THE INDIAN HOTELS COMPANY LTD, MUMBAI V. DCIT (OSDZ0 CIR 2(2), MUMBAI

ITA 9087/MUM/2010

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 8664 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-09-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: K
• Next Hearing Date: 05-08-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 28-12-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: ALIASGAR RAMPURAWALA ARS
• Keywords: Depreciation; Transfer pricing; Principle of natural justice; International transaction; Earning of tax free income; Wholly owned subsidiary; Non compliance; Notional interest; Revised return; Set aside
• Section: 143(3); 234B; 14A; 201; 144C; 192

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNALMUMBAI BENCH K , MUMBAI BEFORE SHRI G.S. PANNU, VICE PRESIDENT AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO. 9087/MUM/2010 (ASSESSMENT YEAR : 2006-07) THE INDIAN HOTELS COMPANY LTD, MANDLIK HOUSE, MANDLIK ROAD, COLABA, MUMBAI-400 001 PAN : AAACT3957G V S DY.CIT (OSD), CIRCLE 2(2), MUMBAI APPELLANT RESPONDEDNT A PP ELLANT BY SHRI KANCHUN KAUSHAL & ALIASGAR RAMPURAWALA ARS RE SPONDENT BY SHRI ANAND MOHAN CIT - DR DATE OF HEARING 17 - 0 6 - 201 9 DATE OF PRONOUNCEMENT 0 6 - 0 9 - 201 9 O R D E R UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JUDICIAL MEMBER : THIS APPEAL BY ASSESSEE UNDER SECTION 253 OF INCOM E-TAX ACT, 1961 (ACT) IS DIRECTED AGAINST THE ASSESSMENT ORDER DATE D 27-10-2010 PASSED U/S 143(3) R.W.S. 144C DATED 27-10-2010, PASSED IN PURSUANCE OF DIRECTION OF DRP DATED 26-09-2010 FOR ASSESSMENT YEAR (AY) 20 06-07. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- THE GROUNDS STATED HERE UNDER ARE INDEPENDENT OF, AND WITHOUT PREJUDICE TO ONE ANOTHER: ADJUSTMENT 7 ADDITION TO TOTAL INCOME: RS. 53,24,92 ,2887- 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED TRANSFER PRICING OFFICER (TPO') AND THE LEARNED ASS ESSING OFFICER ('AO') UNDER THE DIRECTIONS ISSUED BY HON'BLE DISPUTE RESO LUTION PANEL ('DRP'), ERRED IN MAKING AN ADDITION OF RS. 53,24,92,2887- T O THE APPELLANT'S TOTAL INCOME (I.E.,RS.25,39,55,9127- BASED ON THE PROVISI ONS OF CHAPTER X OF THE INCOME-TAX ACT, 1961 ('THE ACT') AND RS. 27,85,36,3 76 BASED ON THE OTHER PROVISIONS OF THE ACT) AND THE SAID ADDITION BEING WHOLLY UNJUSTIFIED IS LIABLE TO BE DELETED. A) GROUND NO. 2 TO 12 RELATE TO TRANSFER PRICING AD JUSTMENTS OF RS 25.39,55.912 BASED ON THE PROVISIONS OF CHAPTER - X OF THE ACT. ITA NO. 9087/MUM/2010 THE INDIAN HOTEL COMPANY 2 ADJUSTMENT RELATING TO INTEREST _ON LOANS GRANTED T O ASSOCIATED ENTERPRISES ('AE') - RS. 24,45,05,5897- 2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED TPO ERRED IN AND THE HON'BLE DRP FURTHER ERRED IN U PHOLDING / CONFIRMING THE ACTION OF TPO IN MAKING AN ADDITION OF RS 24,45 ,05,589/- TO THE APPELLANT'S TOTAL INCOME ON THE ALLEGED GROUND OF C HARGING INTEREST AT LOWER RATE (I.E., AT LIBOR) THAN THE ARM'S LENGTH PRICE/R ATE ON LOANS GRANTED BY IT TO ITS ASSOCIATED ENTERPRISE (AE) DISREGARD OF USE OF CONTROLLED TRANSACTION BARRED B Y LAW 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED TPO ERRED IN AND THE HON'BLE DRP FURTHER ERRED IN U PHOLDING / CONFIRMING THE ACTION OF THE TPO IN MAKING THE AFORESAID ADDIT ION OF RS. 24,45,05,5897- BY USING CONTROLLED TRANSACTIONS TO DETERMINE THE A RM'S LENGTH PRICE7RATE WHICH IS IN VIOLATION OF PROVISIONS OF RULE 10B(L)( A)(I) OF THE INCOME-TAX RULES, 1962 ('THE RULES'). INTEREST RATE EARNED / PAID BY THE APPELLANT FROM / TO INDEPENDENT PARTIES AS CUP 4) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED TPO ERRED IN AND THE HON'BLE DRP FURTHER ERRED IN UPHOLDING / CONFIRMING THE ACTION OF TPO IN MAKING THE AFORESAID ADDITION OF RS. 24,45,05,589/- WITHOUT APPRECIATING THAT A) INTEREST ACTUALLY EARNED AND PAID BY THE APPEL LANT FROM / TO INDEPENDENT THIRD PARTIES ON THE FUNDS OUT OF WHICH LOANS WERE ADVANCED TO THE AES OUGHT TO BE TAKEN AS COMPARABLE UNCONTROLLED PRICE('CUP') FOR DETERMINING THE ARM'S LENGTH PRICE OR ALTERNATIVELY B) THE ADJUSTMENT, IF ANY, OUGHT TO BE COMPUTED B Y CONSIDERING THE INTEREST RATE PAID BY THE AES TO THIRD PARTIES ON THEIR BORR OWINGS. ADJUSTMENT ON ACCOUNT OF LETTER OF COMFORT ISSUED B Y THE APPELLANT - RS. 6,66,4Q8/- 5) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED TPO ERRED IN MAKING AND THE HON'BLE DRP FURTHER ERR ED IN UPHOLDING / CONFIRMING THE ADDITION OF RS. 6,66,408/- TO THE TO TAL INCOME OF THE ITA NO. 9087/MUM/2010 THE INDIAN HOTEL COMPANY 3 APPELLANT BEING THE ALLEGED ARM'S LENGTH PRICE/FEE CHARGEABLE BY THE APPELLANT ON ACCOUNT OF THE LETTER OF COMFORT ISSUE D BY IT TO BANKS IN RESPECT OF THE BORROWINGS MADE BY THE AES. LETTER OF COMFORT ERRONEOUSLY TREATED AS A GUARANTE E 6) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW AND WITHOUT APPRECIATING THE FACT THAT ISSUE OF LETTER OF COMFO RT WOULD NOT CONSTITUTE AN INTERNATIONAL TRANSACTION AS PER THE PROVISIONS OF THE ACT,, THE LEARNED TPO ERRED IN AND THE HON'BLE DRP FURTHER ERRED IN UPHOL DING / CONFIRMING THE ACTION OF TPO IN HOLDING THAT LETTER OF COMFORT ISS UED BY THE APPELLANT CONSTITUTES A GUARANTEE AND THAT THEREFORE, THE APP ELLANT OUGHT TO HAVE CHARGED GUARANTEE FEES FOR ISSUING SUCH LETTERS OF COMFORT. ARBITRARY REJECTION OF RATOF GUARANTEE FEE OBTAINE D BY THE APPELLANT FROM ITS OWN BANK / OPPORTUNITY TO EXAMINE THE MATE RIAL RELIED UPON BY IHC TPQ NOT GRANTED 7) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED TPO ERRED IN AND THE HON'BLE DRP FURTHER ERRED IN A) NOT CONSIDERING THE WITHOUT PREJUDICE PLEA OF THE APPELLANT THAT THE ADJUSTMENT, IF ANY, ON ACCOUNT OF GUARANTEE FEES TO BE CHARGED TO THE AES MUST BE MADE BASED ON THE GUARANTEE FEE/RATE OBTAIN ED BY THE APPELLANT FROM ITS OWN BANK. B) NOT PROVIDING THE APPELLANT AN OPPORTUNITY OF EXAMINING MATERIAL ON THE BASIS OF WHICH RATE OF GUARANTEE FEE WAS APPLIED. DISALLOWANCE OF SALES PROMOTION EXPENSES OF RS. 87, 83,9157- 8) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED TPO ERRED IN AND THE HON'BLE DRP FURTHER ERRED IN U PHOLDING / CONFIRMING THE ACTION OF TPO IN MAKING AN ADDITION OF RS. 87,8 3,915 TO THE TOTAL INCOME OF THE APPELLANT ON ACCOUNT OF THE SALES PROMOTION EXPENSES PAID BY THE APPELLANT TO ITS AES NAMELY APEX HOTEL MANAGEMENT S ERVICES I.E., AHMS (RS. 70,32,174/-) AND INTERNATIONAL HOTELS MANAGEME NT SERVICES I.E., IHMS (RS. 17,51,741/-) IN EXCESS OF THE ALLEGED ARM'S LE NGTH PRICE WITHOUT CONSIDERING THE DETAILS SUBMITTED BY THE ASSESSEE. AHMS REQUISITE CONDITION OF ISSUING SHOW CAUSE NOTICE U/ S 92C(3)- NOT SATISFIED ITA NO. 9087/MUM/2010 THE INDIAN HOTEL COMPANY 4 9) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED TPO ERRED IN AND THE HON'BLE DRP FURTHER ERRED IN C ONFIRMING THE ADJUSTMENT TO THE TOTAL INCOME OF THE APPELLANT IN RESPECT OF THE SALES PROMOTION EXPENSES OF RS. 70,32,1747- PAID TO ITS A E I.E. AHMS IN EXCESS OF THE ALLEGED ARMS LENGTH PRICE WITHOUT ISSUING A SHOW-CAUSE NOTICE BEFORE MAKING THE SAID ADDITION. IHMS REJECTION OF BENCHMARKING ANALYSIS AND APPELLANT AS THE TESTED PARTY WITHOUT GIVING COHERENT REASONS 10) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED TPO ERRED IN AND THE HON'BLE DRP FURTHER ERRED IN U PHOLDING / CONFIRMING THE ACTION OF THE TPO IN MAKING THE ADDITION OF RS. 17,51,7417- TO THE TOTAL INCOME OF THE APPELLANT ON ACCOUNT OF SALES PROMOTI ON EXPENSES PAID BY THE APPELLANT TO ITS AE I.E, IHMS IN EXCESS OF THE ALLE GED ARM'S LENGTH PRICE BY DISREGARDING THE BENCHMARKING ANALYSIS DONE BY THE APPELLANT USING TRANSACTIONAL NET MARGIN METHOD ('TNMM') AND ADOPTI NG AN ALTERNATIVE BENCHMARKING METHODOLOGY BY SELECTING IHMS AS THE T ESTED PARTY INSTEAD OF THE APPELLANT. DENIAL OF BENEFIT OF 5% RANGE 11) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED TPO ERRED AND THE HON'BLE DRP FURTHER ERRED IN UPHOLDING 7 CONFIRMING THE ACTION OF THE TPO IN DENYING THE \ BENEFIT OF 5 PERCENT FROM THE PRICE 7 ARITHMETIC MEAN OF THE MARGIN OF COMPARABLES V COMPANIES AS PROVIDED IN PROVISO TO SECTION 92C(2 ) OF THE ACT, WHILE COMPUTING THE ADJUSTMENTS TO THE TOTAL INCOME OF THE APPELLANT. REQUISITE CONDITIONS UNDER SECTION 92C(3) - NOT SATISFIED 12) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED TPO ERRED AND THE HON'BLE DRP FURTHER ERRED IN UPHO LDING 7 CONFIRMING THE ACTION OF THE TPO IN NOT STATING ANY REASONS TO SHO W THAT EITHER OF THE ITA NO. 9087/MUM/2010 THE INDIAN HOTEL COMPANY 5 CONDITIONS MENTIONED IN CLAUSES (A) TO (D) OF SECTI ON 92C(3) OF THE ACT WERE SATISFIED BEFORE MAKING AN ADJUSTMENT TO THE INCOME OF THE APPELLANT. B) GROUND NO. 13 TO 23 RELATE TO OTHER ADDITIONS/DISALLOWANCES OF RS. 27,85.36.376 BASED ON THE PROVISIONS OTHER JJIAN TH OSE CONTAINED IN CHAPTER X OF THE ACT. 13) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE HON'BLE DRP HAS LEGALLY ERRED IN NOT FOLLOWING THE DECISION OF HIGHER AUTHORITY RENDERED IN THE APPELLANT'S OWN CASE AND THEREBY ER RED IN NOT FOLLOWING PRINCIPLE OF JUDICIAL PROPRIETY. DISALLOWANCE OF INTEREST ON ADVANCES GIVEN TO GROUP COMPANIES 14) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED AO ERRED IN AND THE HON'BLE DRP FURTHER ERRED IN CO NFIRMING THE ACTION OF THE LEARNED AO IN MAKING INTEREST DISALLOWANCE OF R S. 25,52, 566/- IN RESPECT OF ADVANCES GIVEN TO GROUP COMPANIES OF THE APPELLANT. DISALLOWANCE OF INTEREST ON SHARE APPLICATION MONEY ALLOTMENT 15) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO ERRED IN AND THE HON'BLE DRP FURTHER ERR ED IN CONFIRMING THE ACTION OF THE LEARNED AO IN MAKING INTEREST DISALLO WANCE OF RS. 112,600 IN RESPECT OF SHARE APPLICATION OF RS. 20,00,0007-PEND ING ALLOTMENT. EXPENDITURE ON REPLACEMENT OF CARPET TREATED AS CA PITAL EXPENDITURE 1 6) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED AO ERRED IN AND THE HON'BLE DRP FURTHER ERR ED IN CONFIRMING THE ACTION OF THE LEARNED AO IN MAKING DISALLOWANCE OF RS. 1,51,75,9467- BEING EXPENDITURE ON REPLACEMENT OF CARPETS ON THE ALLEGED GROUND THAT THE SAME IS CAPITAL IN NATURE. EXPENDITURE ON REPLACEMENT OF LINEN TREATED AS CAPI TAL EXPENDITURE 1 7) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LEARNED AO ERRED IN AND THE HON'BLE DRP FURTHER ERR ED IN CONFIRMING THE ACTION OF THE LEARNED AO IN MAKING DISALLOWANCE OF RS. 4,30,17,2607- BEING EXPENDITURE ON REPLACEMENT OF LINEN ON THE AL LEGED GROUND THAT THE SAME IS CAPITAL IN NATURE. CARPET AND LINEN TREATED NOT TREATED AS PLANT AND MACHINERY FOR THE PURPOSE OF DEPRECIATION ITA NO. 9087/MUM/2010 THE INDIAN HOTEL COMPANY 6 18} WITHOUT PREJUDICE TO GROUNDS NOS. 16 AND 17, AND PURELY IN THE ALTERNATIVE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO ERRED IN AND THE HON'BLE DRP FURTHER ERR ED IN CONFIRMING THE ACTION OF THE LEARNED AO IN GRANTING DEPRECIATION O N REPLACEMENT OF LINEN AND CARPETS AT THE RATE APPLICABLE TO FURNITURE AND FIXTURES, THEREBY ALLOWING DEPRECIATION ONLY @ 10%, INSTEAD OF TREATING LINEN AND CARPETS AS INCOME EARNING APPARATUS ELIGIBLE FOR DEPRECIATION @ 15%. REJECTION OF LOSS ARISING ON ACCOUNT OF FOREIGN EXC HANGE FLUCTUATION 19) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO ERRED IN AND THE HON'BLE DRP FURTHER ERR ED IN NOT CONSIDERING THE SUBMISSION OF THE ASSESSEE THAT GAINS ARISING O N ACCOUNT OF FOREIGN EXCHANGE FLUCTUATION IN RESPECT OF SHAREHOLDERS DEP OSIT PLACED BY THE APPELLANT WITH ITS WHOLLY OWNED SUBSIDIARY VIZ. TAJ INTERNATIONAL H.K. LIMITED (TIHK') IS NOT TAXABLE. ALTERNATIVELY AND W ITHOUT PREJUDICE, THE LEARNED AO AND THE HON'BLE DRP OUGHT TO HAVE ALLOWE D THE LOSS ARISING ON ACCOUNT OF SUCH FOREIGN EXCHANGE FLUCTUATION. DISALLLOWANCE UNDER SECTION_L4A 20) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, AS AGAINST THE DISALLOWANCE OF RS. 2,00,01,8337- COMPUTED BY A PPELLANT UNDER SECTION 14A OF THE ACT, THE LEARNED AO ERRED IN PROPOSING D ISALLOWANCE OF RS. 6,39,10,8167- AND THE HON'BLE DRP FURTHER ERRED IN UPHOLDING 7 CONFIRMING THE SAID DISALLOWANCE TO THE EXTENT OF RS. 6,20,00, 0007- WHICH WAS FURTHER WRONGLY COMPUTED BY AO AT RS, 14,80,00,0007- (I.E., RS. 5,49,00,0007- ON ACCOUNT OF INTEREST AND RS. 9,31,00,000 ON ACCOUNT OF EXPENSES) AND SAID DISALLOWANCE OF RS. 12,79,98,167/-(I.E., AFTER RED UCING THE DISALLOWANCE OF RS. 2,00,01,8837- MADE BY APPELLANT ITSELF IN ITS C OMPUTATION OF INCOME) IS WHOLLY UNJUSTIFIED AND LIABLE TO BE DELETED. PREMIUM ON REDEMPTION OF FOREIGN CURRENCY CONVERTIB LE BONDS 21) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO ERRED IN AND THE HON'BLE DRP FU RTHER ERRED IN CONFIRMING THE ACTION OF THE LEARNED AO IN MAKING THE A DDITION OF RS. 859,34,837 BEING PRO RATA PREMIUM ON REDEMPTION OF FOREIGN CUR RENCY CONVERTIBLE BONDS ITA NO. 9087/MUM/2010 THE INDIAN HOTEL COMPANY 7 RESULTING INTO DOUBLE TAXATION AS THE APPELLANT HAD ALREADY OFFERED THE SAME FOR TAXATION IN ITS COMPUTATION OF TOTAL INCOME. NOTIONAL INTEREST ON _DEPOSITS WITH TAJ KARNATAKA L TD 22) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO ERRED IN AND THE HON'BLE DRP FURTHER ERR ED IN CONFIRMING THE ACTION OF THE LEARNED AO IN MAKING THE ADDITION OF NOTIONAL INTEREST INCOME OF RS.37,45,00 0 IN RESPECT OF THE DEPOSIT PLACED WITH | TAJ KARNATAKA LTD. LEVY OF INTEREST UNDER SECTION 234B ND 234D 23) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED AO ERRED IN LEVYING INTEREST UNDER SECTION 234B AND 234D OF THE ACT AND SAID LEVY OF INTEREST BEING WHOLLY UNJUSTIF IED IS LIABLE TO BE DELETED. LACK OF ADEQUATE OPPORTUNITY 24) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED TPO, THE LEARNED AO AND HON'BLE DRP ERRED I N NOT GRANTING REASONABLE AND ADEQUATE OPPORTUNITY TO THE APPELLAN T BEFORE PASSING THEIR ORDERS/DIRECTIONS UNDER SECTIONS 92CA(3), 144C(1) A ND 144C(5) OF THE ACT AND THE SAID ORDERS/DIRECTIONS BEING PASSED IN VIOL ATION OF THE PRINCIPLES OF NATURAL JUSTICE ARE LIABLE TO BE QUASHED. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E FILED RETURN OF INCOME FOR A.Y. 2006-07 ON 28-11-2006 DECLARING TOT AL INCOME OF RS.2,54,12,53,961. SUBSEQUENTLY, THE ASSESSEE FILE D REVISED RETURN OF INCOME DECLARING THE SAME TOTAL INCOME ON 28-03-200 8. ALONG WITH THE RETURN OF INCOME, THE ASSESSEE FURNISHED FORM NO.3C EB, REPORTING INTERNATIONAL TRANSACTION WITH ITS ASSOCIATED ENTER PRISES (AES). THE ASSESSING OFFICER (AO) MADE REFERENCE TO THE TRANSF ER PRICING OFFICER (TPO) FOR COMPUTATION OF ARMS LENGTH PRICE (ALP). THE TPO, AFTER GIVING ITA NO. 9087/MUM/2010 THE INDIAN HOTEL COMPANY 8 OPPORTUNITY TO THE ASSESSEE MADE THE FOLLOWING ADJU STMENT OF INTERNATIONAL TRANSACTION:- SR. TRANSACTION ADJ. AMOUNT (RS.) I) IN RESPECT OF INTEREST ON LOAN 24,45,05,589 II) IN RESPECT OF LETTER OF COMFORT PROVIDED 6,66,408 III) IN RESPECT OF SALES PROMOTION SERVICES (AHMS) 70,32,174 IV) IN RESPECT OF SALES PROMOTION SERVICES (IHMS) 17,51,741 TOTAL 25,39,55,912 ON THE BASIS OF ADJUSTMENT SUGGESTED BY TPO, THE AO PASSED DRAFT ASSESSMENT. THE AO MADE ADJUSTMENT SUGGESTED BY TPO AND ALSO MADE VARIOUS ADDITIONS AND DISALLOWANCES IN THE DRAFT AS SESSMENT ORDER DATED 29-12-2009. THE ASSESSEE WAS SERVED WITH THE COPY OF DRAFT ASSESSMENT ORDER. THE ASSESSEE EXERCISED ITS OPTION TO FILE I TS OBJECTION BEFORE THE DISPUTE RESOLUTION PENAL (DRP). THE LD.DRP, VIDE I TS ORDER DATED 26-09- 2010 UPHELD VARIOUS ADDITIONS MADE IN THE DRAFT ASS ESSMENT ORDER. ON RECEIPT OF DIRECTION OF DRP, THE AO PASSED THE FINA L ASSESSMENT ORDER U/S 143(3) R.W.S. 144C(13) OF THE INCOME-TAX ACT, 1961. AGGRIEVED BY VARIOUS ADDITIONS, THE ASSESSEE HAS FILED PRESENT APPEAL BE FORE THIS TRIBUNAL. 3. WE HAVE HEARD THE LD. AUTHORISED REPRESENTATIVE (AR) OF THE ASSESSEE AND LD. DEPARTMENTAL REPRESENTATIVE (DR) F OR THE REVENUE AND WITH THEIR ASSISTANCE PERUSED THE MATERIAL AVAILABL E ON RECORD. ITA NO. 9087/MUM/2010 THE INDIAN HOTEL COMPANY 9 4. GROUND 1 IS GENERAL AND NEEDS NO SPECIFIC ADJUD ICATION. GROUND NO. 2 TO 4 RELATES TO ADDITION ON ACCOUNT OF ADJUSTMENT OF ARM S LENGTH PRICE OF INTEREST CHARGED ON LOAN GIVEN TO AE. THE LD.AR OF THE ASSESSEE SUBMITS THAT THIS GROUND OF APPEAL IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2005-06 IN ITA NO.841/MUM/2010 DATED 31.01.2018. THE DRP WHILE CO NFIRMING THE ACTION OF TPO FOLLOWED THE ORDER OF CIT(A) FOR AYS 2003-04 TO 2004-05 & 2005-06, WHICH HAS BEEN BY THE TRIBUNAL IN FAVOUR O F ASSESSEE HOLDING THAT THE LIBOR IS ACCEPTABLE ARMS LENGTH INTEREST RATE. 5. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SU PPORTED THE ORDER OF LOWER AUTHORITIES. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE P ARTIES AND HAVE GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE H AVE NOTED THAT THE CO- ORDINATE BENCH OF TRIBUNAL IN ASSESSEES OWN CASE F OR AY 2005-06 IN ITA NO.841/MUM/2010 DATED 31-01-2018 PASSED THE FOLLOWI NG ORDER:- 20. GROUND NO. 7 OF THE REVENUES APPEAL IS AGAINS T THE ACTION OF LD. CIT (A) IN DELETING THE ADDITION OF RS. 12,60,80,369/- BEIN G ADJUSTMENT ON ACCOUNT OF INTEREST CHARGED ON LOAN GIVEN BY THE ASSESSEE T O ITS ASSOCIATE ENTERPRISE M/S TAJ INTERNATIONAL HONGKONG LTD. THE LD. DR SUBM ITTED THAT THE ASSESSEE HAD GRANTED LOAN TO TAJ ASIA LTD. TO THE TUNE OF 1. 5 MILLION USD AND TO TAJ INTERNATIONAL HOTELS (UK) LTD. TO THE TUNE OF 2.362 MILLION USD, 90 MILLION USD AND 32 MILLION USD. THE AO HAS RIGHTLY FOLLOWED THE ORDER OF TPO AND HELD THAT THE INTEREST CHARGED ON LOAN GIVEN TO TIH K IS NOT AT ARMS LENGTH ITA NO. 9087/MUM/2010 THE INDIAN HOTEL COMPANY 10 AND HAS RIGHTLY CONFIRMED THE ADJUSTMENT OF RS. 12, 60,80,369/- MADE TO THE VALUE OF THE INTERNATIONAL TRANSACTION IN QUESTION. 21. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE TRANSACTION WAS REPORTED IN FORM 3CEB OF THE F.Y. 2 004-05 AND THE SAME WERE MADE WITH THE APPROVAL OF THE RESERVE BANK OF INDIA. THE LD. COUNSEL FURTHER SUBMITTED THAT IN THE ASSESSEES OWN CASE I TA NO. 6712/MUM/08 AND 2678/MUM/09 FOR THE A.YS. 2003-04 AND 2004-05 R ESPECTIVELY. THE ITAT HAS HELD THAT LIBOR IS ACCEPTABLE ARMS LENGTH INTEREST RATE. THE LD. COUNSEL FURTHER RELIED ON THE DECISIONS OF THE HON BLE BOMBAY HIGH COURT RENDERED IN TATA AUTOCOMP SYSTEMS LTD. 276 CTR 481 (BOM) AND M/S AURINPRO SOLUTIONS LTD. ITA NO. 1869 OF 2014 (MUM) AND HONBLE DELHI HIGH COURT RENDERED IN M/S COTTON NATURALS (1) PVT. LTD. 276 CTR 445 (DEL). 22. WE NOTICE THAT THIS ISSUE HAS BEEN DEALT BY THE COORDINATE BENCH IN ASSESSEES OWN CASE FOR THE A.Y. 2003-04 HOLDING AS UNDER:- 27 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND AL SO PERUSED THE RELEVANT MATERIAL ON RECORD. AS REGARDS THE ISSUE R ELATING TO ARMS LENGTH RATE OF INTEREST CHARGED BY THE ASSESSEE COM PANY TO ITS AE ON THE OUTSTANDING INTEREST, IT IS OBSERVED THAT THE S AME IS SQUARELY COVERED BY THE DECISION OF CO-ORDINATE BENCH OF THI S TRIBUNAL RENDERED IN THE CASE OF HINDUJA GLOBAL SOLUTIONS LT D. VS. ACIT VIDE ITS ORDER DTD. 5TH JUNE, 2013 IN ITA NO. 254/MUM/2013 W HEREIN IT WAS HELD, FOLLOWING THE DECISION OF DELHI BENCH OF THIS TRIBUNAL IN THE CASE OF COTTON NATURAL (I) P. LTD. VS. DCIT, THAT THE CU P METHOD IS THE MOST APPROPRIATE METHOD TO DETERMINE THE ARMS LENGTH RA TE OF INTEREST OF THE INTERNATIONAL TRANSACTION INVOLVING LENDING OF MONEY BY THE ASSESSEE COMPANY IN FOREIGN CURRENCY TO ITS AE AND LIBOR BEING INTER- BANK RATE FIXED FOR THE INTERNATIONAL TRANSACTION H AS TO BE ADOPTED AS ARMS LENGTH RATE. RESPECTFULLY FOLLOWING THIS DECI SION OF THE CO- ORDINATE BENCH OF THIS TRIBUNAL, WE UPHOLD THE IMPU GNED ORDER OF THE LD. CIT (A) DELETING THE ADDITION MADE BY THE A.O./ TPO IN RESPECT OF INTERNATIONAL TRANSACTION INVOLVING INTEREST CHARGE D BY THE ASSESSEE ON OUTSTANDING INTEREST FROM ITS AE. 23. SINCE, THIS ISSUE HAS ALREADY BEEN DECIDED IN F AVOUR OF THE ASSESSEE IN THE ASSESSEES OWN CASE FOR THE A.Y. 2003-04 AND 20 04-05 AFORESAID BY THE ITAT HOLDING THAT THE LIBOR IS ACCEPTABLE ARMS LEN GTH INTEREST RATE, WE RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINA TE BENCH DECIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE AND DISMISS THIS GROUND O F APPEAL OF THE REVENUE. ITA NO. 9087/MUM/2010 THE INDIAN HOTEL COMPANY 11 7. CONSIDERING THE DECISION OF TRIBUNAL FOR AY 2005 -06 WHEREIN THE TRIBUNAL HAS FOLLOWED THE EARLIER ORDER FOR AYS 200 3-04 TO 2004-05, THESE GROUNDS OF APPEAL ARE ALLOWED IN FAVOUR OF THE ASSE SSEE. 8. GROUNDS 5 TO 7 RELATE TO NON CHARGING OF FEES FROM AE FOR PROVIDING LETTER OF COMFORT. THE LD.AR OF THE ASSESSEE SUBMI TS THAT THESE GROUNDS OF APPEAL ARE ALSO COVERED BY THE DECISION OF TRIBUNAL FOR AY 2005-06 WHEREIN THE TRIBUNAL FOLLOWED THE ORDER FOR AYS 200 3-04 AND 2004-05. 9. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE SU PPORTED THE ORDER OF LOWER AUTHORITIES. 10. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND SEEN THAT ON SIMILAR GROUNDS OF APPEAL, THE CO-ORDINATE BENCH OF TRIBUNAL IN ASSESSEES OWN CASE FOR AYS 2003-04 AND 2004-05 HAS PASSED THE FOLLOWING ORDER:- 24. GROUND NO. 8 PERTAINS TO NON CHARGING GUARANTE E FEES FROM AES BY PROVIDING LETTER OF COMFORT TO THE BANK FOR THE LOA N GRANTED TO THE AE. THE LD. DEPARTMENTAL REPRESENTATIVE RELYING ON THE ASSE SSMENT ORDER SUBMITTED THAT AO HAS RIGHTLY CONFIRMED THE ORDER O F TPO THAT THE TRANSACTION OF GIVING UNDERTAKING I.E. LETTER OF CO MFORT TO THE BANKS FOR LOANS GRANTED TO AES IS AN INTERNATIONAL TRANSACTIO N. THE LD. CIT (A) HAS WRONGLY HELD THAT THE APPELLANT HAS NO INTENTION OF TAKING ANY OBLIGATION OF LIABILITY TO REPAY THE LOANS IN CASE ITS SUBSIDI ARIES UNABLE TO REPAY THE SAME. THE INTENTION OF THE ASSESSEE IN ISSUING THE LETTER OF COMFORT WAS MERELY TO CONFIRM THE AFFILIATION OF SUBSIDIARIES A ND ISSUED AS A PART OF ITS SHAREHOLDERS ACTIVITIES. ITA NO. 9087/MUM/2010 THE INDIAN HOTEL COMPANY 12 25. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE SUBMITTED THAT THE LETTER OF COMFORT WAS GIVEN BY THE ASSESSEE COMPANY TO ITS AES TO AVAIL LOAN FROM FINANCIAL INSTITUTIONS, WHICH IS OUTSIDE THE AMBIT OF INTERNATIONAL TRANSACTION. THE LD. COUNSEL RELYING ON THE DECISIO N OF HONBLE KARNATAKA HIGH COURT PASSED IN M/S UNITED BRAVERIES (HOLDINGS LTD.) VS. KARNATAKA ESTATE INDUSTRIAL INVESTMENT AND DEVELOPMENT CORPOR ATION LTD. MFA NO. 4243 OF 2007 IN WHICH IT HAS BEEN HELD THAT THE LET TER OF COMFORT MERELY INDICATES THE APPELLANTS ASSURANCE THAT THE RESPON DENT WOULD COMPLY THE TERMS OF FINANCIAL TRANSACTIONS WITHOUT GUARANTEEIN G PERFORMANCE IN THE EVENT OF DEFAULT. 26. WE HAVE HEARD THE RIVAL SUBMISSIONS SINCE THE A SSESSEE HAS NOT BOND ITSELF FOR REPAYING THE LOANS IN THE EVENT OF DEFAU LT BY THE AES, THE ISSUE IS COVERED BY THE LAW LAID DOWN BY THE HONBLE KARNATA KA HIGH COURT IN THE CASE OF UNITED BRAVERIES HOLDINGS LTD. (SUPRA). MOR EOVER, THE CHENNAI BENCH OF THE ITAT IN TVS LOGISTICS SERVICES LTD. (2 016) 72 TAXMANN.COM 89 (CHENNAI TRIB) HAS HELD THAT THE LETTER OF COMFORT IS OUTSIDE THE AMBIT OF INTERNATIONAL TRANSACTION. HENCE, FOLLOWING THE DEC ISIONS OF THE HONBLE KARNATAKA HIGH COURT AND THE CHENNAI TRIBUNAL, WE H OLD THAT THE LETTER OF COMFORT ISSUED BY THE ASSESSEE IN THIS CASE IS OUTS IDE THE AMBIT OF INTERNATIONAL TRANSACTION. WE, THEREFORE, DISMISS T HIS GROUND OF APPEAL OF THE REVENUE. 11. CONSIDERING THE DECISION OF TRIBUNAL FOR AY 200 5-06 WHEREIN THE TRIBUNAL HAS FOLLOWED THE EARLIER ORDER FOR AYS 200 3-04 TO 2004-05, THEREFORE RESPECTFULLY FOLLOWING THE ORDER OF THE C OORDINATE BENCH OF THE TRIBUNAL, THESE GROUNDS OF APPEAL ARE ALLOWED IN FA VOUR OF THE ASSESSEE. 12. GROUNDS 8 TO 10 RELATES TO DISALLOWANCE OF SALES PROMOTION EXPENSES. THE LD.AR OF THE ASSESSEE SUBMITS THAT T HE TPO MADE ADHOC AND ARBITRARY ADJUSTMENT WHICH IS NOT PERMISSIBLE. THE LD AR FOR THE ITA NO. 9087/MUM/2010 THE INDIAN HOTEL COMPANY 13 ASSESSEE SUBMITS THAT THIS GROUND OF APPEAL IS COVE RED BY THE ORDER OF TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2003-04 AND 2004-5 IN ITA NO.6712/M/2010 & 2678/M/2009. THE LD. COUNSEL OF TH E ASSESSEE ALSO PLACED RELIANCE N THE FOLLOWING DECISIONS:- 1. FIRMENICH AROMATICS INDIA P LTD VS DCIT ITA NO.2590/MUM/2017 2. CIT VS JOHNSON & JOHNSON LTD (ITA NO.1030 OF 20 14)(BOM HC) 3. DCIT VS RAK CERAMICS I.P. LTD (ITA NO.595 O 201 6)(BOM HC) 4. KOSDAK INDIA P LTD VS ACIT (ITA NO.7349/MUM/201 2 13. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE S UPPORTED THE ORDER OF LOWER AUTHORITIES. 14. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND SEEN THAT IN ASSESSEES OWN CASE FOR AY 2003-04 & 2004-0 5 IN ITA NO. 6712/M/2010 & 2678/M/2009 DATED 09.04.2014 THE TRI BUNAL PASSED FOLLOWING ORDER; 29. AS REGARDS THE INTERNATIONAL TRANSACTION INVOLV ING AVAILING SERVICES BY ASSESSEE COMPANY FROM ITS AE IN US FOR SALES PROMOT ION SERVICES, IT IS OBSERVED THAT THE SAME WERE BENCHMARKED IN THE TP STUDY REPO RT SUBMITTED BY THE ASSESSEE BY FOLLOWING TNMM. THE ASSESSEE COMPANY WA S TAKEN AS TESTED PARTY AND SINCE ITS PROFIT MARGIN EARNED FROM THE RELEVAN T TRANSACTION AT 8.75% WAS HIGHER THAN THE AVERAGE PROFIT MARGIN OF 2.36% OF T HE INDIAN COMPARABLE COMPANIES, THE PRICE CHARGED FOR THESE TRANSACTIONS TO ITS AE WAS CLAIMED TO BE AT ALP. IT IS OBSERVED THAT THE TPO, HOWEVER, TO OK THE AE OF ASSESSEE COMPANY IN US AS TESTED PARTY WITHOUT GIVING ANY CO NVINCING REASON TO JUSTIFY THIS ACTION MADE THE TP ADJUSTMENT ON THE BASIS OF HIGHER MARGIN EARNED BY ITA NO. 9087/MUM/2010 THE INDIAN HOTEL COMPANY 14 COMPARABLE COMPANY US. AS FOUND BY THE LEARNED CIT( A) IN HIS IMPUGNED ORDER, THE RELEVANT ART OF THE US COMPARABLE COMPAN IES WAS INCOMPLETE AND UNRELIABLE TO JUSTIFY THE TP ADJUSTMENT MADE BY THE AO/TPO AND THIS FINDING RECORDED BY THE LEARNED CIT(A) HAS NOT BEEN REBUTTE D OR CONTRIBUTED BY THE LEARNED DR. THE LEARNED DR HAS ALSO NOT BEEN ABLE T O POINT OUT ANY REASON GIVEN BY THE AO/TPO TO JUSTIFY THE CHANGE OF TESTE D PARTY FROM THE ASSESSEE COMPANY TO THE AE IN US. WE, THEREFORE, FIND NO JUS TIFIABLE REASON TO INTERFERE WITH THE IMPUGNED ORDER OF THE LEARNED CIT(A) DELET ING THE TP ADJUSTMENT MADE BY THE AO/TPO IN RESPECT OF THE INTERNATIONAL TRANSACTION INVOLVING AVAILING OF SALES PROMOTION SERVICES BY THE ASSESSE E FROM ITS AE IN US. GROUND NO. 6 OF REVENUES APPEAL FOR A WAY TO THOUSAND 3-4 IS ACCORDINGLY TREATED AS PARTLY ALLOWED FOREST ETHICAL PURPOSE. 15. CONSIDERING THE DECISION OF THE TRIBUNAL, WHERE IN ON SIMILAR ADJUSTMENT THE ORDER OF THE LEARNED CIT(A) FOR AY 2 003-04 WAS AFFIRMED, THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF TR IBUNAL THE GROUND NO. 8 TO 10 ARE ALLOWED WITH SIMILAR DIRECTIONS. IN THE R ESULT THESE GROUNDS OF APPEAL ARE DISMISSED. 16. GROUND NO. 11 RELATES TO DENIAL OF 5% BENEFIT RATE AND GROUND NO.12 RELATES TO NON COMPLIANCE OF CONDITIONS OF SECTION 92C(3). THESE GROUNDS OF APPEAL WERE NOT PRESSED BY LD AR FOR THE ASSESSE E HENCE, DISMISSED. 17. GROUND 13 PERTAINS TO DISALLOWANCE OTHER THAN THOSE CONTAINE D UNDER CHAPTER X. THIS GROUND IS GENERAL IN NATURE, THUS NEEDS NO SPECIFIC ADJUDICATION. 18. GROUND 14 PERTAINS TO DISALLOWANCE OF INTEREST ON ADVANCES TO SUBSIDIARY AND GROUP COMPANY. THE LD.AR OF THE ASS ESSEE SUBMITTED THAT ITA NO. 9087/MUM/2010 THE INDIAN HOTEL COMPANY 15 THE ISSUE STANDS DECIDED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE FOR 2005-06 IN ITA NO.841/MUM/2010, WHICH IN TURN, RELIED UPON THE DECISIONS OF THE TRIBUNAL FOR AY 2003-04 AND 2004-0 5 ( ITA NO. 6712/M/2008 &2678/M/09). 19. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE S UPPORTED THE ORDER OF LOWER AUTHORITIES. 20. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND PERUSED THE RECORD. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS ADVANCED LOAN OF RS. 3,50,00,000/- TO M/S KTC HOTEL LTD AND RS. 1,0336,844/- TO TAIDA TRADING INDUSTRIES LTD. WE HAVE NOTED THAT ON IDENTICAL GROUND OF APPEAL IS ASSESSEES OWN CASE F OR AY 2005-06 IN ITA NO. 841/M/2010, BY FOLLOWING THE ORDER IN AY 2003-04 &2 004-5 THE TRIBUNAL PASSED THE FOLLOWING ORDER: 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD INCLUDING THE DECISION OF COORDINATE BENCH. WE NOTI CED THAT THE COORDINATE BENCH HAD SET ASIDE THE FINDING OF LEARNED CIT(A) SO FAR AS THE ADVANCES MADE TO TADIA TRADING AND INDUSTRIES LTD IS CONCERNED. AS REGARDS THE ADVANCES MADE TO KTC HOTELS LTD, THE TRIBUNAL HAS HELD THAT THERE IS NO JUSTIFICATION IN MAKING DISALLOWANCE IS OF INTEREST ATTRIBUTABLE TO ASSESSE ES OWN SUBSIDIARY COMPANY. DURING THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE ADVANCED 4,79,630/- TO TAIDA TRADING AND INDUSTRIES LTD AND 18,42,036/- TO KTC HOTELS LTD. SINCE, THIS ISSUE HAS BEEN DEALT WITH BY THE C OORDINATE BENCH IN ASSESSEES OWN CASE FOR AYS 2003-04 AND 2004-5, WE RESPECTFULLY FO LLOWING THE DECISION OF THE COORDINATE BENCH PARTLY ALLOWED THIS GROUND OF APPE AL AND SET ASIDE THE IMPUGNED ITA NO. 9087/MUM/2010 THE INDIAN HOTEL COMPANY 16 ORDER PASSED BY LEARNED CIT(A) IN RESPECT OF ADVANC E TO M/S TAIDA TRADING AND INDUSTRIES LTD AND UPHOLD THE ORDER DELETING THE DI SALLOWANCE MADE BY AO IN RESPECT OF ADVANCE GIVEN TO M/S KTC HOTLES LTD AO I S DIRECTED TO RECOMPUTE THE DISALLOWANCE OF INTEREST IN TERMS OF THE SAID ORDER . 21. CONSIDERING THE ORDER OF THE TRIBUNAL IN ASSE SSEES OWN CASE AND RESPECTFULLY FOLLOWING THE SAME, WE DIRECT THE AO T O DELETE DISALLOWANCE OF INTEREST IN RESPECT OF ADVANCES TO TAIDA TRADING AND INDUSTRIES LTD AND RECOMPUTE THE DISALLOWANCE OF INTEREST IN RESPECT O F LOAN TO KTC HOTEL AS PER THE DIRECTION OF THE TRIBUNAL IN EARLIER YEARS. IN THE RESULT THIS GROUND OF APPEAL IS PARTLY ALLOWED. 21 GROUND 15 PERTAINS TO DISALLOWANCE OF INTEREST ON SHARE APPL ICATION MONEY PENDING ALLOTMENT. THE LD.AR OF THE ASSESSEE SUBMITTED THAT THE ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE FOR 2005- 06 IN ITA NO.841/MUM/2010, WHICH IN TURN, RELIED UP ON THE DECISIONS OF THE TRIBUNAL FOR AY 2003-04 AND 2004-05 22. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE S UPPORTED THE ORDER OF LOWER AUTHORITIES. 23. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND HAVE NOTED THAT SIMILAR GROUND OF APPEAL THE TRIBUNAL IN ASSES SEES OWN CASE IN AY 2005-06 ON IDENTICAL GROUNDS PASSED THE FOLLOWING O RDER. 8. WE NOTICED THAT THE COORDINATE BENCH HAS DECIDED THIS ISSUE IN FAVOUR OF ASSESSEE IN ASSESSEE OWN CASE FOR AY 2003-04, ITA N O. 6712/MUM/2008 AND AY ITA NO. 9087/MUM/2010 THE INDIAN HOTEL COMPANY 17 2004-05, ITAS NO. 2678/MUM/ 2009. THE FINDINGS OF O RNATE BENCH ARE REPRODUCED AS UNDER:- 8. WE HAVE HEARD THE ARGUMENTS OF BOTH TH E SIDES AND ALSO PRODUCE THE RELEVANT MATERIAL PLACED ON RECORD. AS AGREED BY TH E LEARNED A PERCENTAGE OF BOTH THE SIDES, THIS ISSUE IS SQUARELY COVERED IN F EAR OF ASSESSEE BY THE DECISION OF TRIBUNAL RENDERED IN ASSESSEES OWN CASE FOR EAR LIER YEARS. IN AY 1995-96, IT WAS HELD BY THE TRIBUNAL WIDE ITS ORDER DATED 12 SE PTEMBER 2006 PASSED IN ITA NO. 2527/MUM/2002 THAT THERE BEING NO DIVERSION OF INTEREST-BEARING FUNDS FOR NON-BUSINESS PURPOSE AS ALLEGED BY THE AO , THERE WAS NO JUSTIFICATION IN MAKING ANY DISALLOWANCE ON ACCOUNT OF INTEREST PAID ON THE BORROWED FUNDS. IT WAS NOTED BY TRIBUNAL THAT THE S HARE APPLICATION MONEY WAS FINALLY RETURNED TO THE ASSESSEE WITH INTEREST @ 19% AND THE INTEREST SO RECEIVED WAS DULY OFFERED BY THE ASSESSEE IN THE RE LEVANT YEAR. SIMILAR VIEW HAS BEEN TAKEN BY THE TRIBUNAL IN SUBSEQUENT YEARS I.E. ASSESSMENT YEAR 1996- 97 TO 2002-03. AS THE ISSUE INVOLVED IN THE YEAR UN DER CONSIDERATION AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO THE EARLIER YEARS, WE RESPECTFULLY FOLLOW THE ORDER OF THE TRIBUNAL FOR T HE SAID YEARS AND UPHOLD THE IMPUGNED ORDER OF LEARNED CIT(A) GIVING RELIEF TO T HE ASSESSEE ON THIS ISSUE. 24. CONSIDERING THE DECISION OF TRIBUNAL, WHICH IS CONSISTENTLY FOLLOWED FROM THE ASSESSMENT YEAR 1996-97 ONWARDS, NO VARIA TION OF FACTS IS BROUGHT TO NOTICE THEREFORE RESPECTFULLY FOLLOWING THE DECISION OF COORDINATE BENCH THE GROUND OF APPEAL RAISED BY ASS ESSEE IS ALLOWED. 25. GROUNDS 16 & 18 PERTAIN TO EXPENDITURE ON REPLACEMENT OF CARPET. THE ASSESSEE ALSO RAISED AN ALTERNATIVE GROUND THAT WITHOUT PREJUDICE DEPRECIATION SHOULD BE ALLOWED @15% INSTEAD OF 10% ALLOWED BY THE AO FOR CARPET. THE LD.AR OF THE ASSESSEE SUBMITTED TH AT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL FOR AY 2005 -06 IN ITA ITA NO. 9087/MUM/2010 THE INDIAN HOTEL COMPANY 18 NO.841/MUM/2010 & WHICH FOLLOWED THE ORDER OF TRIBU NAL FOR AYS 2003- 04 & 2004-05 IN ITA NO. 6712/MUM/2008 & 2678/MUM/20 09.S 26. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE S UPPORTED THE ORDER OF LOWER AUTHORITIES. 22. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND HAVE NOTED THAT SIMILAR GROUND OF APPEAL THE TRIBUNAL IN ASSES SEES OWN CASE IN AY 2003-04 &2004-05 IN ITA NO. 6712/MUM/2008, 2678/MUM /20119, WHICH WAS FOLLOWED BY TRIBUNAL IN AY 2005-06 IN ITA NO.84 1/MUM/2010 DATED 31.01.2018 ON IDENTICAL GROUNDS PASSED THE FOLLOWIN G ORDER:- 12. WE NOTICE THAT COORDINATE BENCH HAS DECIDE D THIS ISSUE AND FAIR OF ASSESSEE IN THE ASSESSEES OWN CASE FOR AYS 1992-93 AFORESAID BY FOLLOWING THE DECISION OF ITAT IN CASE OF PIEM HOTLES LTD FOR AYS 1991-92, 1995 - 96, 1993 - 94, 1986 - 87, 1988 - 89 TO 1990 - 91 AND 1994-95. APART FROM THE DECISION OF THE COORDINATE BENCH THE LEARNED COUNSEL FOR THE AS SESSEE RELIED UPON THE DECISION OF HONBLE RAJASTHAN HIGH COURT RENDERED I N CIT VERSUS LAKE PALACE HOTEL AND MOTELS PRIVATE LIMITED 258 ITR 562 (RAJ). SINCE, THIS ISSUE HAS ALREADY BEEN DECIDED IN FAVOUR OF ASSESSEE, WE RESPECTFULLY FOLLOWING THE DECISION OF COORDINATE BENCH UPHOLD THE FILING OF LEARNED CIT(A ) AND DISMISSED THIS GROUND OF APPEAL OF THE REVENUE. 27. CONSIDERING THE DECISION OF THE TRIBUNAL, WHICH IS CONSISTENTLY FOLLOWED IN ALL YEARS, THUS, RESPECTFULLY FOLLOWING THE SAME THESE GROUNDS OF APPEALS ARE ALLOWED. SINCE, WE HAVE ALLOWED THE MAIN GROUND S THEREFORE THE DISCUSSION ON ALTERNATIVE GROUND OF APPEAL FOR ALLO WING DEPRICIATION HAS BECOME ACADEMIC. ITA NO. 9087/MUM/2010 THE INDIAN HOTEL COMPANY 19 28 GROUNDS 17 & 18 RELATES TO EXPENDITURE ON REPLACEMENT OF LINEN. THE ASSESSEE ALSO RAISED AN ALTERNATIVE GROUND THAT WITHOUT PREJUDICE, ALLOWANCE OF DEPRECIATION @15% AND NOT 10% FOR LINE N. THE LD.AR OF THE ASSESSEE SUBMITTED THAT THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL FOR AY 2005-06 IN ITA NO.841/MUM/20 10 & WHICH FOLLOWED THE ORDER OF TRIBUNAL FOR AYS 2003-04 & 2004-05 IN ITA NO. 6712/MUM/2008 & 2678/MUM/2009. 29. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE S UPPORTED THE ORDER OF LOWER AUTHORITIES. 30. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND HAVE NOTED THAT IDENTICAL GROUND OF APPEAL THE TRIBUNAL IN AS SESSEES OWN CASE IN AY 2003-04 &2004-05 IN ITA NO. 6712/MUM/2008, 2678/MUM /20119, WHICH WAS FOLLOWED BY TRIBUNAL IN AY 2005-06 IN ITA NO.84 1/MUM/2010 DATED 31.01.2018 ON IDENTICAL GROUNDS PASSED THE FOLLOWIN G ORDER:- 15. WE NOTICE THAT COORDINATE BENCH HAS DECIDED T HIS ISSUE IN FEAR OF THE ASSESSEE IN ASSESSEES OWN CASE REPORT OF THE LIST HENCE, RESPECTFULLY FOLLOWING THE DECISION OF COORDINATE BENCHES AFORESAID, WE UP HOLD THE FINDING OF LEARNED CIT(A) AND DISMISSED THIS GROUND OF APPEAL OF THE R EVENUE . 31. CONSIDERING THE DECISION OF THE TRIBUNAL, WHICH IS CONSISTENTLY FOLLOWED IN ALL YEARS, THUS, RESPECTFULLY FOLLOWING THE SAME THESE GROUNDS OF APPEALS ARE ALLOWED. SINCE, WE HAVE ALLOWED THE MAIN GROUND S THEREFORE THE ITA NO. 9087/MUM/2010 THE INDIAN HOTEL COMPANY 20 DISCUSSION ON ALTERNATIVE GROUND OF APPEAL FOR ALLO WING DEPRICIATION HAS BECOME ACADEMIC. 32. GROUND 19 PERTAINS TO ADJUSTMENT ON ACCOUNT OF DIFFERENCE ON RATE OF FOREIGN EXCHANGE ON DEPOSIT PLACED WITH WOS (TIH K). THE LD.AR OF THE ASSESSEE SUBMITTED THAT THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE TRIBUNAL FOR AY 200 5-06 IN ITA NO.841/MUM/2010. 32. ON THE OTHER HAND, THE LD.DR FOR THE REVENUE SU PPORTED THE ORDER OF LOWER AUTHORITIES. 33. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND HAVE NOTED THAT IDENTICAL GROUND OF APPEAL THE TRIBUNAL IN AS SESSEES OWN CASE IN AY 2005-06 IN ITA NO.841/MUM/2010 DATED 31.01.2018 ON IDENTICAL GROUNDS PASSED THE FOLLOWING ORDER:- 18. WE HAVE NOTICED THAT THE COORDINATE BENCH HAS DECIDED THIS ISSUE IN FAVOUR OF ASSESSEE HOLDING AS UNDER:- 11. WE HEARD THE ARGUMENTS OF BOTH THE SIDES AND ALSO PURSUED THE RELEVANT MATERIAL RECORD. THE LEARNED COUNSEL FOR T HE ASSESSEE HAS A STRONGLY RELIED ON THE ORDER OF LEARNED CIT (APPEAL S) IN SUPPORT OF ASSESSEES CASE ON THIS ISSUE WHEREAS THE LEARNED D R HAS RELIED ON THE ORDER OF AO IN SUPPORT OF THE REVENUES CASE. IT IS OBSERVED THAT IMPUGNED ADDITIONS WERE MADE BY AO MAINLY RELYING ON AS- 11. ACCORDING TO THE AO, AS PER SAID ACCOUNTING STANDARD, THE INVESTMENT MADE IN THE SHAREHOLDERS DEPOSIT WITH TIHK BY THE ASSESSEE COMP ANY WAS REQUIRED TO ITA NO. 9087/MUM/2010 THE INDIAN HOTEL COMPANY 21 BE RECOGNISED IN THE EXCHANGE RATE PREVAILING ON TH E LAST DATE OF RELEVANT PREVIOUS YEAR. HOWEVER, AS SUBMITTED ON BEHALF OF T HE ASSESSEE BEFORE THE LEARNED CIT(APPEALS) AS WELL AS BEFORE US, ONLY THE MONETARY ITEMS ARE REQUIRED TO BE REPORTED/RECOGNISED AT THE EXCHA NGE RATE PREVAILING ON THE LAST DATE OF THE RELEVANT TRANSACTION. AS PER T HE CLASSIFICATION MADE IN THE AS-11, MONETARY ITEMS MAINLY INCLUDE AMOUNTS HE LD ON CURRENT ACCOUNT, SUCH AS, CASH RECEIVABLES, PAYABLES ETC. W HILE NONMONETARY ITEMS INCLUDE AMOUNTS HELD AS CAPITAL ACCOUNTS, SUC H AS, FIXED ASSETS, INVESTMENT IN SHARES ETC. IN THE PRESENT CASE, THE SHAREHOLDERS DEPOSIT REPRESENTED THE AMOUNT HELD BY THE ASSESSEE ON CAPI TAL ACCOUNT INASMUCH AS IT WAS CONVERTIBLE INTO EQUITY SHARES W ITHIN A PERIOD OF 10 YEARS AND IF NOT SO CONVERTED, IT WAS LIABLE TO BE REFUNDED TO THE ASSESSEE COMPANY AFTER A PERIOD OF 10 YEARS. IN OUR OPINION, THE SAID AMOUNT THUS WAS IN THE NATURE OF NONMONETARY ITEM WHICH WAS REQ UIRED TO BE REPORTED/RECOGNISED AT THE EXCHANGE RATE PREVAILING ON THE DATE OF RELEVANT TRANSACTION AS PER AS-11 HAS RIGHTLY HELD BY LEARNED CIT APPEALS. WE, THEREFORE, FIND NO INFIRMITY IN THE IMPUGNED OR DER OF THE LEARNED CIT(APPEALS) DELETING THE ADDITION IS MADE BY THE A O ON THIS ISSUE AND UPHOLDING THE SAME, WE DISMISS RELEVANT GROUNDS OF REVENUES APPEAL . 19. SINCE, THIS ISSUE HAS ALREADY BEEN DECIDED IN F AVOUR OF ASSESSEES OWN CASE AFORESAID, WE DISMISS THIS GROUND OF APPEAL OF THE REVENUE BY RESPECTFULLY FOLLOWING THE DECISION OF COORDINATE BENCH IN ASSES SEES OWN CASE FOR THE ASSESSMENT YEARS MENTIONED ABOVE. 34. CONSIDERING THE DECISION OF THE TRIBUNAL IN AY 2005-06, WHEREIN THE ORDER OF LD CIT(A) IN ALLOWING RELIEF TO THE ASSESS EE WAS AFFIRMED ON THE IDENTICAL GROUND OF APPEAL, THUS, RESPECTFULLY FOLL OWING THE SAME THESE GROUNDS OF APPEALS ARE ALLOWED. 35 GROUND 20 PERTAINS TO DISALLOWANCE U/S 14A. THE LD.AR OF THE ASSESSEE SUBMITTED THAT THE ISSUE IS SQUARELY FAVOU R OF THE ASSESSEE IN ITA NO. 9087/MUM/2010 THE INDIAN HOTEL COMPANY 22 ASSESSEES OWN CASE BY THE DECISION OF THE TRIBUNAL FOR AY 2005-06 IN ITA NO.841 /MUM / 2010 AND FOR AY 2004-05. 35. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE S UPPORTED THE ORDER OF LOWER AUTHORITIES. 36. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTI ES AND HAVE NOTED THAT IDENTICAL GROUND OF APPEAL THE TRIBUNAL IN AS SESSEES OWN CASE IN AY 2005-06 IN ITA NO.841/MUM/2010 DATED 31.01.2018 ON IDENTICAL GROUNDS PASSED THE FOLLOWING ORDER:- 6. WE HAVE HEARD THE RIVAL SUBMISSION AND ALSO PROD UCE THE MATERIAL ON RECORD INCLUDING THE CASES RELIED UPON BY THE PARTI ES. THE ONLY GRIEVANCE OF THE ASSESSEE IS THAT LEARNED CIT(A) HAS WRONGLY UPHELD THE DISALLOWANCE IS MADE BY THE AO UNDER SECTION 14A OF THE ACT. AS CONTENDED B Y THE LEARNED COUNSEL FOR THE ASSESSEE, THE SUO-MOTO DISALLOWANCE MADE BY ASS ESSEE IS IN ACCORDANCE WITH THE EARLIER YEARS ORDERS, WHICH WAS ACCEPTED BY THE DEPARTMENT. WE NOTICED THAT THE AO HAS ACCEPTED THIS PROMOTER DISA LLOWANCE OF 1,09,33,117/-UNDER SECTION 14A DURING THE ASSESSMEN T YEAR 2004-05 ON THE BASIS OF DISALLOWANCE MADE IN THE YEAR 1998-99 TO A SSESSMENT YEAR 2002-03 HOLDING THAT THE ASSESSEE IS CLAIMED IS FOUND TO BE CORRECT AND IN ORDER. THE ASSESSEE HAS POINTED OUT THAT AS PER THE DECISION O F COORDINATE BENCH IN CASE OF GARWARE WALLS LIMITED VERSUS ADD. CIT 2014 65 SO T 86 (MUMBAI TRIBUNAL) AND OTHER BENCHES OF THE TRIBUNAL STRATEGIC INVESTM ENTS MADE BY THE ASSESSEE AS REQUIRED TO BE EXCLUDED FROM THE VALUE OF INVEST MENT. AS PER THE DECISION OF DELHI BENCH OF THE TRIBUNAL ONLY THOSE INVESTMENTS ARE TO BE CONSIDERED FOR COMPUTING THE AVERAGE VALUE OF INVESTMENTS, WHICH Y IELD EXEMPT INCOME DURING THE YEAR. IN GODREJ AND BOYCE MANUFACTURING CO LTD 328 ITR 81 (BOMBAY), THE HONOURABLE BOMBAY HIGH COURT HAS HELD THAT PROVISIONS OF RULE8D ARE NOT RETROSPECTIVE NATURE AND SHALL APPLY W.E.F. AY 2008-09. HENCE, ITA NO. 9087/MUM/2010 THE INDIAN HOTEL COMPANY 23 IN THE LIGHT OF THE AFORESAID DECISIONS AND IN VIEW OF THE FACT THAT THE SUO-MOTO DISALLOWANCE MADE BY ASSESSEE WAS ALLOWED BY THE DE PARTMENT IN THE YEAR 2004-05, WE ARE OF THE CONSIDERED VIEW THAT THE SUO-MOTO DISALLOWANCE MADE BY THE AO IN THE ASSESSMENT YEAR UNDER CONSIDERATIO N, WHICH IS 10% OF THE EXEMPT DIVIDEND INCOME IS REASONABLE. WE THEREFORE, SET ASIDE THE ORDER OF LD. CIT(A) AND DIRECT THE AO TO DELETE THE DISALLOWANCE CONFIRMED BY LD CIT(A) AND ACCEPT THE SOMA TO DISALLOWANCE MADE BY THE ASSESSE E UNDER SECTION 14 A OF THE ACT. WE ACCORDINGLY ALLOW THE SOLE GROUND OF AP PEAL OF THE ASSESSEE. 37. CONSIDERING THE DECISION OF TRIBUNAL ON SIMILAR SET OF FACTS WE DIRECT THE ASSESSING OFFICER TO ACCEPT THE 10% OF EXEMPT I NCOME, WHICH IS ALLOWED AS SUO MOTO DISALLOWANCE BY THE ASSESSEE. IN THE RESULT THIS GROUND OF APPEAL IS ALLOWED. 38 GROUND 21 PERTAINS TO ADDITION OF PREMIUM ON REDEMPTION OF FOREIGN CURRENCY CONVERTIBLE BONDS. THIS GROUND IS NOT PRESSED BEFORE US. THEREFORE, THIS GROUND IS DISMISSED. 39. GROUND 22 PERTAINS TO ADDITION ON ACCOUNT OF NOTIONAL INTERE ST ON DEPOSITS WITH TAJ KARNATAKA LTD. THE LD.AR OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD PLACED DEPOSIT OF RS.5.35 CRORES W ITH TAJ KARNATAKA IN EARLIER YEARS WITH INTEREST ACCRUAL AT 7% P.A. SIN CE THE FINANCIAL CONDITION OF TAJ KARNATAKA WAS EXTREMELY WEAK, IT WAS DECIDED TO WAIVE OFF INTEREST W.E.F. 01-04-2002 AND THEREFORE, IN CURRENT YEAR, N O INTEREST WAS CHARGED. THE ASSESSING OFFICER DISALLOWED, AS ACCORDING TO H IM, NO EVIDENCE OF INTEREST WAIVER OR COPY OF BOARD RESOLUTION WAS FUR NISHED AND THEREFORE, ITA NO. 9087/MUM/2010 THE INDIAN HOTEL COMPANY 24 RIGHT TO RECEIVED INTEREST WAS CRYSTALLISED. ACCOR DINGLY, HE ADDED AN AMOUNT OF RS.37,45,000/- TO THE TOTAL INCOME. RELY ING ON ACCOUNTING STANDARD 9, THE LD.AR OF THE ASSESSEE SUBMITTED THA T REVENUE TO BE RECOGNISED ONLY WHEN IT BECOMES REASONABLY CERTAIN THAT THE ULTIMATE COLLECTION WOULD BE MADE. THE LD AR SUBMITS THAT IN PAST NO SUCH ADJUSTMENT/ADDITION WAS MADE ON SAME FACTS, NO FUND S WAS GIVEN IN THE YEAR UNDER CONSIDERATION. FOR THIS PROPOSITION HE R ELIED UPON THE FOLLOWING JUDGEMENTS:- 1. UCO BANK LTD AND TAMIL NADU INDUSTRIAL INVESTMENT CORPORATION LTD (237 ITR 889)(SC) 2. MERCANTILE BANK LTD VS CIT (283 ITR 84)(SC) 3. GODHRA ELECTRICITY COMPANY VS CIT (225 ITR 746 (SC) 4. CIT VS SRIDEV ENTERPRISES 192 ITR 165 (KA R) 39. ON THE OTHER HAND, THE LD. DR FOR THE REVENUE S UPPORTED THE ORDER OF LOWER AUTHORITIES. 40. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LD. R EPRESENTATIVES OF THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF THE LOWER AUTHORITIES. THE AO WHILE PASSING THE DRAFT ASSESSMENT ORDER MADE AD DITION OF RS. 37,45,000/- BY TAKING VIEW THAT NO EVIDENCE OF WAIVER OR COPY OF THE BOARD RESOLUTION IS FURNISHED BY THE ASSESSEE. BEFO RE, LD DRP THE ASSESSEE URGED THAT NO INTEREST IS CHARGED FROM APRIL 2002 O N DEPOSIT WITH TAJ KARNATAKA AS THE ACCUMULATED LOSSES ARE FAR EXCEED ITS CAPITAL AND RESERVE ITA NO. 9087/MUM/2010 THE INDIAN HOTEL COMPANY 25 AND THE FINANCIAL CONDITION IS VERY WEEK. THERE IS NO WAIVER IN THE YEAR UNDER CONSIDERATION AND THE POSITION IS THE SAME AS OF EARLIER YEAR. IT WAS SPECIFICALLY STATED THAT THE INCOME WHICH IS ADDED IS NOT ACTUALLY EARNED AND ONLY REAL INCOME IS CHARGEABLE TO TAX , AS NO REAL INCOME IS ACCRUED TO THE ASSESSEE. THE ASSESSEE ALSO RELIED ON THE DECIS ION OF HONBLE SUPREME COURT IN UCO BANK AND TAMIL NADU INDUSTRIAL CORPORA TION LTD (237 ITR 889 SC) AND MARCHATILE BANK LTD VS CIT 283 ITR 84 (SC) AND GODHRA ELECTRICITY COMPANY VS CIT 225 ITR 746 (SC). THE SUBMISSION OF THE ASSESSEE WAS NOT ACCEPTED BY LD. DRP. THE LD DRP CONCLUDED THAT THE ACTION OF THE AO IS CORRECT AND THAT THE ASSESSEE WAS UNABLE TO SATISFY THE UNCERTAINTY TO THE ULTIMATE COLLECTION OF REVENUE FROM THE PARTY TO WH ICH THE ASSESSEE PLACED ITS DEPOSIT. 41. THE HONBLE KARNATAKA HIGH COURT IN CIT VS SRID EV ENTERPRISES (SUPRA) WHILE CONSIDERING THE FACTS IN SAID CASE TH AT DURING THE ACCOUNTING YEAR RELEVANT TO THE ASSESSMENT YEAR 1978-79, THE A SSESSEE-FIRM HAD ADVANCED CERTAIN SUMS TO A FIRM N. THERE WAS CERTAI N OPENING BALANCE OF ADVANCES MADE TO N DURING EARLIER YEARS. THE BALANC E OUTSTANDING FROM N WAS RS. 2,55,750 AS ON 31-3-1978. NO INTEREST WAS C HARGED AGAINST THIS ADVANCE. SOME OF THE PARTNERS OF THE ASSESSEE AND N WERE COMMON AND THEY HAD BUSINESS LINKS INTER SE. THE ASSESSEE HAD BORROWED FROM THIRD ITA NO. 9087/MUM/2010 THE INDIAN HOTEL COMPANY 26 PARTIES AND HAD BEEN PAYING INTEREST THEREON. THE A SSESSEE CLAIMED DEDUCTION IN RESPECT OF THE INTEREST PAYMENT TO THE THIRD PARTIES. THE ASSESSING AUTHORITY DISALLOWED THE DEDUCTION CLAIME D BY THE ASSESSEE TO THE EXTENT OF INTEREST-FREE ADVANCES STANDING IN TH E NAME OF N ON THE GROUND THAT THE AMOUNTS BORROWED WERE NOT UTILISED BY THE ASSESSEE FOR ITS OWN BUSINESS. ON SECOND APPEAL, THE TRIBUNAL HE LD THAT SINCE NO ADDITIONS HAD BEEN MADE IN THE EARLIER YEARS, THE O PENING BALANCE COULD NOT BE CONSIDERED IN THE YEAR IN QUESTION AND THE E NQUIRY HAD TO BE LIMITED ONLY TO THE INCREASE IN THE YEAR IN QUESTIO N. ON REFERENCE TO THE HONBLE COURT IT WAS HELD THAT IN THE INSTANT CASE THE STATUS OF THE AMOUNT STANDING AS OUTSTANDING DUE FROM N ON THE FIRST DAY OF THE ACCOUNTING YEAR WAS THE AMOUNT THAT STOOD OUTSTANDING ON THE LAST D AY OF THE PREVIOUS ACCOUNTING YEAR; THEREFORE, ITS NATURE AND STATUS C OULD NOT BE DIFFERENT ON THE FIRST DAY OF THE CURRENT ACCOUNTING YEAR, FROM ITS NATURE AND STATUS AS ON THE LAST DAY OF THE PREVIOUS ACCOUNTING YEAR. RE GARDING THE PAST YEARS, THE ASSESSEES CLAIMS FOR DEDUCTIONS WERE ALLOWED I N RESPECT OF THE SUMS ADVANCED DURING THOSE YEARS; THIS COULD BE ONLY ON THE ASSUMPTION THAT THOSE ADVANCES WERE NOT OUT OF BORROWED FUNDS OF TH E ASSESSEE. THIS FINDING DURING THE PREVIOUS YEARS WAS THE VERY BASI S OF THE DEDUCTIONS PERMITTED DURING THE PAST YEARS, WHETHER A SPECIFIC FINDING WAS RECORDED ITA NO. 9087/MUM/2010 THE INDIAN HOTEL COMPANY 27 OR NOT. A DEPARTURE FROM THE FINDING IN RESPECT OF THE SAID AMOUNTS ADVANCED DURING THE PREVIOUS YEAR, WOULD RESULT IN A CONTRADICTORY FINDING; IT WOULD NOT BE EQUITABLE TO PERMIT THE REVENUE TO TAKE A DIFFERENT STAND NOW, IN RESPECT OF THE AMOUNTS WHICH WERE THE SUBJE CT-MATTER OF PREVIOUS YEARS ASSESSMENTS CONSISTENCY AND DEFINITENESS OF APPROACH BY THE REVENUE WAS NECESSARY IN THE MATTER OF RECOGNISING THE NATURE OF AN ACCOUNT MAINTAINED BY THE ASSESSEE SO THAT THE BASI S OF A CONCLUDED ASSESSMENT WOULD NOT BE IGNORED WITHOUT ACTUALLY RE OPENING THE ASSESSMENT. THE PRINCIPLE IS SIMILAR TO THE CASES W HERE IT HAS BEEN HELD THAT A DEBT WHICH HAD BEEN TREATED BY THE REVENUE A S A GOOD DEBT IN A PARTICULAR YEAR CANNOT SUBSEQUENTLY BE HELD BY IT T O HAVE BECOME BAD PRIOR TO THAT YEAR. THEREFORE, THE TRIBUNAL WAS, JU STIFIED IN HOLDING THAT SINCE NO ADDITIONS HAD BEEN MADE IN EARLIER YEARS, THE OPENING DEBIT BALANCE COULD NOT BE CONSIDERED DURING THE CURRENT YEAR AND THE ENQUIRY HAD TO BE LIMITED TO THE INCREASE IN THE CURRENT YE AR ONLY. 42. IN VIEW OF THE AFORESAID FACTUAL DISCUSSION AND THE DECISION OF HONBLE KARNATAKA HIGH COURT IN CIT VS SRIDEV ENTERPRISES ( SUPRA), WE RESTORE THIS GROUND OF APPEAL TO THE FILE OF ASSESSING OFFICER T O VERIFY THE FACTS AND GRANT RELIEF TO THE ASSESSEE. THE AO SHALL VERIFY T HAT AS TO WHETHER NO FRESH DEPOSITS WAD MADE WITH TAJ KARNATAKA LTD., DURING T HE PERIOD UNDER ITA NO. 9087/MUM/2010 THE INDIAN HOTEL COMPANY 28 CONSIDERATION AND IN CASE THE DEPOSITS WERE MADE I N EARLIER YEARS AND NO SUCH DISALLOWANCE ON ACCOUNT OF NOTIONAL INTEREST I N EARLIER YEARS, THEREFORE, NO SUCH DISALLOWANCE BE MADE FOR THIS YE AR. IN THE RESULT THIS GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSE . 43. GROUND 23 PERTAINS TO LEVY OF INTEREST U/S 234B AND 234D. L EVY OF INTEREST IS MANDATORY AND CONSEQUENTIAL. THE ASSES SING OFFICER IS DIRECTED TO ALLOW CONSEQUENTIAL RELIEF TO THE ASSESSEE. 44. GROUND 24 PERTAINS TO LACK OF ADEQUATE OPPORTUNITY. THIS GR OUND IS NOT PRESSED BEFORE US; HENCE, REJECTED. 45 GROUND NO. 25 WAS RAISED AS ADDITIONAL GROUNDS O F APPEAL, WHICH RELATES TO NON ISSUANCE OF NOTICE UNDER SECTION 143 (2). WHILE MAKING SUBMISSIONS ON VARIOUS GROUNDS OF APPEAL, NO SUBMIS SIONS FOR ADMISSIONS OF THIS GROUND OF APPEAL WAS NOT MADE NOR ANY SUBMI SSION TO SUBSTANTIATE THE GROUND OF APPEAL WAS MADE, THEREFORE THIS GROUN D OF APPEAL IS DISMISSED AS NOT PRESSED. 46. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 06-09-2019. SD/- SD/- ( G.S. PANNU ) ( PAWAN SINGH ) VICE PRESIDENT JUDICIAL MEMBER MUMBAI, DT : 06 SEPTEMBER, 2019 PK/- ITA NO. 9087/MUM/2010 THE INDIAN HOTEL COMPANY 29 COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR, ITAT, MUMBAI