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TMI Blog2014 (3) TMI 532X X X X Extracts X X X X X X X X Extracts X X X X ..... out of the total interest claim of Rs.118.96 lacs u/s.14A of the Act - The same being qua a direct interest expenditure would also have a direct bearing on the computation of the book profit under Explanation 1(f) below section 115JB(2) - the reduction of the sum in computing the book profit u/s.115JB shall be subject to the interest liability being ascertained - only to the extent it does not represent a direct interest expenditure covered under Explanation 1(f) - the assessee having itself disallowed Rs.110.86 lacs u/s.14A, so that it is in respect of an expenditure booked in accounts and, further, in relation to income that does not form part of the total income – Decided partly in favour of Assessee. Deletion of the interest charged u/ss.234A, 234B and 234C of the Act – Held that:- The decision in CIT vs. Divine Holdings Pvt. Ltd. [2012 (4) TMI 100 - BOMBAY HIGH COURT] - The levy of interest under the provisions of Sections 234A, 234B and 234C is mandatory in nature - the Tribunal was in error in coming to the conclusion that interest under Sections 234A, 234B and 234C cannot be levied on an assessee – thus, the levy of interest under the relevant sections is upheld – Deci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claim for deduction of this amount from the income from other sources by way of interest which is the subject matter of dispute. The assessee's case is that interest had also been allowed by it to the promoters for A.Y. 1991-92, which had been allowed in assessment u/s.143(3). There was a clear nexus of funds borrowed and the assets in-as-much as the same were utilized for investment in shares, part of which were later liquidated, investing the sale proceeds in bank deposits, yielding interest. As such, the interest, worked out on a proportionate basis, is deductible against the bank interest income. The Revenue's case, on the other hand, is that though a reasonable nexus can be said to be established between the borrowed capital and the term deposits yielding interest income, the liability to pay interest is inchoate. No right in favour of the creditors had arisen for the assessee to claim interest. The matter is in dispute before the Special Court, and in case a liability toward interest arises consequent to its decision, so that the assessee is held liable to pay the same for the borrowings/sums under reference, deduction in its respect may be allowed by the A.O. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Housing and Land Development Trust Ltd. [1986] 161 ITR 524 (SC); and CIT vs. Shoorji Vallabhdas Co. [1962] 46 ITR 144 (SC). 3.3 In the facts of the instant case, a part of the money on which interest is being claimed is by way of borrowed capital while the balance represents the unpaid purchase price of shares. The parties making the purchases on behalf of the assessee are not in the business of financing, so that the amount could only be considered as a debt, arising in the course of trade, and payable in due course. The bifurcation of the total amount (on which interest is being claimed) between the two categories is not available on record. The amount is outstanding prior to 08.06.1992. There is however nothing on record to suggest that the interest was being paid on the said sum, wholly or partly, prior to 08.06.1992. The question then is: On what basis a liability to interest, i.e., to pay the same, can be said to have been arisen? There is nothing on record to suggest so, except, as is being claimed, of a claim in its respect having been made before the special court by the custodian representing the said parties, who are also notified parties. In fact, the order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he figure of net loss disclosed by the assessee's books, in computing the book profit is in respect of interest claim of Rs.118.95 lacs. The same stands held by the ld. CIT(A) as not an accrued liability, so that it cannot be said to represent an ascertained liability, and adjustment in its respect, accordingly, confirmed the appeal. The common contention before us was of the same being consequential inasmuch as if the interest is held as an unascertained liability, and thus not allowable, the same would also preclude its deduction in computing the book profit. Accordingly, the same decision as in respect of ground no. 4 would follow for this ground as well. In fact, this is precisely what the ld. CIT(A) has also held vide para 9 of his order, so that his order merits being upheld. However, the assessee has suo motu disallowed Rs.110.86 lacs out of the total interest claim of Rs.118.96 lacs u/s.14A of the Act. The same being qua a direct interest expenditure would also have a direct bearing on the computation of the book profit under Explanation 1(f) below section 115JB(2). In other words, the reduction of the impugned sum in computing the book profit u/s.115JB shall be subject ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... refer para 6). Respectfully following the same, we decide likewise. We may however add that if and to the extent the assessee's income is finally held as liable to be assessed in the hands of Sh. Harshad S. Mehta, no liability and, thus, deductibility of interest to parties forming part of the Harshad Mehta group, whose income is also thus by virtue thereof liable to assessed in his hands, would arise in-as-much as the same would then translate into or become a payment to self, i.e., independent of and de hors of the decision in its respect on merits in terms of paras 3.3 and 4 of this order. We decide accordingly. Revenue's Appeal 6. The sole issue raised by the Revenue is the deletion of the interest charged u/ss.234A, 234B and 234C of the Act following the decisions by the tribunal, listed by the ld. CIT(A) in his order. The matter has since been decided by the hon'ble jurisdictional high court in CIT vs. Divine Holdings Pvt. Ltd. in ITA No.3334 of 2010 dated 07-03-2012 (copy on record) wherein the hon'ble court, relying on the decision by the apex court in the case of CIT vs. Anjum M. H. Ghaswala [2001] 252 ITR 1 (SC); Tax Recovery Officer vs. Custodian [2 ..... 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