Income Tax Appellate Tribunal - Mumbai
Stup Consultants Pvt. Ltd., Mumbai vs Addl.C.I.T. Rg.3(3), Mumbai on 11 December, 2018
1 ITA No. 5827/Mum/2012 STUP Consultants Private Limited आयकर अपीलीय अिधकरण "ई"" यायपीठ मुब ं ई म ।
Assessment Year-2009-10 IN THE INCOME TAX APPELLATE TRIBUNAL "E" BENCH, MUMBAI माननीय ी जोिग दर सह, उपा य एवं माननीय ी मनोज कु मार अ वाल, लेखा सद य के सम ।
BEFORE HON'BLE SHRI JOGINDER SINGH, VP AND HON'BLE SHRI MANOJ KUMAR AGGARWAL, AM आयकर अपील सं./I.T.A. No.5827/Mum/2012 (िनधा रण वष / Assessment Year: 2009-10) STUP Consultants Pvt. Ltd. Additional Commissioner of 1004-05, Raheja Chambers, Income Tax-Range3(3) बनाम/ 213, Free Press Journal Marg, Room No. 606,6 t h Floor Nariman Point Vs. Aaykar Bhawan Mumbai-400 021 M.K.Road, Mumbai-400 020 थायीले खासं . /जीआइआरसं . /PAN/GIR No. AABCS-1945-E (अपीलाथ /Appellant) : ( थ / Respondent) Assessee by : Shri Mahesh Mathur, Ld. AR Revenue by : Shri D.G. Pansari-DR सुनवाई की तारीख/ : 23/10/2018 Date of Hearing घोषणा की तारीख / : 11/12/2018 Date of Pronouncement आदे श / O R D E R Per Manoj Kumar Aggarwal (Accountant Member) 1.1 Aforesaid appeal for Assessment Year [AY] 2009-10 is a recalled matter since it was disposed-off on 22/11/2017 ex-parte qua the assessee. Subsequently, it has been recalled upon assessee's 2 ITA No. 5827/Mum/2012 STUP Consultants Private Limited Assessment Year-2009-10 application MA No.193/Mum/2108 order dated 10/08/2018. Accordingly, the appeal has come up for fresh hearing before the bench. 1.2 Aggrieved by the order of Ld. Commissioner of Income Tax (Appeals)-7, Mumbai, [CIT(A)], Appeal No. CIT(A)-7/Addl.CIT-3(3)/IT- 137/11-12 dated 07/05/2012, the assessee is under appeal before us with following effective Grounds of Appeal: -
1. The Order u/s 250 dated 7th May, 2012, passed by the Commissioner of Income Tax (Appeals)-7, Mumbai, is bad in law, contrary to the facts of the case and evidence on record, to the extent of Ground No.2.
2. The learned CIT (A) erred in upholding the disallowance to the extent of Rs.1,83,05,381 being interest charged u/s 234B; u/s 234C and 234D, being compensatory in nature for use of government dues, as business expenditure u/s 37 of the Income Tax Act, 1961.
Ground Number-2 is a revised ground filed by the assessee on 26/09/2018.
2.1 Briefly stated, the assessee being resident corporate entity engaged in the business of civil engineering & architectural consultancy was assessed for impugned AY in scrutiny assessment u/s 143(3) on 30/11/2011 by Ld. Additional Commissioner of Income Tax, Range 3(3), Mumbai, [AO] wherein the income of the assessee was determined at Rs.25.71 Crores after certain additions / disallowances as against returned income of Rs.23.66 Crores filed by the assessee on 30/09/2009. As evident from grounds of appeal, the only subject matter of present appeal is interest disallowance of Rs.184.25 Lacs as sustained by Ld. first appellate authority. 2.2 During assessment proceedings, it transpired that the assessee debited interest expenditure of Rs.184.25 Lacs in the profit & loss account which comprised-off of the following items: -
3 ITA No. 5827/Mum/2012STUP Consultants Private Limited Assessment Year-2009-10 No. Particulars Amount (Rs.)
1. Interest Paid under protest for FY 2003-04 39,15,823/-
2. Interest Paid under protest for FY 2004-05 68,44,953/-
3. Interest Paid under protest for FY 2005-06 75,44,605/-
4. Interest on Fringe Benefit Tax 1,11,368/-
5. Interest on late deposit of TDS 9,128/-
Total 1,84,25,877/-
It transpired that certain additions were made by Ld. AO in quantum assessments for AYs 2004-05 to 2006-07 and the resultant demand was paid by the assessee. This demand included interest u/s 234B, 234C & 234D, which was paid by the assessee during impugned AY and claimed as business expenditure. The Ld. AO disallowed the same in terms of Section 40a(ii) and by relying upon various judicial pronouncements, which have already been discussed in para 7.1 of the quantum assessment order. The Ld. CIT(A) has confirmed the same on the premise that interest on tax was not allowable deduction u/s 37 as it was the part of tax itself and the payment of tax and interest thereon was the personal liability of the assessee. Aggrieved, the assessee is in further appeal before us.
3. The Ld. Authorized Representative for Assessee [AR], Shri Mahesh Mathur, drawing our attention to the documents placed in the paper-book submitted that the assessee was following cash method of accounting for several years. However, for AYs 2004-05 to 2006-07, the revenue changed the method to mercantile method of accounting which resulted into higher tax outgo for the assessee and consequently, huge interest was paid u/s 234B-C-D during impugned AY. Our attention is drawn to the fact that the levy of interest was mandatory and automatic as per amendment brought in to statute w.e.f. 01/04/1989. The nature of this 4 ITA No. 5827/Mum/2012 STUP Consultants Private Limited Assessment Year-2009-10 interest, as per several judicial pronouncements, was compensatory in nature and not penal in nature. Our attention has further been drawn to the fact that, upon further appeal for AYs 2004-05 to 2006-07, Ld. CIT(A) reversed the stand of revenue which was upheld by the Tribunal on 09/09/2011 and not further appeal/ reference against the same has been filed by the revenue and therefore, the matter attained finality in assessee's favor for those years. Resultantly, the additional tax payment including impugned interest paid by assessee was refunded during AY 2010-11 wherein the aforesaid amount of interest was offered for taxation. Therefore, it was submitted non-allowance of the same in the impugned AY would result into double taxation of the same amount, which was not justified. Per Contra, Ld. Departmental Representative submitted that interest was part and parcel of tax and the same being personal liability for the assessee, the deduction thereof could not be allowed to the assessee.
4.1 We have carefully heard the rival contentions and perused relevant material on record. So far as the nature of interest payment u/s 234 is concerned, there could be no quarrel as to the nature thereof since it is settled legal position that the character of such interest payment is compensatory in nature in the sense that it is payable by the assessee to the revenue for delayed payment of its dues. The said proposition is clearly borne out of the following judicial pronouncements: -
No. Case Title Judicial Authority Citation
1. Anjum M. H. Ghaswala & Others Hon'ble Supreme Court 252 ITR 1
2. CIT Vs Kotak Mahindra Finance Ltd. Hon'ble Bombay High Court 265 ITR 119
3. Raju Bhojwani Vs CIT Hon'ble Delhi High Court 13 Taxman 221
4. CIT Vs Anand Prakash Hon'ble Delhi High Court 316 ITR 141 5 ITA No. 5827/Mum/2012 STUP Consultants Private Limited Assessment Year-2009-10 4.2 Proceedings further, the submissions of Ld. AR that the disallowance could not be made u/s 40(a)(ii) since the expression tax did not include interest, is also tenable in view of the following judicial pronouncements: -
No. Case Title Judicial Authority Citation
1. Harshad Shantilal Mehta Vs Custodian & ors. Hon'ble Supreme Court 231 ITR 871
2. CIT Vs Manoj Kumar Beriwal Hon'ble Bombay High Court 217 CTR 407 Upon perusal, we find that the in terms of the provisions of Section 40(a)(ii), the assessee is not entitled to claim any deduction for any sum paid on account of any rate or tax levied. The expressions tax as defined u/s 2(43) means income tax chargeable under the provisions of this act and includes Fringe Benefit Tax. The expression interest as defined in Section 2(28A) means interest payable in any manner in respect of moneys borrowed or debt incurred (including a deposit, claim or other similar right or obligation) and includes any service fee or other charge in respect of the money borrowed or debt incurred or in respect of any credit facility which has not been utilized. Therefore, tax and interest has been given specific meaning under the act and the provisions of Section 40(a)(ii) refers only to any rate or tax levied without including therein the expression interest. Therefore, the stand of Ld. AO in disallowing the same u/s 40(a)(ii), in our opinion, was not justified. 4.3 However, at the same time, it is also settled position that the payment of income tax is personal liability for the assessee and consequential interest paid thereupon for delay is part and parcel of the aforesaid payment only and retain the same color & character. This being the case, the deduction thereof u/s 37(1) could not be allowed to 6 ITA No. 5827/Mum/2012 STUP Consultants Private Limited Assessment Year-2009-10 the assessee since it was personal expenditure in nature and the same could not be said to have been expanded wholly and exclusively for the purpose of assessee's business since payment of taxes or interest could, by no stretch of imagination, be said to be the assessee's business. For the same reason, the deduction thereof could not be allowed to assessee u/s 36(1)(iii) also which envisages amount of interest paid in respect of capital borrowed for the purposes of business or profession, which is not the case here.
4.4 Proceeding further, it transpires the as per Ld. AR's submissions, the aforesaid interest was paid during impugned AY under protest and the same was refunded to the assessee in AY 2010-11 pursuant to the decisions of appellate authorities wherein assessee's stand in following cash system of accounting got vindicated and the said amount was refunded back to the assessee. This being the case, we are of the opinion that the aforesaid interest paid by the assessee under protest, was nothing but the money kept in trust before the revenue and the expenditure in that respect could not be said to have even crystallized during impugned AY and therefore, there could be no occasion to consider the question that whether the same was an admissible expenditure during impugned AY. Viewing from any angle, the deduction of this expenditure either u/s 37(1) or 36(1)(iii) could not be allowed to the assessee. We order so. The grounds stand dismissed to that extent. 4.5 Having held so, we find substantial force in the argument that the refund of interest amount as received by assessee in the subsequent AY and offered to tax, could not be brought to tax in that AY since the same was mere refund of the money kept under trust and paid under protest 7 ITA No. 5827/Mum/2012 STUP Consultants Private Limited Assessment Year-2009-10 by the assessee. Keeping in view the same, Ld. AO is directed to reconsider this plea as to exclusion of interest amount to the extent of Rs.183.05 Lacs for determining the income for AY 2010-11 after due verification of the fact that said amount was already offered to tax in that AY. The assessee is directed to provide requisite documentary evidences, in this regard, to bolster his claim. The assessee shall get corresponding consequential relief in other AY.
5. For the aforesaid reasons, interest paid on account of late payment of fringe benefit tax could also not be allowed to the assessee. However, the amount of tax deduction at source [TDS] represents the amount of income tax of the third parties party on whose behalf the payment was deducted by the assessee & paid to the Government Exchequer.
Therefore, TDS amount do not represent the tax of the assessee but it is the tax of the party which has been paid by the assessee. This being the case, any interest paid on account of late payment of TDS could not be linked to the Income Tax of the assessee and therefore, the deduction thereof was available to the assessee. Hence, the deduction of Rs.9,128/- as claimed by the assessee would be an allowable expenditure. We order so. The grounds stand allowed to that extent.
6. Finally, the appeal stands partly allowed in terms of our above order.
Order pronounced in the open court on 11th December, 2018.
Sd/- Sd/-
(Joginder Singh) (Manoj Kumar Aggarwal)
उपा य / Vice President लेखासद य / Accountant Member
मुंबई, Mumbai; दनांक,Dated : 11/12/2018
JV, Sr.PS.
8
ITA No. 5827/Mum/2012
STUP Consultants Private Limited
Assessment Year-2009-10
आदेशक ितिलिपअ
ेिषत/Copy of the Order forwarded to :
1. अपीलाथ / The Appellant
2.
यथ / The Respondent
3. आयकरआयु ( अपील) / The CIT(A)
4. आयकरआयु / CIT- concerned
5. िवभागीय
ितिनिध, आयकरअपीलीयअिधकरण, मुंबई/ DR, ITAT, Mumbai
6. गाड फाईल / Guard File आदेशानुसार/ BY ORDER, उप/सहायकपंजीकार (Dy./Asstt.Registrar) आयकरअपीलीयअिधकरण, मुंबई / ITAT, Mumbai