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2013 (10) TMI 1067 - AT - Income TaxAllowability of liabilities towards interest expenditure Assessee made a claim of interest on the basis of the stand taken by the Custodian that the Assessee has to pay interest @ 18% per annum - Held that - reliance has been placed upon the judgment in the case of Hitesh Mehta 2013 (9) TMI 1110 - ITAT MUMBAI . Interest expenditure is allowed Decided in favor of Assessee. Levy of interest u/s 234A, 234B, 234C of the Income Tax Act Held that - Relying upon the judgment in the case of CIT vs. Divine Holdings Pvt. Ltd 2012 (4) TMI 100 - BOMBAY HIGH COURT , it has been held that levy of interest u/s. 234A, 234B and 234C is mandatory Decided against the Revenue.
Issues:
1. Disallowance of interest expenses. 2. Levy of interest under sections 234A and 234B of the Income Tax Act. 3. Taxation of income in the hands of the appellant instead of the actual owner. Issue 1: Disallowance of interest expenses: The appellant, a notified entity under the Special Court Act 1992, appealed against the disallowance of interest expenses amounting to Rs. 2,86,72,678. The CIT(A) confirmed the disallowance based on the decision in the case of Hitesh Mehta. The matter was set aside for fresh adjudication to align with similar cases. The ITAT referred to previous judgments and set aside the issue for the CIT(A) to adjudicate accordingly. The grounds were allowed for statistical purposes, and the issue was decided in favor of the appellant. Issue 2: Levy of interest under sections 234A and 234B: The appellant contested the levy of interest under sections 234A and 234B of the Income Tax Act. The ITAT referred to a similar case involving Velvet Holdings Pvt. Ltd. where the High Court upheld the levy of interest. Despite the matter being referred for reconsideration in another case, the ITAT upheld the levy of interest as mandatory based on the High Court's judgment. The grounds were allowed, and the levy of interest was deemed mandatory, resulting in the dismissal of the appellant's claim. Issue 3: Taxation of income in the hands of the appellant: The appellant raised an additional ground stating that the income assessed should have been taxed in the hands of the actual owner, Shri Harshad S. Mehta. The ITAT considered a similar ground in a previous case and admitted it as a legal ground without requiring new facts. The ITAT emphasized that the decision of the Supreme Court must be followed without dispute, and in this case, if the income belongs to Shri Harshad S. Mehta, it should be taxed in his hands. The additional ground was treated as academic, and in the absence of distinguishing facts, the ITAT decided in favor of the appellant, allowing the appeal for statistical purposes. In conclusion, the ITAT Mumbai partially allowed the appeal by the Assessee, addressing issues related to disallowance of interest expenses, levy of interest under sections 234A and 234B, and the taxation of income in the hands of the appellant. The judgments and decisions were based on legal provisions and previous rulings, ensuring a fair and comprehensive adjudication of the issues raised in the appeal.
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