BACACASASE PERFAMES AND BEUTY PRODUCTS P. LTD, V. DCIT RG 3(1),

MA 321/MUM/2011

• Counselvise Citation: [2011] 123 COUNSELVISE.COM (IT) 7032 (ITAT-MUMBAI)
• Duration Of Justice: 3 month(s) 9 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 16-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Assessment Year: 2002-2003
• Appeal Filed On: 07-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Assessee Lawyers: SANJIV M SHAH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G, MUMBAI BEFORE SHRI P.M. JAGTAP, A.M. AND SHRI V. DURGA RAO , J.M. M.A. NOS. 321, 322, & 323/MUM/2011 (IN ITA NOS. 6017/M/05, 8835 & 8834/MUM/2004 ASSESSMENT YEARS: 2002-03, 2001-02 & 1999-00) M/S BACCAROSE PERFUMES & BEAUTY PRODUCTS LTD., AP PLICANT 66, MAKER CHAMBERS VI, NARIMAN POINT, MUMBAI 400 021 (PAN AAACB2984M) VS. DY. COMMISSIONER OF INCOME-TAX, RESPONDENT RANGE 3(1), MUMBAI. APPLICANT BY : MR. SANJIV M. SHAH RESPONDENT BY : MR. C.G.K. NAIR ORDER PER V. DURGA RAO, J.M.: BY THESE MISCELLANEOUS APPLICATIONS, THE ASSESSEE I S SEEKING RECTIFICATION OF THE MISTAKES ALLEGED TO HAVE OCCUR RED IN THE ORDER OF THE TRIBUNAL DATED 31 ST MARCH, 2011 PASSED IN ITA NOS. 8833, 8834, AND 8835/MUM/2004. 2. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL ON RECORD. AS RIGHTLY SUBMITTED BY THE ASSESSEE IN THESE MISCELLANEOUS APPLICATIONS, THERE IS A MISTAKE IN THE ORDER OF THE TRIBUNAL DATED 31 ST MARCH, 2011 (SUPRA) IN CLUBBING GROUND NO. IV IN ASSESSMENT YEAR 1999-00, AND GROU ND NO. II IN AYS. 2001-02 & 2002-03 RAISED IN ITA NOS. 8834/MUM/ 2004, 8835/MUM/04, AND 6017/MUM/2002-03 INVOLVING A SEPAR ATE ISSUE WITH OTHER GROUNDS AND NOT ADJUDICATING UPON THEM O N MERITS SEPARATELY. AS THE SAID MISTAKE IS APPARENT FROM RE CORD, WE RECTIFY THE SAME BY DISPOSING OFF THE SAID GROUNDS ON MERITS VI DE THE FOLLOWING M.A. NOS. 321, 322 & 323/MUM/2010 M/S BACCAROSE PERFUMES AND BEAUTY PRODUCTS P. LTD . 2 PARAGRAPHS NUMBERED AS 23A TO 23D , WHICH ARE DIRECTED TO BE INSERTED IN THE ORDER OF THE TRIBUNAL DATED 31 ST MARCH, 2011 (SUPRA) AND BE TREATED AS PART OF THE SAID ORDER. 23A. THE COMMON ISSUE INVOLVED IN THE AFORESAID GROUNDS I.E. GROUND NO. IV IN AY 1999-00, AND GROUND NO. II IN AYS 2001-02 & 2002-03 RAISED IN ITA NOS. 8834/MUM/2004, 8835/MUM/04, AND 6017/MUM/2002-03 RELATES TO THE AD DITION MADE BY THE AO AND CONFIRMED BY THE LEARNED CIT(A) ON ACCOUNT OF INTEREST RECEIVABLE ON REDEMPTION OF NON-CONVERT IBLE DEBENTURES. 23B . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO HAD OBSERVED THAT THE ASSESSEE HAD GIVEN ADVANCE TO A COMPANY, NAMELY, VIVA RESORTS AND HOTELS LTD. OF RS . 60 LAKHS TOWARDS PURCHASE OF UNSECURED DEBENTURES IN FY 1996 -97. DURING THE YEAR, THE ASSESSEE HAS CHANGED THE METHO D OF ACCOUNTING FROM MERCANTILE TO CASH BASIS FOR ACCOUN TING OF INTEREST ON DEBENTURES AND THE SAME IS, HOWEVER, IN CORRECT SINCE IT IS SEEN FROM THE P&L ACCOUNT THAT THE ASSESSEE H AD PROVIDED FOR INTEREST ON CERTAIN OTHER DEBENTURES. THE ASSES SEE IN ITS LETTER DATED 27/09/2000, STATED THAT ON CERTAIN NON -CONVERTIBLE DEBENTURES OF TWO COMPANIES AMOUNTING TO RS. 2.21 C RORES, WHICH WERE DUE FOR REDEMPTION, BUT THE REDEMPTION A MOUNT HAD NOT BEEN RECEIVED, THEREFORE, THE COMPANY HAD PROVI DED INTEREST @ 24% ON THE REDEMPTION AMOUNT AGGREGATING TO RS. 5 1.54 LAKHS WHICH HAD BEEN OFFERED FOR TAX. THE AO NOTED THAT THE IT IS THUS EVIDENT THAT THERE HAD BEEN A CHANGE IN THE ME THOD OF ACCOUNTING WITH REGARD TO INTEREST ON DEBENTURES IN AN UN- UNIFORMING MANNER, WHILE IN CERTAIN CASES THE MERCA NTILE SYSTEM SEEMS TO HAVE BEEN FOLLOWED IN RESPECT OF SO ME OTHER DEBENTURES THE ASSESSEE HAD RESORTED TO THE CASH SY STEM. HE FURTHER NOTED THAT A MIXED SYSTEM OF ACCOUNTING IS ACCEPTABLE M.A. NOS. 321, 322 & 323/MUM/2010 M/S BACCAROSE PERFUMES AND BEAUTY PRODUCTS P. LTD . 3 ONLY WHEN THE MERCANTILE OR CASH SYSTEM IF FOLLOWED FOR PARTICULAR CATEGORIES OF INCOME. THE AO WAS OF THE VIEW THAT WITH RESPECT TO THE SAME CATEGORY THE ASSESSEE DOES NOT HAVE AN OPTION TO FOLLOW WHICHEVER METHOD SUITS THE PURPOSE . THE AO NOTED THAT THE CHANGE IN THE SO CALLED METHOD OF AC COUNTING WHICH HAD NOT BEEN IMPLEMENTED IN UN-UNIFORMED MANN ER IN RESPECT OF PARTICULAR CATEGORY OF ASSETS, ARE NOT A CCEPTABLE. ACCORDINGLY, THE AO MADE ADDITION ON ACCOUNT OF INT EREST ON NON-CONVERTIBLE DEBENTURES. ON APPEAL, THE CIT(A) H ELD THAT THE DEBENTURES WERE PURCHASED FOR 15 YEARS, THEREFORE, MERELY THE COMMUNICATION BETWEEN THE ASSESSEE AND THE CONCERNE D COMPANY CANNOT TAKE AWAY RIGHT OF THE ASSESSEE IN R ECOVERING THE AMOUNT AND THE ASSESSEE HAD RECEIVED THE INTERE ST TILL THE END OF THE LAST YEAR AND NOTHING BROUGHT ON RECORD TO SHOW THAT AS TO HOW THE DEBT HAD BECOME BAD. WITH THE SAID OB SERVATIONS, THE CIT(A) CONFIRMED THE ORDER OF THE AO. 23C . WE HAVE HEARD BOTH THE PARTIES, PERUSED THE RECO RD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELO W. THE CASE OF THE AO WAS THAT AS PER P&L ACCOUNT, THE ASSESSEE HAS PROVIDED INTEREST ON CERTAIN DEBENTURES AND ALSO ON CERTAIN NON- CONVERTIBLE DEBENTURES OF TWO COMPANIES AMOUNTING T O RS. 2.21 CRORES, WHICH WERE DUE FOR REDEMPTION, BUT THE REDE MPTION AMOUNT HAD NOT BEEN RECEIVED, THE COMPANY HAD PROVI DED INTEREST @ 24% ON THE REDEMPTION AMOUNT AGGREGATING TO RS. 51.54 LAKHS, WHICH HAS BEEN OFFERED TO TAX. ACCORD ING TO THE AO THERE IS A CHANGE IN THE METHOD OF ACCOUNTING WITH REGARD TO INTEREST ON DEBENTURES IN AN UN-UNIFORMED MANNER. HOWEVER, THE CIT(A) CONFIRMED THE ORDER OF THE AO ON A DIFFE RENT FOOTING. WE FIND THAT THERE IS NO MATERIAL PLACED BEFORE US THAT THE ASSESSEE HAS PROVIDED INTEREST ON CERTAIN OTHER DEB ENTURES AND IT IS ALSO NOT CLEAR THAT TO WHICH COMPANY THE ASSE SSEE HAS PROVIDED INTEREST @ 24% ON THE REDEMPTION AMOUNT AG GREGATING M.A. NOS. 321, 322 & 323/MUM/2010 M/S BACCAROSE PERFUMES AND BEAUTY PRODUCTS P. LTD . 4 TO RS. 51.54 LAKHS, WHICH HAS BEEN OFFERED FOR TAXA TION. THE SAID FACTUAL ASPECTS WERE NOT PROPERLY DISCUSSED BY THE CIT(A) AND THE SAME WERE ALSO NOT CLEAR FROM THE ORDER OF THE AO. WE, THEREFORE, DEEM IT FIT AND PROPER TO REMIT THE ISSU E IN DISPUTE BACK TO THE FILE OF THE AO AND DISCUSS/EXAMINE THE ISSUE IN DETAIL AND DECIDE THE SAME DE-NOVO AND AFTER PROVID ING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE I N THE MATTER. ACCORDINGLY, WE RESTORE THE ISSUE TO THE FILE OF TH E AO IN THE LIGHT OF ABOVE OBSERVATIONS. 23D. THUS, THE GROUND NO. IV IN AY 1999-00 AND GROUND NO. II IN AYS. 2001-02 & 2002-03 RAISED IN ITA NOS. 8834/MUM/2004, 8835/MUM/04, AND 6017/MUM/2002-03 AR E TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 3. IN THE RESULT, THE MISCELLANEOUS APPLICATIONS FI LED BY THE ASSESSEE ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS 16 TH DAY OF SEPTEMBER, 2011. SD/- SD/- (P.M. JAGTAP) (V. DURGA RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI, DATED: 16 TH SEPTEMBER, 2011 KV M.A. NOS. 321, 322 & 323/MUM/2010 M/S BACCAROSE PERFUMES AND BEAUTY PRODUCTS P. LTD . 5 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, G BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI.