ACIT, New Delhi V. M/s. Verve Engineering Pvt. Ltd., Delhi

ITA 3358/DEL/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69621 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-11-2013
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: H
• Next Hearing Date: 06-11-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 29-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAMEER SHARMA
• Keywords: Business income
• Section: 28

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH H HH H : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND SHRI SHRI SHRI SHRI CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG, ,, , JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER JUDICIAL MEMBER ITA NO ITA NO ITA NO ITA NO. .. .3358/DEL/2012 3358/DEL/2012 3358/DEL/2012 3358/DEL/2012 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2009 2009 2009 2009- -- -10 1010 10 ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -17(1), 17(1), 17(1), 17(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. M/S VERVE ENGINEERING PVT.LTD., M/S VERVE ENGINEERING PVT.LTD., M/S VERVE ENGINEERING PVT.LTD., M/S VERVE ENGINEERING PVT.LTD., C CC C- -- -148, MAYAPURI INDUSTRIAL AREA, 148, MAYAPURI INDUSTRIAL AREA, 148, MAYAPURI INDUSTRIAL AREA, 148, MAYAPURI INDUSTRIAL AREA, DELHI DELHI DELHI DELHI 110 064. 110 064. 110 064. 110 064. PAN : PAN : PAN : PAN : AACCV7364H. AACCV7364H. AACCV7364H. AACCV7364H. (APPELLANT) (RESPONDENT) CROSS OBJECTION CROSS OBJECTION CROSS OBJECTION CROSS OBJECTION NO NO NO NO.378/DEL/2012 .378/DEL/2012 .378/DEL/2012 .378/DEL/2012 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2009 2009 2009 2009- -- -10 1010 10 M/S VERVE ENGINEERING M/S VERVE ENGINEERING M/S VERVE ENGINEERING M/S VERVE ENGINEERING PVT.LTD., PVT.LTD., PVT.LTD., PVT.LTD., C/O C/O C/O C/O SHRI KAPIL GOEL, SHRI KAPIL GOEL, SHRI KAPIL GOEL, SHRI KAPIL GOEL, ADVOCATE, ADVOCATE, ADVOCATE, ADVOCATE, F FF F- -- -26/124, SECTOR 26/124, SECTOR 26/124, SECTOR 26/124, SECTOR- -- -7, 7,7, 7, ROHINI, ROHINI, ROHINI, ROHINI, NEAR DEEPALI CHOWK, NEAR DEEPALI CHOWK, NEAR DEEPALI CHOWK, NEAR DEEPALI CHOWK, DELHI DELHI DELHI DELHI 110 085. 110 085. 110 085. 110 085. PAN : AACCV7364H. PAN : AACCV7364H. PAN : AACCV7364H. PAN : AACCV7364H. VS. VS. VS. VS. ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF ASSISTANT COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -17(1), 17(1), 17(1), 17(1), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI SAMEER SHARMA, SR.DR. ASSESSEE BY : SHRI KAPIL GOEL, ADVOCATE. ORDER ORDER ORDER ORDER PER G. PER G. PER G. PER G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VP VPVP VP : : : : THE APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-XIX, NEW DELHI DATED 9 TH APRIL, 2012 FOR THE AY 2009-10. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. LD.CIT(A) ERRED IN LAW AND ON THE FACTS IN HOLD ING THAT THE INTEREST INCOME OF RS.1,13,50,138/- CANNOT BE ITA-3358/D/2012 & C.O.378/D/2012 2 CONSIDERED AS INCOME FROM OTHER SOURCES AND DIRECTI NG THE AO TO SET OFF THE INTEREST INCOME WITH THE INTEREST PAID. 2. LD.CIT(A) ERRED IN LAW AND ON THE FACTS OF THE C ASE IN ALLOWING THE EXPENSES OF RS.61,191/- WITHOUT APPREC IATING THAT THE ASSESSEE DID NOT CARRY OUT ANY BUSINESS AC TIVITY DURING THE YEAR. 3. THE APPELLANT CRAVES FOR RESERVING THE RIGHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUND (S) OF APPEAL AT ANY TIME BEFORE OR DURING THE BEARING OF APPEAL. 3. IN THE CROSS-OBJECTION, THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF C ASE AND IN LAW, THE LD.CIT-A ERRED IN GIVING A FINDING AT PARA 7/PAGE 6 THAT THE AO HAS CLEARLY ESTABLISHED THAT THE FUNDS BORROWED WERE INVESTED IN THE SHARES OF M/S D EN NETWORKS LIMITED WHICH AS PER LD.CIT-A IS LONG TE RM NON TRADE/CAPITAL INVESTMENT. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF CA SE AND IN LAW, THE LD.CIT-A ERRED IN NOT HOLDING THAT FULL INTEREST OF RS.194,03,219 IS ALLOWABLE U/S 36(1)(II I) WITHOUT BEING RESTRICTED TO RS.113,50,138. THAT THE CROSS OBJECTOR CRAVES THE LEAVE TO ADD, AM END, MODIFY, DELETE ANY OF THE GROUND(S) OF CROSS OBJECT ION BEFORE OR AT THE TIME OF HEARING. 4. AT THE TIME OF HEARING BEFORE US, IT IS STATED B Y THE LEARNED DR THAT DURING THE ACCOUNTING YEAR RELEVANT TO THE ASS ESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE BORROWED THE SUM OF ` 22.50 CRORES FROM M/S UNICON FINCAP PVT.LTD. (HEREINAFTER REFERRED TO AS UFPL) AS LOAN. THE ABOVE AMOUNT WAS UTILIZED ON THE SAME DAY FOR P URCHASING THE EQUITY SHARES OF M/S DEN NETWORKS LTD. (HEREINAFTER REFERRED TO AS DNL). THAT ADMITTEDLY, THE SHARES WERE PURCHASED AS AN INVESTMENT AND NOT AS STOCK-IN-TRADE. SINCE THE BORROWED MONE Y WAS NOT UTILIZED FOR THE PURPOSE OF BUSINESS, THE ASSESSING OFFICER, RIGHTLY APPLYING THE PROVISIONS OF SECTION 36(1)(III) OF THE INCOME-TAX ACT, 1961, DISALLOWED ITA-3358/D/2012 & C.O.378/D/2012 3 THE INTEREST PAID TO UFPL AMOUNTING TO ` 1,94,03,219/-. THAT LEARNED CIT(A) ALSO UPHELD THE FINDING OF THE ASSESSING OFF ICER AND HELD THAT THE INTEREST EXPENDITURE IS NOT ALLOWABLE. HOWEVER , THEREAFTER, THE ASSESSING OFFICER SET OFF THE INTEREST RECEIVED BY THE ASSESSEE AMOUNTING TO ` 1,13,50,138/- FROM CITY GUIDE YELLOW PAGES PVT.LTD. AGAINST THE INTEREST PAID TO UFPL AND SUSTAINED THE DISALLOWANCE. FROM THE FACTS OF THE ASSESSEES CASE, IT IS EVIDEN T THAT THE MONEY BORROWED FROM UFPL WAS NOT FOR THE PURPOSE OF BUSIN ESS AND, THEREFORE, THE ENTIRE DISALLOWANCE OF INTEREST WAS TO BE SUSTAINED. THERE IS NO PROVISION UNDER THE INCOME-TAX ACT FOR SETTING OFF THE INTEREST RECEIVED AGAINST THE INTEREST PAID ON THE MONEY WHICH WAS NOT BORROWED FOR THE PURPOSE OF BUSINESS. HE, THEREFOR E, REQUESTED THAT THE ORDER OF LEARNED CIT(A) SHOULD BE REVERSED AND THAT OF THE ASSESSING OFFICER MAY BE RESTORED. WITH REGARD TO DISALLOWANCE OF INTEREST AMOUNTING TO ` 61,191/-, HE RELIED UPON THE ORDER OF THE ASSESSING OFFICER. 5. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTH ER HAND, SO FAR AS REVENUES APPEAL IS CONCERNED, RELIED UPON THE O RDER OF LEARNED CIT(A) AND HE STATED THAT THE MONEY BORROWED FROM U FPL AND THE INTEREST RECEIVED FROM CITY GUIDE YELLOW PAGES PVT. LTD. ARE INEXTRICABLY CONNECTED. IN SUPPORT OF THIS ARGUMENT, HE FILED A NOTE ON THE ENTIRE TRANSACTIONS AND WE REPRODUCE THE SAME BELOW FOR RE ADY REFERENCE:- NOTE ON TRANSACTION 1. MR. SAMEER MANCHANDA WANTED TO ACQUIRE SHARES O F DEN NETWORKS LTD. FROM RRB FINANCIAL WHO INVESTED I NTO THE SHARES OF DEN NETWORKS LTD IN 2007. THESE SHAR ES WERE REQUIRED TO BE ACQUIRED THROUGH A COMPANY VERV ENGINEERING PVT.LTD. WHOSE 90% SHARES WERE HELD WIT H SAMEER. 2. TO ACQUIRE THESE SHARES AT A TOTAL AGREED VALUE OF RS.22.50 CR., THE COMPANY TOOK A LOAN FROM UNICON F INCAP. MR. SAMEER MANCHANDA STOOD GUARANTOR TO THIS LOAN A ND ITA-3358/D/2012 & C.O.378/D/2012 4 ALSO PART FUNDED THE LOAN THROUGH CITY GUIDE YELLOW PAGES PVT.LTD. 3. VERVE ENGINEERING RECEIVED A LOAN OF RS.22.50 CR ON 17/09/2008 FROM UNICON. 4. VERVE ENGINEERING PAID THE CONSIDERATION OF RS.2 2.50 CR ON 17/09/2008 TO RRB INVESTMENTS. 5. CITY GUIDE RECEIVED A LOAN FROM SAMEER MANCHANDA FOR RS.13 CR. (5 CR ON 12/09/2008 AND 8 CR ON 15/09 /2008). 6. {{AS A PART OF PREFACE THESE SHARES WERE FIRST PLANNED TO BE ACQUIRED THOUGH CITY GUIDE AND CITY G UIDE RECEIVED A SUM OF RS.9.50 CR. FROM UNICON ON 10/09 /2008, AS LOAN TO EXECUTE THE TRANSACTION. BUT LATER IT W AS DECIDED TO ACQUIRE THESE SHARES THROUGH VERV AND TRANSACTIO N WAS ROUTED TO VERV.}}. 7. CITY GUIDE PAID AN AMOUNT OF RS.22.50 CR ON 16/09/2008 TO UNICON : A. RS.9.50 CR PAID BACK, RECEIVED FROM UNICON ON 10/09/2008. B. RS.13 CR. PAID TO UNICON, RECEIVED FROM SAMEER O N 12/09/2008. 8. IN NUT SHELL CITY GUIDE FORWARDED A LOAN OF RS.1 3 CR. TO UNICON, TO PART FUND THE LOAN OF RS.22.50 CR. BY UNICON TO VERV. 9. UNICON CHARGED INTEREST ON RS.22.50 CR. FROM VER V RS.1.94 CR. 10. UNICON PAID INTEREST ON RS.13 CR. TO CITY GUIDE RS.1.13 CR. 11. CITY GUIDE PAID INTEREST ON RS.13 CR TO VERV RS.1.13 CR. 12. VERVE ENGINEERING PAID BACK RS.22.50 CR. LOAN T O UNICON. A. 27/10/08 0.75 CR DIRECTLY BY SAMEER RECD. LOAN FROM SAMEER ON SAME DATE. B. 05/01/09 2.00 CR. RTGS FROM HSBC RECD. LOAN FRO M SAMEER ON SAME DATE. ITA-3358/D/2012 & C.O.378/D/2012 5 C. 09/03/09 6.75 CR. RTGS FROM HSBC RECD. LOAN FRO M SAMEER ON SAME DATE. D. 13/03/09 5 CR. RTGS FRM HSBC RECD. LOAN FROM SAMEER ON SAME DATE. E. 16/03/09 5 CR. RTGS. FROM HSBC RECD. LOAN FROM SAMEER ON SAME DATE. F. 18/03/09 3 CR. RTGS FROM HSBC RECD. LOAN FROM SAMEER ON SAME DATE. 13. UNICON PAID BACK 13 CR. TO CITY GUIDE A. 12/03/09 5 CR. RTGS SYNDICATE BANK B. 16/03/09 5 CR RTGS SYNDICATE BANK C. 17/03/09 3 CR. RTGS SYNDICATE BANK 14. CITY GUIDE PAID BACK 13 CR. TO SAMEER A. 12/03/09 5 CR. RTGS SYNDICATE BANK B. 16/03/09 5 CR RTGS SYNDICATE BANK C. 17/03/09 3 CR. RTGS SYNDICATE BANK 6. THE LEARNED COUNSEL FURTHER SUBMITTED THAT THE D ISALLOWANCE SUSTAINED BY THE LEARNED CIT(A) OUT OF INTEREST PAI D IS NOT JUSTIFIED. THE SAME SHOULD BE ALLOWED IN VIEW OF THE CROSS-OBJECTI ON FURNISHED BY THE ASSESSEE. 7. WE HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF BOTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. SECTION 36(1)(III) OF THE INCOME-TAX ACT, 1961 READS AS UNDER:- 36. 36. 36. 36. (1) THE DEDUCTIONS PROVIDED FOR IN THE FOLLOWIN G CLAUSES SHALL BE ALLOWED IN RESPECT OF THE MATTERS DEALT WITH THEREIN, IN COMPUTING THE INCOME REFERRED TO I N SECTION 28 (I) .. (II) .. (III) THE AMOUNT OF THE INTEREST PAID IN RESPECT OF CAPITAL BORROWED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION : [PROVIDED PROVIDED PROVIDED PROVIDED THAT ANY AMOUNT OF THE INTEREST PAID, IN R ESPECT OF CAPITAL BORROWED FOR ACQUISITION OF AN ASSET FOR EXTENSION ITA-3358/D/2012 & C.O.378/D/2012 6 OF EXISTING BUSINESS OR PROFESSION (WHETHER CAPITAL ISED IN THE BOOKS OF ACCOUNT OR NOT); FOR ANY PERIOD BEGINN ING FROM THE DATE ON WHICH THE CAPITAL WAS BORROWED FOR ACQU ISITION OF THE ASSET TILL THE DATE ON WHICH SUCH ASSET WAS FIRST PUT TO USE, SHALL NOT BE ALLOWED AS DEDUCTION.] EXPLANATION.RECURRING SUBSCRIPTIONS PAID PERIODICA LLY BY SHAREHOLDERS, OR SUBSCRIBERS IN MUTUAL BENEFIT SOCI ETIES WHICH FULFIL SUCH CONDITIONS AS MAY BE PRESCRIBED, SHALL BE DEEMED TO BE CAPITAL BORROWED WITHIN THE MEANING OF THIS CLAUSE; 8. FROM THE ABOVE, IT IS EVIDENT THAT SECTION 36 PR OVIDES THE DEDUCTIONS WHICH ARE TO BE ALLOWED WHILE COMPUTING THE INCOME UNDER THE HEAD PROFIT AND GAINS OF BUSINESS. UNDER SEC TION 36(1)(III), DEDUCTION IS ALLOWABLE FOR INTEREST PAID IN RESPECT OF MONEY BORROWED FOR THE PURPOSE OF BUSINESS OR PROFESSION. IN THE APPEAL BEFORE US, THE ASSESSEE PAID INTEREST OF ` 1,94,03,219/- TO UFPL. THE SUM OF ` 22.50 CRORES WAS BORROWED FROM UFPL ON 17.09.2008 AND, ON THE SAME DAY, THE AMOUNT WAS INVESTED FOR PURCHASE OF SHARES OF D NL. IT IS AN ADMITTED POSITION THAT THE SHARES OF DNL WERE KEPT BY THE ASSESSEE AS INVESTMENT AND NOT AS STOCK-IN-TRADE. THEREFORE, T HE MONEY WAS BORROWED BY THE ASSESSEE FROM UFPL NOT FOR THE PURP OSE OF BUSINESS BUT FOR THE PURPOSE OF INVESTMENT IN THE SHARES OF ANOTHER COMPANY. ON THE ABOVE FACTS, IN OUR OPINION, AS PER SECTION 36(1)(III), THE ASSESSEE IS NOT ENTITLED TO THE DEDUCTION OF INTERE ST PAID ON THE MONEY BORROWED FROM UFPL. THE LEARNED CIT(A) HAS ALSO RE CORDED THE SIMILAR FINDING AT PAGE NO.6 PARAGRAPH NO.7 OF HIS ORDER, T HE RELEVANT PORTION OF WHICH READS AS UNDER:- THE AO HAS CLEARLY ESTABLISHED THAT THE FUNDS BORR OWED WERE INVESTED IN THE SHARES OF M/S DEN NETWORKS LTD . THE INVESTMENT IN THE SHARES OF M/S DEN NETWORKS LTD., IS IN THE FORM OF LONG TERM NON-TRADE INVESTMENT/CAPITAL INVE STMENT. IN SUCH A CASE, THE INTEREST EXPENDITURE IS NOT ALL OWABLE. I AM IN AGREEMENT WITH THE CONTENTIONS OF THE AO AND THE ACTION OF THE AO IS UPHELD. ITA-3358/D/2012 & C.O.378/D/2012 7 9. AFTER CONSIDERING THE ARGUMENTS OF BOTH THE SIDE S AND THE FACTS OF THE CASE, WE ENTIRELY AGREE WITH THE ABOVE FINDI NG OF THE LEARNED CIT(A). 10. NOW, THE NEXT QUESTION ARISES WHETHER THE INTER EST PAID TO UFPL IS TO BE SET OFF AGAINST THE INTEREST OF ` 1,13,50,138/- RECEIVED BY THE ASSESSEE FROM CITY GUIDE YELLOW PAGES PVT.LTD. THA T SAMEER MANCHANDA PAID FROM HIS BANK ACCOUNT ` 13 CRORES TO CITY GUIDE YELLOW PAGES PVT.LTD. HOWEVER, LATER ON, THE LOAN ACCOUNT WAS TRANSFERRED TO THE ASSESSEE COMPANY BY PASSING JOURNAL ENTRIES. T HE ASSESSEE HAS NOT PAID ANY INTEREST TO SAMEER MANCHANDA BUT RECEI VED THE INTEREST OF ` 1,13,50,138/- FROM CITY GUIDE YELLOW PAGES PVT.LTD. HOWEVER, ON THE ABOVE FACTS, IN OUR OPINION, THERE IS NO CASE F OR SET OFF OF THE INTEREST PAID TO UFPL WITH THE INTEREST RECEIVED FR OM CITY GUIDE YELLOW PAGES PVT.LTD. THE CIT(A) HAS ALLOWED THE SET OFF WITH THE FOLLOWING FINDING:- THE OTHER CONTENTION OF THE AR IS THAT THE INTERES T RECEIPT SHOULD BE REDUCED FROM THE INTEREST EXPENDITURE INC URRED FOR DISALLOWANCE IF ANY ON THE GROUND THAT, HAD THE FUNDS NOT GIVEN TO M/S CITY GUIDE YELLOW PAGES PVT.LTD., THE SAME WOULD HAVE BEEN AVAILABLE FOR MAKING THE INVESTMENT AND ALSO THERE WOULD BE LESSER BORROWAL OF FUNDS FOR MA KING INVESTMENT WITH LESSER INTEREST BURDEN. THE CONTEN TIONS OF THE AR ARE TENABLE. THE AO IS HEREBY DIRECTED TO A LLOW SET OFF OF INTEREST RECEIVED AGAINST THE INTEREST PAID AND DISALLOWED. 11. THE CIT(A) ALLOWED THE SET OFF ON THE GROUND TH AT HAD THE FUNDS NOT BEEN GIVEN TO CITY GUIDE YELLOW PAGES PVT.LTD., THE SAME SHOULD HAVE BEEN AVAILABLE FOR MAKING THE INVESTMENT FOR T HE PURCHASE OF SHARES AND THERE WOULD BE LESSER BORROWING OF FUNDS WITH LESSER INTEREST BURDEN. THUS, THE CIT(A) ALLOWED THE RELI EF ON THE BASIS OF CONSEQUENCE OF CERTAIN PRESUMPTIVE EVENTS. THAT IN COME IS TO BE COMPUTED ON THE BASIS OF FACTS AS THEY EXISTED AND NOT ON THE BASIS OF SOME HYPOTHESIS THAT HAD THE ASSESSEE NOT ADVANCED TO CITY GUIDE ITA-3358/D/2012 & C.O.378/D/2012 8 YELLOW PAGES PVT.LTD., IT WOULD HAVE BEEN REQUIRED TO BORROW LESS MONEY. THE FACT REMAINS THAT THE ASSESSEE HAS BORR OWED THE MONEY FROM UFPL WHICH WAS EVIDENTLY NOT BORROWED FOR THE PURPOSE OF BUSINESS. THE INTEREST PAID ON SUCH BORROWING CANN OT BE ALLOWED AS A DEDUCTION UNDER SECTION 36(1)(III). THE ASSESSEE M AY HAVE INTEREST INCOME ON ITS CAPITAL OR ON ITS NON-INTEREST BEARIN G FUNDS RECEIVED FROM SOMEBODY ELSE BUT THE SAID INTEREST CANNOT BE SET O FF AGAINST THE INTEREST PAYMENT ON THE BASIS OF SOME HYPOTHESIS OR PRESUMPTION. WE, THEREFORE, REVERSE THE FINDING OF THE LEARNED CIT(A ) IN THIS REGARD AND RESTORE THAT OF THE ASSESSING OFFICER. 12. THE ONLY GROUND THAT REMAINS IN THE REVENUES A PPEAL IS WITH REGARD TO DISALLOWANCE OF EXPENSES OF ` 61,191/- WHICH WERE DISALLOWED BY THE ASSESSING OFFICER AND ALLOWED BY THE LEARNED CIT(A). 13. AFTER CONSIDERING THE ARGUMENTS OF BOTH THE SID ES AND THE FACTS OF THE CASE, WE ARE OF THE OPINION THAT THE LEARNED CIT(A) WAS FULLY JUSTIFIED IN DELETING THE DISALLOWANCE OF THE EXPEN SES AMOUNTING TO ` 61,191/- ON THE GROUND THAT THESE WERE THE EXPENSES OF GENERAL NATURE. IT IS A SETTLED LAW NOW THAT EVEN WHEN THE ASSESSEE HAS NOT CARRIED ON THE BUSINESS, THE CERTAIN EXPENSES WHICH WERE REQUIRED TO BE INCURRED FOR MAINTAINING THE CORPORATE STATUS OF THE ASSESSEE IS ALLOWABLE DEDUCTION. MOREOVER, ON THE FACTS OF THE ASSESSEES CASE, WE ARE OF THE OPINION THAT THE ASSESSEE CARRIED ON THE BUSINESS DURING THE ACCOUNTING YEAR RELEVANT TO THE ASSESSMENT YEAR UND ER CONSIDERATION, WHATEVER SMALL SCALE MAY BE OF THE BUSINESS. MOREO VER, THE ASSESSING OFFICER HIMSELF APPLIED SECTION 36(1)(III) WHILE CO NSIDERING THE ALLOWABILITY OF THE INTEREST PAID TO UFPL. SECTION 36(1)(III) IS APPLICABLE WHILE COMPUTING THE BUSINESS INCOME. THE ASSESSING OFFICER CANNOT TAKE THE DOUBLE STAND ONCE WHILE CONSIDERING THE AL LOWABILITY OF INTEREST AND ANOTHER WHILE CONSIDERING THE ALLOWABI LITY OF THE OFFICE AND ADMINISTRATIVE EXPENSES. IN VIEW OF THE ABOVE, WE ARE OF THE OPINION ITA-3358/D/2012 & C.O.378/D/2012 9 THAT THE DISALLOWANCE OF THE EXPENSES AMOUNTING TO ` 61,191/- WAS NOT JUSTIFIED. ACCORDINGLY, GROUND NO.2 OF THE REVENUE S APPEAL IS REJECTED. 14. IN THE CROSS-OBJECTION, THE ASSESSEE HAS CHALLE NGED THE DISALLOWANCE SUSTAINED BY THE CIT(A) OUT OF THE INT EREST PAYMENT. HOWEVER, WHILE CONSIDERING THE REVENUES APPEAL, WE HAVE HELD THAT THE ENTIRE INTEREST PAID BY THE ASSESSEE TO UFPL IS DISALLOWABLE. THEREFORE, THE ASSESSEES CROSS-OBJECTION HAS NO ME RIT. THE SAME IS REJECTED. 15. IN THE RESULT, THE APPEAL OF THE REVENUE IS PAR TLY ALLOWED WHILE THE CROSS-OBJECTION OF THE ASSESSEE IS DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 22 ND NOVEMBER, 2013. SD/- SD/- ( (( (CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG) )) ) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 22.11.2013 VK. COPY FORWARDED TO: - 1. REVENUE : ASSISTANT COMMISSIONER OF INCOME T AX, ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -17(1), NEW DELHI. 17(1), NEW DELHI. 17(1), NEW DELHI. 17(1), NEW DELHI. 2. ASSESSEE : M/S VERVE ENGINEERING PVT.LTD., M/S VERVE ENGINEERING PVT.LTD., M/S VERVE ENGINEERING PVT.LTD., M/S VERVE ENGINEERING PVT.LTD., C/O SHRI KAPIL GOEL, ADVOCATE, C/O SHRI KAPIL GOEL, ADVOCATE, C/O SHRI KAPIL GOEL, ADVOCATE, C/O SHRI KAPIL GOEL, ADVOCATE, F FF F- -- -26/124, SECTOR 26/124, SECTOR 26/124, SECTOR 26/124, SECTOR- -- -7, ROHINI, 7, ROHINI, 7, ROHINI, 7, ROHINI, NEAR DEEPALI CHOWK, DELHI NEAR DEEPALI CHOWK, DELHI NEAR DEEPALI CHOWK, DELHI NEAR DEEPALI CHOWK, DELHI 110 085. 110 085. 110 085. 110 085. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR