TRIUMPH INTERNATIONAL FINANCE INDIA LTD, MUMBAI V. ASST CIT CEN CIR 40, MUMBAI

ITA 7518/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 3565 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Assessment Year: 2009-2010
• Appeal Filed On: 23-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Opportunity of being heard; Additional evidence; Capital expenditure
• Section: 143(3); 56; 154

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV , JM AND SHRI RAJESH KUMAR, AM ./ I.T.A. NO. 3 225 AND 7518 /MUM/ 201 3 ( / ASSESSMENT YEAR : 200 8 - 09 & 2009 - 10 ) M/S TRIUMPH INTERNATIONAL FINANCE INDIA LTD, OXFOR D CENTRE, 10, SHROFF LANE, COLABA CAUSEWAY, MUMBAI - 4000 0 5 / VS. ASSTT COMMISSIONER OF INCOME TAX , CENTRAL CIRCLE - 4 0 , AAYAKAR BHAVAN, MUMBAI - 400020 ./ PAN : AA AC E 0308A / ASSESSEE BY S HRI RAJEEV KHANDELWAL / REVENUE BY DR.P.DANIEL / DATE OF HEARING : 2 9 .06 . 2016 / DATE OF PRONOUNCEMENT : 25 . 0 8 . 2016 / O R D E R PER RAJESH KUMAR, A. M: THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGAINST THE TWO SEPARATE ORDERS FIRST DATED 19.3.2013 PASSED BY LD.CIT(A) - 37 FOR THE ASSESSMENT YEARS 200 8 - 09 AND SECOND DATED 17.11.2013 BY THE L.D CIT(A) - 36 FOR THE ASSESSMENT YEAR 2009 - 10. SINCE, THE APPEALS BEFORE US RELATE TO THE SAME ASSESSEE, THEREFORE, FOR THE SAKE OF CONVENIENCE, THEY ARE CLUBBED TOGETHER, HEARD TOGETHER AND DISPOSED OF IN THIS CONSOLIDATED ORDER. 2 3 225 /MUM/201 3 7518/MUM/2013 2. FIRST WE SHALL TAKE THE APPEAL IN ITA NO. 3 225 /MUM/201 3 RELATING TO THE ASSESSMENT YEAR 200 8 - 09 3. THE LD AR AT THE OUTSET SUBMITTED THAT THE GROUND NO 1 AGAINST THE CONFIRMING THE DISALLOWANCE OF LOSS OF RS. 3,328/ - ON VALUATION OF STOCKS AND 1 ST PART OF GROUND NO 2 AS REGARD S CONFIRMATION OF DIS ALLOW ANCE OF FINANCIAL COSTS OF RS. 8,59,63,585/ - WERE NOT PRESSED AND ACCORDINGLY DISMISSED AS NOT PRESSED . THE SECOND PART OF GROUND NO 2 QUA CONFIRMATION OF DEPRECIATION DISALLOWANCE BY CIT(A) HAS BEEN DEALT WITH IN PARA 13 OF TH IS ORDER. 4. GROUND NO.3 IS IN RESPECT OF NOT ALLOWING DEDUCTION ON ACCOUNT OF INTEREST INCURRED/PAYABLE TO THE BANKS FROM THE INTEREST INCOME EARNED OF RS.2,60,42,297/ - AND ASSESSED TO TAX UNDER THE HEAD INCOME FROM OTHER SOURCES . 5. BRIEF FACTS OF TH E CASE ARE THAT THE ASSESSEE FILED E - RETURN ON 30.9.2008 DECLARING TOTAL INCOME AT RS. NIL, WHICH WAS PROCESSED U/S 143(1) OF THE ACT. THEREAFTER, SCRUTINY PROCEEDINGS WERE INITIATED AGAINST THE ASSESSEE AND STATUTORY NOTICES UNDER SECTION 143(2) AND 142( 1) WERE ISSUED AND SERVED UPON THE ASSESSEE. DURING THE YEAR UNDER CONSIDER ATION THE ASSESSEE WAS NOT DOING ANY BUSINESS ACTIVITY BUT IN EARLIER YEARS WAS ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND SECURITIES AS MEMBER OF 3 3 225 /MUM/201 3 7518/MUM/2013 THE NSC AND WERE SEBI REG ISTERED MERCHANT BANKERS BEFORE T HE ASSESSEE WAS DEBARRED BY THE INTERIM ORDER OF THE SEBI DA T ED 4.4.2001 FROM UNDERTAKING ANY BUSINESS AS STOCK BROKER OR AS MERCHANT BANK ER TILL FURTHER ORDER . THE SEBI PASSED ANOTHER ORDER DATED 21.6.2001 CONTINUING TH E BAR IMPOSED ON THE ASSESSEE FROM CARRYING ON SUCH BUSINESS ACTIVITIES AS BROKER AND TRADER IN SHARES. THE ORDER PASSED BY THE SEBI WAS APPEALED IN THE SECURITY APPELLATE TRIBUNAL (SAT) IN THE MONTH OF APRIL, 2004 WITH NO SUCCESS AND THE APPEAL F ILED BY THE ASSESSEE BEFORE THE SAT WAS DISMISSED BY THE TRIBUNAL VIDE ORDER DATED 11.5.2007. FINALLY, THE ORDER OF THE SAT WAS ALSO AFFIRMED BY THE HONBLE APEX COURT AND LEADING TO DISCONTINUE/SUSPENSION OF BUSINESS OF THE ASSESSEE . IN THE RETURN OF IN COME FILED BY THE ASSESSEE , IT CLAIMED LOSS OF RS.3328/ - ON ACCOUNT OF DECREASE IN VALUATION OF STOCKS AND ALSO CLAIMED BUSINESS LOSS ON ACCOUNT OF VARIOUS EXPENSES SUCH AS OPERATING AND ADMINISTRATIVE EXPENSE S RS.4,03,818/ - , FINANCIAL EXPENSES RS .8,59,63,585/ - , PRELIMINARY AND MISC. EXP. WRITTEN OFF RS.10,012/ - AND DEPRECIATION RS.179634/ - . BESIDES THESE EXPENSES , THE ASSESSEE HAS EARNED INTEREST INCOME TO THE TUNE OF RS.5,43,92,821 / - . DURING THE COURSE OF SCRUTINY PROCEEDINGS, THE AO OBSERVED THAT SINCE THE ASSESSEE HAS DISCONTINUED ITS BUSINESS FOLLOWING AN IMBARGO BY THE SEBI WHICH WAS AFFIRMED BY THE HONBLE SUPREME COURT AND THEREFORE THE ASSESSEE WAS NOT CARRYING ON ANY BUSINESS ACTIVITY DURING 4 3 225 /MUM/201 3 7518/MUM/2013 THE YEAR AND ACCORDINGLY CAME TO THE CONCLU SION THAT THE LOSS CLAIMED ON ACCOUNT OF DECREASE IN VALUATION OF STOCK AMOUNTING TO RS.3328/ - AND VARIOUS EXPENSES CLAIMED IN THE PROFIT AND LOSS ACCOUNT AS STATED ABOVE AGGREGATING TO RS.8,65,57,048/ - WERE NOT ALLOW ABLE AND ASSESSED THE TOTAL INCOME FROM INTEREST AT RS . 5,43,92,821/ - UNDER THE HEAD OTHER SOURCES AND TAXED THE SAME ACCORDINGLY BY PASSING ORDER U/S 143(3) DATED 28.12.2010 ASSESSING THE INCOME AT RS.5,43,92,820/ - . THE AO WHILE FRAMING THE ASSESSMENT ORDER RELIED ON THE VARIOUS JUDICI AL PRONOUNCEMENTS AS MENTIONED AT PARAS 4.2 TO 4.7 OF THE ASSESSMENT ORDER. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA). DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LD. CIT(A) CALLED FOR THE REMAND REPORT FROM THE AO AS THE LD.AR OF THE APPELLANT MOVED AN APPLICATION DATED 7.12.2011 FOR ADMISSION OF ADDITIONAL EVIDENCE S UNDER RULE 46A OF THE INCOME TAX RULES, 1962 . THE AO SUBMITTED REMAND REPORT DATED 4.2.2013. BEFORE THE LD. CIT( A), THE LD.AR OF THE ASSESSEE TOOK AN ALTERNATIVE PLEA THAT IF THE BUSINESS OF THE ASSESSEE WHICH WAS SUSPENDED FOLLOWING THE ORDER OF SEBI WHICH WAS FINALLY UPHELD BY THE HONBLE APEX COURT, THEN THE INTEREST INCOME ASSESSED UNDER THE HEAD INCOME FR OM OTHER SOURCES SHOULD BE CALCULATED AFTER ALLOWING INTEREST INCURRED/PAYABLE WHICH W AS INCURRED BY THE ASSESSEE IN RELATION TO EARNING OF SUCH INCOME AND HAVE 5 3 225 /MUM/201 3 7518/MUM/2013 DIRECT NEXUS. THE PLEA TAKEN BY THE LD.AR WAS THAT SINCE THE ASSESSEE WAS DOING BUSINESS OF BROKING AS STOCK BROKERS AT NSC , IT WAS REQUIRED TO GIVE SECURITIES AND GUARANTEES TO THE NATIONAL STOCK EXCHANGE . THE SAID SECURITIES/GUARANTEES WERE GIVEN IN THE FORM OF FDRS UNDER LIEN PURCHASED OUT OF BORROWED FUNDS FROM BANKS AND ALSO BANK GUARANTE ES ISSUED BY THE BANKS . T HESE GUARANTEES WERE INVOKED BY THE NATIONAL STOCK EXCHANGE UPON COMMISSION OF DEFAULT BY THE ASSESSEE AND THE PROCEEDS OF FDR S WERE TRANSFERRED TO THE NATIONAL STOCK EXCHANGE BY THE RESPECTIVE BANKS ON INVOCATION THEREOF . THE ASSESSEE TRIED TO CO - RELATE VARIOUS BANK DEPOSITS AND THEIR SOURCE S IN ORDER TO JUSTIFY THE CO - RELATION NEXUS WITH INTEREST RECEIVED FROM THE NSE ON THE MON EY LYING WITH IT. THE ASSESSEE SUBMITTED THAT INTEREST INCURRED TO THE BANK S HAS DIRECT NEX US WITH THE INCOME EARNED BY WAY OF INTEREST FROM NATIONAL STOCK EXCHANGE AND THEREFORE, WERE CLEARLY COVER ED BY THE PROVISION OF SECTION 57( III ) OF THE ACT . THE LD. CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE AND ADDITIONAL PLEA TAKEN BY THE ASSESSEE THEREBY UPHOLDING THE ORDER OF AO OF ASSESSING THE INCOME FROM INTEREST RECEIVED FROM NATIONAL STOCK EXCHANGE UNDER THE HEAD OF OTHER SOURCES INSTEAD OF INCOME FROM BUSINESS AND ALSO NOT ALLOWING THE INTEREST INCURRED TO BANKS ON THE LOANS OUT OF WHICH TH E MONEY WAS TRANSFERRED TO NATIONAL STOCK EXCHANGE UPON INVOKING OF GUARANTEES /EXCERCING LIEN ON FDRS FROM THE SAID INTEREST INCOME AS REQUESTED BY THE 6 3 225 /MUM/201 3 7518/MUM/2013 AR U/S 57(III) OF THE ACT . THE LD CIT(A) RELIED ON VARIOUS DECISIONS AS DISCUSSED IN PARA 5.7.7 TO 5.7. 27 THAT THE ADDITIONAL EVIDENCE PRODUCED BY THE LD. AR DID NOT BRING ANY NEXUS BETWEEN THE INTEREST INCURRED AND INTEREST EARNED. A CCORDINGLY DISMISSED THE PLEA TAKEN BY THE ASSESSEE. THE LD. AR VEHEMENTLY SUBMITTED THAT THE ASSESSEE WAS DOING BUSINES S OF STOCK BROKERING, MERCHANT BANKING AND TRADING IN SHARES. IN ORDER TO CARRY ON THE TRADING IN SHARES AND SECURITIES ON BEHALF OF THE VARIOUS PARTIES, THE ASSESSEE HAS TO DEPOSIT AND GIVE SECURITY TO THE NATIONAL STOCK EXCHANGE WHICH WERE GIVEN IN TH E FORM OF BANK GUARANTEE S AND FDR S UNDER LIEN OF VARIOUS BANKS OUT OF THE DEBIT BALANCES OF THE ASSESSEE FROM VARIOUS BANKS. THE LD. AR FURTHER SUBMITTED THAT DUE TO UNFAVOUR A BLE AND UNFORESEEN DEVELOPMENT THE BUSINESS OF THE ASSESSEE COMPANY WAS SUSPEND ED BY THE SEBI VIDE ORDER DATED 4.4.2001 WHICH WAS APPEALED BEFORE THE SAT AND S AT ALSO DISMISSED THE APPEAL OF THE ASSESSEE . FINALLY , THE SUPREME COURT HAS ALSO UPHELD THE ORDER OF THE SEBI DEBARRING THE ASSESSEE FROM DOING SHARE BROKING AND MERCHANT BANKING BUSINESS A ND IT WAS FOR THESE REASONS THE ASSE SSEE COULD NOT DO ANY BUSINESS AT THE SAME TIME HAD TO INCUR VARIOUS EXPENDITURES IN ORDER TO RUN THE ESTABLISHMENT OF THE ASSESSEE WHICH W ERE CONTINUED TO BE INCURRED AS BEFORE. THE LD. AR SUBMITTE D THAT THE ASSESSEE HAS NOT DISCONTINUED ITS BUSINESS BUT FORCED BY THE SEBI TO STOP THE BUSINESS. BEFORE US, IT WAS SUBMITTED BY THE LD.AR 7 3 225 /MUM/201 3 7518/MUM/2013 THAT REST OF GROUNDS MENTIONED IN THIS APPEAL WERE WITH RESPECT TO THE ALLOWANCE OF DEDUCTION OF INTEREST INCURRED WHICH HAS DIRECT NEX US TO THE INCOME RECEIVED FROM THE N ATIONAL STOCK EXCHANGE . THE ASSESSEE RECEIVED INTEREST OF RS.2 , 60 , 42 , 297 / - FROM NATIONAL STOCK EXCHANGE ON THE VARIOUS DEPOSITS WHICH WERE LYING WITH THE NATIONAL STOCK EXCHANGE FOLLOWING THE INVOK ING OF THE GUARANTEES AND ENCASHING FDRS WHEN LIEN WAS EXERCISED BY THE STOCK EXCHANGE DETAILS WHEREOF WERE ALSO BEFORE US DURING THE COURSE OF HEARING. THE LD. AR FINALLY SUBMITTED THAT SINCE THE MONEY WHICH ACCUMULATED WITH THE NATIONAL STOCK EXCHANGE H AS CAME FROM VARIOUS FDRS WHICH WERE MADE OUT OF OVERDRAFT ACCOUNT OR THE VARIOUS BANK GUARANTEES WHICH WERE INVOKED BY NATIONAL STOCK EXCHANGE BY WHICH ALREADY OVERDUE ACCOUNTS WERE INCREASED TO THAT EXTENT AND THEREFORE WHATEVER INTEREST WAS INCURRED BY THE ASSESSEE ON THE OVERDRAFT O R THE BANK GUARANTEES SHOULD BE ALLOWED TO BE REDUCED UNDER THE PROVISIONS OF SECTION 57( III ) OF THE ACT FROM THE INTEREST INCOME RECEIVED FROM THE NATIONAL STOCK EXCHANGE . THE LD. AR SUBMITTED THAT THE ASSESSEE HAVE INC URRED RS.2,74,88,000/ - ON VARIOUS OVERDRAFTS OUT OF WHICH THE FDR WERE MADE BY THE ASSESSEE AND RECEIVED INTEREST OF RS.2,60,42,297/ - FROM THE NATIONAL STOCK EXCHANGE . FINALLY THE LD. AR SUBMI TT ED THAT THE SAID INTEREST INCURRED BY THE ASSESSEE WAS COV ERED BY THE PROVISIONS OF SECTION 57(III) OF THE ACT AS THE INTEREST INCURRED TO BANKS HAS DIRECT NEXUS AND CONSTITUTED 8 3 225 /MUM/201 3 7518/MUM/2013 INPUT COST OF FUNDS LYING WITH NATIONAL STOCK EXCHANGE AND HENCE THE SAME MAY BE ALLOWED WHILE ASSESSING THE INCOME OF INTEREST UNDER TH E HEAD INCOME FROM OTHER SOURCES . 6 . ON THE CONTRARY, THE LD. DR HEAVILY RELIED ON THE ORDERS OF AUTHORITIES BELOW AND SUBMITTED THAT THE ORDER PASSED BY THE LD.CIT(A) WAS VERY DETAILED AND REASONED ORDER WHICH WAS PASSED AFTER DISCUSSING VARIOUS DECISIO NS OF VARIOUS COURTS AND HAS GIVEN CLEAR CUT FINDING S . THERE WAS NO NEXUS BETWEEN THE INTEREST EARNED FROM NSE AND INTEREST INCURRED TO VARIOUS BANKS ON LOANS AND PRAYED THAT THE FINDING OF THE LD. CIT(A) BE UPHELD BY DISMISSING THE APPEAL OF THE ASSES SEE. 7 . WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE PARTIES, PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW AND CASE LAWS RELIED UPON BY THE PARTIES. WE FIND THAT THE BUSINESS OF THE ASSESSEE WAS DISCONTINUED FOLL OWING THE ORDER OF SEBI WHICH WAS UPHELD BY THE SAT AND APEX COURT ALSO AND THUS THE BUSINESS OF THE ASSESSEE CAME TO FORCED STAND STILL . THE ASSESSEE WAS DOING BUSINESS OF SECURITY AND STOCK BROKING AND TRADING IN SHARES . WE FIND THAT F OLLOWING THE D ISCONTINUANCE OF BUSINESS BY THE ORDER OF SEBI , THE N ATIONAL S TOCK E XCHANGE INVOKED THE GUARANTEE S FURNISHED BY THE ASSESSEE AND ALSO EXERCISED THE LIEN ON FDRS AND PROCEEDS OF FDR WERE ALSO SEND TO THE 9 3 225 /MUM/201 3 7518/MUM/2013 NATIONAL STOCK EXCHANGE BY THE VARIOUS BANKS WHEN T HE ASSESSEE WAS DECLARED DEFAULT ER BY THE NSC RESULTING INTO ACCUMULATION OF DEPOSIT TO THE TUNE OF RS.24,35,12,813/ - WITH NATIONAL STOCK EXCHANGE ON WHICH THE NSE ALLOWED INTEREST OF RS.2,60,42,297 / - D URING THE FINANCIAL YEAR 2007 - 08 RELEVANT TO TH E ASSESSMENT YEAR UNDER CONSIDERATION . WE FIND THAT THESE DEPOSIT OF RS.24 CRORES ACCUMMULATED OUT OF VARIOUS BANK GUARANTEE INVOKED AND PROCEEDS OF FDRS GIVEN AS SECURITY . THE SOURCE OF THE SAID AMOUNTS OF ACCUMULATED FUNDS WITH THE NSC ARE FROM THE BORROWED FUNDS FROM BANKS . N OW THE QUESTION BEFORE US IS WHETHER THE ASSESSEE IS ENTITLED TO DEDUCT ION OF INTEREST INCURRED TO VARIOUS BANK S FROM WHOM THE FUNDS WERE ARRANGED FROM THE INTEREST RECEIVED FROM N ATIONAL S TOCK E XCHANGE WHICH IS ASSESSABL E UNDER THE HEAD INCOME FROM OTHER SOURCES. FOR THE SAKE OF CONVENIENCE AND BETTER UNDERSTANDING , THE PROVISIONS OF SECTION 57(III) ARE REPRODUCED BELOW : 57. THE INCOME CHARGEABLE UNDER THE HEAD 'INCOME FROM OTHER SOURCES' SHALL BE COMPUTED AFTER MAKING THE FOLLOWING DEDUCTIONS, NAMELY : (I) (IA) (II) . (IIA) . (III) ANY OTHER EXPENDITURE (NOT BEING IN THE NATURE OF CAPITAL EXPENDITURE) LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING SUCH INCOME; (IV ) .. 10 3 225 /MUM/201 3 7518/MUM/2013 THE INTEREST IS NOT IN DOUBT OR DISPUTED THAT THE INTEREST RECEIVED FROM THE N ATIONAL S TOCK E XCHANGE ON THE TOTAL AMOUNT OF DEPOSIT WITH IT IS ASSESSABLE AS INCOME FROM OTHER SOURCES. SO FAR AS THE QUESTION OF DEDUCTION QUA INTEREST TO VARIOUS BA NKS IS CONCNERNED, WE ARE OF THE OPINION THAT IF THERE IS NEXUS BETWEEN THE INTEREST RECEIVED AND INTEREST TO BANKS ON BORROWINGS , THE SAME IS TO BE ALLOWED AS DEDUCTION U/S 57(III) OF THE ACT. A PLAIN READING OF PROVISIONS OF SECTION 57(III) OF THE ACT REVEALS THAT ANY EXPENSES WHICH IS NOT OF CAPITAL IN NATURE AND IS WHOLLY AND EXCLUSIVELY INCURRED OR EXPENDED FOR THE PURPOSE OF MAKING OR EARNING OF SUCH INCOME HAS TO BE ALLOWED AGAINST THE INCOME WHICH IS EARNED AND ASSESSABLE UNDER THE PROVISIONS OF S ECTION 56 OF THE ACT. WE ALSO FIND THAT THE NATIONAL STOCK EXCHANGE EXERCISED LIEN ON FDRS OF RS.5 CRORES ON 23.07.2002 (PROCEEDS OF FDRS RS. 5,94,03,209/ - )WHICH WAS PURCHASED ON 19.07.2000 OUT OF MONEY BORROWED FROM THE GLOBAL TRUST BANK AND THE AS SESSEE INCURRED INTEREST ON THE SA ID BANK TO THE TUNE OF RS. 95.00 LAKHS. THREE OTHER DEPOSITS OUT OF INTEREST BEARING FUNDS FROM GLOBAL TRUST BANK WERE ALSO GIVEN RS. 2,00,000/ - ON 07.02.2000, RS. 6,00,000/ - ON 21.09.2000 AND RS. 25,00,000/ - ON 18.10. 2000 ON WHICH THE ASSESSEE INCURRED INTEREST OF RS. 6,27,000/ - .INTEREST ON BANK GUARANTEES INVOKED BY THE STOCK EXCHANGE RS. 3,15,00,000/ - FROM GLOBAL TRUST BANK , INTEREST OF RS.59,85,000/ - WAS INCURRED AND ON RS. 3,00,00,000/ - FROM CENTURIAN BANK 11 3 225 /MUM/201 3 7518/MUM/2013 OUT OF WHICH RS. 2,11,00,000/ - WERE INTEREST BEARING AND INTEREST INCURRED WAS AT RS. 33,76,000/ - . LIKEWISE ASSESSEE INCURRED INTEREST OF RS. 80,00,000/ - ON THE AMOUNT OF INVOKED BANK GUARANTEE OF RS. 5,00,00,000/ - FROM ICICI BANK.THUS THE TOTAL AM OUNT OF I NTEREST INCURRED TO VARIOUS BANKS ON THE BORROWINGS COMES TO RS. 2,74,88,000/ - 8. CONSIDERING THE ABOVE FACTS AND ARGUMENTS OF THE RIVAL PARTIES WE FIND CLEAR CUT NEXUS BETWEEN THE INTEREST EARNED FROM NSE ON DEPOSITS WITH NATIONAL STOCK EXCHANGE OUT OF BA NK GUARANTEES INVOKED AND PROCEEDS OF FDRS AND INTEREST INCURRED ON THE SOURCES OF FUNDS WHICH ARE FROM THE VARIOUS BANKS OUT OF THE INTEREST BEARING FUNDS GIVEN TO NSE IN THE FORM OF THE BANK GUARANTEE S INVOKED IN YEAR 2002 AND FDR S WITH LIEN IN FAV OUR OF NS E ON WHICH THE LIEN WAS EXERCISED IN 2002 . WE FIND MERIT IN THE ARGUMENTS OF THE LD.AR THAT THE INTEREST INCURRED TO THESE BANKS NAMELY GLOBAL TRUST BANK AND CENTURION BANK , ICICI BANK SHOULD BE ALLOWED WHILE ASSESSING THE INTEREST INCOME OF THE ASSESSEE FROM THE DEPOSITS WITH NSE AND WE ARE NOT CONVINCED WITH THE FINDINGS OF LD.CIT(A) THAT THERE IS NO NEXUS BETWEEN THE FUND S/DEPOSITS LYING WITH THE NSE UNDER LIEN AND NSE HAVE VARIOUS DEPOSITS OR FDR UNDER LIEN OR DEPOSITS OUT OF SOURCES AS DISCUSSED SUPRA AND THE INTEREST EXPENSE ACCRUED IN FAVOUR OF VARIOUS BANKS ON THE MONEY BORROWED FOR THE PURPOSE OF FDRS FOR SECURITY AND ALSO FOR BANK GUARANTEES TO NSC . ACCORDINGLY, WE 12 3 225 /MUM/201 3 7518/MUM/2013 SET ASIDE THE ORDER OF LD.CIT(A) AND DIRECT THE AO TO ALLOW DED UCTION OF INTEREST OF RS. 2, 74,88,000/ - OUT OF THE INTEREST RECEIVED FROM THE NATIONAL STOCK EXCHANGE. THIS GROUND IS ALLOWED IN FAVOUR OF THE ASSESSEE . 9 . THE ISSUE RAISED IN GROUND NO.4 IS AGAINST THE NON ALLOWANCE OF CREDIT OF TAX RS.38,79,584/ - . THIS GROUND WAS TAKEN BEFORE THE LD.CIT(A) WHO DISMISSED THE GROUND BY HOLDING THAT THE ASSESSEE WAS FREE TO MOVE AN APPLICATION U/S 154 OF THE ACT BEFORE THE AO AND ACCORDINGLY, CLAIM THE CREDIT OF TDS AND THUS DISMISSED THE APPEAL OF THE ASSESSEE. T HE LD. AR SUBMITTED BEFORE US THAT THE AO HAS NOT ALLOWED THE CREDIT OF TDS DEDUCTED ON BEHALF OF THE ASSESSEE AMOUNTING TO RS.38,79,584/ - . AT THE TIME OF HEARING, THE LD.AR SUBMITTED THAT THE LD. CIT(A) ALSO ERRED IN DIRECTING THE ASSESSEE TO MOVE AN AP PLICATION U/S 154 OF THE ACT INSTEAD OF ISSUING DIRECTION TO THE AO TO ALLOW CREDIT OF TDS WHICH WAS A LEGITIMATE CLAIM TO WHICH THE ASSESSEE WAS LEGALLY ENTITLED. 10 . ON THE CONTR AR Y, THE LD. DR RELIED HEAVILY ON THE ORDER OF LD. CIT(A). 11 . WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE PARTIES, PERUSED THE MATERIAL PLACED BEFORE US INCLUDING THE ORDERS OF AUTHORITIES BELOW. WE FIND THAT THE ASSESSEE HAS NOT BEEN ALLOWED CREDIT OF RS.38,79,584/ - BEING TDS AT SOURC E ON BEHALF OF THE ASSESSEE BY NSE/BANKS AND THE LD. CIT(A) HAS JUST DISMISSED THE GROUND BY DIRECTING THE AS S E S SEE TO FILE RECTIFICATION 13 3 225 /MUM/201 3 7518/MUM/2013 APPLICATION U/S 154 OF THE ACT WHICH IS NOT CORRECT IN OUR VIEW AND HENCE WE ARE OF THE VIEW THAT IT WOULD MEET ENDS OF JUSTICE IF THE AO IS DIR ECTED TO ALLOW THE CREDIT OF TDS OF RS.38,79,584/ - AFTER VERIFYING THE CLAIM OF THE ASSESSEE AFTER ALLOWING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE . THIS GROUND IS ALLOWED FOR STATISTICAL PURPOSES. 12 . THE ISSUE RAISED IN RESPECT OF DEPRE CIATION AMOUNTING TO RS.1,79,634/ - RAISED IN GROUND NO.2 NOT ALLOWING THE DEPRECIATION TO THE ASSESSEE. THE LD. CIT(A) ALSO REJECTED THE GROUND OF THE ASSESSEE ON THE GROUND THAT BUSINESS HAS CEASED AND THEREFORE NO DEPRECATION WAS ALLOWABLE IN THE CUR RENT YEAR OR IN THE SUBSEQUENT YEARS. AGGRIEVED BY THE ORDER OF LD. CIT(A) THE ASSESSEE IN APPEAL BEFORE US. 13 . AFTER HEARING THE RIVAL CONTENTIONS AND ON PERUSAL OF THE RECORD, WE FIND THAT THE ASSESSEE HAS DISCONTINUED THE BUSINESS FOLLOWING THE ORDE R OF SEBI AND THEREFORE THERE WAS NO ACTIVITY DURING THE YEAR AND THE CLAIM OF THE DEPRECIATION O F RS.1,79,634/ - CANNOT BE ALLOWED AS THE ASSESSEE DID NOT CARRY OUT ANY BUSINESS ACTIVITY . HOWEVER, THE ASSESSEE IS FREE TO CLAIM DEPRECATION IN THE YEAR I N WHICH THE BUSINESS IS RE - COM M ENCED ON THE BASIS OF WRITTEN DOWN VALUE IN THE YEAR IN WHICH THE BUSINESS WAS DISCONTINUED . 14 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 14 3 225 /MUM/201 3 7518/MUM/2013 15 . NOW, WE SHALL TAKE THE APPEAL IN ITA NO. 7518 /MUM/2013 RELATING TO THE ASSESSMENT YEAR 200 9 - 10 16 . WE HAVE ALREADY DECIDED AN IDENTICAL ISSUE IN ITA NO. 3225 /MUM/201 3 (AY - 200 8 - 09 ) AND THEREFORE, OUR DECISION IN ITA NO. 3225 /MUM/201 3 WOULD MUTATIS MUTANDIS WOULD APPLY TO THESE APPEALS AS WELL. THE AO IS DIREC TED ACCORDINGLY. 17 . THE APPEAL S FILED BY THE ASSESSEE STANDS PARTLY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 25 . 0 8 . 2016. SD SD ( SHAILENDRA KUMAR YADAV ) (RAJESH KUMAR) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED : 25 . 8 .2016 SR.PS:SRL: / COPY OF THE ORDER FORWARDED TO : 1. / THE APPEL LANT 2. / THE RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, TRUE COPY / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI