Motrik Investment Pvt.Ltd.,, Baroda v. The ACIT, Circle 4, Baroda

ITA 2206/AHD/2013 | 2007-2008
Pronouncement Date: 27-09-2016 | Result: Partly Allowed

Appeal Details

RSA Number 220620514 RSA 2013
Assessee PAN AABCM4266E
Bench Ahmedabad
Appeal Number ITA 2206/AHD/2013
Duration Of Justice 3 year(s) 28 day(s)
Appellant Motrik Investment Pvt.Ltd.,, Baroda
Respondent The ACIT, Circle 4, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 27-09-2016
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted SMC
Tribunal Order Date 27-09-2016
Date Of Final Hearing 27-09-2016
Next Hearing Date 27-09-2016
Assessment Year 2007-2008
Appeal Filed On 30-08-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH AHMEDABAD BEFORE SHRI R.P. TOLANI JUDICIAL MEMBER ./ ITA NO. 2206/AHD/2013 / ASSESSMENT YEAR : 2007-08 MOTRIK INVESTMENT PVT LTD B-3 CHANDAN METAL COMPOUND NEAR BIDC GORWA ROAD BARODA PAN : AABCM 4266 E VS ACIT CIRCLE-4 BARODA / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI PARIN SHAH AR REVENUE BY : SHRI RAHUL KUMAR SR DR / DATE OF HEARING : 27/09/2016 / DATE OF PRONOUNCEMENT: 27/09/2016 / O R D E R THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-III BARODA DA TED 13.06.2013 FOR AY 2007-08. 2. THE EFFECTIVE GROUNDS RAISED BY THE ASSESSEE REA D AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF YOUR APPELLANTS CASE AS WELL AS IN LAW THE LD. CIT(A)-III BARODA HAS ERRED IN CONFIRMING LD. AOS ACTION OF RE- OPENING OF THE ASSESSMENT PROCEEDINGS MERELY ON CHA NGE OF OPINION ALTHOUGH ALL NECESSARY FACTS HAVE BEEN DISCLOSED RI GHT FROM THE STAGE OF FILING OF INCOME TAX RETURN. 2. ON THE FACTS AND CIRCUMSTANCES OF YOUR APPELLANTS CASE AS WELL AS IN LAW THE LD. CIT(A)-III BARODA HAS ERRED IN CONFIRMING LD. AOS ACTION TOWARDS ADDITION OF NOTIONAL INTEREST INCOME TO THE TUNE OF RS.9 80 982/- ON STICKY LOAN. 3. GROUND NO.1 ABOUT REOPENING OF ASSESSMENT IS NOT PRESSED; HENCE DISMISSED AS NOT PRESSED. 4. LD. COUNSEL FOR THE ASSESSEE CONTENDS THAT THE A SSESSEES APPEAL WAS DISMISSED BY LD. CIT(A) RELYING ON EARLIER ITAT ORD ERS HOLDING THAT THE SMC-ITA NO. 2206/AHD/2013 MOTRIK INVESTMENT PVT LTD VS. ACIT AY : 2007-08 2 ACCRUED INTEREST ON STICKY LOANS WAS CHARGEABLE ON MERCANTILE SYSTEM OF ACCOUNTING BY FOLLOWING OBSERVATIONS:- 5.2 THE APPELLANT HAS MADE THE DETAILED SUBMISSIONS IN THIS REGARD DURING THE COURSE OF APPELLATE PROCEEDINGS. IT HAS ALSO BE EN STATED IN THE SUBMISSION THAT THE PRINCIPLE AMOUNT AS WELL AS INTEREST UP TO FINANCIAL YEAR 1998-99 WAS RECEIVED BY THE APPELLANT FROM CHANDAN METAL PR ODUCTS PVT. LTD. AS PER AGREEMENT DATED 02.11.2007. ACCORDINGLY THE ITAT IN ITS DECISION IN APPELLANTS CASE IN ITA NO.1400/AHD/2012 FOR AY 2008-0 9 HELD THAT NO INTEREST FOR THE ASSESSMENT YEAR 2008-09 WAS RECEIV ED OR RECEIVABLE. HENCE THE APPELLANT SUBMITTED THAT NO INTEREST INCOME FOR AY 2007-08 SHOULD ALSO BE ASSESSED. BUT A PERUSAL OF THE ITATS ORDER SHOWS THAT IT WAS BASED UPON THE FACT THAT AGREEMENT DATED 02.11.2007 WAS MADE I N FINANCIAL YEAR 2007-08 AND ACCORDINGLY NO INTEREST WAS RECEIVABLE BY THE A PPELLANT FOR THAT YEAR. SO FAR AS ASSESSMENT YEAR 2007-08 IS CONCERNED AS PER THE ORDERS OF ITAT IN EARLIER YEARS THE INTEREST ON THIS LOAN HAS ACCRUE D TO THE APPELLANT AND HENCE THE APPELLANT WAS REQUIRED TO INCLUDE SUCH INTEREST IN ITS TOTAL INCOME. THUS THE ISSUE IS COVERED AGAINST THE APPELLANT BY THE D ECISION OF ITAT IN ITS OWN CASE IN EARLIER YEAR. ACCORDINGLY THE ADDITION MAD E BY THE AO IS UPHELD AND THIS GROUND IS DISMISSED. THE HONBLE GUJARAT HIGH COURT VIDE ORDER DATED 29. 07.2016 FOR AYS 2000-01 TO 2006-07 HAS REVERSED THE ORDER OF THE IT AT BY HOLDING THAT THE IMPUGNED INTEREST ON STICKY LOANS WAS NOT CHARGEABL E BY FOLLOWING OBSERVATIONS:- 7.3 THUS EVEN FROM THE ABOVE DECISIONS IT IS BO RNE OUT THAT WHERE THE INTEREST ON NON PERFORMING ASSETS WAS NOT RECEIVED A ND THE POSSIBILITY OF RECOVERY WAS ALMOST NIL IT COULD NOT BE TREATED TO HAVE BEEN ACCRUED IN FAVOUR OF THE ASSESSEE. AS AND WHEN THE RECOVERY OF ACCRUED INTEREST IS MADE THE SAME WOULD BE TAXED IN THE HANDS OF THE ASSESSE E. IT IS SETTLED LAW THAT IN A SCENARIO WHERE INTEREST ON NON PERFORMING ASSETS W AS DOUBTFUL OF RECOVERY DUE TO ADVERSE FINANCIAL CIRCUMSTANCES OF THE BORRO WER IT WAS LEGITIMATE MOVE TO INFER THAT INTEREST INCOME HAD NOT ACCRUED AND WAS THEREFORE NOT ELIGIBLE TO TAX IRRESPECTIVE OF THE FACT THAT ASSE SSEE FOLLOWED MERCANTILE SYSTEM OF ACCOUNTING. WE DO NOT FIND ANY INFIRMITY IN THE ORDER PASSED BY THE CIT(A). THE TRIBUNAL ERRED IN COMING TO THE CON CLUSION THAT THE SAID INTEREST IS CHARGEABLE TO TAX. IN THAT VIEW OF THE MATTER BOTH THE QUESTIONS ARE REQUIRED TO BE ANSWERED IN FAVOUR OF ASSESSEE. 5. LD. DEPARTMENTAL REPRESENTATIVE IS HEARD. SMC-ITA NO. 2206/AHD/2013 MOTRIK INVESTMENT PVT LTD VS. ACIT AY : 2007-08 3 6. I HAVE HEARD THE RIVAL CONTENTIONS PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE LOWER AUT HORITIES. SINCE HONBLE GUJARAT HIGH COURT IN ASSESSEES OWN CASE HAS HELD THAT THE IMPUGNED INTEREST CANNOT BE ADDED IN THE HANDS OF THE ASSESS EE THEREFORE RESPECTFULLY FOLLOWING THE SAME THE ADDITION OF INTEREST IS DEL ETED. 7. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 27 TH SEPTEMBER 2016 AT AHMEDABAD. SD/- R.P. TOLANI (JUDICIAL MEMBER) AHMEDABAD; DATED 27/09/2016 *BIJU T. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) 5. / DR ITAT AHMEDABAD 6. / GUARD FILE . / BY ORDER TRUE COPY / ( DY./ASSTT.REGISTRAR) / ITAT AHMEDABAD