9911796707
TMI Blog2019 (12) TMI 1034X X X X Extracts X X X X X X X X Extracts X X X X ..... subsequent year unless there is change in the facts. Similarly, the case of the assessee is also supported by several cases, namely CIT vs. Sridev Enterprises [ 1991 (1) TMI 52 - KARNATAKA HIGH COURT] Escorts Ltd. vs. ACIT [ 2006 (1) TMI 186 - ITAT DELHI-G] , Malwa Cotton Spg. Mills vs. ACIT [ 2003 (12) TMI 274 - ITAT CHANDIGARH-A] , ITO vs. J.M.P. Enterprises [ 2005 (12) TMI 209 - ITAT AMRITSAR] and other decisions referred to above wherein the common ratio is that once an expense is allowed in the earlier year some cannot be disallowed in the subsequent year unless there is a change of facts during the year vis-a-vis earlier years. Therefore after considering the facts of the case in the light of the decisions relied upon by the learned A.R., we are of the considered opinion that interest expenditure in respect of opening balance of amount advanced is to be allowed. Accordingly we set aside the order of the CIT(A) on this issue and direct the AO to allow interest relating to advance made in earlier years. Interest relating to advances made during the year - Since the assessee s own funds were only to the tune of ₹ 24.50 lakhs, which means that money advanced by t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt Member For the Appellant : Shri Vijay Mehta For the Respondent : Shri Awungshi Gimson ORDER PER RAJESH KUMAR, AM These cross appeals filed by the assessee and Revenue are directed against the order of the CIT(A)-12, Mumbai dated 12.03.2018 and it relates to A.Y. 2012-13. ITA No. 3529/Mum/2018 2. At the time of hearing the learned counsel for the assessee pressed only Ground No. 4(a) raised by the assessee and all other grounds, namely Ground Nos. 1, 2, 3(a) 3(b) are accordingly dismissed as not pressed. Ground No. 4(a) reads as under: - 4(a) On the facts and circumstances of the case and in law, the ld. CIT(A) ought to have allowed the deduction of interest incurred on zero coupon bonds of ₹ 84,70,63,010/- (i.e., ₹ 143,30,28,279/- less ₹ 58,59,65,260/-) u/s 36(1)(iii) of the Act though claimed by the appellant u/s 57(iii) of the Act. 3. Brief facts of the case are that the assessee filed return of income on 30.09.2012 declaring loss of ₹ 1170,64,32,415/- other than the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or remand reports from the AO from time to time, which were duly reproduced and discussed in the appellate order. Even the rejoinder filed by the assessee in reply to the remand report was discussed at length. The detailed operative part of the order is extracted as under: - 78. I have carefully considered the facts of the case, the assessment order, the written submissions of the appellant, the remand reports of the AO and the rejoinders furnished by the appellant. The appellant claimed deduction for interest expenditure of ₹ 143,30,28,270/- incurred in respect of the Zero Coupon Bonds (ZCBs) issued to Essar House Ltd against the interest income of ₹ 124,58,14,513/- credited to the P L account, while computing the income under the head Income from Other Sources. The break-up of the interest income, as furnished by the appellant during the appellate proceedings is as under: Sr. No. Particulars Interest income (Rs.) 1 Interest on ICDs ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he books of account of the appellant during the previous year relevant to the present assessment year after the demerger was approved by the Hon'ble Bombay High Court on 20.01.2012. In view of this reason, the ledger accounts of the ZCBs issued to EHL and ICDs placed with EOL in the books of account of EIL and the bank account statements/bank books of EIL for the FYs 2009-10, 2010-11 and 2011-12, when the relevant transactions took place, are required to be examined in order to ascertain whether there was a direct nexus between the funds raised by issue of ZCBs to EHL and the funds invested by way of ICDs in EOL as claimed by the appellant for the purpose of ascertaining whether the interest expenditure in respect of the ZCBs has been incurred for the purpose of earning the interest income on ICDs for the purpose of being eligible for deduction u/s. 57(iii) of the Act. 81. On perusal of the ledger account extracts of the ZCBs issued to EHL and ICDs placed with EOL in the books of account of EIL for the FYs 2009-10, 2010-11 and 2011-12, it is seen that the details of ZCBs issued to EHL and ICDs placed with EOL during these years are as under: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ING Vysya Bank 500011026084 Bank account statement 3 State Bank of Mysore 54030683976 Bank Book 4 State Bank of Mysore Equity support account Bank Book 5 Punjab National Bank Bank Book 6 Axis Bank Bank Book 7 Royal Bank of Scotland 183643 Bank Book 8 ICICI Bank 623505366830 Bank Book 83. On examination of the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 8 04.12.2009 8,05,92,126 04.12.2009 8,00,00,000 9 18.12.2009 109,38,41,681 21.12.2009 109,38,00,0 10 08.03.2010 70,00,00,000 08.03.2010 70,00,00,00 11 10.03.2010 20,00,00,000 10.03.2010 20,00,00,00 12 10.03.2010 27,14,40,271 10.03.2010 27,00,00,00 13 18.03.2010 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00,00, 23 30.06.2011 63,00,00,000 20.07.2011 63,00,00,00 24 30.06.2011 25,00,00,000 02.07.2011 21,00,00,00 25 30.06.2011 100,00,00,000 02.07.2011 100,00,00,0 26 09.08.2011 74,46,97,005 09.08.2011 74,00,00,00 27 22.12.2011 32,85,33,573 22.12.2011 32,50,00,00 28 26.12.2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5,915 Total 968,79,55,915 86. Further, it is seen from the ledger accounts of the ICDs with EOL for the present assessment year that there were repayments of ICDs during the year also. The details of funds advanced to EOL towards the ICDs and the repayment of the ICDs by EOL during the year are as under: Date Opening balance of ICDs with EOL as on 01.04.2011(Rs.) Funds advanced to EOL towards ICDs (Rs.) Repayment of ICDs by EOL (Rs.) Closing balance of ICDs with EOL (Rs.) 01.04.2011 968,79,55,915 968,79,55,915 02.07.2011 100,00,00,000 1068,79,55,915 02.07.2011 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 24.01.2012 150,00,00,000 1149,99,55,915 02.02.2012 6,00,00,000 1143,99,55,915 09.03.2012 35,00,00,000 1108,99,55,915 31.03.2012 1108,99,55,915 87. Based on the above data regarding the amount of ICDs outstanding with EOL at different points of time during the year, the weighted average daily balance of the ICDs with EOL during the year works out to ₹ 1098,43,16,568/-. As already mentioned earlier, only 67.21% of the amount advanced by way of ICDs to EOL was met out of the borrowings made from EHL by issue of ZCBs. In view of this, 67.21% of the weighted average daily balance of the ICDs with EOL of ₹ 1098,43,16,568/- during the year can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the appellant in the written submission dated 11.01.2017, it is seen that the appellant has considered the entire finance cost of ₹ 1022,76,70,168/- for the purpose of apportionment and arrived at proportionate interest expenditure of ₹ 136,33,80,525/-. However, it is pertinent to point out that while computing the income under the head business in the return of income, the appellant added back the entire finance cost of ₹ 1022.76 Crores and claimed deduction for the interest expenditure on ZCBs of 143.30 Crores included in the said finance cost while computing income under the head Income from Other Sources. No deduction was claimed for the balance finance cost of ₹ 879.46 Crores under any head of income in the return of income. The reason for the same was that the said finance cost was incurred towards the borrowings utilised for making investments in shares and securities in the group companies and others. It is therefore evident from the treatment given by the appellant itself in the return of income that the finance cost to the extent of ₹ 879.46 Crores has no relation to the earning of interest income by the appellant from ICDs and loans and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therefore directed to allow deduction for interest expenditure to the extent of ₹ 58,59,65,260/- u/s.57(iii) of the Act, while computing the income under the head Income from Other Sources. The disallowance of the balance interest expenditure of ₹ 84,70,63,010/- is upheld. This ground of appeal is therefore partly allowed. 5. The learned A.R. vehemently submitted before the Bench that the calculation as given by the learned CIT(A) while allowing part relief to the tune of ₹ 58.59 crores is having several legal and factual errors and need to be corrected accordingly. The learned A.R. submitted that the ld. CIT(A) has also erred in considering only the gross figures advanced by ignoring the repayments by the assessee. The learned A.R. submitted that since complete particulars were available with the learned CIT(A), ignoring repayments and working out the average borrowed funds utilised for the purpose of advance is totally wrong and anomalous. The learned A.R. classified the errors/anomalies 6. The ld counsel of the assessee divided the errors committed by the CIT(A) under three broad categories, i.e. (i) Intere ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s advanced, i.e. ₹ 968.79(Opening Balance of Advances) crores may kindly be deleted. 7. As regards the interest pertaining to advances made in the current year, the learned A.R. submitted that the learned CIT(A) has analysed the transactions and reproduced the relevant table on page Nos. 49 50 of the appellate order, which is extracted hereinabove in the CIT(A) findings as reproduced above. While pointing out the apparent mistakes in the table, the learned A.R. pointed out that on 30.09.2011 an advance of ₹ 200 crores has been shown to be made whereas the actual date of advance was 08.10.2011 by referring to page No. 26 of the Paper Book, which is a statement issued by Kotak Mahindra Bank and it was repaid on 10.10.2011 as it is apparent from the bank statement filed at page No. 27 of the Paper Book. Similarly the transaction of ₹ 125 crores on 31.01.2012 is a contra entry as is clear from the bank statement filed at page No. 28 of the Paper Book and not a transaction of advance and repayment which has been misconstrued by the learned CIT(A) in the table. The learned A.R. submitted that in respect of those advances, where the direct nexus is not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... crores under Section 57 of the Act. After perusing the order of the CIT(A), especially interest pertaining to advance made in earlier years we observe that the assessment for A.Y. 2011-12 has also been framed and the said claim of the assessee under Section 57(iii) of the Act has been allowed by the AO as is apparent from the copy of the assessment order filed at page Nos. 24 25 of the Paper Book. We further note that Revenue has not taken any step for reopening the assessment for A.Y. 2011-12. Further assessee s own fund in the form of share capital is only ₹ 24.50 lakhs and thus there is merit in the contentions of the assessee that the entire amount of interest expenditure is to be allowed to the assessee considering the fact that the amounts advanced were out of loaned money Besides , once interest expenditure has been allowed in a particular year, the same cannot be disallowed in the subsequent year unless there is change in the facts. The case of the assessee is supported by the decision of the Hon'ble Gujarat High Court in the case of Virendra R. Gandhi (supra) wherein substantial question of law raised is extracted as under: - Whether, on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ACIT [104 ITD 427 (Del)], Malwa Cotton Spg. Mills vs. ACIT [89 ITD 65 (TM) (Chd)], ITO vs. J.M.P. Enterprises [101 ITD 324 (SMC) (Asr)] and other decisions referred to above wherein the common ratio is that once an expense is allowed in the earlier year some cannot be disallowed in the subsequent year unless there is a change of facts during the year vis-a-vis earlier years. Therefore after considering the facts of the case in the light of the decisions relied upon by the learned A.R., we are of the considered opinion that interest expenditure in respect of opening balance of amount advanced is to be allowed. Accordingly we set aside the order of the CIT(A) on this issue and direct the AO to allow interest relating to advance made in earlier years. 12. So far as interest relating to advances made during the year are concerned, we have noticed that the learned CIT(A) has committed several factual errors in the table appended on age 49 of the appellate order . As has been pointed out by the learned A.R., ₹ 200 crores has been shown to be advance on 30.09.2011 in the table whereas the actual date was 08.20.2011 as is clear from the copy of bank statement filed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... an on which interest income is earned, which is chargeable to tax under s. 56.- Continental Construction Ltd. vs. CIT (1992) 101 CTR'-(SC) 386 : (1992) 195 ITR 81 (SC), U.K. (Investment) Co. (P) Ltd. vs. CIT (1994) 121 CTR (Guj) 470 : (1995) 211 ITR 511 (Guj) and India Cements Ltd. vs. CIT (1966) 60 ITR 52 (SC) relied on; Ms. Ila R. Ambani (ITA Nos. 4340 9341/Bom/90, dt. 30th Sept., 2004) and Srnt. Padmavati Jaiknshna vs. Addl CIT (1987) 62 CTR (SC) 14 : (1987) 166 ITR 176 (SC) distinguished; Mandideep Engineering Packaging Industries (P) Ltd. vs. Dy. CIT (2001) 71 TTJ (Ind) 954 : (2001)77 ITD 307 (Ind) not followed. 13. We also find merit in the contentions of the assessee that interest expenditure corresponding to interest income other than interest received from Essar Oil Ltd. is to be allowed. We note that the total interest income during the year was ₹ 125.58 crores out of which interest received from Essar Oil Ltd. is ₹ 102.02 crores as observed by the learned CIT(A) on page No. 46, para 78 of the appellate order and therefore in our opinion assessee has to be allowed interest expenditure in respect of interest income other than interest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of India Ltd Vs. CIT 187 ITR 688(SC) ii)National thermal Power Corporation of India Ltd.Vs CIT(1998) 220 ITR 383(SC) iii) CIT Vs Prithvi Brokers and Shareholders (2012) 349 ITR 336(bom) 16. The learned D.R., on the other hand, strongly opposed admission of additional grounds on the ground that these grounds were never raised before the learned CIT(A) nor the claim was made in the return of income so far as ground Nos. 3 4 were concerned. The learned D.R. submitted that these grounds could be admitted only if the facts regarding these grounds were available before the AO. Accordingly the learned D.R. prayed that additional grounds may kindly be dismissed. 17. The learned A.R. rebutting the arguments of the learned D.R. submitted that since there was loss during the year, there was no occasion to claim the deduction under Section 80G of the Act in respect of donations. However, in respect of the remaining three grounds all the facts were already before the AO. We have heard the rival submission and perused the material on record. So far as ground Nos. 1, 2 and 3 are concerned the facts are alrea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wance made by A.O. u/s 14A r.w.r. 8D of the Income tax Act, 1961, to the extent of exempt income, without appreciating the fact that the Board circular 5/2014 states that Rule 8D read with section 14A of the Act provides for disallowance of the expenditure even where taxpayer in a particular year has not earned any exempt income. 3. On the facts and in circumstances of the case, the Ld. CIT (A) is not justified in restricting the upward adjustment, to the extent of exempt income, in Book Profit u/s 115JB of Income tax Act, since, the issue of restricting the disallowance made by A.O. u/s 14A r.w.r. 8D of the Income tax Act, 1961, to the extent of exempt income is already contested. 4. The Appellant prays that the order of the CIT (Appeals) on the above grounds be set aside and that of the AO be restored. 22. The issue raised in Ground No. 1 is against the order of CIT(A) allowing deduction of interest expenditure to the tune of ₹ 58,59,65,260/- under Section 57(iii) of the Act out of total disallowance of ₹ 143.30 crores made by the AO based upon the additional evidences in the form of bank statement admitted by C ..... X X X X Extracts X X X X X X X X Extracts X X X X
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