THE ACIT 2(3), MUMBAI v. M/S. INDUSIND BANK LTD, MUMBAI

ITA 4040/MUM/2007 | 2001-2002
Pronouncement Date: 30-09-2011 | Result: Dismissed

Appeal Details

RSA Number 404019914 RSA 2007
Assessee PAN MARCH2001W
Bench Mumbai
Appeal Number ITA 4040/MUM/2007
Duration Of Justice 4 year(s) 4 month(s) 6 day(s)
Appellant THE ACIT 2(3), MUMBAI
Respondent M/S. INDUSIND BANK LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 30-09-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted H
Tribunal Order Date 30-09-2011
Date Of Final Hearing 22-09-2011
Next Hearing Date 22-09-2011
Assessment Year 2001-2002
Appeal Filed On 24-05-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI R.S. SYAL A.M. AND SHRI V. DURGA RAO J.M. ITA NO. 4040/MUM/2007 ASSESSMENT YEAR : 2001-02 ASSTT. COMMISSIONER OF INCOME-TAX-2(3) AP PELLANT ROOM NO. 555 AAYAKAR BHAVAN MUMBAI 400 020 VS. INDUSIND BANK LTD. RESPONDENT 8 TH FLOOR TOWER ONE ONE INDIABULLS CENTRE 841 SENAPATI BAPAT ROAD ELPHINSTON ROAD MUMBAI 400 019. APPELLANT BY : MR. GOLI SRINIVAS RAO RESPONDENT BY : MR. D.S. MAINKAR DATE OF HEARING : 22/09/2011 DATE OF PRONOUNCEMENT : ORDER PER V. DURGA RAO J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAI NST THE ORDER OF CIT(A)- XXXIII MUMBAI PASSED ON 07/03/2007 FOR TH E ASSESSMENT YEAR 2001-02. 2. THE ONLY GROUND RAISED BY THE REVENUE IN THIS AP PEAL IS DIRECTED AGAINST THE ACTION OF THE CIT(A) IN DELETING THE PE NALTY OF RS. 34 32 93 628/- LEVIED BY THE AO U/S 271(1)(C) OF TH E ACT. 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSEE HAD FILED ITS RETURN OF INCOME ON 31/10/01 DECLARING TO TAL INCOME AT RS. 61 64 43 738/- WHICH WAS PROCESSED U/S 143(3) OF T HE ACT ON ITA NO. 4040 /MUM/2007 M/S INDUSIND BANK LTD. 2 30/01/04 DETERMINING THE TOTAL INCOME AT RS. 62 72 03 530/- MAKING THE FOLLOWING ADDITIONS:- 1. INTEREST ACCRUED BUT NOT DUE AS ON 31/03/01 OF R S. 84 71 62 630/-. 2. DISALLOWANCE OUT OF CLAIM OF DEPRECIATION 1 20 0 0 948/- 3. LOSS ON FORWARD EXCHANGE TRANSACTION OF RS. 8 74 020/- 4. PROPORTIONATE SWAP COST ON THE OUTSTANDING SWAP CONTRACTS OF RS. 79 61 454/- 4. ON APPEAL THE CIT(A) CONFIRMED THE SAID ADDITIONS/DISALLOWANCES MADE BY THE AO. THEREAFTER THE AO INITIATED PENALTY PROCEEDINGS U/S 271(1)(C) OF THE ACT ON THE GROUND THAT THE ASSESSEE HAD CONCEALED ITS PARTICULARS OF INCOME AN D LEVIED A PENALTY OF RS. 34 32 93 628/-. AGGRIEVED THE ASSESSEE CARRI ED THE MATTER IN APPEAL BEFORE THE CIT(A). 5. AS REGARDS PENALTIES ON DISALLOWANCE OF INTEREST ACCRUED BUT NOT DUE OF RS. 84 71 62 630/- AND LOSS ON FORWARD E XCHANGE TRANSACTIONS OF RS. 8 74 029/- THE CIT(A) FOLLOWIN G HIS PREDECESSORS ORDER IN ASSESSEES OWN CASE FOR AY 2000-01 DELETE D THE PENALTIES LEVIED ON THESE COUNTS. THE TRIBUNAL HAS DELETED TH E ADDITIONS IN SO FAR AS INTEREST ACCRUED BUT NOT DUE AS ON 31/03/01 OF RS. 84 71 62 630/- AND LOSS ON FORWARD EXCHANGE TRANSAC TION OF RS. 8 74 020/- VIDE ITS ORDER DATED 17 TH JUNE 2011 IN ITA NO. 4343/MUM/2005. 6. AS REGARDS THE PENALTY ON DISALLOWANCE OF DEPRE CIATION OF 1 20 00 948/- THE LEARNED AR OF THE ASSESSEE CONTE NDED BEFORE THE CIT(A) THAT BASIC TEST OF LEVY OF PENALTY ON ACCOUN T OF DISALLOWANCE OF DEPRECIATION ON LEASED ASSETS FAIL DUE TO THE FACT THAT THERE IS NEGATIVE ADDITION TO TOTAL INCOME AFTER REDUCING CAPITAL REC OVERIES. IN THIS CASE ALTHOUGH THERE IS ADDITION OF DEPRECIATION INHERENT IN THIS ADDITION IS THE REDUCTION OF CAPITAL RECOVERIES AND CONSEQUENTL Y THERE IS NET ITA NO. 4040 /MUM/2007 M/S INDUSIND BANK LTD. 3 DEDUCTION FROM THE TOTAL. THUS THERE IS NO ADDITIO N TO THE TOTAL INCOME AS A RESULT OF THIS DISALLOWANCE. THEREFORE THERE IS NO CONCEALED INCOME WITHIN THE MEANING OF EXPLANATIO N 1. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE THE CI T(A) HELD AS UNDER:- 5.2 I HAVE GONE THROUGH THE FACTS OF THE CASE CAREF ULLY. IT IS A FACT THAT THERE IS NO FRESH LEASE TRANSACTIONS ON W HICH DEPRECIATION IS NOT ALLOWED BY THE AO. THE DISALLOW ANCE OF DEPRECIATION MADE BY THE AO IN THE ASSESSMENT ORDER FOR THIS ASSESSMENT YEAR 2001-02 IS WITH REGARD TO THE LEASE TRANSACTIONS ENTERED BY THE APPELLANT DURING THE ASSESSMENT YEAR 1995-96. THE APPELLANT CONTENDS THAT THESE ARE GENUINE TRANS ACTIONS AND ENTITLED FOR DEPRECIATION. BUT THIS CONTENTION OF T HE APPELLANT WAS NOT ACCEPTED BY THE DEPARTMENT. HOWEVER IN CONSIST ENT WITH THE VIEW TAKEN BY THE APPELLANT IN EARLIER YEARS THE A PPELLANT HAS CLAIMED DEPRECIATION IN THIS YEAR. THERE IS NO CONC EALMENT OF PARTICULARS OF INCOME NOR FURNISHING OF INACCURATE PARTICULARS OF INCOME FOR THIS ASSESSMENT YEAR. FURTHER IT IS ALS O SEEN THAT IF THE DEPARTMENTS VIEW IS CORRECT THEN FOR THIS ASSE SSMENT YEAR THE AMOUNT OF DEPRECIATION CLAIMED ON THE LEASED AS SETS IS LESS THAN THE RENTAL INCOME OFFERED AND CONSEQUENTLY TH E ACTUAL INCOME WILL BE LESS THAN THE RETURNED INCOME. CONSI DERING ALL THESE FACTS I AM OF THE VIEW THAT THERE IS NO CONC EALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE P ARTICULARS OF INCOME IN THIS ASSESSMENT YEAR. I HOLD THAT PENALTY U/S 271(1)(C) OF THE ACT IS NOT LEVIABLE ON THIS ISSUE. 7. AS REGARDS THE PENALTY WITH REGARD TO DISALLOWAN CE OF SWAP COST AS PREPAID EXPENDITURE OF RS. 79 61 454/- THE CIT( A) HELD AS UNDER:- 7.1 THE APPELLANT IS A BANKING COMPANY. THE APPELLA NT RECEIVED FOREIGN CURRENCY DEPOSITS AS PER THE SCHEMES APPROVED BY THE RESERVE BANK OF INDIA. THESE DEPOSITS ARE TO BE REPAID IN FOREIGN CURRENCY ALONG WITH INTEREST THEREON AND AR E HENCE VULNERABLE TO EXCHANGE FLUCTUATION RISK. BANKS ARE PERMITTED TO HEDGE THE INTEREST AND FOREIGN EXCHANGE FLUCTUATION RISK INVOLVED IN THESE TRANSACTIONS BY CARRYING OUT SWAP TRANSACT IONS. THE APPELLANT CONVERTS ITS FOREIGN CURRENCY FUNDS INTO RUPEE FUNDS BY WAY OF SWAP TRANSACTIONS. FOR THIS PURPOSE THE APP ELLANT HAS TO PAY A PREMIUM ON THE FOREIGN CURRENCY FUNDS TO THE COUNTERPARTY BANK WHICH IS READY TO PROVIDE THE RUPEE FUNDS TO IT IN EXCHANGE OF FOREIGN CURRENCY FUNDS FOR A SPECIFIED PERIOD. T HUS THIS PREMIUM IS A DEFINITE COST OF THE SWAP TRANSACTION TO THE APPELLANT. THE PROPORTIONATE SWAP COST ON THE OUTST ANDING SWAP CONTRACTS FOR THE YEAR ENDED 31 MARCH 2001 WORKED O UT TO RS. 79 61 454/-. THE AO HAS HELD THAT THE APPELLANT COM PANY DEBITS THIS SWAP COST SO INCURRED FULLY AS EXPENDITURE IN THE CURRENT ITA NO. 4040 /MUM/2007 M/S INDUSIND BANK LTD. 4 YEAR ITSELF INSTEAD OF TREATING THE PROPORTIONATE C OST ON THE SWAP DEALS WHOSE MATURITY FALLS BEYOND THE BALANCE SHEET DATE AS PREPAID EXPENSES. 7.2 FROM THE ABOVE FACTS IT IS CLEAR THAT THE APPE LLANT IS LIABLE TO PAY THE SWAP TRANSACTION COST TO THE COUNTERPART Y BANK. THE DISPUTE HERE IS ONLY WHETHER THE ASSESSEE CAN DEBIT THE ENTIRE COST IN THIS ACCOUNTING YEAR ITSELF EVEN THOUGH THE PERIOD OF THE TRANSACTION SPILLS OVER TO THE NEXT FINANCIAL YEAR. FROM THE ABOVE NARRATED FACTS IT IS CLEAR THAT THERE IS NO CONCEA LMENT OF PARTICULARS OF INCOME NOR FURNISHING OF ANY INACCUR ATE PARTICULAR OF INCOME. THE ADDITION MADE IS ONLY & PURELY ON DI FFERENCE OF OPINION BETWEEN THE DEPARTMENT AND THE APPELLANT. T HERE IS ALSO NO LOSS OF REVENUE SINCE IF THE ENTIRE PREMIUM IS C LAIMED IN THIS ACCOUNTING YEAR THEN THERE WILL BE NO CLAIM IN THE NEXT ACCOUNTING YEAR. IF THE STAND OF THE AO IS CORRECT THEN THE AP PELLANT IS ENTITLED FOR DEDUCTION OF BALANCE AMOUNT IN THE NEX T ACCOUNTING YEAR. NORMALLY THE TELEX TELEPHONE AND FRANKING M ACHINE EXPENSES WILL BE PAID FOR 3 MONTHS PERIOD. THE AO W ANTED TO RESTRICT THE EXPENDITURE WHICH ARE RELATABLE TO THA T ACCOUNTING PERIOD AND TO DISALLOW THE REMAINING EXPENDITURE AS PRE PAID EXPENDITURE BUT THE HONBLE MADRAS HIGH COURT IN TH E CASE OF CIT VS. SOUTHERN ROADWAYS LTD. 282 ITR 379 (MAD) DID N OT APPROVE THE AOS VIEW. IN VIEW OF THE ABOVE I AM OF THE VI EW THAT THE ADDITION MADE BY THE AO IS ON THE BASIS OF INTERPRE TATION OF THE ACCOUNTING PRINCIPLES. THERE IS NO CONCEALMENT OF I NCOME NOT FURNISHING OF ANY INACCURATE PARTICULARS OF INCOME. 8. AGGRIEVED BY THE ORDER OF THE CIT(A) IN DELETING THE PENALTIES LEVIED BY THE AO U/S 271(1)(C) OF THE ACT AS ABOVE THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 9. THE LEARNED DR FAIRLY ACCEPTED THE ADDITIONS IN RESPECT OF INTEREST ACCRUED BUT NOT DUE AS ON 31/03/01 OF RS. 84 71 62 630/- AND LOSS ON FORWARD EXCHANGE TRANSACTION OF RS. 8 7 4 020/- HAVE BEEN DELETED BY THE ITAT (SUPRA) AND IN RESPECT OF THE ADDITIONS PERTAINING TO DISALLOWANCE OUT OF CLAIM OF DEPRECIA TION 1 20 00 948/- AND PROPORTIONATE SWAP COST ON THE OUTSTANDING SWAP CONTRACTS OF RS. 79 61 454/- THE LEARNED DR RELIED UPON THE ORDER O F THE AO. 10. ON THE OTHER HAND THE LEARNED COUNSEL FOR THE ASSESSEE IN SO FAR AS THE DISALLOWANCE OF DEPRECIATION SUBMITTED THAT THE ASSESSEE NEITHER CONCEALED INCOME NOR FILED ANY INACCURATE P ARTICULARS OF ITS ITA NO. 4040 /MUM/2007 M/S INDUSIND BANK LTD. 5 INCOME. IT IS SUBMITTED THAT BEFORE THE ITAT THE AS SESSEE WAS NOT PRESSED THIS ISSUE BECAUSE IN THIS ASPECT THE ASSES SEE WENT TO THE SETTLEMENT COMMISSION AND THE SETTLEMENT COMMISSION ALLOWED THE DEPRECIATION CLAIM OF THE ASSESSEE. IN SO FAR AS PR OPORTIONATE SWAP COST ON THE OUTSTANDING SWAP CONTRACTS IS CONCERNED THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE CLAIM O F THE ASSESSEE IS PRACTICALLY ALLOWED BY THE CIT(A) THEREFORE THE A SSESSEE NEITHER CONCEALED ITS INCOME NOR FURNISHED INACCURATE PARTI CULARS OF INCOME. 11. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF TH E PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDE RS OF THE AUTHORITIES BELOW. WE FIND THAT THE CIT(A) HAS GIVE N CATEGORICAL FINDINGS BEFORE DELETING THE PENALTIES IN RESPECT O F THE ADDITIONS MADE BY THE AO IN THE ASSESSMENT AS ABOVE. MOREOVER W E FIND THAT IN THE QUANTUM APPEAL THE TRIBUNAL DELETED THE ADDITIONS IN RESPECT OF INTEREST ACCRUED BUT NOT DUE AS ON 31/03/01 OF RS. 84 71 62 630/- AND LOSS ON FORWARD EXCHANGE TRANSACTION OF RS. 8 74 020/- VIDE ITS ORDER DATED 17 TH JUNE 2011 IN ITA NO. 4343/MUM/2005. A COPY OF THE SAID ORDER IS AVAILABLE ON RECORD. THEREFORE W E FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) IN DELETING THE PENALTIES L EVIED BY THE AO U/S 271(1)(C) AGAINST THE SAID ADDITIONS. IN SO FAR AS DEPRECIATION CLAIM IS CONCERNED WE FIND THAT IT IS A LEGAL CLAIM MADE BY THE ASSESSEE AND EVEN THE SAME CLAIM WAS MADE IN THE EARLIER YEARS. THE CIT(A) GAVE A FINDING THAT THE ASSESSEE NEITHER CONCEALED ITS INC OME NOR FURNISHED INACCURATE PARTICULARS OF INCOME AND THE CLAIM IS A CONTINUOUS ONE HE DELETED THE PENALTY LEVIED ON THE DEPRECIATION C LAIM BY THE AO. WITH REGARD TO THE PROPORTIONATE SWAP COST ON THE O UTSTANDING SWAP CONTRACTS IS CONCERNED THE CIT(A) GAVE A FINDING T HAT THE ADDITION MADE ONLY ON THE DIFFERENCE OF OPINION BETWEEN THE DEPARTMENT AND THE ASSESSEE. IF THE AO IS CORRECT THE ASSESSEE IS ENTITLED FOR DEDUCTION AND THE BALANCE AMOUNT IN THE NEXT ACCOUN TING YEAR. THEREFORE FROM THE ORDER OF CIT(A) WE FIND THAT TH E ASSESSEE NEITHER ITA NO. 4040 /MUM/2007 M/S INDUSIND BANK LTD. 6 CONCEALED ITS INCOME NOR FURNISHED ANY INACCURATE P ARTICULARS OF INCOME. IN VIEW OF THE ABOVE DISCUSSION WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) IN DELETING THE PENALTIES LEVIE D BY THE AO U/S 271(1) AND THE SAME IS HEREBY UPHELD AND DISMISS TH E GROUNDS RAISED BY THE REVENUE. 12. IN THE RESULT APPEAL OF THE REVENUE IS DISMISS ED. PRONOUNCED IN THE OPEN COURT ON THIS 30 TH DAY OF SEPTEMBER 2011. SD/- SD/- (R.S. SYAL) ( V. DURGA RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI DATED: 30 TH SEPTEMBER 2011 KV COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE H BENCH I.T .A.T. MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR I.T.A.T. MUMBAI.