ITO 9(2)(4), MUMBAI V. PELICAN INVESTMENT P.LTD, MUMBAI

ITA 7751/MUM/2012

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 93068 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 6 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 31-12-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 28-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JEETENDRA KUMAR
• Assessee Lawyers: SUBHASH SHETTY
• Section: 145

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI , , BEFORE SHRI SANJAY ARORA , A M AND SHRI SANJAY GARG , J M ./ I.T.A. N O. 7751/MUM/2012 ( / ASSESSMENT YEAR: 2006 - 07) ITO - 9(2)(4), R. NO. 216B, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400 020 / VS. PELICAN INVESTMENT P. LTD. 1, SANTOS HOUSE, ROAD NO. 3, SAHAR VILLAGE, VILE PARLE (E), MUMBAI - 99 ./ ./ PAN/GIR NO. AAACP 7857 K ( / APPELLANT ) : ( / RESPONDENT ) / APPELLANT BY : SHRI JEETENDRA KUMAR / RESPONDENT BY : SHRI SUBHASH SHETTY / DATE OF HEARI NG : 01.04.2015 / DATE OF PRONOUNCEMENT : 29 .06.2015 / O R D E R PER SANJAY ARORA, A. M.: THIS IS AN A PPEAL BY THE REVENUE DIRECTED AGAINST THE ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 20 , MUMBAI (CIT(A) FOR SHORT) D ATED 08.10.2012 , PARTLY ALLOWING THE A SSESSEES APPEAL CONTESTING ITS ASSESSMENT U/S.143(3) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER) FOR THE ASSESSMENT YEAR (A.Y.) 2006 - 07 VIDE ORDER DATED 19.12.2008 . 2 ITA NO. 7751/MUM/2012 (A.Y. 2006 - 07) ITO VS. PELICAN INVESTMENT P. LTD. 2. THE APPEAL RAISE S A SINGLE ISSUE I.E., T HE MA INTAINABIL ITY O R OTHERWISE IN LAW OF THE DISALLOWANCE OF INTEREST ON DEPOSITS, E FFECTED BY THE ASSESSING OFFICER (AO) IN THE SUM OF RS. 8,28,830/ - , BY THE LEARNED CIT(A) , IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE - COMPANY, IN THE BUSINESS OF LEASING, INVESTMENT A N D TRADING, TOOK OVER ON LEASE A S HOP PING A RCADE AT H OTEL VENTURE, MUMBAI AND GOA, SUB - LETTING THE SAME TO VARIOUS SHOPKEEPERS O N LEAVE AND LICENCE BASIS, WHICH A GREEMENT PROVIDED FOR KEEP ING OF DEPOSITS BY THE SUB - LESSEES WITH THE ASSESSEE. VIDE CLAUSE 5 OF THE SAID AGREEMENT, THE ASSESSEE WAS LIABLE TO PAY INTEREST ON THE DEPOSITS @ 5% P.A. THE ASSESSEE BEING A COMPANY , AND EVEN OTHERWISE F O LL OW ING MERCANTILE SYSTEM OF ACCOUNTING, PROVIDE D FOR INTEREST ON THE SAID DEPOSITS IN THE IMPUGNED SUM , WHICH WAS DISALLOWED BY THE AO FOLLOWING THE ASSESSEES CONSISTENT STAND IN THE MATTER . THE LIABILITY IN ITS VIEW HAD NOT CRYSTALLIZED IN - AS - MUCH AS THE INTEREST WAS PAYABLE ONLY ON THE TERM INATION O F THE LEASE, PLACING RELIANCE OF THE DECISION IN THE CASE OF NEW INDIA MINING CORPORATION LTD . VS. CIT [2000] 243 ITR 640 (SC). THE ASSESSEES CASE , ON THE OTHER HAND , IS THAT THE LIABILITY HAS ACCRUED, SO THAT IT REPRESENTS A LIABILITY IN PRAESENTI , EVEN THOUGH PAYABLE ON A FUTURE DATE. THE T RIBUNAL HAD IN FACT EXAMINED ITS CASE AND ALLOWED IT FOR AY S 1991 - 92 AND 1992 - 93, WHICH DECISION /S HAD BEEN FOLLOWED BY THE FIRST APPELLATE AUTHORITY , SO THAT THE D EPARTMENT BEING IN APPEAL WOULD BE OF LITTLE CONSEQUEN CE, AT LEAST AS FAR AS THE TRIBUNAL IS CONCERNED. 4 . WE HAVE HEARD THE PARTIES, AND PERUSED THE MATERIAL ON RECORD. IN OUR CLEAR VIEW , THE REVENUE HAS NO CASE WHATSOEVER . C ONSIDERING IT FROM THE STAND POINT OF PRECEDENCE, THE ADMITTED POSITION IS OF THE TRIBUNAL HAVING DECIDED THE ISSUE IN THE ASSESSEES FAVOUR. THERE IS NOTHING ON RECORD TO EXHIBIT THAT THE REVENUE HAS APPEALED AGAINST THE SAME BEFORE THE H ONBLE HIGH COURT , SO THAT THE PRESUMPTION WOULD BE OF THE SAID ORDER / S HAVING ATT AI N E D FINALITY . E VEN OTHERWISE, MERE CONTESTING OF A DECISION BEFORE A HIGHER APPELLATE FORUM WOULD NOT DETRACT FROM ITS PRECEDENCE VALUE, SO THAT IT SHALL CONTINUE TO HOLD. 3 ITA NO. 7751/MUM/2012 (A.Y. 2006 - 07) ITO VS. PELICAN INVESTMENT P. LTD. ON MERITS , IT IS THE ADMITTED POSITION THAT THE INTEREST OBLIGATION IS W.R.T. TIME. I NTEREST IS A FUNCTION OF TIME , REPRESENTING THE O PPORTUNITY COST OF FUNDS ( FOR THE RELEVANT PERIOD ) , ACCRUING THUS FROM YEAR TO YEAR (REFER: RAMA BAI V. CIT [1990] 181 ITR 400 (SC) ). T HAT THE LIABILITY IS PAYABLE AT A FUTURE DATE MAY ONLY IMPACT ITS VALUATION . T HE AS SESSEE HAS CATEGORIZED THE SAME AS A CURRENT LIABILITY IN ITS BOOKS, UNDER THE HEAD INTEREST A CCRUED B UT N OT D UE . A CURRENT LIABILITY IS BY DEFINITION ONE WHICH IS LIKELY AND INTENDED TO BE DISCHARGED IN THE FOLLOWING YEA R . T HERE IS NOTHING ON RECORD WHI CH WOULD JUSTIFY THE CLASSIFICATION OF THE LIABILITY AS A CURRENT LIABILITY. IT IS EVEN NOT CLEAR AS TO WHETHER THE DATE OF PAYMENT, I.E., THE DISCHARGE OF THE LIABILITY, IS DEFINED, AS WHERE THE TERM OF THE AGREEMENT IS FIXED, OR IS UNCERTAIN INASMUCH AS IT I S LIABL E TO BE RENEWED , CONDITION IN RESPECT WHICH WOULD THOUGH HAVE TO BE CONSISTENT WITH THE PRINCIPAL LEASE AGREEMENT . I N ANY CASE OF THE MATTER , IT IS ONLY THE DISCHARGE OF THE LIABILITY, SINCE ACCRUED, THAT IS NOT CERTAIN OR DEFINED, I.E., ON THE BASIS OF THE MATERIAL ON RECORD . A S AFORESAID , THE SAME WOULD ONLY IMPACT THE VALUATION OR THE C LASSIFICATION OF THE LIABILITY BY THE ASSESSEE IN ITS BOOKS . THE ONLY QUESTION, THEREFORE , C OULD BE OF ITS VALUATION , QUA WHICH NO CASE HAS BEEN MADE OUT BY THE REVENUE. ACCOUNTING STANDARD - 1 (AS - 1) ISSUED BY CBDT U/S. 145 OF THE ACT , WHICH IS AGAIN IN AGREEMENT WITH AS - 1 ISSUED BY THE ICAI , MANDATES FOR PROVISION OF ALL KNOWN LIABILITIES . THE LAW IN THE MATTER IS TRITE, TOWARD WHICH WE MAY REFER TO, INTER ALIA , THE DECISIONS IN BHARAT EARTH MOVER VS. CIT [2000] 245 ITR 428 (SC) AND ROTORK CONTROLS INDIA P . LTD. VS. CIT [2009] 314 ITR 62 (SC) . F URTHER, THE LIABILITY UNDER REFERENCE HAS ARISEN ONLY DURING THE CURRENT YEAR . T HE SAME, IRRESPECTIVE OF ITS DISCHARGE D ATE , WOULD THUS BE DEDUCTIBLE AS A TIME COST U/S. 36(1)(III) OF THE ACT . THIS WOULD MEET THE ASSESSEES RELIANCE ON NEW INDIA MINING CORPORATION LTD . (SUPRA), THE BASIS OF WHICH DECISION , IN CONTRADICTION , IS THE NON - INCURRING OF ANY EXPENDITURE ON THE RES TORATION OF LAND ON THE DETERMINATION OF THE LEASE , DURING THE RELEVANT YEAR . THE SAID DECISION WOULD THUS HAS NO APPLICATION IN THE FACTS OF THE INSTANT CASE. W E, IN VIEW OF THE FOREGOING, HAVE NO HESITATION I N CONFIRMING THE IMPUGNED ORDER ON THIS GRO UND , UPHOLDING THE ASSESSEES CLAIM. WE DECIDE ACCORDINGLY. 4 ITA NO. 7751/MUM/2012 (A.Y. 2006 - 07) ITO VS. PELICAN INVESTMENT P. LTD. 5. IN THE RESULT, THE R EVENUE S APPEAL IS DISMISSED . ORDER PRONOUNCED IN THE OPEN COURT ON JUNE 29 , 201 5 ( SANJAY GARG ) (S ANJAY ARORA) / J UDICIAL MEMBER / A CCOUNTANT MEMBER MUMBAI ; DATED : 29 . 0 6 .201 5 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3 . ( ) / THE CIT(A) 4. / CIT - CONCERNED 5. , , / DR, ITAT, MUMBAI 6. / GUARD F ILE / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI