ACIT, CHENNAI V. M/s. Shriram Capital Ltd., CHENNAI

ITA 123/CHNY/2011

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6511 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 30-06-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 27-01-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI
• Assessee Lawyers: C V RAJAN
• Keywords: Commercial expediency
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D CHENNAI BEFORE SHRI N.S. SAINI, AM AND SHRI GEORGE MATHAN, J.M. .. I.T.A. NO. 123/MDS/2011 [ASSESSMENT YEAR 2004-05] THE ASSTT. C.I.T COMPANY CIRCLE VI(2) CHENNAI 600 034. VS. M/S SHRIRAM CAPITAL LTD [PREVIOUSLY KNOWN AS M/S SHRIRAM CHITS AND INVESTMENTS P. LTD AND ROAD, SUBSEQUENTLY KNOWN AND SHRIRAM FINANCIAL SERVICES. MOOKAMBIKA COMPLEX 4, LADY DESIKA ROAD, MYLAPORE CHENNAI 600 008. PAN NO. AABSC 2726B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI C.V. RAJAN DEPARTMENT BY : SHRI ANIRUDH RAI, CIT O R D E R PER N.S. SAINI, A.M :- THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER PASSED BY THE CIT(A)-V, CHENNAI DATED 8.10.2010. PAGE 2 OF 8 I.T.A. NO. 123/MDS/2011 2. GROUND NO. 1 RAISED BY THE REVENUE IN THIS APPEA L IS GENERAL IN NATURE AND NEEDS NO ADJUDICATION. 3. GROUND NO. 2 IS DIRECTED AGAINST THE ORDER OF TH E LD. CIT(A) DIRECTING THE ASSESSING OFFICER TO ALLOW DEDUCTION OF RS. 3,147/- WHICH WAS DISALLOWED FOR DELAY IN REMITTANCE OF ESI . 4. AT THE TIME OF HEARING, BOTH THE PARTIES AGREED THAT THE ISSUE IS NOW COVERED BY THE DECISION OF THE HON'BLE SUPRE ME COURT IN THE CASE OF VINAY CEMENTS [2007] 213 CTR [SC] 268 WHERE IN IT WAS HELD THAT THE DEDUCTION WAS ALLOWABLE TO THE ASSESSEE FO R PF AND ESI CONTRIBUTION IF IT WAS NOT DEPOSITED WITHIN THE DUE DATE PRESCRIBED UNDER THE RELEVANT ACT BUT WAS DEPOSITED WITHIN THE DUE DATE OF FILING OF RETURN OF INCOME U/S 139(1) OF THE INCOME -TAX ACT, 1961 [IN SHORT, THE ACT]. 5. BOTH THE PARTIES AGREED THAT THE MATTER SHOULD B E RESTORED TO THE FILE OF THE ASSESSING OFFICER TO VERIFY WHETHER ESI CONTRIBUTION OF RS. 3,147/- WAS DEPOSITED BEFORE THE DUE DATE OF F ILING OF RETURN OF INCOME BY THE ASSESSEE U/S 139(1) OF THE ACT AND IF SO, TO ALLOW PAGE 3 OF 8 I.T.A. NO. 123/MDS/2011 DEDUCTION TO THE ASSESSEE, OTHERWISE NOT. THEREFOR E, THIS GROUND OF APPEAL OF THE REVENUE IS ACCORDINGLY ALLOWED FOR ST ATISTICAL PURPOSES. 6. GROUND NO. 3 OF THE APPEAL OF THE REVENUE IS DIR ECTED AGAINST THE ORDER OF THE LD. CIT(A) DISALLOWING INTEREST ON BANK OVERDRAFT OF RS. 9,63,866/- FOR ADVANCE MADE TO GROUP CONCERNS. 7. AT THE TIME OF HEARING, THE LD. D.R. CONCEDED TH AT THIS ISSUE WAS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISI ON OF THE CHENNAI D BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE VI DE CONSOLIDATED ORDER DATED 18.2.2009 IN ITA NOS. 808 & 809/MDS/200 8. 8. WE FIND THAT THE TRIBUNAL IN ASSESSMENT YEAR 199 5-96 AND 2003-04 IN ITA NOS. 808 & 809/MDS/2008 HAS HELD AS UNDER: 23. AFTER CONSIDERING THE RIVAL CONTENTIONS AND P ERUSING THE MATERIAL ON RECORD, WE FIND THAT THE LD. CIT(A) HAS ALLOWED THE CLAIM OF THE ASSESSEE BY FOLLOWING THE ORDER OF THIS TRIBUNAL IN PARA 3 AS UNDER: PAGE 4 OF 8 I.T.A. NO. 123/MDS/2011 3. THIS ISSUE HAS BEEN THE SUBJECT MATTER OF ADJUDICA TION BY THE I.T.A.T. C BENCH, CHENNAI. THE I.T.A.T. VIDE ITS ORDER DATED 19.12.2007 IN L.T.A. NO. 1088/MDS/2006 HAS HE LD THAT- WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIALS ON RECORD. THE ASSESSING OFFICER DISALLOWED RS.2,OO,93,067/- BEING 85% OF THE TOTAL INTEREST CLAIMED BY THE ASSESSEE AT RS.2,36,38,902/ - ON DEBENTURE I OAR; AMOUNT ON THE REASON THAT THIS LOAN HAS BEEN USED TO ACQUIRE ASSETS WHICH YIELD NON-TAXABLE INCOME. THE CONTENTION OF THE ASSESSEE IS THAT THE ASSESSEE. WAS HAVING HUGE OWN FUNDS AND ON ACCOUNT OF THE COMMERCIAL EXPEDIENCY, THE ASSESSEE 'MADE INVESTMENT IN ASSETS WHICH YIELD NON-TAXABLE INCOME AND SUBMITTED THAT THIS ISSUE IS COVERED BY THE JUDGEMENT OF THE SUPREME COURT IN 288 ITR 1. THERE IS MERIT IN THE PLEA OF THE ASSESSEE. COMMERCIAL EXPEDIENCY IS TO BE SEEN FROM THE POINT OF VIEW OF THE ASSESSEE AND NOT FROM THE POINT OF VIEW OF THE DEPARTMENT. HENCE, WE ALLOW THE GROUND RAISED BY THE ASSESSEE IN THE LIGHT OF THE JUDGEMENT OF THE SUPREME COURT IN THE CASE OF S.A. BUILDERS LIMITED VS. CIT(A) AND ANOTHER IN 288 ITR 1 WHEREIN IT IS HELD AS UNDER:- WHAT IS RELEVANT IS WHETHER THE AMOUNT WAS ADVANCED AS A MEASURE OF COMMERCIAL EXPEDIENCY AND NOT FROM THE PO INT' OF VIEW WHETHER THE' AMOUNT WAS ADVANCED FOR EARNING PR OFITS. ONCE IT IS ESTABLISHED THAT. THERE IS NEXUS BETWEEN THE EXPENDITURE AND PURPOSE OF THE BUSINESS (WHICH NEED NO T NECESSARILY BE THE BUSINESS OF THE ASSESSEE ITSELF), THE REVENUE CANNOT JUSTIFIABLY CLAIM TO PUT ITSELF IN THE ARMCHAIR OF THE BUSINESSMAN OR IN THE POSITION OF THE BOARD O F DIRECTORS AND ASSUME THE ROLE TO DECIDE HOW MUCH IS REASONABLE EXPENDITURE HAVING REGARD TO THE CIRCUMSTA NCES OF THE CASE. NO BUSINESSMAN CAN BE COMPELLED TO MAXIMIS E HIS PROFITS. THIS GROUND OF APPEAL IS ALLOWED. PAGE 5 OF 8 I.T.A. NO. 123/MDS/2011 WE FURTHER NOTE THAT THE DIVIDEND INCOME IS TAXABLE FOR THE IMPUGNED ASSESSMENT YEAR 2003-04 AND THEREFORE SECT ION 14A IS NOT APPLICABLE IN RESPECT OF DIVIDEND INCOME FOR DISALLOWING THE EXPENDITURE. IN VIEW OF THE ABOVE W E DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE COMMISSIONER (A) 9. THEREFORE, RESPECTFULLY FOLLOWING THE ABOVE QUOT ED DECISION, WE DISMISS THE APPEAL OF THE REVENUE. 10. GROUND NO. 4 OF THE APPEAL OF THE REVENUE IS DI RECTED AGAINST THE ORDER OF THE LD. CIT(A) DELETING DISALLOWANCE O F RS. 90,57,232/- BEING LOSS ON CONSUMER DURABLE BUSINESS ACTIVITY. 11. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE H AD DONE CONSUMER DURABLE BUSINESS ACTIVITY ALONGWITH SHRIRA M CITY UNION FINANCE LTD. AND CLAIMED LOSS OF RS. 3,99,50,774/- DURING THE YEAR. THE ASSESSING OFFICER WAS OF THE VIEW THAT OUT OF T HIS RS. 90,57,232/- RELATED TO ASSESSMENT YEAR 2003-04 SINC E SHRIRAM CITY UNION FINANCE LTD HAS DEPOSITED THIS AMOUNT IN THE ACCOUNT OF THE ASSESSEE IN THEIR BOOKS AND THE APPELLANT CREDITED THIS AMOUNT IN ITS BOOKS ON 31.3.2003. THE ASSESSEE CLAIMED THAT CERT AIN CHEQUES PAGE 6 OF 8 I.T.A. NO. 123/MDS/2011 WHICH RELATED TO EMIS REMAINED UNCLEARED AS ON 31.3 .2003 AND EFFORTS WERE MADE TO CONTACT THE DEFAULTERS PERSONA LLY FOR PAYMENT. HOWEVER, EFFORTS FAILED AND THEY HAD TO BE TREATED AS LOSS AFTER 31.3.2003 ALONG WITH SUCH IRRECOVERABLE DURING THE F.Y. 2003-04. THE ASSESSING OFFICER DISALLOWED THE SAME AS NOT RE LATING TO ASSESSMENT YEAR 2004-05. 12. IN APPEAL, THE LD. CIT(A) OBSERVED THAT HE HAD CALLED FOR ASSESSING OFFICERS COMMENT ON THE ASSESSEES SUBMI SSIONS. THE ASSESSING OFFICER, IN HIS REPORT DATED 21.9.2010 HA S SUBMITTED THAT THE CLAIM OF LOSS OF RS. 90,57,232/- IN CONSUMER D URABLE BUSINESS ACTIVITY AS NOT ALLOWABLE IN ASSESSMENT YEAR 2003-0 4 AS ASSESSEE HAS WRITTEN OFF THE AMOUNT IN THE PREVIOUS YEAR RELEVAN T TO ASSESSMENT YEAR 2004-05 AND HENCE THE SAME MAY BE CONSIDERED I N ASSESSMENT YEAR 2004-05 ONLY. THEREFORE, THE LD. CIT(A) HELD THAT THE ASSESSEE HAS WRITTEN OFF THE PARTIES ACCOUNT IN THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2004-05. IN HIS VIEW, LOSS OF RS. 90,57,232/- WAS ALLOWABLE IN ASSESSMENT YEAR 2004-05 ONLY. PAGE 7 OF 8 I.T.A. NO. 123/MDS/2011 13. THE LD. D.R. MERELY RELIED ON THE ORDER OF THE ASSESSING OFFICER WHEREAS THE LD. A.R. SUPPORTED THE ORDER OF THE LD. CIT(A). 14. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE FIN D THAT IN THE INSTANT CASE, THE ASSESSEE HAS CLAIMED LOSS OF RS. 90,57,232/- IN CONSUMER DURABLE BUSINESS ACTIVITY. THE ASSESSING OFFICER DISALLOWED DEDUCTION FOR THE SAME AS IN HIS VIEW TH E LOSS RELATED TO ASSESSMENT YEAR 2003-04. THE ASSESSEE SUBMITTED TH AT IT HAS WRITTEN OFF THE AMOUNT IN ITS BOOKS OF ACCOUNT IN A SSESSMENT YEAR 2004-05 AS SOME EMI CHEQUES WERE PENDING REALIZATIO N AS ON 31.3.2003 AND WHEN LATER ON IT WAS FOUND THAT THE C HEQUES WERE NOT HONORED, LOSS WAS WRITTEN OFF IN THE ASSESSMENT YEA R 2004-05 AND THE PARTIES ACCOUNT WAS CREDIT AND P & L WAS DEBITE D WITH THE SAME. THEREFORE, LOSS WAS ALLOWABLE TO THE ASSESSEE IN TH E YEAR UNDER CONSIDERATION. THE LD. CIT(A) CALLED FOR REMAND RE PORT FORM THE ASSESSING OFFICER WHEREIN THE ASSESSING OFFICER ALS O STATED THAT THE LOSS WAS WRITTEN OFF BY THE ASSESSEE IN ASSESSMENT YEAR 2004-05 AND CAN BE ALLOWABLE IN THAT YEAR ONLY. THEREFORE, HE ALLOWED THE CLAIM OF THE ASSESSEE IN THE YEAR UNDER APPEAL. PAGE 8 OF 8 I.T.A. NO. 123/MDS/2011 15. THE LD. D.R. COULD NOT POINT OUT ANY MISTAKE IN THE ABOVE FINING OF THE LD. CIT(A). STILL FURTHER, IT IS NOT THE CASE OF THE REVENUE THAT LOSS CLAIMED WAS NOT GENUINE OR THAT I T WAS BOGUS. HENCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. CIT(A), WHICH IS CONFIRMED. GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 16. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT IMMEDIATELY AFT ER THE CONCLUSION OF HEARING ON 30 TH JUNE 2011. SD/- SD/- ((GEORGE MATHAN ) (N.S. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 30 TH JUNE, 2011. VL COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE