9911796707
TMI Blog2020 (6) TMI 48X X X X Extracts X X X X X X X X Extracts X X X X ..... t of the COVID-19 pandemic and lockdown, the period of lockdown days need to be excluded. For coming to such a conclusion, we rely upon the decision of the Coordinate Bench of the Mumbai Tribunal in the case of DCIT vs. JSW Limited [ 2020 (5) TMI 359 - ITAT MUMBAI ] - Shri Saktijit Dey, JM And Shri Manoj Kumar Aggarwal, AM For the Appellant : S/Shri Vijay Mehta And Anuj Kisnadwala-Ld. ARs For the Respondent : Ms. Kavita P. Kaushik Shri Amit Pratap Singh - Ld. DRs ORDER MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER): - 1.1 Aforesaid appeal by assessee for Assessment Year [in short referred to as AY ] 2011-12 contest the order of Ld. Commissioner of Income-Tax (Appeals)-52, Mumbai, [in short referred to as CIT(A) ],Appeal No. CIT(A)- 52/IT/DCIT-CC-7(3)/296/2016-17 dated 02/03/2017 on following grounds of appeal: - 1. On the facts of the case and in law, the CIT(A) erred in confirming the disallowance of interest expenses of ₹ 5,01,43,016/- u/s.36(1)(iii) on the ground that it was not incurred for business purposes. 1.2 The assessee has also raised an additional ground of appeal on 26/09/2018 which reads as under: - The Learned Commissioner of Income-Tax (Appeals) ought to have held ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on Debentures 444,86,11,700/- 2. Interest on late payment of TDS 4,737/- 3. Professional fees- finance 17,65,348/- 4. Reimbursement of finance cost given to holding company 41,64,847/- Total 445,45,46,632/- 5. Less: Interest Income on loans given 429,11,89,321/- Net Interest Finance Charges 16,33,57,311/- 2.4 The other major expenditure debited to Profit Loss Account include misc. expenditure written-off for ₹ 1618.48 Lacs which represent amortization of debenture discount debenture issue expenses. The assessee has reflected loss of ₹ 3229.45 Lacs in its Profit Loss Account. However, in the computation of income, it has made various adjustments to the said losses and arrived at loss of ₹ 480.62 Lacs as per the provisions of Income Tax. One of the major suo-moto disallowances made by the assessee is for ₹ 2750.62 Lacs which is interest disallowance u/s 36. 2.5 The aforesaid interest disallowance is nothing but rate of 37.93% on investment of ₹ 7251.85 Lacs stated to be made by the assessee in shares of two associated companies i.e.M/s Ajinath Hi-Tech Builders Pvt. Ltd. M/s Macrotech Constructions Pvt. Ltd. The said disallowance was made since the inves ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... real estate development and no business activity was carried out by the assessee during the year under consideration. The assessee simply borrowed money by way of debentures to the extent of ₹ 161800 Lacs and invested / advanced the same to group concerns. The assessee was forwarding loans at the same effective rate at which it was paying interest for the debentures and it incurred losses only because the assessee could not fully lend the money available with him. Therefore, the assessee, in the opinion of Ld. AO, could not establish the business expediency or the business need for incurring such huge financial expenses which was evident from the fact that accumulated business losses amounted to ₹ 4372.55 Lacs. A conclusion was drawn that part of interest expenditure would go towards funding of accumulated losses. The said losses were due to the fact that the assessee made investment in group concerns. Those investments earned nothing and secondly, the assessee was not able to lend the money available with him for full time during the year. Therefore, these losses were not allowable to the assessee. The assessee did not carry out any business activity rather it was mer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... remaining interest of ₹ 501.43 Lacs was claimed as deduction u/s 36(1)(iii) since the same were incurred for business purposes. 4.2 Therefore, it could be noted that two different stands were taken by the assessee during the course of assessment proceedings and the appellate proceedings. On the basis of the same, a conclusion could be drawn that the correct factual matrix could not be appreciated by both the lower authorities. 4.3 In support of claim of interest expenditure, the assessee raised a plea that similar methodology of disallowance as adopted in earlier years was accepted by revenue in assessments framed u/s 143(3). In other words, a plea of rule of consistency was raised. It was also submitted that the facts were identical in earlier years and the funds were borrowed in earlier years without there being any change in the same during the year and therefore, no disallowance could be made. The assessee also relied upon various judicial pronouncements in support of its claim. 4.4 However, Ld. Ld.CIT(A) concurred with the stand of Ld. AO by observing that the assessee did not carry out any business activity and the proceeds of debentures were diverted towards interest-f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... llate Tribunal) Rules, 1963, the matter was required to be pronounced within a total period of 90 days. As per sub-clause (c) of Rule 34(5), every endeavor was to be made to pronounce the order within 60 days after conclusion of hearing. However, where it is not practicable to do so on the ground of exceptional and extraordinary circumstances, the bench could fix a future date of pronouncement of the order which shall not ordinarily be a day beyond a further period of 30 days. Thus, a period of 60 days has been provided under the extant rule for pronouncement of the order. This period could be extended by the bench on the ground of exceptional and extraordinary circumstances. However, the extended period shall notordinarily exceed a period of 30 days. 7.2 Although the order was well drafted as well as approved before the expiry of 90 days, however, unfortunately, on 24/03/2020, a nationwide lockdown was imposed by the Government of India in view of adverse circumstances created by pandemic covid-19 in the country. The lockdown was extended from time to time which crippled the functioning of most of the government departments including Income Tax Appellate Tribunal (ITAT). The situa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en used in the said rule itself. This rule was inserted as a result of directions of Hon ble jurisdictional High Court in the case of Shivsagar Veg Restaurant Vs ACIT [(2009) 317 ITR 433 (Bom)] wherein Their Lordships had, inter alia, directed that We, therefore, direct the President of the Appellate Tribunal to frame and lay down the guidelines in the similar lines as are laid down by the Apex Court in the case of Anil Rai (supra) and to issue appropriate administrative directions to all the benches of the Tribunal in that behalf. We hope and trust that suitable guidelines shall be framed and issued by the President of the Appellate Tribunal within shortest reasonable time and followed strictly by all the Benches of the Tribunal. In the meanwhile (emphasis, by underlining, supplied by us now), all the revisional and appellate authorities under the Income-tax Act are directed to decide matters heard by them within a period of three months from the date case is closed for judgment . In the ruled so framed, as a result of these directions, the expression ordinarily has been inserted in the requirement to pronounce the order within a period of 90 days. The question then arises whether ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se) maybe invoked, wherever considered appropriate, following the due procedure . The term force majeure has been defined in Black s Law Dictionary, as an event or effect that can be neither anticipated nor controlled When such is the position, and it is officially so notified by the Government of India and the Covid-19 epidemic has been notified as a disaster under the National Disaster Management Act, 2005, and also in the light of the discussions above, the period during which lockdown was in force can be anything but an ordinary period. 10. In the light of the above discussions, we are of the considered view that rather than taking a pedantic view of the rule requiring pronouncement of orders within 90 days, disregarding the important fact that the entire country was in lockdown, we should compute the period of 90 days by excluding at least the period during which the lockdown was in force. We must factor ground realities in mind while interpreting the time limit for the pronouncement of the order. Law is not brooding omnipotence in the sky. It is a pragmatic tool of the social order. The tenets of law being enacted on the basis of pragmatism, and that is how the law is require ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
