Inox Leisure Ltd., Vadodara V. The Pr. CIT- Vadodara-1, Vadodara

ITA 1074/AHD/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5246 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 28-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AP ARNA AGRAWAL
• Keywords: Earning of tax free income; Revenue expenditure; Capital expenditure
• Section: 143(3); 14A; 263; 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH BEFORE: SHR I AMARJIT SINGH , ACCOUNTANT MEMBER AND MS. MADHUMITA ROY , JUDICIAL MEMBER M/S. INOX LEISURE LIMITED, 2 ND FLOOR, ABS TOWERS, OLD PADRA ROAD, BARODA PAN: AAACI6063J (APPELLANT) VS THE PRINCIPAL CIT, VADODARA - 1 , (RESPONDENT) REVENUE BY : MS. APARNA AGRAWAL , CIT - D . R. ASSESSEE BY: SHRI BANDISH SOPARKAR, A.R. DATE OF HEARING : 20 - 12 - 2 018 DATE OF PRONOUNCEMENT : 16 - 01 - 2 019 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S A PPEAL FOR A.Y. 2010 - 11 , ARI SES FROM ORDER OF THE PRINCIPAL CIT, VADODARA - 1 DATED 30 - 03 - 2 015 , IN PROCEEDINGS UNDER SECTION 263 OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2 . THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1. IN RESPECT OF PROCEEDINGS U/S 263: I T A NO . 1074 / A HD/20 15 A SS ESSMENT YEAR 2010 - 11 I.T.A NO. 107 4 /AHD/20 15 A.Y. 2010 - 11 PAGE NO INOX LEISURE LTD. VS. PRINCIPAL CIT 2 A) HE OUGHT TO HAVE DROPPED THE PROCEEDINGS INITIATED U/S 263 IN VIEW OF THE LEGAL AND FACTUAL POSITION OBTAINED IN THIS CASE AND ELABORATELY STATED IN THE WRITTEN SUBMISSIONS MADE BEFORE HIM BEING THE MATTER COVERED BY ORDER OF CIT( A) OR THE ASSESSING OFFICER HAVING CONSIDERED THE ISSUE B) IN SETTING ASIDE THE ASSESSMENT ORDER FOR A.Y. 2010 - 2011 TO BE FRAMED AFRESH C) IN CONCLUDING THAT 'THE PROVISIONS OF 263 WOULD COME INTO OPERATION PRECISELY WHEN THE ORDER IS ERRONEOUS AND PRE JUDICIAL TO THE REVENUE AND IT DOES NOT MATTER WHETHER SUCH ERROR HAS BEEN MADE AFTER AN APPARENT APPLICATION OF MIND' D) IN CONCLUDING THAT THE ASSESSMENT ORDER U/S 143(3) PASSED BY THE ASSESSING OFFICER FOR A.Y. 2010 - 2011 ALLOWING THE ASSESSEE'S CLAIM IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE 2. IN RESPECT OF MATTER REGARDING DISALLOWANCE U/S 14A: A) IN NOT APPRECIATING THAT THE ISSUE WAS DULY DELIBERATED IN THE ASSESSMENT ORDER AND WAS SUBJECT MATTER OF APPEAL BEFOR E COMMISSIONER OF INCOME - TAX (APPEALS) AND HAD BEEN CONSIDERED AND DECIDED IN APPEAL B) IN CONCLUDING THAT THE ISSUE WAS NOT THE SUBJECT MATTER OF APPEAL BEFORE THE COMMISSIONER OF INCOME - TAX (APPEALS). C) IN NOT APPRECIATING AND MERE HOLDING OF DIFFER ENT VIEW DOES NOT JUSTIFY REVISION PROCEEDINGS. 3. IN RESPECT OF MATTER REGARDING DISALLOWANCE U/S 36(1 )(III): A) IN NOT APPRECIATING THAT THE MATTER WAS CONSIDERED BY THE ASSESSING OFFICER B) IN NOT APPRECIATING AND MERE HOLDING OF DIFFERENT VIEW D OES NOT JUSTIFY REVISION PROCEEDINGS 3 . THE FACT IN BRIEF IS THAT IN THIS CASE , THE ASSESSING OFFICER HAS MADE ASSESSMENT U/S. 143(3) OF THE ACT ON 26 TH FEB, 2013 AND DETERMINED THE TO TAL INCOME OF THE ASSESSE AT RS . 116959300/ - . SUBSEQUENTLY, THE LD. P RINCIPAL CIT - 1 BARODA HAS PASSED ORDER U/S. 263 OF THE ACT ON 30 TH MARCH, 2015 BY HOLDING THAT THE ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND THEREFORE THE ORDER WAS SET ASIDE TO BE FRAMED AFRESH. TH E LD. PRINCIPAL CIT HAS CONSIDERED THE ORDER PASSED BY THE ASSESSING OFFICER U/S. 143(3) OF THE ACT TO BE ERRONEOUS AND PREJUDICIAL IN THE INTEREST OF REVENUE IN THE FOLLOWING REASONS : - (I) ON PERUSAL OF P & L AND BALANCE SHEET, IT WAS REVEALED THAT AO HA S DISALLOWED RS. 93,58,350/ - U/S 14A OF THE ACT, HOWEVER, THE DISALLOWANCE WAS ONLY ON THE INTEREST PART RELATED TO RS 122 CRORES, A LOAN TAKEN FROM ITS HOLDING COMPANY, VIZ, GUJARAT FLUROEHEMICALS LTD., FOR PURCHASING SHARES OF FAME INDIA LTD, AS SUCH, DI SALLOWANCE WAS REQUIRED TO BE COMPUTED THE AGGREGATE OF (I), (II) & (III) OF THE MANNER LAID DOWN IN RULE 8D OF THE IT RULES, (II) ON FURTHER PERUSAL, IT WAS NOTICED THAT ASSESSEE HAS OBTAINED TERM LOAN OF RS. 20 CRORES FROM CITY BANK, AS PER THE SA NCTION LETTER, THE PURPOSE OF LOAN WAS FOR FINANCING ITS TERM, REQUIREMENT INCLUDING REFUNDABLE LONG TERM SECURITY DEPOSITS TO BE GIVEN TO MAIL OWNERS AND PREOPERATIVE EXPENSES FOR THE MULTIPLEXES AT MADURAI, COMIBTORE, HUBLLI, JALGAON, THANE, PUNE & JAIPU R, THIS CLEARLY INDICATED THAT TERM LOAN WAS TO BE UTILIZED I.T.A NO. 107 4 /AHD/20 15 A.Y. 2010 - 11 PAGE NO INOX LEISURE LTD. VS. PRINCIPAL CIT 3 FOR PRE - OPERATIVE EXPENSES FOR STARTING MULTIPLEXES AT VARIOUS MAILS LOCATED AT DIFFERENT PLACES. AS NO REVENUE WAS GENERATED FROM SUCH MULTIPLEXES DURING THE A.Y, 2010 - 11, INTEREST PAYMENT OF R S 63,52,554/ - WAS REQUIRED TO BE CAPITALIZED. HOWEVER, THE SAME HAS BEEN ALLOWED AS REVENUE EXPENDITURE BY THE A.O. DURING THE COURSE OF ASSESSMENT T HE ASSESSEE EXPLAINED THAT IT HAS NOT RECEIVED ANY DIVIDEND ON THE INVESTMENT AND ALSO NOT CLAIMED ANY EXEMPT INCOME IN THE CURRENT YEAR IN THE FORM OF DIVIDEND THEREFORE THE PROVISION OF SECTION 14A R.W . RULE 8D WERE NOT APPLICABLE . IN RESPECT OF INTEREST EXPENDITURE OF TERM LOAN FROM CITY BANK , THE ASSESSEE HAS EXPLAINED T HAT ASSES S EE COMPANY HAS ALREAD Y CAPITALIZED INTEREST OF RS. 9 , 37 , 926/ - AND T HE BALANCE AMOUNT WAS UTILIZED FOR THE PURPOSE OF RUNNING THE BUSINESS. THE ASSESSEE HAS ALSO FURNISHED THE DETAILS OF INFORMATION DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE LD. PRINCIPAL CIT HAS NOT ACCEP TED THE EXPLANATION OF THE ASSESSEE. THE LD. CIT HELD THAT THE ISSUE IN RESPECT OF QUANTIFICATION OF DISALLOWANCE U/S. 14A R.W. RULE 8D IS REQUIRED TO BE VERIFIED BY T H E ASSESSING OFFICER. IN R ESPECT OF INTEREST OF RS. 63 , 52 , 5 54/ - OF CITY BANK LOAN, IT I S STATED THAT AS PER SANCTION LETTER OF THE BANK , THE PURPOSE OF LOAN WAS FINANCING TERM REQUIREMENT INCLUDING LONG TERM SECURITY DEPOSIT TO BE GIVEN TO MALL OWNER AND PRE - OPERATING EXPENSES ETC. . IN VIEW OF THE MENTIONED REASON THE LD. PRINCIPAL CIT HEL D THAT THE ORDER PASSED BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AND OBJECTION OF THE ASSESSEE AGAINST INVOKING OF PROVISION OF SECTION 263 WAS NOT APPLICABLE. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD CAREFULLY. THE THREE GROUNDS OF APPEAL RAISED BY THE ASSESSEE ARE INTER CONNECTED TO THE COMMON ISSUE OF PROCEEDINGS INITIATED BY THE LD. PRINCIPAL I.T.A NO. 107 4 /AHD/20 15 A.Y. 2010 - 11 PAGE NO INOX LEISURE LTD. VS. PRINCIPAL CIT 4 CIT(A) U/S. 263 OF THE ACT. IT IS NOTICED THAT T H E LD. PRINCIPAL CIT HAS PASSED ORDER 2 63 OF THE ACT ON 30 - 03 - 2015 HOLDING THAT ASSESSMENT ORDER U/S. 143(3) OF THE ACT PASSED ON 26 - 02 - 2013 BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST TO REVENUE ON THE FOLLOWING TWO ISSUES: (I) SHORT DISALLOWANCE U/S. 14A R.W.R. 8D . (II) INTEREST EXPENSES OF RS. 63,52,554/ - ON THE CITY BANK LOAN ON THE PERUSAL OF THE RECORD, IT IS NOTICED THAT THE ASSESSING OFFICER HAS MADE DETAILED DISCUSSION IN RESPECT OF DISALLOWANCE U/S. 14A OF THE ACT AFTER DULY EXAMINATION OF THE INFORMATION A ND MATERIAL HE HAS RESTRICTED THE DISALLOWANCE TO THE AMOUNT OF RS. 83,58,350/ - . SUBSEQ UENTLY, ON MERIT THE ISSUE HAS ALSO BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE IT AT AHMEDABAD VIDE ITA NO. 3475/AHD/2016 DATED 30 - 10 - 2018 AFTER FOLLOWING THE DECI SION OF HON BLE JURISDICTIONAL HIGH COURT IN THE CASE OF THE CORRTECH ENERGY PVT. LTD. WE OBSERVE THAT I N SPITE OF HAVING DETAILED DISCUSSION ON THIS MATTER IN THE ASSESSMENT ORDER AND THE AVAILABILITY OF RELEVANT DETAIL ON RECORD, THE LD. PRINCIPAL CIT H AS HELD WITHOUT MERIT THAT THE ASSESSING OFFICER HAS NOT EXAMINED THE ISSUE ACCORDINGLY TO THE PROVISION OF RULE 8D OF THE I.T. R U LE. IN THE LIGHT OF THE ABOVE FACT , WE ARE NOT INCLINED WITH T H E FINDINGS OF T HE LD. PRINCIPAL CIT ON HIS ISSUE THEREFORE ACTI ON OF THE PCIT U/S. 263 O N THIS ISSUES IS NOT JUSTIFIED . REGARDING OTHER ISSUE OF INTEREST EXPENSES ON CITY BANK LOAN , THE LD. PCIT IN PROCEEDINGS U/S. 263 OF THE ACT HAS OBSERVED FROM THE SANCTION LETTER OF THE BANK THAT PURPOSE OF LOAN WAS FINANCING I T S TERM REQUIREMENT INCLUDING REFUNDABLE LONG TERM SECURITY DEPOSITS T O BE GIVEN TO MALL OWNERS. HE HAS FURTHER OBSERVED FROM THE ABOVE FACTS THAT THE TERM LOAN WAS TO BE UTILIZED FOR PRE - OPERATIVE EXPENSES WHICH WAS REQUIRED TO BE CAPITALIZED. I.T.A NO. 107 4 /AHD/20 15 A.Y. 2010 - 11 PAGE NO INOX LEISURE LTD. VS. PRINCIPAL CIT 5 THEREFORE, HE HAS HELD THAT THE ASSESSMENT MADE BY THE ASSESSING OFFICER WAS ERRONEOUS AND PREJUDICIAL TO THE REVENUE. IT IS ALSO BROUGHT TO OUR NOTICE BY THE LD. COUNSEL DURING THE COURSE OF APPELLATE PROCEEDINGS THAT THE ITAT VIDE ORDER ITA NO. 3475/AHD/2016 DATE D 16 - 11 - 2018 HAS DECIDED THIS ISSUE ON MERIT IN FAVOUR OF THE ASSESSEE. WE HAVE PERUSED THE MATERIAL ON RECORD IT IS NOTICED THAT THE DURING THE COURSE OF PROCEEDINGS U/S 263 OF THE ACT THE LD. PCIT HAS REPORTED THE SUBMISSION OF THE ASSESSEE AT PAGE 3 OF HIS ORDER THAT THE MATTER WAS ALSO SUBJECT MATTER OF THE DISCUSSION DURING THE ASSESSMENT PROCEEDINGS AND THE COMPANY HAS SUBMITTED ITS REPLY THAT THE INTEREST OF RS.9,37,926 WAS CAPITALIZED FOR CAPITAL EXPENDITURE AND THE ASSESSING OFFICER HAD ALREADY CO NSIDERED THE PAYMENT OF INTEREST, PURPOSE OF LOAN, SANCTION LETTER ETC DURING THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE YEAR UNDER CONSIDERATION . AFTER PERUSAL OF THE ABOVE FACTS AND SUBMISSION OF THE ASSESSEE MADE DURING THE COURSE OF ASSESSMENT PROCEE DINGS WE OBSERVE THAT THE LD. PCIT HAS NOT CONTRADICTED THE AFORESAID FACTS REPORTED BY THE ASSESSEE , THEREFORE, WE ARE NOT INCLINED WITH THE FINDINGS OF THE LD. PRINCIPAL CIT FOR INVOKING PROCEEDINGS U/S. 263 OF THE ACT. 5. IN THE RESULT , THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 16 - 01 - 201 9 SD/ - SD/ - ( MADHUMITA ROY ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 16 /01/2019 I.T.A NO. 107 4 /AHD/20 15 A.Y. 2010 - 11 PAGE NO INOX LEISURE LTD. VS. PRINCIPAL CIT 6 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,