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TMI Blog2019 (1) TMI 1626X X X X Extracts X X X X X X X X Extracts X X X X ..... four years from the end of relevant assessment year and there is no allegation by the AO on the part of the assessee regarding furnishing of all the material facts necessary for assessment, reopening of assessment u/s. 147 of the Act is bad in law and liable to be quashed. Applicability of provisions of Section 115JB of the Act to the banking companies - HELD THAT:- As relying own case [ 2018 (11) TMI 1171 - ITAT MUMBAI] Provisions of Section 115JB shall not be applicable to assessee. Adjustment made towards disallowance of Broken Period Interest to book profits computed u/s. 115JB - We are of the considered view that there is no error in the findings recorded by the Ld. CIT(A) in directing the AO to delete the adjustment made towards disallowance of Broken Period Interest to book profits computed u/s. 115JB of the Act. Hence, we are inclined to uphold the findings of Ld. CIT(A) and reject the grounds raised by Revenue. Computation of interest payable u/s. 244A of the Act on refund arising out of the order - HELD THAT:- . We find that this issue is also covered in favour of assessee by the decision of ITAT, Mumbai in assessee s own case for the AYs. 2007-08 2009-10, where the Co-or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hase of securities during FY 2006-07 and held as stock-in-trade as on March 31, 2007 is not an allowable deduction in the year of purchase of such securities, in such case, the learned ACIT be directed to allow such deduction in the subsequent year, i.e. FY 2007-08 relevant to AY 2008-09, being the year in which the corresponding interest received on such securities is offered to tax. 2B Without prejudice to Ground nos. 2 & 2A above, on the facts and in the circumstances of the case and in law, assuming without accepting that Your Honours is of the view that broken period interest of ₹ 80,79,79,711 paid on purchase of securities during FY 2006-07 and held as stock-in-trade as on March 31, 2007 is not an allowable deduction in the year of purchase of such securities or in the subsequent year, in such case, the learned ACIT be directed to decrease / increase the profits / (loss), respectively, on sale or maturity or redemption or transfer in any manner, as the case may be, of such securities by the amount of the corresponding broken period interest disallowed in the year of purchase of such securities and reduce the total income accordingly. 2C Without prejudice to Ground ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... #39;ble Bombay High Court in the case of America Express International Banking Corporation Vs. CIT (2002) [258 ITR 601] (Bom) to argue that Broken Period Interest paid on securities is an allowable deduction. The AO after considering the submissions of assessee held that Broken Period Interest paid by the assessee is nothing but the part of price paid for the securities for acquiring the said securities. Whatever be the reason that prompted the assessee to purchase the securities, the price paid for them is in the nature of capital outlay. No part of it can be set-off as expenditure against interest accrued on these securities. Accordingly, he disallowed the Broken Period Interest paid for ₹ 80,79,79,711/-. 4.1. Aggrieved by the assessment order, assessee preferred an appeal before the CIT(A). 5. Before the CIT(A), assessee has challenged re-opening of the assessment on the ground that when the assessment has been re-opened after a period of four years from the end of relevant financial year, there should be an allegation by the AO on the part of the assessee to disclose fully and truly all the material facts necessary for completion of assessment, whereas assessee has fi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A), assessee as well as the Revenue have filed appeals before us. 8. The first issue that came up for our consideration in assessee's appeal is validity of re-opening of assessment u/s. 147 of the Act. Ld. AR for the assessee submitted that the assessment has been reopened on mere change of opinion without there being any fresh material in the possession of the AO, which suggest escapement of income, within the meaning of Section 147(b) of the Act, which is evident from the reasons recorded by the AO, as per which the AO is referring to the return of income filed by the assessee to form a reasonable belief of escapement of income. Ld. AR further submitted that in this case, the assessment for the impugned year has been completed u/s. 143(3) of the Act. The assessment has been re-opened after a period of four years from the end of the relevant assessment year, therefore, when the assessment has been re-opened after a period of four years from the end of the relevant assessment year, the proviso to Section 147 will come into operation as per which AO cannot reopen the assessment unless there is an allegation by the AO on the part of the assessee to disclose fully and truly all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and truly all the material facts necessary for completion of assessment. We further noticed that the AO has recorded reasons on the basis of return of income filed by the assessee, without there being any fresh material in his possession to form a reasonable belief of escapement of income. Further, the issue of deductibility of Broken Period Interest is a subject matter of consideration by the AO during assessment proceedings, where the AO has issued a specific question for which the assessee has filed complete details. The AO being satisfied with the explanation filed by the assessee, completed the assessment. Therefore, we are of the considered view that it is a clear case of 'change of opinion' without there being any material in the possession of AO to form a reasonable belief of escapement of income. Further, the AO has re-opened the assessment without making an allegation on the part of assessee to disclose fully and truly all the material facts necessary for completion of assessment. This legal proposition is supported by the decision of the Hon'ble Supreme Court in the case of CIT Vs. Kelvinator of India Ltd., ((supra)), wherein it was categorically held that AO has pow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the assessment year under consideration without appreciating that the said amendment is clarificatory in nature and, thus, retrospective in effect". 3. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in holding that the interest portion of the refund issued earlier has to be ignored for the purpose of calculating interest u/s 244A of the income Tax Act, 1961, payable to the assessee, on refund arising out of the order giving effect to order of appellate authority. 4. "On the facts and in the circumstances of the case and in law, the Ld.CIT(A) erred in interpreting the provisions of section 244a of the Income Tax Act, 1961, so as to ignore interest already granted u/s 244A while calculating interest in order giving effect to the appellate authority." 5. For these and other grounds that may be urged at the time of hearing, the decision of the CIT(A) may be set aside and that of the AO restored". 14. The first issue that came up for our consideration in Ground Nos. 1 & 2 of this appeal is applicability of provisions of Section 115JB of the Act to the banking companies. Ld. AR for the assessee, at the time of hearing submitted that the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15, wherein the Kolkatta tribunal concluded that amendment brought in by Finance Act, 2012 in Section 115JB read with Explanation 3 thereon is prospective in nature and shall be applicable from AY 2013-14 onwards in line with Notes to Clauses of Finance Act, 2012. One of us namely Hon'ble Judicial Member was part of the Division Bench who passed the appellate order in the case of UCO Bank(supra). We have also observed that Hon‟ble Delhi High Court in the case of CIT(LTU) v. Oriental Insurance Company Limited in ITA No. 447 of 2015 vide orders dated 30.08.2015 , held as under: "Applicability of Section 115JB to insurance companies 54. Turning now to ITA No.447/2015, the question concerns the applicability of Section 115JB of the Act to insurance companies. The ITAT has permitted the Assessee to raise this question since, in a large number of judgments of the ITAT, the question has been answered in favour of the Assessee. 55. It is plain, from a reading of Section 44 read with the First Schedule of the Act,that insurance companies are required to prepare accounts as per the IA and the regulations of the IRDA and not as per Parts II and III of Schedule VI of the Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Period Interest to book profits computed u/s. 115JB of the Act. Hence, we are inclined to uphold the findings of Ld. CIT(A) and reject the grounds raised by Revenue. These two grounds of Revenue are dismissed. 16. The next issue came up for our consideration is computation of interest payable u/s. 244A of the Act on refund arising out of the order, giving effect to the order of the appellate authorities. We find that this issue is also covered in favour of assessee by the decision of ITAT, Mumbai in assessee's own case for the AYs. 2007-08 & 2009-10, where the Co-ordinate Bench by following its earlier order for the AY. 2005-06, restored the issue to the file of AO with similar directions as were given for the AY. 2005-06. The relevant observations of the Co-ordinate Bench are as under: "7. The next ground number 3 and 4 raised by Revenue in its appeal for AY 2007-08 relates to computation of grant of interest u/s 244A of the 1961 Act payable to the assessee, on refund arising out of the order giving effect to order of the appellate authority or consequent to order passed u/s 154 of the 1961 Act. The identical issue is also recurring issue in assessee's own case wherein tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X
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