M/s. SI Group India Ltd. (formerly Schenectady India Holdings P. Ltd. Plot No. 2/1, T.T.C. Indl. Vs. Income Tax Officer- 3(3)(2) Mumbai
June, 04th 2014
IN THE INCOME TAX APPELLATE TRIBUNAL
"SMC" Bench, Mumbai
Before Shri D. Manmohan, Vice President
ITA No. 1044/Mum/2014
(Assessment Year: 2010-11)
M/s. SI Group India Ltd. Income Tax Officer- 3(3)(2)
(formerly Schenectady India Holdings P. Ltd. Mumbai
Plot No. 2/1, T.T.C. Indl. Area Vs.
Thane Belapur Road, Opp. Jui Nagar
Rly Stn., Navi Mumbai 400705
PAN - AACCS2571D
Appellant by: Shri Vivyesh I. Shah
Respondent by: Shri Javed Akhtar
Date of Hearing: 03.06.2014
Date of Pronouncement: 03.06.2014
Per D. Manmohan, V.P.
This is an appeal filed at the instance of the assessee company and it
pertains to A.Y. 2010-11.
2. Addition of `90,738/- referable to bank interest on fixed deposit is the
subject matter of dispute before the Tribunal.
3. Admittedly, the assessee made fixed deposit with the Bank of Nova
Scotia for a period of 90 days which ends on 31.03.2009. However, interest
was paid by the bank on 02.04.2009. The assessee is following mercantile
system of accounting. Therefore, the impugned sum was offered to tax in the
previous year relevant to A.Y. 2009-10 and assessment was completed
accordingly. The AO is, however, of the view that the bank deducted the tax
at source on 02.04.2009 and credited to assessee's account within the
previous year relevant to A.Y. 2010-11. Therefore interest accrues to the
assessee only in the year 2010-11. In this regard he observed that the
interest was credited to assessee's account in this year and, therefore, the
assessee was required to reconcile the interest income. In reply the assessee
claimed TDS of `45,417/- pertaining to the total interest income of
2 ITA No. 1044/Mum/2014
Schenectady India Holdings P. Ltd.
`2,60,619/-. With regard to TDS of `4705/- it was stated that the assessee
company has not received the TDS certificates and, therefore, it did not
claim TDS in the return of income for A.Y. 2011-12. A careful scrutiny
reveals that the assessee credited the interest income of `2,60,619/-
whereas in the P & L Account, the income credited is `2,16,935/- only.
Since the assessee followed mercantile system of accounting, the interest
income amounting to `3,07,673/- as per 26AS should be brought to tax in
the year under consideration. In other words, addition amounting to
`90,738/- was made to the total income.
4. Aggrieved, assessee contended before the first Appellate Authority that
the AO erred in making addition of `90,738/- being interest difference
between interest as per P & L Account and interest as per 26AS. It was
further clarified that interest of `90,738/- has been accrued in the year
2009-10 and the same has been assessed to tax in A.Y. 2009-10 and,
therefore, bringing the same amount to tax in this year would amount to
5. The learned CIT(A) did not discuss the issue in detail but merely
observed as under: -
"Ground No. III: The appellant being a company is required to follow
the mercantile system of accounting and therefore the interest
accrued during the relevant previous year is required to be credited to
the P&L A/c of the same period. The AO is therefore justified in
making an addition of Rs.90,738/- i.e. the difference in interest
income. The same is confirmed."
6. Further aggrieved, assessee company is in appeal before the Tribunal.
At the time of hearing the learned counsel for the assessee adverted
attention of the Bench to pages 53 to 65 of the paper book to highlight that
the impugned interest income was offered to tax in the earlier year since the
interest is for the period ending 31.03.2009 and as per mercantile system of
accounting it accrues on the last date.
7. The learned D.R. was not able to controvert the contention of the
assessee and no material, whatsoever, was furnished before me to show that
as per the terms of fixed deposit scheme the interest accrues only on
02.04.2009. It is also not in dispute that the impugned amount was already
3 ITA No. 1044/Mum/2014
Schenectady India Holdings P. Ltd.
offered to tax in the earlier year and assessment was completed under section
143(3) of the Act for A.Y. 2009-10 accepting the impugned interest as income of
that year. Having regard to the circumstances of the case I am of the view that
even as per mercantile system of accounting the impugned interest accrues on
31.03.2009 and, therefore, assessable to tax in A.Y. 2009-10. I therefore direct
the AO to delete the addition made in the year under consideration.
8. In the result, the appeal filed by the assessee is allowed.
Order pronounced in the open court on 3rd June, 2014.
Mumbai, Dated: 3rd June, 2014
1. The Appellant
2. The Respondent
3. The CIT(A) 7, Mumbai
4. The CIT 3, Mumbai City
5. The DR, "SMC" Bench, ITAT, Mumbai
ITAT, Mumbai Benches, Mumbai