TaxTMI 
TaxTMI 
TaxTMI 
2015 (11) TMI 1305
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....(23G) of the Act is to be granted without deducting notional interest cost. 1(b) & 2(b) The Learned Commissioner of Income Tax (Appeals) ought to have held that exemption under section 10(34) of the Act against dividend income is to be granted without deducting notional interest cost. 1(c) & 2(C) The Learned Commissioner of Income Tax (Appeals) ought to have held that penal interest and interest received during the year on non-performing assets relating to the period upto 31st March, 1999, being the relevant financial year during which period, the appellant was not liable to pay income tax keeping in view the then existing Section 37 of the Export-Import Bank of India Act, 1981. First we take up the assessee's appeal: 2. Ground No.1(a)(i) and 2(a)(i) are not pressed by the Ld counsel and therefore these are dismissed. 3. Ground no.1(a)(ii) & Ground No.2(a)(ii): In these grounds, the assessee has contended, without prejudice to his other arguments, that, in alternative and in any view of the matter, Ld CIT(A) ought to have held that if the exemption u/s 10(23G) of the Act was to be granted at net of interest income, then, the deduction for interest cost incurred was to ....
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....vide order dated 14th 2013 for A.Ys. 2000-01 to 2002-03. Reliance has been placed upon the judgments of Hon'ble Bombay High Court in the case of CIT vs. HDFC Bank Ltd. 366 ITR 505 (Bom) and CIT vs. Reliance Utilities & Power Ltd. 313 ITR 340 (Bom). Copies of Balance Sheet and Charts were submitted showing that own funds of the Assessee in the form of paid capital and reserves were far more in comparison to the amount of loans granted out of mixed funds, interest income whereof is exempt u/s 10 (23G) of the Act. Further reliance was placed upon the judgments of Hon'ble Gujarat High Court in the case of Affection Investments Ltd. vs ACIT 326 ITR 255 (Guj) and Hon'ble Madrash High Court in the case of Lakshmi Vilas Bank Ltd. vs. CIT 284 ITR 93 (Mad), for the proposition that no tribunal of fact has any right or jurisdiction to come to conclusion, entirely contrary to the one reached by another Bench of the same tribunal on the same facts. It was further submitted, taking help of these judgments, that once the tribunal had come to the conclusion that the fact situation was identical, to the one obtaining in a decided matter, no coordinate bench of the tribunal has any right....
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....t the impugned figures are expense of interest on loan given to Gujarat Pipavo Port Ltd. at Rs. 1,21,86,219/- and to Information Tech. Part at Rs. 65,19,660/-, being other then foreign currency borrowings. 21. Assessee is neither a company registered under the Companies Act nor is it a Banking Company as per the Banking Regulation Act, 1949. As per Banking Act, "banking" means the accepting, for the purpose of lending or investment, of deposits of money from its public, repayable on demand or otherwise, and withdrawal by cheques, draft, order or otherwise and "banking Company" means any company which transacts the business of banking in India. Both these classifications does not embrace the assessee within itself. Therefore, the assessee is a "lender for loans" only and to earn interest thereon. At times, it has to procure foreign currency loans itself, for making further advances. When we go through the impugned orders and the submissions made we find that there is no denial by the revenue authorities on the fact that the business of the assessee was of un-divisible nature and assessee being the creation of the Parliament, is not a banking company and certainly not a company re....
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....ns in INR granted and investment in shares and securities out of mixed funds are to the tune of Rs. 236.02 crores only, which happens to be merely 9.39 % of the aggregate amount of the own funds of the Assessee. Under these circumstances, investments in shares and loans can be presumed to have been made out of own funds. This view has also been supported by another judgment of Hon'ble Bombay High Court in the case of CIT vs. HDFC Bank Ltd., supra. Thus, respectfully following the judgment of Hon'ble Coordinate bench in the own case of the assessee and in view of the judgments of Hon'ble jurisdictional High Court, we hold that deduction for the interest cost incurred was to be taken only in relation to earmarked borrowings utilized by the assessee for the purpose of granting loans to the enterprises, interest income whereof is exempt u/s 10(23G) of the Act for the purpose of computing net interest income eligible for deduction u/s 10(23G) of the Act. Thus, Ground No.1(a)(ii) and Ground No.2(a)(ii) are allowed. 4. Ground No.1(b) and Ground No.2(b): The assessee has contended that Ld. CIT(A) ought to have held that exemption u/s 10(34) of the Act is to be granted on the a....
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....h the parties and gone through the entire material. It is seen by us that the facts of the impugned year are similar to that as were discussed in the earlier years' orders. Detailed discussion has already been by us in this regard while disposing Ground No.1(a)(ii) and Ground No.2(a)(ii), above. It is seen by us that assessee's own funds exceed the investment made and therefore no disallowance could have been made by the assessing officer in the given facts and circumstances of the case and therefore, respectfully following judgments of Hon'ble Tribunal in assessee's own case and jurisdictional High Court, we decide these grounds in favour of the assessee. Thus, Ground No.1(b) and Ground no.2(b) are allowed. 5. Ground No.1(c) and Ground No.2(c): The assessee has contended that Ld CIT(A) ought to have held that the interest and penal interest received during the year of Rs. 22,09,62,134/- on Non Performing Assets (NPA), pertaining to the financial years ended upto 31st March, 1999, being the relevant years upto which the income of the assessee was not subject to income tax, cannot be assessed as income for the year under consideration. The AO has discussed this issu....
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....t of income. The assessee was requested by the AO to justify the basis on which this income should not be considered as forming part of taxable income of the assessee bank. The assessee explained to the AO that the income of the assessee was not subject to tax in terms of Sec. 37 of the Export-Import Bank of India Act, 1981 as it stood upto 31-3- 1999. It was explained to AO that the assessee was accounting interest on NPA loans and penal interest on cash basis. Hence, pending receipts, no such interest is credited in P & L a/c. The assessee explained that the interest income claimed as not subject to income lax under reference included interest income on NPA loans and penal interest pertaining to the period ended upto 31-3-1999, being the period upto which, in any view of the matter, the assessee was not liable to income tax. It was further explained that provisions of sec. 43D of the Income Tax Act,1961 provides that interest on NPA loans and penal-interest is chargeable to income tax in the previous year in which interest income on such NPA loans is either credited to the P & L Account or in the previous year in which it is received , whichever is earlier. Since the income of th....
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....el submitted that assessing officer has wrongly taxed the income for the period prior to 01.04.1999, when the income of the assessee was exempt in view of section 37 of Export-Import Bank of India Act, 1981. It was further argued by him that this issue stood covered in favour of the assessee with two judgments of Hon'ble ITAT in assessee's own case i.e. for A.Y. 1999-2000 in ITA NO.52/Mum/2005 dated 14th May 2007 and for A.Y. 2000-01 to 2002-03 in ITA No.7361 to 7363/Mum/2005 dated 14th August 2013. 5.8. On the other hand, Ld DR relied upon the orders of the AO and Ld CIT(A). Further, it was submitted by the Ld DR that section 43D has been brought on the statute, which has got overriding effect. However with regard to the decisions of the Hon'ble Tribunal, in assessee's own case, there was nothing with Ld DR to distinguish the same on facts or law. 5.9. We have gone through the orders of the lower authorities, the submissions made by both the sides and orders of the Hon'ble Tribunal in assessee's own case of earlier years. It is noted by us that it has been held by the Tribunal in assessee's own case for A.Y. 1999-2000 that income of the assessee earne....
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.... Export Import Bank of India Act 1981 were to be taken as not in the statute book. In other words, the income earned after 01.04.1999 are clearly liable to tax because of the amendment. Identical issue was dealt by the Hon'ble Madras High Court in the case of CIT v. Ronald William Trikard (215 ITR 638) and the Hon'ble Bombay High Court in the case of Mcdermott International Inc. (no.1) v. Union of India (173 ITR 155) and the issue has been decided in the manner in which the assessee is now canvassing before us. Therefore, we hold that the interest income of the assessee for the year ended, 31.03.1999 is exempt from the Interest tax Act by virtue of section 37 of the : Export Import of Bank of India Act 1981" 5.10. Further, this issue was examined in detail by the Hon'ble Tribunal in Assessee's own case for A.Y.2000-01 to 2002-03 also. Relevant paras of this order are reproduced below: "36. Effective ground no. 3 is with regard to taxing penal interest and interest on Non Performing Asset (NPA) upto 31.03.1998, for which there was no liability of tax on the assessee. 37. It is seen from the orders of the revenue authorities that they have virtually followed th....
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.... case, Hon'ble Supreme Court in the case of UCO Bank vs CIT, reported in 237 ITR 889, has covered circular dated 09.10.1984. This circular could not applied, because it was beneficial for the banks and not for the assessee. The Hon'ble Supreme Court held, that interest on sticky loans, pertaining to earlier years could not be taxed. In the light of this judgment, and respectfully following the same, we cannot endorse the views taken by the revenue authorities. 39. We, therefore, set aside the order of the CIT(A) and direct the AO to delete the interest and penal interest on NPA account upto 31.03.1999, at Rs. 50,89,66,421/-. 40. The ground of appeal is, therefore, allowed." 5.11. The perusal of the above decisions of the Hon'ble Tribunal clarifies that income of the assessee for, the period upto 31.03.1999, was exempt. Hon'ble Bench has also taken into consideration, the effect of provisions of section 43D, while holding that income of the assessee pertains to the period upto 31.03.1999, and even if it was received by the assessee subsequent to that date, would not be liable to tax. It is seen by us that there is no change in the facts in this year as compar....
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....or the financial year ended upto 31.3.1999. Accordingly, assessment was made by the assessing officer and the assessee was required to claim depreciation as per the stand taken by the department. 8.4. The Assessee carried the matter before the Ld CIT(A), re-iterating the submissions as were made by the assessee before the Assessing officer. The Ld CIT(A) examined this issue in detail and decided it in favour of assessee and allowed this issue by holding as under: "This issue has been discussed in detail by my predecessor and it was held that there is no legal basis for adopting WDV of the appellant by reducing Rs. 1,20,03,494/- as notional depreciation for the earlier accounting period in which neither the appellant was assessable to tax nor any depreciation was actually allowed to be appellant under the Act. The WDV of an asset has to be worked out in accordance with the definition given in sec.43(6) of the Act. As per these provisions, WDV, means in the case of assets acquired before the provio0us year, the actual cost to the assessee, less all the depreciation actually allowed to him under this Act or under the I.T. Act 1922. Thus, the assessing officer is directed to allow d....