ITO(OSD), CHENNAI V. M/s Rambal Properties P. Ltd., CHENNAI

ITA 1443/CHNY/2009

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6491 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 15-06-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 11-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI
• Assessee Lawyers: V D GOPAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH D CHENNAI BEFORE SHRI U.B. BEDI, J.M. AND SHRI N.S. SAINI, AM .. I.T.A. NO. 1443/MDS/2009 ASSESSMENT YEARS 2004-05 THE I.T.O COMPANY CIRCLE V(3) CHENNAI VS. M/S RAMBAL PROPERTIES P. LTD 20, CORPORATION ROAD, SEEVARAM PERUNGUDI CHENNAI 600 096. (PAN NO. AAACR 3002 N) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI V.D. GOPAL 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 LD. CIT(A)-V, CHENNAI DATED 28.07.200 8 FOR ASSESSMENT YEAR 2004-05. PAGE 2 OF 6 I.T.A. NO. 1443 /MDS/2009 2. SOLE GROUND OF APPEAL TAKEN BY THE REVENUE IN TH IS APPEAL IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) HOLDIN G THAT DENIAL OF BUSINESS LOSS OF RS. 215.76 LAKHS BY THE ASSESSING OFFICER WAS NOT JUSTIFIED, RELYING UPON THE FINING OF THE HON'BLE J URISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE IN ITA NO. 1240/MDS/20 05 DATED 28.2.2007 FOR ASSESSMENT YEAR 2000-01. THE ORDER RE LIED UPON HAS NOT BECOME FINAL AS APPEAL AGAINST THE SAME HAS BEE N PREFERRED BEFORE THE HON'BLE MADRAS HIGH COURT. 3. THE LD. CIT(A) HAS DECIDED THE ISSUE AS UNDER: 7. AS REGARDS THE SECOND ITEM OF IRRECOVERABLE A DVANCE WRITTEN OFF AMOUNTING TO RS. 215.76 LAKHS, THE RELE VANT FACTS ARE THAT THE ASSESSEE HAD INVESTED AN AMOUNT OF RS. 159.21 LAKHS IN THE COMPANY, SUPER SHOCK ABSORBERS LTD (S SAL) AND ANOTHER SUM OF RS. 559 LAKHS IN THE COMPANY, UMAYAL AGRO INDUSTRIES LTD (UAIL). AS AGAINST SUCH, INVESTMENT, A RETURN OF RS. 502.45 LAKHS, WAS RECEIVED BY THE ASSESSEE COMP ANY BY WAY OF ISSUE OF PREFERENCE SHARES. AS AN AMOUNT OF RS.502 LAKHS ALONE HAD BEEN RECEIVED BY THE ASSESSEE AS AG AINST ITS PAGE 3 OF 6 I.T.A. NO. 1443 /MDS/2009 TOTAL INVESTMENT OF RS.718.21 LAKHS IN THESE TWO CO NCERNS, THE ASSESSEE COMPANY, DURING THE PERIOD UNDER CONSI DERATION, CHOSE TO WRITE OFF THE BALANCE AMOUNT OF RS. 215.76 LAKHS IN ITS BOOKS AS IRRECOVERABLE ADVANCES AND CLAIMED IT AS AN ALLOWABLE DEDUCTION UNDER THE HEAD 'INCOME FROM BUS INESS IN ITS RETURN OF INCOME. 8. THE ASSESSING OFFICER NOTED THAT THE CONCERN, SS AL, WAS A SICK COMPANY. THIS CASE WAS PENDING BEFORE TH E BIFR. SIMILAR WAS THE CASE OF THE OTHER CONCERN UAIL. AS PER THE ORDER OF THE BIFR, THE REHABILITATION OF THESE TWO SICK INDUSTRIAL UNITS HAD TO BE DONE BY VARIOUS CONCERNS OF THE SHRIRAM GROUP OF COMPANIES. THE ASSESSEE COMPANY HA D MADE THE CONCERNED ADVANCES, IN THE OPINION OF THE ASSES SING OFFICER, NOT ON ITS OWN ACCOUNT, BUT ONLY AS A NOMI NEE OF THE SHRIRAM GROUP OF COMPANIES, OF WHICH, THE ASSESSEE COMPANY ITSELF WAS ALSO A PART. THEREFORE, THE ADVANCES HAD NOT BEEN GIVEN AS TRADE ADVANCES IN THE ORDINARY COURSE OF CARRYING ON OF THE ASSESSEE'S OWN BUSINESS BUT ONLY ON BEHALF O F OTHER CONCERNS OF THE SHRIRAM GROUP. THE ASSESSEE COMPANY , IT WAS PAGE 4 OF 6 I.T.A. NO. 1443 /MDS/2009 NOTED BY THE ASSESSING OFFICER, WAS NOT IN THE BUSI NESS OF MONEY LENDING OR FINANCE. ACCORDINGLY, LOSS ON ACC OUNT OF A PORTION OF SUCH ADVANCES BECOMING IRRECOVERABLE WER E NOT PERMISSIBLE AS A DEDUCTION UNDER THE HEAD INCOME F ROM BUSINESS, IT WAS HELD BY THE ASSESSING OFFICER IN THE ASSESSMENT ORDER. IN SUPPORT OF THIS CONCLUSION, T HE ASSESSING OFFICER RELIED UPON THE LD. CIT(A)D DECISION IN TH E ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2000-01 WHEREIN THE LD . CIT(A) HAD GIVEN THE FINDING THAT THESE INVESTMENTS MADE IN TH E CONCERN, SSAL BY THE ASSESSEE COMPANY, WAS ONLY IN THE CAPACITY OF A NOMINEE OF THE SHRIRAM GROUP OF COMPANIES AND NOT AS A PART OF THE ASSESSEE'S OWN BUSINESS ACTIVITIES. 9. THE ABOVE FINDING OF THE CIT(A) WAS SUBSEQUENTLY CHALLENGED BY THE ASSESSEE COMPANY BEFORE THE INCOM E TAX APPELLATE TRIBUNAL. THE 'B' BENCH OF THE ITAT, CHENNAI, VIDE ITS ORDER DATED 28.2.2007 IN ITA.NO.1240/MDS/200S FOR ASSESSMENT YEAR 2000-01, AFTER TAKING INTO ACCOUNT VARIOUS JUDICIAL DECISIONS, PAGE 5 OF 6 I.T.A. NO. 1443 /MDS/2009 CAME TO THE CONCLUSION THAT THE INVESTMENTS IN THE B IFR CONCERNS HAD BEEN MADE BY THE ASSESSEE COMPANY IN T HE COURSE OF RUNNING OF ITS BUSINESS. PAYMENT OF MINIMUM GUARANTEE CHARGES TO THE OTHER CONCERNS OF THE SHRIR AM GROUP BY THE ASSESSEE COMPANY WAS ALSO HELD TO BE A N ALLOWABLE EXPENSE IN TERMS OF SECTION 37(I). THE HI GHEST FACT FINDING AUTHORITY HAVING CONCLUDED, IN THE ASSESSEES OWN CASE, THAT THE RELEVANT INVESTMENTS HAD BEEN MADE IN THE COURSE OF RUNNING OF THE ASSESSEE'S OWN BUSINESS, LOSS ON ACCOUNT OF A PORTION OF SUCH INVESTMENTS BECOMING IRRECOVERABLE WOULD BE AN ALLOWABLE LOSS WHILE COMPUTING THE INCOME CHARGEABLE TO TAX UNDER THE HEAD 'INCOME FROM BUSINESS'. RELYING ON THE FINDING GIVEN BY THE HON'BLE ITAT, IT IS HEREBY HELD THAT DENIAL OF SUCH BUSINESS LOSS OF RS. 215.76 LAKHS BY THE ASSESSING OFFICER ON THE RELEVANT FACTS WAS NOT JUSTIFIED. APPEAL FILED BY THE ASSESSEE ON THIS GROUN D IS, ACCORDINGLY, ALLOWED. PAGE 6 OF 6 I.T.A. NO. 1443 /MDS/2009 4. THE LD. D.R. RELIED ON THE GROUND OF APPEAL TAKE N BY THE DEPARTMENT. HE COULD NOT PRODUCE ANY EVIDENCE TO S HOW THAT THE ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2000-01 D ATED 28.2.2007 IN ASSESSEES OWN CASE IN ITA NO. 1240/MDS/2005 WAS REVERSED IN APPEAL BY A HIGHER AUTHORITY OR THAT OPERATION OF T HE ORDER OF THE TRIBUNAL WAS STAYED BY ANY HIGHER AUTHORITY. NO SP ECIFIC DEFECT IN THE ORDER OF THE LD. CIT(A) COULD ALSO BE POINTED O UT BY THE LD. D.R. WE, THEREFORE, DO NOT FIND ANY INFIRMITY IN THE ORD ER OF THE LD. CIT(A) AND CONFIRM THE SAME AND THE DISMISS THE GRO UND OF APPEAL OF THE REVENUE. 5. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED IN THE COURT ON 30 TH JUNE 2011. SD/- SD/- (U.B.S BEDI ) (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