TaxTMI 
TaxTMI 
2022 (9) TMI 1137
X X X X Extracts X X X X
X X X X Extracts X X X X
....etermined the positive income at Rs.1,10,37,680/- inter alia making additions on account of interest payment and expenses i.e. MSEB, property tax and depreciation vide its order dated 28-03-2014 passed u/s. 143(3) of the Act. Having not satisfied with the order of AO, the assessee preferred an appeal before the CIT(A). We note that the CIT(A) tabulated the chart of additions/disallowances on account of different heads at para:3 of the impugned order. The CIT(A) deleted the disallowances made on account of proportionate interest on loan utilized for purchase of shares of O&P and also processing fees paid to Bank of Baroda and Saraswat Cooperative Bank. The Revenue being aggrieved with the findings of CIT(A), before us, challenging the said two disallowances. 3. Ground No. 1 raised by the Revenue is as under : "1) On the facts and circumstances of the case, the Ld. CIT(A) has erred in deleting the addition made on account of interest on loan utilized for purchase of shares of Oyster & Pearl Hospital Pvt. Ltd. by ignoring the nature of business of the assessee and statement of the assessee that no services are provided to or received from O&PHPL and the assessee failed to ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e admits before the AO. 6. Further, the ld. AR placed on record the Gazette Publication of Direct Tax Vivad Se Vishwas Act, 2020 and argued that Explanation to Section 5, that making a declaration under this Act shall not amount to conceding the tax position and it shall not be lawful for the Income Tax authority to contend that the assessee acquiesced in the decision on the disputed issue by settling the dispute. 7. Further, the ld. AR drew our attention to clarification on provisions of the Direct Tax Vivad se Vishwas Bill, 2020 dated 4th March, 2020 issued by the CBDT. He drew our attention to Q. No. 52 and 55 and argued that Section 5 to Vivad Se Vishwas Act created embargo on the Revenue Department on such argument that the assessee should opt for Vivad Se Vishwas Scheme for subsequent year. 8. Heard both the parties and perused the material available on record. The ld. DR vehemently contended that the assessee has no right to agitate before the CIT(A) as well as this Tribunal regarding the disallowance made by the AO on account of interest payment. We note that according to ld. DR that the assessee itself agreed for the disallowance before the AO and is precluded fro....
X X X X Extracts X X X X
X X X X Extracts X X X X
....s, in Swami Krishnanand Govindananad v. Managing Director, Oswal Hosiery (Regd.) [(2002) 3 SCC 39, this Court held: "2. ....... It appears that when the case was posted for trial, the learned counsel appearing for the respondent conceded the facts disputed by the respondent in his written statement before the Court. That statement of the advocate was recorded by the Additional Rent Controller thus: "The respondent's learned counsel has admitted the ground of eviction and also the fact that the applicant is a public charitable institution and for that purpose it required the premises." .......... 3. .......... Whether the appellant is an institution within the meaning of Section 22 of the Act and whether it required bona fide the premises for furtherance of its activities, are questions touching the jurisdiction of the Additional Rent Controller. He can record his satisfaction only when he holds on these questions in favour of the appellant. For so holding there must be material on record to support his satisfaction otherwise the satisfaction not based on any material or based on irrelevant material, would be vitiated and any order passed on such a satisfaction wil....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se of conducting the industry contracts with any person for the execution by or under such person of the whole or any part of any work which is ordinarily part of the industry, the owner of such industry;" 9. Therefore, the finding rendered by the Hon'ble Supreme Court in the case of Bharat Heavy Electricals Ltd. (supra) by referring to decisions in the cases of Swami Krishnanand Govindananad (supra) and C.M. Arumugam (supra) is applicable to the facts on hand and we hold a concession made by the authorized representative before the AO in the assessment proceedings cannot preclude the assessee in reagitating the same point in the appeal. Therefore, we are unable to accept the contention of ld. DR in submitting that the assessee has no role to challenge the disallowance made on the admission of assessee before the CIT(A). 10. Coming to vehement contention of ld. DR that the assessee should have followed principle of consistency in availing scheme under Vivad Se Vishwas in terms of being availed for A.Y. 2012-13 and 2013-14. On perusal of the Direct Tax Vivad Se Vishwas Act, 2020, the Explanation to Section 5 of the said Act which clarifies that making a declaration under the s....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t the issue covered in Vivad Se Vishwas Act are settled without any prejudice to the same issues pending in other assessment years concerning the same assessee. 12. Further, vide answer to Q. No. 55 that the CBDT reiterated, the Explanation to clause 5 of Vivad Se Vishwas Act by stating, the declaration made by the party shall not amount to conceding the tax position and it shall not be lawful for the Income Tax authority or the declarant being a part in appeal has acquiesced in the decision on the disputed issue by settling the dispute. We find force in the arguments of ld. AR that it is not open for the appellant-revenue to take a stand that the assessee accepted the additions made by the AO in earlier years and cannot dispute it in future assessment years. The relevant portion reads as under: "Question No. 52. Will the result of this Vivad se Vishwas be applied to same issues pending before AO? Answer No, only the issues covered in the declaration are settled in the dispute without any prejudice to same issues pending in other cases. It has been clarified that making a declaration under this Act shall not amount to conceding the tax position and it shall not be la....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rted in [2009] 183 Taxman 159 (Bombay), in the case of Phil Corpn. Ltd. reported in [2011] 14 taxmann.com 58 (Bombay) and in the case of Hero Cycles Pvt. Ltd. reported in [2015] 379 ITR 347 (SC) of Hon'ble Supreme Court, argued that interest payable on borrowed funds which are utilized for purchase of shares both by way of investment as well as stock in trade is allowable deduction. On perusal of the impugned order, we note that the CIT(A) examined every detail involving the facts of the case and also the sequence of events showing, availing loans from the bank for purchase of shares and payment of interest on such loans held to be commercial expediency in securing in furtherance of the assessee business. We note that on an examination of the impugned order, the reasons recorded by the CIT(A) involving the issue on hand, we shall examine the relevant facts and sequence of events in para 5.3.2 of impugned order concerning the deduction on account of interest expenditure. 15. We note that the assessee i.e. M/s Phadnis Clinic Pvt. Ltd. for short hereafter as PCPL being run, managed and controlled by Dr. Avinash R. Phadnis for short hereafter as Dr. ARP and Dr. (Mrs.) Amita Avinash ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ure Capital Company transferred money to new company ONP. We note that the entire money was utilized for purchasing and installing furniture, fixtures and equipment. The Venture Capital Company selected and finalized the suppliers for the same and the newly constructed hospital building of assessee Company PCPL was leased to ONP for 9 years 11 months by a registered lease deed as required by the venture Capital Company. Thus the company ONP took the hospital building on lease from assessee and purchased required furniture and equipment out of funds infused by Venture Capital Company. At the same time, the new company (ONP) also entered into an agreement for Professional Services with the Dr. ARP & Dr. (MRS.) AAP. According to assessee that the two agreements (i.e. Shareholder's Agreement and Lease Deed) had many adverse, restrictive clauses, but, both Dr. ARP & DR. (Mrs.) AAP agreed for these clauses as they had no option or alternative as they wanted the hospital to be completed. The hospital business commenced on a good note, but, due to too many restrictions and restrictive clauses, both Dr. ARP and Dr. (Mrs.) AAP started feeling the effect and the financial pinch and the JV par....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he said circumstances, the assessee and promoters of ONP had with them very little negotiating power and had to agree for the money demanded by the capital venture investor company for selling its shares in the ONP to assessee and the assessee succumbed under pressure for retaining its property and business built over many years and finally agreed to pay Rs.34.20 crores towards shares held by investor in ONP. As the Bank Of Baroda declined to lend additional money to assessee to purchase shares of ONP, the Saraswat cooperative Bank agreed to lend money for purchase of shares, but, it insisted on transferring assessee's term loan availed from Bank of Baroda for building construction to Saraswat cooperative bank, in order to secure the entire loan of Rs.43.30 crores advanced to assessee by mortgaging its property. 20. On bare reading of the above relevant facts and sequence of events we note that the assessee incurred the said interest expenditure in securing furtherance of business under commercial expediency as a prudent business entity. We find direct nexus between the interest expenditure claimed which was incurred towards payment of interest on the loan availed from Bank of B....
X X X X Extracts X X X X
X X X X Extracts X X X X
....hareholding of ONP which is its sister concern and avoided interference from third party business operations. Therefore, in order to examine the allowability of interest expenditure on funds borrowed, when the part of such borrowed funds utilized for purchasing of shares in ONP, the interest paid by the assessee on the amount borrowed for purchasing of such shares of its managed company, in our opinion, is allowable deduction. We find the funds borrowed by the assessee from the Saraswat Cooperative Bank were utilized for the purpose of business and the interest paid thereon would constitute an allowable deduction. There is no diversion of funds for non-business purpose and no finding or allegation from assessing officer to that effect. The assessee utilized borrowed funds for its own business, therefore, assessee is entitled to claim deduction on account of interest expenditure and we find no infirmity in the order of CIT(A) in deleting the disallowance of Rs.1,42,91,085/- made by the Assessing Officer on account of interest expenditure. Thus, the order of CIT(A) is justified. Ground No. 1 raised by the appellant-revenue is dismissed. 22. Ground No. 2 raised by the appellant-rev....