TaxTMI 
TaxTMI 
2020 (6) TMI 48
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.... - The Learned Commissioner of Income-Tax (Appeals) ought to have held that the disallowance of interest amounting to Rs. 27,50,62,799/- suo moto made by the appellant is not required in accordance the provisions of the Income tax Act but is actually an allowable deduction under the provisions of Section 36(1)(iii)/37(1) of the Act." Since the additional ground is inter-connected / legal ground, the same is taken on record as ground no.2. As evident from grounds of appeal, the sole subject matter of dispute before us is interest disallowance u/s 36(1)(iii). 1.3 For ease of understanding, the underlying amounts have been rounded -off toRupees in Lacs except where the figure are fully expanded. 1.4 We have carefully heard the arguments advanced by respective representatives. We have also perused relevant material on record including documents placed in the paper-book. Our adjudication to the subject matter of appeal would be as given in succeeding paragraphs. 2.1 Facts on record would reveal that the assessee being resident corporate assessee stated to be engaged in development and construction of real estate properties was assessed for year under consideration u....
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....ssociated companies i.e.M/s Ajinath Hi-Tech Builders Pvt. Ltd. & M/s Macrotech Constructions Pvt. Ltd. The said disallowance was made since the investments were stated to be made out of borrowed funds. The rate of 37.93%, as per para 4.3 of the assessment order, is interest rate earned by the assessee on loans and advances. 2.6 As per the Balance Sheet, the assessee has issued debentures of Rs. 161800 Lacs which are the same as in preceding year. The assessee has made investments of Rs. 7251.85 Lacs which have also remained constant during the year. The same has already been elaborated in preceding para 2.5. The assessee has year-end loans and advances of Rs. 76912.20 Lacs as against previous year figures of Rs. 151909.02 Lacs. The majority of year-end loans are in the shape of loans to subsidiaries / fellow subsidiaries. The accumulated losses stand at Rs. 4372.55 Lacs. The cash and bank balances have been reflected to be Rs. 73910.93 Lacs. From the perusal of its Balance Sheet, it is quite discernible that the assessee has not carried out any real estate projects either in this year or in the preceding year, which is stated to be its primary business, Proceedings befo....
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.... time during the year. Therefore, these losses were not allowable to the assessee. The assessee did not carry out any business activity rather it was merely acting as a middleman in disbursing the money to the group concerns. Therefore, the amount of Rs. 3252.05 Lacs as incurred for interest and discount / expense on debentures was to be disallowed u/s 36(1)(iii). The said amount comprised-off of net interest expenditure of Rs. 1633.57 Lacs and misc. expenditure written-off for Rs. 1618.48 Lacs. Since the assessee had already made suo-moto disallowance of Rs. 2750.62 Lacs, the differential amount i.e. Rs. 501.43 Lacs was disallowed and loss was reduced to that extent. 3.4 From the assessment order, it could be observed that Ld. AO has erred in noting down the correct factual matrix since miscellaneous expenditure incurred by the assessee on account of debenture discount and debenture issue expenses was not a claim u/s 36(1)(iii) rather it represent amortization of these expenditure over the life of debentures i.e. 39 months for which a separate claim was made in the Profit & Loss Account and no suo-moto disallowance was offered by the assessee on this account, in its computation....
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....that the assessee did not carry out any business activity and the proceeds of debentures were diverted towards interest-free investments in sister concerns. Even if simple interest of 12% is applied on these investments, the disallowance would be Rs. 8.50 Crores as against disallowance of Rs. 5.01 Crores made by Ld. AO. Therefore, the aforesaid interest disallowance was confirmed, against which the assessee is under further appeal before us. 5.1 The Ld. Authorized Representative for assessee (AR), drawing our attention to assessee's financial statements as well as assessment orders of earlier years, submitted that similar methodology as adopted by assessee in those years has been accepted by the revenue. This methodology is stated to have been accepted in subsequent years also. It has been submitted that the interest income has been assessed as business income. To support the same, copy of assessee's Memorandum and Articles of Association has been placed on record. A plea of Rule of consistency has been raised to submit that since the assessee fulfilled the conditions laid down in Sec.36(1)(iii), entire interest-disallowance including suo-moto disallowance made by the assessee, ....
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....ime to time which crippled the functioning of most of the government departments including Income Tax Appellate Tribunal (ITAT). The situation led to unprecedented disruption of judicial work all over the country and the order could not be pronounced despite lapse of considerable period of time. The situation created by pandemic covid-19 could be termed as unprecedented and beyond the control of any human being. The situation, thus created by this pandemic, could never be termed as ordinary circumstances and would warrant exclusion of lockdown period for the purpose of aforesaid rule governing the pronouncement of the order. Accordingly, the order is being pronounced now after the re-opening of the offices. 7.3 Faced with similar facts and circumstances, the co-ordinate bench of this Tribunal comprising-off of Hon'ble President and Hon'ble Vice President, in its recent decision titled as DCIT V/s JSW Limited (ITA Nos. 6264 & 6103/Mum/2018) order dated 14/05/2020 held as under: - 7. However, before we part with the matter, we must deal with one procedural issue as well. While hearing of these appeals was concluded on 7th January 2020, this order thereon is being prono....
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....judgment". In the ruled so framed, as a result of these directions, the expression "ordinarily" has been inserted in the requirement to pronounce the order within a period of 90 days. The question then arises whether the passing of this order, beyond ninety days, was necessitated by any "extraordinary" circumstances. 9. Let us in this light revert to the prevailing situation in the country. On 24th March, 2020, Hon'ble Prime Minister of India took the bold step of imposing a nationwide lockdown, for 21 days, to prevent the spread of Covid 19 epidemic, and this lockdown was extended from time to time. As a matter of fact, even before this formal nationwide lockdown, the functioning of the Income Tax Appellate Tribunal at Mumbai was severely restricted on account of lockdown by the Maharashtra Government, and on account of strict enforcement of health advisories with a view of checking spread of Covid 19. The epidemic situation in Mumbai being grave, there was not much of a relaxation in subsequent lockdowns also. In any case, there was unprecedented disruption of judicial wok all over the country. As a matter of fact, it has been such an unprecedented situation, causing dis....
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....le interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is required to interpreted. The interpretation so assigned by us is not only in consonance with the letter and spirit of rule 34(5) but is also a pragmatic approach at a time when a disaster, notified under the Disaster Management Act 2005, is causing unprecedented disruption in the functioning of our justice delivery system. Undoubtedly, in the case of Otters Club Vs DIT [(2017) 392 ITR 244 (Bom)], Hon'ble Bombay High Court did not approve an order being passed by the Tribunal beyond a period of 90 days, but then in the present situation Hon'ble Bombay High Court itself has, vide judgment dated 15th April 2020, held that directed "while calculating the time for disposal of matters made timebound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly". The extraordinary steps taken suo motu by Hon'ble jurisdictional High Court and Hon'ble Supreme Court also ....