JCIT (OSD), New Delhi V. M/s DLF Utilities Ltd, New Delhi

ITA 2566/DEL/2016

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5763 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-06-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 06-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Keywords: Business expenditure; Commercial expediency
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH A, NEW DELHI BEFORE SH. G.D. AGRAWAL, PRESIDENT AND SH. SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO.1998/DEL/2016 (A.Y.: 2011-12) DLF UTILITIES LTD. 9 TH FLOOR, DLF CENTRE, SANSAD MARG NEW DELHI VS. DCIT CIRCLE-7(1) NEW DELHI PAN : AAACN3199A (APPELLANT) (RESPONDENT) ITA NO. 2566/DEL/2016 (A.Y. : 2011-12) JCIT (OSD) CIRCLE-7(1), 403, C.R.BUILDING I.P.ESTATE NEW DELHI VS. DLF UTILITIES LTD. 9 TH FLOOR, DLF CENTRE, SANSAD MARG NEW DELHI (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. R.S.SINGHVI, SR. DR REVENUE BY : MS. ASHIMA NEB, SR. DR DATE OF HEARING : 27.06.2018 DATE OF PRONOUNCEMENT : 28.06.2018 O R D E R PER BENCH : ITA NO. 1998/DEL/2016 IS THE ASSESSEES APPEAL AGAI NST ORDER DATED 26.02.2016 PASSED BY THE LD. CIT (APPEALS)-3, NEW DELHI FOR 2 ITA NO.1998, 2566/DEL/2016 (DLF UTILITIES LTD.) ASSESSMENT YEAR 2011-12 WHEREAS ITA NO. 2566/DEL/201 6 IS THE DEPARTMENTS CROSS APPEAL FOR THE YEAR. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY WAS ENGAGED IN THE BUSINESS OF GENERATION OF POWER THRO UGH GAS TURBINES AND GAS ENGINES, RUNNING OF MULTIPLEX THEA TRES, DISTRIBUTION OF NATURAL GAS, PROVIDING FACILITY MAN AGEMENT SERVICES AND REAL ESTATE DEVELOPMENT. THE RETURN WAS FILED DE CLARING A LOSS OF RS. 4,11,60,55,330/-. THE CASE WAS SELECTED FOR SCRU TINY UNDER CASS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED THAT DURING THE YEAR THE ASSESSEE HAD TAKEN SECURED AND UNSECURED LOANS AGGREGATING TO RS. 16,13,53,80,970/- ON WHICH INTEREST OF RS. 43,04,42,633/- HAD BEEN PAID. THE AO ALSO NOTED THA T THERE WERE INVESTMENTS AND INTEREST FREE LOANS AND ADVANCES AN D CAPITAL WORK IN PROGRESS WHICH WERE FINANCED FROM THE BORROWED FUN DS WHEREAS THE ASSESSEES FUND, INCLUDING SHARE CAPITAL AND RE SERVE & SURPLUS, WAS RS. 2,59,78,94,150/-. THE AO WAS OF THE VIEW THAT SINCE THE ASSESSEE HAD USED BORROWED FUNDS FOR INVESTMENTS, C APITAL WORK- IN- PROGRESS AND OTHER LOANS AND ADVANCES, THE PROV ISIONS OF SECTION 36(1)(III) WERE TO BE INVOKED. THE AO PROCEEDED TO MAKE A DISALLOWANCE OF RS. 2,75,11,416/- U/S 36(1)(III) OF THE ACT. FURTHER, 3 ITA NO.1998, 2566/DEL/2016 (DLF UTILITIES LTD.) THE AO ALSO MADE A DISALLOWANCE OF RS. 9,65,734/- U/ S 14A OF THE ACT. 2.1 THE ASSESSEE APPROACHED THE LD. CIT (A) AGAINST THESE DISALLOWANCES. THE LD. CIT (A) DELETED THE DISALLOW ANCE MADE U/S 36(1)(III) OF THE ACT BUT PARTLY UPHELD THE DISALLO WANCE U/S 14A OF THE ACT. NOW, THE DEPARTMENT IS IN APPEAL CHALLENGI NG THE DELETION OF DISALLOWANCE OF RS. 2,75,11,416/- MADE BY THE A O U/S 36(1)(III) OF THE ACT WHEREAS THE ASSESSEE IS IN APPEAL AGAINST THE DISALLOWANCE OF RS. 1,84,996/- SUSTAINED U/S 14A OF THE ACT. 3. THE LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT AS FAR AS THE DEPARTMENTS APPEAL CHALLENGING THE DELETION OF DIS ALLOWANCE U/S 36(1)(III) OF THE ACT WAS CONCERNED, THE ISSUE IS CO VERED IN FAVOUR OF THE ASSESSEE BY ORDER OF ITAT DELHI BENCH IN ASSESS EES OWN CASE FOR ASSESSMENT YEAR 2008-09 IN ITA NO. 4348/DEL/201 2. 3.1 WITH RESPECT TO THE ASSESSEES APPEAL CHALLENGI NG THE UPHOLDING OF DISALLOWANCE U/S 14A OF THE ACT, THE LD . AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ASSESSEE WISHED T O WITHDRAW THE APPEAL IN VIEW OF THE SMALLNESS OF AMOUNT WITH LIBERT Y TO AGITATE THIS ISSUE IN OTHER ASSESSMENT YEARS IF THE ISSUE SO ARO SE. 4 ITA NO.1998, 2566/DEL/2016 (DLF UTILITIES LTD.) 4. THE LD. SR. DEPARTMENTAL REPRESENTATIVE, WITH RES PECT TO THE DEPARTMENTS APPEAL, READ OUT EXTENSIVELY FROM THE ASSESSMENT ORDER AND SUPPORTED THE FINDINGS OF THE AO WITH RESP ECT TO THE DISALLOWANCE U/S 36(1)(III) OF THE ACT. THE LD. SR. DEPARTMENTAL REPRESENTATIVE VEHEMENTLY ARGUED THAT THE ISSUE WAS NOT COVERED BY THE ORDER OF THE ITAT IN ASSESSMENT YEAR 2008-09 AS FACTS HAVE TO BE EXAMINED FOR EACH ASSESSMENT YEAR ON A STAND- ALONE BASIS. 4.1 WITH RESPECT TO THE ASSESSEES PRAYER FOR WITHDR AWAL OF ITS APPEAL, SHE HAD NO OBJECTION. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE ALS O PERUSED THE MATERIAL ON RECORD. AS FAR AS THE ISSUE OF DISA LLOWANCE OF INTEREST U/S 36(1)(III) OF THE ACT IS CONCERNED, WE FIND THAT THE LD. CIT (A) HAS DISCUSSED THE ISSUE AT LENGTH IN PARAGR APH 3.2 OF THE IMPUGNED ORDER WHEREIN HE HAS GIVEN A CATEGORICAL FI NDING THAT THE LOANS AND ADVANCES INCLUDE INVESTMENT IN IMMOVABLE PROPERTY WHICH WAS PART OF THE BUSINESS ACTIVITY OF THE ASSESS EE. IT HAS BEEN FURTHER RECORDED BY THE LD. CIT (A) THAT THE INVEST MENT IN THE PARTNERSHIP FIRM WAS MADE EXCLUSIVELY FOR THE PURPOS E OF THE BUSINESS. IT HAS ALSO BEEN NOTED BY THE LD. CIT (A) THAT THE ADVANCES RECOVERABLE AND FORWARD-COVER RECEIVABLE IN CLUDED IN THE 5 ITA NO.1998, 2566/DEL/2016 (DLF UTILITIES LTD.) ADVANCES ARE BUSINESS ADVANCES AND HAVE BEEN GIVEN TO SUPPLIERS WITH WHOM REGULAR BUSINESS TRANSACTIONS ARE UNDER TAK EN. SIMILARLY WITH RESPECT TO THE ADVANCE GIVEN TO DLF L TD., THE LD. CIT (A) HAS NOTED THAT THE SAME HAS ALSO BEEN GIVEN FOR THE PURPOSE OF BUSINESS. THE LD. CIT (A) HAS ALSO NOTED THAT APART FROM THESE ADVANCES, THERE WERE OTHER ADVANCES ALSO BUT ON WHICH INTEREST HAS DULY BEEN CHARGED BY THE ASSESSEE. THE LD. CIT (A) HAS ALSO PLACED RELIANCE ON THE JUDGMENT OF THE HONBLE APEX COURT IN THE CASE OF S.A. BUILDERS LTD. REPORTED IN 288 ITR 1 WHEREIN THE HONBLE APEX COURT HAD HELD THAT AN EXPENDITURE MAY NOT HAVE BEE N INCURRED UNDER ANY LEGAL OBJECTION BUT YET IT IS ALLOWABLE AS A BUSINESS EXPENDITURE IF IT WAS INCURRED ON THE GROUNDS OF COM MERCIAL EXPEDIENCY. WE NOTE THAT THE HONBLE APEX COURT HAS ALSO OBSERVED THAT THE EXPRESSION COMMERCIAL EXPEDIENCY IS AN E XPRESSION OF WIDE IMPORT AND INCLUDES SUCH EXPENDITURE AS A PRUD ENT BUSINESSMAN INCURS FOR THE PURPOSE OF BUSINESS. TH E LD. CIT (A) HAS ALSO REFERRED TO THE JUDGMENT OF HONBLE DELHI HIGH COURT IN THE CASE OF CIT VS. DALMIA CEMENT (PVT.) LTD. REPORTED IN 254 ITR 377 WHEREIN IT HAD BEEN HELD BY THE HONBLE HIGH COURT T HAT ONCE IT WAS ESTABLISHED THAT THERE WAS A NEXUS BETWEEN THE EXPEN DITURE AND 6 ITA NO.1998, 2566/DEL/2016 (DLF UTILITIES LTD.) THE PURPOSE OF BUSINESS, THE REVENUE CANNOT JUSTIF IABLY CLAIM TO PUT ITSELF IN THE ARMCHAIR OF THE BUSINESSMAN AND T AKE UP THE ROLE TO DECIDE AS TO HOW MUCH IS REASONABLE EXPENDITURE H AVING REGARD TO THE CIRCUMSTANCES OF THE CASE. THEREAFTER, THE L D. CIT (A) HAS GIVEN A CATEGORICAL FINDING THAT IN THE INSTANT CAS E THE LOANS AND ADVANCES HAVE BEEN GIVEN ON ACCOUNT OF COMMERCIAL E XPEDIENCY. THE LD. SR. DEPARTMENTAL REPRESENTATIVE COULD NOT P OINT OUT ANY FACTUAL INACCURACY IN THE FINDINGS OF THE LD. CIT ( A) NOR COULD SHE POINT OUT HOW THE IMPUGNED ORDER WAS NOT LEGALLY SUST AINABLE. ACCORDINGLY, WE FIND NO REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT (A) ON THIS ISSUE AND WE DISMISS THE GROUND S RAISED BY THE DEPARTMENT. 5.1 THUS, THE APPEAL OF THE DEPARTMENT STANDS DISMI SSED. 6. AS THE LD. AR HAS SUBMITTED THAT HE WISHES TO WITH DRAW THE ASSESSEES APPEAL DUE TO SMALLNESS OF AMOUNT, WE AC CEDE TO HIS REQUEST AND GIVE PERMISSION FOR THE WITHDRAWAL OF TH E APPEAL. WE ALSO GRANT LIBERTY TO THE ASSESSEE TO RAISE IDENTIC AL GROUND IN OTHER ASSESSMENT YEARS, SHOULD THE NEED SO ARISE. ACCORDI NGLY, THE APPEAL OF THE ASSESSEE STANDS DISMISSED AS WITHDRAWN. 7 ITA NO.1998, 2566/DEL/2016 (DLF UTILITIES LTD.) 7. IN THE FINAL RESULT THE APPEAL OF THE DEPARTMEN T AS WELL AS THE ASSESSEE STAND DISMISSED. (ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH JUNE, 2018). SD/- SD/- (G.D.AGARWAL) (SUDHANSHU SRIVASTAVA ) PRESIDENT J UDICIAL MEMBER DATE: 28.06.2018 BINITA COPY OF ORDER TO: - 1) THE APPELLANT; 2) THE RESPONDENT; 3) THE CIT; 4) THE CIT(A)-, NEW DELHI; 5) THE DR, I.T.A.T., NEW DELHI; TRUE COPY BY ORDER ITAT, NEW DELHI 8 ITA NO.1998, 2566/DEL/2016 (DLF UTILITIES LTD.)