2019 (6) TMI 590 - AT - Income Tax

Rectification u/s 254 - deduction of finance charges u/s 36(1)(iii) - non discussion of case law relied upon - HELD THAT - Activity of investment in group company for acquiring controlling interest when such investment has been treated as long term investment in the financial statement cannot be considered as main business activity of the assessee, consequently, the assessee is not liable for deduction towards finance charges u/s 36(1)(iii). Tribunal has recorded its finding on the basis of facts brought out by the parties during the course of hearing. No doubt, the decision relied upon the assessee in the case of Pistabai Rikhabchand Kothari 2013 (1) TMI 852 - ITAT MUMBAI has not been discussed in the order of the Tribunal, but fact remains that whether it is necessary to discuss the case laws referred to by the parties is depend upon the facts of each case. If the Court /Tribunal finds that the facts of the present cases is different from the case laws relied upon by the parties, then it is not necessary for Court/Tribunal to discuss the said case in the order as long the larger ratio rendered by the courts is not in conformity with the facts of the present case. The ratio rendered by any Courts/Tribunal is not universal and such ration is solely depends upon facts of each case. The ratio or observations of the Court cannot be picked to suit the particular facts of the present case, unless the facts brought out in those cases are identical to the facts brought out by the lower authorities in the case on hand. We find that the case relied upon by the the assessee is all together different which cannot be applied to the facts of the present case and hence, the Tribunal has taken conscious decision not to discuss the case laws referred by the assessee in its order. We are of the considered view that there is no merit in the miscellaneous application filed by the assessee in light of decision in Honda Siel Power Products Ltd. vs CIT 2007 (11) TMI 8 - SUPREME COURT hence, we are of the considered view that assessee has failed to make out a case of mistakes apparent on record in the order of the Tribunal which can be rectified u/s 254(2) - Miscellaneous application filed by the assessee is dismissed.

Summary

Issues Involved:
1. Allowability of financial charges under Section 36(1)(iii) or Section 37(1) of the Income Tax Act.
2. Pro-rata disallowance of financial charges under Section 57(iii) of the Income Tax Act.
3. Errors in the ITAT order not considering judicial precedents cited by the assessee.

Comprehensive, Issue-wise Detailed Analysis:

1. Allowability of Financial Charges under Section 36(1)(iii) or Section 37(1) of the Income Tax Act:
The primary issue discussed was whether the financial charges incurred by the assessee could be allowed as a deduction under Section 36(1)(iii) or Section 37(1) of the Income Tax Act. The Tribunal concluded that the activity carried out by the assessee, which involved investment in shares of group companies for holding controlling interest, could not be considered the main business activity of the assessee in the nature of trade or commerce. The Tribunal noted that the statutory auditors reported that the company was not engaged in any business activity other than making long-term investments. The Tribunal held that the finance charges were not deductible under Section 36(1)(iii) of the Income Tax Act.

2. Pro-rata Disallowance of Financial Charges under Section 57(iii) of the Income Tax Act:
The assessee contested the CIT(A)'s direction to allow a deduction under Section 57(iii) of the Act by making a pro-rata disallowance of financial charges incurred on investments in equity shares on which no dividends were received. The Tribunal upheld the CIT(A)'s decision, emphasizing that the activity of investment in group companies for acquiring controlling interest was not the main business activity of the assessee.

3. Errors in the ITAT Order Not Considering Judicial Precedents Cited by the Assessee:
The assessee filed a Miscellaneous Application under Section 254(2) of the Income Tax Act, requesting to recall the ITAT order, arguing that the Tribunal did not consider certain judicial precedents. The assessee cited decisions from the Delhi Tribunal in Poysha Oxygen (P) Ltd., the Mumbai Tribunal in Pistabai Rikhabchand Kothari, and the Supreme Court in Vodafone International Holding BV. The Tribunal acknowledged that the cited decisions were not discussed in the order but emphasized that it is not mandatory to discuss every case law if the facts of the present case differ from those cited. The Tribunal found that the facts of the present case were distinct and did not align with the cited cases. Consequently, the Tribunal dismissed the Miscellaneous Application, stating that the assessee failed to demonstrate any apparent mistake in the original order that could be rectified under Section 254(2) of the Income Tax Act.

Conclusion:
The Tribunal upheld its original decision, denying the deduction of financial charges under Section 36(1)(iii) and Section 37(1) of the Income Tax Act, and maintained the pro-rata disallowance under Section 57(iii). The Tribunal also dismissed the Miscellaneous Application, confirming that there were no apparent mistakes in the original order warranting rectification. The order was pronounced in the open court on 14/05/2019.