GODREJ AGROVET LTD, MUMBAI V. DCIT 10(2), MUMBAI

ITA 8489/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8836 (ITAT-MUMBAI)
• Duration Of Justice: 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 10-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 14-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K NAYAK
• Keywords: Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G BEFORE SHRI P.M.JAGTAP, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER. I.T.A. NO. 2482/MUM/2011. ASSESS MENT YEAR :2006-07. I.T.A. NO.8489/MUM/2010 ASSESSM ENT YEAR : 2007-08. M/S WINDIA INFRASTRUCTURE FINANCE LTD., THE INCOME TAX OFFICER (IN RESPECT OF OM MITRA SECURITIES LTD. VS. 4(3)(3), MUMBAI. SINCE AMALGAMATED WITH WINDIA), 214, EMPIRE HOUSE, DR. D.N. ROAD, ENT. A.K. NAYAK MARG, FORT, MUMBAI 400001. .PAN AAACW1343B APPELLANT RESPONDENT. APPELLANT BY : SHRI VIJAY MEHTA. RESPONDENT BY : SHRI A.K. NAYAK. DATE OF HEARING : 24-09-2012. DATE OF PRONOUNCEMENT : 26-09-2012. O R D E R PER P.M. JAGTAP, A.M. THESE TWO APPEALS FILED BY THE ASSESSEE AGAINST TWO SEPARATE ORDERS PASSED BY THE LEARNED CIT(APPEALS)-11, MUMBAI DATED 08-02-2011 AND BY THE LEARNED CIT(APPEALS)-8, MUMBAI DATED 10-11-2010 FOR ASSESSMENT YEARS 2006-07 AND 2007-08 RESPECTIVELY INVOLVE A COMMON I SSUE AND THE SAME, 2 ITA NO.2482/MUM/2011 & ITA NO.8489/MUM/2010. THEREFORE, HAVE BEEN HEARD TOGETHER AND ARE BEING D ISPOSED OF BY THIS SINGLE COMPOSITE ORDER FOR THE SAKE OF CONVENIENCE. 2. THE SOLITARY COMMON ISSUE INVOLVED IN T HESE APPEALS RELATE TO THE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LE ARNED CIT(APPEALS) OUT OF INTEREST PAID BY THE ASSESSEE ON NON-CONVERT IBLE DEBENTURES ISSUED TO M/S MITRA FIDELITY LTD. AMOUNTING TO RS.60,993/- AN D RS.4,77,587/- FOR ASSESSMENT YEARS 2006-07 AND 2007-08 RESPECTIVELY. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WHICH IS ENGAGED IN THE B USINESS OF TRADING IN SHARES & SECURITIES, BORROWING & LENDING OF MONEY A ND RENDERING FINANCIAL SERVICES. THE RETURNS OF INCOME FOR THE YEARS UNDER CONSIDERATION WERE FILED BY IT ON 27-11-2006 AND 26-10-2007 DECLARING TOTAL INCOME OF RS.67,13,078/- AND LOSS OF RS.44,84,835/- FOR ASSES SMENT YEARS 2006-07 AND 2007-08 RESPECTIVELY. IN THE SAID RETURNS, DEDUCTIO N WAS CLAIMED BY THE ASSESSEE ON ACCOUNT OF INTEREST/PREMIUM PAID BY IT ON THE NON-CONVERTIBLE DEBENTURES ISSUED TO ITS SISTER CONCERN M/S MITRA F IDELITY LTD. ACCORDING TO THE AO, INTEREST/PREMIUM PAID BY THE ASSESSEE ON TH E NCDS ISSUED TO ITS SISTER CONCERN AT THE RATE OF 15% AND 18% PER ANNUM WAS HIGHER THAN THE PREVAILING MARKET RATE. HE, THEREFORE, ADOPTED THE PREVAILING RATE OF INTEREST AT 10% AND MADE A DISALLOWANCE ON ACCOUNT OF EXCES S INTEREST/DISCOUNT ALLEGEDLY PAID BY THE ASSESSEE COMPANY TO ITS SISTE R CONCERN. ON APPEAL, THE LEARNED CIT(APPEALS) CONFIRMED THE SAID DISALLOWANC E. AGGRIEVED BY THE ORDERS OF THE LEARNED CIT(APPEALS), THE ASSESSEE HA S PREFERRED THESE APPEALS BEFORE THE TRIBUNAL. 3. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS SUBMITTED BY THE LE ARNED COUNSEL FOR THE 3 ITA NO.2482/MUM/2011 & ITA NO.8489/MUM/2010. ASSESSEE, NCDS WERE ISSUED BY THE ASSESSEE COMPANY TO ITS SISTER CONCERN IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2002- 03 FOR A PERIOD OF THREE YEARS WITH INTEREST AT THE RATE OF 21% AND PREMIUM PAYABLE ON MATURITY AT THE RATE OF 18%. HE HAS SUBMITTED THAT THE PERIOD O F NCDS WAS SUBSEQUENTLY REVISED AND AS PER THE TERMS AND CONDITIONS OF THE SAID REVISION, INTEREST RATE PAYABLE BY THE ASSESSEE COMPANY ON NCDS WAS AGREED TO BE REDUCED. HE HAS SUBMITTED THAT THE INTEREST RATE SO AGREED TO B E PAID FOR THE YEARS UNDER CONSIDERATION WAS ACTUALLY LESS THAN THE PREVAILING RATE OF INTEREST OF 10% AND, THEREFORE, THE DISALLOWANCE MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(APPEALS) OUT OF INTEREST ASSUMING THE R ATE OF INTEREST/DISCOUNT AT 15% AND 18% IS NOT SUSTAINABLE. HE HAS CONTENDED TH AT NO SUCH DISALLOWANCE OUT OF INTEREST/DISCOUNT PAID BY THE A SSESSEE COMPANY ON NCDS IS ACTUALLY WARRANTED KEEPING IN VIEW THAT INT EREST/DISCOUNT PAID BY THE ASSESSEE WAS LESS THAN THE PREVAILING MARKET RA TE OF 10% TAKEN BY THE AO HIMSELF. ALTHOUGH THE LEARNED DR HAS AGREED WIT H THIS CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE IN PRINCIPLE, HE H AS CONTENDED THAT THE MATTER RELATING TO ACTUAL INTEREST PAID BY THE ASSE SSEE COMPANY ON NCDS BEING LESS THAN 10% REQUIRES VERIFICATION BY THE AO AS THE SUBMISSION NOW BEING MADE ON BEHALF OF THE ASSESSEE TO THIS EFFECT DOES NOT FIND MENTION IN THE ORDERS OF THE AUTHORITIES BELOW. WE FIND MERIT IN THIS CONTENTION OF THE LEARNED DR. ACCORDINGLY, THE IMPUGNED ORDERS OF THE LEARNED CIT(APPEALS) ON THE ISSUE UNDER CONSIDERATION ARE SET ASIDE AND THE MATTER IS RESTORED TO THE FILE OF THE AO FOR THE PURPOSE OF VERIFYING THE ACTUAL RATE OF INTEREST/PREMIUM PAID BY THE ASSESSEE COMPANY ON NC DS ISSUED TO ITS SISTER CONCERN. IF THE INTEREST/PREMIUM SO CHARGED IS FOUN D TO BE LESS THAN THE PREVAILING MARKET RATE OF 10% AS CONTENDED ON BEHAL F OF THE ASSESSEE, NO 4 ITA NO.2482/MUM/2011 & ITA NO.8489/MUM/2010. DISALLOWANCE OUT OF SUCH INTEREST/DISCOUNT CAN JUST IFIABLY BE MADE. THE AO IS ACCORDINGLY DIRECTED TO CONSIDER THIS ISSUE AFRE SH ON MERIT AFTER GIVING THE ASSESSEE AN OPPORTUNITY OF BEING HEARD. 4. IN THE RESULT, THE APPEALS OF THE ASSES SEE ARE TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 26 TH DAY OF SEPT., 2012. SD/- (VIVEK VARMA) JUDICIAL MEMBER SD/- (P.M. JAGTAP) ACCOUNTANT MEMBER DATED : 26 TH SEPT., 2012 COPY TO : 1. THE ASSESSEE 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT, CONCERNED. 5. THE DR CONCERNED, MUMBAI 6. GUARD FILE BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI