Madras High Court
M/S. Rohini Holdings Private Limited vs Commissioner Of Income Tax Iii on 16 August, 2011
Author: Chitra Venkataraman
Bench: Chitra Venkataraman, M.Jaichandren
IN THE HIGH COURT OF JUDICATURE AT MADRAS Dated : 16.08.2011 Coram The Honourable Mrs.Justice CHITRA VENKATARAMAN and The Honourable Mr.Justice M.JAICHANDREN TC(A). Nos. 1074 of 2004, 1184 of 2008, 502 and 704 of 2009 M/s. Rohini Holdings Private Limited New No. 137, Old No. 67, Chamiers Road Chennai 600 028. ... Appellant in all appeals -vs- Commissioner of Income Tax III Nungambakkam High Road Chennai 600 034. ... Respondent in TC(A).1074 of 2004 The Assistant Commissioner of Income Tax Company Circle V (4) Nungambakkam High Road Chennai 600 034. ... Respondent in TC(A).Nos.1184 of 2008 502 & 704 of 2009 TC(A). No. 1074 of 2004 : Appeal against the order of the Income Tax Appellate Tribunal, Bench 'D' Chennai dated 3.8.2004 passed in ITA.No. 1(Mds)/2004 for assessment year 2000-01. TC(A). No. 1184 of 2008 : Appeal against the order of the Income Tax Appellate Tribunal, Bench 'B' Chennai dated 16.5.2008 passed in ITA.No. 1246/Mds/2006 for assessment year 2001-02. TC(A). No.502 of 2009 : Appeal against the order of the Income Tax Appellate Tribunal, Bench 'D' Chennai dated 2.1.2009 passed in ITA.No. 727/Mds/2008 for assessment years 2002-03. TC(A). No. 704 of 2009 : Appeal against the order of the Income Tax Appellate Tribunal, Bench 'D' Chennai dated 5.6.2009 passed in ITA.No. 732/Mds/2008 for assessment years 2003-04. For Appellants : Mr.V.S.Jayakumar For respondent : Mr.T.Ravikumar JUDGMENT
(Judgment of the Court was made by CHITRA VENKATARAMAN,J) The assessee is on appeals as against the order of the Tribunal relating to assessment years 2000-01 to 2003-04.
2. T.C.No.1074 of 2004 was admitted on the following substantial questions of law:
(i) Whether on the facts and in the circumstances of the case, the Appellate Tribunal was right in law in holding that the sum of Rs.52,50,000/- accrues to the appellant towards the interest on mortgage loan of Rs.250 lakhs?
(ii) Whether the Tribunal was right in holding that the sum of Rs.5,69,587/- accrues to the appellant towards interest on loan of Rs.25.27 lakhs?
(iii) Whether the Tribunal was right in holding that the amount covered by the debit note represents income of the appellant?
3. T.C.No.1184 of 2008 was admitted on the following substantial questions of law:
(i) Whether on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the sum of Rs.52,50,000/- accrued to the appellant towards the interest on mortgage loan of Rs.350 lakhs advanced to M/s.Sri Krishna Tiles and Potteries (Madras) (P) Limited, especially when the principal amount itself is doubtful of recovery on the basis of real income theory and the relevant accounting standards?
(ii) Whether the Tribunal was right in holding that the sum of Rs.5,69,587/- accrued to the appellant towards interest on loan of Rs.25.27 lakhs advanced to M/s.S&S Industries and Enterprises Limited even though the assessee has complied with the Accounting Standards and the real income theory for not recognizing it as income?
4. T.C.No.502 of 2009 was admitted on the following substantial questions of law:
(i) Whether on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the sum of Rs.52,50,000/- accrued to the appellant towards the interest on mortgage loan of Rs.250 lakhs ignoring the principal of real income u/s. 4 or u/s.28 of the Income Tax Act, 1961?
(ii) Whether the Tribunal was right in holding that the sum of Rs.3,73,748/- accrued to the appellant towards interest on loan of Rs.23,37,100/-, ignoring the principal of real income u/s. 4 or u/s.28 of the Income Tax Act, 1961?
5. T.C.No.704 of 2009 was admitted on the following substantial questions of law:
(i) Whether on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the sum of Rs.1,57,50,000/- being interest on the mortgage loan of Rs.250 lakhs which was already added to the total income of the appellant in the earlier assessment years by the Assessing Officer but included by the appellant in realisation during this year need not be reduced from the total income of the appellant as claimed by the appellant?
(ii) Whether on the facts and in the circumstances of the case, the Appellate Tribunal is right in law in holding that the sum of Rs.15,12,922/- being interest on the loan of Rs.23,37,100/-, which was added to the total interest of the appellant in the earlier years by the Assessing Officer based on accrual need not be reduced from the total income of the appellant in this year as claimed by the appellant in spite of the appellant not being able to recover both the principal and interest on this loan?
(iii) Whether on the facts and in the circumstances of the case, the appellate Tribunal is right in law in holding that the sum of Rs.29,39,246/- which was added to the total income of the appellant by the Assessing Officer in assessment year 2000-01 based on accrual need not be reduced from the total income of the appellant for this year as claimed by the appellant in spite of the said sum not being realised at all by the appellant?
6. The assessee is a private limited company engaged in the business of investments, lending and trading. It is seen from the facts projected before us that the assessee advanced a sum of Rs.2.5 crores to Sree Krishna Tiles and Potteries (Madras) Private Limited on the strength of the mortgage deed executed in the last quarter of 1999 in respect of 2 acres of land at Anna Nagar, which formed part of a larger extent of 34 acres of land belonging to the mortgagor. It is stated that the loan amount was deposited into the account of M/s.S&S Industries and Enterprises Private Limited, which is a group concern of the borrower, who stood as guarantor for repayment of the loan. The assessee company also advanced a sum of Rs.23,37,100/- to M/s.S&S Industries and Enterprises Private Limited. In respect of the said borrowing M/s.S&S Industries and Enterprises Private Limited created a second mortgage in respect of the property at Aarti Chambers, Anna Salai, Madras 6. The first charge was held by M/s.Lakshmi General Finance.
7. It is seen from the facts herein that till November, 2001, the principal borrower viz., M/s.Sree Krishna Tiles and Potteries (Madras) Private Limited did not register the mortgage with the Registrar of Companies. This led to the assessee filing a petition before the Company Law Board for a direction to the debtor company to register the mortgage. Thus, pursuant to the orders of the Company Law Board, the mortgage was registered with the Registrar of Companies.
8. It is seen from the records herein that, apart from this, the assessee had other dealings with M/s.S&S Industries and Enterprises Private Limited, as regards import of oil, in respect of which, the assessee had trading income of Rs.29,39,246/-. The assessee raised a debit note to the extent of Rs.75,84,350/-. Since M/s.S&S Industries and Enterprises Private Limited disputed the said amount, ultimately it was mutually agreed that the debit note would be of a sum of Rs.58,78,491/-. It was also agreed that out of the above, 50% of the said amount would be recoverable in future in respect of further business transactions that the assessee would have with the said M/s.S&S Industries and Enterprises Private Limited in the matter of import of oil. Thus, the assessee offered trading income only to the extent of Rs.29,39,246/- - it being 50% of Rs.58,78,491/-.
9. It is stated that on enquiry made after disbursement of loan to M/s.S&S Industries and Enterprises Private Limited, that it was a sick company and had filed a petition to B.I.F.R. As far as mortgaged property was concerned, it is stated that the assessee had difficulty in enforcing the mortgage in view of the difficulty in delineating the boundaries of the land due to discrepancies in the measurements between revenue records and the records of the Sub Registrar's Office. In view of the restricted entry to the mortgaged property, the assessee faced non-availability of access to the mortgaged property. The facts herein show that in the Board Meeting held on 28.8.2000, a note was circulated by one of the Directors, pointing out that right from the date of granting of loan, the borrowers had not repaid either the principal amount or the interest amount. Even though the landed property at Anna Nagar actually belonged to the company, there were claims and counter claims from the family members and third parties. Thus, if the assessee had to go ahead with legal action to enforce the security, there would be delay in recovery of loan. It was further pointed out that on enquiry made about the status of M/s.S&S Industries and Enterprises Private Limited, who stood as guarantor as well as borrower of Rs.23 lakhs, the said company had been referred to BIFR due to its inability to pay the debts. It was also pointed out in the note that the balance sheet filed by M/s.S&S Industries and Enterprises Private Limited, before the Registrar of Companies and the one given to the assessee company were at variance. Thus, while the one given to the assessee showed it as a profit making company, the one given before the Registrar of Companies showed it as a loss making company. Thus, the reliability of the financial strength of the company remaining highly doubtful, the Board of Directors were requested to consider the issue on certainty of recovery while finalizing the accounts of the company for the year ended 31.3.2000. Considering the uncertainty as regards recovery of the amount, the assessee felt that the income could not be offered as income in the Profit and Loss account. As regards the debit note raised to the extent of Rs.75,84,350/-, it was pointed out that since M/s.S&S Industries and Enterprises Limited was a sick company, the question of including the said amount also had to be considered by the Directors while finalizing the accounts.
10. It is seen from the facts projected before this Court that following the mercantile system of accounting, initially the assessee offered interest income earned on the loan advanced to M/s.Sri Krishna Tiles and Potteries (Madras) (P) Limited, on accrual basis. It is stated that the assessee, although initially offered interest income for the year 1999-2000, for the subsequent years from 2000-2001 till 2003-2004, the assessee did not show the accrued interest in its accounts. However, considering the financial status of the guarantor M/s.S&S Industries and Enterprises Limited and the default committed by the borrowers, which included both the borrowers and the suits filed before this Court by 20 other persons claiming ownership over a portion of the property belonging to the mortgagor, M/s. Sri Krishna Tiles and Potteries (Madras)(P) Limited, in which suit the assessee also figured in as one of the defendants, the assessee is stated to have entertained bona fide doubt on the possibilities of recovery of the loan advanced and the reliability of the security offered. It is also stated that the Global Trust Bank also moved the Debts Recovery Tribunal against the debtor company. In the background of the said facts, the assessee entered into a tripartite agreement with the borrower as well as with the third party M/s.Sundaram Medical Foundation, for the sale of the property. Accordingly, the property was sold for a total sum of Rs.4.68 crores.
11. Thus on the note placed before the Board of Directors, it was decided not to recognise the interest income on the above said two loan accounts. Further, M/s.S&S Industries and Enterprises Private Limited moved the BIFR. Thus after adjusting Rs.2.50 crores towards the principal amount, in the returns filed for the assessment year 2003-2004, the assessee offered balance of Rs.218 lakhs by way of interest income. The assessee took the stand that in respect of the assessment made for the year 2000-01 to 2002-03, as the recovery of loan for all these years remained uncertain, the question of adding the interest as income in the assessment for 2000-01 to 2002-03 did not arise. In any event, as the assessee had offered the said income on the assessment year 2003-04, to include the said income in the earlier assessment year, would amount to double taxation on the self same interest income. While completing the assessment for the assessment years 2000-2001 to 2002-2003, the Assessing Officer made addition on account of interest accrued on the mortgaged loan of Rs.250 lakhs and Rs.23.37 lakhs and thereby rejected the assessee's plea. The aggrieved assessee challenged the assessments made in respect of the above said assessment years before the Commissioner of Income Tax (Appeals), which were, however, dismissed.
12. Before the Income Tax Appellate Tribunal, the assessee took a specific stand that even though the assessee had given a loan of a sum of Rs.2.50 crores to M/s.Sree Krishna Tiles and Potteries (Madras) Private Limited, on the strength of security furnished by the said company in the form of immovable property, guaranteed by M/s.S&S Industries and Enterprises Private Limited, given the fact that the mortgagor had not paid any amount towards loan and the guarantor also had not taken steps to honour its commitment, the Board of Directors, in its meeting, took a decision to decide on the course of action to be taken on the said loan amount for the year ending 31.3.2000.
13. The assessee also pointed out to the financial status of M/s.S&S Industries and Enterprises Private Limited as well as to the two contradicting balance sheets of the said company and submitted that considering the sickness of the company, the recovery remained highly doubtful. Apart from that, with the fact that the enforceability of the mortgage as a mode of recovery also appeared a complicated process by reason of the suit proceedings taken by 20 persons claiming ownership over the portion of the property, the mortgaged property formed part of a larger extent of land owned by M/s.Sree Krishna Tiles and Potteries (Madras) Private Limited. Thus with the difficulty in identifying the said property, the assessee realised the odds against its interest in the matter of enforcing its right. All these developments happened only after 1.4.1999. In the said background, the assessee did not offer interest income in its assessment.
14. The Tribunal rejected the contentions of the assessee, pointing out that it was an admitted fact that in the year 31.3.1998, M/s.S&S Industries and Enterprises Private Limited was declared as a sick company and that it had been referred to BIFR. The Tribunal found that the loan was sanctioned and disbursed only thereafter when the said debtor company was declared a sick unit. Since the assessee had knowledge about the financial status of the debtor company, the claim of the assessee that it had no knowledge about the same could not be accepted. The Tribunal further pointed out that even though civil suit was filed by 20 persons claiming right over the mortgaged property, there was hardly any material available to show that the assessee had difficulty in enforcing its right over the mortgaged property. With the facts thus available, the Tribunal held that the conduct of the assessee in sanctioning the loan was a conscious act; that the interest accrued had to be necessarily assessed on accrual basis.
15. The Tribunal further pointed out that even though the assessee company found out about the financial status of M/s.S&S Industries and Enterprises Private Limited, the assessee took no steps to treat the interest as bad debt and was not written off in the books of accounts also. Thus, referring the decision of the Apex Court reported in 158 ITR 102 STATE BANK OF TRAVANCORE v. COMMISSIONER OF INCOME TAX, the Tribunal held that the mere impossibility of recovery of the loan amount would not make interest income a bad debt to be written off. Thus the Tribunal viewed that when the interest income had accrued to the assessee, the fact that the debtor company was declared a sick company and the matter was pending before the BIFR, would not be a ground for not recognising the accrued interest as income for the purpose of computing the total income. Thus, the Tribunal came to the conclusion that the situation that prevailed at the time of sanctioning the loan, continued; therefore, the assessee could not take advantage of the fact that the debtor company was subsequently referred to BIFR. Thus, the Tribunal rejected the assessee's claim that the interest income assessed at the hands of the assessee in respect of the loan given for the assessment year 2000-01 to 2003-04 was rightly assessed by the Assessing Officer.
16. As far as the trading income of Rs.29,39,246/- is concerned, the Tribunal pointed out that the assessee had admittedly raised debit note for the above-said sum, making various claims on loss sustained in respect of import of oil. Even though the assessee raised debit note for Rs.75,84,350/-, after mutual discussion and negotiation between the parties, it was agreed that the amount of debit note would be Rs.58,78,491/-. Once the said amount is mutually agreed, the claim of the assessee that 50% of the agreed amount as not accrued to the assessee could not be accepted. In the circumstances, the Tribunal confirmed the order of the lower authorities. Aggrieved by the same, the assessee is before us.
17. Learned counsel for the assessee drew our attention to the Director's note as well as to the balance sheets in respect of M/s.S&S Industries and Enterprises Private Limited only to point out to the two different balance sheets filed, one before the Company Law Board and the other before the Registrar of Companies are at variance with each other. He pointed out that while the balance sheet given to the assessee by M/s. S&S Industries and Enterprises Private Limited showed the said company as a as a profit making Industry, the balance sheet of M/s.S&S Industries and Enterprises Private Limited given to the Registrar of Companies showed the company as a loss making company. He submitted that the assessee went by the balance sheet given to it and believing it to be true, it granted the loan. Only on the debtor company's default in registering the mortgage with the Registrar of Companies and on the default in payment of interest and principal, the assessee made enquiries and found about the actual state of affairs. Thereupon, the assessee herein took a conscious decision to sell the mortgaged property belonging to M/s.Sree Krishna Tiles and Potteries (Madras) Private Limited. Even there on considering the difficulties in bringing the property for sale, the assessee decided to assign the debt by entering into a tripartite agreement with a third party M/s.Sundaram Medical Foundation, who offered Rs.4.5 crores.
18. In the background of the above facts, on the initiative taken, the company, in fact, was able to realise the principal amount as well as the interest. Thus, taking note of the conduct of the mortgage viz., Krishna Tiles and Potteries (Madras) Private Limited as well as M/s.S&S Industries and Enterprises Private Limited, in the face of the conflicting balance sheet presented and the difficulties in identifying the property, the company rightly did not offer the interest income from 2000-01 onwards and that finally on the assignment of debt, the company offered entire amount of interest on the amount lent as assessable under the assessment year 2003-04. He pointed out that orders of assessment passed by the Assessing Officer had virtually resulted in double taxation on the self same interest income offered in the assessment year 2003-04. In the light of the above said facts, learned counsel submits that the order of the Tribunal has to be set aside. The Revenue, however, reiterated the stand taken by the Assessing Officer and supported the order of the Tribunal.
19. Heard learned counsel for the assessee as well as learned Standing counsel appearing for the Revenue and perused the materials papers.
20. A perusal of the order of assessment in respect of the above said assessment years show that apart from assessing the interest income in the respective assessment years, the Assessing Authority levied penal interest in respect of all these years. Considering the above aspect, in order to bring a finality to the dispute and the fact that the assessee had already offered the entire interest income for assessment in the return for the assessment year 2003-04, the Revenue was directed to look into this aspect and report. In the letter dated 17.6.2011, addressed to the Standing Counsel, the Assistant Commissioner of Income Tax, however, pointed out that it was no doubt true that the interest on mortgage loan was assessed on accrual basis as well as on receipt basis, which is not a proper one. However, the interest income that is assessable at the hands of the assessee has to be assessed only on accrual basis, in which event, for the assessment year 2003-04, the amount of Rs.157.50 crores has to be reduced from the income assessed therein by taking a sum of Rs.52.50 lakhs to each of the assessment years starting from 2000-01 to 2003-04 as assessable in the respective years. After adjusting the refund due, the assessee's demand is reduced considerably to a sum of Rs.8 lakhs. The Assistant Commissioner of Income Tax (Appeals) has also enclosed the working sheet on this, which included the interest payable under Section 234B, 234C and 234D.
21. Leaving this aside, as far as the merits of the order of the Tribunal is concerned, as already pointed out, the assessee herein advanced loan to M/s.Krishna Tiles and Potteries (Madras) Private Limited, in respect of which, evidently, the assessee had taken the immovable property as a security. It is a matter of record that the said mortgage was registered with the Sub Registrar. After the proceedings taken before the Company Law Board, the mortgagor had the mortgage deed registered with the Registrar of Companies. It is also a matter of record that M/s.S&S Industries and Enterprises Private Limited stood as guarantor for the loan taken for a sum of Rs.2.5 crores by M/s.Krishna Tiles and Potteries (Madras) Private Limited. The loan itself being granted in the last quarter of the financial year 31.3.1999, the repayment started after 1.4.1999. Even though the assessee had placed heavy reliance on the balance sheet contradictions and on the financial status of M/s.S&S Industries and Enterprises Private Limited, and that the assessee had been corresponding with the mortgagor for the realisation of the said amount; there is hardly any material to show the steps taken by the assessee for the realisation of the said amount advanced to M/s. Sree Krishna Tiles and Potteries (Madras) Private Limited or for enforcing of the mortgage. The assessee pointed out that there were civil suits filed at the instance of 20 persons claiming rights over the said property, which is stated to be a huge one and that out of the said property, only two acres was given as a security and the assessee was also one of the defendants in the suit. As rightly pointed out by the Tribunal, no steps were taken by the assessee for enforcing the mortgage. Whatever be the correctness of the decision taken, we do not find any justification in the assessee waiting upto 2003-04 for assignment of the debt and thereafter to offer interest income for the assessment. As rightly pointed out by the Revenue,the assessee had had the knowledge on all these facts even as early as 2000 as evident from the Director's note. Ultimately, only in the assessment year 2003-04 the assessee went in for tripartite agreement with the third party for the purpose of assignment of said mortgage.
22. The assessee does not deny as a matter of fact that it was maintaining a mercantile system for accounting and for the first time in the year 1999-2000, they offered interest income. Thus the reason given by the assessee in not accounting for the said interest income subsequent to this assessment year, does not appear to be an acceptable one, particularly in the background of the fact that so long as the assessee had the benefit of property security therein, there could be hardly any reason in the eye of law to suggest that the assessee was incapacitated in offering the interest income in its return for the assessment year starting from 2000-01 onwards. As rightly pointed out, the mere difficulty that the assessee may encounter in successfully enforcing the mortgage in the event of decree passed in its favour, does not make the debt bad.
23. A reading of the Tribunal's order shows that it adverted its attention mainly on the financial status of the guarantor company viz., M/s.S&S Industries and Enterprises Private Limited, on the action taken on the mortgagor company to realise the dues and the knowledge of the assessee as to the financial status of the company. However, we do not find any materials to show that the assessee, in fact, took serious steps to enforce the mortgage. Thus in the absence of anything to substantiate the said fact, rightly the Revenue assessed the interest income to the extent of Rs.52.50 lakhs in respect of each assessment year starting from 2000-01 onwards.
24. A perusal of the order of the Tribunal shows that it had tested the claim of the assessee with reference to the case laws given. Thus, on the ultimate findings arrived at by the Tribunal, we do agree with the Tribunal that the assessee cannot take advantage of guarantor-debtor company being sick company. As rightly pointed out by the Tribunal, the situation which prevailed at the time of sanctioning of the loan continued even thereafterwards; ultimately the assessee went in for the assignment of the debt in favour of the third party through tripartite agreement, to which the assessee as well as borrower company were parties.
25. A look at the materials relied on by the assessee shows that evidently satisfied of the security given, the assessee advanced loan of Rs.2.5 crores in December. 1998 and a further sum of Rs.23.37 to the guarantor company on the strength of the second mortgage created on the property belonging to this company. The delay in registering the mortgage document with reference to the Anna Nagar property of M/s.Sree Krishna Tiles and Potteries (Madras) (P) Limited till 2000 and the absence of reference about the mortgage in the balance sheet of the said company are no doubt circumstances spoken to by the assessee as telling on the conduct of the debtor company. As far as the mortgaged property is concerned, a suit filed by the family member of the debtor companies in C.S.No.196 of 2001 and the suit filed by the rival claimants were cited and the difficulty in precisely pointing out the location was cited as circumstances which stood in the way of enforcing the legal claim. We do not think that in the absence of any material shown as to the efforts taken to defend its rights as mortgagee, the assessee is justified in relying on any of the above circumstances as a hurdle that stood in the way of realising the money or in making the debt a bad debt. There is hardly any material to suggest that the assessee was prevented from enforcing the mortgage or in taking steps to realise the money immediately on coming to know about the circumstances pointed out to the legal hurdles in enforcing the subject matter of the mortgage. Thus the Tribunal rightly held that the facts pleaded by the assessee did not establish the fact that the interest accrued on the loan advanced could not be recovered. As far as the second debtor company is concerned, the situation that prevailed on the date of sanctioning the loan continued to remain the same during the assessment year under consideration. Yet, the assessee did not treat the interest as bad debt to be written off, nor was there any such contention that the assessee had given its claim on interest. The second debtor company going before the B.I.F.R. is a fact which came long after the loan was sanctioned. Even therein no action was taken by the assessee to defend its interest. There is hardly any material to suggest on the action taken on the security given by the second mortgagor company. Going by these facts, we reject the contention of the assessee upholding the order of the Tribunal.
26. As far as trading income of Rs.29,39,246/- is concerned, evidently, the assessee had agreed that the debit note originally raised for Rs.75,84,350/- was scaled down to Rs.29,39,246/-. Thus, on the agreement reached between the assessee company and M/s. S&S Industries and Enterprises Private Limited, in respect of the import of oil, the claim was settled for sum of Rs.58,78,491/- with 50% out of the said amount recoverable later. The Tribunal pointed out that the fact that M/s.S&S Industries and Enterprises Private Limited had been declared as a sick company and referred to BIFR, by itself, could not be a circumstance that could be taken advantage of by the assessee. Once the assessee and the other party had mutually agreed on the amount on the debit note at Rs.58,78,491/-, the amount payable thus having got crystallised, rightly the Tribunal rejected the assessee's contention, thereby, affirmed the view of the Officer to assess the said amount during the assessment year 2000-01. In the light of the above-said facts, we have no hesitation in rejecting the plea of the assessee in all these Tax Cases.
27. Even though we approve the Tribunal's order in respect of all the assessment years, nevertheless the fact remains that once the interest income is directed to be assessed at Rs.52.50 lakhs for each of the assessment years starting from 2000-01 to 2002-03, as rightly pointed out by the Assistant Commissioner of Income Tax in her communication to the Standing Counsel, the Revenue would not be justified in taxing the entire interest income again for the year 2003-04. Thus, with the interest income of Rs.157.50 crores spread over from the assessment year 2000-01 onwards, the assessment of the said amount for the assessment year 2003-04 cannot be sustained. Hence, the Assessing Officer has to redo the assessment relating to assessment year 2003-04 by taking into account the above said facts.
28. In the light of the above said fact, the Tribunal's order as regards the assessment for the assessment year 2003-04 in respect of the appeal in T.C.No.704 of 2009 is set aside and the same is allowed in part, with a direction to the Assessing Officer to redo the same, taking note that the interest income at Rs.52.50 lakhs has to be assessed under each of the assessment year starting from 2000-01 onwards.
29. In the light of the above, barring T.C.No.704 of 2009, relating to assessment year 2003-04, we reject the Tax Case Appeals filed by the assessee; thereby, the order of the Tribunal stands confirmed.
30. Learned counsel for the assessee further pointed out the circumstances under which the assessee did not offer interest income for the assessment. He, however, pointed out that after assessing interest income for each of the years, interest had also been levied under Section 234B, 234C and 234D, treating the assessee as a defaulter.
31. He submitted that in the background of conflicting balance sheets and the difficulty in enforcing the mortgage, the bona fides of the conduct of the assessee cannot be overlooked and that the interest levied is too harsh. Thus for no fault on the part of the assessee, the interest had been levied which is approximately to the tune of Rs.35 lakhs. Going by the provisions under Sections 234B, 234C, 234D and having regard to the fact that the assessment herein are all confirmed, we do not think that this Court should consider the said claim of the assessee in the Tax Cases. However, we feel, it is open to the assessee, if so advised, to take such steps as are available under the Act, to move the Appropriate Authority for necessary relief in this regard. In such an event, the concerned authority shall take note of the above said facts while passing order on the petition.
32. In the result, Tax Case Appeal Nos. 1074 of 2004, 1184 of 2008, 502 of 2009 are dismissed and Tax Case Appeal No. 704 of 2009 is partly allowed. No costs.
Index : Yes/No (C.V.,J) (M.J.,J)
Internet: Yes/No 16.08.2011
bg
To
1. Commissioner of Income Tax III
Nungambakkam High Road
Chennai 600 034.
2. The Assistant Commissioner of Income Tax
Company Circle V (4)
Nungambakkam High Road
Chennai 600 034.
3. The Income Tax Appellate Tribunal, Bench 'D' Chennai.
4. The Income Tax Appellate Tribunal, Bench 'B' Chennai.
CHITRA VENKATARAMAN,J
and
M.JAICHANDREN,J
bg/-
TC(A). Nos. 1074 of 2004,
1184 of 2008, 502 & 704 of 2009
Dated: 16.08.2011