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2017 (12) TMI 1668
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....Sudhir S. Mehta, has filed the following revised grounds of appeal: - "1. The Ld. Commissioner of Income-Tax (Appeals) ought to have allowed the deduction of interest expenditure to the extent of Rs. 2,64,72,208/- as follows: Sr. No. Entities Outstanding amount payable Interest @ 12% p. a. payable 1. Ashwin S. Mehta 4,87,92,875 58,55,145 2. Jyoti H. Mehta 4,43,50,467 53,22,056 3. Harshad S. Mehta 13,03,84,858 1,56,46,183 Total 22,35,28,200 2,68,23,384 Less: Proportionate disallowance of interest u/s. 14 A of the Act 3,51,176 Total 2,64,72,208 2. The Ld. Commissioner of Income-Tax (Appeals) has erred in law and in facts in confirming the estimated addition on account of personal household expenses amounting to Rs. 6,00,000/-. 3. The Ld. Commissioner of Income-Tax (Appeals) has erred in law and in facts that in confirming the levy of interest u/s. 234A, 234B and 234C of the Act. 4. The Ld, Commissioner of Income-tax (Appeals) has erred in law and in facts in not appreciating that the income assessed in the hands of the appellant were subjected to the ....
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....vestment. 5. After hearing the rival submissions and going through the orders of the Tax Authorities below as well as the case law relied upon before us which we have gone through, we hold that to the extent the assessee has not incurred liability towards interest for earning of the income towards borrowing for the purpose of making investment in shares and securities. The interest to that extent shall form part of the cost of acquisition of shares and securities and has to be taken into account as part of cost of shares for determining the profit on sale of shares. To that extent we allow the additional ground in each of the case. 6. Ground No. 1 relates to the interest expenditure claimed by the assessee. The AO disallowed the same because the interest income on term deposits as claimed by the assessee, in the opinion of the AO, was not allowable due to the following reasons: - (a) The interest payable is tentative and provisional. (b) There is no basis as per which the assessee has a right to pay and the creditors has a right to receive. (c) There is no basis of computation of interest payable which has been provided by the assessee. (d)....
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....ct of interest not payable is factually incorrect. The assessee has entered into oral agreement with creditors being three brokerage firms, i.e. M/s. Harshad S. Mehta, M/s. J.H. Mehta and M/s. Ashwin S. Mehta to pay the interest @12% per annum on the credit balance. The family members are dealing with the above three brokerage firms within the family itself. There was no written agreement. Based on such understanding interest on credit balance was provided by the assessee as he followed mercantile system of accounting and therefore it is necessary for the assessee to reckon both income and expenditure. Our attention was drawn towards the assessment order in this regard that the assessee was following mercantile system of accounting. It was further submitted that the assessee has made such claims in the past which were duly allowed by the AO. In this regard attention was drawn towards computation of income for A.Y. 1990-91 as well as assessment order dated 26.03.1993 passed under Section 143(3). In that year assessee claimed interest on mercantile basis, which was allowed. The order for A.Y. 1990-91 was passed well after notification of the assessee on 08.06.1992 and even without an....
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....ct or agreement do not get disturbed by invocation unless the custodian appointed under the Special Court Act invoke power under Section 4(1). The custodian in the impugned case during the past 25 years has not cancelled the agreement to pay interest between the assessee and his creditors. Our attention was also drawn to the evidence filed by the custodian in M.P. No. 41 of 1999 in which the custodian himself strongly advocated levy of interest and infact calculated interest on such credit balances @15% to 18% per annum to demonstrate that the liability of the family members including the assessee are more than the assets of the respective members. This proves that the funds borrowed by the assessee from the brokerage firms were subject to levy of interest as claimed, even as per the custodian. Thus it was contended that since the contract entered into by the assessee to avail interest bearing loans and advances has not affected by the notification and the assessee is liable to pay the interest. The said interest should be allowed as deduction. Reliance was placed in this regard on the decision of the Hon'ble Supreme Court in the case of Asea Brown Boveri Ltd. vs. IFCI 154 taxm....
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.... Section 11(2) of the Special Court Act. It was further submitted that in pursuance to the direction of the Hon'ble Special Court some payment has been made to the account of Late Shri Harshad Mehta during A.Y. 2011-12 and for this attention was drawn toward the ledger account of Late Shri Harshad Mehta in his books for A.Y. 2011-12. For the objection of the AO that no basis for calculation of interest has been submitted by the assessee, the learned A.R. contended that this allegation is totally incorrect. The details were duly filed along with revised ground of appeal and therefore the observations of the AO are not justified. With regard to allegation of the CIT(A) that the nexus of interest income with interest expenses is not established the learned D.R. contended that the monies were borrowed to meet the investment in shares and securities. Subsequently under the direction of the Hon'ble Special Court for other years part of these very investments were sold and the fund realised were invested in the fixed deposits with several banks. Thus the income generated has been brought to tax by the AO in the impugned assessment year. There was in fact a direct nexus between the....
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....racts have been entered into fraudulently or to defeat the provisions of the Special Court Act. In A.Y. 1990-91, the AO in the assessment order passed under Section 143(3) dated 26.03.1993 allowed the interest expenses to the assessee to the extent of Rs. 5,86,404/-. From page 75 of the paper book which contains the computation of income for A.Y. 1990-91, we noted that the assessee has disclosed the loan taken for the purchase of investment. The assessee is consistently following mercantile system of accounting which is apparent even from the assessment order of A.Y. 1990-91 as well as from the impugned assessment year. The order for A.Y. 1990-91 in fact has been passed by the AO after the date of notification and the enactment of the Special Court Act. We have gone through the order passed by the CIT(A) in the case of Shri Ashwin S. Mehta assessment years 2010-11 and 2011-12, where we noted that this issue of taxability of interest income of the assessee and other parties has specifically been dealt with by the CIT(A) and accordingly interest income of Rs. 10,68,83,732/- was brought to tax. In view of this fact it is apparent that the assessee is liable to pay interest on the amou....
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....he AO has disputed the very existence of liability towards interest to creditors. The CIT(A) vide his order dated 31.08.2010 confirmed and approved the claim of the assessee that there was no need for any written agreement and that the oral agreement coupled with action and intentions of the parties is sufficient to prove the existence of liability. This order of the CIT(A) was followed by him in the case of the assessee while adjudicating the ground relating to the interest expenses for A.Y. 2006-07 vide order dated 27.09.2013 under para 6 which has been reproduced under para 18 of the order of the assessee. These finding and observation in the above orders of the CIT(A) has not been disputed by the Revenue by filing an appeal. In view of this finding becoming final, in our view, the existence of liability for payment of interest cannot be disputed. 14. Coming to the objection of the Revenue that interest cannot be allowed as deduction has not been shown by recipients in their income. As has been discussed by us in the preceding paragraphs the interest has been shown as income by Mr. Ashwin S. Mehta in assessment years 2010- 11 and 2011-12. We also noted that Late Shri Harshad ....
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....with interest income, following his own finding in the case of another notified entity, i.e. Eminent Holding Pvt. Ltd. for A.Y. 2007-08 which are reproduced as under: - "As regards the nexus of the interest expenditure with the interest income, I find that the Balance Sheet of the appellant and the affidavit filed by the custodian before the Hon'ble Special Court supports the fact that the funds borrowed from Shri Harshad S. Mehta were deployed by the appellant in various assets like shares and securities, properties, etc. These funds generated income in the form of dividend and interest income. After being notified, such shares and securities got converted into Fixed Deposits with various banks. These fixed deposits generated interest income which is offered to tax. Hence, a reasonable nexus can be said to exist between the interest liability incurred by the appellant, and the interest income earned from these assets. However, this matter being sub-judice before the Hon'ble Special Court, no finding can be given on these matters." 15. Similar issue has arisen in the case of Shri Hitesh S. Mehta for A.Y. 2005-06 wherein the CIT(A) vide his order dated 31.08.2010....
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.... other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. 19. On these reasonings in the absence of any material change justifying the Revenue to take a different view of the matter and if there was not change it was in support of the assesses - we do not think the question should have been reopened and contrary to what had been decided by the Commission of Income-Tax in the earlier proceedings, a different and contradictory stand should have been taken. We are, therefore, of the view that these appeals should be allowed and the question should be answered in the affirmative namely, that the Tribunal was justified in holding that the income derived by the Radhasoami Satsang was entitled to exemption under Sections 11 and 12 of the Income Tax Act of 1961." The aforesaid dictum of law was reiterated recently by the Supreme Court in CIT vs. Excel Industries Ltd. : 358 ITR 295. "It appears from the record that in several assessment years, the Revenue accepted the order of the Tribunal in favour of the Assessee and did not pursue the m....
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....nal fees to the consultants and other expenditures have been mainly incurred by Dr. Hitesh S. Mehta. Looking to the overall withdrawals by the family members, the addition made and sustained is far too high and excessive. He further referred to the details of expenditure on account of personal and household expenses incurred and added in the hands of the following members of the family, which are as under:- Sr. No. Name A.Y. 20O6-07 A.Y. 2007-O8 Additions by AO (Rs.) Confirmed by CIT(A) (Rs.) Additions by AO (Rs.) Confirmed by CIT(A) (Rs.) 1. Ashwin S. Mehta (Appellant) 12,00,0000 6,00,000 12,00,000 6,00,000 2. Jyoti H. Mehta 18,00,000 9,00,000 18,00,000 9,00,000 3. Rasila S. Mehta 6,00,000 3,00,000 6,00,000 3,00,000 4. Deepika A. Mehta 6,00,000 3,00,000 6,00,000 3,00,000 5. Sudhir S. Mehta - - 12,00,000 12,00,000 6. Smt. Rina S. Mehta - 6,00,000 6,00,000 TOTAL 42,00,000 21,00,000 60,00,000 39,00,000 20: On the other hand, Ld. Special Counsel submitted that the appellant is maintain....
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....ppeal against the said order before the Hon'ble Supreme Court, that the income earned in the year under consideration was subjected to provisions of TDS, that the changeability of the section 234A, 234B and 234C of the Act should be after considering the amount of tax deductible at source on the income assessed. The appellant relies in this regard on the following decisions. He relied upon the cases of Motorola inc. v. DCIT [95 ITD 269 (Del.) (SB)], Sedco Fores Drilling Co. Ltd. [264 ITR 320], NGC Network Asia LLC [313 ITR 187], Summit Bhatacharya [ 300 ITR (AT) 347 (Bom)(SB)], Vijal Gopal Jindal [ITA No. 4333/Del/2009] & Emillo Ruiz Berdejo [320 ITR 190 (Bom)]. DR relied upon the cases of Devine Holdings Pvt. Ltd. 3.1.We have heard the rival submissions and perused the material before us. We find that in the case of Devine Holdings Pvt. Ltd. Hon'ble Bombay High Court has held that provisions of section 234A, 234B and 234C were applicable to the notified person also. Therefore, upholding the order of the FAA to that extent, we hold that provisions of section 234 of the Act are applicable. As far as calculation part is concerned, we find merits in the submission mad....
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....the cost of shares and securities. Thus this ground stands allowed. 25. Ground Nos. 3 & 4 relate to the levy and computation of interest under Section 234A, 234B and 234C. As agreed by both the parties that similar ground has arisen in the case of Shri Sudhir S. Mehta in ITA No. 5799/Mum/2015 for A.Y. 2009-10. Therefore the Tribunal may take the same view in the case of the assessee also. We ,therefore, respectfully following our order in the preceding paragraph in ITA No. 5799/Mum/ 2015 dismiss ground No. 3 and direct the AO to recomputed the interest in accordance with our direction given in the case of Sudhir S. Mehta in ITA No. 5799/Mum/2015 while disposing off ground No. 4. Thus ground No. 4 is statistically allowed. 26. In the result, appeal filed by the assessee is partly allowed for statistical purposes. Smt. Rasila S. Mehta - ITA Nos. 5806/Mum/2015 & ITA 2378 & 2379/Mum/2017 27. In this case also the assessee has taken additional ground as has been taken in the case of Shri Sudhir S. Mehta in ITA No. 5799/Mum/2015. In view of the discussion in the case of Shri Sudhir S. Mehta the additional ground taken by the assessee stands admitted. 28. In A.Y. 2011-12 as....
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.... 30. Since ground Nos. 3 & 4 in A.Y. 2011-12 and Ground Nos. 2 & 3 in A.Y. 2012-13 and 2013-14 relating to levy and calculation of interest under Section 234A, 2343B and 234C are similar to ground Nos. 3 & 4 ground taken in the case of Shri Sudhir S. Mehta in ITA No. 5799/Mum/2015 for A.Y. 2009-10, both the parties agreed that the Tribunal may take the same view in the case of the assessee also. We ,therefore, respectfully following our order in the preceding paragraph in ITA No. 5799/Mum/ 2015 dismiss ground No. 3 in A.Y. 2011-12 and ground No. 2 in A.Y. 2012-13 and 2013-14 and direct the AO to recompute the interest in accordance with our direction given in the case of Sudhir S. Mehta in ITA No. 5799/Mum/2015 while disposing off ground No. 4. Thus ground No. 4 in A.Y. 2011-12 and ground No. 3 in A.Y. 2012-13 and 2013- 14 are statistically allowed. 31. In the result, appeals of the assessee are partly allowed for statistical purposes. Smt. Raina S. Mehta - ITA Nos. 5804 & 5805/Mum/2015 & ITA Nos. 2600, 2601, 4570 & 4571/Mum/2017 32. Both the parties agreed that the issue involved in all these appeals are common. In A.Y. 2004-05 and 2005-06 there are two more grounds re....
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....ce of interest of Rs. 34,94,301/- respectively. Both the parties agreed that this issue is similar to the claim of interest arising in ground No. 1 in the case of Shri Sudhir S. Mehta in ITA No. 4799/Mum/2015 and whatever view the Tribunal may take in that case the same view may be taken in the case of the assessee also. We, while disposing of the said issue in the case of Shri Sudhir Mehta has deleted the said disallowance. We, therefore respectfully following the said decision of this Tribunal in the preceding paragraph allow the deduction of interest after disallowance of proportionate interest in each of the assessment year after verifying the calculation of interest quantification. 34. The additional ground taken by the assessee relates to the disallowance of proportionate interest which has been claimed by the assessee to be capitalised towards the cost of shares and securities. As both the parties agreed that similar issue has arisen in the case of Shri Sudhir S. Mehta in ITA No. 5799/Mum/2015 for A.Y. 2009-10 and whatever view this Tribunal may take in the case of Shri Sudhir S. Mehta the same view may be taken in the case of the assessee also. We therefore respectfully ....
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....ax (Appeals) has erred in law and in facts in not appreciating that the income assessed in the hands of the appellant were subjected to the provisions of TDS and hence on the said amount of tax no interest can be computed u/s. 234B and 234C of the Act." Except the ground relating to sustenance of disallowance under Section 14A, ground relating to the claim of interest expenditure is similar to ground No. 4 in y 2011-12 except change in figure. In A.Y. 2012-13 the claim of the assessee for interest is Rs. 4,15,511/- after proportionate disallowance of Rs. 2,06,778/-. Both the parties agreed that both the appeals be decided on the basis of the facts relating to A.Y. 2011-12. In both the assessment years the assessee has also taken the additional ground relating to capitalization of interest. As the additional ground has been admitted in all the other cases, therefore the said ground stand admitted in both the years. 38. So far as the ground relating to the claim of interest after disallowing proportionate interest is concerned in both the assessment years, both the parties agreed that similar issue has arising in ground 1 in ITA No. 5799/Mum/2015 in the case of Shri Sudhir S. M....
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....0-11 the assessee has taken as many as five grounds of appeal. Ground No. 1 since not pressed stands dismissed as not pressed thereby surviving the following grounds for our adjudication: - "2. The Ld. Commissioner of Income-Tax (Appeals) ought to have allowed the deduction of interest expenditure to the extent of Rs. 5,98,27,767/- as follows: Sr. No. Entities Outstanding amount payable Interest @ 12% p. a. payable 1. Ashwin S. Mehta 2,18,55,629 59,53,246 2. Harshad S. Mehta 2,37,00,42,828 28,10,74,569 Total 2,39,18,98,457 28,70,27,815 Less: Proportionate disallowance of interest u/s. 14 A of the Act 17,51,42,729/- Total 11,18,85,023 3. The Ld. Commissioner of Income-Tax (Appeals) has erred in law and in facts in confirming the estimated addition on account of personal household expenses amount to Rs. 3,00,000/-. 4. The Ld. Commissioner of Income-Tax (Appeals) has erred in law and in facts that in confirming the levy of interest u/s. 234A, 234B and 234C of the Act. 5. The Ld, Commissioner of Income-tax (Appeals) has erred in law and in facts in not appreciating....
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....ercantile system of accounting the interest income has been left to be assessed to tax. Even the AO failed to calculate the interest income earned by the assessee from the family members who were assessed under his charge into her income even though the assessee is following mercantile system of accounting. The correct amount of interest to be assessed in the hands of the assessee. It was further submitted that the details of interest income have now been filed and provided under the prior admission of additional ground. Therefore he requested to give the direction to the AO to determine the income of the assessee after including the said interest income. 47. The learned D.R., on the other hand relied on the order of the Tax Authorities below. 48. After hearing and carefully considering the rival submissions, we are of the view that the correct interest income has to be assessed in the hand of the assessee. The assessee has given the calculation of interest income which has to be assessed in the hand of the assessee amounting to Rs. 24,18,43,334/-. We, therefore, set aside this issue and restore this issue to the file of the assessee and direct the AO to recalculate the inter....
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....ssessment years relating to capitalization of interest attributable to acquisition of shares and securities. As both the parties agreed that similar issue has arising in the case of Shri Sudhir S. Mehta in ITA No. 5799/Mum/2015 for A.Y. 2009-10 and whatever view this Tribunal may take in the case of Shri Sudhir S. Mehta the same view may be taken in the case of the assessee also. We therefore respectfully following the said decision of the Tribunal in the case of Shri Sudhir S. Mehta direct the AO to treat the proportionate interest disallowed in each assessment year to be part of cost of acquisition of shares and securities. Thus the additional ground No. 2 in each of the assessment year stand allowed. 53. The next ground in both the assessment years relate to sustenance of addition on account of personal household expenses. Similar issue, as agreed by both the parties, has arisen in ITA No. 5799/Mum/2015 in the case of Shri Sudhir S. Mehta for A.Y. 2009-10. As in that case we have reduced the addition on account household expenses by 50%, we therefore respectfully following our order in ITA No. 5779/Mum/2015 for A.Y. 2009- 10 reduce the addition on account of household expense....
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....r releasing the appeal fees required for filing the appeal. It was pointed out that identical issue has arisen in the case of another notified entity, M/s. Fortune Holding Pvt. Ltd. wherein the delay in filing the appeal for 749 days was condoned by the Coordinate Bench of this Tribunal. The appeal in the present case is also identical. Even it was also contended that this Tribunal has condoned the delay in the case of Aatur Holding Pvt. Ltd. and others vs. DCIT in ITA No. 1223/Mum/2017 for A.Y. 2012-13 of 391 days which was due to the inaction of the custodian. A chart showing chronology of events leading to the delay was filed. 58. On the other hand, the learned D.R. contended that this is a case of negligence on the part of the assessee, therefore the delay should not be condoned. 59. We noted that under identical facts and circumstances the Coordinate Bench of this Tribunal in the case of Fortune Holding P. Ltd. ITA No. 939/Mum/2017 has condoned the delay for more than 749 days. Respectfully following the said decision of the Coordinate Bench, we condone the delay and admit the appeal filed by the assessee. 60. Ground No. 1 relates to the claim of interest by the assessee....
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....a and hence the Income confirmed by the learned Commissioner of Income-Tax (Appeals) ought to have been taxed in the hands of Late Shri. Harshad S. Mehta and not in the hands of the appellant. 2. The Ld. Commissioner of Income-tax (Appeals) has erred in law and in facts in confirming the addition of Rs. 6,37,325/- on account of unexplained entries in the bank account of the appellant. 3. The Ld. Commissioner of Income-tax (Appeals) ought to have allowed the deduction of following interest expenditure to the extent of interest income i.e. Rs. 1,47,13,638/- Sr. No. Entities Outstanding amount payable Interest @ 12% p.a. payable 1. Jyoti H. Mehta 9,38,31,858 1,12,59,823 2. Harshad S. Mehta 80,79,93,217 9,69,59,186 Total 90,18,25,075 10,82,19,009 Less: Proportionate disallowance of interest u/s. 14A of the Act 8,39,99,631 Total 2,42,19,378 4. The Ld. Commissioner of Income-tax (Appeals) has erred in law and in facts in confirming the disallowance of audit fees Rs. 40,000/-. 5. The Ld. Commissioner of Income-Tax (Appeals) has erred in law and in facts that in confir....
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....irect the AO to allow deduction to the assessee in respect of interest expenditure out of interest earned on term deposit amounting to Rs. 1,47,13,638/- out of interest earned on term deposit with the similar directions. Thus, this ground taken by the assessee is allowed. 68. Ground Nos. 5 & 6 taken by the assessee relate to levy and calculation of interest under Section 234A, 234B and 234C. As agreed by both the parties, similar issue has arisen in ITA No. 5799/Mum/2015 in the case of Shri Sudhir S. Mehta for 2009-10. We, therefore, respectfully following the said decision dismiss ground No. 5 regarding levy of interest but direct the AO in respect of ground No. 6 that the interest levied under Section 234A, 234B and 234C be recomputed after excluding the income which is subject to TDS. Thus, this ground is allowed for statistical purposes. 69. The assessee has also taken the following additional grounds: - "1. Whether in facts and circumstances of the case, the Ld. Assessing officer and Ld. CIT(A) ought to have adjudicated the issue of interest income. The correct amount of interest income ought to have been determined to arrive at the correct taxable income as per....
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....stically allowed. 74. In A.Y. 2003-04 the assessee has taken as many as six revised grounds. Since ground Nos. 1 & 3 are not pressed, therefore the same is dismissed as not pressed. Grounds No. 2, 3, 5 & 6 are similar to Ground Nos. 2, 3, 5 & 6 taken in A.Y. 2002-03 except change in figure. Therefore, both the parties agreed that whatever view this Tribunal may taken in disposing off ground Nos. 2, 3, 5 & 6 for A.Y. 2002-03 same view may be taken in this assessment year also. 75. In assessment year 2002-03 we have restored ground No. 2 to the file of the AO with the direction that the AO shall redecide this issue relating to sustenance of the addition by CIT(A) on account of unexplained entries in the bank account of the assessee. We, therefore, respectfully following our order in the case of the assessee for A.Y. 2002-03 restore this issue regarding addition of Rs. 1,50,79,191/- on account of unexplained entries to the file of the AO with the direction that the AO shall redecide this issue afresh after giving proper and sufficient opportunity to the assessee. In case the AO is satisfied with the explanation of the assessee to that extent the addition should be deleted. 76....