DCIT, V. M/s United Breweries Holdings Ltd.,

ITA 1732/BANG/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9268 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-12-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 06-09-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 09-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: G R REDDY I
• Assessee Lawyers: K R PRADEEP
• Keywords: Depreciation; Bad and doubtful debts; Commercial expediency
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : BANGALORE BEFORE SMT ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER AND SHRI INTURI RAMA RAO, ACCOUNTANT MEMBER ITA NO.1800/BANG/2013 (ASSESSMENT YEAR: 2006-07) ASSESSEES APPEAL REVENUES APPEAL ASSESSEE BY : SHRI. K. R. PRADEEP, CA REVENUE BY : SHRI. G. R. REDDY, CIT-DR-I DATE OF HEARING : 06.09.2016 DATE OF PRONOUNCEMENT : 05 . 1 2 .2016 M/S. UNITED BREWERIES (HOLDINGS) LIMITED, UB TOWERS, LEVEL 14, UB CITY FLOOR, 24, VITTAL MALLYA ROAD, BANGALORE 560 001. PAN : AAACU2307D VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 12(5), 14/3, 4 TH FLOOR, R. P. BHAVAN, NRUPATHUNGA ROAD, BANGALORE-560001. APPELLANT RESPONDENT ITA NO.1732/BANG/2013 (ASSESSMENT YEAR: 2006-07) DY. COMMISSIONER OF INCOME TAX, CIRCLE 12(5), BANGALORE. VS. M/S. UNITED BREWERIES (HOLDINGS) LIMITED, BANGALORE 560 001. PAN : AAACU2307D APPELLANT RESPONDENT ITA NO.1800/BANG/2013AND ITA NO.1732/BANG/2013 PAGE 2 OF 10 ORDER PER INTURI RAMA RAO, AM : THESE ARE THE CROSS APPEALS FILED BY THE ASSESSEE COMPANY AS WELL AS THE REVENUE, DIRECTED AGAINST TH E ORDER OF LEARNED CIT(A)-III, BANGALORE DATED 03.09.2013 F OR THE ASSESSMENT YEAR 2006-07. 2. BRIEFLY THE FACTS OF THE CASE ARE AS UNDER: I. THE ASSESSEE IS A COMPANY INCORPORATED UNDER THE PROVISIONS OF THE COMPANIES ACT, 1956. IT IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF BEER. THE RETURN OF INCOME FOR THE ASSESSMENT YEAR 2006-07 WAS FILED ON 30.11.2006 DECLARING LOSS OF RS.25,57,39,022/-. AFTER ISSUING NOTICE UNDER SECTION 142, THE ASSESSMENT UNDER SECTION 143(3) WAS COMPLETED VIDE ORDER DATED 19.12.2008 AT TOTAL INCOME OF RS.2,25,40,768/-. WHILE DOING SO, THE LEARNED AO MADE THE DISALLOWANCES UNDER SECTION 14A OF RS.26,37,28,791/-. 3. BEING AGGRIEVED, AN APPEAL WAS PREFERRED BEFORE THE CIT(A)-III, BANGALORE, WHO VIDE IMPUGNED ORDER HAD PARTLY ALLOWED THE APPEAL. THE LEARNED CIT(A) CONFIRMED T HE ITA NO.1800/BANG/2013AND ITA NO.1732/BANG/2013 PAGE 3 OF 10 ADDITION ON ACCOUNT OF WRITING OFF OF SEVERAL ADVAN CES TO VARIOUS PARTIES ON THE GROUND THAT SUCH WRITE OFF C ANNOT BE ALLOWED AS BAD DEBTS UNDER SECTION 36(2) OF THE ACT AS THE ADVANCE DOES NOT CONSTITUTE DEBTS WHICH NEVER FORME D PART OF THE INCOME OF THE ASSESSEE BEFORE. AS REGARDS T HE DISALLOWANCES UNDER SECTION 14A, THE LEARNED CIT(A) HELD THAT NO DISALLOWANCE UNDER SECTION 14A CAN BE MADE BEFORE THE INSERTION OF THE RULE READ WITH 8D I.E., WITH E FFECT FROM ASSESSMENT YEAR 2008-09 AND ACCORDINGLY HE DELETED THE ADDITION UNDER SECTION 14A OF THE ACT. AS REGARDS THE DISALLOWANCES OF DEPRECIATION ON AIRCRAFT, HE CONFI RMED THE DISALLOWANCE THAT IN THE ABSENCE OF PASSENGER DETAI LS WHO TRAVELED ON AIRCRAFT, THE DEPRECIATION CANNOT BE AL LOWED. 4. BEING AGGRIEVED WITH THAT PART OF THE ORDER WHIC H IS AGAINST IT, THE REVENUE IS IN APPEAL IN ITA NO.1732/BANGALORE/2013 AND THE ASSESSEE IS IN APPEA L IN ITA NO. 1800/BANGALORE/2013. 5. WE SHALL NOW FIRST TAKE UP THE ASSESSEES APPEA L. THE ASSESSEE RAISED THE FOLLOWING 12 GROUNDS OF APPEAL: ITA NO.1800/BANG/2013AND ITA NO.1732/BANG/2013 PAGE 4 OF 10 6. GROUND NOS. 1, 2, 11 AND 12 ARE GENERAL IN NATUR E DO NOT REQUIRE ANY ADJUDICATION. GROUND NOS.3, 4 AND 5 RELATES TO CONFIRMING THE ADDITION ON ACCOUNT OF WRITE OFF ADVANCES TO VARIOUS PARTIES BY THE CIT(A). THE AO HAD MADE ADDITION ON ACCOUNT OF WRITE OFF OF ADVANCES TO M/S. UB TRAN SIT SYSTEMS LTD., OF RS.60,000/- AND M/S. GSTAAD OFRS.6,15,856/- FOR WANT OF DETAILS AS TO THE TRUE NATURE OF THE TRANSACTION AND WHETHER SUCH ADVANCES WERE MADE DURING THE COURSE OF BUSINESS OF THE ASSESSEE. EVE N BEFORE THE CIT(A), THE ASSESSEE HAD NOT MADE ANY ATTEMPT T O PROVE THAT THESE ADVANCES ARE MADE DURING THE COURS E OF THE BUSINESS OF THE ASSESSEE COMPANY NOR ASSESSEE H AD ITA NO.1800/BANG/2013AND ITA NO.1732/BANG/2013 PAGE 5 OF 10 DEMONSTRATED THAT THE CONDITIONS WHICH ARE NECESSAR Y FOR THE ALLOWANCE AS A BAD DEBT UNDER THE PROVISIONS OF THE SECTION 36(2) ARE FULFILLED. EVEN BEFORE US, THE A SSESSEE HAD MADE NO EFFORT TO DEMONSTRATE THAT THE CONDITIONS N ECESSARY FOR ALLOWANCES UNDER SECTION 36(2) ARE FULFILLED NO R THE ADVANCES WERE MADE DURING THE COURSE OF BUSINESS OU T OF COMMERCIAL EXPEDIENCY. IN THE CIRCUMSTANCES, WE HA VE NO OPTION BUT TO CONFIRM THE ADDITION OF THE CIT(A). THUS THE GROUNDS OF APPEAL NOS. 3, 4 AND 5 ARE DISMISSED. 7. GROUND NOS. 6, 7 AND 8 CHALLENGES THE CONFIRMATI ON OF DISALLOWANCES OF DEPRECIATION ON AIRCRAFT. WE FIND THAT THE ISSUE IN THESE GROUNDS OF APPEAL ARE COVERED AGAINS T THE ASSESSEE IN THE ASSESSEES OWN CASE FOR THE ASSESSM ENT YEARS 1997-98, 2001-02 & 2002-03 IN ITA NO. 1583- 1585/B/2013 DATED 27.11.2015 WHEREIN IT WAS HELD AS FOLLOWS: ITA NO.1800/BANG/2013AND ITA NO.1732/BANG/2013 PAGE 6 OF 10 ITA NO.1800/BANG/2013AND ITA NO.1732/BANG/2013 PAGE 7 OF 10 8. RESPECTFULLY FOLLOWING THE SAME DECISION, WE HOL D THAT THE ASSESSEE IS NOT ENTITLED TO DEPRECIATION ON THE AIRCRAFT. ACCORDINGLY, THE GROUNDS OF APPEAL ARE DISMISSED. 9. GROUND NOS. 9 AND 10 ARE ONLY CONSEQUENTIAL, DOE S NOT REQUIRE ANY ADJUDICATION AND ARE DISMISSED AS S UCH. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. REVENUES APPEAL: THE REVENUE RAISED 6 GROUNDS OF APPEAL AS FOLLOWS: ITA NO.1800/BANG/2013AND ITA NO.1732/BANG/2013 PAGE 8 OF 10 11. GROUND NOS. 1 AND 6 ARE GENERAL IN NATURE. DO NOT REQUIRE ANY ADJUDICATION. GROUND NOS. 2 AND 3 ONLY CHALLENGES THE DIRECTIONS OF THE CIT(A) TO DELETE A DDITION OF RS.26,37,28,791/- ON ACCOUNT OF INVESTMENT IN EQUIT Y SHARES. DURING THE COURSE OF THE PROCEEDINGS, THE AO NOTICED THAT THE ASSESSEE COMPANY EARNED DIVIDEND I NCOME OF RS.16,80,42,761/- AND HE FURTHER NOTICED THAT TH E ASSESSEE MADE AN INVESTMENT IN EQUITY SHARES FOR RS.601,39,63,000/-, OUT OF WHICH PAID UP CAPITAL OF THE ASSESSEE IS ONLY RS.591,90,94,000/-. THEREFORE THE AO ITA NO.1800/BANG/2013AND ITA NO.1732/BANG/2013 PAGE 9 OF 10 ASSUMED THAT INTEREST BEARING FUNDS HAVE BEEN UTILI ZED FOR THE PURPOSE OF INVESTING IN THE GROUP COMPANIES AND THEREFORE INVOKED THE PROVISIONS OF SECTION 14A AND DISALLOWED A SUM OF RS.26,37,28,791/- APPLYING THE PROVISIONS OF RULE 8D, ON APPEAL BEFORE THE CIT(A), THE ADDITION WAS DELETED HOLDING THAT NO DISALLOWANCE U NDER SECTION 14A CAN BE MADE PRIOR TO INSERTION OF RULE 8D. 12. BEING AGGRIEVED, THE REVENUE IS IN APPEAL. WE ARE INFORMED AT THE BAR THAT THIS ISSUE WAS RESTORED TO THE FILE OF AO FOR FRESH ADJUDICATION IN THE EARLIER YEARS BY T HE HONBLE HIGH COURT FOR ASSESSMENT YEAR 2003-04 AND BY THE H ONBLE TRIBUNAL FOR THE ASSESSMENT YEAR 2004-05 AND THEREF ORE ON THE PARITY OF THE SAME, WE ALSO REMIT THIS ISSUE BA CK TO THE FILE OF AO FOR FRESH ADJUDICATION IN ACCORDANCE WIT H THE LAW. 13. IN THE RESULT, APPEAL FILED BY THE REVENUE IS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 5 TH DAY OF DECEMBER, 2016 SD/- SD/- (ASHA VIJAYARAGHAVAN) (INTURI RAMA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER PLACE : BANGALORE DATED : 05/12/2016 /NS/ ITA NO.1800/BANG/2013AND ITA NO.1732/BANG/2013 PAGE 10 OF 10 COPY TO : 1. APPELLANT 2. RESPONDENT 3. CIT(A)-II BANGALORE 4. CIT 5. DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTR AR INCOME-TAX APPELLAT E TRIBUNAL BANGALORE