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TMI Blog2020 (7) TMI 622X X X X Extracts X X X X X X X X Extracts X X X X ..... record that the interest expenditure is directly incurred for earning interest income. That being the case, we uphold the disallowance made by the Assessing Officer and confirmed by learned Commissioner (Appeals). Set off of business loss against the other heads of income while completing the assessment - HELD THAT:- As it appears from the facts on record, this issue was not raised by the assessee before learned Commissioner (Appeals). This is evident from the grounds of appeal attached with Form no.35. Therefore, there was no occasion on the part of learned Commissioner (Appeals) to examine the issue. It is before the Tribunal the assessee has raised the issue by way of additional ground. Though, we admit the additional ground considering the fact that the AO has also accepted the loss while computing the income of the assessee, however, whether such loss can be set off against income from other heads is subject to verification by the AO. Accordingly, we restore the issue to the file of the Assessing Officer for deciding afresh in accordance with law after providing due opportunity of being heard to the assessee. This ground is allowed for statistical purposes. - Shri Shamim Yah ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... record, identical addition of interest on interest free security deposit was made by the Assessing Officer in assessee s own case in the assessment year 2012 13. When the dispute ultimately came up for consideration before the Tribunal in ITA no.3549/Mum./2016, the Tribunal vide order dated 9th February 2018, after considering the submissions of the parties and relevant facts and materials on record, though, upheld the decision of the Assessing Officer in computing interest on interest free security deposit received by the assessee, however, the quantum was reduced from 10% to 9%. The relevant observations of the Tribunal in this regard are reproduced herein below for better appreciation and clarity. 7. We have heard the rival submissions and perused the relevant materials on record. The reasons for our decision are given below. The assessee has declared ₹ 4,80,000/- being leave and licence fees from office premises situated in Poddar Chambers under the head Income from Other Sources . The assessee is a tenant of the said premises and has granted leave and licence rights to the licensee. The assessee had also received security deposit of ₹ 2,75,00,000/- from the licens ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... art have agreed to enter into an agreement with regard to the above referred office premises to be effective from April 1, 2004. 6. M/s Asit C. Mehta Investment Intermediates Ltd. has authorized Mr. Kirit H. Vora, Whole-time Director, to sign and execute the agreement to be effective from April 1, 2004. 7. Whereas both the parties are desirous of reducing the terms and conditions into writing so as to safeguard their mutual benefits and understand their obligations and responsibilities. NOW THIS AGREEMENT WITNESSTH AND IT IS HEREBY AGREED BY AND BETWEEN THE PARTIES HERETO AS FOLLOWS: ..... ..... ..... ..... ..... ..... ..... ..... 4. The License hereby granted shall effective from April 1, 2004 and shall remain in force for a period of 33 months, i.e. upto and including December 31, 2006 and will end on that day under any circumstances. 5. The Licensee shall pay to the Licensor a lump sum license fee at the rate of ₹ 40,000/- per month being the monthly fees for the use of said premises and for the furniture, fixtures, fitting and equipments in the said premises. This however, will not create any right, title or interest in the Licensed Premises in favour of the Licensee what ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come of ₹ 1.50 lakhs as annual letting value in respect of those properties. There was no provision in the agreement for increase in rent from year to year. The Assessing Officer determined the annual value of ₹ 7,80,000 by adding notional interest of ₹ 6,30,000 calculated at the rate of 18% per annum on ₹ 35 lakhs taken as security deposit, to the value of ₹ 1.50 lakhs shown by the assessee. The Commissioner (Appeals) deleted the notional interest of ₹ 6,30,000. The Tribunal affirmed the order of the Commissioner (Appeals). On further appeal, their Lordships of the Hon ble Punjab and Haryana High Court held as under: A perusal of the lease deeds and on a conjoint reading of all the documents and an analysis of factual aspect, the irresistible conclusion is that the security deposit of ₹ 35,00,000 was disproportionate to the actual contractual rent of ₹ 25,000 per month, i.e. total ₹ 12,500 per month for land and building etc. and ₹ 12,500 per month for furniture, fixture, plant and machinery etc. which amounts to 140 times of monthly rent and has no rationale with the agreed rent and the assessee had adopted a device to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... examine whether the clauses relating to Leave and License Fee and Security Deposit in the Leave Licence Agreement in the instant case are to be read separately or together. The Hon ble Supreme Court vide order dated 23.03.2009 in Vimal Chand Ghevarchand Jain ors. vs. Ramakant Eknath Jajoo, [Civil Appeal No. 1784 of 2009], while dealing with the construction of a commercial contract observed : A document, as is well known, must be construed in its entirety . In assessing the true nature and character of a transaction, the label which parties may ascribe to the transaction is not determinative of its character. The nature of the transaction has to be ascertained from the covenants of the contract and from the surrounding circumstances. In National Cement Mines Industries Ltd. vs. CIT [1961] 42 ITR 69, Justice J.C. Shah (as His Lordship then was) speaking for the Hon ble Supreme Court emphasized the following principles of interpretation to be adopted by the Court in construing a commercial transaction : The court has, on an appraisal of all the facts, to assess whether a transaction is commercial in character yielding income or is one in consideration of parting with property for re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts relating to the disputed issue in the impugned assessment year being identical to assessment year 2012 13, we do not find any reason to deviate from the finding of the Co ordinate Bench while deciding the issue in assessment year 2012 13. Therefore, respectfully following the aforesaid decision of the Tribunal in assessee s own case, we uphold the decision of learned Commissioner (Appeals) on the disputed issue. Grounds are dismissed. 7. In ground no.5, the assessee has challenged part disallowance of interest expenditure amounting to ₹ 1,93,400. 8. Brief facts are, during the assessment proceedings the Assessing Officer noticed that the assessee has claimed deduction of ₹ 2,45,196, towards interest paid while computing income under the head income from other sources. From the details furnished he found that the interest income earned by the assessee during the year was ₹ 51,796. Thus, he concluded that interest expenditure only to the extent of interest income can be allowed to the assessee. Therefore, after netting off the interest expenditure against interest income, he disallowed an amount of ₹ 1,93,400. While doing so, he further observed that simil ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as raised an additional ground seeking directions to the Assessing Officer to allow set off of business loss of the year against income from other heads. On a perusal of the facts on record, it is evident that the assessee has reported loss of ₹ 2,45,00,196, while computing income under the head business and profession. In fact, the Assessing Officer has also not disturbed the loss claimed by the assessee under the aforesaid head while determining the total income of the assessee. However, it appears that the Assessing Officer has not allowed set off of business loss against the other heads of income while completing the assessment. As it appears from the facts on record, this issue was not raised by the assessee before learned Commissioner (Appeals). This is evident from the grounds of appeal attached with Form no.35. Therefore, there was no occasion on the part of learned Commissioner (Appeals) to examine the issue. It is before the Tribunal the assessee has raised the issue by way of additional ground. Though, we admit the additional ground considering the fact that the Assessing Officer has also accepted the loss while computing the income of the assessee, however, whethe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly on the conclusion of the hearing, the Bench shall give a date for pronouncement. (c) In a case where no date of pronouncement is given by the Bench, every endeavour shall be made by the Bench to pronounce the order within 60 days from the date on which the hearing of the case was concluded but, where it is not practicable so to do on the ground of exceptional and extraordinary circumstances of the case, the Bench shall fix a future day for pronouncement of the order, and such date shall not ordinarily (emphasis supplied by us now) be a day beyond a further period of 30 days and due notice of the day so fixed shall be given on the notice board. 8. Quite clearly, ordinarily the order on an appeal should be pronounced by the bench within no more than 90 days from the date of concluding the hearing. It is, however, important to note that the expression ordinarily has been 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion arises shall be extended for a period of 15 days after the lifting of lockdown . Hon ble Bombay High Court, in an order dated 15th April 2020, has, besides extending the validity of all interim orders, has also observed that, It is also clarified that while calculating time for disposal of matters made time-bound by this Court, the period for which the order dated 26th March 2020 continues to operate shall be added and time shall stand extended accordingly , and also observed that arrangement continued by an order dated 26th March 2020 till 30th April 2020 shall continue further till 15th June 2020 . It has been an unprecedented situation not only in India but all over the world. Government of India has, vide notification dated 19th February 2020, taken the stand that, the coronavirus should be considered a case of natural calamity and FMC (i.e. force majeure clause) 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- ..... X X X X Extracts X X X X X X X X Extracts X X X X
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