Deputy Commissioner of Income-Tax, Circle-4(1)(2), Bangalore V. M/s. Manipal Education and Medical Group India Pvt. Ltd., Bangalore

MA 1/BANG/2024

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 8826 (ITAT-BANGALORE)
• Duration Of Justice: 1 month(s) 7 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 07-02-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 01-02-2024
• Assessment Year: 2015-2016
• Appeal Filed On: 31-12-2023
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Capital asset; Source of fund
• Section: 254(2); 64; 101; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “C” BENCH : BANGALORE BEFORE SHRI GEORGE GEORGE K., VICE PRESIDENT AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER MP No.1/Bang/2024 [in ITA No.105/Bang/2023] Assessment year : 2015-16 The Deputy Commissioner of Income Tax, Central Circle 1(2), Bangalore. Vs. M/s. Manipal Education and Medical Group India Pvt. Ltd., 24/1, 15 th Floor, JW Marriot, Bangalore – 560 001. PAN : AADCM 8103A APPLICANT RESPONDENT Applicant by : Shri V. Parithivel, Jt. CIT(DR), Bengaluru. Respondent by : Shri S.K. Tulsiyan & Ms. Bhoomija Verma, Advocates Date of hearing : 02.02.2024 Date of Pronouncement : 08.02.2024 O R D E R Per Laxmi Prasad Sahu, Accountant Member This miscellaneous petition is filed by the assessee seeking rectification of the mistakes apparent on the record in the order of the Tribunal dated 29.08.2023. 2. The ld. DR submitted that there are mistakes apparent from record in the order of the Tribunal since the findings are an account of the following:- MP No.1/Bang/2024 Page 2 of 11 (i) without considering the letter of the assessee dated 12.12.2018 filed before the Addl. CIT in the proceedings u/s. 144A wherein it has admitted that proceeds of loan from IDFC was utilized for purchase of impugned land for Rs.45.04 crores; (ii) not verifying the source of funds to purchase of impugned land and has merely relied on the statement of AR of the assessee; (iii) not examining the agreement regarding CCD from IDFC PE Fund III dated 03.10.2012 wherein it is mandated that funds were specifically earmarked for hostel construction / identified business; and (iv) not considering the significant borrowing during the year and that the current year accruals are not sufficient for all the investments made by the assessee in the year. 3. The ld. DR accordingly submitted that the order may be rectified accordingly. 4. The ld. AR supported the order of the Tribunal and submitted that there was no apparent mistake in the order. The ld. AR submitted written synopsis as follows:- “B. ........ It is the submission of the Assessee that the very jurisdiction of this Hon'ble ITAT in entertaining this M.A. have not been fulfilled by the Department in terms of the legal requirements of Sec.254(2) of the Act, which are as below: • ....... • Sub-section (2) of Sec.254 provides covers two distinct situations: (i) It enables the Tribunal at any time within six months from the end of the month in which the order was passed, amend any order passed under sub-section (1) with MP No.1/Bang/2024 Page 3 of 11 a view to rectify any mistake apparent from the record, and (ii) It requires the Tribunal to make such amendment if the mistake is brought to its notice by the assessee or the Assessing Officer. C. By way of the M.A. the Department is now seeking to review the decision of this Hon'ble Bench, that has duly considered the facts and evidences relevant to the A.Y. in question, to adjudicate the matter in favour of the Assessee. The Department has in fact preferred this M.A. to review the matter by raising the fallacious allegation that this Hon'ble Bench has not adequately investigated the matter. The Order of this Hon'ble Bench does not reflect any mistake apparent from record, and the entire case that is being made out by the Department is an attempt to bring on record new documentation [that is not relevant to the A.Y, in question] - in order to review the matter that has now attained finality. D. In doing so, the Department has erred in ignoring the settled position of law qua the powers of the Tribunal under Sec.254(2) of the Act — which holds an 'apparent mistake' to only refers to those errors or inconsistency that is evident from the face of the documents/order of the authority in respect of which two views are not possible. The 'apparent mistake' can be in the form of calculation, data, wrong assumption of facts, misinterpretation of the provisions of law, misreporting of income, deduction, or any other relevant information. However, the mistakes which require arguments, debate, evaluation of law/facts in its determination, cannot be referred as 'mistake apparent from the record'. E. The Assessee craves reliance on the following decisions ........... 1. T.S. Balaram, ITO v. Volkart Bros. [1971] 82 ITR 50 (SC) 2. ACIT v Saurashtra Kutch Stock Exchange Ltd (2008) 173 taxman 322 (SC) 3. CIT v. Suman Tea & Plywood Industries (P.) Ltd., (1997] 94 Taxman 305 (Calcutta) MP No.1/Bang/2024 Page 4 of 11 4. CIT v. Maruti Insurance Distribution Services Ltd., (2012] 26 taxmann.com 68 (Delhi).” The issues raised by the Department in the MP are rebutted by the assessee in the following manner:- 1. It is seen that the Hon'ble /TAT has given its finding without considering the letter of assessee dated 12.12.2018 filed before the Addl. CIT in proceeding u/s 144A wherein it has admitted that proceeds of loan from IDFC was utilized for purchase of impugned land for Rs. 45.04 Cr. Ans: The allegation of the Department is unsupported since the Assessee has already submitted before this Hon'ble ITAT that it has taken only one borrowing from IDFC, i.e., a debt instrument, initially entered into on 19.06.2012, and revised during the F.Y. under consideration via revised Letter of Intent dated 14.03.2014 entered into between the Assessee and IDFC Company Ltd. [and attached to the Paper Book at Pgs. 41 to 62], whereby the Rupee Term Loan was reduced from Rs.600 Crores to 349 Crores. The nature of this borrowing was for the purpose of hostel project constructions as per speculations specified in the Letter of Intent [as evident from the Project Purpose Clause at Pg.42 of the Paper Book]. The purpose behind such debt borrowing was centered around hostel development for the various universities of Manipal Group [as evident from Annexure II of the revised Letter of Intent at Pg.57 of the Paper Book r/w Completion Certificate for Phase 1 dated 15.09.2015 attached herewith at Pgs.63 to 64 of the Paper Book]. Further the hostel constructions [being purpose of business] has not only commenced and carried on in this F.Y. but also in previous accounting years, starting from F.Y. 2013, when the debt instrument was originally sanctioned by IDFC. This is visible from the aforementioned Annexure II. This is thus not a case of mistake apparent from the record. 2. The Hon'ble ITAT has also erred in not verifying the source of funds to purchase of impugned land and has merely relied on statement of A.R. of the assessee. MP No.1/Bang/2024 Page 5 of 11 Ans: The allegation of the Department is unsupported since the Assessee has already submitted the source of the funds from the audited financials for the current A.Y. and erstwhile A.Y. The same has been duly examined and iterated by this Hon'ble Bench in Para 17 of the Order in the following manner: 1. Rs.40.20 crores were paid in the FY 2013-14 which is clear from Note No.36 placed of financial statement as on 31.03.2014. [See Pg.101 of the Paper Book] 2. Rs.1.80 crores was paid in the impugned FY 2014-15 and conveyance deed executed in May, 2014. 3. Schedule No.13 of the financial statement under sub-head 'Capital Advances' shows that the amount is reduced from Rs.54.17 crores to Rs.22.86 crores. [See Pg 20 of the Paper Book] 4. The land appears in the Fixed Assets Schedule of the current year of Rs.45.04 crores under Note No.10.1 inclusive of stamp duty and miscellaneous charges. [See Pg.22 of the Paper Book] 5. The reserves & surplus increased by Rs.2.76 crores from 37.68 to 40.44 crores. [See Pg.6 of the Paper Book]. 6. Current investments decreased from Rs.23.19 to 7.42 crores which is source of cash. [See Pg.6 of the Paper Book] 7. As per the cash flow statements the net cash & cash equivalent accrued are Rs.13.32 crores. 8. As per Note No.04, the CCDs is of Rs. 99,99,90,000 out of Rs. 49,99,90,000 was raised upto 31.3.2013 and Rs.50 crores in 31.03.2014. [See Pg.62 of the Paper Book]. 9. The CCD is interest free as held by the coordinate Bench in the assessee's own case for AYs 2013-14 & 2014-15 (supra). [See Pg.13 of Case Law Compilation]. MP No.1/Bang/2024 Page 6 of 11 10. Interest bearing funds have not been utilized for the purchase of land and the assessee had sufficient interest free funds and also observed by the coordinate bench in the assessee's own case for earlier AYs 2013-14 & 2014-15. [See Pg.14 and 15, Para 9-11 of Case Law Compilation]. This is thus not a case of mistake apparent from the record. 3. The Hon'ble ITAT has failed to examine the agreement regarding CCD from IDFC PE Fund III dated 03.10.2012 wherein it is mandated that funds were specifically earmarked for hostel construction/identified business. Ans: The allegation of the Department is unsupported since the Assessee has already submitted before this Hon'ble Bench that the initial borrowing from IDFC was revised via Letter of Intent dated 14.03.2014 [attached to the Paper Book at Pgs. 41 to 62]. The same has been duly examined / considered by this Hon'ble Bench, before passing the Order, and any such Departmental reference to an IDFC agreement entered into in F.Y. 2012-2013 is irrelevant to the case at hand. This is thus not a case of mistake apparent from the record. 4. The Hon'ble ITAT has also erred in not considering the significant borrowing during year and considering that the current year accruals are not sufficient for all the investments made by assessee in the year. Ans: The allegation of the Department is unsupported. The Assessee reiterates that it has not utilized any borrowed funds towards making such advances for the purchase of the fixed asset in F.Y. 2013-2014. The source of the funds utilized towards acquisition of the fixed asset, is the additional Compulsory Convertible Debentures [CCDs] of Rs. 50,00,00,000/- issued to IDFC Private Equity Fund III vide an Agreement entered in F.Y. 2013-2014. The Loan for IDFC was qua hostel construction, and has been utilized only MP No.1/Bang/2024 Page 7 of 11 for that purpose, and not for the purpose of purchasing a fixed asset. The addition of such interest free funds arising from the issuance of [CCDs] is visible from Schedule 5 of the audited financials for F.Y. 2013-2014, at Pg. 82 of the Paper Book, and no addition to this effect has been made in the case of the Assessee, in the erstwhile A.Y.s 2013¬2014 and A.Y. 2014-2015. The fact that the CCDs are in the nature of interest free funds as visible from Para 9 of the of decision rendered in ITA No.980/Bang/2018 by this Hon'ble Bench in the Assessee's case for the erstwhile A.Y.s at Para 6 [See Pg.13 of the Paper Book of Case Laws]. Now, qua the remainder payment made in the A.Y. under consideration, A.Y. 2015-2016 [F.Y. 2014-2015], the same is also through the Assessee's own funds, since it held a sufficient opening cash balance, visible from Schedule 17 of the audited accounts for F.Y. 2014-2015 at Pg.6 of the Paper Book. Therefore, the Assessee has not utilized any borrowed funds towards the acquisition of the fixed asset either in the preceding A.Y. or even in this A.Y. rendering the allegation of the Department to be fallacious and bereft of jurisdiction. This is thus not a case of mistake apparent from the record. G. The Assessee further submits that the Department has preferred this M.A. by failing to consider the settled position of law taken by this Hon'ble ITAT — which states that when the presumption that would arise is that the investment in the capital asset has been made out of such interest free funds generated — when such interest free funds are sufficient to meet the investment in the capital asset. See decision of this Hon'ble ITAT in the case of RNS Infrastructure Limited Vs. The DCIT, 1TA No.1171/Bang/2022, decision dated 17.05.2023. [Attached at Pg.17-28 of the Paper Book of Case Laws]. H. To conclude: In the M.A. preferred by the Department, nowhere has it been established that such a mistake apparent on the record exists. This MP No.1/Bang/2024 Page 8 of 11 Hon'ble Bench has duly examined all the necessary evidence along with the judicial pronouncements, to hold that interest free funds have been utilised for the purchase of the impugned land in question. An M.A. can in no manner be preferred by the Department to reagitate the matter by seeking to rehash / re- examine evidence that have not been submitted by the Assessee before the Hon'ble ITAT or for that matter have neither been brought on record by the Department at the time of the hearing. The power under Sec.254(2) cannot be exercised in the capacity of a "change in opinion" as the Department is seeking to establish. Debatable issues, based on new evidence are outside the scope of rectification as the same is hardly a "mistake apparent from the record." On the basis of the above submissions, the Assessee respectfully submits that when this Hon'ble Tribunal has passed the Order after due application of mind and after effectively perusing the evidences brought on record —then no case can be made out by the Department by terming it as a mistake apparent from the record. This is because the view has been formed by this Hon'ble ITAT after considering the necessary facts and the law on the point of dispute - cannot be reviewed again in the garb of apparent mistake. The Department if he aggrieved should approach the higher forum for the redressal of the issue involved in the dispute. The provisions of Sec. 254(2) of the Act cannot be invoked, and the M.A. thus out to be dismissed by this Hon'ble Bench for want of jurisdiction.” 5. After hearing both the parties and perusing the material on record, we note that all the above issues raised in the miscellaneous petition were considered by the Tribunal and it was held as under in paras 15 to 17 of the order:- “15. The ld. AR referred to the financial statements and submitted that the land purchase advance was given in the AY 2014-15 and the coordinate Bench in the assessee’s own case (Manipal Integrated Services Pvt. Ltd.) for AYs 2013-14 & 2014- MP No.1/Bang/2024 Page 9 of 11 15 in ITA No. 979& 980/Bang/2018 dated 05.04.2019 held that CCDs loans raised during the year which are interest free and no interest bearing funds are utilised for earning exempt income. The assessee had CCDs of Rs. 99,99,90,000/- as on 31.03.2014. In the present case, the property was registered in the financial year 2014-15 and a small amount of Rs.1.80 crores was paid in the current financial year out of internal accounts. The loan from IDFC was for hostel construction and has been utilized only for that purpose and not for the purchase of land and the interest on such loan has been capitalized by the assessee. 16. The ld. DR relied on the orders of the lower authorities. He submitted that the ld. Addl. CIT has examined this issue and gave direction to the AO that the total amount of interest to be capitalized u/s. 36(1)(iii) which has been accordingly done by the AO and confirmed by the CIT(Appeals). Therefore the orders of authorities below should be upheld. 17. After hearing the rival contentions, we note from the record that the interest paid to IDFC of Rs.4.85 crores has been capitalized by the AO by observing that the capital asset (land) purchased for which loan was taken, was not put to use in the business of the assessee and the assessee is not in the business of trading of land and this land has been purchased as investment, and therefore it should be capitalized u/s. 36(1)(iii) of the Act. The Addl. CIT in the 144A proceedings gave opportunity to the assessee to explain the utilization of loan from IDFC and treatment of interest paid on such loan. The assessee submitted reply on 10.12.2018 which is incorporated in his order. He observed that a sum of Rs.45.04 crores was utilized to purchase land from the part of fresh loan taken from IDFC & Aditya Birla Finance Ltd. and others of Rs.128.35 crores @ 11.75% since in the balance sheet of the company the long term loan has increased to Rs.406 crores from Rs.281 crores instead of Rs.128.35 crores claimed by the assessee. Accordingly the proportionate amount of Rs.4.85 crores was disallowed. The assessee in the written synopsis submitted that Rs.40.20 crores were paid in the FY 2013-14 which is clear from Note No.36 placed at PB page No. 101 of financial statement as on MP No.1/Bang/2024 Page 10 of 11 31.03.2014 and Rs.1.80 crores was paid in the impugned FY 2014-15 and conveyance deed executed in May, 2014. We note from Schedule No.13 of the financial statement under sub-head ‘Capital Advances’ PB page No. 20 that the amount is reduced from Rs.54.17 crores to Rs.22.86 crores. The land appears in the Fixed Assets Schedule of the current year of Rs.45.04 crores under Note No.10.1 inclusive of stamp duty and miscellaneous charges. The reserves & surplus increased by Rs.2.76 crores from 37.68 to 40.44 crores. Current investments decreased from Rs.23.19 to 7.42 crores which is source of cash. As per the cash flow statements the net cash & cash equivalent accrued are Rs.13.32 crores. As per Note No.04, the CCDs is of Rs. 99,99,90,000 out of Rs. 49,99,90,000 was raised upto 31.3.2013 and Rs.50 crores in 31.03.2014. The CCD is interest free as held by the coordinate Bench in the assessee’s own case for AYs 2013-14 & 2014-15 (supra). We noted from the submission of the assessee that interest bearing funds have not been utilized for the purchase of land and the assessee had sufficient interest free funds and also observed by the coordinate bench in the assessee’s own case for earlier AYs 2013-14 & 2014-15. The case law relied by the ld. AR of the assessee in his written synopsis supports the case of the assessee. After analysis of the above, we hold that the assessee has not utilized the borrowed fund for the purchase of land. The assessee has also sufficient opening cash balance as per Note No.17 and cash flow statement. Further, the assessee’s submission that no interest bearing funds have been utilized is supported by the case laws referred by the assessee. Considering the entire facts and submissions, we hold that the land purchase by the assessee is out of non-interest bearing funds. Therefore the disallowance of interest of Rs.4.85 crores u/s 36(1)(iii) is not warranted and the same is deleted. We therefore allow ground No. 03 of the assessee.” 6. It is noted in para 17 of the order that CCDs were raised in the previous assessment year and it is interest free as held by the coordinate Bench in the case of Manipal Integrated Services Pvt. Ltd. MP No.1/Bang/2024 Page 11 of 11 for AYs 2013-14 & 2014-15 in ITA No. 979 & 980/Bang/2018 dated 05.04.2019. We also rely on the order of Apex Court in the case of Commissioner of Income-tax (IT-4) Mumbai vs Reliance Telecom Ltd. reported in [2021] 133 taxmann.com 41 (SC). Therefore, there is no apparent mistake in the order of the Tribunal. 7. In the result, the miscellaneous petition filed by the revenue is dismissed. Pronounced in the open court on this 08 th day of February, 2024. Sd/- Sd/- ( GEORGE GEORGE K.) (LAXMI PRASAD SAHU ) VICE PRESIDENT ACCOUNTANT MEMBER Bangalore, Dated, the 08 th day of February, 2024. /Desai S Murthy / Copy to: 1. Appellant 2. Respondent 3. CIT 4. CIT(A) 5. DR, ITAT, Bangalore. By order Assistant Registrar ITAT, Bangalore.