TaxTMI 
TaxTMI 
2023 (5) TMI 786
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....ntioned only the facts for the first assessment year (i.e., 2009-10) before us for the sake of brevity. However, if any particular issue is arising in any assessment year for the first time, facts pertaining to the same are discussed accordingly. 3. The assessee's appeals being ITAs No. 1425 to 1429/Mum./2018 are delayed by 2 days. In the affidavits sworn by the former Director of the assessee, it has been submitted that since the FIR was lodged against the company and its directors, the same resulted in a complete disruption of affairs for a few days and therefore the appeals could not be filed within the limitation period, resulting in a delay of 2 days. In the larger interest of justice as well as in view of the reasons stated in the affidavit, the slight delay of 2 days in filing the aforesaid appeals by the assessee is condoned and we proceed to decide these appeals on merits. ITA no.1425/Mum./2018 Assessee's Appeal - A.Y. 2009-10 4. In its appeal, the assessee has raised the following grounds:- "1. The Ld. CIT (Appeals) erred in confirming the action of the Ld. D.C.I.T. of re-opening of assessment U/S 147/148 of Income Tax Act, 1961 without a valid reason....
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....lected under the scheme to its investors within a period of 3 months from the date of the order. In an appeal against the aforesaid order passed by the SEBI, the Hon'ble Securities Appellate Tribunal vide order dated 03/02/2016 dismissed the appeal filed by the assessee, however, granted 2 years to the assessee to refund the balance amount to its investors. In further appeal by the SEBI, the Hon'ble Supreme Court vide order dated 18/07/2016 dismissed the appeal and clarified that the assessee shall not collect further amount from the investors until it is registered as CIS and shall also give details to the SEBI with regard to the amount disbursed by it at the end of every quarter. 6. Subsequently, some of the operational creditors approached the Hon'ble National Company Law Tribunal ("Hon'ble NCLT") to initiate Corporate Insolvency Resolution Process in respect of the assessee. On 02/05/2017, Hon'ble NCLT appointed an Insolvency Resolution Professional under the provisions of the Insolvency and Bankruptcy Code, 2016 ("IBC, 2016") and a moratorium as per section 14 of the IBC, 2016 was initiated. Subsequently, some of the investors filed an appeal before the Hon'ble National Com....
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.... with the Revenue's approach of treating the Non-Availing Compensation ("NAC") paid by the assessee to its members as interest, which was disallowed under section 40(a)(ia) for non-deduction of tax under section 194A of the Act. 9. The brief facts of the case pertaining to this issue are: For the year under consideration, the assessee filed its return of income on 29/12/2010 declaring a total income of Rs.44,34,122. Pursuant to the search and seizure action conducted under section 132 of the Act in the case of the assessee along with the other associated persons and companies, the assessment in the case of the assessee was concluded under section 143(3) r/w section 153A of the Act assessing the total income at Rs.69,13,670 after making certain disallowances. Subsequently, on the basis of the order dated 21/08/2015 passed by the SEBI and the information received from the office of DCIT(TDS)-2(1), Mumbai, the Assessing Officer ("AO") initiated reassessment proceedings under section 147 in the case of the assessee and issued notice dated 30/03/2016 under section 148 of the Act. In the reasons recorded while reopening the assessment, it was mentioned that the SEBI has concluded that....
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....uded the return of the principal amount and interest amount below Rs.5000, while calculating the aforesaid disallowance. As regards the submission of the assessee that since part of deposits have been offered as income in the profit and loss account, therefore the same should be excluded from the income, the AO rejected the same on the basis that the assessee is simultaneously claiming the deduction on account of repayment of principal amount by debiting it under the head Non-Availing Compensation. 10. The learned CIT(A) vide impugned order dated 28/11/2017 upheld the findings of the AO in treating NAC as interest and accordingly, affirmed the disallowance of Rs.1,48,41,755 under section 40(a)(ia) of the Act. Further, as regards the alternative plea of the assessee regarding the removal of such deposits from sale proceeds, the learned CIT(A) held that the entire amount collected by the assessee has been diverted to the associate, subsidiary companies, and concerns owned by directors and other family concerns in the form of investments and long-term advances and loans, therefore the character of deposits from the members and its utilisation gives it a character of assessee's own ....
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....g, the learned AR placed reliance upon the decision of the Hon'ble Supreme Court in Peerless General Finance and Investment Company Limited vs CIT, [2019] 416 ITR 1(SC), wherein it was held that the subscription received from the public at large under a collective investment scheme is in the nature of capital receipt and not income. It is pertinent to note that in the facts of this case, the taxpayer had floated various schemes which require subscribers to deposit certain amounts by way of subscriptions in its hands, and, depending upon the scheme in question, these subscribed amounts at the end of the scheme are ultimately repaid with interest. Further, the taxpayer, in this case, has also shown the sum as income in its books of accounts. However, the Hon'ble Supreme Court by referring to the various judicial pronouncements agreed with the submission of the taxpayer that it would not be possible to go only by the treatment of such subscriptions in the accounts of the assessee itself. 13. In the present case, it is no doubt true that the amount received from members and apportioned to the year is considered as "sales" by the assessee in its books of account, however, in view of ....
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.... action of the Ld. D.C.1.T. of re-opening of assessment U/S 147/148 of Income Tax Act, 1961 without a valid reason for re- opening the assessment. 2. The Ld. C.I.T. (Appeals) erred in not directing to the Ld. D.C.I.T not to make provision of section 194A to non availing compensation. 3. The Ld. CIT (Appeals) erred in confirming the addition made by the Ld. D.C.I.T. Rs 18,74,87,000/- U/s 40(a)(ia) of the Income Tax Act, 1961 by treating the sale proceeds as deposits and further erred in confirming the treatment of the part of non availing compensation as interest. 4. The Ld. CIT (Appeals) erred in not directing the Ld. D.C.I.T. to remove such deemed deposits from sale proceeds and accordingly also erred in not directing the Ld. D.C.I.T. to reduce the income by the amount treated as Deposits which cannot be treated as income if treated as deposit and cannot be taxed. 5. The Ld. CIT (Appeals) erred in not directing the Ld. D.C.I.T. to follow the Mercantile system of accounting while treating part of the NAC as interest and Tax interest on accrual basis. 6. The Appellant reserves the right to add, to alter and to amplify the Grounds of Appea....
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....nds raised in the appeal need not be gone into and can be kept open. In respect of ground no.4, the Learned AR adopted his arguments as were made in the appeal for the assessment year 2009-10. Since a similar issue has been decided in assessee's appeal for the assessment year 2009-10, the decision rendered therein shall apply mutatis mutandis. As a result, grounds no.4 raised in assessee's appeal is allowed. 22. Since the relief has been granted to the assessee in respect of ground no.4, in view of the submission of the learned AR, the other grounds raised in the present appeal are kept open. 23. In the result, the appeal by the assessee is allowed. ITA no.1012/Mum./2019 Assessee's Appeal - A.Y. 2012-13 24. In its appeal, the assessee has raised the following grounds:- "1. The Ld. C.I.T. (Appeals) erred in confirming the action of the Ld. D.C.I.T. of re-opening of assessment U/S 147/148 of the Income Tax Act, 1961 without a valid reason for re-opening the assessment. 2.a The Ld. C.I.T. (Appeals) erred in not directing to the Ld. D.C.I.T not to make applicable the provision of section availing (NAC). 2.b The Ld. CIT (Appeals) erred in confir....
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....ITA no.1013/Mum./2019 Assessee's Appeal - A.Y. 2013-14 29. In its appeal, the assessee has raised the following grounds:- "1. The Ld. C.I.T. erred (Appeals) in confirming the action of the Ld. D.C.I.T. of re-opening of assessment U/S 147/148 of the Income Tax Act, 1961 without a valid reason for re-opening the assessment. 2.a The Ld. C.I.T. (Appeals) erred in not directing to the Ld. D.C.I.T not to make applicable the provision of section availing (NAC). 2.b The Ld. CIT (Appeals) erred in confirming the addition made by the Ld. D.C.I.T. of Rs. 497,13,57,000/- U/s 40 (a) (ia) of the Income Tax Act, 1961 by treating the sale proceeds as deposits and further erred in confirming the treatment of part of non availing compensation (NAC) as interest. 2.c The Ld. CIT (Appeals) erred in not directing the Ld. D.C.I.T. to remove such deemed deposits from sale proceeds and accordingly also erred in not directing the Ld. D.C.I.T. to reduce the income by the amount treated as Deposits which can not be treated as income if treated as deposit and can not be taxed. 2.d Without prejudice, Hon'ble CIT (Appeals) erred in confirming the amount whic....
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.... 35. The only grievance of the assessee, in the present appeal, is pertaining to disallowance made under section 14A r/w Rule 8D of the Income Tax Rules, 1962. 36. The brief facts of the case pertaining to this issue are: For the year under consideration, the assessee filed its return of income on 03/04/2014 declaring a total income of Rs.6,83,32,200. During the assessment proceedings, it was observed that the assessee has earned a dividend income of Rs.5,25,985, which was claimed as exempt. It was also observed that the assessee in its profit and loss account has debited an amount of Rs.2,59,55,000 as interest on loan, forming part of its financial cost. Further, the assessee in its balance sheet has shown a total investment of Rs.660,23,99,000. Accordingly, the assessee was asked to show cause as to why the disallowance under section 14A should not be made for the exempt income shown. In response thereto, the assessee submitted that it has not made any investment with a view to earning exempt income, and the assessee, as part of its business activity, has acquired a strategic stake in other companies to hold business interest with a view to earn profit. Thus, it was submitted....
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....be treated as income if treated as deposit and can not be taxed. 4. The Ld. CIT (Appeals) erred in not directing the Ld. D.C.I.T. to follow the Mercantile system of accounting while treating part of the NAC as interest and Tax interest on accrual basis. 5. The Ld. CIT(Appeals) erred in confirming the addition made by Ld. D.C.I.T. on account of disallowance of Rs. 5,90,62.655/- U/s. 14A r.w. Rule 8D. 6. The Ld. CIT (Appeals) erred in holding that expenses attributed towards earning exempt income even when there were no nexus. 7. The Ld. CIT (Appeals) erred in considering the facts that the major investments were made for acquiring strategic business stake. 8. The Appellant reserves the right to add, to alter and to amplify the Grounds of Appeal." 41. The issue arising in grounds no.5-7, raised in assessee's appeal, is pertaining to disallowance made under section 14A r/w Rule 8D. Since a similar issue has been decided in assessee's appeal being ITA no.1428/Mum./2018 for the assessment year 2013-14, therefore, the decision rendered therein shall apply mutatis mutandis. Accordingly, we direct the AO to restrict the disallowance made unde....
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....dition of Rs. 477,37,39,847/- for the purpose of disallowance U/s 40(a)(ia) of the Income Tax Act instead of considering only 30% of the total alleged interest (i.e. additional amount of NAC) as applicable for the assessment consideration. 2.a The Ld. CIT(Appeals) erred in confirming the addition made by Ld. D.C.I.T. on account of disallowance of Rs. 3,35,47,391/- U/s 14A r.w. Rule 8D. 2.b The Ld. CIT (Appeals) erred in holding that expenses attributed towards earning exempt income even when there were no nexus. 2.c The Ld. CIT (Appeals) erred in considering the facts that the major investments were made for acquiring strategic business stake. 2.d Without prejudice, Hon'ble CIT (Appeals) erred in confirming disallowance U/s 14A r.w. Rule 8D in excess of exempted income earned by the Appellant. 2.e The Hon'ble CIT (Appeals) erred in addition confirming the made by Ld. D.C.I.T Rs. 335,47,391/- u/s.14A read with Rule 8D of the Income Tax Act in the book profit calculated u/s 115JB of the Appellant. 4. The Appellant reserves the right to add, to alter and to amplify the Grounds of Appeal." 46. The issue arising in grounds....