2014 (6) TMI 998 - AT - Income Tax

Disallowance of interest expenditure - Held that - Identical issue had come up for adjudication before the Tribunal in one of the group cases i. e. in the case of Eminent Holdings Pvt. Ltd 2014 (7) TMI 2 - ITAT MUMBAI that matter was restored back to the file of the FAA. Departmental Representative(DR) left to the issue to the discretion of the Bench. After hearing the rival contentions, we are of the opinion that this matter should be remanded back to the file of the FAA. Levy of interest u/s. 234 - Held that - Provisions of section 234A, 234B and 234C were applicable to the notified person also. Therefore, upholding the order of the FAA to that extent, we hold that provisions of section 234 of the Act are applicable. As far as calculation part is concerned, we find merits in the submission made by the assessee. Therefore, we are restoring back the issue to the file of the AO for fresh adjudication who would decide the issue after considering the amount taxed deductible at source on the income assessed and after affording a reasonable opportunity of hearing to the assessee. Ground allowed in part in favour of the assessee.

Summary

Issues involved:
1. Disallowance of interest expenditure.
2. Confirmation of interest charged under sections 234A, 234B, and 234C of the Act.

Detailed Analysis:

1. Disallowance of interest expenditure:
The case involved an assessee-company engaged in trading and investing in securities, which failed to file its income tax return on time. Consequently, the Assessing Officer (AO) passed an order under section 144 of the Act, determining the income of the assessee. Various additions were made during the assessment, which were challenged before the First Appellate Authority (FAA). The appellant raised six grounds of appeal, out of which the first three were dismissed as not pressed during the hearing. Ground number 4 pertained to the disallowance of interest expenditure. The Authorized Representative (AR) argued that a similar issue had been considered by the Tribunal in another case and was remanded back to the FAA for fresh adjudication. After considering the arguments, the Tribunal decided to remand the matter back to the FAA for fresh adjudication, following the precedent set in the previous case. Consequently, ground number 4 was allowed in part in favor of the assessee.

2. Confirmation of interest charged under sections 234A, 234B, and 234C of the Act:
The next ground of appeal focused on the levy of interest under sections 234A, 234B, and 234C of the Act. The AR contended that the provisions of these sections were deemed to have been complied with, as the assets were already under attachment of the Custodian appointed under the Special Courts Act. The AR also cited various legal precedents to support the appellant's position. The Tribunal considered the arguments and noted that the Bombay High Court had held that the provisions of sections 234A, 234B, and 234C were applicable to notified entities. While upholding the applicability of section 234 of the Act, the Tribunal remanded the calculation part back to the AO for fresh adjudication, considering the tax deductible at source on the income assessed. Consequently, ground number 5 was allowed in part in favor of the assessee, and the appeal was partly allowed.

In conclusion, the Tribunal's judgment addressed the issues of disallowance of interest expenditure and confirmation of interest charged under sections 234A, 234B, and 234C of the Act. The decision provided detailed reasoning based on legal precedents and directed the matter to be remanded back for fresh adjudication in line with relevant legal principles and considerations.