIT(A) FOR FRESH DECISION IN ACCORD ANCE WITH LAW AND AFTER DUE OPPORTUNITY OF THE ASSESSEE. 7. AS REGARDS GROUND NO.6, OUR ATTENTION IS DRAWN T O PARAGRAPHS 23 TO 26 OF THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S.ORION TRAVELS PVT. LTD. IN THAT CASE ALSO INTER EST WAS LEVIED UNDER SECTIONS 234A TO 234C. THE TRIBUNAL NOTICED T HAT THE SPECIAL COURT IN ITS RULING HAD PROHIBITED THE NOTI FIED PERSONS FROM PAYING ADVANCE TAX, CITING THE PROVISIONS OF T HE SPECIAL COURTS (TRIAL OF OFFENCES RELATING TO TRANSACTIONS IN SECURITIES) ACT. IT HAS BEEN SPECIFICALLY NOTICED BY THE SPECIA L COURT IN ITS RULING THAT IN CASE OF CONFLICT BETWEEN THE INCOME TAX ACT AND THE SPECIAL COURTS ACT, THE LATTER SHOULD PREVAIL A ND THOUGH THE INCOME TAX ACT DIRECTS AN ASSESSEE TO PAY ADVANCE T AX, A NOTIFIED PERSON CANNOT PAY SUCH TAX IN VIEW OF THE PROVISIONS OF THE SPECIAL COURTS ACT. ON THE BASIS OF THE RULING OF THE SPECIAL COURT, THE TRIBUNAL HAS HELD THAT IT WAS IMPOSSIBLE FOR A NOTIFIED PERSON TO PAY ADVANCE TAX, EVEN IF HE WANTED TOO, B ECAUSE THERE WAS A STATUTORY DISABILITY IN PAYING THE ADVANCE TA X. IF ADVANCE TAX COULD NOT BE PAID BECAUSE OF THE SPECIAL PROVIS IONS OF THE SPECIAL COURTS ACT, THE ASSESSEE CANNOT BE FAULTED FOR NOT PAYING THE SAME AND NO INTEREST UNDER SECTIONS 234A TO 234C OF ITA NO.6412/MUM/08 4 THE INCOME TAX ACT CAN BE CHARGED FOR THE DEFAULT. THE TRIBUNAL ALSO NOTICED THAT EVEN THOUGH LEVY OF INTE REST UNDER SECTION 234A IS FOR THE DELAY IN FILING THE RETURN, THE QUANTIFICATION OF THE INTEREST DEPENDS ON THE ADVAN CE TAX PAID WHICH COULD NOT BE PAID BY THE ASSESSEE BECAUSE OF THE SPECIAL COURTS ACT. FURTHER ALL THE ASSETS OF THE NOTIFIED PERSON INCLUDING THE BANK ACCOUNT WERE ATTACHED AND VESTED IN THE CUSTODIAN APPOINTED UNDER THE SPECIAL COURTS ACT. F OR THESE REASONS, THE TRIBUNAL HELD THAT NO INTEREST CAN BE LEVIED ON A NOTIFIED PERSON UNDER SECTIONS 234A TO 234C OF TH E INCOME TAX ACT. THE ASSESSEE BEFORE US IS ALSO A NOTIFIED PERS ON UNDER THE SPECIAL COURTS ACT AND THEREFORE THE RULING OF THE TRIBUNAL IN THE CASE OF ORION TRAVELS PVT. LTD. (SUPRA) FULLY APPLIES TO THIS CASE. RESPECTFULLY FOLLOWING THE SAID ORDER WE DELE TE THE INTEREST LEVIED UNDER THE ABOVE SECTIONS AND ALLOW THE GROUN D. 8. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 21 ST DAY OF DECEMBER, 2009 . SD/- (J.SUDHAKAR REDDY) SD/- ( R.V.EASWAR ) ACCOUNTANT MEMBER SENIOR VICE PRESIDENT MUMBAI, DATED 21 ST DECEMBER, 2009. SOMU COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT, CENT.II MUMBAI. 4. THE CIT(A)-CENT.IV, MUMBAI 5. THE DR G BENCH /TRUE COPY/ BY ORDE R ASSTT. REGISTRAR, I.T.A.T, MUMBAI