AEGON RELIGARE LIFE INSURANCE CO, LTD, MUMBAI V. ADDL CIT CIR 3(1), MUMBAI

ITA 2772/MUM/2012

• Counselvise Citation: 277219914 RSA 2012
• Duration Of Justice: 1 year(s) 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 29-01-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 24-04-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S J SINGH
• Assessee Lawyers: NIRAJ SHETH
• Section: 11

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - A BENCH. , ! ! ! ! , ,, , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & VIVEK VAR MA,JUDICIAL MEMBER /. ITA NO.2772/MUM/2012, # # # # $ $ $ $ / ASSESSMENT YEAR-2008-09 M/S AEGON RELIGARE LIFE INSURANCE CO. LTD. 2 ND FLOOR, GYS INFINITY, PARANJPE B SCHEME, SUBHASH ROAD, NEAR GARWARE HOUSE, VILE PARLE (EAST), MUMBAI-400057 VS ACIT CIRCLE 3(1) MUMBAI. PAN: AAGCA3203J ( %& / APPELLANT) ( '(%& / RESPONDENT) #)* #)* #)* #)* + + + + / ASSESSEE BY : SHRI NIRAJ SHETH , + / REVENUE BY : SHRI S.J. SINGH # # # # , ,, , *- *- *- *- / DATE OF HEARING : 29-01-2014 ./$ , *- / DATE OF PRONOUNCEMENT : 29-01-2014 # # # # , 1961 , ,, , 254 )1( *0* *0* *0* *0* 1 1 1 1 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM # # # # : CHALLENGING THE ORDER DT.25.01.2012 OF THE CIT(A)-5 ,MUMBAI,ASSESSEE-COMPANY HAS RAISED FOLLOWING GROUNDS OF APPEAL: GROUND NO. 1: DISALLOWANCE OF EXPENSES OF RS. 26,41 ,92,647 INCURRED POST SET-UP OF BUSINESS THE LEARNED CIT(A) HAS ERRED IN DISALLOWING THE EXP ENSES OF RS. 26,41,92,647 CLAIMED BY THE APPELLANT DURING THE COURSE OF ASSESSMENT PROCEEDIN GS DESPITE THE FACT THAT THE EXPENSES WERE INCURRED POST SETTING-UP OF ITS BUSINESS. WHILE MAKING THE DISALLOWANCE, THE LEARNED CIT(A) H AS ALSO ERRED ON THE FOLLOWING GROUNDS: 1.1THE LEARNED CIT(A) HAS ERRED IN NOT ACCEPTING TH E FACTS THAT THE APPELLANTS BUSINESS WAS SETUP ON 30 JUNE 2007. 1.2WHILE CONCLUDING THAT THE APPELLANT COMMENCED BU SINESS ONLY AFTER OBTAINING REQUISITE PERMISSION FROM THE IRDA, THE LEARNED CIT(A) ERRED IN NOT APPRECIATING THE FACT THAT SET-UP OF BUSINESS IS DIFFERENT FROM COMMENCEMENT AND WHAT IS RELEVANT FOR CLAIMING EXPENDITURE IS THE DATE OF SET-UP OF BUSINESS AND NOT THE DATE OF COMMENCEM ENT. 1.3THE CIT(A) HAS ERRED IN NOT CONSIDERING THE RATI ONALE LAID DOWN BY THE VARIOUS DECISIONS OF HIGH COURT AND TRIBUNAL RELIED UPON BY THE APPELLAN T WHEREIN IT WAS HELD THAT DATE OF SET-UP OF BUSINESS IS DIFFERENT FROM DATE OF COMMENCEMENT OF BUSINESS AND THEREFORE THE EXPENSES INCURRED AFTER SETTING UP OF THE BUSINESS WERE ALLOWABLE EXP ENSE. 1.4THE CIT(A) HAS ERRED IN NOT CONSIDERING DECISION OF HONOURABLE HIGH COURT RELIED UPON BY THE APPELLANT WHEREIN INTER ALIA IT WAS HELD THAT APPRO VAL FROM REGULATORY AUTHORITY FOR OBTAINING A LICENSE IS A CONSEQUENTIAL ACTIVITY AND THE SAME IS NOT KEY CRITERIA TO DETERMINE DATE OF SET-UP OF TH E BUSINESS. THE APPELLANT PRAYS THAT THE AO BE DIRECTED TO ALLO W THE EXPENSES OF RS. 26,41,92,647 INCURRED POST SET-UP OF ITS BUSINESS WHILE COMPUTING THE TOT AL INCOME. GROUND NO. 2: INTEREST LEVIED UNDER SECTION 234C OF THE ACT 2 ITA NO. 2772/MUM/2012 M/S AEGON RELIGARE LIFE INSURAN CE CO. LTD. THE CIT(A) ERRED IN UPHOLDING THE ORDER OF THE AO L EVYING EXCESS INTEREST OF RS. 3,808 UNDER SECTIONS 234C OF THE ACT WITHOUT CONSIDERING THE FI RST PROVISO TO SECTION 234C( 1) OF THE ACT, WHICH CLEARLY STATES THAT NO INTEREST WILL BE LEVIED IN R ESPECT OF ANY SHORTFALL IN THE PAYMENT OF ADVANCE TAX, IF SUCH SHORTFALL IS ON ACCOUNT OF UNDERESTIMA TE OR FAILURE TO ESTIMATE THE AMOUNT OF CAPITAL GAINS, AND THE TAX ON SUCH INCOME IS PAID O N OR BEFORE THE IMMEDIATE DUE DATE FOR PAYMENT OF THE ADVANCE TAX INSTALLMENT IN CONNECTION WITH T HE RELEVANT PERIOD. THE APPELLANT REQUESTS THAT THE AO BE GIVEN A SUITA BLE DIRECTION TO DELETE SUCH INTEREST. THE APPELLANT CRAVES LEAVE TO ADD TO OR ALTER, BY D ELETION, SUBSTITUTION OR OTHERWISE, ANY OR ALL OF THE ABOVE GROUNDS OF APPEAL, AT ANY TIME BEFORE OR DURING THE HEARING OF THE APPEAL. 2. ASSESSEE-COMPANY,ENGAGED IN THE BUSINESS OF LIFE IN SURANCE,FILED ITS RETURN OF INCOME ON 30.09.2008 DECLARING TOTAL LOSS OF RS.25,86,10,656/ -.ASSESSING OFFICER (AO) FINALISED THE ASSESSMENT ORDER U/S.143(3) OF THE ACT, ON 27.12.20 10,DETERMINING THE TOTAL INCOME AT RS.64,13,018/-.DURING THE COURSE OF HEARING BEFORE US,AUTHORISED REPRESENTATIVE(AR) SUBMITTED THAT ASSESSEE WANTED TO WITHDRAW GROUND NO.1.IN THI S REGARD BELOW MENTIONED SUBMISSIONS WERE MADE BY THE ASSESSEE VIDE ITS LETTER DATED 29.1.201 4 : THE CORE ISSUE INVOLVED IN GROUND 1 OF THE APPEAL IS AS TO WHAT IS THE DATE OF SET-UP OF BUSINESS OF THE APPELLANT. ACCORDING TO THE APPELLANT, THE DATE OF SET-UP IS 30 JUNE 2007. ACCORDING TO THE ASSESSING OFFICER, THE DATE OF SET-UP IS 27 JUNE 2008. IN VIE W OF THIS, THE AO HAS DISALLOWED THE ENTIRE EXPENDI TURE OF RS. 26,41,92,647 INCURRED BY THE APPELLANT BETWE EN 30 JUNE 2007 AND 31 MARCH 2008. THE APPELLANT SHAREHOLDING UNDERWENT A CHANGE DURIN G THE PREVIOUS YEAR RELEVANT TO THE ASSESSMENT YEAR 2009-10. THEREFORE, THE ENTIRE LOSS ARISING ON ACCOUNT OF CLAIM OF THE AFORESAID EXPENDITURE OF R S. 26,41,92,647 HAS BECOME UNAVAILABLE ON ACCOUNT OF T HE PROVISIONS OF SECTION 79 OF THE INCOME-TAX ACT, 1961 (THE ACT). CONSEQUENTLY, THE ALLOWABILITY OR OTHERWISE OF THE AFORESAID EXPENDITURE HAS BECOME PURELY ACADEMIC. IN VIEW OF THE ABOVE, WHILST THE APPELLANT MAINTAIN S THAT THE DATE OF SET-UP OF ITS BUSINESS .IS 30 JU NE 2007,SINCE THE ISSUE IN THIS YEAR IS ACADEMIC, THE APPELLANT REQUESTS THAT GROUND I OF THIS APPEAL BE TREATED AS WITHDRAWN. DEPARTMENTAL REPRESENTATIVE (DR) STATED THAT HE HAD NO OBJECTION IF ASSESSEE IS ALLOWED TO WITHDRAW THE GROUND.THEREFORE,GROUND NO. 1 STANDS D ISMISSED AS WITHDRAWN.ASSESSEE WILL BE AT LIBERTY TO RAISE THE ISSUE AS AND WHEN NEED ARISES. 3. NEXT GROUND OF APPEAL PERTAINS TO LEVYING EXCESS IN TEREST OF RS. 3,808/- UNDER SECTIONS 234C OF THE ACT.WHILE FRAMING THE ASSESSMENT AO LEVIED INTE REST U/S.234 C THAT WAS CHALLENGED BEFORE THE FIRST APPELLATE AUTHORITY(FAA).AS PER THE AR,FAA DI D NOT DECIDE THE ISSUE THOUGH A SPECIFIC GROUND WAS RAISED.HE FURTHER SUBMITTED THAT AO/FAA LEVIED/CONFIRMED INTEREST WITHOUT CONSIDERING THE FIRST PROVISO TO SECTION 234C( 1) O F THE ACT,THAT AS PER THE PROVISO NO INTEREST WAS BE LEVIED IN RESPECT OF ANY SHORTFALL IN THE PAYMEN T OF ADVANCE TAX, IF SUCH SHORTFALL WAS ON ACCOUNT OF UNDERESTIMATE OR FAILURE TO ESTIMATE THE AMOUNT OF CAPITAL GAINS, AND THE TAX ON SUCH INCOME WAS PAID ON OR BEFORE THE IMMEDIATE DUE DATE FOR PAYMENT OF THE ADVANCE TAX INSTALLMENT IN CONNECTION WITH THE RELEVANT PERIOD,THAT FAA DID NOT PASS A SPEAKING ORDER,THAT AO SHOULD BE DIRECTED TO PASS FRESH ORDER AND LEVY DUE INTEREST. DR SUBMITTED THAT HE HAD NO OBJECTION IF THE MATTER WAS RESTORED BACK. 3.1. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT THE ASSESSEE HAD RAISED THE ISSUE OF CHARGING OF EXCESS INTEREST, BY THE AO,U/S. 234 C OF THE ACT BEFORE THE FAA,BUT HE SIMPLY HELD THAT LEVY OF INTEREST WA S MANDATORY.HE DID NOT ADJUDICATE THE ISSUE OF EXCESS INTEREST.THEREFORE,WE ARE OF THE OPINION THA T IN THE INTEREST OF JUSTICE,MATTER SHOULD BE REMITTED BACK TO THE FILE OF THE AO TO DECIDE THE I SSUE OF LEVY OF INTEREST AFRESH.HE IS DIRECTED TO AFFORD A REASONABLE OPPORTUNITY OF HEARING TO THE A SSESSEE.GROUND NO.2 IS ALLOWED FOR STATISTICAL PURPOSES. AS A RESULT,APPEAL FILED BY THE ASSESSEE-COMPANY ST ANDS PARTLY ALLOWED. 3 ITA NO. 2772/MUM/2012 M/S AEGON RELIGARE LIFE INSURAN CE CO. LTD. ORDER PRONOUNCED IN THE OP EN COURT ON 29 TH JANUARY,2014 . 1 , ./$ 2 3# 29 TUOJH TUOJH TUOJH TUOJH , 201 4 / , 0 4 SD/- SD/- ( ! ! ! ! / VIVEK VARMA) ( / RAJENDRA) / JUDICIAL MEMBER /ACCOUNTANT MEMBER / MUMBAI, 3# /DATE: 29 TH JANUARY,2014. SK 1 1 1 1 , ,, , '*! '*! '*! '*! 5!$* 5!$* 5!$* 5!$* / COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE / %& 2. RESPONDENT / '(%& 3. THE CONCERNED CIT (A) / 6 7 , 4. THE CONCERNED CIT / 6 7 5. DR A BENCH, ITAT, MUMBAI / !80 '*# , ,, , , . . . 6. GUARD FILE/ 0 9 (!* (!* (!* (!* '* '*'* '* //TRUE COPY// 1# / BY ORDER, : / ; DY./ASST. REGISTRAR , /ITAT, MUMBAI