Appeal details
Counselvise Citation
[2017] 128 COUNSELVISE.COM (IT) 2680 (ITAT-DELHI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
3 year(s) 7 month(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
31-07-2017
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
D
Next Hearing Date
22-05-2017
Assessment Year
2009-2010
Appeal Filed On
30-12-2013
Judgement Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: D, NEW DELHI BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO. 6786/DEL/2013 AY: 2008-09 MAHANAGAR TELEPHONE NIGAM LTD. VS. DCIT, LTU 9, CGO COMPLEX, LODHI ROAD NEW DELHI NEW DELHI 110 003 PAN: AAACM 0828 R ITA NO. 147/DEL/2014 AY: 2008-09 DCIT (LTU) VS. MAHANAGAR TELEPHONE NIGAM LTD. NEW DELHI NEW DELHI ITA NO. 6787/DEL/2013 AY: 2009-10 MAHANAGAR TELEPHONE NIGAM LTD. VS. DCIT, LTU NEW DELHI NEW DELHI ITA NO . 148/DEL/2014 AY: 2009-10 DCIT (LTU) VS. MAHANAGAR TELEPHONE NIGAM LTD. NEW DELHI NEW DELHI (APPELLANT) (RESPONDENT) 2 ASSESSEE BY : SHRI VED JAIN, ADV. AND SH.ASHISH GOEL, C.A. REVENUE BY : SHRI SHRAVAN GOTRU, SR.D.R. DATE OF HEARING : 13 TH JULY, 2017 DATE OF PRONOUNCEMENT : 31 ST JULY, 2017 ORDER PER R.K. PANDA, ACCOUNTANT MEMBER THESE ARE CROSS APPEALS FOR ASSESSMENT YEARS 2008-0 9 AND 2009-10 AND ARE DIRECTED AGAINST THE SEPARATE ORDERS DATED 30TH OCTOBER,2013 OF THE LD. CIT(A)-LTU, NEW DELHI. SINCE COMMON GROUNDS ARE I NVOLVED, THEREFORE, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY TH IS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO.6786/DEL/2013 (BY ASSESSEE) : 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS FOLLOWS : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN CONFIRMING PROPORTIONA TE DISALLOWANCE OF INTEREST IN RESPECT OF SECURITY DEPOSIT OF RS.127,6 9,83,720/-. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN IGNORING THE FACT THAT THE ASSESSEE BEING A PUBLIC SECTOR COMPANY, THE ENTIRE SECURITY DEPOSIT HELD BY IT IS OF THE CUSTOMERS AND THE INTEREST THEREON CANNOT BE DISALLOWED MEREL Y ON THE SURMISE THAT SECURITY DEPOSIT IS AN UNEXPLAINED DEPOSIT. 3 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ANY OF THE GROUNDS OF APPEAL. 3 . FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSE E IS A PUBLIC SECTOR UNDERTAKING AND IS ENGAGED IN THE BUSINESS OF PROVI DING TELEPHONE AND MOBILE SERVICES IN NEW DELHI AND MUMBAI. IT FIELD ITS RE TURN OF INCOME ON 29TH SEPTEMBER, 2008 DECLARING TAXABLE INCOME OF RS.9,12 ,10,67,240/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFI CER OBSERVED THAT THE ASSESSEE COMPANY HAD CLAIMED INTEREST AMOUNTING TO RS.2,94,8 0,000/- WHICH PERTAINS TO CUSTOMERS DEPOSITS RECEIVED BY THE COMPANY. THE ENTIRE AMOUNT OF THESE DEPOSITS WERE HELD AS TAXABLE BY THE A.O. IN THE A. Y. 2006-07 AND ACCORDINGLY INTEREST ON THESE DEPOSITS WERE DISALLOWED BY THE A.O. ALLEGING THAT NO INTEREST COULD BE SAID TO HAVE BEEN PAYABLE BY THE ASSESSEE ON THE AMOUNTS WHICH BELONG TO THE ASSESSEE. HE ACCORDINGLY DISALLOWED INTEREST AMOUNT OF RS.2,94,80,000/- CLAIMED BY THE ASSESSEE AND ADDED THE SAME TO THE TOTAL INCOME. 4. IN APPEAL THE LD. CIT(A) FOLLOWING THE ORDER FOR T HE A.Y. 2006-07 WHERE HE HAS HELD THAT OUT OF THE TOTAL DEPOSITS OF RS.11,59 ,32,90,000/-, DEPOSITS AMOUNTING TO RS.127,69,83,720/- WERE UNEXPLAINED AND HAD DEL ETED THE BALANCE AMOUNT, DIRECTED THE A.O. TO RECOMPUTE THE DISALLOWANCE OF PROPORTIONATE INTEREST BY OBSERVING AS UNDER. 6.3 REGARDING THE GROUND NO.3 OF THE APPEAL RELATI NG TO INTEREST ON CUSTOMER'S DEPOSIT ACCOUNT, I FIND THAT THE ONLY GR OUND ON WHICH SUCH A 4 DISALLOWANCE WAS MADE BY THE LD. AO, WAS A FINDING GIVEN IN THE ASSESSMENT ORDER FOR AY 2006-07, WHEREBY THE SECURITY DEPOSITS FROM CUSTOMERS WAS HELD AS UNEXPLAINED WITHIN THE MEANING OF SECTION 6 8. ACCORDINGLY, IN THE ASSESSMENT PROCEEDINGS FOR THAT YEAR, THE ENTIRE AM OUNT OF SUCH DEPOSITS WAS ADDED U/S 68 AND INTEREST THEREON, WHICH WAS PROVID ED FOR THE APPELLANT IN VIEW OF ITS POLICY, WAS ALSO DISALLOWED. I FIND THA T THE APPEAL FOR THE AY 2006-07 FILED BY THE APPELLANT HAS SINCE BEEN DECID ED, BY WHICH THE ADDITION IN RESPECT OF SUCH SECURITY DEPOSIT U/S 68 WAS DELE TED. ONLY AN AMOUNT OF RS.L,27,69,83,720 IN RESPECT OF WHICH THE APPELLANT COMPANY COULD NOT RECONCILE THE INFORMATION WITH RESPECT TO THE SPECI FIC CUSTOMERS, WAS HELD AS UNEXPLAINED AND THE ADDITION IN RESPECT OF WHICH WA S CONFIRMED. THE INTEREST ON SUCH DEPOSIT ALONE WAS DISALLOWED BY TH E CIT(A). ON CAREFUL CONSIDERATION OF THE SUBMISSIONS GIVEN BY THE APPEL LANT. I FIND THAT THE LD. AD HAS TAKEN WRONG FIGURES OF RS.29.48 MILLION AS INTEREST PAID ON CUSTOMER'S DEPOSITS AS THE CORRECT, FIGURES FOR INT EREST ON SUCH SECURITY DEPOSIT IS RS.15.82 MILLION. IN VIEW OF THE APPELLA TE ORDER FOR AY 2006-07 DATED 22.05.2013, OUT OF THE TOTAL INTEREST EXPENSE OF RS.15.82 CLAIMED BY THE APPELLANT IN RESPECT OF THE SECURITY DEPOSITS, THE INTEREST EXPENSES IN THE RATIO OF RS.1,27,69,83,720 (HELD AS UNEXPLAINED) TO RS.11 ,59,32,90,000/- (WHICH REPRESENTS TOTAL AMOUNT OF SECURITY DEPOSIT) AMOUNT ING TO RS.17,42,542/- MAY ALONE NEED TO BE DISALLOWED. THE LD. AO IS DIRE CTED TO RECOMPUTE THE DISALLOWANCE ACCORDINGLY. THE APPELLANT GETS RELIEF IN RESPECT OF THE BALANCE AMOUNT. 4.1. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A) THE AS SESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 5 5. THE LD.COUNSEL FOR THE ASSESSEE REFERRING TO THE D ECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2006-07 IN ITA NO. 4587/DEL/2013 ORDER DATED 5 TH SEPTEMBER, 2016 SUBMITTED THAT THE TRIBUNAL HAD RES TORED THE MATTER TO THE FILE OF THE A.O. WITH A DIRECTION TO GIVE AN OPPORTUNITY TO THE ASSESSEE FOR RECONCILIATION OF THE DEPOSITS OF RS.127,69,83,720/- AND DECIDE THE I SSUE AFRESH. HE SUBMITTED THAT FOLLOWING THE DIRECTION OF THE TRIBUNAL FOR THE A.Y . 2006-07 THIS ISSUE MAY ALSO BE RESTORED TO THE FILE OF A.O. FOR FRESH ADJUDICATION . 6. THE LD. DR, ON THE OTHER HAND, WHILE SUPPORTING TH E ORDER OF CIT(A) FAIRLY SUBMITTED THAT HE HAS NO OBJECTION FOR RESTORING TH E MATTER TO THE FILE OF AO FOR DECIDING THE ISSUE AFRESH IN THE LIGHT OF THE DIREC TION OF THE TRIBUNAL. 7. AFTER HEARING BOTH SIDES WE FIND THE TRIBUNAL IN A SSESSEES OWN CASE FOR A.Y. 2006-07 WHILE DECIDING THE ISSUE HAS RESTORED THE MATTER TO THE FILE OF THE A.O. BY OBSERVING AS UNDER : 17. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENT IONS. THE BRIEF NATURE OF THE SECURITY DEPOSIT IS THAT WHEN CUSTOMER DEMANDS FOR A CONNECTION SAME IS COLLECTED AND WHEN IT IS DISCONNECTED THE AMOUNT OF DEPOSIT BECOMES REFUNDABLE TO THE CUSTOMER ON PRODUCTION OF DEPOSIT RECEIPT AND MAKING CLAIM THEREOF. AS IT IS APPARENT THAT ASSESSEE IS A PUBLIC SECTOR UNDERTAKING AND OPERATES THE TELEPHONY SERVICES IN SELECT CITIE S. IT ALSO USES CSMS SYSTEM WHICH IS A PROGRAMME REGARDING NEW CONNECTION REFUN D ADJUSTMENT AND DISCONNECTIONS. THEREFORE, AS ON 31.03.2006 AN AMOU NT OF RS. 11593290000/- WAS OUTSTANDING AS NET BALANCE OF SEC URITY DEPOSIT. 6 THEREFORE, SUCH AMOUNT OF DEPOSIT ARE ACCEPTED WITH AN OBLIGATION OF REPAYMENT AT THE TIME OF DISCONNECTIONS OF SERVICES . APPARENTLY THIS MONEY DOES NOT BELONG TO THE ASSESSEE COMPANY BUT IS REQU IRED TO BE REFUNDED TO THE CUSTOMERS AS AND WHEN CLAIMED. BEFORE THE LD CI T(A) THE ASSESSEE HAS SUBMITTED THE DETAILS OF THIS ACCOUNT WITH RESPECT TO OUTSTANDING BALANCES, INTEREST ACCRUED THEREON, TELEPHONE CONNECTION DISC ONNECTED DURING THE YEAR, THE AMOUNT OF SECURITY DEPOSIT RECEIVED DURIN G THE YEAR AND SECURITY DEPOSIT REFUNDED DURING THE YEAR FOR YEAR ENDED MAR CH 2003 TO MARCH 2009. REGARDING THE LIVE CONNECTIONS ASSESSEE SUBMITTED D ETAILS WITH CUSTOMER CODE AND FOR SECURITY DEPOSIT REFUND THE SUBSCRIBER DETAILS. IT ALSO SUBMITTED AS PER ANNEXURE 3 DETAILS WITH REGARD TO CURRENT ST ATUS OF LIVE CONNECTIONS AND AMOUNT OF OUTSTAYING SECURITY DEPOSIT. BEFORE H IM THE ASSESSEE ALSO SUBMITTED THAT TRIAL BALANCE, NATURE OF DEPOSITS, D EPOSIT REFUND ACCOUNT AND DETAILS OF DEPOSIT ADJUSTMENTS. SUCH FURNISHING OF DETAILS HAVE BEEN MENTIONED BY THE LD CIT(A) IN PARA 5.2.4 TO 5.2.6 I N HIS ORDER. ON SUBMISSION OF THIS INFORMATION THE LD CIT(A) OBTAIN ED THE REMAND REPORT FROM ASSESSING OFFICER AND AFTER OBTAINING REJOINDE R HAS HELD THAT THE DEPOSITS HELD BY THE ASSESSEE ARE IN THE CHARACTER OF CUSTODIAL AS IT HAS TO REFUND IT AS SOON AS SERVICES ARE TERMINATED. HE FU RTHER PAGE 18 OF 19 OBSERVED THAT THE DEPOSIT OUTSTANDING IS DECREASING GRADUALLY AND THEREFORE HELD THAT IT DOES NOT PARTAKE THE CHARACTER OF TRAD ING LIABILITY AS THERE IS OBLIGATION TO REPAY THE SAME. HE FURTHER HELD THAT THE APPELLANT DOES NOT ENJOY COMPLETE DOMINION OVER THIS DEPOSIT AS IT DOE S NOT OWN IT. HOWEVER, HE CONFIRMED THE ADDITION TO THE EXTENT OF RS. 127.69 CRORES AND DELETED THE ADDITION OF RS. 1031.62 CRORES. THE REASON GIVEN BY HIM FOR CONFIRMING THE AMOUNT IS THAT THESE COULD NOT BE RECONCILED WITH T HE RESPECT TO THE LIVE CONNECTION AS PER STATEMENT IN ANNEXURE 3 SUBMITTED . WE DO NOT AGREE WITH 7 THE FINDING OF THE LD CIT(A) TO THE EXTENT OF CONFI RMATION OF THE ADDITION PARTLY MERELY BECAUSE RECONCILIATION IN THESE ACCOU NTS WITH RESPECT TO THE LIVE CONNECTIONS ARE PENDING. THE OBSERVATION OF TH E LD CIT(A) IS ALSO NOT CORRECT THAT ASSESSEE SUBMITTED THAT THIS AMOUNT IS UNDER RECONCILIATION AND TO THAT EXTENT SUCH CREDITS ARE NOT FULLY EXPLAINED . BEFORE HIM ASSESSEE SUBMITTED THAT IT IS UNDER RECONCILIATION. FURTHER WHEN THE CHARACTER OF DEPOSIT IS DETERMINED, LOOKING TO THE NATURE OF OPE RATION GEOGRAPHICALLY AS WELL AS LARGE SUBSCRIBERS BASE , IT IS NOT CORRECT TO HOLD THAT PENDING RECONCILIATION THE DEPOSIT BECOME INCOME OF THE ASS ESSE. IN VIEW OF THIS WE SET ASIDE THIS ISSUE BACK TO THE FILE OF THE ASSESS ING OFFICER TO GIVE PROPER OPPORTUNITY TO THE ASSESSEE TO PROVIDE RECONCILIATI ON OF THE SAME AND THEN IF THE AMOUNTS ARE NOT AT ALL IDENTIFIABLE WITH RESPEC T TO THE CUSTOMERS THEN TO THAT EXTENT ADDITION MAY BE RESTRICTED. HOWEVER, IF THIS AMOUNT IS IDENTIFIABLE WITH THE SUBSCRIBER AND EVEN IF IT IS NOT CLAIMED B Y THE SUBSCRIBER DESPITE DISCONNECTION OF THE SERVICES ASSESSEE IS UNDER OBL IGATION TO REPAY WHENEVER DEMANDED BY THE CUSTOMER. THEREFORE, LD ASSESSING O FFICER IS DIRECTED TO GRANT AN OPPORTUNITY TO THE ASSESSEE FOR RECONCILIA TION OF THE ABOVE DEPOSIT AS HELD ABOVE AND THEN DECIDE THE ISSUE AFRESH. IN VIEW OF THIS GROUND NO. 6 OF THE ASSESSEES APPEAL IS ALLOWED ACCORDINGLY. 7.1. SINCE THE FACTS OF THE INSTANT GROUND ARE IDENTICAL TO THE FACTS OF THE GROUND IN AY 2006-07 IN ASSESSEES OWN CASE, THEREFORE, RESPE CTFULLY FOLLOWING THE DECISION IN ASSESSEES OWN CASE, WE RESTORE THE ISSUE TO THE FILE OF THE A.O. WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE DIRE CTION OF THE TRIBUNAL AND IN 8 ACCORDANCE WITH LAW. THE GROUND RAISED BY THE ASSE SSEE IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.147/DEL/2014 (BY REVENUE) : 8. GROUND NO.1 BY REVENUE READS AS UNDER : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.1,23,2 0,000/- MADE U/S 14A HOLDING THE SAME IS NOT SUSTAINABLE. 8.1 . FACTS OF THE CASE, IN BRIEF, ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE A.O. OBSERVED THAT THE ASSESSEE HAS RECEIVED DIVIDEND INCOME OF RS.1,71,85,557/-, WHICH WAS CLAIMED AS EXEMPT U/S 1 0 OF THE I.T. ACT, 1961. THE A.O. ASKED THE ASSESSEE TO EXPLAIN AS TO WHY DISALL OWANCE UNDER RULE 8D SHOULD NOT BE MADE. THE REPLY OF THE ASSESSEE THAT NO EXP ENSES WERE ACTUALLY INCURRED IN RELATION TO SUCH EXEMPT DIVIDEND INCOME WAS REJECTE D BY THE A.O., ON THE GROUND THAT IN MAKING INVESTMENT OF RS.7,644 MILLION, THE ASSESSEE HAD USED BORROWED FUNDS, ON WHICH INTEREST EXPENSES OF ABOUT RS.28 MI LLION WERE INCURRED. THE A.O. ALSO HELD THAT THE ASSESSEES BORROWINGS WERE NOT E NTIRELY USED FOR BUSINESS PURPOSES AND THE ASSESSEE HAS NOT KEPT BOOKS SEPARA TELY SO AS TO WORK OUT THE EXPENSES INCURRED FOR EARNING THE EXEMPT DIVIDEND I NCOME. IN VIEW OF THIS, HE INVOKED THE PROVISION OF RULE 8D AND MADE DISALLOWA NCE OF RS.1,23,20,000/-. 9 8.2 . IN APPEAL THE LD. CIT(A) DELETED THE ADDITION MAD E BY THE AO BY OBSERVING AS UNDER : 6.2 REGARDING THE GROUND NO.2 OF THE APPEAL RELATI NG TO DISALLOWANCE U/S 14A, WHICH WAS MADE BY THE D. AO BY RESORTING TO TH E PROVISIONS OF RULE 8D, I FIND THAT THE APPELLANT HAD EARNED DIVIDEND INCOM E OF RS.1.71 CRORES DURING THE YEAR. DURING THE YEAR, THE TOTAL REVENUE OF THE APPELLANT COMPANY WAS TO THE TUNE OF RS.5329.93 CRORES FROM ITS TELEC OM OPERATION. I FIND THAT THE LD. AO WAS OF THE VIEW THAT THE APPELLANT COMPA NY OUGHT TO HAVE MAINTAINED SEPARATE ACCOUNTS FOR ITS TAX EXEMPT INC OME AND TAXABLE INCOME, WHICH IT FAILED TO DO. THE SPECIFIC, GROUND ON WHIC H THE LD. AO WAS NOT SATISFIED WITH THE CLAIM OF THE APPELLANT OF NOT AT TRIBUTING ANY EXPENDITURE TO EARNING OF THE DIVIDEND INCOME, WAS IN RESPECT OF C LAIM OF INTEREST EXPENSES OF RS.27.82 MILLION, WHICH IN THE VIEW' OF THE LD. AO, WERE TOWARDS THE BORROWED FUNDS USED FOR MAKING INVESTMENT FOR EARNI NG TAX-EXEMPT DIVIDEND INCOME. ON CAREFUL CONSIDERATION OF THE SUBMISSION OF THE APPELLANT IN THE LIGHT OF THE RELEVANT SCHEDULE OF ACCOUNT, IT IS EV IDENTLY CLEAR THAT THE APPELLANT HAD NOT BORROWED ANY LOANS AND HENCE NO I NTEREST EXPENSES ON BORROWING WERE PAID DURING CURRENT YEAR. THE AMOUNT OF INTEREST EXPENSES OF RS.27.82 MILLION DEBITED IN P&L ACCOUNT PERTAINE D TO INTEREST ON SECURITY DEPOSIT GIVEN BY THE CUSTOMERS, INTEREST ON GPF AND INTEREST PAID TO THE MUNICIPAL AUTHORITY OF MUMBAI. DURING THE YEAR, THE APPELLANT'S INCOME FROM TELECOM OPERATION WAS SIZEABLE TO THE TUNE OF RS.5329.9 CRORES AND IT IS EVIDENT THAT IN THE ABSENCE OF ANY BORROWED LOANS, THE INVESTMENT IN LIE AND UTI MUTUAL FUND DURING THE CURRENT YEAR WAS MADE OU T OF ITS OWN INCOME, IN VIEW OF THE ABOVE, I FIND THAT THE LACK OF SATISFAC TION OF THE LD. AO WITH THE 10 CLAIM OF THE APPELLANT WAS ON FAULTY GROUND. IN VIE W OF THIS, KEEPING IN VIEW THE DECISION OF HON'BLE DELHI HIGH COURT DCIT VS. M AXOPP INVESTMENT 247 CTR 162 IN THE ABSENCE OF ANY COGENT REASONS, HAVIN G REGARD TO THE ACCOUNT OF THE APPELLANT, PROVISIONS OF RULE 80 COULD NOT B E APPLIED FOR MAKING DISALLOWANCE U/S 14A. NO OTHER METHOD FOR MAKING DI SALLOWED U/S 14A IS ALLOWABLE W.E.F. 24.03.2008. IN VIEW OF THE SAME, I HOLD THAT THE LD. AO WAS NOT JUSTIFIED FOR INVOKING THE PROVISIONS OF RULE 8 01 AS THE LACK OF SATISFACTION WAS NOT ON COGENT GROUNDS BUT WAS BASE D ON 'INCORRECT APPRECIATION OF FACTS. IN VIEW OF THIS, THE DISALLO WANCE U/S 14A IS NOT SUSTAINABLE AND ACCORDINGLY ADDITION MADE ON THIS G ROUND IS DELETED. 8.3 . AGGRIEVED WITH SUCH ORDER OF LD. CIT(A) THE REVE NUE IS AN APPEAL BEFORE THE TRIBUNAL. 9. AFTER HEARING BOTH SIDES, WE DO NOT FIND ANY INFIR MITY IN THE ORDER OF THE LD. CIT(A). THE FACTUAL FINDING OF THE LD. CIT(A) THAT THE ASSESSEE HAS NOT BORROWED ANY LOANS AND THEREFORE NO INTEREST HAS BEEN PAID O N ACCOUNT OF SUCH BORROWINGS COULD BE CONTROVERTED BY THE LD. DR. WE FIND THE I NTEREST EXPENDITURE INCURRED BY THE ASSESSEE COMPANY IS ON ACCOUNT OF INTEREST PAI D ON SECURITY DEPOSITS RECEIVED FROM THE CUSTOMERS, INTEREST ON GPF AND INTEREST PA ID TO THE MUNICIPAL AUTHORITIES, MUMBAI. WE FURTHER FIND FROM THE VARIOUS DETAILS FURNISHED BY THE ASSESSEE IN THE PAPER BOOK THAT SUFFICIENT FUNDS ARE AVAILABLE WITH THE ASSESSEE WHICH ARE MUCH MORE THAN THE INVESTMENTS MADE DURING THE YEAR. TH EREFORE IN VIEW OF THE DECISION OF HONBLE MUMBAI HIGH COURT IN THE CASE OF CIT V S. HDFC BANK LTD. IN ITA 11 330/2012 ORDER DATED 23 RD JULY, 2014, THE DECISION OF HONBLE PUNJAB & HARYA NA HIGH COURT IN THE CASE OF CIT VS. MAX INDIA LTD. I N ITA 186/2013 ORDER DATED 6 TH SEPTEMBER, 2016 AND THE DECISION OF THE DELHI BENC H OF THE TRIBUNAL IN THE CASE OF GAGAN GOYAL VS. JCIT IN ITA NO.1514/DEL/15 ORDER D T. 2 ND AUGUST, 2016, THE ORDER OF LD. CIT(A) IN OUR OPINION IS FULLY JUSTIFI ED. LD. D.R. COULD NOT DISTINGUISH THE DECISION OF HONBLE DELHI HIGH COUR T IN THE CASE OF MAXOPP INVESTMENTS (SUPRA) WHICH HAS BEEN RELIED UPON BY T HE LD. CIT(A). SINCE THE LD. CIT(A) HAS GIVEN JUSTIFIABLE REASONS AS TO WHY PRO VISIONS OF RULE 8D AND 14A ARE NOT APPLICABLE TO THE FACTS OF THE PRESENT CASE, A ND SINCE THE LD.DR COULD NOT POINT OUT ANY INFIRMITY IN THE ORDER OF THE LD. CI T(A), THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE SAME. ACCORDINGL Y, THE ORDER OF LD. CIT(A) ON THIS ISSUE IS UPHELD AND THE GROUND RAISED BY THE REVENU E IS DISMISSED. 10. GROUND OF APPEAL NO.2 BY REVENUE READS AS UNDER : 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE TO RS.17, 42,542/-, OUT OF TOTAL DISALLOWANCE OF INTEREST OF RS.2,94,80,000/- ON CUS TOMERS DEPOSIT ACCOUNTS AND IN ALLOWING RELIEF IN RESPECT OF THE BALANCE AM OUNT OF RS.2,77,37,458. 11. AFTER HEARING BOTH THE SIDES, WE FIND THAT THE A .O. FOLLOWING HIS ORDER FOR THE A.Y. 2006-07 DISALLOWED THE INTEREST EXPENSES OF RS.2,94,80,000/- ON THE GROUND THAT NO INTEREST COULD BE SAID TO HAVE BEEN PAYABLE ON THE AMOUNT WHICH BELONG TO THE ASSESSEE. WE FIND LD. CIT(A) RESTRIC TED THE DISALLOWANCE TO 12 RS.17,42,542/- FOLLOWING HIS ORDER FOR A.Y. 2006-0 7 WHICH HAS ALREADY BEEN REPRODUCED IN THE PRECEDING PARAGRAPHS. WE FIND ID ENTICAL ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE IN A.Y. 2006-07 AND THE GROUND RAISED BY THE REVENUE WAS DISMISSED BY THE TRIBUNAL BY OB SERVING AS UNDER : 21. GROUND NO. 1 TO 4 OF THE APPEAL ARE AGAINST DE LETION OF ADDITION ON ACCOUNT OF SUBSCRIBER DEPOSIT AND INTEREST THEREON. THESE GROUNDS OF APPEAL ARE INTER LINKED TO THE GROUND NO. 6 AND 7 OF THE A PPEAL OF THE ASSESSEE. WHILE DECIDING THE GROUND NOS. 6 AND 7 OF THE APPEA L OF THE ASSESSEE WE HAVE HELD THAT THAT THERE IS NO INFIRMITY IN THE OR DER OF THE LD CIT(A) WITH PAGE 19 OF 19 RESPECT TO SUBSCRIBERS DEPOSIT HELD TO BE PAYABLE BY THE ASSESSEE TO THE SUBSCRIBER ON TERMINATION OF SERVIC ES TO THE EXTENT OF RECONCILED AMOUNT AND THEREFORE, IT CANNOT BE ADDED TO THE INCOME OF THE ASSESSEE SPECIALLY IN VIEW OF THE ASSESSEE FURNISHI NG SUBSTANTIAL DETAILS AND RECONCILIATION OF THE AMOUNT OUTSTANDING. FURTHER T HE AMOUNT OF INTEREST RELATED TO THAT DEPOSIT IS ALSO DELETED BY THE LD C IT(A) AS THE INTEREST WAS PAYABLE WITH RESPECT TO SUBSCRIBER DEPOSIT WHICH IS COMPLETELY RECONCILED. IN VIEW OF THIS WE DISMISS GROUND NO. 1 TO 4 OF THE AP PEAL OF THE REVENUE. 11.1 . SINCE THE FACTS OF THE INSTANT GROUND IS IDENTICA L TO THE GROUND ALREADY DECIDED BY THE TRIBUNAL, THEREFORE, RESPECTFULLY FO LLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2006-07 AN D IN ABSENCE OF ANY CONTRARY 13 MATERIAL BROUGHT TO OUR NOTICE, WE FIND NO INFIRMIT Y IN THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. ACCORDINGLY, THE SAME IS UPHELD AND THE GROUND RAISED BY THE REVENUE ON THIS ISSUE IS DISMISSED. 12. GROUND OF APPEAL NO.3 BY REVENUE READS AS UNDER : 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING ADDITION OF RS.37,30,0 00/- MADE ON ACCOUNT OF UNDERSTATEMENT OF INCOME DUE TO CHANGES IN THE ACCO UNTING POLICY. 12.1 . FACTS OF THE CASE, IN BRIEF, ARE THAT THE A.O. D URING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT IN THE NOTES TO ACCOUNTS ATTACHED WITH THE AUDIT REPORT, THE AUDITOR HAS REPORTED THAT THE ASSESSEE HAS CHAN GED ITS ACCOUNTING POLICY FOR ALLOCATION OF OVERHEADS AND FOR THE INTANGIBLE ASSE TS WHICH HAD RESULTED IN UNDERSTATEMENT OF PROFITS BY RS.1.11 AND RS.2.62 MI LLION, RESPECTIVELY. THE REPLY OF THE ASSESSEE THAT SUCH CHANGES WERE CARRIED OUT IN LINE WITH THE ACCOUNTING POLICY WAS NOT ACCEPTED BY THE A.O. ON THE GROUND T HAT THE ASSESSEE COULD NOT SHOW THE IMMEDIATE NEED TO CHANGE THE ACCOUNTING SY STEM. HE ACCORDINGLY MADE ADDITION OF RS.37,30,000/- TO THE TOTAL INCOME. 12.2. IN APPEAL THE LD. CIT(A) DELETED THE ADDITION MADE BY THE A.O. BY OBSERVING AS UNDER : 6.4 REGARDING THE GROUND NO.4 OF THE APPEAL, WHERE BY THE APPELLANT CHALLENGED THE ACTION OF THE LD.AO IN DISREGARDING THE CHANGE IN 14 ACCOUNTING POLICY AND THEREBY MAKING ADDITION OF R S.37,30,000-, I FIND THAT THE LD. AO HAS SELECTIVELY CHOSEN CHANGE IN ACCOUNT ING POLICY AND WHEREVER THE EFFECT OF SUCH CHANGE WAS OVER-STATEMENT OF PRO FIT, SUCH CHANGES WERE DISREGARDED. HOWEVER, WHEREVER, THERE WAS AN UNDER- STATEMENT OF PROFIT RESULTING FROM ACCOUNTING CHANGE, THE LD. AO HAS D ISALLOWED THE SAME. KEEPING IN VIEW THE DECISION OF HON'BLE SUPREME CO URT IN THE CASE OF MEHTA PARIKH VS. CIT 30 ITR 181 AND OF ITAT DELHI I N THE CASE OF APPELLANT ITSELF FOR AY 1998-99, I HOLD THAT THE LD. AO WAS N OT JUSTIFIED IN CONSIDERING ONLY PART- OF ACCOUNTING CHANGES. MOREOVER, THERE I S NO DISPUTE THAT THE ACCOUNTING CHANGES CARRIED OUT BY THE APPELLANT COM PANY WERE IN ACCORDANCE WITH THE PREVAILING ACCOUNTING STANDARDS AND THEREFORE, THERE IS NO DISPUTE ON THE MERIT OF SUCH CHANGE. FURTHER, AS SUBMITTED BY THE APPELLANT, OVER A PERIOD OF TIME SUCH CHANGES WILL EVEN OUT THE EFFECT OF SUCH CHANGES IN THE ACCOUNTING POLICY. KEEPING IN VIEW T HE ABOVE, THE ADDITION MADE ON THIS GROUND IS DELETED. 12.3. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A) THE RE VENUE IS IN APPEAL BEFORE THE TRIBUNAL. 13. AFTER HEARING BOTH THE SIDES, WE DO NOT FIND ANY I NFIRMITY IN THE ORDER OF THE LD. CIT(A) ON THIS ISSUE. WE FIND THE ASSESSEE COM PANY DURING THE YEAR UNDER CONSIDERATION HAS CHANGED ITS ACCOUNTING POLICY FOR VALUATION OF INVENTORY OF STORES 15 AND SPARE PARTS AND HAS ADOPTED A NEW POLICY FOR VA LUATION OF INTANGIBLES. WITH REGARD TO VALUATION OF INVENTORY OF STORES AND SPAR ES, WE FIND THE ASSESSEE HAS CHANGED ITS ACCOUNTING POLICY TO VALUE THE INVENTOR Y AT COST OR NET REALISABLE VALUE, WHICHEVER IS LOWER. WITH REGARD TO VALUATION OF IN TANGIBLES, WE FIND THE ASSESSEE HAS INTRODUCED NEW ACCOUNTING POLICY WHEREBY IT HAS BEEN SPECIFIED THAT THE INTANGIBLE ASSETS WILL BE CAPITALISED WHEN THEY ARE READY TO USE. THE CHANGES IN ACCOUNTING POLICY ADOPTED BY THE ASSESSEE IN OUR OP INION ARE IN LINE WITH THE AS NOTIFIED BY ICAI, AND THIS FACT HAS ALSO NOT BEEN C ONTROVERTED BY THE A.O. IT IS AN ACCEPTED FACT THAT REVENUE CANNOT PICK AND CHOOSE A ND MAKE ADDITIONS OR DISALLOWANCES IN PART. IN VIEW OF THE ABOVE AND IN VIEW OF THE DETAILED REASONING GIVEN BY THE CIT(A) ON THIS ISSUE, WE DO NOT FIND A NY INFIRMITY IN HIS ORDER ON THIS ISSUE. ACCORDINGLY, THE SAME IS UPHELD AND THE GRO UND RAISED BY THE REVENUE IS DISMISSED. ITA NO.6787/DEL/2013 (BY ASSESSEE) FOR A.Y. 2009-10 : 14. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, TH E LD. CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN CONFIRMING PROPORTIONA TE DISALLOWANCE OF INTEREST IN RESPECT OF SECURITY DEPOSIT OF RS.127,6 9,83,720/-. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED, BOTH ON FACTS AND IN LAW, IN IGNORING THE FACT THAT THE ASSESSEE BEING A PUBLIC SECTOR COMPANY, THE ENTIRE SECURITY DEPOSIT HELD BY IT IS OF THE CUSTOMERS AND THE INTEREST THEREON CANNOT BE DISALLOWED MEREL Y ON THE SURMISE THAT SECURITY DEPOSIT IS AN UNEXPLAINED DEPOSIT. 16 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND OR ALTE R ANY OF THE GROUNDS OF APPEAL. 15. AFTER HEARING BOTH SIDES, WE FIND THE ABOVE GROUN DS ARE IDENTICAL TO THE GROUNDS OF APPEAL NO.1 AND 2 IN ITA NO.6786/DEL/201 3 FILED BY THE ASSESSEE FOR THE A.Y. 2008-09. WE HAVE ALREADY DECIDED THE ISSU E AND THE MATTER HAS BEEN RESTORED TO THE FILE OF THE A.O. WITH CERTAIN DIREC TIONS. FOLLOWING THE SAME REASONING THE ABOVE GROUNDS ARE ALSO RESTORED TO TH E FILE OF THE A.O. THE GROUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. ITA NO.148/DEL/2014: (BY REVENUE) FOR A.Y. 2009-10: 16. GROUND NO.1 BY THE REVENUE READS AS UNDER : 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS.1,31,9 2,000/- MADE U/S 14A HOLDING THE SAME IS NOT SUSTAINABLE. 17 . AFTER HEARING BOTH THE SIDES, WE FIND THE ABOVE G ROUND IS IDENTICAL TO GROUND NO.1 IN REVENUES APPEAL FOR THE A.Y. 2008-09 IN IT A NO.147/DEL/2014. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUND RAISED BY THE REVENUE HAS BEEN DISMISSED. FOLLOWING SIMILAR REASONING THIS GROUND RAISED BY T HE REVENUE IS DISMISSED. 18. GROUND NO.2 BY THE REVENUE READS AS UNDER : ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) HAS ERRED IN RESTRICTING THE DISALLOWANCE TO RS.11,91,8 07/--, OUT OF TOTAL DISALLOWANCE OF INTEREST OF RS.1,08,20,000/- ON CU STOMERS DEPOSIT ACCOUNTS AND IN ALLOWING RELIEF IN RESPECT OF THE BALANCE AM OUNT OF RS.96,28,193/-. 17 19. AFTER HEARING BOTH THE SIDES, WE FIND THE ABOVE GR OUND IS IDENTICAL TO GROUND NO.2 IN REVENUES APPEAL FOR THE A.Y. 2008-09 IN I TA NO.147/DEL/2014. WE HAVE ALREADY DECIDED THE ISSUE AND THE GROUND RAISED BY THE REVENUE HAS BEEN DISMISSED. FOLLOWING SIMILAR REASONING THIS GROUND RAISED BY T HE REVENUE IS DISMISSED. 20. IN THE RESULT THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES AND THE APPEALS FILED BY THE REVENUE ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 31 ST JULY, 2017. SD/- SD/- (KULDIP SINGH) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: THE 31 ST JULY, 2017 * MANGA/SUJEET COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT BY ORDER, //TRUE COPY// ASSISTANT REGI STRAR ITAT DELHI BENCHES NEW D ELHI
