Appeal Details
Counselvise Citation
[2011] 134 COUNSELVISE.COM (IT) 7943 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
2 year(s) 23 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
25-03-2011
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
E
Next Hearing Date
08-03-2011
Assessment Year
2005-2006
Appeal Filed On
04-03-2009
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, E, MUMBAI BEFORE SHRI R.S.SYAL, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) STANDARD CHARTERED INVESTMENTS AND LOANS(INDIA), CORPORATE OFFICE. METRO HOUSE, 4 TH FL, M G ROAD, MUMBAI-400020. PAN: AAHCS6432N . APPELLANT VS DCIT 1(3), AAYAKAR BHAVAN, MARINE LINES, MUMBAI-400020. RESPONDENT APPELLANT BY : SHRI SANJIV M SHAH RESPONDENT BY : SHRI D SONGATE . O R D E R PER VIJAY PAL RAO THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 15.12.2008 OF CIT(A) FOR THE ASSESSME NT YEAR 2005-06. 2. ONLY ISSUE RAISED IN THIS APPEAL BY THE ASSESSEE IS WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) IS JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO FOR THE CLAIM OF RS.67,20,695/- BEING THE DEBT ISSUE EXPENSES INCURRED AND UNAMORTIZED BY THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 2 3. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED T HE RELEVANT RECORD. AT THE OUTSET, THE LEARNED AR HAS SUBMITTED THAT WHILE DECIDING THE ISSUE OF THE ASSESSEE, THE CIT(A) HAS FOLLOWED THE ORDER FOR THE ASSESSMENT YEAR 2004-05 WHEREAS THIS TRIBUNAL HAS ADJUDICATED THE ISSUE VIDE ORDER DATED 22.09.2009 PASSED IN APPEAL NO. ITA 6978/MUM/2007 FOR THE ASSESSMENT YEAR 2004-05. THUS, THE LEARNED AR HAS S UBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL STANDS COVE RED BY THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE F OR THE ASSESSMENT YEAR 2004-05. THE LEARNED AR OF THE ASSE SSEE HAS ALSO FILED A COPY OF THE ORDER OF THE CIT(A) FOR THE ASSESSMENT YEAR 2004-05 TO SHOW THAT THE CIT(A) HA S FOLLOWED THE SAME ORDER FOR THE ASSESSMENT YEAR UND ER CONSIDERATION. HE HAS FURTHER POINTED OUT THAT IN THE GIVING EFFECT ORDER, THE AO HAS ACCEPTED THE CLAIM OF TH E ASSESSEE AFTER VERIFICATION AS PER THE DIRECTION OF THIS TRI BUNAL. 4. ON THE OTHER HAND, THE LEARNED DR HAS RELIED UPO N THE ORDERS OF THE LOWER AUTHORITIES. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND RE LEVANT RECORD. WE FIND THAT THE CIT(A) HAS ADJUDICATED T HE ISSUE IN PARAGRAPHS 4 AND 4.1 AS UNDER : 4. THE APPELLANT IS WHOLLY OWNED SUBSIDIARY COMPANY OF STANDARD CHARTERED , UK. THE APPELLANT COMPANY IS ENGAGED IN THE BUSINESS OF BORROWING AND LENDING OF MONEY. THE SAME ISSUE CAME UP BEFORE THE ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 3 CIT(A)-XV, MUMBAI WHO HAS CONSIDERED THE FACTS OF THE CASE IN ITS ENTIRELY AND ALSO CONSIDERED HE3 JUDICIAL PRONOUNCEMENTS CITED BY THE APPELLANT. AF TER DUE CONSIDERATION, IT WAS HELD BY HIM VIDE HIS OR DER NO. CIT(A)-XV/IT-155/ACIT.15.(1)/2006-07LK DATED 13.09.2007 THAT THE APPELLANT COMPANY ITSELF HAD GIVEN AN ACCOUNTING TREATMENT TO AMORTIZE THE DEBT ISSUE EXPENSES BY SPREADING THE EXPENDITURE OVER TH E PERIOD FOR WHICH THE DEBT INSTRUMENT WAS RATED. 4.1 FOR THE DETAILED REASONS GIVEN IN THE SAID ORDER, IT IS HELD THAT THERE IS NO REASON FOR THE NON- APPLICABILITY OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD V/S CIT 225 ITR 802 (SC), WHERE THE FACTS ARE FAIRLY COMPATIBLE TO THE ASSESSEES CASE. ACCORDINGLY, THE FINDING OF THE AO IS CONFIRMED ON THIS ISSUE AND THE APPEAL IS DISMISSED 6. THUS, IT IS CLEARED FROM THE IMPUGNED ORDER OF T HE CIT(A) THAT THE CIT(A) HAS FOLLOWED THE ORDER DAT ED 30.9.2007 FOR THE ASSESSMENT YEAR 2004-05. THIS TR IBUNAL HAS DECIDED THE ISSUE FOR THE ASSESSMENT YEAR 2004-05 A S UNDER : 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSE THE RECORD. THE ALLOWABILITY OF THE EXPENSES ONLY TO BE SEEN IN THE LIGHT OF SECTIO N 37 OF THE ACT AND NOT IN ACCORDANCE WITH THE BOOKS OF ACCOUNT OF THE ASSESSEE. THEREFORE, WE DO NOT AGREE WITH THE REVENUE THAT IN THE BOOKS OF ACCOUNT THE EXPENSES WERE TREATED AS DEFERRED REVENUE EXPENSES AND THE SAME CANNOT BE CLAIMED U/S 37 OF THE ACT. T HE EXPENSES INCURRED IN RESPECT OF STAMP DUTY REGISTRA TION FEES AND LEGAL FEE FOR OBTAINING LOAN ARE OF REVENU E EXPENDITURE AND THE SAME ARE ALLOWABLE U/S 37 OF TH E ACT AS HELD BY THE APEX COURT IN THE CASE OF INDIA CEMENTS LTD. CITED SUPRA. THE JUDGMENT OF THE APEX COURT IN THE CASE OF MADRAS INDUSTRIAL CORPORATION LTD.(SUPRA) IS DISTINGUISHABLE ON FACTS AS IN THAT CASE THE ISSUE WAS IN RESPECT OF DISCOUNT GIVEN ON ISSUE OF DEBENTURES WAS AN INBUILT CONDITION OF THE TRANSACT ION AS DEBENTURES WERE ISSUED AT A DISCOUNT OF 2% REDEEMAB LE AFTER 12 YEARS. THE LIABILITY WAS FOR 12 YEARS AND ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 4 MATCHING PRINCIPLE DEMANDS THAT IT SHOULD BE ALLOWA BLE OVER TWELVE YEARS. UNDER THE CIRCUMSTANCES, THE AP EX COURT ALLOWED TO DISCOUNT WRITTEN OFF PROPORTIONATE LY EACH YEAR OVER A PERIOD OF REDEMPTION. IN PRINCIPLE , BOTH THE JUDGMENTS OF THE APEX COURT IN THE CASE OF INDI A CEMENTS LTD. AND MADRAS INDUSTRIAL CORPORATION LTD. CITED SUPRA HAVE LAID DOWN THE LAW CONSIDERING THE FACTS OF THE RESPECTIVE CASE. IN THE CASE UNDER CONSIDERA TION, THE ASSESSEE FILED CRISIL AND THE RATINGS ARE SAID TO BE A CERTIFICATE ISSUED BY THE CRISIL, DATED 12.07.200 5, WHICH IS THE DATE FALLING AFTER THE END OF THE RELE VANT YEAR I.E. 31 ST MARCH, 2004. THE LEARNED AR CLARIFIED THAT THIS CERTIFICATE HAS WRONGLY ENCLOSED WHEREAS THE CORRECT CERTIFICATE HAS BEEN PLACED AT PAGE 13 OF T HE ASSESSEES PAPER BOOK WHICH IS DATED 5 TH MARCH, 2004. THE NATURE OF EXPENDITURE OF BOTH THE AMOUNTS OF RS . 8,64,000/- TOWARDS RATING CHARGES PAID TO CRISIL AN D RS. 36,000/- FOR STAMPING CHARGES FOR CPS ARE NOT AVAILABLE ON RECORD AS NO RELEVANT RECEIPTS WERE PRODUCED. WHETHER SUCH CERTIFICATES AMOUNT TO LOAN PAPER. THE NATURE OF THE DOCUMENT HAS NOT BEEN EXAMINED BY THE REVENUE AUTHORITIES AFTER CONSIDERI NG RELEVANT RULES & PROCEDURE AND UTILIZATION OF THE CERTIFICATE. THE RELEVANT FACTS ARE REQUIRED TO PUT ON RECORD AFTER NECESSARY VERIFICATION. FURTHER, IT IS NOT CLEAR FROM THE RECORD THAT THE AMOUNT PAID TO CRISI L LTD. IS IN RESPECT OF CERTIFICATED DATED 5 TH MARCH04 OR 12.07.2005. THE RELEVANT DETAILS OF PARTICULARS OF TOTAL COMMERCIAL PAPERS PERTAINING TO THE YEAR UNDER CONSIDERATION ARE ALSO NOT ON RECORD, WHICH ARE NECESSARY FOR DECIDING THE ISSUE UNDER CONSIDERATIO N. UNDER THESE CIRCUMSTANCES, SINCE THE ABOVE FACTS AR E REQUIRED TO BE BROUGHT ON RECORD AFTER VERIFICATION , WE REMIT THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE ISSUE IN ACCORDANCE WITH LA W AFTER CONSIDERING THE DISCUSSION MADE AS ABOVE AND AFTER PROVIDING THE OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 7. FOLLOWING THE DECISION OF THIS TRIBUNAL IN ASSE SSEES OWN CASE, WE REMIT THIS ISSUE TO THE RECORD OF THE AO FOR ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 5 VERIFICATION OF VARIOUS FACTS AS POINTED OUT BY THI S TRIBUNAL IN THE ABOVE ORDER AND DECIDE THE ISSUE AS PER LAW. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON 25 TH, MARCH 2011 SD SD (R.S.SYAL) (VIJ AY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, ON THIS 25 TH DAY OF MARCH, 2011 SRL:21311 COPY TO: 1. APPLICANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, E, MUMBAI BEFORE SHRI R.S.SYAL, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) STANDARD CHARTERED INVESTMENTS AND LOANS(INDIA), CORPORATE OFFICE. METRO HOUSE, 4 TH FL, M G ROAD, MUMBAI-400020. PAN: AAHCS6432N . APPELLANT VS DCIT 1(3), AAYAKAR BHAVAN, MARINE LINES, MUMBAI-400020. RESPONDENT APPELLANT BY : SHRI SANJIV M SHAH RESPONDENT BY : SHRI D SONGATE . O R D E R PER VIJAY PAL RAO THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 15.12.2008 OF CIT(A) FOR THE ASSESSME NT YEAR 2005-06. 2. ONLY ISSUE RAISED IN THIS APPEAL BY THE ASSESSEE IS WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) IS JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO FOR THE CLAIM OF RS.67,20,695/- BEING THE DEBT ISSUE EXPENSES INCURRED AND UNAMORTIZED BY THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 2 3. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED T HE RELEVANT RECORD. AT THE OUTSET, THE LEARNED AR HAS SUBMITTED THAT WHILE DECIDING THE ISSUE OF THE ASSESSEE, THE CIT(A) HAS FOLLOWED THE ORDER FOR THE ASSESSMENT YEAR 2004-05 WHEREAS THIS TRIBUNAL HAS ADJUDICATED THE ISSUE VIDE ORDER DATED 22.09.2009 PASSED IN APPEAL NO. ITA 6978/MUM/2007 FOR THE ASSESSMENT YEAR 2004-05. THUS, THE LEARNED AR HAS S UBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL STANDS COVE RED BY THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE F OR THE ASSESSMENT YEAR 2004-05. THE LEARNED AR OF THE ASSE SSEE HAS ALSO FILED A COPY OF THE ORDER OF THE CIT(A) FOR THE ASSESSMENT YEAR 2004-05 TO SHOW THAT THE CIT(A) HA S FOLLOWED THE SAME ORDER FOR THE ASSESSMENT YEAR UND ER CONSIDERATION. HE HAS FURTHER POINTED OUT THAT IN THE GIVING EFFECT ORDER, THE AO HAS ACCEPTED THE CLAIM OF TH E ASSESSEE AFTER VERIFICATION AS PER THE DIRECTION OF THIS TRI BUNAL. 4. ON THE OTHER HAND, THE LEARNED DR HAS RELIED UPO N THE ORDERS OF THE LOWER AUTHORITIES. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND RE LEVANT RECORD. WE FIND THAT THE CIT(A) HAS ADJUDICATED T HE ISSUE IN PARAGRAPHS 4 AND 4.1 AS UNDER : 4. THE APPELLANT IS WHOLLY OWNED SUBSIDIARY COMPANY OF STANDARD CHARTERED , UK. THE APPELLANT COMPANY IS ENGAGED IN THE BUSINESS OF BORROWING AND LENDING OF MONEY. THE SAME ISSUE CAME UP BEFORE THE ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 3 CIT(A)-XV, MUMBAI WHO HAS CONSIDERED THE FACTS OF THE CASE IN ITS ENTIRELY AND ALSO CONSIDERED HE3 JUDICIAL PRONOUNCEMENTS CITED BY THE APPELLANT. AF TER DUE CONSIDERATION, IT WAS HELD BY HIM VIDE HIS OR DER NO. CIT(A)-XV/IT-155/ACIT.15.(1)/2006-07LK DATED 13.09.2007 THAT THE APPELLANT COMPANY ITSELF HAD GIVEN AN ACCOUNTING TREATMENT TO AMORTIZE THE DEBT ISSUE EXPENSES BY SPREADING THE EXPENDITURE OVER TH E PERIOD FOR WHICH THE DEBT INSTRUMENT WAS RATED. 4.1 FOR THE DETAILED REASONS GIVEN IN THE SAID ORDER, IT IS HELD THAT THERE IS NO REASON FOR THE NON- APPLICABILITY OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD V/S CIT 225 ITR 802 (SC), WHERE THE FACTS ARE FAIRLY COMPATIBLE TO THE ASSESSEES CASE. ACCORDINGLY, THE FINDING OF THE AO IS CONFIRMED ON THIS ISSUE AND THE APPEAL IS DISMISSED 6. THUS, IT IS CLEARED FROM THE IMPUGNED ORDER OF T HE CIT(A) THAT THE CIT(A) HAS FOLLOWED THE ORDER DAT ED 30.9.2007 FOR THE ASSESSMENT YEAR 2004-05. THIS TR IBUNAL HAS DECIDED THE ISSUE FOR THE ASSESSMENT YEAR 2004-05 A S UNDER : 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSE THE RECORD. THE ALLOWABILITY OF THE EXPENSES ONLY TO BE SEEN IN THE LIGHT OF SECTIO N 37 OF THE ACT AND NOT IN ACCORDANCE WITH THE BOOKS OF ACCOUNT OF THE ASSESSEE. THEREFORE, WE DO NOT AGREE WITH THE REVENUE THAT IN THE BOOKS OF ACCOUNT THE EXPENSES WERE TREATED AS DEFERRED REVENUE EXPENSES AND THE SAME CANNOT BE CLAIMED U/S 37 OF THE ACT. T HE EXPENSES INCURRED IN RESPECT OF STAMP DUTY REGISTRA TION FEES AND LEGAL FEE FOR OBTAINING LOAN ARE OF REVENU E EXPENDITURE AND THE SAME ARE ALLOWABLE U/S 37 OF TH E ACT AS HELD BY THE APEX COURT IN THE CASE OF INDIA CEMENTS LTD. CITED SUPRA. THE JUDGMENT OF THE APEX COURT IN THE CASE OF MADRAS INDUSTRIAL CORPORATION LTD.(SUPRA) IS DISTINGUISHABLE ON FACTS AS IN THAT CASE THE ISSUE WAS IN RESPECT OF DISCOUNT GIVEN ON ISSUE OF DEBENTURES WAS AN INBUILT CONDITION OF THE TRANSACT ION AS DEBENTURES WERE ISSUED AT A DISCOUNT OF 2% REDEEMAB LE AFTER 12 YEARS. THE LIABILITY WAS FOR 12 YEARS AND ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 4 MATCHING PRINCIPLE DEMANDS THAT IT SHOULD BE ALLOWA BLE OVER TWELVE YEARS. UNDER THE CIRCUMSTANCES, THE AP EX COURT ALLOWED TO DISCOUNT WRITTEN OFF PROPORTIONATE LY EACH YEAR OVER A PERIOD OF REDEMPTION. IN PRINCIPLE , BOTH THE JUDGMENTS OF THE APEX COURT IN THE CASE OF INDI A CEMENTS LTD. AND MADRAS INDUSTRIAL CORPORATION LTD. CITED SUPRA HAVE LAID DOWN THE LAW CONSIDERING THE FACTS OF THE RESPECTIVE CASE. IN THE CASE UNDER CONSIDERA TION, THE ASSESSEE FILED CRISIL AND THE RATINGS ARE SAID TO BE A CERTIFICATE ISSUED BY THE CRISIL, DATED 12.07.200 5, WHICH IS THE DATE FALLING AFTER THE END OF THE RELE VANT YEAR I.E. 31 ST MARCH, 2004. THE LEARNED AR CLARIFIED THAT THIS CERTIFICATE HAS WRONGLY ENCLOSED WHEREAS THE CORRECT CERTIFICATE HAS BEEN PLACED AT PAGE 13 OF T HE ASSESSEES PAPER BOOK WHICH IS DATED 5 TH MARCH, 2004. THE NATURE OF EXPENDITURE OF BOTH THE AMOUNTS OF RS . 8,64,000/- TOWARDS RATING CHARGES PAID TO CRISIL AN D RS. 36,000/- FOR STAMPING CHARGES FOR CPS ARE NOT AVAILABLE ON RECORD AS NO RELEVANT RECEIPTS WERE PRODUCED. WHETHER SUCH CERTIFICATES AMOUNT TO LOAN PAPER. THE NATURE OF THE DOCUMENT HAS NOT BEEN EXAMINED BY THE REVENUE AUTHORITIES AFTER CONSIDERI NG RELEVANT RULES & PROCEDURE AND UTILIZATION OF THE CERTIFICATE. THE RELEVANT FACTS ARE REQUIRED TO PUT ON RECORD AFTER NECESSARY VERIFICATION. FURTHER, IT IS NOT CLEAR FROM THE RECORD THAT THE AMOUNT PAID TO CRISI L LTD. IS IN RESPECT OF CERTIFICATED DATED 5 TH MARCH04 OR 12.07.2005. THE RELEVANT DETAILS OF PARTICULARS OF TOTAL COMMERCIAL PAPERS PERTAINING TO THE YEAR UNDER CONSIDERATION ARE ALSO NOT ON RECORD, WHICH ARE NECESSARY FOR DECIDING THE ISSUE UNDER CONSIDERATIO N. UNDER THESE CIRCUMSTANCES, SINCE THE ABOVE FACTS AR E REQUIRED TO BE BROUGHT ON RECORD AFTER VERIFICATION , WE REMIT THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE ISSUE IN ACCORDANCE WITH LA W AFTER CONSIDERING THE DISCUSSION MADE AS ABOVE AND AFTER PROVIDING THE OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 7. FOLLOWING THE DECISION OF THIS TRIBUNAL IN ASSE SSEES OWN CASE, WE REMIT THIS ISSUE TO THE RECORD OF THE AO FOR ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 5 VERIFICATION OF VARIOUS FACTS AS POINTED OUT BY THI S TRIBUNAL IN THE ABOVE ORDER AND DECIDE THE ISSUE AS PER LAW. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON 25 TH, MARCH 2011 SD SD (R.S.SYAL) (VIJ AY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, ON THIS 25 TH DAY OF MARCH, 2011 SRL:21311 COPY TO: 1. APPLICANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, E, MUMBAI BEFORE SHRI R.S.SYAL, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) STANDARD CHARTERED INVESTMENTS AND LOANS(INDIA), CORPORATE OFFICE. METRO HOUSE, 4 TH FL, M G ROAD, MUMBAI-400020. PAN: AAHCS6432N . APPELLANT VS DCIT 1(3), AAYAKAR BHAVAN, MARINE LINES, MUMBAI-400020. RESPONDENT APPELLANT BY : SHRI SANJIV M SHAH RESPONDENT BY : SHRI D SONGATE . O R D E R PER VIJAY PAL RAO THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 15.12.2008 OF CIT(A) FOR THE ASSESSME NT YEAR 2005-06. 2. ONLY ISSUE RAISED IN THIS APPEAL BY THE ASSESSEE IS WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) IS JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO FOR THE CLAIM OF RS.67,20,695/- BEING THE DEBT ISSUE EXPENSES INCURRED AND UNAMORTIZED BY THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 2 3. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED T HE RELEVANT RECORD. AT THE OUTSET, THE LEARNED AR HAS SUBMITTED THAT WHILE DECIDING THE ISSUE OF THE ASSESSEE, THE CIT(A) HAS FOLLOWED THE ORDER FOR THE ASSESSMENT YEAR 2004-05 WHEREAS THIS TRIBUNAL HAS ADJUDICATED THE ISSUE VIDE ORDER DATED 22.09.2009 PASSED IN APPEAL NO. ITA 6978/MUM/2007 FOR THE ASSESSMENT YEAR 2004-05. THUS, THE LEARNED AR HAS S UBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL STANDS COVE RED BY THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE F OR THE ASSESSMENT YEAR 2004-05. THE LEARNED AR OF THE ASSE SSEE HAS ALSO FILED A COPY OF THE ORDER OF THE CIT(A) FOR THE ASSESSMENT YEAR 2004-05 TO SHOW THAT THE CIT(A) HA S FOLLOWED THE SAME ORDER FOR THE ASSESSMENT YEAR UND ER CONSIDERATION. HE HAS FURTHER POINTED OUT THAT IN THE GIVING EFFECT ORDER, THE AO HAS ACCEPTED THE CLAIM OF TH E ASSESSEE AFTER VERIFICATION AS PER THE DIRECTION OF THIS TRI BUNAL. 4. ON THE OTHER HAND, THE LEARNED DR HAS RELIED UPO N THE ORDERS OF THE LOWER AUTHORITIES. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND RE LEVANT RECORD. WE FIND THAT THE CIT(A) HAS ADJUDICATED T HE ISSUE IN PARAGRAPHS 4 AND 4.1 AS UNDER : 4. THE APPELLANT IS WHOLLY OWNED SUBSIDIARY COMPANY OF STANDARD CHARTERED , UK. THE APPELLANT COMPANY IS ENGAGED IN THE BUSINESS OF BORROWING AND LENDING OF MONEY. THE SAME ISSUE CAME UP BEFORE THE ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 3 CIT(A)-XV, MUMBAI WHO HAS CONSIDERED THE FACTS OF THE CASE IN ITS ENTIRELY AND ALSO CONSIDERED HE3 JUDICIAL PRONOUNCEMENTS CITED BY THE APPELLANT. AF TER DUE CONSIDERATION, IT WAS HELD BY HIM VIDE HIS OR DER NO. CIT(A)-XV/IT-155/ACIT.15.(1)/2006-07LK DATED 13.09.2007 THAT THE APPELLANT COMPANY ITSELF HAD GIVEN AN ACCOUNTING TREATMENT TO AMORTIZE THE DEBT ISSUE EXPENSES BY SPREADING THE EXPENDITURE OVER TH E PERIOD FOR WHICH THE DEBT INSTRUMENT WAS RATED. 4.1 FOR THE DETAILED REASONS GIVEN IN THE SAID ORDER, IT IS HELD THAT THERE IS NO REASON FOR THE NON- APPLICABILITY OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD V/S CIT 225 ITR 802 (SC), WHERE THE FACTS ARE FAIRLY COMPATIBLE TO THE ASSESSEES CASE. ACCORDINGLY, THE FINDING OF THE AO IS CONFIRMED ON THIS ISSUE AND THE APPEAL IS DISMISSED 6. THUS, IT IS CLEARED FROM THE IMPUGNED ORDER OF T HE CIT(A) THAT THE CIT(A) HAS FOLLOWED THE ORDER DAT ED 30.9.2007 FOR THE ASSESSMENT YEAR 2004-05. THIS TR IBUNAL HAS DECIDED THE ISSUE FOR THE ASSESSMENT YEAR 2004-05 A S UNDER : 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSE THE RECORD. THE ALLOWABILITY OF THE EXPENSES ONLY TO BE SEEN IN THE LIGHT OF SECTIO N 37 OF THE ACT AND NOT IN ACCORDANCE WITH THE BOOKS OF ACCOUNT OF THE ASSESSEE. THEREFORE, WE DO NOT AGREE WITH THE REVENUE THAT IN THE BOOKS OF ACCOUNT THE EXPENSES WERE TREATED AS DEFERRED REVENUE EXPENSES AND THE SAME CANNOT BE CLAIMED U/S 37 OF THE ACT. T HE EXPENSES INCURRED IN RESPECT OF STAMP DUTY REGISTRA TION FEES AND LEGAL FEE FOR OBTAINING LOAN ARE OF REVENU E EXPENDITURE AND THE SAME ARE ALLOWABLE U/S 37 OF TH E ACT AS HELD BY THE APEX COURT IN THE CASE OF INDIA CEMENTS LTD. CITED SUPRA. THE JUDGMENT OF THE APEX COURT IN THE CASE OF MADRAS INDUSTRIAL CORPORATION LTD.(SUPRA) IS DISTINGUISHABLE ON FACTS AS IN THAT CASE THE ISSUE WAS IN RESPECT OF DISCOUNT GIVEN ON ISSUE OF DEBENTURES WAS AN INBUILT CONDITION OF THE TRANSACT ION AS DEBENTURES WERE ISSUED AT A DISCOUNT OF 2% REDEEMAB LE AFTER 12 YEARS. THE LIABILITY WAS FOR 12 YEARS AND ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 4 MATCHING PRINCIPLE DEMANDS THAT IT SHOULD BE ALLOWA BLE OVER TWELVE YEARS. UNDER THE CIRCUMSTANCES, THE AP EX COURT ALLOWED TO DISCOUNT WRITTEN OFF PROPORTIONATE LY EACH YEAR OVER A PERIOD OF REDEMPTION. IN PRINCIPLE , BOTH THE JUDGMENTS OF THE APEX COURT IN THE CASE OF INDI A CEMENTS LTD. AND MADRAS INDUSTRIAL CORPORATION LTD. CITED SUPRA HAVE LAID DOWN THE LAW CONSIDERING THE FACTS OF THE RESPECTIVE CASE. IN THE CASE UNDER CONSIDERA TION, THE ASSESSEE FILED CRISIL AND THE RATINGS ARE SAID TO BE A CERTIFICATE ISSUED BY THE CRISIL, DATED 12.07.200 5, WHICH IS THE DATE FALLING AFTER THE END OF THE RELE VANT YEAR I.E. 31 ST MARCH, 2004. THE LEARNED AR CLARIFIED THAT THIS CERTIFICATE HAS WRONGLY ENCLOSED WHEREAS THE CORRECT CERTIFICATE HAS BEEN PLACED AT PAGE 13 OF T HE ASSESSEES PAPER BOOK WHICH IS DATED 5 TH MARCH, 2004. THE NATURE OF EXPENDITURE OF BOTH THE AMOUNTS OF RS . 8,64,000/- TOWARDS RATING CHARGES PAID TO CRISIL AN D RS. 36,000/- FOR STAMPING CHARGES FOR CPS ARE NOT AVAILABLE ON RECORD AS NO RELEVANT RECEIPTS WERE PRODUCED. WHETHER SUCH CERTIFICATES AMOUNT TO LOAN PAPER. THE NATURE OF THE DOCUMENT HAS NOT BEEN EXAMINED BY THE REVENUE AUTHORITIES AFTER CONSIDERI NG RELEVANT RULES & PROCEDURE AND UTILIZATION OF THE CERTIFICATE. THE RELEVANT FACTS ARE REQUIRED TO PUT ON RECORD AFTER NECESSARY VERIFICATION. FURTHER, IT IS NOT CLEAR FROM THE RECORD THAT THE AMOUNT PAID TO CRISI L LTD. IS IN RESPECT OF CERTIFICATED DATED 5 TH MARCH04 OR 12.07.2005. THE RELEVANT DETAILS OF PARTICULARS OF TOTAL COMMERCIAL PAPERS PERTAINING TO THE YEAR UNDER CONSIDERATION ARE ALSO NOT ON RECORD, WHICH ARE NECESSARY FOR DECIDING THE ISSUE UNDER CONSIDERATIO N. UNDER THESE CIRCUMSTANCES, SINCE THE ABOVE FACTS AR E REQUIRED TO BE BROUGHT ON RECORD AFTER VERIFICATION , WE REMIT THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE ISSUE IN ACCORDANCE WITH LA W AFTER CONSIDERING THE DISCUSSION MADE AS ABOVE AND AFTER PROVIDING THE OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 7. FOLLOWING THE DECISION OF THIS TRIBUNAL IN ASSE SSEES OWN CASE, WE REMIT THIS ISSUE TO THE RECORD OF THE AO FOR ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 5 VERIFICATION OF VARIOUS FACTS AS POINTED OUT BY THI S TRIBUNAL IN THE ABOVE ORDER AND DECIDE THE ISSUE AS PER LAW. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON 25 TH, MARCH 2011 SD SD (R.S.SYAL) (VIJ AY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, ON THIS 25 TH DAY OF MARCH, 2011 SRL:21311 COPY TO: 1. APPLICANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, E, MUMBAI BEFORE SHRI R.S.SYAL, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) STANDARD CHARTERED INVESTMENTS AND LOANS(INDIA), CORPORATE OFFICE. METRO HOUSE, 4 TH FL, M G ROAD, MUMBAI-400020. PAN: AAHCS6432N . APPELLANT VS DCIT 1(3), AAYAKAR BHAVAN, MARINE LINES, MUMBAI-400020. RESPONDENT APPELLANT BY : SHRI SANJIV M SHAH RESPONDENT BY : SHRI D SONGATE . O R D E R PER VIJAY PAL RAO THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 15.12.2008 OF CIT(A) FOR THE ASSESSME NT YEAR 2005-06. 2. ONLY ISSUE RAISED IN THIS APPEAL BY THE ASSESSEE IS WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) IS JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO FOR THE CLAIM OF RS.67,20,695/- BEING THE DEBT ISSUE EXPENSES INCURRED AND UNAMORTIZED BY THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 2 3. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED T HE RELEVANT RECORD. AT THE OUTSET, THE LEARNED AR HAS SUBMITTED THAT WHILE DECIDING THE ISSUE OF THE ASSESSEE, THE CIT(A) HAS FOLLOWED THE ORDER FOR THE ASSESSMENT YEAR 2004-05 WHEREAS THIS TRIBUNAL HAS ADJUDICATED THE ISSUE VIDE ORDER DATED 22.09.2009 PASSED IN APPEAL NO. ITA 6978/MUM/2007 FOR THE ASSESSMENT YEAR 2004-05. THUS, THE LEARNED AR HAS S UBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL STANDS COVE RED BY THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE F OR THE ASSESSMENT YEAR 2004-05. THE LEARNED AR OF THE ASSE SSEE HAS ALSO FILED A COPY OF THE ORDER OF THE CIT(A) FOR THE ASSESSMENT YEAR 2004-05 TO SHOW THAT THE CIT(A) HA S FOLLOWED THE SAME ORDER FOR THE ASSESSMENT YEAR UND ER CONSIDERATION. HE HAS FURTHER POINTED OUT THAT IN THE GIVING EFFECT ORDER, THE AO HAS ACCEPTED THE CLAIM OF TH E ASSESSEE AFTER VERIFICATION AS PER THE DIRECTION OF THIS TRI BUNAL. 4. ON THE OTHER HAND, THE LEARNED DR HAS RELIED UPO N THE ORDERS OF THE LOWER AUTHORITIES. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND RE LEVANT RECORD. WE FIND THAT THE CIT(A) HAS ADJUDICATED T HE ISSUE IN PARAGRAPHS 4 AND 4.1 AS UNDER : 4. THE APPELLANT IS WHOLLY OWNED SUBSIDIARY COMPANY OF STANDARD CHARTERED , UK. THE APPELLANT COMPANY IS ENGAGED IN THE BUSINESS OF BORROWING AND LENDING OF MONEY. THE SAME ISSUE CAME UP BEFORE THE ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 3 CIT(A)-XV, MUMBAI WHO HAS CONSIDERED THE FACTS OF THE CASE IN ITS ENTIRELY AND ALSO CONSIDERED HE3 JUDICIAL PRONOUNCEMENTS CITED BY THE APPELLANT. AF TER DUE CONSIDERATION, IT WAS HELD BY HIM VIDE HIS OR DER NO. CIT(A)-XV/IT-155/ACIT.15.(1)/2006-07LK DATED 13.09.2007 THAT THE APPELLANT COMPANY ITSELF HAD GIVEN AN ACCOUNTING TREATMENT TO AMORTIZE THE DEBT ISSUE EXPENSES BY SPREADING THE EXPENDITURE OVER TH E PERIOD FOR WHICH THE DEBT INSTRUMENT WAS RATED. 4.1 FOR THE DETAILED REASONS GIVEN IN THE SAID ORDER, IT IS HELD THAT THERE IS NO REASON FOR THE NON- APPLICABILITY OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD V/S CIT 225 ITR 802 (SC), WHERE THE FACTS ARE FAIRLY COMPATIBLE TO THE ASSESSEES CASE. ACCORDINGLY, THE FINDING OF THE AO IS CONFIRMED ON THIS ISSUE AND THE APPEAL IS DISMISSED 6. THUS, IT IS CLEARED FROM THE IMPUGNED ORDER OF T HE CIT(A) THAT THE CIT(A) HAS FOLLOWED THE ORDER DAT ED 30.9.2007 FOR THE ASSESSMENT YEAR 2004-05. THIS TR IBUNAL HAS DECIDED THE ISSUE FOR THE ASSESSMENT YEAR 2004-05 A S UNDER : 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSE THE RECORD. THE ALLOWABILITY OF THE EXPENSES ONLY TO BE SEEN IN THE LIGHT OF SECTIO N 37 OF THE ACT AND NOT IN ACCORDANCE WITH THE BOOKS OF ACCOUNT OF THE ASSESSEE. THEREFORE, WE DO NOT AGREE WITH THE REVENUE THAT IN THE BOOKS OF ACCOUNT THE EXPENSES WERE TREATED AS DEFERRED REVENUE EXPENSES AND THE SAME CANNOT BE CLAIMED U/S 37 OF THE ACT. T HE EXPENSES INCURRED IN RESPECT OF STAMP DUTY REGISTRA TION FEES AND LEGAL FEE FOR OBTAINING LOAN ARE OF REVENU E EXPENDITURE AND THE SAME ARE ALLOWABLE U/S 37 OF TH E ACT AS HELD BY THE APEX COURT IN THE CASE OF INDIA CEMENTS LTD. CITED SUPRA. THE JUDGMENT OF THE APEX COURT IN THE CASE OF MADRAS INDUSTRIAL CORPORATION LTD.(SUPRA) IS DISTINGUISHABLE ON FACTS AS IN THAT CASE THE ISSUE WAS IN RESPECT OF DISCOUNT GIVEN ON ISSUE OF DEBENTURES WAS AN INBUILT CONDITION OF THE TRANSACT ION AS DEBENTURES WERE ISSUED AT A DISCOUNT OF 2% REDEEMAB LE AFTER 12 YEARS. THE LIABILITY WAS FOR 12 YEARS AND ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 4 MATCHING PRINCIPLE DEMANDS THAT IT SHOULD BE ALLOWA BLE OVER TWELVE YEARS. UNDER THE CIRCUMSTANCES, THE AP EX COURT ALLOWED TO DISCOUNT WRITTEN OFF PROPORTIONATE LY EACH YEAR OVER A PERIOD OF REDEMPTION. IN PRINCIPLE , BOTH THE JUDGMENTS OF THE APEX COURT IN THE CASE OF INDI A CEMENTS LTD. AND MADRAS INDUSTRIAL CORPORATION LTD. CITED SUPRA HAVE LAID DOWN THE LAW CONSIDERING THE FACTS OF THE RESPECTIVE CASE. IN THE CASE UNDER CONSIDERA TION, THE ASSESSEE FILED CRISIL AND THE RATINGS ARE SAID TO BE A CERTIFICATE ISSUED BY THE CRISIL, DATED 12.07.200 5, WHICH IS THE DATE FALLING AFTER THE END OF THE RELE VANT YEAR I.E. 31 ST MARCH, 2004. THE LEARNED AR CLARIFIED THAT THIS CERTIFICATE HAS WRONGLY ENCLOSED WHEREAS THE CORRECT CERTIFICATE HAS BEEN PLACED AT PAGE 13 OF T HE ASSESSEES PAPER BOOK WHICH IS DATED 5 TH MARCH, 2004. THE NATURE OF EXPENDITURE OF BOTH THE AMOUNTS OF RS . 8,64,000/- TOWARDS RATING CHARGES PAID TO CRISIL AN D RS. 36,000/- FOR STAMPING CHARGES FOR CPS ARE NOT AVAILABLE ON RECORD AS NO RELEVANT RECEIPTS WERE PRODUCED. WHETHER SUCH CERTIFICATES AMOUNT TO LOAN PAPER. THE NATURE OF THE DOCUMENT HAS NOT BEEN EXAMINED BY THE REVENUE AUTHORITIES AFTER CONSIDERI NG RELEVANT RULES & PROCEDURE AND UTILIZATION OF THE CERTIFICATE. THE RELEVANT FACTS ARE REQUIRED TO PUT ON RECORD AFTER NECESSARY VERIFICATION. FURTHER, IT IS NOT CLEAR FROM THE RECORD THAT THE AMOUNT PAID TO CRISI L LTD. IS IN RESPECT OF CERTIFICATED DATED 5 TH MARCH04 OR 12.07.2005. THE RELEVANT DETAILS OF PARTICULARS OF TOTAL COMMERCIAL PAPERS PERTAINING TO THE YEAR UNDER CONSIDERATION ARE ALSO NOT ON RECORD, WHICH ARE NECESSARY FOR DECIDING THE ISSUE UNDER CONSIDERATIO N. UNDER THESE CIRCUMSTANCES, SINCE THE ABOVE FACTS AR E REQUIRED TO BE BROUGHT ON RECORD AFTER VERIFICATION , WE REMIT THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE ISSUE IN ACCORDANCE WITH LA W AFTER CONSIDERING THE DISCUSSION MADE AS ABOVE AND AFTER PROVIDING THE OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 7. FOLLOWING THE DECISION OF THIS TRIBUNAL IN ASSE SSEES OWN CASE, WE REMIT THIS ISSUE TO THE RECORD OF THE AO FOR ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 5 VERIFICATION OF VARIOUS FACTS AS POINTED OUT BY THI S TRIBUNAL IN THE ABOVE ORDER AND DECIDE THE ISSUE AS PER LAW. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON 25 TH, MARCH 2011 SD SD (R.S.SYAL) (VIJ AY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, ON THIS 25 TH DAY OF MARCH, 2011 SRL:21311 COPY TO: 1. APPLICANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, E, MUMBAI BEFORE SHRI R.S.SYAL, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) STANDARD CHARTERED INVESTMENTS AND LOANS(INDIA), CORPORATE OFFICE. METRO HOUSE, 4 TH FL, M G ROAD, MUMBAI-400020. PAN: AAHCS6432N . APPELLANT VS DCIT 1(3), AAYAKAR BHAVAN, MARINE LINES, MUMBAI-400020. RESPONDENT APPELLANT BY : SHRI SANJIV M SHAH RESPONDENT BY : SHRI D SONGATE . O R D E R PER VIJAY PAL RAO THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 15.12.2008 OF CIT(A) FOR THE ASSESSME NT YEAR 2005-06. 2. ONLY ISSUE RAISED IN THIS APPEAL BY THE ASSESSEE IS WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) IS JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO FOR THE CLAIM OF RS.67,20,695/- BEING THE DEBT ISSUE EXPENSES INCURRED AND UNAMORTIZED BY THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 2 3. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED T HE RELEVANT RECORD. AT THE OUTSET, THE LEARNED AR HAS SUBMITTED THAT WHILE DECIDING THE ISSUE OF THE ASSESSEE, THE CIT(A) HAS FOLLOWED THE ORDER FOR THE ASSESSMENT YEAR 2004-05 WHEREAS THIS TRIBUNAL HAS ADJUDICATED THE ISSUE VIDE ORDER DATED 22.09.2009 PASSED IN APPEAL NO. ITA 6978/MUM/2007 FOR THE ASSESSMENT YEAR 2004-05. THUS, THE LEARNED AR HAS S UBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL STANDS COVE RED BY THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE F OR THE ASSESSMENT YEAR 2004-05. THE LEARNED AR OF THE ASSE SSEE HAS ALSO FILED A COPY OF THE ORDER OF THE CIT(A) FOR THE ASSESSMENT YEAR 2004-05 TO SHOW THAT THE CIT(A) HA S FOLLOWED THE SAME ORDER FOR THE ASSESSMENT YEAR UND ER CONSIDERATION. HE HAS FURTHER POINTED OUT THAT IN THE GIVING EFFECT ORDER, THE AO HAS ACCEPTED THE CLAIM OF TH E ASSESSEE AFTER VERIFICATION AS PER THE DIRECTION OF THIS TRI BUNAL. 4. ON THE OTHER HAND, THE LEARNED DR HAS RELIED UPO N THE ORDERS OF THE LOWER AUTHORITIES. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND RE LEVANT RECORD. WE FIND THAT THE CIT(A) HAS ADJUDICATED T HE ISSUE IN PARAGRAPHS 4 AND 4.1 AS UNDER : 4. THE APPELLANT IS WHOLLY OWNED SUBSIDIARY COMPANY OF STANDARD CHARTERED , UK. THE APPELLANT COMPANY IS ENGAGED IN THE BUSINESS OF BORROWING AND LENDING OF MONEY. THE SAME ISSUE CAME UP BEFORE THE ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 3 CIT(A)-XV, MUMBAI WHO HAS CONSIDERED THE FACTS OF THE CASE IN ITS ENTIRELY AND ALSO CONSIDERED HE3 JUDICIAL PRONOUNCEMENTS CITED BY THE APPELLANT. AF TER DUE CONSIDERATION, IT WAS HELD BY HIM VIDE HIS OR DER NO. CIT(A)-XV/IT-155/ACIT.15.(1)/2006-07LK DATED 13.09.2007 THAT THE APPELLANT COMPANY ITSELF HAD GIVEN AN ACCOUNTING TREATMENT TO AMORTIZE THE DEBT ISSUE EXPENSES BY SPREADING THE EXPENDITURE OVER TH E PERIOD FOR WHICH THE DEBT INSTRUMENT WAS RATED. 4.1 FOR THE DETAILED REASONS GIVEN IN THE SAID ORDER, IT IS HELD THAT THERE IS NO REASON FOR THE NON- APPLICABILITY OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD V/S CIT 225 ITR 802 (SC), WHERE THE FACTS ARE FAIRLY COMPATIBLE TO THE ASSESSEES CASE. ACCORDINGLY, THE FINDING OF THE AO IS CONFIRMED ON THIS ISSUE AND THE APPEAL IS DISMISSED 6. THUS, IT IS CLEARED FROM THE IMPUGNED ORDER OF T HE CIT(A) THAT THE CIT(A) HAS FOLLOWED THE ORDER DAT ED 30.9.2007 FOR THE ASSESSMENT YEAR 2004-05. THIS TR IBUNAL HAS DECIDED THE ISSUE FOR THE ASSESSMENT YEAR 2004-05 A S UNDER : 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSE THE RECORD. THE ALLOWABILITY OF THE EXPENSES ONLY TO BE SEEN IN THE LIGHT OF SECTIO N 37 OF THE ACT AND NOT IN ACCORDANCE WITH THE BOOKS OF ACCOUNT OF THE ASSESSEE. THEREFORE, WE DO NOT AGREE WITH THE REVENUE THAT IN THE BOOKS OF ACCOUNT THE EXPENSES WERE TREATED AS DEFERRED REVENUE EXPENSES AND THE SAME CANNOT BE CLAIMED U/S 37 OF THE ACT. T HE EXPENSES INCURRED IN RESPECT OF STAMP DUTY REGISTRA TION FEES AND LEGAL FEE FOR OBTAINING LOAN ARE OF REVENU E EXPENDITURE AND THE SAME ARE ALLOWABLE U/S 37 OF TH E ACT AS HELD BY THE APEX COURT IN THE CASE OF INDIA CEMENTS LTD. CITED SUPRA. THE JUDGMENT OF THE APEX COURT IN THE CASE OF MADRAS INDUSTRIAL CORPORATION LTD.(SUPRA) IS DISTINGUISHABLE ON FACTS AS IN THAT CASE THE ISSUE WAS IN RESPECT OF DISCOUNT GIVEN ON ISSUE OF DEBENTURES WAS AN INBUILT CONDITION OF THE TRANSACT ION AS DEBENTURES WERE ISSUED AT A DISCOUNT OF 2% REDEEMAB LE AFTER 12 YEARS. THE LIABILITY WAS FOR 12 YEARS AND ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 4 MATCHING PRINCIPLE DEMANDS THAT IT SHOULD BE ALLOWA BLE OVER TWELVE YEARS. UNDER THE CIRCUMSTANCES, THE AP EX COURT ALLOWED TO DISCOUNT WRITTEN OFF PROPORTIONATE LY EACH YEAR OVER A PERIOD OF REDEMPTION. IN PRINCIPLE , BOTH THE JUDGMENTS OF THE APEX COURT IN THE CASE OF INDI A CEMENTS LTD. AND MADRAS INDUSTRIAL CORPORATION LTD. CITED SUPRA HAVE LAID DOWN THE LAW CONSIDERING THE FACTS OF THE RESPECTIVE CASE. IN THE CASE UNDER CONSIDERA TION, THE ASSESSEE FILED CRISIL AND THE RATINGS ARE SAID TO BE A CERTIFICATE ISSUED BY THE CRISIL, DATED 12.07.200 5, WHICH IS THE DATE FALLING AFTER THE END OF THE RELE VANT YEAR I.E. 31 ST MARCH, 2004. THE LEARNED AR CLARIFIED THAT THIS CERTIFICATE HAS WRONGLY ENCLOSED WHEREAS THE CORRECT CERTIFICATE HAS BEEN PLACED AT PAGE 13 OF T HE ASSESSEES PAPER BOOK WHICH IS DATED 5 TH MARCH, 2004. THE NATURE OF EXPENDITURE OF BOTH THE AMOUNTS OF RS . 8,64,000/- TOWARDS RATING CHARGES PAID TO CRISIL AN D RS. 36,000/- FOR STAMPING CHARGES FOR CPS ARE NOT AVAILABLE ON RECORD AS NO RELEVANT RECEIPTS WERE PRODUCED. WHETHER SUCH CERTIFICATES AMOUNT TO LOAN PAPER. THE NATURE OF THE DOCUMENT HAS NOT BEEN EXAMINED BY THE REVENUE AUTHORITIES AFTER CONSIDERI NG RELEVANT RULES & PROCEDURE AND UTILIZATION OF THE CERTIFICATE. THE RELEVANT FACTS ARE REQUIRED TO PUT ON RECORD AFTER NECESSARY VERIFICATION. FURTHER, IT IS NOT CLEAR FROM THE RECORD THAT THE AMOUNT PAID TO CRISI L LTD. IS IN RESPECT OF CERTIFICATED DATED 5 TH MARCH04 OR 12.07.2005. THE RELEVANT DETAILS OF PARTICULARS OF TOTAL COMMERCIAL PAPERS PERTAINING TO THE YEAR UNDER CONSIDERATION ARE ALSO NOT ON RECORD, WHICH ARE NECESSARY FOR DECIDING THE ISSUE UNDER CONSIDERATIO N. UNDER THESE CIRCUMSTANCES, SINCE THE ABOVE FACTS AR E REQUIRED TO BE BROUGHT ON RECORD AFTER VERIFICATION , WE REMIT THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE ISSUE IN ACCORDANCE WITH LA W AFTER CONSIDERING THE DISCUSSION MADE AS ABOVE AND AFTER PROVIDING THE OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 7. FOLLOWING THE DECISION OF THIS TRIBUNAL IN ASSE SSEES OWN CASE, WE REMIT THIS ISSUE TO THE RECORD OF THE AO FOR ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 5 VERIFICATION OF VARIOUS FACTS AS POINTED OUT BY THI S TRIBUNAL IN THE ABOVE ORDER AND DECIDE THE ISSUE AS PER LAW. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON 25 TH, MARCH 2011 SD SD (R.S.SYAL) (VIJ AY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, ON THIS 25 TH DAY OF MARCH, 2011 SRL:21311 COPY TO: 1. APPLICANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, E, MUMBAI BEFORE SHRI R.S.SYAL, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) STANDARD CHARTERED INVESTMENTS AND LOANS(INDIA), CORPORATE OFFICE. METRO HOUSE, 4 TH FL, M G ROAD, MUMBAI-400020. PAN: AAHCS6432N . APPELLANT VS DCIT 1(3), AAYAKAR BHAVAN, MARINE LINES, MUMBAI-400020. RESPONDENT APPELLANT BY : SHRI SANJIV M SHAH RESPONDENT BY : SHRI D SONGATE . O R D E R PER VIJAY PAL RAO THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 15.12.2008 OF CIT(A) FOR THE ASSESSME NT YEAR 2005-06. 2. ONLY ISSUE RAISED IN THIS APPEAL BY THE ASSESSEE IS WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) IS JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO FOR THE CLAIM OF RS.67,20,695/- BEING THE DEBT ISSUE EXPENSES INCURRED AND UNAMORTIZED BY THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 2 3. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED T HE RELEVANT RECORD. AT THE OUTSET, THE LEARNED AR HAS SUBMITTED THAT WHILE DECIDING THE ISSUE OF THE ASSESSEE, THE CIT(A) HAS FOLLOWED THE ORDER FOR THE ASSESSMENT YEAR 2004-05 WHEREAS THIS TRIBUNAL HAS ADJUDICATED THE ISSUE VIDE ORDER DATED 22.09.2009 PASSED IN APPEAL NO. ITA 6978/MUM/2007 FOR THE ASSESSMENT YEAR 2004-05. THUS, THE LEARNED AR HAS S UBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL STANDS COVE RED BY THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE F OR THE ASSESSMENT YEAR 2004-05. THE LEARNED AR OF THE ASSE SSEE HAS ALSO FILED A COPY OF THE ORDER OF THE CIT(A) FOR THE ASSESSMENT YEAR 2004-05 TO SHOW THAT THE CIT(A) HA S FOLLOWED THE SAME ORDER FOR THE ASSESSMENT YEAR UND ER CONSIDERATION. HE HAS FURTHER POINTED OUT THAT IN THE GIVING EFFECT ORDER, THE AO HAS ACCEPTED THE CLAIM OF TH E ASSESSEE AFTER VERIFICATION AS PER THE DIRECTION OF THIS TRI BUNAL. 4. ON THE OTHER HAND, THE LEARNED DR HAS RELIED UPO N THE ORDERS OF THE LOWER AUTHORITIES. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND RE LEVANT RECORD. WE FIND THAT THE CIT(A) HAS ADJUDICATED T HE ISSUE IN PARAGRAPHS 4 AND 4.1 AS UNDER : 4. THE APPELLANT IS WHOLLY OWNED SUBSIDIARY COMPANY OF STANDARD CHARTERED , UK. THE APPELLANT COMPANY IS ENGAGED IN THE BUSINESS OF BORROWING AND LENDING OF MONEY. THE SAME ISSUE CAME UP BEFORE THE ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 3 CIT(A)-XV, MUMBAI WHO HAS CONSIDERED THE FACTS OF THE CASE IN ITS ENTIRELY AND ALSO CONSIDERED HE3 JUDICIAL PRONOUNCEMENTS CITED BY THE APPELLANT. AF TER DUE CONSIDERATION, IT WAS HELD BY HIM VIDE HIS OR DER NO. CIT(A)-XV/IT-155/ACIT.15.(1)/2006-07LK DATED 13.09.2007 THAT THE APPELLANT COMPANY ITSELF HAD GIVEN AN ACCOUNTING TREATMENT TO AMORTIZE THE DEBT ISSUE EXPENSES BY SPREADING THE EXPENDITURE OVER TH E PERIOD FOR WHICH THE DEBT INSTRUMENT WAS RATED. 4.1 FOR THE DETAILED REASONS GIVEN IN THE SAID ORDER, IT IS HELD THAT THERE IS NO REASON FOR THE NON- APPLICABILITY OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD V/S CIT 225 ITR 802 (SC), WHERE THE FACTS ARE FAIRLY COMPATIBLE TO THE ASSESSEES CASE. ACCORDINGLY, THE FINDING OF THE AO IS CONFIRMED ON THIS ISSUE AND THE APPEAL IS DISMISSED 6. THUS, IT IS CLEARED FROM THE IMPUGNED ORDER OF T HE CIT(A) THAT THE CIT(A) HAS FOLLOWED THE ORDER DAT ED 30.9.2007 FOR THE ASSESSMENT YEAR 2004-05. THIS TR IBUNAL HAS DECIDED THE ISSUE FOR THE ASSESSMENT YEAR 2004-05 A S UNDER : 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSE THE RECORD. THE ALLOWABILITY OF THE EXPENSES ONLY TO BE SEEN IN THE LIGHT OF SECTIO N 37 OF THE ACT AND NOT IN ACCORDANCE WITH THE BOOKS OF ACCOUNT OF THE ASSESSEE. THEREFORE, WE DO NOT AGREE WITH THE REVENUE THAT IN THE BOOKS OF ACCOUNT THE EXPENSES WERE TREATED AS DEFERRED REVENUE EXPENSES AND THE SAME CANNOT BE CLAIMED U/S 37 OF THE ACT. T HE EXPENSES INCURRED IN RESPECT OF STAMP DUTY REGISTRA TION FEES AND LEGAL FEE FOR OBTAINING LOAN ARE OF REVENU E EXPENDITURE AND THE SAME ARE ALLOWABLE U/S 37 OF TH E ACT AS HELD BY THE APEX COURT IN THE CASE OF INDIA CEMENTS LTD. CITED SUPRA. THE JUDGMENT OF THE APEX COURT IN THE CASE OF MADRAS INDUSTRIAL CORPORATION LTD.(SUPRA) IS DISTINGUISHABLE ON FACTS AS IN THAT CASE THE ISSUE WAS IN RESPECT OF DISCOUNT GIVEN ON ISSUE OF DEBENTURES WAS AN INBUILT CONDITION OF THE TRANSACT ION AS DEBENTURES WERE ISSUED AT A DISCOUNT OF 2% REDEEMAB LE AFTER 12 YEARS. THE LIABILITY WAS FOR 12 YEARS AND ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 4 MATCHING PRINCIPLE DEMANDS THAT IT SHOULD BE ALLOWA BLE OVER TWELVE YEARS. UNDER THE CIRCUMSTANCES, THE AP EX COURT ALLOWED TO DISCOUNT WRITTEN OFF PROPORTIONATE LY EACH YEAR OVER A PERIOD OF REDEMPTION. IN PRINCIPLE , BOTH THE JUDGMENTS OF THE APEX COURT IN THE CASE OF INDI A CEMENTS LTD. AND MADRAS INDUSTRIAL CORPORATION LTD. CITED SUPRA HAVE LAID DOWN THE LAW CONSIDERING THE FACTS OF THE RESPECTIVE CASE. IN THE CASE UNDER CONSIDERA TION, THE ASSESSEE FILED CRISIL AND THE RATINGS ARE SAID TO BE A CERTIFICATE ISSUED BY THE CRISIL, DATED 12.07.200 5, WHICH IS THE DATE FALLING AFTER THE END OF THE RELE VANT YEAR I.E. 31 ST MARCH, 2004. THE LEARNED AR CLARIFIED THAT THIS CERTIFICATE HAS WRONGLY ENCLOSED WHEREAS THE CORRECT CERTIFICATE HAS BEEN PLACED AT PAGE 13 OF T HE ASSESSEES PAPER BOOK WHICH IS DATED 5 TH MARCH, 2004. THE NATURE OF EXPENDITURE OF BOTH THE AMOUNTS OF RS . 8,64,000/- TOWARDS RATING CHARGES PAID TO CRISIL AN D RS. 36,000/- FOR STAMPING CHARGES FOR CPS ARE NOT AVAILABLE ON RECORD AS NO RELEVANT RECEIPTS WERE PRODUCED. WHETHER SUCH CERTIFICATES AMOUNT TO LOAN PAPER. THE NATURE OF THE DOCUMENT HAS NOT BEEN EXAMINED BY THE REVENUE AUTHORITIES AFTER CONSIDERI NG RELEVANT RULES & PROCEDURE AND UTILIZATION OF THE CERTIFICATE. THE RELEVANT FACTS ARE REQUIRED TO PUT ON RECORD AFTER NECESSARY VERIFICATION. FURTHER, IT IS NOT CLEAR FROM THE RECORD THAT THE AMOUNT PAID TO CRISI L LTD. IS IN RESPECT OF CERTIFICATED DATED 5 TH MARCH04 OR 12.07.2005. THE RELEVANT DETAILS OF PARTICULARS OF TOTAL COMMERCIAL PAPERS PERTAINING TO THE YEAR UNDER CONSIDERATION ARE ALSO NOT ON RECORD, WHICH ARE NECESSARY FOR DECIDING THE ISSUE UNDER CONSIDERATIO N. UNDER THESE CIRCUMSTANCES, SINCE THE ABOVE FACTS AR E REQUIRED TO BE BROUGHT ON RECORD AFTER VERIFICATION , WE REMIT THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE ISSUE IN ACCORDANCE WITH LA W AFTER CONSIDERING THE DISCUSSION MADE AS ABOVE AND AFTER PROVIDING THE OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 7. FOLLOWING THE DECISION OF THIS TRIBUNAL IN ASSE SSEES OWN CASE, WE REMIT THIS ISSUE TO THE RECORD OF THE AO FOR ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 5 VERIFICATION OF VARIOUS FACTS AS POINTED OUT BY THI S TRIBUNAL IN THE ABOVE ORDER AND DECIDE THE ISSUE AS PER LAW. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON 25 TH, MARCH 2011 SD SD (R.S.SYAL) (VIJ AY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, ON THIS 25 TH DAY OF MARCH, 2011 SRL:21311 COPY TO: 1. APPLICANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, E, MUMBAI BEFORE SHRI R.S.SYAL, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) STANDARD CHARTERED INVESTMENTS AND LOANS(INDIA), CORPORATE OFFICE. METRO HOUSE, 4 TH FL, M G ROAD, MUMBAI-400020. PAN: AAHCS6432N . APPELLANT VS DCIT 1(3), AAYAKAR BHAVAN, MARINE LINES, MUMBAI-400020. RESPONDENT APPELLANT BY : SHRI SANJIV M SHAH RESPONDENT BY : SHRI D SONGATE . O R D E R PER VIJAY PAL RAO THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 15.12.2008 OF CIT(A) FOR THE ASSESSME NT YEAR 2005-06. 2. ONLY ISSUE RAISED IN THIS APPEAL BY THE ASSESSEE IS WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) IS JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO FOR THE CLAIM OF RS.67,20,695/- BEING THE DEBT ISSUE EXPENSES INCURRED AND UNAMORTIZED BY THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 2 3. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED T HE RELEVANT RECORD. AT THE OUTSET, THE LEARNED AR HAS SUBMITTED THAT WHILE DECIDING THE ISSUE OF THE ASSESSEE, THE CIT(A) HAS FOLLOWED THE ORDER FOR THE ASSESSMENT YEAR 2004-05 WHEREAS THIS TRIBUNAL HAS ADJUDICATED THE ISSUE VIDE ORDER DATED 22.09.2009 PASSED IN APPEAL NO. ITA 6978/MUM/2007 FOR THE ASSESSMENT YEAR 2004-05. THUS, THE LEARNED AR HAS S UBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL STANDS COVE RED BY THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE F OR THE ASSESSMENT YEAR 2004-05. THE LEARNED AR OF THE ASSE SSEE HAS ALSO FILED A COPY OF THE ORDER OF THE CIT(A) FOR THE ASSESSMENT YEAR 2004-05 TO SHOW THAT THE CIT(A) HA S FOLLOWED THE SAME ORDER FOR THE ASSESSMENT YEAR UND ER CONSIDERATION. HE HAS FURTHER POINTED OUT THAT IN THE GIVING EFFECT ORDER, THE AO HAS ACCEPTED THE CLAIM OF TH E ASSESSEE AFTER VERIFICATION AS PER THE DIRECTION OF THIS TRI BUNAL. 4. ON THE OTHER HAND, THE LEARNED DR HAS RELIED UPO N THE ORDERS OF THE LOWER AUTHORITIES. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND RE LEVANT RECORD. WE FIND THAT THE CIT(A) HAS ADJUDICATED T HE ISSUE IN PARAGRAPHS 4 AND 4.1 AS UNDER : 4. THE APPELLANT IS WHOLLY OWNED SUBSIDIARY COMPANY OF STANDARD CHARTERED , UK. THE APPELLANT COMPANY IS ENGAGED IN THE BUSINESS OF BORROWING AND LENDING OF MONEY. THE SAME ISSUE CAME UP BEFORE THE ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 3 CIT(A)-XV, MUMBAI WHO HAS CONSIDERED THE FACTS OF THE CASE IN ITS ENTIRELY AND ALSO CONSIDERED HE3 JUDICIAL PRONOUNCEMENTS CITED BY THE APPELLANT. AF TER DUE CONSIDERATION, IT WAS HELD BY HIM VIDE HIS OR DER NO. CIT(A)-XV/IT-155/ACIT.15.(1)/2006-07LK DATED 13.09.2007 THAT THE APPELLANT COMPANY ITSELF HAD GIVEN AN ACCOUNTING TREATMENT TO AMORTIZE THE DEBT ISSUE EXPENSES BY SPREADING THE EXPENDITURE OVER TH E PERIOD FOR WHICH THE DEBT INSTRUMENT WAS RATED. 4.1 FOR THE DETAILED REASONS GIVEN IN THE SAID ORDER, IT IS HELD THAT THERE IS NO REASON FOR THE NON- APPLICABILITY OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD V/S CIT 225 ITR 802 (SC), WHERE THE FACTS ARE FAIRLY COMPATIBLE TO THE ASSESSEES CASE. ACCORDINGLY, THE FINDING OF THE AO IS CONFIRMED ON THIS ISSUE AND THE APPEAL IS DISMISSED 6. THUS, IT IS CLEARED FROM THE IMPUGNED ORDER OF T HE CIT(A) THAT THE CIT(A) HAS FOLLOWED THE ORDER DAT ED 30.9.2007 FOR THE ASSESSMENT YEAR 2004-05. THIS TR IBUNAL HAS DECIDED THE ISSUE FOR THE ASSESSMENT YEAR 2004-05 A S UNDER : 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSE THE RECORD. THE ALLOWABILITY OF THE EXPENSES ONLY TO BE SEEN IN THE LIGHT OF SECTIO N 37 OF THE ACT AND NOT IN ACCORDANCE WITH THE BOOKS OF ACCOUNT OF THE ASSESSEE. THEREFORE, WE DO NOT AGREE WITH THE REVENUE THAT IN THE BOOKS OF ACCOUNT THE EXPENSES WERE TREATED AS DEFERRED REVENUE EXPENSES AND THE SAME CANNOT BE CLAIMED U/S 37 OF THE ACT. T HE EXPENSES INCURRED IN RESPECT OF STAMP DUTY REGISTRA TION FEES AND LEGAL FEE FOR OBTAINING LOAN ARE OF REVENU E EXPENDITURE AND THE SAME ARE ALLOWABLE U/S 37 OF TH E ACT AS HELD BY THE APEX COURT IN THE CASE OF INDIA CEMENTS LTD. CITED SUPRA. THE JUDGMENT OF THE APEX COURT IN THE CASE OF MADRAS INDUSTRIAL CORPORATION LTD.(SUPRA) IS DISTINGUISHABLE ON FACTS AS IN THAT CASE THE ISSUE WAS IN RESPECT OF DISCOUNT GIVEN ON ISSUE OF DEBENTURES WAS AN INBUILT CONDITION OF THE TRANSACT ION AS DEBENTURES WERE ISSUED AT A DISCOUNT OF 2% REDEEMAB LE AFTER 12 YEARS. THE LIABILITY WAS FOR 12 YEARS AND ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 4 MATCHING PRINCIPLE DEMANDS THAT IT SHOULD BE ALLOWA BLE OVER TWELVE YEARS. UNDER THE CIRCUMSTANCES, THE AP EX COURT ALLOWED TO DISCOUNT WRITTEN OFF PROPORTIONATE LY EACH YEAR OVER A PERIOD OF REDEMPTION. IN PRINCIPLE , BOTH THE JUDGMENTS OF THE APEX COURT IN THE CASE OF INDI A CEMENTS LTD. AND MADRAS INDUSTRIAL CORPORATION LTD. CITED SUPRA HAVE LAID DOWN THE LAW CONSIDERING THE FACTS OF THE RESPECTIVE CASE. IN THE CASE UNDER CONSIDERA TION, THE ASSESSEE FILED CRISIL AND THE RATINGS ARE SAID TO BE A CERTIFICATE ISSUED BY THE CRISIL, DATED 12.07.200 5, WHICH IS THE DATE FALLING AFTER THE END OF THE RELE VANT YEAR I.E. 31 ST MARCH, 2004. THE LEARNED AR CLARIFIED THAT THIS CERTIFICATE HAS WRONGLY ENCLOSED WHEREAS THE CORRECT CERTIFICATE HAS BEEN PLACED AT PAGE 13 OF T HE ASSESSEES PAPER BOOK WHICH IS DATED 5 TH MARCH, 2004. THE NATURE OF EXPENDITURE OF BOTH THE AMOUNTS OF RS . 8,64,000/- TOWARDS RATING CHARGES PAID TO CRISIL AN D RS. 36,000/- FOR STAMPING CHARGES FOR CPS ARE NOT AVAILABLE ON RECORD AS NO RELEVANT RECEIPTS WERE PRODUCED. WHETHER SUCH CERTIFICATES AMOUNT TO LOAN PAPER. THE NATURE OF THE DOCUMENT HAS NOT BEEN EXAMINED BY THE REVENUE AUTHORITIES AFTER CONSIDERI NG RELEVANT RULES & PROCEDURE AND UTILIZATION OF THE CERTIFICATE. THE RELEVANT FACTS ARE REQUIRED TO PUT ON RECORD AFTER NECESSARY VERIFICATION. FURTHER, IT IS NOT CLEAR FROM THE RECORD THAT THE AMOUNT PAID TO CRISI L LTD. IS IN RESPECT OF CERTIFICATED DATED 5 TH MARCH04 OR 12.07.2005. THE RELEVANT DETAILS OF PARTICULARS OF TOTAL COMMERCIAL PAPERS PERTAINING TO THE YEAR UNDER CONSIDERATION ARE ALSO NOT ON RECORD, WHICH ARE NECESSARY FOR DECIDING THE ISSUE UNDER CONSIDERATIO N. UNDER THESE CIRCUMSTANCES, SINCE THE ABOVE FACTS AR E REQUIRED TO BE BROUGHT ON RECORD AFTER VERIFICATION , WE REMIT THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE ISSUE IN ACCORDANCE WITH LA W AFTER CONSIDERING THE DISCUSSION MADE AS ABOVE AND AFTER PROVIDING THE OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 7. FOLLOWING THE DECISION OF THIS TRIBUNAL IN ASSE SSEES OWN CASE, WE REMIT THIS ISSUE TO THE RECORD OF THE AO FOR ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 5 VERIFICATION OF VARIOUS FACTS AS POINTED OUT BY THI S TRIBUNAL IN THE ABOVE ORDER AND DECIDE THE ISSUE AS PER LAW. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON 25 TH, MARCH 2011 SD SD (R.S.SYAL) (VIJ AY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, ON THIS 25 TH DAY OF MARCH, 2011 SRL:21311 COPY TO: 1. APPLICANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, E, MUMBAI BEFORE SHRI R.S.SYAL, ACCOUNTANT MEMBER AND SHRI VIJAY PAL RAO, JUDICIAL MEMBER ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) STANDARD CHARTERED INVESTMENTS AND LOANS(INDIA), CORPORATE OFFICE. METRO HOUSE, 4 TH FL, M G ROAD, MUMBAI-400020. PAN: AAHCS6432N . APPELLANT VS DCIT 1(3), AAYAKAR BHAVAN, MARINE LINES, MUMBAI-400020. RESPONDENT APPELLANT BY : SHRI SANJIV M SHAH RESPONDENT BY : SHRI D SONGATE . O R D E R PER VIJAY PAL RAO THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 15.12.2008 OF CIT(A) FOR THE ASSESSME NT YEAR 2005-06. 2. ONLY ISSUE RAISED IN THIS APPEAL BY THE ASSESSEE IS WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) IS JUSTIFIED IN CONFIRMING THE DISALLOWANCE MADE BY THE AO FOR THE CLAIM OF RS.67,20,695/- BEING THE DEBT ISSUE EXPENSES INCURRED AND UNAMORTIZED BY THE ASSESSEE DURING THE ASSESSMENT YEAR UNDER CONSIDERATION. ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 2 3. WE HAVE HEARD BOTH THE PARTIES AND CONSIDERED T HE RELEVANT RECORD. AT THE OUTSET, THE LEARNED AR HAS SUBMITTED THAT WHILE DECIDING THE ISSUE OF THE ASSESSEE, THE CIT(A) HAS FOLLOWED THE ORDER FOR THE ASSESSMENT YEAR 2004-05 WHEREAS THIS TRIBUNAL HAS ADJUDICATED THE ISSUE VIDE ORDER DATED 22.09.2009 PASSED IN APPEAL NO. ITA 6978/MUM/2007 FOR THE ASSESSMENT YEAR 2004-05. THUS, THE LEARNED AR HAS S UBMITTED THAT THE ISSUE INVOLVED IN THIS APPEAL STANDS COVE RED BY THE DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE F OR THE ASSESSMENT YEAR 2004-05. THE LEARNED AR OF THE ASSE SSEE HAS ALSO FILED A COPY OF THE ORDER OF THE CIT(A) FOR THE ASSESSMENT YEAR 2004-05 TO SHOW THAT THE CIT(A) HA S FOLLOWED THE SAME ORDER FOR THE ASSESSMENT YEAR UND ER CONSIDERATION. HE HAS FURTHER POINTED OUT THAT IN THE GIVING EFFECT ORDER, THE AO HAS ACCEPTED THE CLAIM OF TH E ASSESSEE AFTER VERIFICATION AS PER THE DIRECTION OF THIS TRI BUNAL. 4. ON THE OTHER HAND, THE LEARNED DR HAS RELIED UPO N THE ORDERS OF THE LOWER AUTHORITIES. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND RE LEVANT RECORD. WE FIND THAT THE CIT(A) HAS ADJUDICATED T HE ISSUE IN PARAGRAPHS 4 AND 4.1 AS UNDER : 4. THE APPELLANT IS WHOLLY OWNED SUBSIDIARY COMPANY OF STANDARD CHARTERED , UK. THE APPELLANT COMPANY IS ENGAGED IN THE BUSINESS OF BORROWING AND LENDING OF MONEY. THE SAME ISSUE CAME UP BEFORE THE ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 3 CIT(A)-XV, MUMBAI WHO HAS CONSIDERED THE FACTS OF THE CASE IN ITS ENTIRELY AND ALSO CONSIDERED HE3 JUDICIAL PRONOUNCEMENTS CITED BY THE APPELLANT. AF TER DUE CONSIDERATION, IT WAS HELD BY HIM VIDE HIS OR DER NO. CIT(A)-XV/IT-155/ACIT.15.(1)/2006-07LK DATED 13.09.2007 THAT THE APPELLANT COMPANY ITSELF HAD GIVEN AN ACCOUNTING TREATMENT TO AMORTIZE THE DEBT ISSUE EXPENSES BY SPREADING THE EXPENDITURE OVER TH E PERIOD FOR WHICH THE DEBT INSTRUMENT WAS RATED. 4.1 FOR THE DETAILED REASONS GIVEN IN THE SAID ORDER, IT IS HELD THAT THERE IS NO REASON FOR THE NON- APPLICABILITY OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF MADRAS INDUSTRIAL INVESTMENT CORPORATION LTD V/S CIT 225 ITR 802 (SC), WHERE THE FACTS ARE FAIRLY COMPATIBLE TO THE ASSESSEES CASE. ACCORDINGLY, THE FINDING OF THE AO IS CONFIRMED ON THIS ISSUE AND THE APPEAL IS DISMISSED 6. THUS, IT IS CLEARED FROM THE IMPUGNED ORDER OF T HE CIT(A) THAT THE CIT(A) HAS FOLLOWED THE ORDER DAT ED 30.9.2007 FOR THE ASSESSMENT YEAR 2004-05. THIS TR IBUNAL HAS DECIDED THE ISSUE FOR THE ASSESSMENT YEAR 2004-05 A S UNDER : 6. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSE THE RECORD. THE ALLOWABILITY OF THE EXPENSES ONLY TO BE SEEN IN THE LIGHT OF SECTIO N 37 OF THE ACT AND NOT IN ACCORDANCE WITH THE BOOKS OF ACCOUNT OF THE ASSESSEE. THEREFORE, WE DO NOT AGREE WITH THE REVENUE THAT IN THE BOOKS OF ACCOUNT THE EXPENSES WERE TREATED AS DEFERRED REVENUE EXPENSES AND THE SAME CANNOT BE CLAIMED U/S 37 OF THE ACT. T HE EXPENSES INCURRED IN RESPECT OF STAMP DUTY REGISTRA TION FEES AND LEGAL FEE FOR OBTAINING LOAN ARE OF REVENU E EXPENDITURE AND THE SAME ARE ALLOWABLE U/S 37 OF TH E ACT AS HELD BY THE APEX COURT IN THE CASE OF INDIA CEMENTS LTD. CITED SUPRA. THE JUDGMENT OF THE APEX COURT IN THE CASE OF MADRAS INDUSTRIAL CORPORATION LTD.(SUPRA) IS DISTINGUISHABLE ON FACTS AS IN THAT CASE THE ISSUE WAS IN RESPECT OF DISCOUNT GIVEN ON ISSUE OF DEBENTURES WAS AN INBUILT CONDITION OF THE TRANSACT ION AS DEBENTURES WERE ISSUED AT A DISCOUNT OF 2% REDEEMAB LE AFTER 12 YEARS. THE LIABILITY WAS FOR 12 YEARS AND ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 4 MATCHING PRINCIPLE DEMANDS THAT IT SHOULD BE ALLOWA BLE OVER TWELVE YEARS. UNDER THE CIRCUMSTANCES, THE AP EX COURT ALLOWED TO DISCOUNT WRITTEN OFF PROPORTIONATE LY EACH YEAR OVER A PERIOD OF REDEMPTION. IN PRINCIPLE , BOTH THE JUDGMENTS OF THE APEX COURT IN THE CASE OF INDI A CEMENTS LTD. AND MADRAS INDUSTRIAL CORPORATION LTD. CITED SUPRA HAVE LAID DOWN THE LAW CONSIDERING THE FACTS OF THE RESPECTIVE CASE. IN THE CASE UNDER CONSIDERA TION, THE ASSESSEE FILED CRISIL AND THE RATINGS ARE SAID TO BE A CERTIFICATE ISSUED BY THE CRISIL, DATED 12.07.200 5, WHICH IS THE DATE FALLING AFTER THE END OF THE RELE VANT YEAR I.E. 31 ST MARCH, 2004. THE LEARNED AR CLARIFIED THAT THIS CERTIFICATE HAS WRONGLY ENCLOSED WHEREAS THE CORRECT CERTIFICATE HAS BEEN PLACED AT PAGE 13 OF T HE ASSESSEES PAPER BOOK WHICH IS DATED 5 TH MARCH, 2004. THE NATURE OF EXPENDITURE OF BOTH THE AMOUNTS OF RS . 8,64,000/- TOWARDS RATING CHARGES PAID TO CRISIL AN D RS. 36,000/- FOR STAMPING CHARGES FOR CPS ARE NOT AVAILABLE ON RECORD AS NO RELEVANT RECEIPTS WERE PRODUCED. WHETHER SUCH CERTIFICATES AMOUNT TO LOAN PAPER. THE NATURE OF THE DOCUMENT HAS NOT BEEN EXAMINED BY THE REVENUE AUTHORITIES AFTER CONSIDERI NG RELEVANT RULES & PROCEDURE AND UTILIZATION OF THE CERTIFICATE. THE RELEVANT FACTS ARE REQUIRED TO PUT ON RECORD AFTER NECESSARY VERIFICATION. FURTHER, IT IS NOT CLEAR FROM THE RECORD THAT THE AMOUNT PAID TO CRISI L LTD. IS IN RESPECT OF CERTIFICATED DATED 5 TH MARCH04 OR 12.07.2005. THE RELEVANT DETAILS OF PARTICULARS OF TOTAL COMMERCIAL PAPERS PERTAINING TO THE YEAR UNDER CONSIDERATION ARE ALSO NOT ON RECORD, WHICH ARE NECESSARY FOR DECIDING THE ISSUE UNDER CONSIDERATIO N. UNDER THESE CIRCUMSTANCES, SINCE THE ABOVE FACTS AR E REQUIRED TO BE BROUGHT ON RECORD AFTER VERIFICATION , WE REMIT THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO DECIDE THE ISSUE IN ACCORDANCE WITH LA W AFTER CONSIDERING THE DISCUSSION MADE AS ABOVE AND AFTER PROVIDING THE OPPORTUNITY OF HEARING TO THE ASSESSEE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 7. FOLLOWING THE DECISION OF THIS TRIBUNAL IN ASSE SSEES OWN CASE, WE REMIT THIS ISSUE TO THE RECORD OF THE AO FOR ITA NO. 1474/MUM/2009 (ASSESSMENT YEARS: 2005-06) 5 VERIFICATION OF VARIOUS FACTS AS POINTED OUT BY THI S TRIBUNAL IN THE ABOVE ORDER AND DECIDE THE ISSUE AS PER LAW. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSE. PRONOUNCED IN THE OPEN COURT ON 25 TH, MARCH 2011 SD SD (R.S.SYAL) (VIJ AY PAL RAO) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, ON THIS 25 TH DAY OF MARCH, 2011 SRL:21311 COPY TO: 1. APPLICANT 2. RESPONDENT 3. CIT CONCERNED 4. CIT(A) CONCERNED 5. DR CONCERNED BENCH BY ORDER TRUE COPY ASSTT. REGISTRAR, ITAT, MUMBAI
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