ASST CIT LTU, MUMBAI V. ASIAN PAINTS LTD, MUMBAI

ITA 2364/MUM/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2777 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 12-01-2016
• Assessment Year: 2004-2005
• Appeal Filed On: 25-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Notional interest

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI . . , , ! '#, $ , % BEFORE SHRI B.R.BASKARAN, AM AND SHRI AMARJIT SINGH , JM / I.T.A. NO.1295/MUM/2013 ( $ & '& / ASSESSMENT YEAR: 2003-04) ASIAN PAINTS LTD. 6A, SHANTI NAGAR, SANTACRUZ(EAST) MUMBAI - 400055 / VS. ADDL. COMMISSIONER OF INCOME TAX LTU LA RGE TAXPAYER UNIT, 29 TH FLOOR, WORLD TRADE CENTRE, CUFFE PARADE, MUMBAI - 400005 / I.T.A. NO.3825/MUM/2012 ( $ & '& / ASSESSMENT YEAR: 2009-10) ASIAN PAINTS LTD. (ERSTWHILE TECHNICAL INSTRUMENTS MANUFACTURES (INDIA) LIMITED) 6A, SHANTI NAGAR, SANTACRUZ(EAST) MUMBAI - 400055 / VS. ASSISTANT COMMISSIONER OF INCOME TAX 10(1) 461, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI - 400020 / I.T.A. NO.2363/MUM/2013 & 2364/MUM/2013 ( $ & '& / ASSESSMENT YEAR: 2003-04 & 2004-05) ASST. COMMISSIONER OF INCOME TAX LTU CENTRE I, 28 TH FLOOR, WORLD TRADE CENTRE, CUFFE PARADE, MUMBAI - 400005 / VS. M/S. ASIAN PAINTS LTD. ASIAN PAINTS HOUSE, 6A, SHANTI NAGAR, SANTACRUZ(EAST), MUMBAI - 400055 I.T.A. NO.1295/MUM/2013 & 3825/MUM/2012, I.T.A.NO.2363& 2364/MUM/2013 A.Y.: 2003-04 ,2004-05 &2009-10 2 ./ ./ PAN/GIR NO. : AAACA3622K ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 27.05.2016 !' /DATE OF PRONOUNCEMENT: 23.09.2016 #$ / O R D E R PER AMARJIT SINGH, JM: THE REVENUE AS WELL AS ASSESSEE FILED THE ABOVE MEN TIONED APPEALS AGAINST THE DIFFERENT ORDERS PASSED BY THE COMMISSIONER OF INCOME TAX (APPEAL) 24 & 21 MUMBAI [HEREINAFTER REF ERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y.2003-04, 2004-05 & 2 009-10. THESE APPEALS ARE BEING TAKEN UP TOGETHER FOR ADJUDICATIO N BEING THE PARTIES ARE THE SAME AND THE MATTER OF CONTROVERSY IS ALSO SAME WHICH CAN CONVENIENTLY BE ADJUDICATED BY A SINGLE ORDER. ITA NO.1295/M/2013 (A.Y.2003-04):- 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THE HONBLE COMMISSIONER OF INCOME TAX (APPEAL S) LTU, MUMBAI ERRED IN DISALLOWING RS.25,94,034/- BEI NG UNADJUSTED BALANCES IN EMPLOYEES ACCOUNT WRITTEN OF F DURING THE YEAR UNDER PRIOR PERIOD EXPENDITURE. ASSESSEE BY: SHRI K. SHIVRAM DEPARTMENT BY: SHRI GANESH BARE I.T.A. NO.1295/MUM/2013 & 3825/MUM/2012, I.T.A.NO.2363& 2364/MUM/2013 A.Y.: 2003-04 ,2004-05 &2009-10 3 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAS FILED THE RETURN OF INCOME DECLARING TOTAL INCOME TO THE TUNE OF RS.2,27,72,31,850/- ON 28.11.2003. THE CASE WAS PR OCESSED U/S.143(1) OF THE INCOME TAX ACT, 1961 ( IN SHORT THE ACT). THE REFUND WAS DUE AND ALLOWED TO THE ASSESSEE, THEREAF TER THE NOTICES U/S. 143(2) OF THE ACT WERE ISSUED ON 13.04.2004 AND 07. 12.2005. SUBSEQUENTLY, NOTICE U/S.142(1) OF THE ACT DATED 12 .12.2005 WAS ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE WAS IN THE BUSINESS OF MANUFACTURING AND TRADING IN PAINTS ETC. THEREA FTER, THE ASSESSMENT WAS COMPLETED BY ASSESSING THE TOTAL INCOME TO THE TUNE OF RS.242,04,36,965/-. BEING NOT SATISFIED, THE ASSES SEE FILED AN APPEAL BEFORE THE CIT(A) WHO CONFIRMED THE SAID ORDER. SU BSEQUENTLY THE ASSESSEE AS WELL AS REVENUE WERE IN THE APPEAL IN I TA NO.5092/M/2007 AND ITA NO.5164/M/2007 WHEREIN THE C ASE WAS REMITTED TO THE CIT(A) TO DECIDE THE ISSUE IN VIEW OF THE LAW SETTLED IN SUPREME COURT OF INDIA IN THE CASE OF GOETZE (INDIA ) LTD., 284 ITR 323. THEREAFTER, THE CIT(A) RECONSIDERED THE MATTE R AND DISALLOWED AN AMOUNT OF RS.25,94,034/- BEING UNADJUSTED BALANC E IN EMPLOYEES ACCOUNT WRITTEN OFF DURING THE YEAR UNDER PRIOR PER IOD EXPENDITURE. THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEA L BEFORE US. 4. WE HAVE HEARD THE ARGUMENTS ADVANCED BY THE LEAR NED REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECOR D. THE ASSESSEE HAS RAISED THE SOLE ISSUE ON ACCOUNT OF NON ALLOWANCE O F DEDUCTION ON I.T.A. NO.1295/MUM/2013 & 3825/MUM/2012, I.T.A.NO.2363& 2364/MUM/2013 A.Y.: 2003-04 ,2004-05 &2009-10 4 WRITTEN OFF UNADJUSTED BALANCE IN EMPLOYEES ACCOUNT OF RS.25,94,034/- BUT AT THE TIME OF ARGUMENT THE LEAR NED REPRESENTATIVE OF THE ASSESSEE DID NOT PRESS THIS GROUND, THEREFOR E THIS ISSUE IS DECIDED AGAINST THE ASSESSEE AND IN FAVOUR OF THE R EVENUE. 5. IN RESULT THE APPEAL FILED BY THE ASSESSEE IS HEREBY DISMISSED BEING NOT PRESSED. ITA NO.2263/M/2013 (A.Y.2003-04):- 6. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWA NCE OF NOTIONAL INTEREST OF RS.2,62,74,000/- ON INTEREST F REE LOAN GIVEN TO WHOLLY OWNED SUBSIDIARIES. THE CIT(A) FAI LED TO APPRECIATE THAT THE HONBLE SUPREME COURT IN ADDL. CIT VS. TULIP STAR HOTELS LTD. [CC 7138-7140/2012] DATE D 30.04.2012 HAS GRANTED SPECIAL LEAVE TO APPEAL STAT ING THAT THE DECISION IN S.A.BUILDERS LTD. VS. CIT REPORTED IN [288 ITR 1] NEEDS RECONSIDERATION. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CI T(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. 7. SINCE THIS APPEAL RELATES TO THE APPEAL FOR THE A.Y.2003-04 FILED BY THE ASSESSEE WHICH HAS BEEN DECIDED ABOVE. THE FACTS OF THE PRESENT CASE SAME AS MENTIONED IN THE ABOVE APPEAL OF THE ASSESSEE THEREFORE THERE IS NO NEED TO REPEAT THE FACTS. ISSUE NO.1:- I.T.A. NO.1295/MUM/2013 & 3825/MUM/2012, I.T.A.NO.2363& 2364/MUM/2013 A.Y.: 2003-04 ,2004-05 &2009-10 5 8. UNDER THIS ISSUE THE REVENUE HAS CHALLENGED THE DELETION OF DISALLOWANCE OF NOTIONAL INTEREST OF RS.2,62,74,000 /- ON INTEREST FREE LOAN GIVEN TO WHOLLY OWNED SUBSIDIARIES. BEFORE GO ING FURTHER IT IS NECESSARY TO ADVERT THE FINDING OF THE CIT(A) ON RE CORD:- 3.2.1 PERUSAL OF SUBMISSIONS OF THE ASSESSEE REVEALS THAT ALL THE LOANS WERE GIVEN IN EARLIER YEARS BY THE ASSESSEE TO ITS SUBSIDIARY COMPANIES FOR BUSINESS PURPOSES, ASSESSEE HAD INTEREST FREE FUNDS IN THOSE YEARS AND ASSESSEE HAD A SUBSTANTIAL BUSINESS CONNECTION WITH ALL THE THREE SUBSIDIARY COMPANIES. FACT OF INDIVIDUAL LOANS ARE DISCUSSED IN FOLLOWING PARAGRAPHS. 3.2.2 ASSESSEE HAD GIVEN LOAN OF R S.5,80,30,000/- TO ITS SUBSIDIARY PENTASIA INVESTMENTS LTD. FOR INVESTING IN PENTASIA CHEMICALS LTD. TO AVOID COMPANY LAW RESTRICTIONS AND PENTASIA CHEMICALS LTD. WAS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SUPPLY OF PENTAERITHRITOL AN IMPORTANT RAW MATERIAL IN MANUFACTURE OF PAINTS. SUBSEQUENTLY, PENTASIA CHEMICALS LTD. BECAME A SICK COMPANY AND WAS REFERRED TO BIFR AND IT WAS MERGED WITH ASSESSEE AND OF PENTASIA INVESTMENTS LTD. RECEIVED SHARES OF ASSESSEE COMPANY. SUBSEQUENTLY, PENTASIA I.T.A. NO.1295/MUM/2013 & 3825/MUM/2012, I.T.A.NO.2363& 2364/MUM/2013 A.Y.: 2003-04 ,2004-05 &2009-10 6 INVESTMENTS LTD. WAS MERGED WITH THE ASSESSEE COMPANY VIDE MUMBAI HIGH COURT ORDER DATED 27.10.2003. THUS, PRIMARY PURPOSE FOR ADVANCING AN INTEREST FREE LOAN TO PENTASIA INVESTMNETS LTD. WAS FOR INVESTING IN A COMPANY MANUFACTURING AN IMPORTANT AND VITAL INGREDIENT / CHEMICAL USED IN THE MANUFACTURE OF PAINTS WHICH IS THE MAIN BUSINESS OF THE ASSESSEE, AND BUT FOR THE COMPANY LAW REQUIREMENTS ASSESSEE WOULD HAVE DIRECTLY INVESTED IN THE COMPANY. MOREOVER, IF THE ASSESSEE HAD NOT RECEIVED SUPPLY OF THIS VITAL CHEMICAL FROM PENTASIA CHEMICALS, IT WOULD NOT HAVE BEEN ABLE TO MANUFACTURE PAINTS AND THIS WOULD HAVE AFFECTED ITS BUSINESS OF MANUFACTURE OF PAINTS. MOREOVER, PENTASIA INVESTMNETS LTD. HAS ALREADY MERGED WITH THE ASSESSEE WITH EFFECT FROM 01.04.2002 AS PER THE ORDERS OF MUMBAI HIGH COURT AND, THEREFORE, THE ISSUE IS NOT RELEVANT FOR THIS YEAR. IT MAY BE MENTIONED HERE THAT ASSESSING OFFICER HAS ALSO DELETED THE DISALLOWANCE OF INTEREST IN RESPECT OF LOAN TO P.I. LTD. FOR A.Y.2000-01, 2001-02 AND 2002-03. KEEPING IN VIEW, THE FACTS OF THE CASE I AM OF THE OPINION THA T THE INTEREST FREE LOAN OF RS.5,89,30,000/- GIVEN BY I.T.A. NO.1295/MUM/2013 & 3825/MUM/2012, I.T.A.NO.2363& 2364/MUM/2013 A.Y.: 2003-04 ,2004-05 &2009-10 7 THE ASSESSEE TO PENTASIA INVESTMENTS LTD. WAS FOR BUSINESS PURPOSES. 3.2.3 ASSESSEE HAD GIVEN INTEREST FREE LOAN OF RS.6,00,00,000/- TO ITS SUBSIDIARY ASIAN PAINTS INDUSTRIAL COATINGS LTD. WHICH IS ALSO ENGAGED IN THE BUSINESS OF MANUFACTURING POWER COATINGS SIMILAR TO ASSESSEES BUSINESS AND ASSESSEE WAS ALSO DOING PROCESSING WORK FOR APIC LTD. ASSESSING OFFICER HAS ALSO DELETED THE DISALLOWANCE OF INTEREST IN RESPECT OF INTEREST FRE E LOANS GIVEN TO APIC LTD. FOR A.Y.2001-02, 2002- 03 AND 2005-06. KEEPING IN VIEW, ENTIRE FACTS OF THE CASE IT IS HELD THAT THE INTEREST FREE LOAN OF RS.6,00,00,000/- GIVEN BY THE ASSESSEE TO APIC LTD. WAS GIVEN FOR BUSINESS PURPOSE. 3.2.4 ASSESSEE ADVANCED INTEREST FREE LOAN OF RS.100,02,00,000/- TO TIMI LTD. SO AS TO ENABLE IT TO LIQUIDATE LOANS IT HAD TAKEN FROM ITS OLD SHAREHOLDERS. M/S. TIMI LTD. WAS THE OWNER OF THE ASSEESEES CORPORATE OFFICE AND ASSESSEE HAD TAKEN THE OFFICE ON RENT. ASSESSEE CHARGED INTEREST UPTO 10.09.2001, THE DATE WHEN TIMI LTD. BECAME ITS SUBSIDIARY TO MEET WITH THE REQUIREMENTS OF RBI I.T.A. NO.1295/MUM/2013 & 3825/MUM/2012, I.T.A.NO.2363& 2364/MUM/2013 A.Y.: 2003-04 ,2004-05 &2009-10 8 REGULATIONS AND WHEN TIMI LTD. BECAME ITS SUBSIDIARY IT STOPPED CHARGING INTEREST. TIMI LTD. OWNED THE OFFICE BUILDING WHERE CORPORATE OFFICE OF ASSESSEE IS LOCATED AND ASSESSEE HAD TAKEN IT ON RENTAL BASIS. TIMI LTD. WAS MERGED WITH ASSESSEE COMPANY WITH EFFECT FROM 01.04.2009 AS PER ORDERS OF MUMBAI HIGH COURT. ASSESSING OFFICER HAS ALSO DELETED THE DISALLOWANCE OF INTEREST IN RESPEC T OF INTEREST FREE LOAN GIVEN TO TIMI LTD. KEEPING I N VIEW THE FACTS OF THE CASE IT IS HELD THAT THE INTE REST FREE LOAN OF RS.10,00,20,000/- GIVEN TO TIMI LTD. WAS FOR BUSINESS PURPOSE. IN THIS CONNECTION, RELIANCE IS ALSO PLACED ON THE DECISION OF MUMBAI HIGH COURT IN CIT VS. RELIANCE UTILITIES AND POWER LTD. 221/CTR/435/BOM AND SUPREME COURT IN THE CASE OF S.A.BUILDERS LTD. V/S. CIT- 288/ITR/1. 3.2.5 THUS, IT IS OBSERVED THAT ALL THE THREE INTE REST FREE LOANS WERE GIVEN BY THE ASSESSEE TO ITS SUBSIDIARIE S FOR BUSINESS PURPOSE SINCE IT HAD SUBSTANTIAL INTEREST IN THESE COMPANIES. THEREFORE, I AM OF TH E OPINION THAT DISALLOWANCE OF INTEREST OF RS.2,62,74,000/- IN RESPECT OF THREE INTEREST FREE I.T.A. NO.1295/MUM/2013 & 3825/MUM/2012, I.T.A.NO.2363& 2364/MUM/2013 A.Y.: 2003-04 ,2004-05 &2009-10 9 LOANS IS NOT JUSTIFIED AND DELETED. IN THIS CONNECTION, RELIANCE IS ALSO PLACED ON THE DECISION S CITED BY THE ASSESSEE IN ITS LETTER DATED 07.11.201 2. 1) CIT VS. RADICO KHAITAN LTD. (2004) 274 ITR 354 (ALLAHABAD HIGH COURT) 2) ORG INFORMATICS LTD. VS. ASSTT. CIT (2011- TIOL-537-ITAT-AHM) 3) CIT VS. SOUTH INDIA CORPORATION (AGENCIES) LTD. (2007-TIOL-138-HC-MAD) 4) CIT VS. SUGAR MILLS CO. LTD. (2010-TIO:- 697-HC-DEL-IT) 5) J.K.INDUSTIRES LTD. VS. CIT (CENTRAL) I, MUMBAI (2011-TIOL-448-HC-KOL-IT) 3.2.5 THUS, ASSESSEES APPEAL ON THIS GROUND IS AL LOWED. 9. ON APPRAISAL OF THE ABOVE MENTIONED ORDER, IT IS NOT IN DISPUTE THAT THE COMPANY PENTASIA INVESTMENT LTD. TECHNICAL LY ENGAGED IN BUSINESS OF MANUFACTURING AND SUPPLY OF PENTAERITHR ITOL AN IMPORTANT RAW MATERIAL IN MANUFACTURE OF PAINTS. THE PENTASI A INVESTMENTS LTD. AND TECHNICAL INSTRUMENTS MFG. CO. LTD. AND ASIAN P AINTS INDUSTRIAL COATINGS LTD. SUBSIDIARY COMPANY AND ASSESSEE COMPA NY WAS MERGED VIDE MUMBAI HIGH COURT ORDER DATED 27.10.2003. SUB SIDIARY I.T.A. NO.1295/MUM/2013 & 3825/MUM/2012, I.T.A.NO.2363& 2364/MUM/2013 A.Y.: 2003-04 ,2004-05 &2009-10 10 COMPANY AND ASSESSEE COMPANY WAS MERGED VIDE MUMBAI HIGH COURT ORDER DATED 27.10.2003. SO FAR AS THE COMPAN Y OF PENTASIA INVESTMENTS LTD. IS CONCERNED THE DISALLOWANCE OF I NTEREST IN RESPECT OF LOAN TO PANTASIA INVESTMENTS LTD. FOR A.Y.2000-0 1, 2001-02 AND 2002-03 THE CIT(A) HAS ARRIVED AT THIS CONCLUSION T HAT THE INTEREST FREE LOAN TO THE TUNE OF RS.5,89,30,000/- GIVEN BY THE A SSESSEE TO PENTASIA INVESTMENTS LTD. WAS FOR THE BUSINESS PURPOSE. ACC ORDINGLY, THE ASSESSEE HAD GIVEN THE INTEREST FREE LOAN OF RS.6,0 0,00,000/- TO ITS SUBSIDIARY ASIAN PAINTS INDUSTRIAL COATINGS LTD. WH ICH IS ALSO ENGAGED IN THE BUSINESS OF MANUFACTURING POWDER COATINGS SI MILAR TO ASSESSEES BUSINESS AND ASSESSEE WAS ALSO DOING PROCESSING WOR K FOR APIC LTD. THE CIT(A) WAS OF THE VIEW THAT THE ASSESSING OFFIC ER HAS WRONGLY DECLINED THE INTEREST ON THE INTEREST FREE LOAN TO APIC LTD. FOR THE A.Y.2001-02, 2002-03 AND 2005-06 BECAUSE THE SAID L OAN WAS FOR THE BUSINESS PURPOSE. SIMILARLY THE ASSESSEE COMPANY A DVANCED INTEREST FREE LOAN OF RS.100,02,00,000/- TO TIMI LTD. SO AS TO ENABLE IT TO LIQUIDATE LOANS IT HAD TAKEN FROM ITS OLD SHAREHOLD ERS. M/S. TIMI LTD. WAS THE OWNER OF ASSESSEES CORPORATE OFFICE AND AS SESSEE HAD TAKEN THE OFFICE ON RENT. ASSESSEE CHARGED INTEREST UP TO 10.09.2001, THE DATE WHEN TIMI LTD. BECAME ITS SUBSIDIARY TO MEET W ITH THE REQUIREMENTS OF RBI REGULATIONS AND WHEN TIMI LTD. BECAME ITS SUBSIDIARY IT STOPPED CHARGING INTEREST. THE ASSES SING OFFICER DISALLOWED THE INTEREST ON ACCOUNT OF INTEREST FREE LOAN GIVEN TO TIMI LTD. TO THE TUNE OF RS.10,00,20,000/- BUT THE CIT(A ) HAS ALLOWED THE I.T.A. NO.1295/MUM/2013 & 3825/MUM/2012, I.T.A.NO.2363& 2364/MUM/2013 A.Y.: 2003-04 ,2004-05 &2009-10 11 SAME IN VIEW OF THE LAW SETTLED BY THE MUMBAI HIGH COURT IN CASE CIT VS. RELIANCE UTILITIES AND POWER LTD.-221/CTR/4 35/BOM AND SUPREME COURT IN THE CASE OF S.A.BUILDERS LTD. V/S. CIT-288/ITR/1 AND [2015] 379 ITR 347 (SC) IN CASE TITLED AS HERO CYCLES P. LTD. VS. COMMISSIONER OF INCOME TAX. NO DISTINGUISHABLE FAC TS HAVE BEEN PLACED ON RECORD. THE ASSESSEE COMPANY HAD GIVEN L OAN TO ITS SUBSIDIARY COMPANY WITHOUT INTEREST FOR BUSINESS PU RPOSE. THEREFORE, THE LEARNED CIT(A) HAS RIGHTLY DELETED THE DISALLOW ANCE ON NOTIONAL INTEREST TO THE TUNE OF RS.2,62,74,000/- IN ACCORDA NCE WITH LAW BY DULY RELYING UPON THE LAW SETTLED BY THE MUMBAI HIGH COU RT (SUPRA) AND HONBLE SUPREME COURT (SUPRA) . THEREFORE, THE CIT (A) HAS PASSED THE ORDER JUDICIOUSLY AND CORRECTLY WHICH DOES NOT REQUIRE TO BE INTEREST WITH AT THIS APPELLATE STAGE. ITA NO.2264/M/2013 (A.Y.2004-05):- 10. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWA NCE OF NOTIONAL INTEREST OF RS.1,02,83,000/- ON INTEREST F REE LOAN GIVEN TO WHOLLY OWNED SUBSIDIARIES. THE CIT(A) FAI LED TO APPRECIATE THAT THE HONBLE SUPREME COURT IN ADDL. CIT VS. TULIP STAR HOTELS LTD. [CC 7138-7140/2012] DATE D 30.04.2012 HAS GRANTED SPECIAL LEAVE TO APPEAL STAT ING THAT THE DECISION IN S.A.BUILDERS LTD. VS. CIT REPORTED IN [288 ITR 1] NEEDS RECONSIDERATION. 2. THE APPELLANT PRAYS THAT THE ORDER OF THE LD. CI T(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER RESTORED. I.T.A. NO.1295/MUM/2013 & 3825/MUM/2012, I.T.A.NO.2363& 2364/MUM/2013 A.Y.: 2003-04 ,2004-05 &2009-10 12 THE FACTS OF THE CASE ARE THE SAME AS MENTIONED ABO VE WHILE DECIDING THE APPEAL RELATING TO THE A.Y.2003-04 FILED BY THE PARTIES. HOWEVER THE FIGURES ARE THE DIFFERENT. ISSUE NO.1:- 11. THIS MATTER OF CONTROVERSY HAS ALREADY BEEN A DJUDICATED WHILE DECIDING THE APPEAL OF THE REVENUE FOR THE A.Y.2003 -04. THE ISSUE IS THE SAME WHICH IS IN CONNECTION WITH DISALLOWANCE O F NOTIONAL INTEREST THE TUNE OF RS.1,02,83,000/-. THIS ISSUE HAS ALREA DY BEEN DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE THEREFOR E THIS ISSUE IS ALSO DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVE NUE IN VIEW OF THE TERMS AS DECIDED ABOVE WHILE DECIDING THE APPEAL OF THE REVENUE FOR THE A.Y.2003-04. ACCORDINGLY THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. ITA NO.3825/MUM/2012 (A.Y.2009-10):- 13. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S)-21 (CIT (A)) MUMBAI ERRED IN CONFIRMING THE DISALLOW ANCE OF RS.60,87,581/- BEING EXPENDITURE INCURRED ON ACC OUNT OF PROPERTY TAX PAID FOR THE LAND. AS THERE WAS NO ST RUCTURE ON LAND AND NO INCOME WAS EARNED, NO INCOME WAS OFF ERED TO TAX. THE EXPENDITURE CONSIDERED AS BUSINESS EXP ENDITURE DUO TO WHICH THERE WAS BUSINESS LOSS. THE LEARNED CIT(A) IS CONFIRMING THE EXPENDITURE AS NON BUSINESS EXPEN SES I.T.A. NO.1295/MUM/2013 & 3825/MUM/2012, I.T.A.NO.2363& 2364/MUM/2013 A.Y.: 2003-04 ,2004-05 &2009-10 13 ONLY BECAUSE THERE IS NO BUSINESS ACTIVITY IN CONNE CTION WITH THE LAND AND NO INCOME WAS GENERATED FROM THE LAND. 14. THE FACTS OF THE CASE ARE SAME AS MENTIONED ABO VE WHEREAS THE FIGURES ARE QUITE DIFFERENT. IN THE SAID ASSESSMEN T YEAR THE ASSESSEE CLAIMED THE EXPENDITURE PERTAINING TO THE PROPERTY TAX FOR LAND AT TURBHE. THE ASSESSING OFFICER WAS OF THE VIEW THAT THE BUSINESS ACTIVITY WAS NOT THEIR THEREFORE THE EXPENSES TO TH E TUNE OF RS.60,87,581/- IS NOT LIABLE TO BE ALLOWED HENCE DE CLINED THE SAME. CIT(A) HAS CONFIRMED THE ORDER OF THE ASSESSING OFF ICER, THEREFORE THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US . 15. WE HAVE HEARD THE ARGUMENTS ADVANCED BY THE LEA RNED REPRESENTATIVE OF THE PARTIES AND PERUSED THE RECOR D. THE SOLE POINT WHICH HAS BEEN RAISED BY THE ASSESSEE IS THAT THE D ISALLOWANCE ON PROPERTY TAX TO THE TUNE OF RS.60,87,581/- ON ACCOU NT OF NON RUNNING BUSINESS THERE HAS WRONGLY BEEN DECLINED WHICH IS L IABLE TO BE ALLOWED. THE CONTENTION OF THE ASSESSEE IS THAT HE PURCHASED THE LEASE HOLD RIGHT FROM M/S. TECHNICAL INSTRUMENTS MANUFACT URES (INDIA) PVT. LTD. WHICH WAS INCORPORATED ON 29.12.1955 AND WAS 1 00% SUBSIDIARY OF ASIAN PAINTS LTD.. ACCORDING TO THE OBJECTS, TH E ASSESSEE WAS ENTITLED TO ACQUIRE PROPERTY FOR THE PURPOSE OF THE COMPANY. IT IS ARGUED THAT THE ASSESSEE ACQUIRED THE LEASE HOLD RI GHTS OF INDUSTRIAL LAND IN MIDC AREA IN TURBHE (NAVI MUMBAI) IN A.Y.20 08-09 AND THE SAID RIGHTS WERE ASSIGNED TO ASIAN PAINTS LTD. IN A .Y.2009-10. IT IS ARGUED THAT THE PERMISSION LETTER FROM MIDC REQUIRI NG ASIAN PAINTS I.T.A. NO.1295/MUM/2013 & 3825/MUM/2012, I.T.A.NO.2363& 2364/MUM/2013 A.Y.: 2003-04 ,2004-05 &2009-10 14 LTD. TO ESTABLISHED R & D CENTRE. NO DOUBT IN THE RELEVANT ASSESSMENT YEAR NO CONSTRUCTION OF ANY KIND WAS SHO WN BUT THE PROPERTY TAX WAS PAID IN THE RELEVANT ASSESSMENT YE AR. ON 24.07.2009 THE ASSESSEE COMPANY AMALGAMATED WITH ASIAN PAINTS LTD, THEREFORE IN THE SAID CIRCUMSTANCES THE SAID EXPENDITURE IS N OT REQUIRED TO BE DISALLOWED ON THE GROUND OF THAT THE ASSESSEE HAD N O BUSINESS. IN SUPPORT OF THESE CONTENTIONS THE LEARNED REPRESENTA TIVE OF THE ASSESSEE HAS PLACED RELIANCE ON THE LAW SETTLED IN CIT VS. R ALLIWOLF LTD. (1980) 121 ITR 262 (BOM.) AND SARDAR SAROVAR NARMADA NIGAM LTD. VS. ACIT (2012) 138 ITD 203 (AHD.) (SB) AND WESTERN IND IA VEGETABLE PRODUCTS LTD. VS. CIT (1954) 26 ITR 151 (BOM.) AND CIT VS. SAURASHTRA CEMENT AND CHEMICAL INDUSTRIES LTD. (197 3) 91 ITR 170 (GUJ.) 16. ON THE OTHER HAND LEARNED REPRESENTATIVE OF THE DEPARTMENT HAS STRONGLY RELIED UPON THE FINDING OF THE CIT(A) IN Q UESTION. IT IS NOT IN DISPUTE THAT THE ASSESSEE COMPANY WAS INCORPORATED ON 29.12.1955 AND IN THIS REGARD THE CERTIFICATION OF INCORPORATI ON IS ON RECORD LIES AT PAGE 69 OF THE PAPER BOOK. THE MEMORANDUM OF UNDER STANDING (MOU) IS ALSO ON RECORD WHICH LIES AT PAGE 66 TO 94 OF THE PAPER BOOK. IN THE SAID MOU AT SERIAL NO.28 THE COMPANY COULD ACQUIRE THE PROPERTY FOR THE BUSINESS PURPOSE WHICH IS HEREBY R EPRODUCED BELOW:- 28. TO ACQUIRE BY PURCHASE, LEASE OR OTHERWISE, FO R THE PURPOSE OF THE COMPANY ANY REAL OR FORMAL PROPERTY, I.T.A. NO.1295/MUM/2013 & 3825/MUM/2012, I.T.A.NO.2363& 2364/MUM/2013 A.Y.: 2003-04 ,2004-05 &2009-10 15 RIGHTS, PRIVILEGES, AND IN PARTICULAR ANY LAND, BUI LDING RIGHTS, EASEMENTS, LICENCES, CONCESSIONS, PRIVILEGE S, PATENT RIGHTS. 17. THEREFORE IN THE SAID CIRCUMSTANCES, IT IS NOT IN DISPUTE THAT THE ASSESSEE COMPANY CAN PURCHASE THE PROPERTY FOR THE BUSINESS PURPOSE. THE IMPORTANT DOCUMENTS HAS BEEN FILED BY THE ASSES SEE COMPANY WHICH LIES AT PAGE 25 OF THE PAPER BOOK IN WHICH TH E LESSER MIDC HAS LEASED OUT THE LAND TO THE LESSEE M/S. ASIAN PAINTS LTD. AND IN VIEW OF THE SAID RECEIPT THE ASSESSEE PAID AN AMOUNT OF RS. 60,87,581/- AND ASSESSEE PAID PROPERTY TAX TO THE TUNE OF RS.60,87, 581/- DURING THE RELEVANT ASSESSMENT YEAR WHICH HAS BEEN DECLINED ON THE GROUND OF THAT THE ASSESSEE DID NOT DO THE BUSINESS. THE REC EIPT LIES AT PAGE 25 OF THE PAPER BOOK ALSO SPEAKS ABOUT THE PURPOSE IN WHICH THE PURPOSE HAS BEEN WRITTEN FOR FACTORY. MOREOVER, THE ALLOTT ED LAND WAS IN NATURE OF INDUSTRIAL LAND IN MIDC AREA, TURBHE, NAVI MUMBA I. IT IS NOT A CASE WHERE NEW FACTORY HAS BEEN ESTABLISHED BY THE ASSESSEE. THE COMPANY OF THE ASSESSEE IS OLD AND ACQUIRED THE IND USTRIAL PLOT WHOSE MONEY, ONLY PROPERTY TAX HAS BEEN PAID TO THE TUNE OF RS.60,87,581/-. IT IS NOT NECESSARY THAT AFTER ACQUIRING THE RIGHT UPON INDUSTRIAL PLOT THE ASSESSEE SHOULD IMMEDIATELY CONSTRUCT THE BUILDING AND TO START ANY ANOTHER UNIT COLLATERAL TO HIS OBJECT. THE COMPAN IES ARE WORKING IN ACCORDANCE WITH ITS OBJECT. THE INCORPORATION DATE OF THE COMPANY IS 29.12.1955. IN THE YEAR FOR THE YEAR 2008-09, THE COMPANIES CANNOT I.T.A. NO.1295/MUM/2013 & 3825/MUM/2012, I.T.A.NO.2363& 2364/MUM/2013 A.Y.: 2003-04 ,2004-05 &2009-10 16 BE SAID TO SET UP THE BUSINESS, IN THIS REGARD WE A LSO FOUND SUPPORT OF LAW RELIED IN CIT VS. RALLIWOLF LTD. (1980) 121 ITR 262 (BOM.) AND SARDAR SAROVAR NARMADA NIGAM LTD. VS. ACIT (2012) 1 38 ITD 203 (AHD.) (SB) AND WESTERN INDIA VEGETABLE PRODUCTS LT D. VS. CIT (1954) 26 ITR 151 (BOM.) AND CIT VS. SAURASHTRA CEM ENT AND CHEMICAL INDUSTRIES LTD. (1973) 91 ITR 170 (GUJ.). 18. KEEPING IN VIEW OF THE SAID CIRCUMSTANCES, WE A RE OF THE VIEW THAT THE ORDER PASSED BY THE CIT(A) IN QUESTION IS WRONG AGAINST LAW AND FACTS AND IS NOT LIABLE TO BE SUSTAINABLE IN TH E EYES OF LAW, THEREFORE, WE SET ASIDE THE ORDER OF THE CIT(A) ON THIS ISSUE AND DELETED THE SAID ADDITION AND THE ASSESSING OFFICER IS HEREBY DIRECTED TO ALLOW THE PROPERTY TAX TO THE TUNE OF RS.60,87,5 81/- FOR THE RELEVANT ASSESSMENT YEAR. ACCORDINGLY THIS ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE AGAINST THE REVENUE. 19. IN RESULT THE APPEAL FILED BY THE ASSESSEE IN I TA NO.1295/M/2013 FOR A.Y.2003-04 AND THE APPEALS FILE D BY THE REVENUE IN ITA NO.2263/M/2013 FOR A.Y.2003-04 AND I TA NO.2264/M/2013 FOR A.Y.2004-05 ARE DISMISSED AND A PPEAL FILED BY THE ASSESSEE IN ITA NO.3825/MUM/2012 FOR A.Y.2009-1 0 IS HEREBY ORDERED TO BE ALLOWED. I.T.A. NO.1295/MUM/2013 & 3825/MUM/2012, I.T.A.NO.2363& 2364/MUM/2013 A.Y.: 2003-04 ,2004-05 &2009-10 17 ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD SEPTEMBER , 2016. SD/- SD/- (B.R.BASKARAN) (AMARJIT SINGH) # / ACCOUNTANT MEMBER %& # /JUDICIAL MEMBER ' ( MUMBAI; )# DATED : 23 RD SEPTEMBER, 2016 MP MP MP MP ) * +$!', -,'! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. * ( ) / THE CIT(A)- 4. * / CIT 5. -./ &&01 , 01' , ' ( / DR, ITAT, MUMBAI 6. /34 5 / GUARD FILE. ) / BY ORDER, - & //TRUE COPY// ./# /(DY./ASSTT. REGISTRAR) , ' ( / ITAT, MUMBAI