DCIT CEN CIR 4(3), CEN RG 4, PR. CIT(C)-2 , MUMBAI V. CASCADE HOLDINGS P.LTD, MUMBAI

ITA 6770/MUM/2018

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 6159 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 29-11-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR P DANIEL SPECIAL
• Keywords: Cost of acquisition; TDS; Liquidation
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VIRTUAL COURT C , BENCH MUMBAI BEFORE SHRI M.BALAGANESH, AM & SHRI PAVAN KUMAR GADALE, JM ITA NO. 6770 /MUM/201 8 ( ASSESSMENT YEAR : 2014 - 15 ) DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRC LE - 4(3), MUMBAI, CENTRAL RANGE - 4, PR. CIT(C) - 2, MUMBAI R.NO.1921, 19 TH FLOOR AIR INDIA BUILDING, NARIMAN POINT MUMBAI VS. M/S. CASCADE HOLDINGS PVT. LTD., 32, MADHULI APARTMENT 3 RD FLOOR, DR. A.B. ROAD WORLI, MUMBAI PAN/GIR NO. AAACC5768N (APPELLANT ) .. ( RESPONDENT ) ITA NO. 6967 /MUM/201 8 ( ASSESSMENT YEAR : 2014 - 15 ) M/S. CASCADE HOLDINGS PVT. LTD., 32, MADHULI APARTMENT 3 RD FLOOR, DR. A.B. ROAD WORLI, MUMBAI VS. DEPUTY COMMISSIONER OF INCOME TAX CENTRAL CIRCLE - 4(3), MUMBAI, CENTRAL RANGE - 4, PR. CIT(C) - 2 , MUMBAI R.NO.1921, 19 TH FLOOR AIR INDIA BUILDING, NARIMAN POINT MUMBAI PAN/GIR NO. AAACC5768N (APPELLANT ) .. (RESPONDENT ) ITA NO . 677 0/MUM/2018 & 6967/MUM/2018 M/S. CASCADE HOLDINGS (P) LTD., 2 REVENUE BY DR. P. DANIEL , SPECIAL COUNSEL FOR THE REVENUE ASSESSEE BY SHRI DHARMESH SHAH , C.A. DATE OF HEARING 10 / 09/2 020 DATE OF PRONOUNCEMENT 23 /09/2020 / O R D E R PER M.BALAGANESH (AM): THESE CROSS APPEAL S IN ITA NO. 6770/MUM/2018 & 6967/MUM/2018 FOR A.Y. 2014 - 15 ARISE OUT OF THE ORDER BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS) - 52, MUMBAI IN AP PEAL NO. CIT(A) - 52/DC,CC4(3)/IT - 691/16 - 17 DATED 10/02/2017 (LD. CIT(A) IN SHORT) AGAINST THE ORDER OF ASSESSMENT PASSED U/S.143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS ACT) DATED 29/06/2016 BY THE LD. DY. COMMISSIONER OF INCOME TAX, CENTR AL CIRCLE 4(3), CENTRAL RANGE - 4, MUMBAI (HEREINAFTER REFERRED TO AS LD. AO). 2. THE FIRST ISSUE TO BE DECIDED IN THIS APPEAL OF THE ASSESSEE IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN CONFIRMING THE INTEREST DISALLOWANCE OF RS.4,13,695/ - IN THE FACT S AND CIRCUMSTANCES OF THE CASE. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE HAD SHOWN INTEREST INCOME OF RS.4,13,695/ - ON TERM DEPOSITS UNDER THE HEAD INCOME FROM OTHER SOU RCES. AGAINST THESE INTEREST RECEIPTS, THE ASSESSEE HAD CLAIMED DEDUCTION OF INTEREST EXPENDITURE U/S.57 OF THE ACT TO THE TUNE OF RS.9,86,14,668/ - ON THE AMOUNTS OUTSTANDING TO RELATED THREE ITA NO . 677 0/MUM/2018 & 6967/MUM/2018 M/S. CASCADE HOLDINGS (P) LTD., 3 NOTIFIED BROKER ENTITIES M/S. HARSHAD MEHTA, M/S. J.H. MEHTA AN D M/S. ASHWIN MEHTA. THE LD. AO OBSERVED THAT OUT OF THE SAME, THE ASSESSEE HAD SUO MOTO DISALLOWED AN AMOUNT OF RS.2,85,49,286/ - U/S.14A OF THE ACT AND THE BALANCE INTEREST PAYMENT OF RS.7,00,65,382/ - WAS CLAIMED AS DEDUCTION U/S.57 OF THE ACT AGAINST THE INTEREST INCOME ON TERM DEPOSITS. WE FIND THAT THE ASSESSMENT WAS COMPLETED BY THE LD. AO DISALLOWING THE ASSESSEE CLAIM OF DEDUCTION TOWARDS INTEREST U/S.57 OF THE ACT IN THE SUM OF RS.7,00,65,382/ - ON THE GROUND THAT THE SAID LIABILITY IS ONLY PROVISION AL AND CONTINGENT. WE FIND THAT THE LD. CIT(A) HAD MODIFIED INTEREST DISALLOWANCE BY REDUCING THE SAID FIGURE IN THE APPELLATE ORDER. 3.1. BEFORE US , BOTH THE PARTIES FAIRLY STATED THAT THIS ISSUE HAS ALREADY BEEN THE SUBJECT MATTER OF ADJUDICATION BY TH IS TRIBUNAL IN ASSESSEES OWN CASE FOR A.YRS. 2012 - 13, 2013 - 14 AND 2015 - 16 IN ITA NOS.6965, 6966 AND 6969/MUM/2018 DATED 16/03/2020 WHEREIN THIS TRIBUNAL HAD RESTRICTED ALLOWABILITY OF INTEREST EXPENDITURE U/S.57 OF THE ACT TO THE EXTENT OF INTEREST INCOME . THE RELEVANT PORTION OF THE SAID ORDER IS REPRODUCED HEREIN FOR THE SAKE OF CONVENIENCE : - 9. CONSIDERED THE RIVAL SUBMISSION AND MATERIAL PLACED ON RECORD, WE NOTICE FROM THE RECORDS THAT THE ASSESSEE HAS EARNED INTEREST INCOME FROM THE DEPOSITS IN BAN K. THESE DEPOSITS ARE OUT OF THE BALANCE OF LIQUIDATING CERTAIN INVESTMENTS. SINCE THE ASSESSEE IS UNDER THE DIRECT CONTROL OF HON'BLE SPL. COURT AND ALL THE ISSUES ARE PENDING BEFORE THE HON'BLE SPL. COURT. THE PLEA OF THE ASSESSEE IS THAT THERE IS ORAL C ONTRACT BETWEEN THE PARTIES TO PAY 12% PER ANNUM AND WHATEVER THE INTEREST INCOME EARNED BY THE ASSESSEE ARE OUT OF THE SURPLUS OF THE LIQUIDATION OF CERTAIN INVESTMENT. THE INVESTMENT AS WELL AS THE FUND MANAGEMENT ARE UNDER THE SUPERVISION OF THE HON'BLE SPL. COURT, ASSESSEE HAS NO ROLE TO PLAY. FROM THE FACTS ON RECORD, PRIMA FACIE, IT APPEARS THAT THERE IS A NEXUS BETWEEN THE BORROWED FUNDS ON WHICH ASSESSEE HAS PAID INTEREST AND THE INVESTMENT ON WHICH IT HAS EARNED INTEREST INCOME. THEREFORE, THE ASSE SSEE SHOULD GET DEDUCTION OF INTEREST EXPENDITURE TO THE EXTENT OF INTEREST INCOME EARNED OF RS.3,52,622/ - . IT IS RELEVANT TO OBSERVE, IN ASSESSEE'S OWN CASE IN AY 2017 - 18, THE AO HIMSELF HAS ALLOWED CLAIM OF DEDUCTION OF ITA NO . 677 0/MUM/2018 & 6967/MUM/2018 M/S. CASCADE HOLDINGS (P) LTD., 4 INTEREST EXPENDITURE TO THE EXTENT OF INTEREST INCOME EARNED DURING THAT YEAR. IN VIEW OF THE AFORESAID, THE GROUND IS ALLOWED AS INDICATED ABOVE. 3.2. RESPECTFULLY FOLLOWING THE AFORESAID DECISION, WE DIRECT THE LD. AO TO RESTRICT THE DISALLOWANCE OF INTEREST TO THE EXTENT OF RS.4,13,6 95/ - BEING THE INTEREST INCOME RECEIVED ON TERM DEPOSITS. ACCORDINGLY, THE GROUND NO.1 RAISED BY THE ASSESSEE IS ALLOWED. 4. THE GROUND NO.2 & 3 RAISED BY THE ASSESSEE IS WITH REGARD TO CHARGING OF INTEREST U/S.234A, 234B & 234C OF THE ACT WHICH WAS CHARG ED WITHOUT GIVING CREDIT FOR TAX DEDUCTED AT SOURCE. 4.1. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THIS ISSUE WAS ALSO THE SUBJECT MATTER OF ADJUDICATION BY THIS TRIBUNAL IN THE CASE OF DCIT VS. AATUR HOLDINGS PVT. LTD., IN ITA NO.6763/MUM/2018 FOR A.Y.2014 - 15 AND ITA NO.6764/MUM/2018 FOR A.Y. 2015 - 16 DATED 13/03/2020 WHEREIN IT WAS OBSERVED AS UNDER: - 12. GROUND NO. 2 & 3 RELATES TO LEVY OF COLLECTION OF INTEREST TINDER SECTION 234A. 234R & 234C AND CHARGING OF INTEREST EXCLUDING THE INCOME WHICH IS SUBJECT TO TDS . WE HAVE NOTED THAT ON SIMILAR POUND OF APPEAL IN ASSESSEE'S GROUP CASE IN ITA NO. 5799 / MUM / 2015 IN CASE OF SUDHIR S. MEHTA, THE ISSUE WAS DECIDED THAT INTEREST LEVIED UNDER SECTION 234 A . 234B & 234C BE RECOMPUTED AFTER EXCLUDING THE INCOME WHICH IS SUBJECT TO TDS. THEREFORE, CONSIDERING THE DECISION IN ITA NO. 5799/MUM/2015, THE ASSESSING OFFICER IS DIRECTED TO RECOMPUTE THE INTEREST ACCORDINGLY. IN THE RESULT, THESE GROUNDS OF APPEAL AR E ALLOWED FOR STATISTICAL PURPOSE . 4.2. RESPECTFULLY FOLLOWING THE SAID DECISION, THE GROUND NOS. 2&3 RAISED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES, WHEREIN THE LD. AO IS DIRECTED TO RECOMPUTE THE INTEREST IN THE LIGHT OF THE AFORESAID DECI SION. ITA NO . 677 0/MUM/2018 & 6967/MUM/2018 M/S. CASCADE HOLDINGS (P) LTD., 5 4.3. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 5. LET US TAKE UP THE REVENUE APPEAL. THE ONLY ISSUE INVOLVED IN THE APPEAL OF THE REVENUE IS AS TO WHETHER THE LD. CITA) WAS JUSTIFIED IN CAPITALISING THE DISALLOW ANCE OF INTEREST MADE U/S.14A OF THE ACT IN THE SUM OF RS.2,86,67,490/ - IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 5.1. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. WE FIND THAT THIS ISSUE HAS ALREADY BEEN ADJUDICATED BY THIS TRIBUNAL IN ASSESSEES OWN CASE FOR A.YRS.2012 - 13, 2013 - 14 AND 2015 - 16 IN ITA NO.6768, 6769 AND 6771/MUM/2018 DATED 16/03/2020 WHEREIN IT WAS OBSERVED AS UNDER: - 11. NOW WE TAKE UP ITA NO. 6768, 6769 & 6771/MUM/2018 FOR AY 2012 - 13, 2013 - 14 & 2015 - 16 FILED BY THE REVENUE ON ACCOUNT OF FINDINGS OF LD. CIT(A) IN CAPITALIZING THE DISALLOWANCE OF INTEREST OF RS. 2,86,67,490/ - U/S 14 A OF THE ACT BY RELYING ON THE DECISION OF ITAT. 12. AT THE OUTSET, LD. AR APPEARING ON BEHALF OF THE ASSESSEE SUBMITTED THAT THE GROUND RAISED BY THE REVENUE IS SQUARELY COVERED BY THE CONSOLIDATED ORDER OF COORDINATE BENCH OF HON'BLE ITAT IN ITA NO. 5799/MUM/2015 FOR AY 2009 - 10 IN SHRI SUDHIR S. MEHTA CASE, WHEREIN THE HON'B LE ITAT HAS ALLOWED THE GROUND OF MERIT IN FAVOUR OF ASSESSEE. 13. ON THE OTHER HAND, LD. DR SUPPORTED THE ORDERS PASSED BY AO AND SUBMITTED THAT LD. CIT(A) WAS NOT JUSTIFIED IN CAPITALIZING THE DISALLOWANCE OF INTEREST OF RS. 2,86,67,490/ - U/S 14 A OF THE ACT ONLY RELYING ON THE DECISION OF ITAT IN ITA NO. 5799/MUM/2015 FOR AY 2009 - 10 TO 2011 - 12 IN THE CASE OF SUDHIR S. MEHTA. 14. WE HAVE HEARD COUNSELS FOR BOTH THE PARTIES AND WE HAVE ALSO PERUSED THE M ATERIAL PLACED ON RECORD AS WELL AS THE ORDERS PASSED BY REVENUE AUTHORITIES. WE FIND THAT THE IDENTICAL GROUND RAISED IN THE PRESENT APPEAL HAS ALREADY BEEN DECIDED BY THE COORDINATE BENCH OF ITAT IN ITA NO. 5799/MUM/2015 FOR AY 2009 - 10 IN SHRI SUDHIR S. MEHTA CASE, WHEREIN THE HON'BLE ITAT HAS ALLOWED THE GROUND ON MERIT IN FAVOUR OF ASSESSEE. FOR THE SAKE OF CLARITY, WHICH IS REPRODUCED BELOW: - ITA NO . 677 0/MUM/2018 & 6967/MUM/2018 M/S. CASCADE HOLDINGS (P) LTD., 6 17. NOW COMING TO THE ADDITIONAL GROUND RAISED WITH RESPECT TO CAPITALIZATION OF INTEREST WE ARE OF THE VIEW TH AT TO THE EXTENT THE INTEREST RELATE TO THE INVESTMENT, I.E. BEING DISALLOWABLE UNDER SECTION 57 WILL BECOME PART OF COST OF ACQUISITION OF SHARES AND THEREFORE THE AO IS DIRECTED TO TAKE IT AS PART OF THE COST OF SHARES FOR DETERMINING PROFIT ON SALE OF THE SHARES. THUS, THE ADDITIONAL GROUND STANDS ALLOWED TO THAT EXTENT. 15. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF COORDINATE BENCH OF ITAT, WHICH IS APPLICABLE MUTATIS MUTANDIS IN THE PRESENT CASES, WE ARE INCLINED TO ACCEPT THE FINDINGS OF LD. CIT(A) AND DISMISS THE GROUND RAISED BY THE REVENUE IN ALL THESE APPEALS. 5.2. RESPECTFULLY FOLLOWING THE SAID DECISION, THE GROUNDS RAISED BY THE REVENUE ARE DISMISSED. TO SUM UP: - 6. THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES AND APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON 23 / 09 /2020 BY WAY OF PROPER MENTIONING IN THE NOTICE BOARD. SD/ - ( PAV AN KUMAR GADALE ) SD/ - (M.BALAGANESH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 23 / 09 / 2020 KARUNA , SR.PS ITA NO . 677 0/MUM/2018 & 6967/MUM/2018 M/S. CASCADE HOLDINGS (P) LTD., 7 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GU ARD FILE. //TRUE COPY//