M/s BlueScope Steel India Pvt. Ltd., Pune V. DCIT, New Delhi

ITA 2489/DEL/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5360 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 04-05-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: RONAK G DOSHARI
• Keywords: Business income; Depreciation; Business expenditure; Unabsorbed depreciation
• Section: 37(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C : NEW DELHI) BEFORE SHRI R.K.PANDA, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.2489/DEL./2016 (ASSESSMENT YEAR : 2012-13) BLUE SCOPE STEEL INDIA PVT LTD. DCIT FINAL PLOT NO. 27, SURVEY NO. 21 VS. CIRCLE 5( 1), WAKDEWADI, SHIVAJI NAGAR, NEW DELHI PUNE (PAN : AAACB2855R) (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. RONAK G. DOSHARI, ADV. REVENUE BY : SHRI AMIT KATOCH, SR. DR DATE OF HEARING : 16.01.2019 DATE OF ORDER : 29.01.2019 O R D E R PER KULDIP SINGH, JUDICIAL MEMBER : THE APPELLANT, BLUE SCOPE STEEL INDIA P. LTD. (HERE INAFTER REFERRED TO AS THE ASSESSEE) BY FILING THE PRESENT APPEAL SOU GHT TO SET ASIDE THE IMPUGNED ORDER DATED 29.01.2016 PASSED BY THE COMMI SSIONER OF INCOME-TAX (APPEALS)-2, NEW DELHI QUA THE ASSESSMEN T YEAR 2012-13. 2. BRIEFLY STATED THAT FACTS NECESSARY FOR ADJUDIC ATION OF THE CONTROVERSY AT HAND ARE : BLUE SCOPE STEEL INDIA P VT. LTD., ASSESSEE A SUBSIDIARY OF BLUE SCOPE LTD. AUSTRALIA (HOLDING CO MPANY), WAS INTO ITA NO.2489/DEL./2016 2 MANUFACTURING OF ROLL FORM ZINC/ALUMINUM COATED STE EL SHEETS WHICH IT HAS NOT PURSUED FURTHER . FROM APRIL, 2004 ONWARDS ASSESSEE STARTED RENDERING BUSINESS SUPPORT SERVICES TO ITS HOLDING COMPANY. ASSESSEE HAS SOLD PROJECT TO TATA BLUE SCOPE STEEL LTD. (TBS L). AFTER SALE THE ASSESSEE ALSO RENDERED TECHNICAL SERVICES TO TBSL. THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS. 25,71,961/- CLA IMED BY THE ASSESSEE AS EXPENSES DEBITED TO P/L ACCOUNT BY INVO KING THE PROVISIONS CONTAINED U/S 37(1) BY TREATING THE SAME AS NON-BUSINESS EXPENDITURE. ASSESSING OFFICER ALSO TREATED OTHER I NCOME SHOWN IN P/L ACCOUNT AMOUNTING TO RS. 78,52,967/- AS INCOME FROM OTHER SOURCES TO BE TAXED THE SAME. 3. ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) BY W AY OF FILING THE APPEAL WHO HAS CONFIRMED THE ADDITION BY DISMISSING THE APPEAL. 4. WE HAVE HEARD THE LD. AUTHORIZED REPRESENTATIVES OF THE PARTIES TO THE APPEAL, GONE THROUGH THE DOCUMENTS RELIED UPON AND ORDERS PASSED BY THE REVENUE AUTHORITIES BELOW IN THE LIGHT OF TH E FACTS AND CIRCUMSTANCES OF THE CASE. 5. GROUND NO. 1 UNDISPUTEDLY ASSESSEE HAS DISCONTINUED ITS BUSINESS A NUMBER OF YEARS PRIOR TO THE YEAR UNDER ASSESSMENT. IT IS ALSO NOT IN DISPUTE THAT THERE IS NO RECEIPT IN THE P/L ACCOUNT ON ACCOUNT RENDERING BUSINESS SUPPORT ITA NO.2489/DEL./2016 3 SERVICES IT IS ALSO NOT IN DISPUTE THAT THE RECEIP T OF THE ASSESSEE ARE ONLY ON ACCOUNT OF SALE OF ASSETS, BALANCES RETURN BACK, INTEREST ETC. IT IS ALSO NOT IN DISPUTE THAT THE LD. CIT(A) CONFIRMED THE DI SALLOWANCE MADE BY THE AO CLAIMED BY THE ASSESSEE ON ACCOUNT OF EXPEND ITURE BY FOLLOWING ASSESSMENT YEAR 2010-11. 6. IN THE BACKDROP OF THE AFORESAID UNDISPUTED FACT S AND CIRCUMSTANCES OF THE CASE IT IS BROUGHT TO OUR NOTICE BY THE LD. AR FOR THE ASSESSEE THAT THIS ISSUE IS COVERED IN CASE OF THE ASSESSEE IN ITS OWN CASE FOR AY 2010-11 IN ITA NO. 6847/DEL/2014. IDENTICAL ISSUE I N CONTROVERSY HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE CO-OR DINATE BENCH OF TRIBUNAL BY RETURNING FOLLOWING FINDINGS :- 16. I HAVE CONSIDERED THE SUBMISSIONS OF BOTH THE PARTIES AND HAVE PERUSED THE RECORD OF THE CASE. ADMITTEDLY FROM AY 2006-07 TO 2009-10 THE ASSESSEES RECEIPTS FROM BUSINESS SUPPORT SERVICES AND TECHNICAL SERVICES TO TBSL WERE ASSESSED UNDER THE HEAD BUSINESS INCOME. LD. COUNSEL IN COURSE OF SUBMISSIONS REFERRED TO PAGE 1 5 OF THE PB, WHEREIN THE NOTES TO ACCOUNT ARE CONTAINED, IN WHICH IT IS, INTER ALIA, STATED AS UNDER :- THE PARENT COMPANY HAS ASSURED CONTINUED FINANCIAL SUPPORT THROUGH INFUSION OF EQUITY CAPITAL OF RS. 10,000,000 IN THE CURRENT YEAR. THE COMPANY PRESENT LY HAS ENOUGH FUNDS TO MEET ITS LIABILITIES (IN THE NEXT T WELVE ITA NO.2489/DEL./2016 4 MONTHS) AS AND WHEN THEY FALL DUE. PENDING FINALIZA TION OF FUTURE BUSINESS PLANS OF THE COMPANY, THE FINANCIAL STATEMENTS HAS BEEN PREPARED ON GOING CONCERN BASIS . THE FINANCIAL STATEMENTS DO NOT INCLUDE ANY ADJUSTMENTS RELATING TO RECOVERABILITY AND CLASSIFICATION OF RE CORDED ASSET AMOUNTS OR TO AMOUNT AND CLASSIFICATION OF LI ABILITIES THAT MAY BE NECESSARY IF THE ENTITY IS UNABLE TO CO NTINUE AS A GOING CONCERN. 17. FROM THIS IT IS EVIDENT THAT THERE WAS NO INTENTION TO CLOSE DOWN THE BUSINESS AND, THEREFORE, I AM IN AGR EEMENT WITH THE SUBMISSION OF ID. COUNSEL FOR THE ASSESSEE THAT THOUGH THERE WAS NO RECEIPT FROM THE TWO SOURCES DU RING THE YEAR BUT IT WAS A CASE OF LULL PHASE OF BUSINES S AND NORMAL BUSINESS EXPENSES INCURRED BY IT TO KEEP THE STATUS OF COMPANY AS A GOING CONCERN HAD TO BE INCURRED. F ROM PAGE 9 OF THE PB, WHEREIN SCHEDULE 11 RELATING TO OPERATING AND OTHER EXPENSES IS CONTAINED, I FIND T HAT THE DETAILS OF EXPENSES WERE AS UNDER: YEAR ENDED YEAR ENDED MARCH, 31,2010 MARCH 31, 2009 RUPEES RUPEES ELECTRICITY EXPENSES 42,630 16 5,520 RENT 585,292 3,087,650 RATES AND TAXES 417,839 490,000 INSURANCE -- --- REPAIRS AND MAINTENANCE -- 1,101,813 TRAVELLING AND CONVEYANCE 71,327 5,496,082 ITA NO.2489/DEL./2016 5 COMMUNICATION COSTS 16,963 30,082 LEGAL AND PROFESSIONAL 5,105,498 1,717,807 CHARGES FOREIGN EXCHANGE 479,563 6,222,694 DIFFERENCE (NET) SECURITY CHARGES --- 179,024 AUDITORS REMUNERATION 521,333 899,000 (NET OF REVERSAL OF RS. NIL FOR PRIOR PERIOD) PREVIOUS YEAR INCLUDE RS. 168,664 FOR PRIOR PERIOD MISCELLANEOUS EXPENSES 11,702 178,381 7,252,147 19,617,223 18. NONE OF THESE EXPENSES CAN BE SAID TO BE NOT NECESSARY FOR RETAINING THE STATUS OF ASSESSEE COMP ANY. FURTHER, LD. COUNSEL ALSO POINTED OUT THAT DURING T HE YEAR UNDER CONSIDERATION THE ASSESSEE CONTINUED TO REALI ZE ITS DEBTORS AND MADE PAYMENTS TO ITS CREDITORS AND FURT HER CONTINUED ITS EFFORTS TO REVIVE THE BUSINESS. THERE FORE, FOREIGN EXCHANGE DIFFERENCE (NET) HAD TO BE ALLOWED . IN VIEW OF ABOVE DISCUSSION, ALL THE EXPENSES ARE TO B E ALLOWED SUBJECT TO MY SUBSEQUENT FINDINGS IN RESPEC T OF LEGAL AND PROFESSIONAL CHARGES. 7. WHEN UNDISPUTEDLY NO SERVICES HAVE BEEN RENDERED BY THE ASSESSEE TO ITS HOLDING COMPANY TBSL. THERE IS NO BUSINESS I NCOME TOWARDS SUCH SERVICES DURING THE YEAR UNDER ASSESSMENT. AO HAS DISALLOWED THE EXPENSES DEBITED TO P/L ACCOUNT BY THE ASSESSEE ON THE GROUND THAT THE ITA NO.2489/DEL./2016 6 ASSESSEE HAS FAILED TO PROCEED WITH THE MAIN OBJECT OF ITS OWN COMPANY I.E. THE BUSINESS HAS NOT BEEN SET UP / NOT COMMENC ED, THE EXPENSES CLAIMED ARE NOT ALLOWABLE. THIS ISSUE HAS BEEN DE CIDED IN FAVOUR OF THE ASSESSEE BY THE CO-ORDINATE BENCH OF THE TRIBU NAL IN ASSESSEES OWN CASE FOR AY 2010-11 THAT THOUGH THERE WAS NO RECEIPT FROM THE TWO SOURCES DURING THE YEAR UNDER ASSESSMENT BUT IT WAS A CASE OF LULL PHASE OF BUSINESS IN WHICH NORMAL BUSINESS EXPENSES TO KEEP THE STATUS OF COMPANY AS A GOING CONCERN HAD TO BE INCURRED . 8. SO FOLLOWING THE DECISION RENDERED BY THE CO-ORD INATE BENCH OF TRIBUNAL IN ASSESSEES OWN CASE FOR AY 2010-11. WE ARE OF THE CONSIDERED VIEW THAT ALL THESE EXPENSES APPEARING I N THE P/L ACCOUNT BY THE ASSESSEE ARE NECESSARY TO RETAIN THE STATUS OF THE ASSESSEE COMPANY, HENCE ALLOWABLE. SO LD. CIT(A) HAS ERRED I N DISALLOWING THE EXPENSES WHICH ARE ORDERED TO BE ALLOWED. CONSEQUEN TLY GROUND NO. 1 IS DETERMINED IN FAVOUR OF THE ASSESSEE. 9. GROUND NO. 2 ASSESSEE HAS CLAIMED THE BENEFIT OF BROUGHT FORWAR D LOSSES / UNABSORBED DEPRECIATION FOR DETERMINING THE TAXABL E INCOME AND REQUESTED TO ALLOW THE AMOUNT U/S 40(A). UNDISPUTED LY THIS AMOUNT WAS DISALLOWED IN THE EARLIER YEARS. THE LD. CIT(A) HAD DIRECTED THE ASSESSING OFFICER TO DECIDE THE ISSUE IN ACCORDANCE WITH LAW ON THE BASIS OF THE MATERIAL AVAILABLE ON RECORD. SINCE TH E LD. CIT(A) HAS ITA NO.2489/DEL./2016 7 ALREADY DIRECTED TO AO TO DECIDE THIS ISSUE AS PER LAW ON THE BASIS OF MATERIAL AVAILABLE ON RECORD, THERE IS NO NEED TO M AKE FURTHER DISCUSSION ON THIS ISSUE. SO AO IS DIRECTED TO DECI DE THE SAME IN ACCORDANCE WITH LAW. ACCORDINGLY GROUND NUMBER 2 IS DETERMINED IN FAVOUR OF THE ASSESSEE FOR STATISTICAL PURPOSES. 10. IN VIEW OF WHAT HAS BEEN DISCUSSED ABOVE, APPE AL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 2 9 TH JANUARY, 2019. SD/- SD/- (R.K.PANDA) (KULDIP SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED 29/01/ 2019 BR COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXVI, NEW DELHI. 5.CIT(ITAT), NEW DELHI. AR, ITAT NEW DELHI. ITA NO.2489/DEL./2016 8 DATE OF DICTATION 18.01.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 18.01.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT 29.01.2019 DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 01.02.2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 01.02.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER