Billroth Hospitals Limited, CHENNAI V. ITO (OSD), CHENNAI

ITA 384/CHNY/2015

• Counselvise Citation: 38421714 RSA 2015
• Duration Of Justice: 4 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2004-2005
• Appeal Filed On: 20-02-2015
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN JCITD R
• Assessee Lawyers: K M MOHANDASS
• Keywords: Proportionate interest; Capital expenditure
• Section: 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI ... , . , , BEFORE SHRI N.R.S.GANESAN, JUDICIAL MEMBER AND SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ I.T.A.NO.384 /MDS./2015 ( ! '! / ASSESSMENT YEAR :2004-05) BILLROTH HOSPITALS LIMITED , NO.43, LAKSHMI TALKIES ROAD, SHENOY NAGAR, CHENNAI 600 030. VS. THE INCOME TAX OFFICER (OSD) COMPANY CIRCLE I (2), CHENNAI 600 034. PAN AAACB 2221P ( / APPELLANT ) ( / RESPONDENT ) #$ % & / APPELLANT BY : MR. K.M. MOHANDASS, C.A. '(#$ % & / RESPONDENT BY : MR.P. RADHAKRISHNAN, JCIT,D.R ) * % +, / DATE OF HEARING : 08.07.2015 -' % +, /DATE OF PRONOUNCEMENT : 15.07.2015 / O R D E R PER A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER: THIS APPEAL IS FILED BY THE ASSESSEE, AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (A)-I, CHENNAI D ATED ITA NO.384 /MDS/2015 2 20.10.2014 IN ITA NO.179/08-09/A-I PASSED UNDER SE C.143 (3) READ WITH SECTION SEC. 147 OF THE ACT. 2. THE ASSESSEE HAS RAISED SEVEN ELABORATE GROUNDS IN ITS APPEAL, HOWEVER THE CRUX OF THE ISSUE IS THAT:- I) THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLO WANCE OF ` 3,22,596/- BEING PROPORTIONATE INTEREST TOWARDS INT EREST FREE LOAN ADVANCED TO SISTER CONCERN VIZ. M/S.KAY PEE KAY MED ICAL SERVICES PRIVATE LTD.,(KPK). II) THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLO WANCE OF FILING FEE OF ` 25,000/- PAID TO REGISTRAR OF COMPANIES TOWARDS INC REASE OF AUTHORIZED CAPITAL. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSES SEE IS A LIMITED COMPANY, ENGAGED IN THE BUSINESS OF RUNNING HOSPITA LS AND PHARMACIES, FILED ITS RETURN OF INCOME FOR THE ASSE SSMENT YEAR 2004- 05 ON 30.10.2004 ADMITTING TOTAL INCOME AS ` 39,47,110/-. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AN D THE ASSESSMENT U/S.143(3) WAS COMPLETED ON 18.12.2008 WHEREIN THE LD.A.O DISALLOWED INTEREST TO THE EXTENT OF ` 3,22,596/- BEING PROPORTIONATE ITA NO.384 /MDS/2015 3 INTEREST TOWARDS INTEREST FREE LOAN ADVANCED TO SIS TER CONCERN & FILING FEE OF ` 25,000/- PAID TO REGISTRAR OF COMPANIES TOWARDS INC REASE OF AUTHORIZED CAPITAL. 4.1 GROUND NO.1 - DISALLOWANCE OF ` 3,22,596/- AS PROPORTIONATE INTEREST ON INTEREST FREE LOAN GIVEN TO SISTER CONC ERN. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE LD. ASSESSING OFFICER, ON EXAMINING THE BOOKS OF ACCOUN TS OF THE ASSESSEE OBSERVED THAT THE ASSESSEE COMPANY HAD AVA ILED A LOAN FROM INDIAN OVERSEAS BANK TO THE TUNE OF ` 2,26,50,000/- AND PAID INTEREST THEREON. IT WAS FURTHER NOTICED THAT THE ASSESSEE COMPANY HAD COMPANY HAD ADVANCED THE SAME TO ITS SISTER CON CERN AS INTEREST FREE LOAN. THEREFORE THE LD. ASSESSING OFFICER DISA LLOWED THE INTEREST ON THE AFORESAID AMOUNT AS ALLOWABLE DEDUCTION. LD . CIT (A) ALSO CONFIRMED THE ORDER OF THE LD. ASSESSING OFFICER AF TER DETAILED DISCUSSIONS. 4.2 AT THE OUTSET THE LD. A.R SUBMITTED BEFORE US THE BALANCE SHEET OF THE ASSESSEE COMPANY FOR THE RELEVANT ASSESSMENT YEAR AND ARGUED BY STATING THAT THE ASSESSEE HAD SUFFICIENT SHARE CAPITAL, ITA NO.384 /MDS/2015 4 RESERVES AND SURPLUS AND SHARE APPLICATION MONEY TO COVER THE AMOUNT ADVANCED TO THE SISTER COMPANY. IT WAS THER EFORE ARGUED THAT THE INTEREST DISALLOWED BY THE REVENUE IS NOT WARRA NTED BECAUSE THE ASSESSEE CAN DEPLOY ITS OWN NON-INTEREST BEARING FU NDS IN WHATEVER MANNER IT FINDS APPROPRIATE. LD. D.R ARGUED IN SUP PORT OF THE ORDERS OF THE REVENUE. 4.3 WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY P ERUSED THE MATERIALS AVAILABLE ON RECORD AND PAPER BOOKS SUBMI TTED BY THE ASSESSEE. FROM THE BALANCE SHEET SUBMITTED BEFORE U S, WE FIND THAT THE ASSESSEE HAD EQUITY SHARE CAPITAL, RESERVES AND INTEREST FREE FUNDS AS FOLLOWS AS ON 31.03.2003:- SL. NO. PB PAGE NO. PARTICULARS AMOUNT 1 13 SHARE CAPITAL 15,00,00,000 2 13 RESERVE & SURPLUS 36,32,267 3 18 SHARE APPLICATION MONEY 1,23,00,000 TOTAL 16,59,32,267 FURTHER, WE FIND THAT THE ASSESSEES EQUITY SHARE C APITAL, RESERVES AND INTEREST FREE FUNDS HAS IMPROVED AS ON 31.03.20 04 AS FOLLOWS:- ITA NO.384 /MDS/2015 5 SL. NO. PB PAGE NO. PARTICULARS AMOUNT 1 13 SHARE CAPITAL 20,00,00,000 2 13 RESERVE & SURPLUS 59,24,705 3 18 SHARE APPLICATION MONEY 2,50,60,000 TOTAL 23,19, 84,705 FROM THE ABOVE IT IS APPARENT THAT THE ASSESSEE HAS NON-INTEREST BEARING FUNDS AS ON 01.04.2003 ` 16,59,32,267/- AND AS ON 31.03.2004 RS. 23,19,64,705/-. IF THE ASSESSEE HAD ADVANCED THE AMOUNT OF ` 2,26,50,000/- OUT OF THE ABOVE FUNDS, THEN IT CANNO T BE SAID THAT THE ASSESSEE HAD ADVANCED INTEREST BEARIN G FUNDS TO ITS SISTER CONCERN, THOUGH THE ASSESSEE COMPANY HAD OBT AINED INTEREST BEARING LOAN OF `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` 25,000/- PAID TO REGISTRAR OF COMPANIES TOWARDS INCREASE OF AUTHORIZ ED CAPITAL. THE LD. ASSESSING OFFICER OBSERVED THAT THE ASSESSE E HAD PAID RS.25,000/- AS ROC FEES FOR INCREASING ITS AUTHORIZ ED SHARE CAPITAL. HE WAS OF THE VIEW THAT THIS EXPENDITURE IS CAPITAL EXPENDITURE AND THEREFORE, DISALLOWED THE SAME AND ADDED TO THE INC OME OF THE ASSESSEE. THE LD. CIT (A) FOLLOWING THE ORDER OF T HE HONBLE SUPREME COURT IN THE CASE OF PUNJAB STATE INDUSTRIA L DEVELOPMENT BANK VS. CIT REPORTED IN 225 ITR 792, CONFIRMED THE ORDER OF THE LD. ASSESSING OFFICER AGGRIEVED BY WHICH THE ASSESSEE I S IN APPEAL BEFORE US. SINCE THE MATTER HAS BEEN ALREADY DECID ED BY THE HONBLE ITA NO.384 /MDS/2015 7 APEX COURT AGAINST THE ASSESSEE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE REVENUE. HENCE, THE DISALLOWANCE ON AC COUNT OF FILING FEE OF ` 25,000/- PAID TO REGISTRAR OF COMPANIES TOWARDS INC REASE OF AUTHORIZED CAPITAL STANDS CONFIRMED. 6. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AS INDICATED HEREINABOVE. ORDER PRONOUNCED ON 15 TH JULY, 2015 AT CHENNAI. SD/- SD/- ( . . . ) ( N.R.S.GANESAN ) ( . '#$ %' ) (A.MOHAN ALANKAMONY) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 15 TH JULY, 2015. K S SUNDARAM. % '+./ 0 /'+ /COPY TO: 1. #$ /APPELLANT 2. '(#$ /RESPONDENT 3. ) 1+ () /CIT(A) 4. ) 1+ /CIT 5. /4 '+5 /DR 6. 6! 7* /GF