M/s. Core Health Care Ltd., Ahmedabad V. The DCIT, Circle-3(1)(1), Ahmedabad

CO 68/AHD/2017

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 2938 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 04-03-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2003-2004
• Appeal Filed On: 19-09-2017
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Revenue expenditure
• Section: 37

Judgement Text

ITA NO.: 1409 AND 1800/AHD/15; CO NO. 68/AHD/17 ASSESSMENT YEAR: 2003-04 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, AHMEDABAD D BENCH, AHMEDABAD [CORAM: JUSTICE P P BHATT, PRESIDENT AND PRAMOD KUM AR VICE PRESIDENT] ITA NO.: 1800/AHD/15 ASSESSMENT YEAR: 2003-04 DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 3(3), AHMEDABAD .....APPELLANT VS CORE HEALTHCARE LIMITED ..RESPONDENT NIRMA HOUSE, ASHRAM ROAD AHMEDABAD 380 009 [PAN: AAACC6252H] CO NO. 68/AHD/2017 IN ITA NO.: 1800/AHD/15 ASSESSMENT YEAR: 2003-04 CORE HEALTHCARE LIMITED ...CROSS OBJECTOR NIRMA HOUSE, ASHRAM ROAD AHMEDABAD 380 009 [PAN: AAACC6252H] VS. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 3(3), AHMEDABAD ..........RESPONDE NT ITA NO.: 1409/AHD/15 ASSESSMENT YEAR: 2003-04 CORE HEALTHCARE LIMITED .....APPELLANT NIRMA HOUSE, ASHRAM ROAD AHMEDABAD 380 009 [PAN: AAACC6252H] VS. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 3(3), AHMEDABAD ..........RESPONDE NT APPEARANCES BY S N SOPARKAR ALONG WITH HIMANSHU SHAH, FOR THE ASSESSEE SUBHASH BAINS FOR THE REVENUE DATE OF CONCLUDING THE HEARING : DECEMBER 6, 2018 DATE OF PRONOUNCEMENT : MARCH 4, 2019 ITA NO.: 1409 AND 1800/AHD/15; CO NO. 68/AHD/17 ASSESSMENT YEAR: 2003-04 PAGE 2 OF 5 O R D E R 1. WE WILL FIRST TAKE UP THE APPEAL FILED BY THE AS SESSING OFFICER. 2. THIS APPEAL CHALLENGES CORRECTNESS OF THE ORDER DATED 16 TH MARCH 2015 PASSED BY THE CIT(A) IN THE MATTER OF ASSESSMENT UNDER SECTION 14 3(3) R.W.S. 147 OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2003-04. 3. IN GROUND NO. 1, THE ASSESSING OFFICER HAS RAISE D THE FOLLOWING GRIEVANCE: THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITION OF RS 21,98,50,000 ON ACCOUNT OF DISALLOWANCE OF INTEREST EXPENDITURE WHICH WAS ADMITTEDLY A PROVISION AND NOT COVERED BY THE DECIS ION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS CORE HEALTHCARE LTD [(2 008) 298 ITR 194 (SC)]. 4. DURING THE COURSE OF REOPENED SCRUTINY ASSESSMEN T PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS CLAIMED A DEDUCTION OF RS 21,98,50,000 AND, IN A NOTE TO THE COMPUTATION OF TAXABLE INCOME, STATED THAT THE PROV ISION FOR INTEREST LIABILITY OF RS 21,98,50,000 WHICH HAS ACCRUED BUT NOT PROVIDED FO R, IS DEDUCTIBLE UNDER SECTION 36(1)(III) AS NO PART OF THIS INTEREST IS COVERED BY SECTION 4 3B OF THE ACT. THE DEDUCTION WAS THUS CLAIMED. ON THESE FACTS, THE ASSESSING OFFICER CONC LUDED THAT THE ASSESSEE HAS THUS CAPITALIZED THE EXPENSES IN THE BOOKS OF ACCOUNTS B UT THE SAME HAS BEEN CLAIMED AS REVENUE EXPENDITURE IN THE STATEMENT FURNISHED ALONGWITH TH E RETURN OF INCOME. THE ASSESSING OFFICER REJECTED THE CLAIM BY OBSERVING THAT FIRST LY, ADMITTEDLY IT IS A PROVISION AND SECONDLY IT IS NOT PROVIDED IN THE BOOKS OF ACCOUNTS. AGGR IEVED BY THE DISALLOWANCE SO MADE, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CI T(A) WHO GRANTED THE RELIEF BY FOLLOWING A DIRECT DECISION DATED 5 TH JUNE 2009 OF A COORDINATE BENCH OF THIS TRIBUNAL, IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1998-99 TO 2002-03. T HE ASSESSING OFFICER IS NOT SATISFIED AND IS IN APPEAL BEFORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 6. WE FIND THAT THERE IS NO DISPUTE THAT THE MATERI AL FACTS AND CIRCUMSTANCES OF THIS ASSESSMENT YEAR, VIS--VIS THE ASSESSMENT YEARS 199 8-99 TO 2002-03, ARE MATERIALLY SIMILAR. THE RELIEF ON THIS ISSUE WAS GIVEN BY THE COORDINAT E BENCH, BUT NO SPECIFIC GRIEVANCE RAISED BY THE ASSESSING OFFICER AGAINST THE TRIBUNAL ORDER , ON THAT ASPECT, BEFORE HONBLE HIGH COURT. WE FURTHER FIND THAT EARLIER DECISION DATED 5 TH JUNE 2009 PASSED BY THE COORDINATE BENCH WAS CARRIED IN APPEAL BEFORE HONBLE JURISDIC TIONAL HIGH COURT ON ANOTHER ASPECT, AND, THEIR LORDSHIPS, VIDE JUDGMENT DATED 26 TH JULY 2016, WERE PLEASED TO CONFIRM THE DECISION OF THE TRIBUNAL. THE RELIEF GRANTED BY THE COORDINATE BENCH, ON THIS PARTICULAR ASPECT, HOWEVER REACHED FINALITY BECAUSE OF THE ASSESSING OFFICER N OT CHALLENGING THE TRIBUNAL FINDINGS ON THAT ASPECT BEFORE HONBLE COURT ABOVE. IN THE CASE OF UNION OF INDIA V. KAUMUDINI NARAYAN DALAL [2001] 249 ITR 2191, HONBLE SUPREME COURT HA D AN OCCASION TO CONSIDER WHETHER IT IS OPEN TO REVENUE TO ACCEPT A JUDGMENT IN THE CASE OF ONE ASSESSEE, AND APPEAL, AGAINST THE ITA NO.: 1409 AND 1800/AHD/15; CO NO. 68/AHD/17 ASSESSMENT YEAR: 2003-04 PAGE 3 OF 5 IDENTICAL JUDGMENT IN THE CASE OF ANOTHER. THEIR LO RDSHIPS HELD THAT SUCH A DIFFERENTIAL TREATMENT ON THE SAME SET OF FACTS WAS NOT PERMISSI BLE IN LAW, AND OBSERVED THAT, 'IT IS NOT OPEN TO REVENUE TO ACCEPT THE JUDGMENT IN THE CASE OF THE ASSESSEE IN THAT CASE AND CHALLENGE ITS CORRECTNESS IN THE CASE OF ANOTHER ASSESSEE, WI THOUT JUST CAUSE.' THE SAME VIEW WAS REITERATED BY THE HONBLE SUPREME COURT IN THE CASE OF BERGER PAINTS INDIA LTD. V. CIT [2004] 266 ITR 992, AND FOLLOWED BY THE HONBLE DELHI HIGH COURT IN THE CASES OF CWT V. R.K.K.R. INTERNATIONAL (P.) LTD. [2005] 198 CTR 567 AND CIT V. NEO POLY PACK PVT. LTD. [2000] 245 ITR 492. WHEN SUCH ARE THE VIEWS OF HON BLE COURTS ABOVE, IT IS BEYOND ANY DOUBT OR CONTROVERSY THAT THE REVENUE AUTHORITIES C ANNOT EVEN CHALLENGE THE RELIEF GRANTED BY AN APPELLATE AUTHORITY IN ONE ASSESSMENT YEAR, WHEN , ON THE SAME ISSUE, IT HAS ACCEPTED THE RELIEF GRANTED BY THE APPELLATE AUTHORITY IN ANOTHE R ASSESSMENT YEAR. BE THAT AS IT MAY, THE ISSUE IN APPEAL IS COVERED, IN FAVOUR OF THE ASSESS EE, BY AN DECISION OF THE COORDINATE BENCH. IN THIS VIEW OF THE MATTER, RESPECTFULLY FOLLOWING THE COORDINATE BENCH DECISION AND HAVING REGARD TO THE FACT THAT THE LEARNED DEPARTMENTAL RE PRESENTATIVE HAS NOT POINTED OUT ANY REASONS WHATSOEVER AS TO WHY THE COORDINATE BENCH D ECISION WILL NOT APPLY ON THIS ASSESSMENT YEAR AS WELL, WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. NO INTERFERENCE IS CALLED FOR. 7. GROUND NO. 1 IS THUS DISMISSED. 8. IN GROUND NO. 2, THE ASSESSING OFFICER HAS RAISE D THE FOLLOWING GRIEVANCE: THE CIT(A) HAS ERRED IN LAW AND ON FACTS WITH RESPE CT TO THE ADDITION OF RS 4,84,19,370 ON ACCOUNT OF INTEREST FREE LOANS AND A DVANCES TO SISTER CONCERNS IN DIRECTING TO VERIFY THE CLAIM OF ACTUAL INTEREST EX PENSES OF THE ASSESSEE AND NOT CONSIDERING THAT ADDITION OF ONLY 3% OF THE TOTAL I NTEREST EXPENDITURE WHICH WAS ATTRIBUTABLE TO INTEREST FREE ADVANCES TO SISTER CO NCERN. THE CIT(A) HAS ERRED IN LAW IN GIVING THE ABOVE DIR ECTION WHEN ACTUALLY THE ASSESSEE DID NOT DISCHARGE THE ONUS OF SHOWING THE NEXUS OF INTEREST FREE ADVANCES AND LOAN WITH INTEREST FREE FUNDS. 9. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEED INGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS ADVANCED LOANS OF RS 52,32,92 ,352 TO A SUBSIDIARY COMPANY BY THE NAME OF SPAN MEDICALS LTD. WHEN HE PROBED THE MATTE R FURTHER, IT WAS EXPLAINED BY THE ASSESSEE THAT SPAN MEDICALS WAS A VIRTUALLY DEFUNCT COMPANY AND THERE WAS NO COMMERCIAL SENSE IN PROVIDING FOR INTEREST ON THIS OUTSTANDING AMOUNT. IT WAS ALSO EXPLAINED THAT THE LOAN WAS ORIGINALLY GIVEN FOR SOUND COMMERCIAL REASONS, AND THAT, IN ANY EVENT, INTEREST FREE FUNDS AVAILABLE TO THE ASSESSEE WERE FAR IN EXCESS OF THE THIS INTEREST FREE ADVANCE- THE SHARE CAOITAL AND RESERVE AND SURPLUS ITSELF EXCEEDING RS 345 CRO RES. IT WAS ALSO EXPLAINED THAT THE BORROWINGS BY THE ASSESSEE WERE USED FOR ITS OWN BU SINESS PURPOSES, AND THAT NO PART OF THESE BORROWINGS WERE USED IN ADVANCING THIS INTEREST FRE E ADVANCE. NONE OF THESE SUBMISSIONS, HOWEVER, IMPRESSED THE ASSESSING OFFICER. HE WAS OF THE VIEW THAT THE ASSESSEE COULD HAVE SAVED ITS HUGE INTEREST BURDEN ONLY IF THE ASSESSEE HAD CHARGED INTEREST ON INTEREST FREE ADVANCE TO ITS SUBSIDIARY. THE ASSESSING OFFICER FU RTHER NOTED THAT THE RATIO OF THIS ADVANCE TO THE TOTAL BORROWINGS IS 3%. THE ASSESSING OFFICER T HUS PROCEEDED TO DISALLOW 3% OF TOTAL INTEREST PAID BY THE ASSESSEE, WHICH WORKED OUT TO RS 4,84,19,370. AGGRIEVED BY THE ITA NO.: 1409 AND 1800/AHD/15; CO NO. 68/AHD/17 ASSESSMENT YEAR: 2003-04 PAGE 4 OF 5 DISALLOWANCE SO MADE, ASSESSEE CARRIED THE MATTER I N APPEAL BEFORE THE CIT(A) WHO GRANTED THE RELIEF BY FOLLOWING A DIRECT DECISION DATED 5 TH JUNE 2009 OF A COORDINATE BENCH OF THIS TRIBUNAL, IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEARS 1998-99 TO 2002-03. THE ASSESSING OFFICER IS NOT SATISFIED AND IS IN APPEAL BEFORE US . 10. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. WE FIND THAT THERE IS NO DISPUTE THAT THE MATERIAL FACTS AND CIRCUMSTANCE S OF THIS ASSESSMENT YEAR, VIS--VIS THE ASSESSMENT YEARS 1998-99 TO 2002-03, ARE MATERIALLY SIMILAR. THE RELIEF ON THIS ISSUE WAS GIVEN BY THE COORDINATE BENCH WAS CHALLENGED BY THE ASSESSING OFFICER BEFORE HONBLE HIGH COURT. WE FURTHER FIND THAT EARLIER DECISION DATED 5 TH JUNE 2009 PASSED BY THE COORDINATE BENCH WAS CARRIED IN APPEAL BEFORE HONBLE JURISDIC TIONAL HIGH COURT ON THIS ISSUE, AND, THEIR LORDSHIPS, VIDE JUDGMENT DATED 26 TH JULY 2016, WERE PLEASED TO CONFIRM THE DECISION OF THE TRIBUNAL ON THE SAME. IN THIS VIEW OF THE MATTER, R ESPECTFULLY FOLLOWING THE HONBLE JURISDICTIONAL HIGH COURTS JUDGMENT ON THE ISSUE A ND HAVING REGARD TO THE FACT THAT THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS NOT POINTED OUT ANY REASONS WHATSOEVER AS TO WHY THE COORDINATE BENCH DECISION WILL NOT APPLY ON THI S ASSESSMENT YEAR AS WELL, WE APPROVE THE CONCLUSIONS ARRIVED AT BY THE CIT(A) AND DECLINE TO INTERFERE IN THE MATTER. NO INTERFERENCE IS CALLED FOR. 11. GROUND NO. 2 IS THUS DISMISSED. 12. THE ONLY OTHER GROUND OF APPEAL RAISED BY THE A SSESSING OFFICER IS AS FOLLOWS: THE CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETIN G THE ADDITION OF RS 1,32,000 MADE UNDER SECTION 37 OF THE ACT, AND NOT CONSIDERING TH AT THE PAYMENTS WERE MADE FOR THE KICKBACKS AND NOT INCURRED FOR BUSINESS PURPOSES. 13. SO FAR AS THIS DISALLOWANCE IS CONCERNED, THE R ELEVANT MATERIAL FACTS ARE AS FOLLOWS. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, TH E ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD PAID RS 1,32,000 TO DELHI BASE AGENT BY THE NAME OF TRUE BELL INTERNATIONAL FOR FEES AND EXPENSES TO BE INCURRED FOR REGISTRATION O F ASSESSEES PRODUCTS IN IRAQ. THERE WAS ANOTHER PAYMENT OF US $ 2,447 FOR AFTER SALES SERVI CE FEES PAID TO IRAQI ENTITIES, WHICH FOR THE DETAILED REASONS SET OUT IN THE ASSESSMENT ORDE R, WAS FOUND TO BE OF THE NATURE OF KICKBACKS BUT FINALLY, IN COMPUTATION OF INCOME, NO DISALLOWANCE WAS MADE IN RESPECT OF THE SAME. THE DISALLOWANCE WAS MAD ONLY FOR RS 1,32,000 BEING THE REGISTRATION CHARGES. BE THAT AS IT MAY, THE CIT(A) DELETED THE SAID DISALLOWANCE OF RS 1,32,000. THE ASSESSING OFFICER IS AGGRIEVED AND IS IN APPEAL BEFORE US. 14. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED TH E MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 15. WE FIND THAT THE FEES PAID TO A DELHI BASED AGE NT FOR REGISTRATION OF PRODUCTS IN IRAQ, BY NO STRETCH OF IMAGINATION, CAN BE SAID TO BE A P AYMENT OF KICKBACKS TO IRAQI REGIME. THE ERUDITE DISCUSSION IN THE ASSESSMENT ORDER, ABOUT T HE VOLKER COMMITTEE REPORT AND THE KICKBACKS TO IRAQI REGIME BY THOSE DOING BUSINESS W ITH IRAQ IN THE SANCTION DAYS, HAS NOTHING TO DO WITH THIS DISALLOWANCE. WE FIND THAT THE PAYM ENT IS MADE FOR A LEGITIMATE PURPOSES AND ITA NO.: 1409 AND 1800/AHD/15; CO NO. 68/AHD/17 ASSESSMENT YEAR: 2003-04 PAGE 5 OF 5 THERE IS NO BAR UNDER SECTION 37 ON ITS DEDUCTIBILI TY. WE, THEREFORE, APPROVE THE CONCLUSIONS ARRIVED AT BY THE CIT(A) AND DECLINE TO INTERFERE I N THE MATTER ON THIS ASPECT AS WELL. 16. THIRD AND FINAL GROUND OF APPEAL IN THE ASSESSI NG OFFICERS APPEAL IS ALSO DISMISSED. 17. THE APPEAL FILED BY THE ASSESSING OFFICER IS TH US DISMISSED. 18. THE APPEAL FILED BY THE ASSESSEE AND THE CROSS OBJECTIONS WERE NOT PRESSED BEFORE US. THESE ARE THUS DISMISSED FOR WANT OF PROSECUTION. 19. IN THE RESULT, BOTH THE APPEALS, AS ALSO THE CR OSS OBJECTIONS, ARE DISMISSED. PRONOUNCED IN THE OPEN COURT TODAY ON THE 4 TH DAY OF MARCH, 2019. SD/- SD/- JUSTICE P P BHATT PRAMOD KUMAR (PRESIDENT) (VI CE PRESIDENT) AHMEDABAD, DATED THE 4 TH DAY OF MARCH, 2019 COPIES TO: (1) THE APPELLANT (2) THE RESPOND ENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ETC TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD