The DCIT, Circle-5, Ahmedabad V. M/s. Parshwanath Housing Finance Corporation Ltd., Ahmedabad

ITA 842/AHD/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6322 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 21-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 17-03-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: G S SOURYAWANSHI
• Assessee Lawyers: M G PATEL
• Keywords: Notional interest; Set aside
• Section: 43B; 14A; 40(a)(ia); 139(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HONB LE SHRI A.N.PAHUJA, A.M.) I.T.A. NO. 842/AHD./2009 : ASSESSMENT YEAR : 2005-2006 DCIT, CIRCLE-5, AHMEDABAD VS- M/S.PARSHWANA TH HOUSING FINANCE CORPN. LTD. (PAN : AAACP 9020A) (APPELLANT) (RESPONDENT) C.O. NO.84/AHD/2009 : ASSESSMENT YEAR : 2005-2006 M/S.PARSHWANATH HOUSING FINANCE CORPN. LTD. -VS- DCIT, CIRCLE-5, AHMEDABAD DEPARTMENT BY : SHRI G.S.SOURYAWANSHI, SR.D. R. ASSESSEE BY : SHRI M.G. PATEL, A.R. O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER : THIS APPEAL FILED BY THE REVENUE AND THE CROSS-OBJ ECTION FILED BY THE ASSESSEE ARE AGAINST THE ORDER DATED 09-01-2009 OF LEARNED C OMMISSIONER OF INCOME TAX(APPEALS)-XI, AHMEDABAD FOR THE ASSESSMENT YEAR 2005-06. 2. THE ONLY GROUND RAISED BY THE REVENUE IN ITS APP EAL IS AS UNDER: 1. THE LD. COMMISSIONER OF INCOME TAX (A)-XI, AHMED ABAD HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE ADDITION MADE ON AC COUNT OF DISALLOWANCE OF INTEREST EXPENDITURE U/S.43B OF THE ACT FROM RS.45, 72,867/- TO RS.32,52,208/-. 2.1 GROUNDS RAISED BY THE ASSESSEE IN ITS CROSS-OBJ ECTION ARE AS UNDER: 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS )-XI, AHMEDABAD HAS ERRED IN LAW AS WELL AS ON FACTS OF THE CASE BY CONFIRMING THE DISALLOWANCE OF RS.23,13,666/- IN RESPECT OF INTERE ST PAID TO HUDCO U/S 14A OF THE I T ACT, 1961. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -XI, AHMEDABAD HAS ERRED IN LAW AS WELL AS ON FACTS OF THE CASE BY CON FIRMING THE DISALLOWANCE OF RS.33,52,208/- OUT OF TOTAL INTEREST EXPENDITURE OF RS. 45,72,867/- U/S 43B OF THE I. T.ACT, 1961. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) -XI, AHMEDABAD HAS ERRED IN LAW AS WELL ON FACTS OF THE CASE BY CONFIR MING THE ADDITION OF ITA NO.842-AHD-09 & C.O. 84-AHD-09 2 RS.26,61,850/- BY WAY OF NOTIONAL INTEREST ON LOANS OF RS.2,21,82,083/- WHICH HAVE BEEN CLASSIFIED AS NON-PERFORMING ASSETS AS PER GUIDELINES ISSUED BY NATIONAL HOUSING BANK. 3. BRIEF FACTS RELATING TO THE CONTROVERSY INVOLVED IN ONLY GROUND TAKEN BY THE REVENUE AND GROUND NO.2 TAKEN BY THE ASSESSEE IN IT S CROSS-OBJECTION ARE THAT IN THE ASSESSMENT ORDER, THE AO DISALLOWED RS.45,72,867/- UNDER SECTION 43B IN RESPECT OF INTEREST PAYABLE DEBITED TO INTEREST EXPENSES A/C. BEFORE THE AO, IT WAS SUBMITTED THAT INTEREST BECOMES PAYABLE ON ACCOUNT OF SETTLEMENT A RRIVED AT BY THE ASSESSEE COMPANY WITH HUDCO FROM WHOM THE LOAN WAS OBTAINED. THE SET TLEMENT ARRIVED UNDER THE OTS PACKAGE, ACCORDING TO WHICH, THE ASSESSEE WAS T O MAKE PAYMENT OF RS.41 LAKHS IN THE MONTH OF MARCH, ETC. AS PER HUDCOS LETTER D ATED 31.03.2005 AND ACCORDINGLY INTEREST TO BE PAID. ON VERIFICATION, SCHEME OF REP AYMENT OF LOANS CAME INTO OPERATION AND ACTUAL PAYMENT MADE THEREAFTER, THE AO OBSERVED THAT THE ASSESSEE WAS PAYING ONLY PRINCIPAL AMOUNT WHEREAS INTEREST AMOUNT REMAI NS OUTSTANDING. INTEREST AMOUNT PAYABLE AT RS.45,72,867/-, THOUGH ACCRUED, WAS NOT PAID DURING THE YEAR OR WITHIN THE PRESCRIBED TIME BY WHICH THE RETURN OF INCOME WAS T O BE FILED UNDER SECTION 139(1) OF THE I.T.ACT, 1961. FINALLY, HE OBSERVED THAT THE HU DCO IS A FINANCIAL INSTITUTION AND IT IS GOVERNMENT OF INDIA ENTERPRISE. THEREFORE, THE P ROVISIONS OF SECTION 43B ARE ATTRACTED AND HE ACCORDINGLY DISALLOWED INTEREST OF RS.45,72,867/-. 4. ON APPEAL, IN THE IMPUGNED ORDER, THE LD. CIT(A ) OBSERVED THAT THE ASSESSEE HAD PAID INTEREST OF RS.12,20,659/- TO HUDCO BEFORE DUE DATE OF FILING THE RETURN OF INCOME UNDER SECTION 139(1) OF THE I.T.ACT. THEREFO RE, HE DELETED THE DISALLOWANCE TO THE EXTENT OF RS.12,20,659/- AND CONFIRMED THE BALA NCE DISALLOWANCE OF RS.33,52,208/- 5. AGGRIEVED WITH THE ORDER OF THE LD. CIT(A) DELET ING THE ADDITION OF RS.12,20,659/-, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL AND AGAINST THE CONFIRMATION OF DISALLOWANCE OF RS.33,52,208/-, THE ASSESSEE HAS FILED THE CROSS- OBJECTION VIDE GROUND NO.2. 6. AT THE TIME OF HEARING BEFORE US, ON BEHALF OF T HE ASSESSEE, SHRI M.G.PATEL APPEARED AND FILED A PAPER BOOK CONTAINING 84 PAGES . HE DREW OUR ATTENTION TO PAGE ITA NO.842-AHD-09 & C.O. 84-AHD-09 3 NOS. 47 AND 48 OF THE PAPER BOOK WHICH CONTAINED TH E HUDCO LOAN ACCOUNT. HE POINTED OUT THAT THE ASSESSEE HAD PAID MORE THAN RS .46 LAKHS AS INTEREST AS AGAINST RS.45,72,867/- DISALLOWED BY THE AO. THE COUNSEL OF THE ASSESSEE FURTHER SUBMITTED THAT HE HAS NO OBJECTION IF THE MATTER IS REMANDED BACK TO THE AO TO MAKE VERIFICATION FROM THE HUDCO. 7. ON THE OTHER HAND, SHRI G.S.SOURYAWANSHI, SR.D.R . APPEARED ON BEHALF OF THE REVENUE AND DREW OUR ATTENTION TO PAGE NOS. 74 TO 7 7 OF THE PAPER BOOK, BEING LETTER DATED 23.12.2008, SUBMISSIONS MADE TO THE LD. CIT(A ). HE POINTED OUT THAT IN PARA 3.3, THE ASSESSEE, BEFORE THE LD. CIT(A), STATED THAT TH EY HAVE PAID INTEREST AMOUNT OF RS.12,20,659/- OUT OF INTEREST AMOUNT OF RS.45,72,8 67/-, WHICH IS EVIDENT FROM THE LEDGER ACCOUNT ENCLOSED AT PAGE NOS. 41 TO 42, WHIC H WERE ALSO SUBMITTED BEFORE THE AO, VIDE LETTER DATED 11.10.2002. THE LD. DR POINTE D OUT THAT IN PARA 3.3. BEFORE THE LD. CIT(A), IT IS SUBMITTED THAT THE AO HAS ALREADY DISALLOWED RS.23,13,666/- VIDE PARA 5 OF THE ASSESSMENT ORDER. THEREFORE, THE SAME EXPENDITURE CANNOT BE DISALLOWED UNDER DIFFERENT PROVISIONS OF SECTIONS OF THE INCOM E-TAX ACT, 1961. THE LD. DR FURTHER HIGHLIGHTED FROM THE WRITTEN SUBMISSIONS, F ILED BEFORE THE LD. CIT(A), THAT THE ASSESSEE HAS PLEADED THAT VIDE PARA 5 OF THE ASSESS MENT ORDER, THE AO HAS DISALLOWED RS.23,13,666/- (INTEREST PAYMENT TO HUDCO), THEREFO RE, SAME DISALLOWANCE BE NOT MADE UNDER SECTION 43B OF THE ACT TO AVOID DOUBLE T AXATION. ON THIS BASIS, THE LD. D.R. POINTED OUT THAT GROUND NO.2 OF CROSS-OBJECTION BE DISMISSED AND FOR VERIFICATION WHETHER RS.12,20,659/- WAS PAID BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME, THE MATTER BE REMANDED TO THE FILE OF THE AO. 7.1 IN REJOINDER, THE COUNSEL OF THE ASSESSEE POINT ED OUT THAT THE MATTER BE RESTORED TO THE FILE OF THE AO BECAUSE IT HAS PAID MORE THAN RS.46 LAKHS AS INTEREST TO HUDCO, WHICH IS A GOVERNMENT CONCERN UNDER ONE TIME SETTLE MENT (OTS). AS PER THE SCHEME, RS.41 LAKHS WAS PRINCIPAL AMOUNT WHICH WAS REQUIRED TO BE PAID WITHIN A WEEK FROM THE DATE OF ACCEPTANCE OF THE PROPOSAL BY HUDCO AND THE BALANCE AMOUNT OF RS.2.25 CRORES WAS TO BE PAID ALONG WITH THE INT EREST IN 36 EQUAL MONTHLY INSTALMENTS COMMENCING FROM MARCH, 2005. IT WAS SU BMITTED THAT IN TERMS OF OTS, ITA NO.842-AHD-09 & C.O. 84-AHD-09 4 INTEREST PROVISION OF RS.45,72,867/- HAD BEEN MADE IN THE BOOKS WHICH WAS INCLUSIVE OF PENAL INTEREST CHARGED BY HUDCO AMOUNTING TO RS. 17,29,541/-. 8. AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IT IS PERTINENT TO NOTE THAT IN WRITTEN SUBMISSIONS FILED BEFORE THE LD. CIT(A), THE ASSESSEE HIMSELF HAS STATED THAT IT HAS PAID ONLY RS.12,20,659/- BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME THIS INTERES T IS PAID INCLUDED IN THE INSTALMENTS PAID, THE DETAILS OF THIS INTEREST ARE AS UNDER: 30/04/2005 RS. 2,16,650/- 30/05/2005 RS. 2,11,436/- 30/06/2005 RS. 2,06,171/- 30.07/2005 RS. 2,00,854/- 31/08/2005 RS. 1,95,485/- 30/09/2005 RS. 1,90,063/- TOTAL RS.12,20,659/- 8.1 THE AFORESAID INTEREST IS ALLOWED BY THE LD. C IT(A), IN THE IMPUGNED ORDER. WHETHER THIS INTEREST PERTAINS TO THE ASSESSMENT YE AR UNDER APPEAL OR NEXT ASSESSMENT YEAR NEEDS VERIFICATION AT THE END OF THE AO. ADMI TTEDLY, NEITHER BEFORE US NOR BEFORE THE LD. CIT(A), THE ASSESSEE HAS FURNISHED ANY EVID ENCE IN SUPPORT OF BALANCE PAYMENT AMOUNTING TO RS. 33,52,208/- PAID BEFORE THE DUE DA TE OF FILING THE RETURN OF INCOME. HOWEVER, AT THE TIME OF HEARING, THE COUNSEL OF THE ASSESSEE SUBMITTED THAT PROOF OF PAYMENT CAN BE OBTAINED FROM THE HUDCO AND THE SAME SHALL BE FURNISHED BEFORE THE AO. WE, THEREFORE, SET ASIDE THE ORDER OF THE LD. C IT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO WITH THE DIRECTION THAT THE ASSESSEE SHALL OBTAIN A CERTIFICATE FROM THE HUDCO CERTIFYING THE ACTUAL INTEREST PAID BEFORE THE DUE DATE OF FILING OF RETURN OF INCOME UNDER SECTION 139(1) AND THE AO WI LL VERIFY THE SAME AND RE-WORK OUT THE DISALLOWANCE UNDER SECTION 43B OF THE I.T. ACT, 1961 9. WITH REGARD TO GROUND NO.1 OF THE CROSS OBJECTIO N, THE LD. COUNSEL OF THE ASSESSEE POINTED OUT THAT THE ITAT, IN ASSESSEES O WN CASE IN ITA NO.636/A/2007 VIDE ORDER DATED 02.04.2008 FOR THE ASSESSMENT YEAR S 2002-03 TO 2004-05, REWORKED OUT THE DISALLOWANCE UNDER SECTION 14A OF THE I.T. ACT, 1961. HE SUBMITTED THAT FOR THE ASSESSMENT YEAR UNDER APPEAL, THE ASSESSEE HAS RE-WORKED OUT THE DISALLOWANCE UNDER SECTION 14A, AS PER THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ITA NO.842-AHD-09 & C.O. 84-AHD-09 5 ASSESSMENT YEARS 2002-2003 TO 2004-05 ( SUPRA ) AND DISALLOWANCE WORKS OUT TO NIL. THEREFORE, DISALLOWANCE OF RS.23 LAKHS MADE UNDER S ECTION 14A BE DELETED. 10. ON THE OTHER HAND, THE D.R. CONTENDED THAT THIS CANNOT BE DELETED BECAUSE THE SAME IS NOT ALLOWABLE UNDER SECTION 43B OF THE I.T. ACT, 1961. 11. RIVAL SUBMISSIONS WERE CONSIDERED. IT IS PERTIN ENT TO NOTE THAT THE ASSESSEE HAS CLAIMED TOTAL INTEREST PAID TO HUDCO AMOUNTING TO R S.45,72,867/-. OUT OF THIS, THE AO DISALLOWED RS.23,13,666/- UNDER SECTION 14A AND THEREAFTER ALSO HELD THAT THE ENTIRE AMOUNT OF INTEREST IS DISALLOWABLE UNDER SEC TION 43B BECAUSE THE SAME IS NOT PAID BEFORE THE DUE DATE OF FILING THE RETURN OF IN COME. WHILE ADJUDICATING THE REVENUES APPEAL AND GROUND NO.2 OF THE ASSESSEES CROSS-OBJECTION, WE HAVE RESTORED THE DISALLOWANCE OF INTEREST OF RS.45,72,8 67/- UNDER SECTION 43B TO THE FILE OF THE AO. COUNSEL OF THE ASSESSEE HAS FURNISHED THE C ALCULATION OF DISALLOWANCE AS PER 14A, AS PER THE DECISION DATED 02.04.2008 OF THE IT AT, IN ASSESSEES OWN CASE ( SUPRA ). AS PER THE WORKING, INTEREST-FREE FUND ADVANCES ARE FROM INTEREST FREE FUNDS AVAILABLE AND THEREFORE, NO DISALLOWANCE IS CALLED FOR. THE WORKING FURNISHED BY THE ASSESSEE IS AS UNDER: INTEREST BEARING FUNDS NON INTEREST BEARING FUNDS HUDCO LOAN LESS: INTEREST BEARING ADVANCES (SCHEDULE-8) EXCESS OF INTEREST BEARING ADVANCES OVER INTEREST BEARING FUNDS 2,53,46,276 2,83,70,355 30,24,079 SHARE CAPITAL & RESERVES LESS: DEBIT BALANCE OF PROFIT & LOSS A/C. TOTAL INTEREST FREE FUNDS AVAILABLE LESS : INTEREST FREE ADVANCES GIVEN INTEREST FREE ADVANCES GIVEN 3,16,83,750 1,53,48,379 1,63,35,371 1,20,30,750 43,04,621 11.1 THE LD. D.R., APPEARING FOR THE REVENUE, COULD NOT POINT OUT ANY MISTAKE IN THE AFORESAID WORKING. WE, THEREFORE, FOLLOWING THE DEC ISION DATED 02.04.2008 OF THE ITAT IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR ( SUPRA ), DELETE THE DISALLOWANCE OF INTEREST. ITA NO.842-AHD-09 & C.O. 84-AHD-09 6 12. WITH REGARD TO LAST GROUND OF CROSS-OBJECTION, THE LD. COUNSEL OF THE ASSESSEE DREW OUR ATTENTION TO PROVISIONS CONTAINED IN SECTI ON 43B READ WITH RULE 6EB OF I.T. RULES AND CONTENDED THAT THE ASSESSEE COMPANY IS HA VING NON-PERFORMING ASSET (NPA) OF RS.2,21,82,083/- ON WHICH NO INTEREST HAS BEEN RECEIVED. THEREFORE, THE AO IS NOT JUSTIFIED TO COMPEL THE ASSESSEE TO CHARGE I NTEREST ON NPA AND OFFER FOR TAX PURPOSE. HE POINTED OUT THAT IN RESPECT OF THE CASE , SUIT FOR RECOVERY OF THE AMOUNT HAS BEEN FILED. THE ITAT, C BENCH, IN ASSESSEES OWN CASE IN ITA NO.640/AHD/2000 & 1419/AHD/96 FOR THE ASSESSMENT YEARS 1991-92 AND 19 92-93, HAS DELETED THE SIMILAR DISALLOWANCE. THE RELEVANT DISCUSSION IS CONTAINED IN PARA 8 OF THE DECISION OF THE TRIBUNAL. 13. ON THE OTHER HAND, THE LD. D.R., APPEARING ON B EHALF OF THE REVENUE, COULD NOT CONTROVERT THE AFORESAID SUBMISSIONS MADE BY THE LD . COUNSEL OF THE ASSESSEE. 14. AFTER HEARING BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS THE PROVISIONS CONTAIN ED IN SECTION 40(A)(IA) AS WELL AS THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE, RE LIED ON BY THE LD. COUNSEL. ADMITTEDLY, IN ALL THE CASES, SUITS HAVE BEEN FILED . THEREFORE, INTEREST WILL BE FINALIZED BY THE COURT AND TILL THE ORDER OF THE COURT COMES, THE ASSESSEE DO NOT HAVE RIGHT TO RECEIVE THE INTEREST. ON THIS GROUND, WE, FOLLOWING THE DECISION OF THE TRIBUNAL, IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS ( SUPRA ), DELETE THE DISALLOWANCE OF INTEREST OF RS.26,61,850/-. HENCE, THE GROUND NO.3 OF THE ASSESSEES CROSS-OBJECTION IS ALLOWED. 15. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALL OWED FOR STATISTICAL PURPOSES WHEREAS THE CROSS-OBJECTION FILED BY THE ASSESSEE I S PARTLY ALLOWED. THE ORDER PRONOUNCED IN THE COURT ON 24.06.2011 SD/- SD/- (A.N.PAHUJA) (T.K. S HARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 24/06/2011 ITA NO.842-AHD-09 & C.O. 84-AHD-09 7 COPY OF THE ORDER IS FORWARDED TO:- (1) THE ASSESSEE (2) THE DEPARTMENT. (3) CIT (A.) CONCERNED. (4) CIT CONCERNED. (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AH MEDABAD. TALUKDAR/ SR. P.S.