INDIAN OIL CORPORATION LTD., MUMBAI V. DCIT 10(1), MUMBAI

ITA 813/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 78807 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-04-2014
• Appeal Filed By: Assessee
• Bench Allotted: I
• Next Hearing Date: 28-04-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 28-01-2011
• Court: TRIBUNAL
• Department Lawyers: O P SINGH; JKTLP DH LS SHRI P K SHUKLA
• Assessee Lawyers: FUKKZFJRH DH LS SHRI K K VED
• Keywords: Reopening of assessment; Business income; Rectification of order; Difference of opinion; Reason to believe; Change of opinion
• Section: 143(3); 244A; 115JB; 37(1); 148; 263; 144; 154

Judgement Text

INDIAN OIL CORPORATION LTD 1 VK;DJ VIHYH; VF/KDJ.K VKBZ U;K;IHB EQACBZ ESAA IN THE INCOME TAX APPELLATE TRIBUNAL I BENCH, MUMBAI JH JH JH JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOT; IKY JKO] U;KF;D LNL; ,OA JH JKTSUNZ JKTSUNZ JKTSUNZ JKTSUNZ] YS[KK LNL; DS LE{K ] YS[KK LNL; DS LE{K ] YS[KK LNL; DS LE{K ] YS[KK LNL; DS LE{K BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI RAJENDRA, ACCOUNTANT MEMBER VK;DJ VIHY LA[;K /ITA NO.813/MUM/2011 FU/KKZJ.K O'KZ @ ASSESSMENT YEAR:- 2001-02 INDIAN OIL CORPORATION LTD. G-9, ALI YAVAR JUNG MARG, BANDRA (EAST), MUMBAI 400 051. VS. DEPUTY COMMISSIONER OF INCOME TAX, 10(1), AAYAKAR BHAVAN, MUMBAI 400 020. PAN: - AAACI 1681G APPELLANT RESPONDENT ASSESSEE BY/ FU/KKZFJRH DH VKSJ LS SHRI K.K. VED REVENUE BY/ JKTLP DH VKSJ LS SHRI P.K. SHUKLA & SHRI O.P. SINGH ORDER PER VIJAY PAL RAO, JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 25.10.2010 OF CIT(A) FOR A.Y. 2001-02. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL. THE APPELLANT OBJECTS TO THE ORDER DATED 25 OCTOBER 2010 PASSED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) 21, MUMBAI ON THE FOLLOWING AMONG OTHER GROUNDS: REOPENING OF ASSESSMENT 1. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE AP PRECIATED THAT THERE WAS NO INCOME CHARGEABLE TO TAX THAT HAS ESCAPED ASSESSMEN T AND THEREFORE THE LEARNED DATE OF HEARING 28.04.2014 DATE OF PRONOUNCEMENT 30.04.2014 INDIAN OIL CORPORATION LTD 2 COMMISSIONER (APPEALS) OUGHT TO HAVE QUASHED ORDER DATED 24 NOVEMBER 2008 PASSED UNDER SECTION 143(3) READ WITH 147 PURSUANT TO THE NOTICE DATED 22 FEBRUARY 2008 ISSUED UNDER SECTION 148. 2. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE A PPRECIATED THAT NO NEW FACTS HAVE BEEN BROUGHT ON RECORD BY THE ASSESSING. OFFIC ER FOR FRAMING REASSESSMENT UNDER SECTION 147 OF THE ACT. ,3. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CON FIRMING THE REOPENING PROCEEDINGS BASED ON THE CHANGE OF OPINION. : 4. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONFIRMING THE REOPENING OF THE ASSESSMENT BY ISSUE OF NOTICE DATED 22 FEBRUARY 200 8 UNDER SECTION 148 OF THE ACT AFTER EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. R NO ESCAPEMENT OF INCOME 5. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONFIR MING THAT THERE WAS ESCAPEMENT OF INCOME. 6. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE A PPRECIATED THAT EVEN AFTER TAXING INTEREST INCOME OF RS.11 ,77,49,053 UNDER NO RMAL PROVISIONS OF THE ACT, THE ASSESSING OFFICER ASSESSED THE APPELLANT UNDER THE PROVISIONS OF SECTION 115JB OF THE ACT AS PER RETURNED INCOME. THEREFORE, THE APPELLAN T SUBMITS THAT THERE WAS NO ESCAPEMENT OF INCOME. 7. THE LEARNED COMMISSIONER (APPEALS) ERRED IN HOLDING THAT HAD THE INTEREST INCOME OF RS.LL,77,49,053 OFFERED BY THE APPELLANT IN THE RET URN, THE DIFFERENCE BETWEEN ASSESSED TAX AND TAX PAYABLE UNDER SECTION 1 15JB WOULD HAVE BEEN LESS AND CONSEQUENTLY LESSER AMOUNT OF TAX CREDIT WOULD HAVE BEEN AVAILABLE TO THE APPELLANT FOR ADJUSTMENT AGAINST THE TAX LIABILITY OF SUBSEQUENT YEARS. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE APPRECIATED TH AT DURING THE RELEVANT ASSESSMENT YEAR, NO TAX CREDIT FOR TAX PAID UNDER S ECTION 115JB WAS ALLOWED TO CARRY FORWARD TO SUBSEQUENT YEARS. I N TEREST O N I N C OM E - T A X REFUND 8. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONFIR MING TO ADDITION OF INTEREST ON INCOME-TAX REFUND OF RS.11,77,49,053 TO TOTAL IN COME OF THE APPELLANT UNDER THE NORMAL PROVISION. 9. THE LEARNED COMMISSIONER (APPEALS) OUGHT TO HAVE A PPRECIATED THAT DURING THE RELEVANT TAX YEAR, INTEREST PAID BY THE APPELLANT W AS MORE THAN INTEREST INCOME AND THEREFORE NO INTEREST INCOME WAS ACCRUED TO THE APP ELLANT. INCOME UNDER THE HEAD 'INCOME FROM OTHER SOURCES' 10. THE LEARNED COMMISSIONER (APPEALS) ERRED IN CONFIR MING THE ACTION OF THE INDIAN OIL CORPORATION LTD 3 ASSESSING OFFICER IN ASSESSING INTEREST ON INCOME-T AX REFUND OF RS.11,77,49,053 UNDER THE HEAD 'INCOME FROM OTHER SOURCES'. 2. GROUND NO. 1 TO 7 ARE REGARDING VALIDITY OF REO PENING OF ASSESSMENT. THE ASSESSMENT IN THE CASE OF THE ASSESSEEE WAS COMPLET ED U/S 143(3) ON 26.03.2004 AND INCOME WAS ASSESSED AT RS. 381.11 CR ORES FOR COMPUTING THE TAX LIABILITY U/S 115JB. SUBSEQUENTLY THE AO ISSUED NOT ICE U/S 148 ON 22 ND FEBRUARY 2008 ON THE GROUND THAT THE ASSESSEEE RECE IVED AN AMOUNT OF RS. 11,77,49,053/- CRORE AS INTEREST ON REFUND PERTAINI NG TO THE ASSESSMENT YEAR 1994-95. THE INTEREST INCOME RECEIVED BY THE ASSESS EE DURING THE PREVIOUS YEAR 2000-01 RELEVANT TO THE YEAR UNDER CONSIDERATION. T HEREFORE, THE ASSESSEE WAS RQUIRED TO OFFER THE SAME FOR TAXATION IN THIS ASSE SSMENT YEAR. SINCE THE ASSESSEE HAS NOT OFFERED THE SAID INCOME FOR TAXATI ON THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT. REASSESSMENT WAS COMPLE TED WHEREBY THE INTEREST RECEIVED BY THE ASSESSEE OF RS. 11,77,49,053/- WAS ASSESSED TO TAX. THE ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE THE CIT(A) INCLUDING THE VALIDITY OF THE REOPENING OF THE ASSESSEMENT BUT COULD NOT S UCCEED. 2.1 BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMI TTED THAT THE REOPENING OF THE ASSESSMENT IS BEYOND FOUR YEARS AND, THEREFORE, IN VIEW OF THE PROVISO TO SECTION 147 THE NOTICE ISSUED BEYOND PRESCRIBED PER IOD OF TIME IS NOT VALID WHEN THERE IS NO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR ASSESSMENT. THE LD. AR OF THE ASSESSEE HAS SUBMITTED THAT THE REFUND WAS ISSUED BY THE DEPARTM ENT AND IT WAS IN THE KNOWLEDGE OF THE AO THAT ALONG WITH THE REFUND THE SAID AMOUNT OF INTEREST U/S 244A WAS PAID TO THE ASESSEE, THEREFORE, THERE IS N O QUESTIN OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY THE FAC TS NECESSARY FOR ASSESSMENT OF THE SAID INCOME. FURTHER SINCE THE APPEAL IN RESPEC T OF A.Y. 1994-95 WAS PENDING BEFORE THIS TRIBUNAL AND THE ISSUE OF REFUN D HAD NOT ATTEND THE FINALITY, THEREFORE, THE ASSESSEE DID NOT OFFER THE SAID AMOU NT OF INTEREST RECEIVED U/S 244A TO TAX. INDIAN OIL CORPORATION LTD 4 2.2 ON THE OTHER HAND, THE LD. DR HAS SUBMITTED THA T THE ASSESSEE HAS NOT DISCLOSED THIS FACT OF RECEIPT OF INTEREST OF RS. 1 1,77,49,053/- U/S 244A IN THE YEAR UNDER CONSIDERATION AND, THEREFORE, THE BENEFI T OF PROVISO TO SECTION 147 IS NOT AVAILABLE TO THE ASSESSEE. HE HAS RELIED UPON T HE ORDERS OF AUTHORITIES BELOW. 2.3 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WEL L AS RELEVANT MATERIAL ON REOCRD. THERE IS NO DISPUTE THAT THE ASSESSEE RECEI VED A SUM OF RS. 11,77,49,053/- TOWARDS INTEREST U/S 244A OF THE IN COME TAX ACT ALONG WITH THE REFUND PERTAINING TO A.Y. 1994-95. IN THE RETURN OF INCOME THE ASSESSEE HAS NEITHER OFFERED THIS AMOUNT TO TAX NOR DISCLOSED TH IS FACT OF RECEIPT OF THE INTEREST AND THE REASONS FOR NOT OFFERING TO TAX. THE AO VID E NOTICE U/S 148 DATED 22 ND FEBRUARY 2008 HAS REOPENED THE ASSESSMENT AFTER RE CORDING THE FOLLOWING REASONS:- THE ASSESSEE RECEIVED AN AMOUNT OF RS. 11.78 CRORES AS INTEREST ON A REFUND PERTAINING TO THE ASSESSMENT YEAR 1994-95, WHICH WAS ISSUED BY THE DEPARTMENT VIDE RECTIFICATION ORDER OF FEBRUARY , 2001. THE INTEREST INCOME RECEIVED BY THE ASSESSEE DURING 2000-01 BEING THE RELEVANT PREVIOUS YEAR TO THE ASSESSMENT YEAR 2001-02 WAS REQUIRED TO BE OFFERED FOR TAXATION IN ASSESSMENT YEAR 2001-02. HOWEVER, THE SAME WAS NOT OFFERED FOR TAXATION BY THE ASSESSEE IN THE ASSESSMENT OF ASSESSMENT YEAR 2001-02. THE OMISSION RESULTED IN UNDER ASSESSMENT OF INCOME OF RS. 11.78 CRORES INVOLVING SHORT LEVY OF TAX OF RS. 4. 61 CRORES INCLUDING INTEREST. IN VIEW OF THE ABOVE, I HAVE REASON TO BELIEVE THAT INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT COMING WITHIN THE MEANING OF SECTION 147 READ WITH PROVISO THERETO, BY REASON OF FAILURE ON THE P ART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR THE ASSESSMENT. THEREFORE NOTICE UNDER SECTION 148 OF THE INCOME TAX ACT IS HEREBY ISSUED ' 2.4 THE REASONS RECORDED BY THE AO CLEARLY MANIFEST THAT THE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY THE REA SON ON FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERI AL FACTS NECESSARY FOR ASSESSMENT. THOUGH THE ASSESSMENT HAS BEEN REOPENED AFTER EXPIRY OF FOUR YEARS HOWEVER THE BENEFIT OF THE PROVISO TO SECTION 147 IS NOT AVAILABLE TO THE ASSESSEE IN VIEW OF THE FACT THAT THERE IS A COMPLE TE FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE THE PRIMARY FACT OF RECIEPT OF THIS AMOUNT IN THE RETURN OF INDIAN OIL CORPORATION LTD 5 INCOEM AND FURTHER NO EXPLANATION IN THE RETURN OF INCOME AS TO WHY THIS AMOUNT HAS NOT BEEN OFFERED TO TAX. WHEN THE ASSESS EE HAS FAILED TO DISCLOSE THE INTEREST AMOUNT OF RS. 11,77,49,053/- RECEIVED U/S 244A IN THE RETURN OF INCOEM AND EVEN DURING THE ASSESSMENT PROCEEDINGS THEN THIS CONDUCT OF THE ASSESSEE CLEARLY FALLS UNDER THE CATEGORY OF THE CA SES WHERE THE INCOEM CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT BY THE REA SON OF FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERI AL FACTS NECESSARY FOR ASSESSMENT IN TERMS OF SECITON 147 OF THE INCOME TA X ACT. THE MERE FACT THAT THIS AMOUNT WAS RECEIVED FROM INCOME TAX DEPARTMENT DOES NOT OBLITERATE THE REQUIREMENT AND DUTY CAST ON THE ASSESSEE TO DISCLO SE ALL FACTS RELEVANT TO THE ASSESSMENT. THEREFORE, WE ARE OF THE CONSIDERED VIE W THAT THE BENEFIT OF THE PROVISO TO SECTION 147 IS NOT AVAILABLE TO THE ASSE SSEE IN THIS CASE. ACCORDINGLY WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER S OF AUTHORITIES BELOW QUA THIS ISSUE OF VALIDITY OF REOPENING OF ASSESSMENT. 3. GROUND NO. 8 IS REGARDING ASSESSMENT OF THE INTE REST RECEIVED U/S 244A OF RS. 11,77,49,053/- IN THE YEAR UNDER CONSIDERATION. 3.1 WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE AO HAS ASSESSED THE SAID AM OUNT BY ADDING TO THE TOTAL INCOME OF THE ASSESSEE WHILE FRAMING REASSESSMENT U NDER CONSIDERATION. THE ASSESSEE CONTENDED THAT THE AMOUNT OF INTEREST HAS NOT BEEN FINALISED AND, THEREFORE, IS NOT ASSESSABLE IN THIS YEAR. THE LD. AR OF THE ASSESSEE HAS POINTED OUT THAT THE AO HAS ALREADY GIVEN EFFECT TO THE ORD ERS OF TRIBUNAL AND HAS DETERMINED THE INTEREST U/S 244A AT RS. 8,01,46,478 /- ONLY. AT THE OUTSET WE NOTE THAT THIS ISSUE OF TAXABILITY OF THE INTEREST RECEIVED U/S 244A OF INCOME TAX HAS BEEN CONSIDERED AND DECIDED BY THE SPECIAL BENC H OF THIS TRIBUNAL IN THE CASE OF AVADA TRADING CO. (P) LTD. VS. ACIT (10 0 ITD 131) AND HELD IN PARA 8 AS UNDER:- INDIAN OIL CORPORATION LTD 6 8. LET US NOW LOOK AT THE RELEVANT PROVISIONS OF S ECTION 244A OF THE ACT WHICH FOR THE BENEFIT OF THI S ORDER ARE STATED BELOW : '244A. (1) WHERE REFUND OF ANY AMOUNT BECOMES DUE T O THE ASSESSEE UNDER THIS ACT, HE SHALL, SUBJECT TO THE PROVISIONS OF HIS SECTION, BE ENTITL ED TO RECEIVE, IN ADDITION TO THE SAID AMOUNT, SIMP LE INTEREST THEREON CALCULATED IN THE FOLLOWING MANNER , NAMELY : (A)WHERE THE REFUND IS OUT OF ANY TAX PAID UNDER SE CTION 115WJ OR COLLECTED AT SOURCE UNDER SECTION 206C OR PAID BY WAY OF ADVANCE TAX OR TREAT ED AS PAID UNDER SECTION 199, DURING THE FINANCIAL YEAR IMMEDIATELY PRECEDING THE ASSESSMENT YEAR, SUCH INTEREST SHALL BE CALCULATED AT THE RATE OF ONE-HALF PER CENT FOR EVERY MONTH OR PA RT OF A MONTH COMPRISED IN THE PERIOD FROM THE 1ST DAY OF APRIL OF THE ASSESSMENT YEAR TO THE DATE ON WHICH THE REFUND IS GRANTED: PROVIDED THAT NO INTEREST SHALL BE PAYABLE IF THE A MOUNT OF REFUND IS LESS THAN TEN PER CENT OF THE TA X AS DETERMINED UNDER SUB-SECTION (1) OF SECTION 115W E OR SUB-SECTION (1) OF SECTION 143 OR ON REGULAR ASSESSMENT; (B)IN ANY OTHER CASE, SUCH INTEREST SHALL BE CALCUL ATED AT THE RATE OF ONE-HALF PER CENT FOR EVERY MONTH OR PART OF A MONTH COMPRISED IN THE PERIOD OR PERIODS FROM THE DATE OR, AS THE CASE MAY BE, DATES OF PAYMENT OF THE TAX OR PENALTY TO THE D ATE ON WHICH THE REFUND IS GRANTED. (3) WHERE, AS A RESULT OF AN ORDER UNDER SUB-SECTIO N (3) OF SECTION 115WE OR SECTION 115WF OR SECTION 115WG OR SUB-SECTION (3) OF SECTION 143 OR SECTION 144 OR SECTION 147 OR SECTION 154 OR SECTION 155 OR SECTION 250 OR SECTION 254 OR SECTIO N 260 OR SECTION 262 OR SECTION 263 OR SECTION 264 OR AN ORDER OF THE SETTLEMENT COMMISSION UNDER SUB-SECTION (4) OF SECTION 245D, THE AMOUNT ON WHICH INTEREST WAS PAYABLE UNDER SUB-SECTION (1) HA S BEEN INCREASED OR REDUCED, AS THE CASE MAY BE, THE INTEREST SHALL BE INCREASED OR REDUCED ACCO RDINGLY, AND IN A CASE WHERE THE INTEREST IS REDUCED, THE ASSESSING OFFICER SHALL SERVE ON THE A SSESSEE A NOTICE OF DEMAND IN THE PRESCRIBED FORM SPECIFYING THE AMOUNT OF THE DEMAND SHALL BE D EEMED TO BE A NOTICE UNDER SECTION 156 AND THE PROVISIONS OF THIS ACT SHALL APPLY ACCORDINGLY.' A BARE LOOK AT THE PROVISIONS OF SUB-SECTION (1) RE VEALS THAT AS SOON AS ANY REFUND BECOMES DUE UNDER ANY PROVISIONS OF THE ACT, THE ASSESSEE BECOMES ENT ITLED TO RECEIVE THE INTEREST IN RESPECT OF SUCH RE FUND CALCULATED IN THE MANNER PROVIDED IN CLAUSES (A) AN D (B) OF SUCH PROVISIONS. THEREFORE, THE MOMENT THE REFUND IS GRANTED, AS ENFORCEABLE DEBT IS CREATED I N FAVOUR OF ASSESSEE IN RESPECT OF INTEREST DUE ON SUCH REFUND. CONSEQUENTLY, INCOME CAN BE SAID TO ACCRUE ON THE DATE OF REFUND ITSELF. THEREFORE, WHEN SUCH INTEREST IS ACTUALLY GRANTED ALONG WITH THE REFUND THEN, IN OUR OPINION, THE REQUIREMENT OF SECTIONS 4 AND 5 OF THE ACT ARE FULLY SATISFIED AND THE SAME CAN B E TAXED IN THE YEAR OF RECEIPT. 3.2 THUS THE ISSUE OF TAXABILITY OF INTEREST RECEIV ED U/S 244A IN THE YEAR OF RECEIPT IS COVERED AGAINST THE ASSESSEE AND, THEREF ORE, WE DO NOT FIND ANY MERIT IN THE ASSESSEES CLAIM. 3.3 AS REGARDS ADJUSTMENT IN TERMS OF THE TRIBUNAL ORDER FOR THE A.Y. 1994-95 THE AO HAS ALREADY GIVEN EFFECT TO THE SAID ORDER A ND, THEREFORE, NO GRIEVANCE IS LEFT IN THIS RESPECT. INDIAN OIL CORPORATION LTD 7 4. GROUND NO. 9 IS REGARDING NETTING OF INTEREST RE CEIVED U/S 244A BY THE AMOUNT OF INTEREST PAID BY THE ASSESSEE. 4.1 WE HAVE HEARD THE LD. AR AS WELL AS LD. DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS CLAIMED THAT T HE PAYMENT OF INTEREST IN THE YEAR UNDER CONSIDERATION IS MORE THAN THE INTEREST RECEIVED BY THE ASSESSEE U/S 244A AND, THEREFORE, THE INTEREST RECEIVED HAS TO B E NETTED AGAINST THE INTEREST PAYMENT BY THE ASSESSEE AND NO AMOUNT CAN BE TAXED IN THE YEAR UNDER CONSIDERATION ON ACCOUNT OF INTEREST RECEIPT. IT I S PERTINENT TO NOTE THAT THE INTEREST PAID UNDER INCOME TAX ACT FALLS UNDER THE CATEGORY OF INCOME TAX AND, THEREFORE, IS NOT AN ALLOWABLE DEDUCTION. WHEREAS T HE INTEREST RECEIVED ON REFUND OF TAX IS AN INCOME ASSESSABLE UNDER THE HEAD INCO ME FROM OTHER SOURCES. AN IDENTICLA ISSUE HAS BEEN DEALT BY THE THIRD MEMBER DECISION OF THIS TRIBUNAL IN THE CASE OF DCIT VS. SANDVIK ASIA LTD. (133 ITD 126 ), WHEREIN THE TRIBUNAL HAS CONDIDERED THIS ASPECT IN PARA 11 TO 13 AS UNDER:- 11. THE NEXT QUESTION IS WHETHER THE INTEREST CAN BE C LAIMED AS A DEDUCTION UNDER SECTION 37(1) OF THE ACT WHILE COMPUTING THE BUSINESS INCOM E. ON THIS QUESTION ALSO, THE JUDGMENT OF THE SUPREME COURT CITED ABOVE IS IN FAVOUR OF TH E DEPARTMENT. IT WAS ALSO HELD IN THAT JUDGMENT THAT INTEREST LEVIED FOR FAILURE TO PAY AD VANCE TAX UP TO THE STATUTORY PERCENTAGE AND INTEREST LEVIED FOR DELAY IN FILING THE RETURN OF INCOME WERE NOT DEDUCTIBLE UNDER SECTION 37(1) OF THE ACT. IN FACT, THE BOMBAY HIGH COURT IN THE CASE OF ARUNA MILLS LTD. (SUPRA) HAS TAKEN A SIMILAR VIEW AND THE SUPREME CO URT HAS REFERRED TO THE JUDGMENT OF THE BOMBAY HIGH COURT IN ARRIVING AT ITS DECISION. 12. THUS THE QUESTION AS TO WHETHER THE INTEREST PAID TO THE INCOME TAX DEPARTMENT UNDER THE PROVISIONS OF THE INCOME TAX ACT CAN BE DEDUCTE D WHILE COMPUTING THE BUSINESS INCOME OF THE ASSESSEE HAS TO BE DECIDED AGAINST THE ASSES SEE. 13. THE NEXT QUESTION WHICH ARISES IS WHETHER ON GENER AL PRINCIPLES AND ON THE PRINCIPLE OF REAL INCOME THE INTEREST RECEIVED FROM AND PAID TO THE INCOME TAX DEPARTMENT CAN BE ADJUSTED OR NETTED AGAINST EACH OTHER. ON THIS QUES TION THERE ARE TWO JUDGMENTS, ONE OF THE SUPREME COURT IN DR V P GOPINATHAN (SUPRA) AND THE OTHER OF THE BOMBAY HIGH COURT IN THE CASE OF ARUNA MILLS LTD. (SUPRA), BOTH OF WHICH ARE AGAINST THE ASSESSEE. IN THE CASE OF DR V P GOPINATHAN (SUPRA), THE ASSESSEE PLACED MONI ES IN A FIXED DEPOSIT WITH THE BANK AND EARNED INTEREST. HE TOOK A LOAN FROM THE BANK O N THE SECURITY OF THE FIXED DEPOSIT AND INDIAN OIL CORPORATION LTD 8 PAID INTEREST ON THE LOAN. THE INTEREST RECEIVED ON THE FIXED DEPOSIT WAS MORE THAN THE INTEREST PAID ON THE LOAN BY RS. 27,034/-. THE ASSE SSEE'S CASE WAS THAT HE SHOULD BE TAXED ONLY ON THE DIFFERENCE OF RS. 27,034/- UNDER THE RE SIDUARY HEAD WHEREAS THE CASE OF THE REVENUE WAS THAT THE ENTIRE INTEREST RECEIVED SHOUL D BE BROUGHT TO TAX WITHOUT REDUCING THE SAME BY THE INTEREST PAID. IT WAS NOTICED BY THE SU PREME COURT THAT THE LEARNED COUNSEL APPEARING FOR THE ASSESSEE BEFORE THE TRIBUNAL HAD MADE IT CLEAR THAT THE ASSESSEE'S CASE DID NOT REST UPON THE PROVISIONS OF SECTION 57(III) OF THE ACT, WHICH PROVIDED FOR A DEDUCTION OF THE INTEREST PAID BY THE ASSESSEE FOR EARNING THE INTEREST INCOME. IN OTHER WORDS, IT WAS NOT THE CONTENTION OF THE ASSESSEE TH AT HE WAS PAYING INTEREST TO THE BANK TO FACILITATE THE EARNING OF INTEREST FROM THE BANK. T HIS ASPECT OF THE MATTER WAS NOTICED BY THE SUPREME COURT AT PAGE 450 OF THE REPORT. THEREAFTER THE SUPREME COURT NOTICED THAT THE ARGUMENT BEFORE THEM ON BEHALF OF THE ASSESSEE WAS THAT THE REAL INCOME OF THE ASSESSEE WAS ONLY RS. 27,034/-. THIS ARGUMENT WAS REJECTED B Y THE SUPREME COURT IN THE FOLLOWING WORDS: - 'IT WAS NOT DISPUTED, AS IT COULD NOT BE, THAT IF T HE ASSESSEE HAD TAKEN A LOAN FROM ANOTHER BANK AND PAID INTEREST THEREON HIS REAL INC OME WOULD NOT DIMINISH TO THE EXTENT THEREOF. THE ONLY QUESTION THEN IS : DOES IT MAKE ANY DIFFERENCE THAT HE TOOK THE LOAN FROM THE SAME BANK IN WHICH HE HAD PLACED THE FIXED DEPOSIT. THERE IS NO DIFFERENCE IN THE EYE OF THE LAW. THE INTEREST THAT THE ASSESSEE RECEIVED FROM THE BANK WAS INCOME IN HIS HANDS. IT COULD STAND DIMINISHED ONLY IF THERE WAS A PROVISION IN LAW WHICH PERMITS SUCH DIMINUTION. THERE IS NONE, A ND, THEREFORE, THE AMOUNT PAID BY THE ASSESSEE AS INTEREST ON THE LOAN THAT HE TOOK F ROM THE BANK DID NOT REDUCE HIS INCOME BY WAY OF INTEREST ON THE FIXED DEPOSIT PLAC ED BY HIM IN THE BANK.' THE LEARNED COUNSEL FOR THE ASSESSEE SOUGHT TO POIN T OUT A DISTINCTION BETWEEN DR. V.P. GOPINATHAN'S CASE (SUPRA) AND THE PRESENT CASE BY P OINTING OUT THAT IF THE ASSESSEE IN THE CASE BEFORE THE SUPREME COURT HAD TAKEN A LOAN FROM ANOTHER BANK ON THE STRENGTH OF THE FIXED DEPOSIT PLACED BY HIM IN HIS BANK AND PAID IN TEREST THEREON THEN THE DECISION OF THE SUPREME COURT WOULD HAVE BEEN DIFFERENT. I AM UNABL E TO ACCEPT THE SUBMISSION BECAUSE IN THE PARAGRAPH QUOTED ABOVE THE SUPREME COURT HAS OB SERVED THAT EVEN IF THAT WERE TO BE THE CASE, THE ASSESSEE'S REAL INCOME WOULD NOT HAVE DIMINISHED TO THE EXTENT OF THE INTEREST PAID TO THE BANK FROM WHICH HE TOOK A LOAN. THE JUD GMENT OF THE SUPREME COURT, REJECTING THE ARGUMENT BASED ON THE THEORY OF REAL INCOME, AP PLIES EQUALLY TO THE COMPUTATION OF BUSINESS INCOME AND IN THIS VIEW OF THE MATTER I MU ST DECIDE THAT THE RULE OF NETTING DOES NOT APPLY TO THE CASE BEFORE ME AND THAT THE ASSESS EE IS PROPERLY ASSESSABLE ON THE GROSS INTEREST OF RS. 45,90,876/- AND NOT MERELY ON THE N ET INTEREST OF RS. 44,53,655/-. 4.2 IN VIEW OF THE ABOVE DECISION OF TRIBUNAL ON TH IS ISSUE, WE DO NOT FIND ANY ERROR OR ILLEGALITY IN THE ORDER OF CIT(A) QUA THIS ISSUE. ACCORDINGLY THIS GROUND IS DECIDED AGAINST THE ASSESSEE. INDIAN OIL CORPORATION LTD 9 5. GROUND NO. 10 IS REGARDING ASSESSMENT OF INTERES T ON REFUND OF TAX UNDER THE HEAD INCOME FROM OTHER SOURCES. THIS ISSUE IS C ONNECTED WITH THE ISSUE RAISED IN GROUNDS NO. 8 AND 9, IN VIEW OF OUR FINDI NG ON THE GROUNDS NO. 8 AND 9, THIS GROUND OF ASSESSEES APPEAL IS DIMISSED. 6. THE ASSESSEE HAS ALSO RAISED AN ADDITIONAL GROUN D WHICH READS AS UNDER:- THE APPELLANT SUBMITS THAT IN CASE IT IS HELD THAT THE INTEREST U/S. 244A FOR THE ASSESSMENT YEAR 1994-95 IS TAXABLE AS INCOEM FOR TH E YEAR THEN THE ASSESSING OFFICER BE DIRECTED TO REDUCE THE SAME FROM THE APP ELLANTS INCOME FOR THE ASSESSMENT YEAR 2009-10 WHEN IT HAS BEEN OFFERED TO TAX BY THE APPELLANT. 6.1 WE HAVE HEARD LD. AR AS WELL AS LD. DR. THE ADD ITIONAL GROUND RAISED BY THE ASSESSEE IS ONLY WITH RESPECT TO THE AVOIDANCE OF D OUBLE TAXATION OF INTEREST IN QUESTION IN VIEW OF THE FACT THAT THE ASSESSEE HAS ALREADY O FFERED THE SAID AMOUNT TO TAX FOR THE A.Y. 2009-10. SINCE THE TAXABILITY OF THE INTEREST IN QUESTION HAS BEEN DECIDED BY US BEING TAXABLE IN THE YEAR OF RECEIPT I.E. 2001-02, THEREFORE, THE SAME INCOME CANNOT BE TAXED TWICE AND, ACCORDINGLY, THE AO IS DIRECTED NO T TO TAX THE SAID INCOME FOR THE A.Y. 2009-10 7. IN THE RESULT APPEAL OF THE ASSESSEE IS DISMISSE D SUBJECT TO OBSERVATION ON ADDITIONAL GROUND. ORDER PRONOUNCED IN THE OPEN COURT TODAY I.E 30 -04-2014 SD/- SD/- ( RAJENDRA ) ( VIJAY PAL RAO ) ( ACCOUNTANT MEMBER / YS[KK LNL; YS[KK LNL; YS[KK LNL; YS[KK LNL; ) (JUDICIAL MEMBER/ U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; ) MUMBAI DATED 30 -04-2014 SKS SR. P.S, INDIAN OIL CORPORATION LTD 10 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, I BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI