DCIT, V. M/s Bihar State Electronics Development Corpn. Ltd.,

ITA 37/PAT/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7762 (ITAT-PATNA)
• Duration Of Justice: 2 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2004-2005
• Appeal Filed On: 10-07-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K K DAS
• Assessee Lawyers: A K RASTOGI
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PATNA BENCH, PATNA BEFORE SHRI SANDEEP GOSAIN (JM) & M BALAGANESH (AM ) I T A NO S . 37 & 38 / PAT /20 1 5 ASSESSMENT YEAR: 200 4 - 05 & 2005 - 06 DCIT VS. M/S. BIHAR STATE ELECTRONIC DEVELOPMENT CORP. LTD. , CIRCLE - 2 , BELTRON BH AWAN, PATNA . PATNA. ( APPELLANT) (RESPONDENT) PAN - AA BTA1325M DEPARTMENT BY : S HRI K. K.DAS , DR . ASSESSEE BY : SHRI A. K. RASTOGI , A DV . DATE OF HEARING: - 12 / 10 /201 7 DATE OF PRONOUNCEMENT: - 13 / 1 0 /201 7 ORDER PER BENCH : TH ESE APPEAL S BY THE REVENUE DIRECTED AGAINST THE ORDER OF THE CIT (A) - 1 DATED - 22.04.2017 AND PERTAIN TO ASSESSMENT YEAR S 200 4 - 05 & 20 0 5 - 0 6 . 2. THE EFFECTIVE ISSUE RAISED IN BOTH THE APPEALS ARE READ AS UNDER: 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE T HE LD. CIT(A) WAS CORRECT IN DELETING THE DISALLOWANCE OF INTEREST OF RS.92,08,396/ - AND RS.91,98,940/ - MADE BY THE AO IN RESPECT OF ASSESSMENT YEARS 2004 - 05 AND 2005 - 06. 2. ANY OTHER GROUND WILL BE TAKEN AT THE TI ME OF HEARING. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A LIMITED COMPANY OWNED BY BIHAR GOVERNMENT WITH A PAID UP SHARE CAPITAL OF RS.4,07,77,100/ - I TA NO S . - 37 & 38 / PAT /20 1 5 2 ENGAGED IN THE BUSINESS OF DEVELOPMENT OF JOINT VENTURE IN ELECTRONIC ITEMS AND TO DEAL IN SUCH ITEMS. THE RETURN OF INCOME WAS FILED ON 01.11.2004 DISCLOSING TOTAL TURNOVER OF RS.67,64,155/ - AND NET LOSS OF RS.1,12,29,153/ - FOR ASSESSMENT YEAR 2004 - 05 AND RETURN OF INCOME WAS FILED ON 29.10.2005 DISCLOSING TOTAL TURNOVER OF RS.1,06,96,115/ - AN D NET LOSS OF RS.84,18,350/ - FOR ASSESSMENT YEAR 2005 - 06. SUBSEQUENTLY ASSESSMENT U/S143(3) WAS COMPLETED AT A TOTAL LOSS OF RS.20,20,760/ - FOR ASSESSMENT YEAR 2004 - 05AND RS. NIL FOR ASSESSMENT YEAR 2005 - 06. 4. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE PRE FERRED AN APPEAL BEFORE LD. CIT(A) ALLOWED THE APPEAL OF BOTH THE YEARS2004 - 05 & 2005 - 06. 5. AGGRIEVED BY THE ORDER OF LD.CIT(A), THE REVENUE IS IN APPEAL BEFORE US ON THE GROUND MENTIONED HEREINABOVE. 6. THE STATUTORY GROUND RAISED BY THE REVENUE IS THA T THE LD. CIT(A) WITH REGARD IN DELETING THE DISALLOWANCES OF INTEREST OF RS.92,08,396/ - AND RS.91,98,940/ - MADE BY THE AO IN RESPECT OF ASSESSMENT YEAR 2004 - 05 AND 2005 - 06. 7 . WE HAVE HEARD THE COUNSEL FOR BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED ON RECORD AS WELL AS THE ORDERS OF THE AUTHORITIES BELOW. 8 . BEFORE WE DECIDE THE MERITS OF THE CASE, IT IS NECESSARY TO EVALUATE AND ANALYSE THE ORDERS PASSED BY THE LD. CIT(A) WHILE DEALING WITH THIS GROUND. I TA NO S . - 37 & 38 / PAT /20 1 5 3 THE LD. CIT(A) HAS DEALT WITH THIS GROUND AT PARA NO S.3 TO 5 IN ITS ORDER. THE EFFECTIVE PORTION IS REPRODUCED BELOW: APPELLATE FINDINGS AND DECISIONS AFTER GOING THROUGH THE FINDINGS OF THE DECISIONS OF ITAT, PATNA BENCH, PATNA IN THE CASE OF APPELLANT FOR AY 2003 - 04, I FIND THAT THE HONBLE ITAT, PATNA BENCH HAS DECIDED THE ISSUE ON THE BASIS OF DETAIL FINDINGS GIVEN IN THE CASE OF THE APPELLANT FOR AY 2002 - 03 IN ITA NO.165/PAT/06 AND ITA NO.404/PAT/06 FOR AY 2002 - 03. THE FINDINGS OF THE TRIBUNAL FOR AY 2002 - 03 IS REPRODUCED AS UNDER: WE HAVE CA REFULLY CONSIDERED THE SUBMISSIONS OF THE LEARNED REPRESENTATIVE OF THE PARTIES AND HAVE PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE HAVE GONE THROUGH THE CASE LAWS CITED BY THE LEARNED REPRESENTATIVES IN SUPPORT OF THEIR RESPECTIVE SUBMISSIONS. THERE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE IS AN UNDERTAKING HUNDRED PER CENT OWNED BY THE GOVERNMENT OF BIHAR. IT HAS BEEN GIVEN LOAN BY THE GOVERNMENT OF BIHAR FROM TIME TO TIME FOR DEVELOPING AND PROMOTING ELECTRONIC BASED INDUSTRIES IN THE STATE. THE DEPARTMENT HAS NOT DISPUTED THE CONTENTION OF THE ASSESSEE THAT THE ASSESSEE COMPANY HAD GIVEN LOAN TO BELTRON GROUP OF COMPANIES FOR SETTING UP JOINT VENTURE/PROJECT. THE SAID AMOUNT HAS BEEN GIVEN AS AN INVESTMENT AS PER ITS OBJECT CLAUSE FOR PROMOTING A ND DEVELOPING ELECTRONICS BASED INDUSTRIES IN THE STATE. SINCE IT IS AN INVESTMENT FOR SETTING UP THE JOINT VENTURE, WE FIND SUBSTANCE IN THE SUBMISSIONS FOR THE LEARNED REPRESENTATIVE OF THE ASSESSEE THAT NO INTEREST ON THE SAID AMOUNT ADVANCED BY THE ASS ESSEE COMPANY TO THE BELTRON GROUP OF COMPANIES IS CHARGEABLE IN RESPECT OF PROVISIONS MADE BY THE ASSESSEE COMPANY ON ACCOUNT OF INTEREST OF RS.77,13,940/ - . THE DEPARTMENT HAS NOT DISPUTED THE FACT THAT THE ASSESSEE COMPANY IS TO PAY INTEREST TO THE STATE GOVERNMENT ON THE LOAN GIVEN BY IT TO THE ASSESSEE COMPANY. THE DEPARTMENT HAS NOT DISPUTED THE FACT THAT THE ASSESSEE COMPANY IS TO PAY INTEREST AS PER FORMS AND CONDITIONS OF THE LOANS GIVEN TO IT. SINCE THE ASSESSEE COMPANY IS FOLLOWING MERCANTILE SYST EM OF ACCOUNTING WE ARE OF THE CONSIDERED VIEW THAT THE LEARNED CIT(A) HAS RIGHTLY DELETED THE DISALLOWANCE OF RS.77,13,940/ - ON ACCOUNT OF INTEREST PAYABLE BY THE ASSESSEE COMPANY TO THE STATE GOVERNMENT. THE CASE LAWS RELIED UPON BY THE LEARNED DEPARTME NTAL REPRESENTATIVE (SUPRA) WE OBSERVE THAT THEY ARE NOT RELEVANT AND APPLICABLE TO THE FACTS OF THE CASE BEFORE US. IN THOSE CASES, THE LOANS WERE GIVEN BY THE ASSESSEE OUT OF THE BORROWED FUNDS TO ITS SISTER CONCERNS/ASSOCIATES AND NO INTEREST WAS CHARGE D, THOUGH THE ASSESSEE I TA NO S . - 37 & 38 / PAT /20 1 5 4 COMPANY PAID INTEREST ON THE BORROWED FUNDS. THEREFORE, IT WAS HELD THAT THE INTEREST ON BORROWED FUNDS WAS NOT DEDUCTIBLE. AS HELD HEREIN ABOVE IN THE CASE BEFORE US, THE ASSESSEE COMPANY IS HUNDRED PER CENT OWNED BY THE STATE GOVER NMENT AND HAS ADVANCED MONEY TO THE BELTROM GROUP OF COMPANIES AS AN INVESTMENT FOR SETTING UP JOINT VENTURE/PROJECT TO DEVELOP AND PROMOTE ELECTRONIC BASED INDUSTRIES IN THE STATE AND IT IS NOT A CASE THAT THE ASSESSEE COMPANY HAD GIVEN INTEREST FREE LOAN TO ITS SISTER CONCERN FOR NON BUSINESS PURPOSES. THE FACT IS THAT THE ASSESSEE COMPANY HAD GIVEN LOAN TO ITS JOINT VENTURE PURSUANT TO ITS OBJECT AND THUS IT IS FOR THE BUSINESS PURPOSES. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A) IN DELETING DISALLOWANCE OF RS.77,13,940/ - MADE BY THE AO. ACCORDINGLY GROUND NO.1 OF THE APPEAL TAKEN BY THE DEPARTMENT IS REJECTED DURING THE COURSE OF APPELLATE PROCEEDINGS, THE APPELLANTS AR WAS REQUESTED TO FURNISH BIFURCATION OF NORMAL INT EREST AND PENAL INTEREST FOR CONSIDERING DISALLOWANCE OF PENAL INTEREST AS DONE BY MY PREDECESSOR IN THE CASE OF APPELLANT FOR AY 2002 - 03. IN REPLY THE APPELLANT FILED COPY OF THE ORDER OF HONBLE ITAT PATNA BENCH FOR AY 2002 - 03 WHEREIN THE APPELLANTS APP EAL ON ALLOWABILITY OF PENAL INTEREST WAS ALLOWED BY THE BENCH BY CITING JUDGMENT OF APEX COURT IN THE CASE OF MAHALAKSHMI SUGAR MILLS CO. VS. CIT (123 ITR 129). THUS THE AR CONTENDED THAT THE WHOLE INTEREST INCLUSIVE OF PENAL INTEREST WAS ALLOWABLE TO THE APPELLANT. IN VIEW OF THE ABOVE CLEAR CUT FINDINGS OF THE ITAT, PATNA BENCH AND THE DECISION BEING BINDING IN NATURE, THE DISALLOWANCE OF INTEREST MADE BY THE AO IN BOTH THE ASSESSMENT YEARS I.E. AY 2004 - 05 & 2005 - 06 ARE HEREBY DELETED. 9 . AFTER HAVING GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND HAVING HEARD THE COUNSEL FOR BOTH THE PARTIES AT LENGTH, WE FIND THAT WHILE DELETING THESE GROUNDS HAS RELIED UPON THE ORDER OF THE HONBLE PATNA BENCH, PATNA OF THE ITAT IN ASSESSEES OWN CASE FOR ASSE SSMENT YEARS 2002 - 03 AND 2003 - 04. WE HAVE FURTHER NOTICE D THAT THE CO - ORDINATE BENCH OF THE ITAT IN ASSESSEES OWN CASE WHILE DELETING THE DISALLOWANCE HAD RELIED ON THE JUDGMENT OF HONBLE APEX COURT IN THE CASE OF S.A BUILDERS VS. ACIT, I TA NO S . - 37 & 38 / PAT /20 1 5 5 (2007) 288 ITR 01 (SC). THE HONBLE ITAT IN ITS ORDER AT PAGE 7 PARA 9 HAS GIVEN A CLEAR CUT FINDING THAT IN THE PRESENT CASE, THE ASSESSE HAD ADVANCED THE MONEY TO HIS SUBSIDIARIES FOR PROMOTING DEVELOPMENT OF ELECTRONICS IN THE STATE OF BIHAR WHICH WAS AN OBJECTIVE AND BUSINESS PURPOSE FOR THE ASSESSE. ACCORDINGLY, AS PER THE DECISION OF HONBLE SUPREME COURT IN S A BUILDERS (SUPRA), NO DISALLOWANCE IS REQUIRED TO BE MADE ON THIS GROUND. FURTHER, INTEREST IS ACCRUED TO THE ASSESSE AS ASSESSE IS FOLLOWING MERCANTILE SYSTE M OF ACCOUNTING. IT IS NOT A PROVISION BUT AN ASCERTAINED LIABILITY WHICH IS TO BE ALLOWED. 10 . NO NEW FACTS, CIRCUMSTANCES OR CONTRARY JUDGMENTS HAVE BEEN BROUGHT ON RECORD BEFORE US IN ORDER TO CONTROVERT OR REBUT THE FINDINGS SO RECORDED BY LD. CIT(A). BOTH THE APPEALS FILED BY THE REVENUE IS DISMISSED. 11 . IN THE RESULT, BOTH THE APPEALS FILED BY THE REVENUE STAND DISMISSED. O RDER IS PRONOUNCED IN THE OPEN COURT ON 13 TH OCTOBER , 201 7 . SD/ - SD/ - ( M. BALAGANESH ) ( SANDEEP GOSAIN ) ACCOUNTANT MEM BER JUDICIAL MEMBER DATE OF ORDER: 13 TH OCTOBER , 201 7 . S . S INH A (PS) COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT . I TA NO S . - 37 & 38 / PAT /20 1 5 6 2. THE RESPONDENT.: 3. THE CIT(A) - PATNA 4. CIT , PATNA 5. INCOME TAX APPELLATE TRIBUNAL,PATNA 6. GUARD FILE. //TR UE COPY// BY ORDER PRIVATE SECRETARY