ICICI HOME FINANCE COMPANY LTD, MUMBAI V. ADDL CIT 10(1), MUMBAI

MA 242/MUM/2022

AI Insights

The case involves ICICI Home Finance Company Ltd. appealing against the decision of the Additional CIT, which was upheld by the CIT(A), regarding the exclusion of certain interest income from the deduction under section 36(1)(vii) of the Income Tax Act. The Tribunal initially overlooked the adjudication of Ground No. 4(i) in their previous order and acknowledged a typographical error in the same. Upon rectification, the Tribunal examined the merits of the case, particularly focusing on whether the interest income from a buyout portfolio qualifies for deductions under the specified section, considering the company's business activities of refinancing and purchasing housing loan portfolios from other banks.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123317 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s) 11 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 19-04-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 16-03-2023
• Assessment Year: 2009-2010
• Appeal Filed On: 07-09-2022
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH “C”, MUMBAI BEFORE SHRI VIKAS AWASTHY, HON'BLE JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, HON'BLE ACCOUNTANT MEMBER MA.No. 242/MUM/2022 [ARISING OUT OF ITA NO. 1325/MUM/2013 (A.Y: 2009-10)] & ITA NO. 1325/MUM/2013 (A.Y: 2009-10) M/s. ICICI Home Finance Company Ltd., 7 th Floor, West Wing, South Tower ICICI Bank Towers Bandra Kurla Complex Bandra (E), Mumbai -400051 PAN: AAACI6285N v. Addl. CIT – Range – 10(1) 4 th Floor Aayakar Bhavan, M.K. Road Mumbai - 400020 (Appellant) (Respondent) Assessee Represented by : Smt. Aarti Vissanji Department Represented by : Shri R.A. Dhyani Date of Hearing : 17.03.2023 Date of Pronouncement : 20.04.2023 2 MA.No. 242/MUM/2022 & ITA NO. 1325/MUM/2013 (A.Y: 2009-10) M/s. ICICI Home Finance Company Ltd., O R D E R PER S. RIFAUR RAHMAN (AM) 1. Through this Miscellaneous Application assessee is seeking for rectification of certain mistakes crept in the order passed by the Tribunal in ITA.No. 1325/Mum/2013 dated 03.06.2022 for the A.Y. 2009-10. 2. At the time of hearing, Ld. AR of the assessee submitted that in the Tribunal order dated 03.06.2022 the Tribunal has omitted to dispose of the ground raised by the assessee in Ground No. 4(i) and further there is a typographic error in Para No. 11 at Page No. 14, which are apparent on record and requested to rectify the same. 3. On the other hand, Ld.DR objected to the submissions of the assessee and submitted that there is no mistake apparent on record in the Tribunal order. 4. Considered the rival submissions and material placed on record, on a careful perusal of the order of the Tribunal dated 03.06.2022, we observe that at Page No. 14 in Para No. 11 at the end of the paragraph there is a typographic error of including the words “....... which includes short term as well as ......”. It is a typographical error 3 MA.No. 242/MUM/2022 & ITA NO. 1325/MUM/2013 (A.Y: 2009-10) M/s. ICICI Home Finance Company Ltd., which is occurred inadvertently in the order dated 03.06.2022, accordingly, we rectify the same by reproducing the Para No. 11 as under: - “11. Considered the rival submissions and material placed on record, we observe from the record that the assessee claimed deduction u/s.36(1)(viii) of the Act on the basis of income earned from the long term housing finance business and it is the only activity carried by the assessee. When the legislature intends to give benefit based on the activities of the housing finance then deduction also has to be determined based on these activities only. We notice that assessee has claimed deduction based on the income earned thru the housing finance and it has bifurcated the same into long term which is more than 5 years and short term which is less than 5 years’ duration. It has claimed deduction only to the extent of income earned from the long term financing. In our view, it is proper method and the tax authorities included other source of income like capital gains, dividends etc., in the total income to deny the ratio of actual deduction, which is not proper. We direct the AO to calculate the deduction from the profit derived from the eligible business, which is the earning of income from the activities in line of earning income from construction or purchase of residential purpose. In the given case the eligible profit is the profit earned from the business of lending for residential housing purpose for long term. With the above direction, we allow the ground raised by the assessee.” 4 MA.No. 242/MUM/2022 & ITA NO. 1325/MUM/2013 (A.Y: 2009-10) M/s. ICICI Home Finance Company Ltd., 5. With regard to non-adjudication of Ground No.4(i) raised by the assessee in grounds of appeal, considered submissions of both the parities, we observe that Tribunal by oversight failed to dispose of the ground raised by the assessee in ground No. 4(i), which is the mistake apparent on record. Accordingly, we deem it fit and proper to recall the order to adjudicate the Ground No. 4(i). Since both the parties agreed to submit and make representation on the merits on the issue raised by assessee in Ground No. 4(i), accordingly, we proceeded to decide the issue herein below. 6. With regard to Ground No. 4(i) which is in respect of interest earned by the assessee on buyout portfolio, Ld. AR of the assessee submitted that the relevant facts are, during the year assessee has earned interest income of ₹.12,83,38,76,586/-. The Assessing Officer observed from the bifurcation of the interest income declared by the assessee contains the interest income earned from buyout portfolio at ₹.2,32,73,63,039/-. He observed that interest income earned by the assessee on purchase of housing loan portfolio from other banks. This means that the principle housing loan relating to this interest income was not disbursed by the assessee itself. Thus, housing loans were 5 MA.No. 242/MUM/2022 & ITA NO. 1325/MUM/2013 (A.Y: 2009-10) M/s. ICICI Home Finance Company Ltd., disbursed by some other banks and this loan portfolio were purchased by the assessee from those banks. Since the interest earned by the assessee was not disbursed by the assessee therefore in respect to this interest income it could not be said that the assessee derived profit from business of providing long term housing finance relating to such loans. Therefore, he rejected the claim of the assessee observing that this amount will not qualify for deduction u/s.36(1)(vii) of the Act. 7. Aggrieved, assessee preferred an appeal before the Ld.CIT(A), Ld.CIT(A) also sustained the addition observing that the claim u/s.36(1)(vii) of the Act is only on the receipt of eligible business. Therefore, he considered this receipt of income has not earned out of eligible business. 8. Aggrieved assessee preferred appeal before us, raising Ground No. 4(i) of grounds of appeal, which is as under: - Re: Special Reserve Deduction u/s 36(1)(viii) [4] On the facts and circumstances of the case and in law, the CIT(A) erred in excluding the following income on the ground that the same do not qualify for deduction under section 36(1)(vii) without appreciating the facts explained by the appellant during the course of appeal hearings : 6 MA.No. 242/MUM/2022 & ITA NO. 1325/MUM/2013 (A.Y: 2009-10) M/s. ICICI Home Finance Company Ltd., Sr.No. Particulars Amount 1. Interest on Buyout Portfolio 232,73,63,039 2. Interest income - Securitisation Cases 9,93,70,283 3. Interest on Termination Waived Off 49,04,263 4. Principal Adjust Interest Expense (10,33,740) 5. Pre EMI Due From Customer 14,39,243), 6. Termination Excess Income 48,886 7. Ops Risk Account HL (1,04,041) 8. Premium - Buyout W/Off (4,98,15,449) 9. Termination Excess Income - New Lap 1,318 10. 10. Interest on Termination Waive Off-New LAP 27,13,167) 11. Principal Amt Waiver ~ Termination - New LAP (15,04,858) 12. Interest on Termination Waived Off - DDA (12,89,411) 13. Principal Amt Waiver-Termination - DDA : (90,568) 9. At the time of hearing, Ld. AR of the assessee submitted that as per the requirement of Section 36(1)(vii) and as per the definition of housing finance company, the main object of carrying on the business of providing long term finance for construction or purchase of houses in India for residential purpose. She submitted that assessee has provided long term finances for residential purposes only and it is sufficient that assessee has refinanced the same and took over the loan from other financial institutions. As per the requirement of the Act, the finance should be provided for long term it does not provides that it should be given by assessee itself. It can also include refinance. In this regard 7 MA.No. 242/MUM/2022 & ITA NO. 1325/MUM/2013 (A.Y: 2009-10) M/s. ICICI Home Finance Company Ltd., she relied on the remand report of the assessee for A.Y. 2011-12 which is placed on record at Page No. 330 of the Paper Book wherein Assessing Officer himself considered and observed that interest income on buyout portfolio qualifies as housing finance income and eligible for deduction u/s. 36(1)(viii) of the Act. 10. On the other hand, Ld. DR relied on the findings of the Ld.CIT(A) and she brought to our notice Page No. 15 of the appellate order. 11. Considered the rival submissions and material placed on record, we observe from the record that assessee has provided long term finance by refinancing to the customers of other banks by adopting buyout i.e. purchase of housing loan portfolio from other banks. Since the condition prescribed in the section for financing long term residential projects which the assessee has satisfied in this case by providing long term finance by purchase of housing loan portfolio from other banks. There is no bar to finance only direct finance, it includes refinance, as long as it satisfies the condition for financing long term for the residential projects. Therefore, this branch of financing also comes under eligible business as defined u/s.36(i)(viii) of the Act. Therefore, 8 MA.No. 242/MUM/2022 & ITA NO. 1325/MUM/2013 (A.Y: 2009-10) M/s. ICICI Home Finance Company Ltd., we are inclined to allow the claim made by the assessee in Ground No. 4(i) of grounds of appeal. 12. In the result, the Miscellaneous Application filed by the assessee is allowed and appeal filed by the assessee is partly allowed. Order pronounced in the open court on 20 th April, 2023. Sd/- Sd/- (VIKAS AWASTHY) (S. RIFAUR RAHMAN) JUDICIAL MEMBER ACCOUNTANT MEMBER Mumbai / Dated 20/04/2023 Giridhar, Sr.PS Copy of the Order forwarded to: 1. The Appellant 2. The Respondent. 3. CIT 4. DR, ITAT, Mumbai 5. Guard file. //True Copy// BY ORDER (Asstt. Registrar) ITAT, Mum