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TMI Blog2012 (12) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... the instrument concerned is certain as to its period of life and specifically points out to a particular interest amount to be paid on the maturity date, the question of assessing the entire interest in the first year itself, does not arise. - the question of assessing the entire interest income of Rs.3,10,43,664/- in the assessment year 1997-98 does not arise and that the Revenue would be entitled to assess a sum of Rs.3,37,431/- alone for the assessment year 1997-98 and the balance amount of Rs.3,07,06,233/- has to be assessed for the assessment year 1998-99. - Tax Case (Appeal) No.2555 of 2006 - - - Dated:- 31-10-2012 - MRS. CHITRA VENKATARAMAN AND MR. K. RAVICHANDRABAABU JJ. For Appellant: Mr.Farrokh V.Irani, Senior counsel for Mr.O.R.Santhana Krishnan For Respondent: Mr.T. Ravikumar ------- JUDGMENT (Judgment of the Court was delivered by CHITRA VENKATARAMAN,J. ) The assessee is on appeal as against the order of the Income Tax Appellate Tribunal relating to the assessment year 1997-98. Following are the questions of law raised by the assessee:- "(1) Whether the Income Tax Appellate Tribunal erred in holding that interest of Rs.3,07,06,233/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the admitted case of the assessee that out of the above amount received by the assessee, it purchased three certificates of deposit on 31.3.1997. The deposits were with IDBI, UTI Bank and HDFC Bank Limited. The letter written by the assessee company to the respective banks dated 31.3.1997 showed the amount of investments at Rs.29,13,70,639/- with IDBI Limited, and a sum of Rs.48,53,20,710/- and a sum of Rs.29,22,64,987/- with HDFC Bank Limited. The certificates of deposits issued by the respective banks viz., IDBI, UTI Bank and HDFC Bank Limited dated 31.3.97 show the period of deposit as 92 days and the maturity value of deposits at Rs.30 crores, Rs.50 crores and Rs.30 crores respectively. In the return filed for the assessment year 1997-98, the assessee offered a sum of Rs.3,37,431/- as interest relatable to 31st March 1997 i.e. the date of purchase of CODs. The balance interest of Rs.3,07,06,233/- was offered by the assessee in the next assessment year 1998-99. Accordingly, the Revenue assessed a sum of Rs.3,07,06,233/- by an intimation passed under Section 143(1) of the Act. While considering the claim of the assessee for the assessment year 1997-98, the Assessing Officer ca ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on claimed by the assessee on the interest payment allowed by the Officer concerned. 3. Aggrieved by this, the assessee went on further appeal before the Income Tax Appellate Tribunal, which dismissed the assessee's appeal. 4. As far as the claim of the assessee on the enhancement aspect is concerned, the Tribunal viewed that there was no infirmity in the order of the Commissioner of Income Tax (Appeals) with respect to Section 251(1) of the Act and that the Commissioner of Income Tax (Appeals) directed the Assessing Officer to make in-depth enquiries and had not ordered any enhancement. In the circumstances, the Tribunal referred to the Apex Court decision reported in 262 ITR 278 in the case of PANDIAN CHEMICALS LTD, as regards the strict interpretation of the provision and held that the assessment order made based on surmises, hence, was to be set aside. Since the Commissioner of Income Tax (Appeals) had directed the Assessment Officer to make de novo enquiry, adequate opportunity was always available to the assessee to state its case and that the additional ground raised by the assessee as regards the order of the Commissioner of Income Tax (Appeals) on the enhancement o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal that the assessee would be having an opportunity before the Officer on remand, practically there is nothing left for the Assessing Officer to consider the said issue on deduction. 7. Per contra, learned standing counsel appearing for the Revenue supported the order of the Tribunal and submitted that since the Officer had to pass the order based on the views of the Commissioner, necessarily the assessee would have an opportunity before the assessment was completed. 8. As far as this issue is concerned, we do not find any ground to agree with the view of the Tribunal. As has been stated in the preceding paragraph, the assessee claimed deduction for a sum of Rs.49,97,522/- being the interest paid to the subscribers pending allotment of equity shares. On considering the claim, the Officer granted the relief to the assessee. Hence, there was no need at all to file an appeal. When, in the course of considering the assessee's appeal on a different issue, the Commissioner of Income Tax (Appeals) thought it fit to exercise his enhancement powers with reference to one aspect of assessment, which was not the subject matter of the appeal, it is no doubt true that Section 251 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... aturity, the assessee would be receiving the deposited amount with interest at 11.75% per annum. Thus, as against the deposit of Rs.48,53,20,710/- with UTI Bank, the assessee would receive a sum of Rs.50 crores, and as against a sum of Rs.29,22,64,987/- with IDBI, the assessee would receive a sum of Rs.30 crores. As rightly pointed out by learned senior counsel appearing for the assesee, the fact that the assessee had stated that the deposit amount is discounted, does not mean that the assessee had, in fact, received the interest in advance from these banks. On the other hand, on the deposited discounted price, the assesee received the amount, with interest added to the deposited amount, to make the amount as Rs.30 crores, Rs.50 crores and Rs.30 crores respectively. It is evident from the bank statement available before this Court, which was also produced before the Tribunal, that the amount of Rs.30 crores, Rs.50 crores and Rs.30 crores were credited to the assessee's account after the maturity date. The Revenue does not dispute this fact. It is a matter of record that what was deposited and what had matured amount as on 1.7.97 are not one and the same. In the background of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y value. The interest which was calculated on the deposited amount was added to the deposit amount and that the deposit receipts issued by the respective banks clearly stated that on the expiry of 92 days after the date of deposit, the respective banks promised to pay to the assessee, a sum of Rs.30 crores, Rs.50 crores and Rs.30 crores respectively upon presentation and surrender of certificates. Thus, the finding of the Tribunal, being one without any basis or materials is perverse, we have no hesitation in setting aside the order of the Tribunal and hold that the assessee received interest only on the maturity date and not at any time before the date of maturity. 11. Keeping this finding aside, when we look at the decisions of this Court reported in 256 ITR 187 CIT v. A.R.SANTHANAKRISHNAN, and 258 ITR 404 EID PARRY (I) LIMITED v. CIT. , as rightly pointed out by learned senior counsel appearing for the assessee, both the decisions are distinguishable on the facts of the case. 12. As far as the decision reported in 256 ITR 187 CIT v. A.R.SANTHANAKRISHNAN, is concerned, the assessee therein had opted for discounted interest and the same was paid during the year previous to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... articular year, to spread and claim it over a period of ensuing years. Taking note of the fact that the issue of debentures were redeemable after 12 years, the discount of Rs.3 lakhs proportionately over the 12 years' period of redemption was justifiable and the assessee was entitled to deduct a sum of Rs.12,500/- out of the discount of Rs.3 lakhs in the relevant assessment year and the balance could not be deducted in the assessment year. The Apex Court pointed out that as there was a continuing benefit to the business of the company over the entire period, the liability should be spread over to the period of debentures. The Apex Court pointed out that facts may justify in a given case for an assesee, who has incurred expenditure in a particular year, to spread and claim it over a period of ensuing years. In fact, allowing the entire expenditure in one year, might give a very distorted picture of the profits of a particular year. 16. In contrast to the decided case relating to claim of deduction as expenditure, the case on hand is related to the assessment of income. Even though the parameter for considering the expenditure and income is not the same, yet, the principle to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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