TaxTMI 
TaxTMI 
2016 (12) TMI 1771
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....onsideration and the tax effect for the AYs 2001-02, 2002-03 and 2003-04 in the Revenue‟s appeals (ie ITA Nos.7392, 7393 and 7394/M/2013) works out to Rs. 8,75,097/- (AY 2001-02); Rs. 8,63,990/- (AY 2002-03) and Rs. 9,23,553/- (AY 2003- 04). In this regard, Ld Counsel for the assessee brought our attention to the contents of the CBDT Circular No.21/2015, dated 10.12.2015 and mentioned that the order of the CIT (A) is assessment year specific and not a composite order. In such cases, despite the commonness of the issue, Revenue is not allowed to filed the appeals. 3. After hearing both the parties, we are of the opinion that the said three appeals for the AYs 2001-02, 2002-03 and 2003-04 (ie ITA Nos.7392, 7393 and 7394/M/2013) and the relevant Cross Objections (ie C.O. Nos.25,26 and 27/M/2015) are required to be dismissed on the ground of low tax effect. We order accordingly. 4. In the result, all the three appeals of the Revenue (ie ITA Nos.7392, 7393 and 7394/M/2013) and three Cross Objections of the assessee (ie C.O. Nos.25,26 and 27/M/2015) are dismissed. 5. That leaves, four appeals for adjudication ie ITA Nos.7395, 7396, 7397 and 7398/M/2013 for the AYs 2004-05;....
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....the assessment years is deleted‟. When the issue came up regarding allowing the interest expenditure on the borrowed funds, which are utilised for buying the debt from the Bank of Baroda, in harmony with the decision about non-recognizing the notional interest income, CIT (A) did not allow the said interest debits stating that the same is allowable after the interest income is accrued and recognised for taxation. 7. Relevant facts relating to the above findings include that during the banking business, the Bank of Baroda extended the credit facility to its customer member ie International Cotton Corporation Pvt Ltd (ICCPL) and M/s. Karnataka Traders. The Thakkar and Ashar family members stood as guarantors. When there was a default in respect of the re-payments, the bank filed Suit (No.105 of 1986) in Bombay High Court for recovery of the debts. The premises viz "Madhavkunj", belonging to Thakkar family, was mortgaged in bank on 9.8.1983. Subsequently, by virtue of the deed of assignment dated 26.2.1999, assessee company entered into an agreement with the Bank of Baroda and the assessee acquired the rights on debts and related interest. Assessee had made the payment of Rs.....
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....e above, before us, Ld Counsel for the assessee submitted that as per the provisions of section 34 of the CPC, the rate of interest be paid on the principal sum is depending on the outcome of the suit. Relying on various decisions, Ld Counsel for the assessee submitted that the said provisions were explained by various High Courts. Bringing our attention to the judgment of the Bombay High Court in the case of Maharashtra State Financial Corporation Ltd vs. CIT [2005] 278 ITR 654 (Bom.) Ld Counsel for the assessee submitted that the said judgment is relevant for the proposition that in view of the provisions of section 34 of the Civil Procedure Code, 1908, the interest from the date of suit till the date of decree is a matter within the discretion of the court passing the decree. Consequently, the right to receive future interest comes into the picture when the court passes the decree. The interest amount could not have been added to the total income as interest income‟. Bringing our attention to the judgment of the Hon‟ble Madhya Pradesh High Court in the case of CIT vs. M.P. Financial Corporation (227 ITR 888), Ld Counsel for the assessee submitted that the contents ex....
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....hat the company borrowed the funds from Bank of Baroda and the guarantors ie Thakkar and Ashar family members of the present assessee-company are all related and connected financially. In that case, this is an arrangement by which the assessee-company does not want to pay tax on the interest income earned by the assessee. Further, bringing our attention to the assignment deed, Ld DR for the Revenue submitted that the said assignment deed provides for right to recover the interest as per the interest rate specified in the said deed. In that case, the provisions of section 34 of the CPC should not come on the way. Referring to the decisions cited by the Ld Counsel for the assessee, Ld DR for the Revenue mentioned that they are distinguishable. 11. We have heard both the parties and perused the orders of the Revenue Authorities as well as the paper books filed before us. On hearing both the parties and on perusal of the relevant material placed before us, we find, there is no dispute on the facts about the assessee acquiring the debts from the Bank of Baroda for a sum of Rs. 84,97,400/- with the borrowed funds, the loan creditors have not paid interest income to either bank or to t....
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....o considered the reasoning given by the CIT (A) in paras 4.1.4 and 4.1.5 of his order. Considering the above, we are of the opinion, the conclusion drawn by the CIT (A) is fair and reasonable and it does not call for any interference. Accordingly, relevant grounds raised by the Revenue in all the four appeals are dismissed. 13. The other common ground raised by the Revenue in all the Revenue‟s appeals relates to the CIT (A)‟s decision in restricting the disallowance u/s 14A of the Act. In this regard, we have perused the contents of para 4.2.2 of the CIT (A)‟s order and find the same is relevant in this regard. For the sake of completeness of this order, the said para 4.2.2 is extracted as under:- "4.2.2. As mentioned above, the disallowance in AY 2001-02, 2003-04 and 2004-05 have been made to the extent of 10% of the expenses ( other expenses plus finance expenses). In the case of assessee, the shares are held as stock in trade and income in trading thereof is of speculative nature and taxable, therefore, in my considered view, the disallowance need to be limited to the dividend (exempted income). The AO is accordingly directed to restrict the disallo....