THE ITO 8(1)(4), MUMBAI v. M/S. GIFT HOLDING PVT. LTD, MUMBAI

ITA 7669/MUM/2007 | 2004-2005
Pronouncement Date: 28-01-2011 | Result: Dismissed

Appeal Details

RSA Number 766919914 RSA 2007
Bench Mumbai
Appeal Number ITA 7669/MUM/2007
Duration Of Justice 3 year(s) 1 month(s)
Appellant THE ITO 8(1)(4), MUMBAI
Respondent M/S. GIFT HOLDING PVT. LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 28-01-2011
Date Of Final Hearing 04-11-2010
Next Hearing Date 04-11-2010
Assessment Year 2004-2005
Appeal Filed On 28-12-2007
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G MUMBAI BEFORE SHRI PRAMOD KUMAR A.M. AND SHRI V. DURGA RA O J.M. ITA NO. 7669/M/2007 ASSESSMENT YEAR: 2004-05 INCOME TAX OFFICER 8(1)(4) APPELLANT 206 AAYAKAR BHAVAN 2 ND FLOOR M.K. ROAD MUMBAI 400 020 VS. M/S GIFT HOLDING PVT. LTD. RESPONDENT 1 MERMAID JUHU-TARA ROAD JUHU MUMBAI 400 049. (PAN - AABCG APPELLANT BY : MR. PANAN VED RESPONDENT BY : MR. J.D. MISTRY . ORDER PER V. DURGA RAO J.M.: THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)- VIII MUMBAI PASSED ON 10/10/2007 FOR THE ASSESSMENT YEAR 2004-05 WHEREIN THE REVENUE HAS RAISED THE FOLLOWIN G GROUND OF APPEAL:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF RS . 25 00 000/- AS UNACCOUNTED INTEREST WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE AO. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ITO/AO/DCIT BE RESTORED. 2. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SEE COMPANY IS ENGAGED IN THE BUSINESS OF PROVIDING BUSINESS CENTR E FACILITIES. THE ASSESSEE HAD TREATED SERVICE CHARGES FOR PROVIDING CENTRE FACILITIES AS ITA NO. 7669/M/07 M/GIFT HOLDING PVT. LTD. 2 BUSINESS INCOME AND HAS NOT CONSIDERED IT AS INCOME FROM HOUSE PROPERTY RIGHT FROM ITS INCORPORATION. THE ASSESSEE HAD ADVANCED A LOAN OF RS. 1 25 00 000/- TO ANOTHER COMPANY M/S BS I LTD. AT AN INTEREST RATE OF 20%. THE AO NOTICED THAT THE ASSES SEE HAD NOT CREDITED THEE ACCRUED INTEREST TO THE P&L A/C THER EFORE HE ASKED THE ASSESSEE TO FURNISH ITS EXPLANATION FOR THE SAME. T HE EXPLANATION OFFERED BY THE ASSESSEE WAS NOT ACCEPTED BY THE AO ON THE GROUND THAT THE ASSESSEE IS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING ACCORDING TO WHICH THE ASSESSEE HAS TO TAKE CREDIT FOR ALL INCOME THAT HAVE BEEN ACCRUED DURING THE YEAR. THE AO HELD THAT SINCE THE CONCEPT OF REAL INCOME COULD NOT BE USED SO AS TO D EFEAT THE VERY OBJECT OF THE PROVISIONS OF SECTION 5 AND 28 OF THE ACT THE AO MADE AN ADDITION OF RS. 25 00 000/- BEING INTEREST @ 20% ON RS. 1 25 00 000/- WHICH IS NOT ACCOUNTED FOR BY THE AS SESSEE BY FOLLOWING VARIOUS CASE LAWS. BEFORE THE CIT(A) THE AR OF THE ASSESSEE HAD SUBMITTED THAT THIS ISSUE IS COVERED BY THE DEC ISION OF THE CIT(A) FOR AY 2001-02 2002-03 AND 2003-04 IN FAVOUR OF TH E ASSESSEE AND HAS ALSO BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE ITAT IN THE DECISION FOR AY 2001-02 VIDE ITA NO. 6350/-MUM/2003 DATED 29/12/2006. THE CIT(A) ACCEPTED THE SUBMISSIONS OF THE ASSESSEE AND DELETED THE ADDITION MADE BY THE AO. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US. 3. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSE THE RECORD. WE FIND THAT THE ISSUE UNDER CON SIDERATION IS SQUARELY COVERED BY THE DECISION OF ITAT IN ASSESSE ES OWN CASE FOR AY 2001-02 WHEREIN THE ITAT HELD AS UNDER:- ON CAREFUL CONSIDERATION OF THE FACTS AND CIRCUMSTA NCES OF THE CASE WE ARE OF THE CONSIDERED OPINION THAT THE ORD ER OF THE FIRST APPELLATE AUTHORITY HAS TO BE UPHELD. THE ASSESSEE IS A NBFC. IT HAS ADVANCED AN AMOUNT TO M/S BSI LTD. AND THE SAME HAS BECOME STICKY. THE ASSESSEE HAS FILED SUFFICIENT DO CUMENTS TO PROVE THAT CRIMINAL COMPLAINTS HAVE BEEN FILED BEFO RE THE COURTS AGAINST THE BSI LTD. FOR RECOVERY OF NOT ONLY THE P RINCIPAL BUT ALSO THE INTEREST THEREON. IT IS ALSO NOT DISPUTED THAT THE ASSESSEE HAD NOT RECEIVED ANY AMOUNT TOWARDS INTEREST OR TOWARDS PRINCIPALS. ITA NO. 7669/M/07 M/GIFT HOLDING PVT. LTD. 3 UNDER THESE CIRCUMSTANCES WE AGREE WITH THE FINDIN GS OF THE FIRST APPELLATE AUTHORITY THAT NO INCOME HAS ACCRUED TO T HE ASSESSEE COMPANY UNDER THE REAL INCOME CONCEPT. EVEN OTHERWI SE THE ASSESSEE COMPANY A NBFC IS BOUND BY THE DIRECTIONS ISSUED BY RESERVE BANK OF INDIA. THIS ISSUE HAS BEEN DEALT A T LENGTH BY THE DELHI BENCH OF THE TRIBUNAL IN THE CASE OF TED CO INVESTMENT AND FINANCIAL SERVICES (P.) LTD. VS. DCIT REPORTED IN 87 ITD 298 (DEL.) B BENCH AS WELL AS THE DECISION OF THE HY DERABAD BENCH OF THE TRIBUNAL IN THE CASE OF TCI FINANCE LTD. VS. ACIT REPORTED IN 91 ITD 573. IN BOTH THESE DECISIONS THE ISSUE HA S BEEN DISCUSSED AT LENGTH AND HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE PROPOSITIONS L AID DOWN BY THESE CO-ORDINATE BENCHES WE UPHOLD THE FINDING OF THE CIT(A) AND ALLOW THE APPEAL OF THE REVENUE. 4. IN AY 2002-03 THE ITAT FOLLOWED THE DECISION OF AY 2001-02. SINCE THE ISSUE UNDER CONSIDERATION IS MATERIALLY I DENTICAL TO THAT OF AY 2001-02 & 2002-03 WE RESPECTFULLY FOLLOW THE DE CISION OF ITAT IN AY 2001-02 AND IN THE LIGHT OF THAT WE CONFIRM THE ORDER OF THE CIT(A) IN DELETING THE ADDITION OF RS. 25 00 000/- MADE BY THE AO ON ACCOUNT OF INTEREST. 5. IN THE RESULT THE APPEAL OF THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF JANUARY 2011. SD/- SD/- (PRAMOD KUMAR) (V. DU RGA RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI DATED: 28 TH JANUARY 2011. ITA NO. 7669/M/07 M/GIFT HOLDING PVT. LTD. 4 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE G BENCH I.T .A.T. MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR I.T.A.T. MUMBAI. KV S.NO. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON 20/01/11 SR.P.S./P.S 2. DRAFT PLACED BEFORE AUTHOR 21/01/11 SR.P.S/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.P.S./PS SR.P.S./P.S 6. KEPT FOR PRONOUNCEMENT ON SR. P.S./P.S. 7. FILE SENT TO THE BENCH CLERK SR.P.S./P.S 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER