BANIHAL HOLDINGS P. LTD, AHEMEDABAD V. DCIT 8(1), MUMBAI

ITA 7429/MUM/2010

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2455 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 8 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2016
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 01-02-2016
• Assessment Year: 2005-2006
• Appeal Filed On: 29-10-2010
• Court: TRIBUNAL
• Department Lawyers: RANDHIV GUPTA
• Assessee Lawyers: A R AJGAONKAR

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI SANDEEP GOSAIN , JM ./ ITA NO. 7429 / MUM/20 1 0 ( / ASSESSMENT YEAR : 20 0 5 - 20 0 6 ) BANIHAL HO LDINGS PVT. LTD., NIRMA HOUSE, ASHRAM ROAD, AHMEDABAD VS. DCIT - 8(1), MUMBAI ./ ./ PAN/GIR NO. : A A ACB 4694 E ( / APPELLANT ) .. ( / RESPONDENT ) /AS SESSEE BY : SHRI A.R.AJGAONKAR /REVENUE BY : SHRI RANDHIV GUPTA / DATE OF HEARING : 28 /0 7 /2016 / DATE OF PRONOUNCEMENT 28/07 /201 6 / O R D E R PER R.C.SHARMA (A.M) : TH IS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT (A), MUMBAI, FOR THE ASSESSMENT YEAR 20 0 5 - 200 6 , IN THE MATTER OF ORDER PASSED U/S.143(3) OF I.T.ACT , ON THE FOLLOWING GROUNDS : - 2. IN LAW AND IN FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, THE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS GROSSL Y ERRED IN DIRECTING ASSESSING OFFICER TO RECOMPUTE DISALLOWANCE U/S.14A OF I T. ACT AFTER TAKING INTO CONSIDERATION THE INTEREST INCOME SHOWN AS TAXABLE IN THE COMPUTATION OF INCOME. 3. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF THE APPELLANT'S CASE, T HE LEARNED COMMISSIONER OF INCOME - TAX (APPEALS) HAS GROSSLY ERRED IN CONFIRMING ASSESSMENT OF INTEREST ON OPTIONALLY FULLY CONVERTIBLE PREMIUM NOTES (OFCPNS) OF NIRMA INDUSTRIES LTD. FOR RS.21,71,750. LEARNED CIT(A) HAS ERRED IN HOLDING THAT THERE IS NO PR OVISION IN LAW THAT INCOME IS ASSESSED AT LOWER FIGURE THAN THE RETURNED INCOME. ITA NO. 7429 /1 0 2 2. THE MADE AN ADDITION OF RS.1,67,540/ - U/S.14A WHICH WAS CONFIRMED BY CIT(A) IN THE IMPUGNED ORDER. 3 . AT THE OUTSET LD. AR PLACED ON RECORD ORDER OF THE TRIBUNAL IN THE G ROUP CONCERN OF THE ASSESSEE M/S KULGAM HOLDINGS PVT. LTD. FOR THE ASSESSMENT YEAR 2005 - 2006, WHEREIN UNDER EXACTLY SIMILAR FACTS THE TRIBUNAL HAVE DIRECTED TO RESTRICT THE DISALLOWANCE UNDER RULE 8D(2)(III). AND HELD THAT N O DISALLOWANCE UNDER RULE 8D (2 )(I) & (II) WAS WARRANTED. 4 . AS THE RELEVANT ASSESSMENT YEAR UNDER CONSIDERATION IS ALSO A.Y.2005 - 06, WHEREIN FACTS AND CIRCUMSTANCES ARE PARI MATERIA , R ESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL, WE DIRECT THE AO TO RESTRICT THE DISALLOWANCE WITH RESPECT TO RULE 8D(2)(III). 5 . NEXT GRIEVANCE OF THE ASSESSEE RELATES TO ADDITION OF INTEREST ON OPTIONALLY CONVERTIBLE PREMIUM NOTES OF NIRMA INDUSTRIES LTD. 6 . LD. AR PLACED ON RECORD ORDER OF THE GROUP CONCERNS M/S KULGAM HOLDINGS PVT. LTD. IN ITA NO.34 98/MUM/2011, ORDER DATED 24 - 2 - 2016 , WHEREIN EXACTLY SIMILAR ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE AFTER HAVING FOLLOWING OBSERVATIONS : - 7. BY WAY OF GROUND OF APPEAL NO.2 & 3, THE REVENUE HAS SOUGHT TO ASSAIL THE DECISION OF THE CIT(APPEALS) IN DIRE CTING THE ASSESSING OFFICER TO EXCLUDE ACCRUED INTEREST OF RS.28,18,197/ - FROM THE TOTAL INCOME. THE SAID AMOUNT REFLECTED INTEREST ACCRUED ON OPTIONALLY FULLY CONVERTIBLE PREMIUM NOTES(OFCPNS) OF M/S. NIRMA INDUSTRIES LTD. ACQUIRED BY THE ASSESSEE. 8. IN THIS CONTEXT, THE BRIEF FACTS ARE THAT THE ASSESSEE COMPANY INVESTED IN 1612 OPTIONALLY FULLY CONVERTIBLE PREMIUM NOTES(OFCPNS) OF RS. 25,000/ - EACH FOR RS.4.03 CRORES OF M/S. NIRMA INDUSTRIES LTD. THE ISSUE PRICE OF OFCPN WAS RS.25,000/ - EACH AND THE FACE VALUE THEREOF OF RS.33,750/ - WAS TO BE PAID AFTER A TENURE OF FIVE YEARS. THE HOLDER OF OFCPNS HAD OPTION TO INVEST IN THE EQUITY SHARES OF M/S. NIRMA INDUSTRIES LTD. AND NO INTEREST WAS PAYABLE TILL MATURITY. THE INTEREST ACCRUED ON INVESTMENT IN OFCPN ITA NO. 7429 /1 0 3 O F M/S. NIRMA INDUSTRIES LTD. FOR THE PERIOD ENDED 31/03/2005 WAS DETERMINED AT RS.28,14,197/ - AND WAS OFFERED IN THE RETURN OF INCOME WITH A QUALIFYING NOTE ATTACHED TO RETURN OF INCOME, WHICH READ AS UNDER: - 'THE RETURN OF INCOME INCLUDES INTEREST INCOME O F RS.28,14,197 AN INVESTMENT IN OFCPN IN NIRMA INDUSTRIES LTD. HELD AS 31.03.05. THE SAID INCOME IS OFFERED TO AVOID LITIGATION WITHOUT PREJUDICE TO THE VALIDITY OF THE CIRCULAR NO.2/2002 F.NO.149/235/2001 - TPL DATED 15/02/2002 ISSUED BY CBDT.' 8.1 SINCE TH E ASSESSEE COMPANY HAD OFFERED THE SAID AMOUNT AS INCOME IN ITS RETURN OF INCOME, THE ASSESSING OFFICER TREATED IT AS PART OF THE TOTAL INCOME WITHOUT MAKING ANY DISCUSSION ON THE STAND OF THE ASSESSEE STATED IN THE AFORESAID NOTE ACCOMPANYING THE RETURN O F INCOME. 8.2 BEFORE CIT(APPEALS), ASSESSEE COMPANY ASSAILED THE INCLUSION OF RS.28,14,197/ - IN THE TOTAL INCOME ON THE GROUND THAT SUCH INCOME COULD NOT BE TAXED ON ACCRUAL BASIS. THE CIT(APPEALS) REFERRED TO A DECISION OF THE AHMEDABAD BENCH OF THE TRIBU NAL IN THE CASE OF KISSAN DISCRETIONARY FAMILY TRUST DATED 02/11/2007 FOR ASSESSMENT YEAR 2003 - 04, WHEREIN ON IDENTICAL ISSUE THE STAND OF THE ASSESSEE WAS UPHELD. ACCORDINGLY, CIT(APPEALS) DIRECTED THE ASSESSING OFFICER TO EXCLUDE THE IMPUGNED INTEREST I NCOME ON OFCPNS FROM THE TOTAL INCOME. 8.3 ON THIS ASPECT, A PRELIMINARY POINT MADE OUT BY THE LD. REPRESENTATIVE FOR THE RESPONDENT ASSESSEE WAS THAT THE GROUNDS OF APPEAL AS FORMULATED BY THE REVENUE (REPRODUCED ABOVE) DOES NOT REFLECT ANY GRIEVANCE WITH REGARD TO THE MERIT OF THE DECISION OF THE CIT(A) TO EXCLUDE THE IMPUGNED SUM FROM THE TOTAL INCOME. EXPLAINING THE SAID POSITION THE LD. REPRESENTATIVE FOR THE ASSESSEE POINTED OUT THAT IN THE STATED GROUNDS OF APPEAL, THE GRIEVANCE PROJECTED BY THE REVE NUE WAS THAT THE SAID INCOME WAS OFFERED BY THE ASSESSEE ITSELF IN THE RETURN OF INCOME AND THAT THE FINAL ASSESSED INCOME COULD NOT BE LESS THAN THE RETURNED INCOME. APART THERE FROM, THE LD. REPRESENTATIVE FOR THE ASSESSEE ALSO REFERRED TO THE ORDER OF T HE AHMEDABAD BENCH OF THE TRIBUNAL IN THE CASE OF ASSESSEE ITSELF FOR ASSESSMENT YEARS 2002 - 03 AND 2003 - 04 VIDE ITA NO.1259/AHD/2007 DATED 21/06/2013 AND ALSO FOR ASSESSMENT YEAR 2004 - 05 VIDE ITA NO.1920/MUM/2009 DATED 22/11/2013 TO POINT OUT THAT SIMILAR ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. IT WAS POINTED OUT THAT IN ASSESSMENT YEAR 2004 - 05(SUPRA) ALSO, THE OBJECTIONS OF THE REVENUE WAS ON SIMILAR LINES. 8.4 IN THIS BACKGROUND, THE LD. DEPARTMENTAL REPRESENTATIVE MERELY REITERATED THE GRIEVANC E PROJECTED IN THE GROUNDS OF APPEAL NO.2 &3 STATED ABOVE. ITA NO. 7429 /1 0 4 9. HAVING CONSIDERED THE RIVAL STANDS, IN OUR OPINION, NO ERROR CAN BE FOUND WITH THE ORDER OF THE CIT(APPEALS) CONSIDERING THAT HIS DECISION IS IN CONSONANCE WITH THE DECISION OF THE TRIBUNAL IN T HE ITA NO. 3498/MUM/2011 C.O. NO.08/MUM/2016 (ASSESSMENT YEAR : 2005 - 06) ASSESSEE'S OWN CASE FOR ASSESSMENT YEAR 2002 - 03 AND 2003 - 04 DATED 21/06/2013 AND FOR ASSESSMENT YEAR 2004 - 05(SUPRA) DATED 21/11/2013, COPIES OF WHICH HAD BEEN PLACED ON RECORD. THE OR DERS OF THE TRIBUNAL CONTINUE TO HOLD THE FIELD AND, THEREFORE, IN OUR VIEW THE IMPUGNED DECISION OF THE CIT(APPEALS) DESERVES TO BE AFFIRMED. WE HOLD SO. 7 . AS THE FACTS AND CIRCUMSTANCES DURING THE YEAR ARE EXACTLY SAME, RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE, GROUND NO.3 OF ASSESSEES APPEAL IS ALLOWED. 8 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED IN PART. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 28 /07 / 201 6 . S D/ - ( SANDEEP GOSAIN ) SD/ - ( R.C.SHARM A ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 28 /07 /201 6 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPON DENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//