H.D.F.C. Bank Limited v. Cit

the decision of Hon'ble Bombay High Court in the case of American Express International Banking Corporation vs. CIT (258 ITR 601). He submitted that in a subsequent decision rendered in the case of CIT vs. Citibank N.A. (264 ITR 18), the Hon'ble Bombay High Court following the decision of American Express International Banking Corporation (supra) again held that the broken period interest is an allowable expenditure and the SLP filed by the Department against the said decision of the Hon'ble Bombay High Court has already been dismissed by the Hon'ble Supreme Court by passing a speaking order vide judgment dtd. 12^thAugust, 2008 passed in Civil Appeal No. 1549/2006. He submitted that in A.Y. 2002-03, a similar disallowance was made by the A.O. on account of broken period interest which was deleted by the ld. CIT(A) and the department did not prefer any appeal against the order of ld. CIT(A) for A.Y. 2002-03 on this issue. He submitted that the A.O. himself allowed the broken period interest in assessee's own case for assessment years 2003-04 to 2008- 09 consistently but took a different stand in A.Y. 2009-10. He submitted that the ld. CIT(A), however, deleted the said disallowance made by the A.O. and the matter is now pending in appeal before the Tribunal. He submitted that in the year under consideration i.e 2010-11, the A.O. again repeated the disallowance on account of broken period interest and the ld. CIT(A) has confirmed the same, even after the history/background of assessee's own case on the similar issue was brought to his notice, on a very strange ground that the copy of the judgment of Hon'ble Supreme Court rejecting the SLP was not filed by the assessee before him. He submitted that the copy of the said judgment was very much placed on record by the assessee before the ld. CIT(A) and in any case, the non-filing of the Hon'ble Supreme Court judgment could not be a reason for not following the law laid down by the Hon'ble Supreme Court. He submitted that reliance is placed by the ld. CIT(A) on the decision of Hon'ble Rajasthan High Court in the case of CIT vs. Bank of Rajasthan Ltd. (316 ITR 391)while confirming the disallowance made by the A.O. on account of broken period interest ignoring that a similar issue has been decided by the Hon'ble jurisdictional High Court in the case of American Express International

2

Banking (supra) which is binding on him. He contended that the assessee thus has a good prima facie case to succeed in its appeal on the main issue of broken period interest and once it is decided in favour of the assessee, it will result in refund of tax for the year under consideration instead of the present outstanding demand. He contended that it is thus a fit case to grant the stay of outstanding demand and the appeal of the assessee may also be fixed for hearing out of turn.

3. The ld. D.R., on the other hand, strongly opposed the stay application filed by the assessee. He submitted that even after giving effect to the ld. CIT(A)'s order on 27-2-2014 giving rise to the impugned demand, the A.O. has not taken any coercive action to recover the same inspite of the fact that the assessee has not paid any amount against the outstanding demand. He submitted that the A.O. has adopted a very fair and reasonable approach in the recovery of outstanding demand from the assessee by giving fifteen days time to the assessee to pay the outstanding demand. He submitted that the relevant securities held by the assessee are treated by the A.O. as investment in the year under consideration by giving sound reasons as against the treatment given in the earlier years as stock-in-trade. He contended that the disallowance on account of broken period interest thus has been made by the A.O. on a specific ground which is different from the earlier years and the ld. CIT(A) already having confirmed the said disallowance made by the A.O., it cannot be said that the assessee has a good prima facie case on merit on this issue. He contended that the case of the assessee thus is not a fit case to grant the stay of outstanding demand and if at all the Tribunal is of the view that stay of outstanding demand is to be granted, the assessee should be directed to pay some substantial amount against the outstanding demand.

4. We have heard the arguments of both the sides and also perused the relevant material placed on record. Having regard to all the relevant aspects of the matter including especially the prima facie case of the assessee on merit on the main issue of disallowance of broken period interest, we are of the view that

3

the balance of convenience lies in favour of the assessee and it is a fit case to stay the outstanding demand as sought by the assessee by way of the present application. Accordingly we direct that the impugned outstanding demand against the assessee for A.Y. 2010-11 be kept in abeyance for a period of six months or till the disposal of the appeal of the assessee by the Tribunal whichever is earlier. The Registry is directed to post the said appeal for hearing out of turn on 10-06-2014. Keeping in view that the appeal of the assessee is now fixed for hearing on 10-06-2014 and in order to protect the interest of the Revenue, we direct the assessee to offer sufficient security for the outstanding demand to the satisfaction of the A.O. till the stay granted by this order is operational.

5. In the result, the Stay Application filed by the assessee is allowed. Order pronounced in the open court on 26^thMarch, 2014. Sd/- sd/-

(Dr. S.T.M. PAVALAN) (P.M. JAGTAP)

JUDICIAL MEMBER ACCOUNTANT MEMBER

Mumbai,26-3-2014.

RK

copy to…

1. The appellant

2. The Respondent

3. The CIT(A) - Concerned, Mumbai

4. The CIT- Concerned, Mumbai

5. The DR Bench, H

6. Master File // Tue copy//

BY ORDER

DY/ASSTT. REGISTRAR

ITAT, MUMBAI

4