DCIT-14(3)(1), Mumbai V. M/S RELIANCE INFRASTRUCTURE LIMITED , Mumbai

ITA 3592/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 5846 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 24-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA GUPTA
• Keywords: Business income; Proportionate interest; Set aside
• Section: 13; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D, MUMBAI BEFORE SHRI RAJESH KUMAR, ACCOUNTANT MEMBER AND SHRI AMARJIT SINGH, JUDICIAL MEMBER ITA NO S . 3 590 & 3592 /MUM/2019 : A.Y S : 20 07 - 08 & 2008 - 09 DY . COMMISSIONER OF INCOME TAX 14 ( 3 )(1), MUMBAI. (APPELLANT) VS. M/S. RELIANCE INFRASTRUCTURE L TD., RELIANCE CENTRE, SANTA CRUZ (E), MUMBAI 400 055. PAN : AACC R7446Q (RESPONDENT) APPELLANT BY : SMT. ASHIMA GUPTA RESPONDENT BY : SHRI JITENDRA SANGHVI DATE OF HEARING : 16/11/2020 DATE OF PRONOUNCEMENT : 13 /01/2021 O R D E R PER RAJESH KUMAR, AM : TH E S E APPEAL S BY ASSESSEE ARE DIRECTED AGAINST THE RESPECTIVE ORDER S OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS) - 22 , MUMBAI (IN SHORT THE CIT(A)) , BOTH OF EVEN DATE, PERTAINING TO ASSESSMENT YEAR S 2007 - 08 & 2008 - 09 . 2. IDENTICAL ISSUES HAVE BEEN RAISED BY THE REVENUE IN BOTH THE APPEALS WHICH READ AS UNDER : - 1. THE LD. CIT(A) HAS ERRED IN ALLOWING THE ISSUE OF INTEREST EXPENSES WITHOUT APPRECIATING THE FACT THAT THE INTEREST BEARING FUNDS TAKEN FOR BUSINESS PURPOSES WERE DEPLOYED FOR NON - BUSINESS PURPOSES. 2 ITA NOS. 3590 & 3592/MUM/2019 M/S. RELIANCE INFRASTRUCTURE LTD. 2. THE LD. CIT(A) HAS ERRED IN FAILING TO APPRECIATED THE FACT THAT A PART OF THE EXTERNAL COMMERCIAL BORROWINGS RAISED FOR THE PURPOSE OF BUSINESS WAS DEPLOYED FOR PURPOSE S, WHICH DO NOT FORM THE BUSINESS ACTIVITY OF THE ASSESSEE. 3. THE CIT(A)S ORDER IS CONTRARY TO LAW AND ON FACTS AND DESERVES TO BE SET ASIDE. 4. THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) - 22, MUMBAI ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE AS SESSING OFFICER BE RESTORED. 3. THE ISSUE RAISED IN GROUND NO. 1 IS AGAINST THE ORDER OF LEARNED CIT(A) ALLOWING THE INTEREST EXPENSES WITHOUT APPRECIATING THE FACT THAT INTEREST BEARING FUNDS TAKEN FOR BUSINESS PURPOSE WERE DEPLOYED FOR NON - BUSINESS PUR POSE S . 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED AT THE OUTSET THAT THE ISSUE HAS BEEN DECIDED BY THE LEARNED CIT(A) IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH OF ASSESSEES SISTER CONCER N IN THE CASE OF RELIANC E NATURAL RESOURCES LTD. IN ITA NO. 1000/MUM/2016 DATED 12.05.2017 WHEREIN THE ISSUE UNDER CONSIDERATION HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER PRAYED THAT THE GROUND NO. 1 RAISED BY THE REVENUE MAY KINDLY BE DISMISSED. 5. THE LEARNED DEPARTMENTAL REPRESENTATIVE, ON THE OTHER HAND, FAIRLY AGREED WITH THE CONTENTION OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT SIMILAR ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE, HOWEVER, RELIED ON GROUND NO. 1 FILED BY THE REVENUE. 3 ITA NOS. 3590 & 3592/MUM/2019 M/S. RELIANCE INFRASTRUCTURE LTD. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT THE UNDISPUTED FACTS ARE THAT THE APPELLANT HAD RAISED FUNDS BY WAY OF ECB OF USD 360 MILLION. THE FUNDS WERE RECEIVED FROM THE LENDERS INTO THE APPELLA NT'S ACCOUNT WITH UBS AG, LONDON ON 15.11.2006. OUT OF THE ECB PROCEEDS OF USD 360 MILLION, USD 300 MILLION WERE REPATRIATED TO INDIA ON 26.4.2007. BALANCE OF USD 60 MILLION WAS RETAINED ABROAD AND THEREAFTER WAS DIRECTLY INVESTED INTO THE RELIANCE INFRA P ROJECTS INTERNATIONAL LIMITED (RIPIL), A PERMITTED END - USE AS PER RBI GUIDELINES ON 24.7.2008. AS PER ASSESSING OFFICER, THE APPELLANT HAD MADE INDIRECT INVESTMENT IN THE SHARES OF RELIANCE COMMUNICATIONS LTD. (RCL) THROUGH INVESTMENT VEHICLE 'PLURI CELL E'. AS PER ASSESSING OFFICER THE CAPITAL OF PLURI CELL E WAS SUBSCRIBED BY VARIOUS FINANCIAL INSTITUTIONS WHO ISSUED BACK TO BACK YIELD MANAGEMENT CERTIFICATES WHICH ARE LINKED TO THE VALUE OF UNDERLYING ASSETS BEING SHARES OF RCL. AS PER ASSESSING OFFICER , THE APPELLANT HAD ENTERED INTO VARIOUS PURCHASE AND SALE TRANSACTIONS OF YMCS, FUNDS OF WHICH ARE ULTIMATELY INVESTED IN PLURI CELL E. THE ASSESSING OFFICER HAS RELIED UPON THE REPORT FROM D I T (INTELLIGENCE), NEW DELHI AND THE REPORT OF SEBI. THE ASSESS ING OFFICER HAS NOT PROVIDED COPY OF THE SAID DOCUMENTS EITHER AT THE TIME OF FILING OBJECTION TO THE REOPENING OR IN COURSE OF RE - ASSESSMENT PROCEEDINGS INSPITE OF THE ASSESSEE REQUESTING FOR THE SAME. AS PER ASSESSING OFFICER THE INTEREST ON ECB FUNDS, W HICH ARE INVESTED IN THE YMCS OF VARIOUS INSTITUTIONS I.E. CALYON, SOCIETE GENERALE, CREDIT SUISSE, EXANE, IS REQUIRED TO BE DISALLOWED. THE ASSESSING OFFICER WORKED OUT THE PROPORTIONATE INTEREST AT RS. 10,30,76,078/ - . THE ASSESSING OFFICER HAS ADMITTED T HAT THE APPELLANT HAS RECEIVED INTEREST FROM YMC OF VARIOUS INSTITUTIONS AMOUNTING TO RS. 9,12,04,109/ - BUT DENIED SET OFF OF THE INTEREST INCOME DERIVED FROM THE SAID INVESTMENTS AGAINST THE INTEREST ATTRIBUTABLE ON ECB FUNDS. THE ASSESSING OFFICER HAS DI SALLOWED THE GROSS INTEREST PAID OF 4 ITA NOS. 3590 & 3592/MUM/2019 M/S. RELIANCE INFRASTRUCTURE LTD. RS.10,30,76,078/ - ON THE GROUND THAT THE INTEREST EXPENDITURE IS NOT RELATED TO BUSINESS PURPOSE. 7. WE FIND THAT THE LEARNED CIT( A) HAS ALLOWED THE APPEAL OF ASSESSEE BY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH IN THE CASE OF ASSESSEES SISTER CONCERN, RELIANCE NATURAL RESOURCES LTD. IN ITA NO. 1000/MUM/2016 DATED 12.05.2017 WHEREIN THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE UNDER SIMILAR CIRCUMSTANCES. THE OPERATING PART OF THE SAID DECISION OF TRIBUNAL IS REPRODUCED HEREUNDER : - 34. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES. WE FIND THAT THE ASSESSEE HAS OFFERED TO TAX THE INVESTMENT INCOME WHICH I S NOT DISPUTED BY THE A.O. THE AO HAS ALSO TAXED THE INVESTMENTS INCOME AS BUSINESS INCOME BOTH IN ORIGINAL ASSESSMENT AND RE - ASSESSMENT. AFTER TAXING THE INCOME FROM APPLICATION OF FUNDS, THE AO CANNOT TURN HIS BACK AND CLAIM THAT THE EXPENDITURE ON BORRO WING IS NOT ALLOWABLE AS BUSINESS EXPENSE. THE ASSESSEE HAS BEEN REQUESTING THE AO TO PROVIDE THE COPY OF REPORT OF SEBI AND REPORT OF DIRECTOR OF DIT (INTELLIGENCE) WHICH IS THE BASIS FOR REOPENING THE ASSESSMENT AS WELL AS MAKING THE ADDITION. THE SAME H AS NOT BEEN SUPPLIED TO THE ASSESSE. NO ADVERSE EVIDENCE HAS BEEN CONFRONTED TO THE ASSESSE. THE PERUSAL OF THE ASSESSMENT ORDER ALSO DOES NOT REVEAL ANY ADVERSE EVIDENCE. THE FINDING OF THE AO IN THIS REGARD IS UNSUPPORTED BY ANY EVIDENCE. CONSIDERING THE ABOVE AND THE FACT THAT INCOME FROM INVESTMENTS HAS BEEN OFFERED TO TAX AND THE SAME HAS BEEN TAXED AS BUSINESS INCOME, THERE IS NO JUSTIFICATION FOR DISALLOWANCE OF SOCALLED PROPORTIONATE INTEREST. WE THEREFORE HOLD THAT THE ORDER OF CIT(A) UPHOLDING THE DISALLOWANCE OF PROPORTIONATE INTEREST IS TO BE REVERSED. WE HOLD ACCORDINGLY. 8. SINCE THE FACTS OF THE PRESENT CASE BEFORE US ARE MATERIALLY SIMILAR , W E, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH IN THE CASE OF ASSESSEE S SISTER CONCERN CONFIRM THE ORDER OF LEARNED CIT(A) AND ACCORDINGLY, GROUND NO. 1 IS DI S MISSED. 5 ITA NOS. 3590 & 3592/MUM/2019 M/S. RELIANCE INFRASTRUCTURE LTD. 9. THE ISSUE RAISED IN GROUND NO. 2 IS ANCILLARY TO THAT RAISED IN GROUND NO. 1 WHICH HAS BEEN DISMISSED BY US SUPRA AND HENCE NEEDS NO SEPARATE ADJUDICATIO N. 10. THE ISSUES RAISED IN GROUND NOS. 3 AND 4 ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY ADJUDICATION. 11. IN THE RESULT, BOTH THE APPEAL S OF THE REVENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 1 3 T H JANUARY, 2021. SD/ - SD/ - (AMARJIT SINGH) JUDICIAL MEMBER (RAJESH KUMAR) ACCOUNTANT MEMBER MUMBAI, DATE : 1 3 T H JANUARY, 2021 *SSL* COPY TO : 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT(A) CONCERNED 4) THE CIT CONCERNED 5) THE D.R, D BENCH, MUMBAI 6) GUARD FILE BY ORDER DY./ASSTT. REGISTRAR I.T.A.T, MUMBAI