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TMI Blog2017 (7) TMI 1302X X X X Extracts X X X X X X X X Extracts X X X X ..... ctor Company, the entire security deposit held by it is of the customers and the interest thereon cannot be disallowed merely on the surmise that security deposit is an unexplained deposit. 3. The appellant craves leave to add, amend or alter any of the grounds of appeal." 3. Facts of the case, in brief, are that the assessee is a Public Sector Undertaking and is engaged in the business of providing telephone and mobile services in New Delhi and Mumbai. It field its return of income on 29th September, 2008 declaring taxable income of Rs. 9,12,10,67,240/-. During the course of assessment proceedings the Assessing Officer observed that the assessee company had claimed interest amounting to Rs. 2,94,80,000/- which pertains to customer's deposits received by the company. The entire amount of these deposits were held as taxable by the A.O. in the A.Y. 2006-07 and accordingly interest on these deposits were disallowed by the A.O. alleging that no interest could be said to have been payable by the assessee on the amounts which belong to the assessee. He accordingly disallowed interest amount of Rs. 2,94,80,000/- claimed by the assessee and added the same to the total income. 4. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ember, 2016 submitted that the Tribunal had restored the matter to the file of the A.O. with a direction to give an opportunity to the assessee for reconciliation of the deposits of Rs. 127,69,83,720/- and decide the issue afresh. He submitted that following the direction of the Tribunal for the A.Y. 2006-07 this issue may also be restored to the file of A.O. for fresh adjudication. 6. The Ld. DR, on the other hand, while supporting the order of CIT(A) fairly submitted that he has no objection for restoring the matter to the file of AO for deciding the issue afresh in the light of the direction of the Tribunal. 7. After hearing both sides we find the Tribunal in assessee's own case for A.Y. 2006-07 while deciding the issue has restored the matter to the file of the A.O. by observing as under : "17. We have carefully considered the rival contentions. The brief nature of the security deposit is that when customer demands for a connection same is collected and when it is disconnected the amount of deposit becomes refundable to the customer on production of deposit receipt and making claim thereof. As it is apparent that assessee is a public sector undertaking and operates the t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... live connections are pending. The observation of the ld CIT(A) is also not correct that assessee submitted that this amount is under reconciliation and to that extent such credits are not fully explained. Before him assessee submitted that it is under reconciliation. Further when the character of deposit is determined, looking to the nature of operation geographically as well as large subscriber's base , it is not correct to hold that pending reconciliation the deposit become income of the assesse. In view of this we set aside this issue back to the file of the Assessing Officer to give proper opportunity to the assessee to provide reconciliation of the same and then if the amounts are not at all identifiable with respect to the customers then to that extent addition may be restricted. However, if this amount is identifiable with the subscriber and even if it is not claimed by the subscriber despite disconnection of the services assessee is under obligation to repay whenever demanded by the customer. Therefore, ld Assessing Officer is directed to grant an opportunity to the assessee for reconciliation of the above deposit as held above and then decide the issue afresh. In view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . AO was not satisfied with the claim of the appellant of not attributing any expenditure to earning of the dividend income, was in respect of claim of interest expenses of Rs. 27.82 million, which in the view' of the Ld. AO, were towards the borrowed funds used for making investment for earning tax-exempt dividend income. On careful consideration of the submission of the appellant in the light of the relevant schedule of account, it is evidently clear that the appellant had not borrowed any loans and hence no interest expenses on borrowing were paid during current year. The amount of interest expenses of Rs. 27.82 million debited in P&L account pertained to interest on security deposit given by the customers, interest on GPF and interest paid to the Municipal Authority of Mumbai. During the year, the appellant's income from telecom operation was sizeable to the tune of Rs. 5329.9 crores and it is evident that in the absence of any borrowed loans, the investment in Lie and UTI mutual fund during the current year was made out of its own income, In view of the above, I find that the lack of satisfaction of the Ld. AO with the claim of the appellant was on faulty ground. In vi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the same. Accordingly, the order of ld. CIT(A) on this issue is upheld and the ground raised by the revenue is dismissed. 10. Ground of appeal No.2 by Revenue reads as under : 2. On the facts and circumstances of the case and in law the Ld. CIT(A) has erred in restricting the disallowance to Rs. 17,42,542/-, out of total disallowance of interest of Rs. 2,94,80,000/- on customers deposit accounts and in allowing relief in respect of the balance amount of Rs. 2,77,37,458." 11. After hearing both the sides, we find that the A.O. following his order for the A.Y. 2006-07 disallowed the interest expenses of Rs. 2,94,80,000/- on the ground that no interest could be said to have been payable on the amount which belong to the assessee. We find Ld. CIT(A) restricted the disallowance to Rs. 17,42,542/- following his order for A.Y. 2006-07 which has already been reproduced in the preceding paragraphs. We find identical issue had come up before the Tribunal in assessee's own case in A.Y. 2006-07 and the ground raised by the revenue was dismissed by The Tribunal by observing as under : "21. Ground No. 1 to 4 of the appeal are against deletion of addition on account of subscriber de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d No.4 of the appeal, whereby the appellant challenged the action of the Ld.AO in disregarding the change in accounting policy and thereby making addition of Rs. 37,30,000-, I find that the Ld. AO has selectively chosen change in accounting policy and wherever the effect of such change was over-statement of profit, such changes were disregarded. However, wherever, there was an under-statement of profit resulting from accounting change, the Ld. AO has disallowed the same. Keeping in view the decision of Hon'ble Supreme Court in the case of Mehta Parikh Vs. CIT 30 ITR 181 and of ITAT Delhi in the case of appellant itself for AY 1998-99, I hold that the Ld. AO was not justified in considering only part- of accounting changes. Moreover, there is no dispute that the accounting changes carried out by the appellant company were in accordance with the prevailing accounting standards and therefore, there is no dispute on the merit of such change. Further, as submitted by the appellant, over a period of time such changes will even out the effect of such changes in the accounting policy. Keeping in view the above, the addition made on this ground is deleted." 12.3. Aggrieved with such o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... restored to the file of the A.O. The Grounds raised by the assessee are accordingly allowed for statistical purposes. ITA No.148/Del/2014: (By Revenue) for A.Y. 2009-10: 16. Ground no.1 by the revenue reads as under : "1. On the facts and circumstances of the case and in law the Ld. CIT(A) has erred in deleting the disallowance of Rs. 1,31,92,000/- made u/s 14A holding the same is not sustainable." 17. After hearing both the sides, we find the above ground is identical to Ground no.1 in revenue's appeal for the A.Y. 2008-09 in ITA No.147/Del/2014. We have already decided the issue and the ground raised by the revenue has been dismissed. Following similar reasoning this ground raised by the revenue is dismissed. 18. Ground no.2 by the revenue reads as under : "On the facts and circumstances of the case and in law the Ld. CIT(A) has erred in restricting the disallowance to Rs. 11,91,807/--, out of total disallowance of interest of Rs. 1,08,20,000/- on customers deposit accounts and in allowing relief in respect of the balance amount of Rs. 96,28,193/-." 19. After hearing both the sides, we find the above ground is identical to Ground no.2 in revenue's appeal for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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