TaxTMI 
TaxTMI 
2016 (5) TMI 415
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....assessment year 2009-2010 and accordingly, ought to have directed the AO to delete the penalty levied vide order dated 29th February,2012 of Rs. 4,71,89,550/ -. 2. It is humbly prayed that the reliefs as prayed for hereinabove and/or such other reliefs as may be justified by the facts and circumstances of the case and as may meet the ends of justice should be granted." 3. The brief facts of the case are that the assessee company is engaged in the business of development and/or construction of complexes. 4. During the course of the assessment proceedings u/s 143(3) read with Section 143(2) of the Income Tax Act,1961 (hereinafter called "the Act") , on 15-07-2011 , the assessee company was asked by learned assessing officer(Hereinafter called "the AO") to explain why not the interest claimed in the Profit & Loss A/c of Rs. 14,91,61,322/- be disallowed as there are interest free advances out of the borrowed funds. In response there-of, the assessee company submitted its reply dated 16.07.2011 on 20.07.2011 and also filed a revised computation of income in which the assessee company itself made the disallowance of said interest expenditure . Further, in the said submissi....
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....d were recalled. (b) Keeping in view the overall utilization of funds received from the Holding Company, interest expenditure / financial charges of Rs. 14,91,61,322/- was claimed as an allowable deduction: (i) Nature of business of the assessee company, being that of development of real estate; (ii) Nature of advance so granted, being for a proposed real estate project; (iii) Principle of commercial expediency; (iv) Guiding principles laid down by the Hon. Supreme Court of India in the matter of SA Builders reported in 288 ITR 1. (c) The necessary disclosure of claim of such interest expenditure / financial charges has been made vide Note No. 1 forming part of the statement of computation of total income submitted to your goodself vide our letter dated 1st June, 2011. (d) The Holding Company has divested its investment in the assessee company during the financial year 2010-2011 and therefore, by virtue of Section 79 of the Act, the right to carry forward losses lapses and as such claim of interest expenditure / financial charges resulting into business loss has became infructuous. (e) Hence, the withdrawal of ....
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....re Limited(hereinafter called "HDIL"). Hence, it could not be said that expenditure made based on withdrawal of claim by the assessee company for its admissibility in the facts and circumstances as applicable, cannot be equated to the assessee company having either concealed the particulars of income or furnished inaccurate particulars of such income, hence, the question of levy of penalty u/s 271 (1)(c) of the Act does not and cannot survive in law. The assessee company relied upon the decision of the Hon'ble Supreme Court in the case of CIT v. Reliance Petroproducts (P) Ltd., reported in 322 ITR 158(SC). The assessee company also relied upon the decision of Hon'ble Gujarat High Court in case of New Sorathia Engineering Co. v. CIT 282 ITR 642(Guj.) The AO, however, rejected the submissions of the assessee company and held that since this issue has come to light during the assessment proceedings and the assessee company withdrew the claim as this case was selected for scrutiny assessment otherwise the assessee company had no intention to offer this income to tax. The AO held that the case laws relied upon by the assessee company is distinguishable and are not applicable to asses....
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....count under the head "Recovery of Financial Charges in respect of Unsecured Loans". The same was claimed as admissible deduction, in returning the loss for the year in the return of income filed with the Revenue. The same charges were incurred in connection with placing of advances in terms of MOU dated 27th October, 2007, representing a business venture in the hands of the assessee company , which is a revenue expenditure incurred in the course of the business of the assessee company , keeping in view the commercial expediency. In support, the assessee company relied upon the judgment of the Hon'ble Supreme Court in the case of S.A. Builders reported in 288 ITR 1 (SC). In the Statement of income attached with the return of income furnished for the year, adequate disclosure was made in relation to the said claim for deduction. The assessee company also submitted that the assessee company was a wholly owned subsidiary company of DB Realty Private Limited up to the year ended 31st March, 2011. After 31st March, 2011, the said Holding Company divested its investments in the shares of the assessee company to a third party viz. Adani Properties Pvt. Ltd., having consequential effect....
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....ms of the applicable provisions of the Act. The assessee company drew the attention of the AO in the course of assessment proceedings for voluntary withdrawal of the captioned expenditure. The assessee company submitted that by that time, the AO was only collecting the information. In nutshell, the assessee company submitted that the claim in relation to the captioned charges was not an improper claim in law. There was a proper disclosure of the claim in the statement of income attached along with the return of income furnished for the year and there was a change in the shareholding pattern of the assessee company which attracted the provisions of Section 79 of the Act, resulting into disentitlement of the right to carry forward the loss for future set off. The said change took place after 31st March, 2011 and revised return of income could not have been filed for withdrawal. The assessee company submitted that with a view to avoid litigation and to buy peace and also the said claim would have been disallowed due to provisions of Section 79 of the Act, the claim of the interest expenditure/financial charges was withdrawn in the course of the assessment proceedings. This withdrawal ....
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....f section 79 of the Act and taking its shelter under that provision is also an afterthought. The onus is on the assessee company to furnish evidence in support of its claim. By not furnishing evidence in support of its claim and merely withdrawing the claim, the assessee company has not discharged its onus of proving its claim. The claim of the assessee company that to buy peace, it withdrew the claim has no legal sanctity and once the return of income is filed and accounts submitted , assessee company is bound to furnish evidence in support of its claim. In the instant case , the assessee company instead of furnishing any evidence just withdrew the claim after a query was raised on the issue by the A.O. . The CIT(A) held that the A.O. is right in concluding that assessee company has furnished inaccurate particulars of income and has rightly levied the penalty u/s 271(1)(c) of the Act. In support of his contention, the CIT(A) relied on the judgment of Hon'ble supreme Court in the case of JCIT v. Saheli Leasing & Industries Ltd. [2010] 191 Taxman 165 wherein it was held that the penalty u/s 271(1)(c) of the Act has been rightly levied by the A.O., even in cases of disallowances wher....
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....per the said MOU with MIAL. However, during the year, the MOU entered with the HDIL in this regard was cancelled and the advances granted were recalled. Consequent to which funds received have been repaid by loan obtained by the holding company on the behest of the assessee company. The assessee company has claimed deduction of interest of Rs. 14,91,61,322/- which was recovered by the holding company for the loans obtained by the holding company at the behest of the assessee company. The assessee company filed the return of income on 22nd September, 2009 for the assessment year 2009-10 whereby the said interest was claimed as expenditure. It was submitted that the assessee company is a subsidiary of DB Realty Private Limited up to the year ended 31st March, 2011 and after 31st March, 2011 the holding company divested its investments in the shares of the assessee company to a third party viz. Adani Properties Pvt. Ltd. The share transfer form and copy of share certificate is placed at paper book page 52 to 57 of the paper book. In view of provisions of section 79 of the Act, the said claim is not available to the assessee company for carry forward and set-off of losses as there is c....
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....ng asked during assessment and appellate proceedings , rather the same was withdrawn to buy peace and also in view of Section 79 of the Act. The decision of Hon'ble Supreme Court in the case of Dharmendra Textiles Processors (2008) 306 ITR 277(SC) and Mak Data Private Limited v. CIT (2013) 358 ITR 593 (SC) is directly applicable to the assessee company's case The return of income was filed on 22nd September, 2009 , while the shareholding has been transferred in the year 2011. The ld. DR submitted that the assessee company has failed to prove that the interest expenditure has been incurred wholly and exclusively for the purposes of business of the assessee company. The ld. D.R. further relied on the orders of A.O. and the CIT(A). He submitted that the advance has been given free of interest while the assessee company is paying interest on borrowed funds. The assessee company has surrendered and withdrawn the claim of interest after it was cornered by the A.O. . He further relied upon the decision of Tribunal in the case of Trans Polyurethane Private Limited in ITA No. 8125/Mum/2010 dated 25-03-2015 and Hon'ble Delhi High Court decision in the case of Zoom Communications Limited (201....
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....company which has been claimed as an admissible deduction in the return of income filed with the Revenue and was claimed to have been incurred wholly and exclusively for the purpose's of the company's business and hence should be allowed accordingly. We have observed that there is no claim of interest expenditure in the immediately preceding assessment year and this is the first year when such a claim of allowability of interest expenditure was made by the assessee company. We have observed that the Revenue has issued notice u/s 143(2) and 142(1) of the Act dated 14th June, 2011 whereby all the details were called and the information have been furnished by the assessee company on 15-07-2011. The assessee company also supplied the details of unsecured loans with name, address of parties and amount involved etc.. On 15-07- 2011, the AO asked the assessee company why the claim of interest expenditure should not be disallowed .We observed that vide its letter dated 16th July, 2011 filed on 20-07-2011, the assessee company has withdrawn allowance of interest expenditure of Rs. 14,91,61,322/- which was stated to be recovered by the holding company for loans obtained on behalf and at behe....
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....tional Airport Pvt. Ltd. and HDIL have entered into an agreement dated 15th October, 2007 which agreement is subject to the provisions of Operation, Management and Development Agreement dated 4th April, 2006 executed between Mumbai International Airport Pvt. Ltd. and Airport Authority of India entered into for the purpose of operation, management and development of the Mumbai Airport. We further noted that under the agreement dated 15th October, 2007, the HDIL has undertaken the obligation of removal of the slum dwellers encroaching on the Airport land, resettlement of such slum dwellers on any land outside the Airport land and to hand over vacant and peaceful possession of the encroached airport land to Mumbai International Airport Pvt. Ltd. . HDIL, under the said agreement dated 15th October, 2007 is, inter alia, entitled to receive the Transferable Development Rights (TDR) for the resettlement of the slum dwellers as may be permitted under the rehabilitation scheme as also entitled to development rights in respect of 55% of certain encroached land, upon removal and resettlement of slum dwellers from the said encroached land which is described as "Released Land" in the said agree....
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....sment year 2009-10. We have further observed that it is stated that the assessee company has made claim for the interest expenditure of Rs. 14,91,61,322/- which was recovered by the holding company incurred on the loan so obtained on assessee company's behalf and at the behest of the assessee company in the return of income filed with the Revenue on 22.09.2009 and the assessee company immediately withdrew the said claim of interest expenditure after being pointed out by the A.O. on 15-07-2011 . The A.O. accepted the contentions of the assessee company and did not verify further whether the claim was made bona-fide at the time of filing of the return of income in 2009 as the assessee company itself surrendered and withdrew the said claim of allowance of interest expenditure. The AO invoked the penalty provisions u/s 271(1)(c) of the Act for furnishing of in-accurate particulars of income. The assessee company has not submitted complete and full details with respect to these loans and its terms and conditions stated to be obtained by the holding company on behalf and at the behest of the assessee company and payment of interest even during the appellant proceedings to substantiate wh....