TaxTMI 
TaxTMI 
TaxTMI 
2017 (10) TMI 1523
X X X X Extracts X X X X
X X X X Extracts X X X X
....ricted to Rs. 1,88,64,396) being interest expense against income from other sources on the ground that the lending bank has discontinued providing for interest effective from lsl April, 2003 and hence, there is no liability/ obligation of the appellants to pay to the bank. The appellants contend that on the facts and in the circumstances of the case and in law, the CIT(A) ought to have allowed the claim of the said interest expense against income from other sources inspite of the fact that the impugned interest is not debited by the lending bank inasmuch as the appellants are contractually liable to pay the same. 2. The CIT(A) erred in upholding the disallowance made by the Assessing Officer in not allowing operating and administration expenses Rs. 1,95,604 and deprecation Rs. 1,79,143 against the income of Rs. 22,053, being write back of mark-to-market valuation of shares. The appellants contend that on the facts and in the circumstances of the case and in law, the CIT(A) ought to have allowed the impugned expenses. 3. The CIT(A) erred in upholding the action of the Assessing Officer in not allowing set-off of unabsorbed depreciation and business loss, including speculation ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f Rs. 3,28,65,299/- wholly and exclusively for the purpose of earning interest income of Rs. 1,88,64,396/-. The assessee has not kept the funds with the NSE on its own to earn income against which deduction of Rs. 3,28,65,299/-, as interest expended was claimed. The A.O. further observed that earning of interest income was not the sole purpose against which interest expenditure has been expended as claimed by the assessee. The assessee had not invested the fund with NSE, but earned interest on fund due to invocation of Bank Guarantee by the NSE. Due to invocation of bank guarantee, the assessee had expended money and interest paid thereon out of necessity. Hence, the A.O. was of the view that assessee was not entitled to deduction claimed u/s. 57(iii) of Rs. 1,88,64,396/-. 6. The A.O. has not accepted the above said claim on the ground that the assessee was not entitled to claim deduction u/s.57(iii) of the Act. Further, the assessee company did not submit any documents in support of their contention except written submissions filed in the course of assessment proceedings. The A.O. has referred to the remand report submitted to the CIT(A) during the course of appeal proceedings fo....
X X X X Extracts X X X X
X X X X Extracts X X X X
....the year under consideration are same, the CIT(A) ought to have followed the order of the Tribunal in as much as the Tribunal is a higher forum and for this purpose reliance is placed on the decision of the Supreme Court in the case of Collector of Central Excise v. Dunlop India Ltd, [1985] 154 ITR 172, which held that "the better wisdom of the Court below must yield to the higher wisdom of the Court above. Therefore, the decision of a High Court on a relevant issue must be followed in the absence of any contrary decision of any other High Court on the issue, because ignoring the decision of a High Court by a Tribunal would amount to demeaning the authority of law which is not correct," 13. With regard to obligations of the assessee to pay interest, reliance can be placed on the following decisions of co-ordinate Benches of the Tribunal at Mumbai, in the case of associate concerns of the assessee - Name of the Company ITA Nos Chat Computers Pvt. Ltd 4818/Mum/2007 NH Securities Ltd 78/Mum/2009 Panther Fincap & Management Services Pvt. Ltd 7278/Mum/2007 193and369/Mum/2008 14. We found that the banks have stopped providing the interest as they are governed by the NPA guidelin....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... including the orders of authorities below and case laws relied upon by the parties. We find that the business of the assessee was discontinued following the order of SEBI which was upheld by the SAT and Apex Court also and thus the business of the assessee came to forced stand still. The assessee was doing business of security and stock broking and trading in shares. We find that following the discontinuance of business by the order of SEBI, the National Stock Exchange invoked the guarantees furnished by the assessee and also exercised the lien on FDRs and proceeds of FOR were also send to the National Stock Exchange by the various banks when the assessee was declared defaulter by the NSC resulting into accumulation of deposit to the tune of Rs. 24,35,12,8137- with National Stock Exchange on which the NSE allowed interest of Rs. 2,60,42,2977- during the financial year 2007-08 relevant to the assessment year under consideration. We find that these deposit of Rs. 24 crores accumulated out of various bank guarantee invoked and proceeds of FDRs given as security. The source of the said amounts of accumulated funds with the NSC are from the borrowed funds from banks. Now the question b....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... is wholly and exclusively incurred or expended for the purpose of making or earning of such income has to be allowed against the income which is earned and assessable under the provisions of section 56 of the Act. We also find that the National Stock Exchange exercised lien on FDRs of Rs. 5 crores on 23.07.2002 (proceeds of FDRs Rs. 5,94,03,209/-)which was purchased on 19.07.2000 out of money borrowed from the Global Trust Bank and the assessee incurred interest on the said bank to the tune of Rs. 95.00 lakhs. Three other deposits out of interest bearing funds from Global Trust Bank were also given Rs. 2,00,000/- on 07.02.2000, Rs, 6,00,000/- on 21.09,2000 and Rs. 25,00,000/- on 18.10.2000 on which the assessee incurred interest of Rs. 6,27,000/-.Interest on bank guarantees invoked by the stock Exchange Rs. 3,15,00,000/- from Global Trust Bank , interest of Rs. 59,85,0007- was incurred and on Rs. 3,00,00,000/- from Centurian Bank out of which Rs. 2,11,00,000/-were interest bearing and interest incurred was at Rs. 33,76,000/-. Likewise assessee incurred interest of Rs. 80,00,000/- on the amount of invoked bank guarantee of Rs. 5,00,00,000/- from ICICI Bank. Thus the total amount of....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... of authorities below. We find that the assessee has not been allowed credit of Rs. 38,79,5847- being TDS at source on behalf of the assessee by NSE/Banks and the Id. CIT(A) has just dismissed the ground by directing the assessee to file rectification application u/s 154 of the Act which is not correct in our view and hence we are of the view that it would meet ends of justice if the AO is directed to allow the credit of TDS of Rs. 38,79,5847- after verifying the claim of the assessee after allowing reasonable opportunity of being heard to the assessee. This ground is allowed for statistical purposes. 12. The issue raised in respect of depreciation amounting to Rs. 1,79,634/- raised in ground No.2 not allowing the depreciation to the assessee. The Id. CIT(A) also rejected the ground of the assessee on the ground that business has ceased and therefore no deprecation was allowable in the current year or in the subsequent years. Aggrieved by the order of Id. CIT(A) the assessee in appeal before us. 13. After hearing the rival contentions and on perusal of the record, we find that the assessee has discontinued the business following the order of SEBI and therefore there was no ac....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he returned income of Rs.Nil. While finalizing the assessment, the A.O., among other additions, has made an addition of Rs. 14,45,48,419/- on account of loan written off by Centurion Bank. The assessee preferred appeal before the CIT(A) against the action of the A.O., who in turn, had confirmed the action of A.O. The assessee preferred an appeal before the Hon'ble IT AT which has set aside the issue of disallowance of loan written off Centurion Bank to the file of the A.O. for fresh adjudication. Accordingly, notice u/s.143(2)/142(1) dated 28.02.2014 was issued to the assessee. The A.O. has completed the assessment on 31.03.2015 at total income of Rs. 1,20,645,480/- after making an addition of R« 103.711,957/-on account of loan written by Centurion Bank. 29. During the course of assessment proceedings, the A.O. observed that the assessee company filed the same details which were filed before the Assessing Officer and various appellate forum. The assessee was requested to file the interest expenses ledger account appearing in the books of the assessee relating to the period A.Y.2001-02 to 2005-06 to which the amount of waiver pertained. However, not convinced with the ass....
X X X X Extracts X X X X
X X X X Extracts X X X X
....account at pages 24 to 35 of the paper book. We notice there from that the assessee has been given a loan of Rs. 20.00 crores by Centurion bank on 30-05-2000. The balance as on 14/02/2001 is shown as Rs. 10,99,64,081/-, which means, there is merit in the contentions of the assessee that it has repaid principal amount to the tune of Rs. 9.01 crores and also the liability towards interest/charges raised by the bank till 14/02/2001 has been settled by the assessee. From the statement furnished by the assessee, a further debit towards interest/charges/payments has been raised by the bank to the tune of Rs. 2.12 crores. The bank has collected a sum of Rs. 6.37 crores by way of repayment, share invocation and dividend. 12. The contention of the assessee is that the above said amount of Rs. 6.30 crores should be adjusted against the interest/charges liability, meaning thereby, the interest/charges liability has been fully settled by the assessee and the balance amount of Rs. 4.25 crores have been repaid towards principal portion of loan. Accordingly it has been contended that the remaining amount waived by the bank would represent only principal portion only. 13. In our view, the ab....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ne through the orders of the authorities below and found that the present appeal is the second round, partial relief given to the assessee by the CIT(A) in the first round, which attained finality inasmuch as the Department did not file an appeal against the order of the CIT(A). It is the appeal of the assessee to the Tribunal which was set-aside and therefore, the Assessing Officer and the CIT(A) in the second round travelled beyond the directions of the Tribunal in the first innings. 36. Directions of the Tribunal in the first round - (a) The directions of the Tribunal in the first round are contained in para 11 on page 6 of the order. In response to the observation of the Tribunal order as to how the amount of Rs. 4,08,36,462, being the principal amount, which was deleted by the CIT(A) has been arrived at, the AR referred to point no 2 at page no 29, page nos 28 to 30 of the paper book were submitted to the Tribunal in the first round. 37. This we found that the direction of the Tribunal was limited to the extent of "to identify what is the principal amount waived and the interest amount waived ...... It has also to be verified as to what is the interest expenditure thai was c....
X X X X Extracts X X X X
X X X X Extracts X X X X
....itted the matter back to you to decide the issue afresh. The break-up of Rs. 10,37,11,957 is given below - Interest + Other charges + Rs. 4,08,36,462 Bank guarantee 9,67,76,538-page no 22 Interestpre-March, 2001 69,35,419 -page no 22 10,37,11,957 In this connection, we observe as follows - 1. Following amounts cannot be brought to tax at all under section 41(1) as they have not been allowed in any of the earlier years Refer para 6.1 on page no 5 of CIT(A) order Interest-A.Y. 2004-05 2,02,61,611 } Section 43B Interest-A.Y. 2005-06 50,65,403 } TDS on FD interest 3,26,811 Bank guarantee 2,06,12,258 4,62,66,083 Thus, out of 14,45,48,419 4,62,66,083 - to be reduced 9,82,82,336 Balance 2. Rs. 9,82,82,336 includes interest as given below - Pre-March, 2001 69,35,419 F.Y. 2001-02 (A.Y. 2002-03) 1,67,82,574 1,63,69,303 F.Y. 2002-03 (A.Y. 2003-04) 1,73,57,050 5,74,44,346 and the balance is Rs. 4,08,37,990 Waiver on principal account Difference Demat charges 528 Bank charges 1,000 1,528 Payments made Interest on fixed deposit 3,37,155 Sale proceeds of shar....