Hubergroup India Pvt. Ltd. (Formerly known as Micro Inks Pvt. Ltd.), Vapi V. Pr. CIT, Valsad

ITA 385/SRT/2018

• Counselvise Citation: [2020] 109 COUNSELVISE.COM (IT) 9973 (ITAT-SURAT)
• Duration Of Justice: 2 year(s) 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 17-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S T BIDARI
• Assessee Lawyers: GOPALAKRISHNAN
• Keywords: Revision of order; Transfer pricing; Principle of natural justice; International transaction; Set aside
• Section: 143(3); 22; 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, HON'BLE JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, HON'BLE ACCOUNTANT MEMBER (VIRTUAL HEARING) . . ./ I.T.A NO.385/SRT/2018 [ [ / ASSESSMENT YEAR: 2011-12 HUBERGROUP INDIA PRIVATE LIMITED, (FORMERLY KNOWN AS MICRO INKS LIMITED), PLOT NO.808/E, PHASE-II, G.I.D.C., VAPI 396 195. [PAN: AAACH 7063 F] VS. THE PRINCIPAL COMMISSIONER OF INCOME TAX, VALSAD, GUJARAT. / APPELLANT /RESPONDENT [ /ASSESSEE BY SHRI GOPALA KRISHNAN CA /REVENUE BY SHRI S.T.BIDARI CIT(DR) / DATE OF HEARING: 01 . 1 2 .20 20 /PRONOUNCEMENT ON: 04 . 1 2 .20 20 /O R D E R PER PAWAN SINGH, JUDICIAL MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED PRINCIPAL COMMISSIONER OF INCOME TAX (PCIT), VALSAD, DATED 31.03.2018 PASSED ORDER UNDER SECTION 263 OF THE INCOME TAX ACT, 1961 FOR THE A.Y. 2011-12. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER U/S 263 PASSED BY THE LEARNED PCIT IS CONTRARY TO THE FACTS OF THE CASE AND LAW AND PREJUDICIAL TO THE ASSESSEE. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LEARNED PCIT HAS ERRED IN INVOKING JURISDICTION U/S.263 OF THE INCOME TAX ACT, 1961 BY HOLDING THAT THE ORDER OF THE LEARNED ASSESSING OFFICER U/S 143(3) R.W.S. 144A DATED 04.12.2015 IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE NOTICE DATED 23.03.2018 ISSUED U/S. 263 OF ACT IS NOT IN HUBERGROUP INDIA PVT. LTD.VS. PCIT, VALSAD/ ITA NO.385/SRT/2018 FOR A.Y. 2011-12 2 ACCORDANCE WITH THE PROVISIONS OF THE ACT AND DESERVES TO BE QUASHED IN TOTO 3. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE AND INTERPRETATION OF LAW THE LEARNED PCIT HAS ERRED IN SETTING ASIDE THE ORDER OF THE LEARNED ASSESSING OFFICER U/S 143(3) R.W.S. 144A DATED 04.12.2015 AND DIRECTING THE LEARNED ASSESSING OFFICER TO FRAME THE ASSESSMENT ORDER AFRESH. THE ORDER OF THE LEARNED PCIT U/S. 263 OF THE ACT IS CONTRARY TO FACTS OF THE CASE AND LAW AND DESERVES TO BE DELETED IN TOTO. 4. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED PCIT HAS IN PASSING THE ORDER U/S.263 WITHOUT AFFORDING A REASONABLE OPPORTUNITY OF PERSONAL HEARING. THE ORDER OF THE LEARNED PRINCIPAL COMMISSIONER OF INCOME TAX U/S.263 OF THE ACT HAS BEEN PASSED WITHOUT FOLLOWING THE PRINCIPLE OF NATURAL JUSTICE AND DESERVES TO BE QUASHED IN TOTO. 5. ON APPRECIATION OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER U/S.263 OF THE ACT PASSED BY THE LEARNED PCIT HAS NOT BEEN SERVED UPON THE APPELLANT COMPANY WITHIN THE TIME PRESCRIBED UNDER THE INCOME TAX ACT, 1961 AND IS THEREFORE BARRED BY LIMITATION AND DESERVES TO BE QUASHED IN TOTO. 6. THE APPELLANT CRAVES LEAVE TO ADD, AMEND, MODIFY OR ALTER THE ABOVE GROUNDS OF APPEAL AT ANY STAGE OF APPELLATE PROCEEDINGS. 7. THE APPELLANT HUMBLY PRAYS THAT THE APPEAL BE ALLOWED IN TOTO. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF PRINTING INKS AND AUXILIARY PRODUCTS. FOR THE ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE FILED ITS RETURN OF INCOME ON 25.11.2011, WHICH WAS TAKEN IN A SCRUTINY BY THE ASSESSING OFFICER. DURING THE ASSESSMENT THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS REPORTED INTERNATIONAL TRANSACTION WITH ITS ASSOCIATED ENTERPRISES. THE ASSESSING OFFICER AFTER RAISING VARIOUS QUARRIES PASSED THE DRAFT ASSESSMENT ORDER UNDER SECTION 143(3) READ WITH 144C(3) ON 23 RD HUBERGROUP INDIA PVT. LTD.VS. PCIT, VALSAD/ ITA NO.385/SRT/2018 FOR A.Y. 2011-12 3 DECEMBER 2015. THE ASSESSEE EXERCISE ITS OPTION TO FILE OBJECTION BEFORE DISPUTE RESOLUTION PENAL (DRP) ON VARIOUS ADDITIONS/ADJUSTMENTS SUGGESTED OR MADE BY THE ASSESSING OFFICER. THE DRP PASSED ITS DIRECTIONS VIDE ITS ORDER DATED 29.10.205. CONSEQUENT ON RECEIPT OF THE DIRECTION OF DRP, THE ASSESSING ORDER PASSED FINAL ASSESSMENT ORDER UNDER SECTION 143(3) READ WITH SECTION 144C(13) DATED 04 TH DECEMBER 2015. 3. THE ASSESSMENT ORDER WAS REVISED BY LEARNED PRINCIPAL COMMISSIONER OF INCOME TAX VIDE HIS ORDER DATED 31 ST MARCH 2018, PASSED UNDER SECTION 263 OF THE INCOME TAX ACT. THE LEARNED PCIT BEFORE REVISING THE ASSESSMENT ORDER ISSUED SHOW CAUSE NOTICE UNDER SECTION 263 DATED 23 RD MARCH 2018 BY TAKING VIEW THAT THE ASSESSMENT ORDER PASSED BY ASSESSING OFFICER IS PRIME FACIA ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE. THE LEARNED PCIT SHOULD SHOW CAUSE NOTICE UNDER SECTION 263 ON 23 RD MARCH 2018 BY FIXING THE DATE OF HEARING ON 27 TH MARCH 2018. IN THE SHOW CAUSE NOTICE THE LEARNED PCIT MENTIONED THAT THE ASSESSEE HAS SHOWN INTEREST PAYMENT OF 2.88 CRORE TO THE FOREIGN BANKS. THE INTEREST EXPENSES HAVE BEEN INCURRED BY ASSESSEE IN THE FORM OF PAYMENT OF INTEREST ON BORROWINGS FROM FOREIGN BANKS FOR THE PURPOSE OF MAKING INVESTMENT IN SHARE CAPITAL OF SUBSIDIARY COMPANIES OUTSIDE INDIA. THE ASSESSEE HAS WRONGLY CLAIMED THIS AMOUNT AS AN ITEM OF EXPENDITURE UNDER SECTION 57(III) OF THE INCOME TAX ACT AND THAT ASSESSING OFFICER HAS WRONGLY ALLOWED SUCH INTEREST EXPENDITURE. HUBERGROUP INDIA PVT. LTD.VS. PCIT, VALSAD/ ITA NO.385/SRT/2018 FOR A.Y. 2011-12 4 4. IT IS IN RESPONSE TO THE SHOW CAUSE NOTICE THE ASSESSEE FILED ITS REPLY DATED 27 TH MARCH 2018. IN THE REPLY THE ASSESSEE BESIDES THE OTHER CONTENTIONS, CONTENDED THAT SIMILAR SHOW CAUSE NOTICE DATED 8 TH MARCH 2016 WAS ISSUED BY LEARNED PCIT FOR ASSESSMENT YEAR 2009-10 FOR REVISING THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2009-10. THE ASSESSEE CHALLENGED THE SHOW CAUSE NOTICE DATED 8 TH MARCH 2016, ISSUED UNDER SECTION 263 FOR ASSESSMENT YEAR 2009- 10 BEFORE HON'BLE JURISDICTIONAL HIGH COURT. THE SAID SHOW CAUSE NOTICE HAS BEEN SET ASIDE BY HONBLE HIGH COURT VIDE ORDER DATED 22 ND AUGUST 2017 IN CIVIL APPEAL NO.4036 OF 2016. THE ASSESSEE CONTENDED TO DROP THE ACTION INITIATED UNDER SECTION 263 OF INCOME-TAX ACT. THE CONTENTION OF ASSESSEE WAS NOT ACCEPTED BY LEARNED PCIT. THE LEARNED PCIT HAS HELD THAT ALLOWABILITY OF INTEREST PAID ON THE BORROWING FROM THE FOREIGN BANKS FOR THE PURPOSE OF INVESTING IN SUBSIDIARY COMPANY OUTSIDE INDIA IS TO BE DISALLOWED UNDER SECTION 36(1)(III). THE LEARNED PCIT FURTHER CONCLUDED THAT INVESTMENT HAVE BEEN MADE BY ASSESSEE TO PROMOTE ITS SUBSIDIARY COMPANY AND NOT TO EARN ANY DIVIDEND INCOME AND THAT IT IS OTHER MATTER THAT DIVIDEND INCOME WOULD COME AS A NATURAL BYPRODUCT ON THE SAID INVESTMENT. ACCORDING TO LEARNED PCIT THE PROVISION OF SECTION 57(III) ARE NOT APPLICABLE AND THE INTEREST PAID IS NOT ALLOWABLE UNDER SECTION 57(III). THE LEARNED PCIT CONCLUDED THAT INTEREST EXPENDITURE UNDER SECTION 36(1)(III) CAN BE ALLOWED ONLY IF THE MONEY BORROWED BY ASSESSEE FOR THE PURPOSE OF BUSINESS. A SUBSIDIARY COMPANY IS AN INDEPENDENT HUBERGROUP INDIA PVT. LTD.VS. PCIT, VALSAD/ ITA NO.385/SRT/2018 FOR A.Y. 2011-12 5 IDENTITY AND NOT IN ANY WAY AN EXTENSION OF BUSINESS OF THE ASSESSEE. THE PROFIT AND LOSS ACCOUNT TO SAID SUBSIDIARY COMPANY IS SEPARATELY TAXABLE IN THEIR HAND. ACCORDINGLY, THE LEARNED PCIT HELD THAT INTEREST PAID OF 2.88 CRORE IS DISALLOWABLE UNDER SECTION 36(1)(III). THE PCIT SET ASIDE THE ASSESSMENT ORDER DATED 4 TH DECEMBER 2015 AND DIRECTED THE ASSESSING OFFICER TO MADE FRESH ASSESSMENT ORDER AFTER AFFORDING OPPORTUNITY TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD. PCIT, THE ASSESSEE HAS FILED PRESENT APPEAL BEFORE THIS TRIBUNAL. 5. WE HAVE HEARD THE SUBMISSION OF LEARNED AUTHORISED REPRESENTATIVE (AR) OF THE ASSESSEE AND THE LEARNED COMMISSIONER OF INCOME TAX-/LEARNED DEPARTMENTAL REPRESENTATIVE (LD. CIT-DR/ DR) FOR THE REVENUE AND HAVE GONE THROUGH THE ORDERS OF LOWER AUTHORITIES. THE LEARNED AR FOR THE ASSESSEE SUBMITS THAT THE GROUNDS OF APPEAL RAISED IN THE PRESENT APPEAL IS DIRECTLY COVERED BY THE DECISION OF HONBLE GUJARAT HIGH COURT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10 WHEREIN SIMILAR SHOW CAUSE NOTICE UNDER SECTION 263 WAS CHALLENGED BY THE ASSESSEE IN A SPECIAL CIVIL APPEAL NO. 4036 OF 2016 AND THE SHOW CAUSE NOTICE FOR ASSESSMENT YEAR 2009-10 WAS SET ASIDE. THE LEARNED AR FOR THE ASSESSEE FURTHER SUBMITS THAT SIMILAR NOTICES UNDER SECTION 263 WERE ISSUED FOR ASSESSMENT YEAR 2012-2013, 2013-2014 AND 2014- 2015. THE LEARNED PCIT VIDE SEPARATE ORDERS DATED 6 TH MARCH 2019 DROPPED THE PROCEEDING FOR ALL THREE SUBSEQUENT YEARS. THE COPY OF ORDER DATED 6 TH MARCH 2019 IS PLACED ON RECORD. THE LEARNED AR HUBERGROUP INDIA PVT. LTD.VS. PCIT, VALSAD/ ITA NO.385/SRT/2018 FOR A.Y. 2011-12 6 FOR THE ASSESSEE SUBMITS THAT THE REVENUE HAS ACCEPTED THE ORDER OF GUJARAT HIGH COURT IN ASSESSEE IS OWN CASE FOR ASSESSMENT YEAR 2009-10 ON SIMILAR ISSUE AS NO FURTHER SPECIAL LEAVE PETITION (SLP) IS FILED BEFORE HONBLE SUPREME COURT, AGAINST THE ORDER OF HIGH COURT. THE LEARNED AR FOR THE ASSESSEE SUBMITS THAT FACTS OF THE YEAR UNDER CONSIDERATION ARE EXACTLY SIMILAR TO THE FACT FOR ASSESSMENT YEAR 2009-10, SINCE THE ORDER OF HONBLE GUJARAT HIGH COURT ATTAINED FINALITY, ACCORDINGLY THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE DIRECTLY COVERED IN FAVOUR OF ASSESSEE AND AGAINST THE REVENUE. 6. ON THE OTHER HAND THE LEARNED DR FOR THE REVENUE SUPPORTED THE ORDER OF LEARNED PC IT. THE LEARNED CIT-DR SUBMITS THAT INTEREST EXPENSES OF 2.88 CRORE TO FOREIGN BANKS HAVE BEEN INCURRED BY THE ASSESSEE IN THE FORM OF PAYMENT OF INTEREST ON BORROWING FROM THE FOREIGN BANKS FOR THE PURPOSE OF MAKING INVESTMENTS IN THE SHARE CAPITAL OF SUBSIDIARY COMPANIES SITUATED OUTSIDE INDIA. THE ASSESSEE HAS WRONGLY CLAIMED THIS AMOUNT AS AN ITEM OF EXPENDITURE UNDER SECTION 57(III) AND THE ASSESSING OFFICER HAS WRONGLY ALLOWED THE SAME. BEFORE LEARNED PCIT, DURING THE PROCEEDING UNDER SECTION 263, THE MAIN CONTENTION OF ASSESSEE WAS THAT ISSUE HAS BEEN DECIDED IN FAVOUR OF ASSESSEE BY THE DECISION OF HONBLE GUJARAT HIGH COURT FOR ASSESSMENT YEAR 2009-10. THE LEARNED PCIT AFTER CONSIDERING THE SAID JUDGMENT OF HONBLE HIGH COURT HAS HELD THAT THE ONLY ISSUE IS THE LAW APPLICABLE REGARDING ALLOWABILITY OF INTEREST PAID ON THE BORROWINGS UTILIZED FOR HUBERGROUP INDIA PVT. LTD.VS. PCIT, VALSAD/ ITA NO.385/SRT/2018 FOR A.Y. 2011-12 7 PROMOTING A SUBSIDIARY COMPANY. THE ISSUE IS WHETHER THE PROVISION OF SECTION 57 (III) WOULD APPLY OR SOME OTHER PROVISION INCLUDING SECTION 36(1)(III) WOULD APPLY IS THE ONLY ISSUE. THE LEARNED PCIT HAS HELD THAT ALLOWABILITY OF INTEREST PAID ON THE BORROWINGS FROM THE FOREIGN BANKS FOR THE PURPOSE OF INVESTING IN THE SUBSIDIARY COMPANY OUTSIDE INDIA IS TO BE DISALLOWED UNDER SECTION 36(1)(III). THE LEARNED PCIT ADDED THAT IT IS AN UNDISPUTED FACT THAT THE INVESTMENTS HAVE BEEN MADE BY THE ASSESSEE TO PROMOTE ITS SUBSIDIARY COMPANY AND NOT TO EARN DIVIDEND INCOME. UNDER SECTION 36(1)(III), THE INTEREST EXPENDITURE CAN BE ALLOWED ONLY IF THE MONEY IS BORROWED BY THE ASSESSEE AND UTILIZED FOR THE PURPOSE OF BUSINESS. A SUBSIDIARY COMPANY, IS AN INDEPENDENT ENTITY AND NOT IN ANY WAY AN EXTENSION OF BUSINESS AS CANVASSED BY ASSESSEE. THE PROFIT OR LOSS ACCRUING TO THE SUBSIDIARY COMPANY IS SEPARATELY TAXABLE UNITS AND AS HELD BY LEARNED PCIT. THE LEARNED PCIT WAS VERY MUCH AWARE OF THE JUDGMENTS OF HONBLE GUJARAT HIGH COURT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10. THE LEARNED PCIT IMPLIEDLY DISTINGUISHED AND DIFFERED FROM THE SAME FOR ARRIVING AT THIS CONCLUSION BASED ON MERIT. 7. IT WAS SUBMITTED THAT THE CONTENTION OF LEARNED AR OF THE ASSESSEE BEFORE THE BENCH TO TREAT THE APPEAL AS COVERED CASE ON THE BASIS OF ACTION OF SUCCESSOR OF LEARNED PCIT FOR THREE SUBSEQUENT YEARS, WHEREIN THE SIMILAR PROCEEDINGS UNDER SECTION 263 ON THE BASIS OF OBSERVATION OF DIRECTORATE OF INCOME TAX (L&R) OBSERVING THAT HIGH COURT HAS HELD THAT THE VIEW TAKEN BY ASSESSING OFFICER WAS HUBERGROUP INDIA PVT. LTD.VS. PCIT, VALSAD/ ITA NO.385/SRT/2018 FOR A.Y. 2011-12 8 PLAUSIBLE VIEW AND HENCE DID NOT UPHELD THE ORDER PASSED BY LEARNED PCIT. THE LEARNED DR FOR THE REVENUE SUBMITS THE DECISION OF DIRECTORATE OF INCOME TAX (L&R)) CBT OR THAT SUCCESSOR OF PCIT IN SUBSEQUENT YEARS IS NOT BINDING ON THE TRIBUNAL. THE TRIBUNAL IS WITHIN ITS POWER TO EXAMINE THE ISSUE ON MERIT AND ADJUDICATE THE APPEAL. THE LEARNED PCIT IN THE PRESENT CASE HAS ARRIVED AT THE CONCLUSION THAT IMPUGNED INTEREST EXPENDITURE IS NOT ALLOWABLE UNDER SECTION 57(III) AND IT IS TO BE DISALLOWED UNDER SECTION 36(1)(III) AND PRAYED TO DECIDE THE ISSUE ON MERIT. 8. WE HAVE CONSIDERED THE RIVAL CONTENTION OF BOTH THE PARTIES AND HAVE GONE THROUGH THE ORDERS OF LEARNED PCIT, HONBLE GUJARAT HIGH COURT IN A SPECIAL CIVIL APPEAL NO.4036 OF 2016 FOR ASSESSMENT YEAR 2009-10 AND ORDERS OF LEARNED PCIT FOR SUBSEQUENT THREE ASSESSMENT YEARS. WE HAVE NOTED THAT ON SIMILAR SHOW CAUSE NOTICE, WHICH WAS CHALLENGED BY THE ASSESSEE BEFORE HIGH COURT, IN ASSESSMENT YEAR 2009-10, IN SPECIAL CIVIL APPEAL NO.4036 OF 2016 THE HIGH COURT PASSED FOLLOWING ORDER; 9. FROM THE MATERIALS ON RECORD, IT CAN BE SEEN THAT REGARDING THE INTEREST AND OTHER FINANCE CHARGES OF 2.36 CRORE, THE ASSESSING OFFICER HAD UNDERTAKEN A DETAILED SCRUTINY DURING THE ASSESSMENT PROCEEDING AND CALLED UPON THE ASSESSEE TO JUSTIFY THE CLAIM. THE ASSESSEES STAND WAS TWOFOLD. FIRSTLY, THAT INTEREST RELATED TO THE BORROWED AMOUNT WHICH WAS INVESTED IN THE STOCK OF SUBSIDIARY COMPANY SET UP IN USA. THIS COMPANY WAS SET UP TO INCREASE THE ASSESSEES SALE. THE EXPENDITURE WAS THUS EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. IN THE ALTERNATIVE, THE EXPENDITURE SHOULD BE ALLOWED UNDER SECTION 57(III) OF THE ACT SINCE SUCH INVESTMENT WOULD EARN DIVIDEND INCOME. MERELY BECAUSE NO DIVIDEND WAS PAID DURING THE YEAR UNDER CONSIDERATION WOULD NOT BE OF ANY HUBERGROUP INDIA PVT. LTD.VS. PCIT, VALSAD/ ITA NO.385/SRT/2018 FOR A.Y. 2011-12 9 CONSEQUENCE. THE ASSESSING OFFICER REJECTED THE 1 ST CONTENTION BUT ACCEPTED THE LATER. THE ASSESSEE DID NOT OBJECT TO THIS PROPOSAL IN THE DRAFT ORDER SUPPLIED BY THE ASSESSING OFFICER. CONSEQUENTLY, THE ASSESSING OFFICER PASSED THE FINAL ORDER OF ASSESSMENT GRANTING RELIEF TO THE ASSESSEE. THE COMMISSIONER IN THE NOTICE CITED HIS TENTATIVE REASON FOR TAKING THE ORDER IN REVISION. IN HIS OPINION BEFORE GRANTING THE BENEFIT UNDER SECTION 57(III) OF THE ACT, THE ASSESSING OFFICER SHOULD HAVE PROPERLY VERIFIED THE NATURE OF INVESTMENT MADE BY THE ASSESSEE IN THE SUBSIDIARY COMPANY. HE WAS OF THE OPINION THAT THE INVESTMENT WAS MADE FOR THE PURPOSE OF PROMOTING THE INTEREST OF ITS SUBSIDIARY COMPANY IN USA. THIS DID NOT SATISFY THE REQUIREMENT OF SECTION 57(III) OF THE ACT SINCE IT WAS NECESSARY THAT PRIMARY MOTIVE OF INCURRING THE EXPENDITURE SHOULD BE DIRECTLY TO THE INCOME FALLING UNDER THE HEAD INCOME FROM OTHER SOURCES. THE COMMISSIONER DID NOT DISPUTE THE ASSESSEES STAND THAT THOUGH THE STOCK OF THE SUBSIDIARY PURCHASED BY THE PETITIONER IN DUE COURSE, DIVIDEND WOULD BE PAID AND THAT SUCH DIVIDEND WOULD BE TAXABLE AS INCOME FROM OTHER SOURCES. HE HOWEVER, HARPED UPON THE ISSUE THAT SUCH INVESTMENT SHOULD BE MADE WITH THE PRIMARY MOTIVE OF EARNING AND THAT SUCH MOTIVE SHOULD HAVE DIRECT LINK WITH THE PURPOSE OF EARNING INCOME. SECTION 57 3 RD OF THE ACT ALLOWED DEDUCTION WHILE COMPUTING INCOME CHARGEABLE UNDER THE HEAD INCOME FROM OTHER SOURCES, ANY OTHER EXPENDITURE LAID OUT OR EXPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF MAKING OR EARNING SUCH INCOME. IT WAS THIS CONTEXT THE ASSESSING OFFICER HAD ACCEPTED THE ASSESSEES CONTENTION THAT IF THE INVESTMENT IS TREATED AS NOT HAVING BEEN EXPENDED IN THE ASSESSEE IS BUSINESS IN USA AND THEREFORE, WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE SAME SHOULD BE TREATED AS ONE FOR EARNING INCOME FROM OTHER SOURCES. THE ASSESSING OFFICER ALSO ACCEPTED THE ASSESSEES RELIANCE ON THE DECISION OF THE SUPREME COURT IN RAJENDRA PRASAD MOODY (SUPRA) IN WHICH IT WAS HELD THAT DEDUCTION UNDER SECTION 57(III) OF THE ACT, WAS NOT CONDITIONAL UPON ACTUALLY MAKING OR EARNING INCOME. IT WAS A CASE WHERE INTEREST WAS PAID ON MONIES BORROWED FOR INVESTMENT IN SHARES. ON SUCH SHARES, NO DIVIDEND WAS RECEIVED. WHEN THE REVENUE OBJECTED TO THE INTEREST EXPENDITURE BEING ALLOWED BY WAY OF DEDUCTION ON THE GROUND THAT NO INCOME WAS GENERATED HUBERGROUP INDIA PVT. LTD.VS. PCIT, VALSAD/ ITA NO.385/SRT/2018 FOR A.Y. 2011-12 10 OUT OF SUCH INVESTMENT, SUPREME COURT REJECTED THE CONTENTION. IT WAS NOTED THAT ACCEPTING SUCH A CONTENTION WOULD BRING OUT A SITUATION THAT THE EXPENDITURE WOULD DISQUALIFY FOR DEDUCTION ONLY IF NO INCOME RESULT FROM SUCH EXPENDITURE IN A PARTICULAR ASSESSMENT YEAR BUT IF THERE IS SOME INCOME HOWSOEVER SMALL OR MEAGRE, THE EXPENDITURE WOULD BE ELIGIBLE FOR DEDUCTION. IN THE OPINION OF THE SUPREME COURT THIS WOULD BRING ABOUT AN ANOMALOUS RESULT. 10. IT CAN THUS BE SEEN THAT THE VIEW ADOPTED BY THE ASSESSING OFFICER WAS AFTER PROPER SCRUTINY OF THE RELEVANT FACTS AND CLEARLY A PLAUSIBLE VIEW AND THEREFORE, NOT OPEN TO REVISION AT THE HANDS OF COMMISSIONER. THE SUPREME COURT IN CASE OF MALABAR INDUSTRIAL CO LTD (SUPRA), WHICH HAS BEEN REFERRED TO TIME AND AGAIN, HELD AND OBSERVED THAT THE ORDER OF ASSESSMENT WOULD BE OPEN TO REVISION PROVIDED TO AND CONDITION OF SAME BEING ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE ARE SATISFIED. IT IS ALSO WELL SETTLED THAT IF AFTER PROPER ENQUIRIES, THE ASSESSING OFFICER HAS ADOPTED A VIEW WHICH IS PLAUSIBLE ONE, THE VIEW WOULD NOT BE OPEN TO REVISION BY THE COMMISSIONER. 9. WE HAVE FURTHER NOTED THAT SIMILAR SHOW CAUSE NOTICE UNDER SECTION 263 WAS ISSUED BY LEARNED PCIT FOR THREE SUBSEQUENT ASSESSMENT YEARS. AFTER THE DECISION OF HONBLE GUJARAT HIGH COURT IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-10, ALL PROCEEDINGS INITIATED FOR THREE SUBSEQUENT YEARS ON THE SIMILAR SHOW CAUSE NOTICES UNDER SECTION 263 WERE DROPPED VIDE ORDER DATED 6 TH MARCH 2019. THE PROCEEDING INITIATED FOR THREE SUBSEQUENT YEARS WERE DROPPED BY LEARNED PCIT IN A VERBATIM ORDER FOR ALL THREE YEARS, FOR COMPLETENESS OF THE ORDER THE OBSERVATION OF LEARNED PCIT IN ALL THREE SUBSEQUENT YEARS IS EXPECTED BELOW; 10. THE FACTS OF THE CASE AS MENTIONED IN SCA NO. 4036 OF 2016 FOR AY 2009 -10 ARE SIMILAR TO THE FACTS OF THE INSTANT CASE WHEREIN THE ASSESSEE HUBERGROUP INDIA PVT. LTD.VS. PCIT, VALSAD/ ITA NO.385/SRT/2018 FOR A.Y. 2011-12 11 HAS DEBITED INTEREST PAYMENT ON ACCOUNT OF LOAN TAKEN FOR INVESTMENT IN SHARE CAPITAL OF SUBSIDIARY COMPANIES OUTSIDE INDIA. SINCE CASE HAS REACHED ITS FINALITY FOR A BUY 2009 -10 ON SAME ISSUE, DECIDING THAT NO SLP IS REQUIRED TO BE FILED IN SCA NO. 4036 OF 2016 FOR AY 2009-10, SETTING ASIDE THE ORDER PASSED UNDER SECTION 263 OF IT ACT AND ALLOWING THE PETITION OF THE ASSESSEE, THE 263 PROCEEDING ON SIMILAR ISSUE, IN THE INSTANT CASE ARE REQUIRED TO BE DROPPED. 10. THUS, KEEPING IN VIEW THE AFORESAID FACTUAL DISCUSSION WHEN THE SHOW CAUSE NOTICE UNDER SECTION 263 ON SIMILAR GROUND FOR REVISING THE ASSESSMENT ORDER FOR ASSESSMENT YEAR 2009-10 HAS BEEN SET ASIDE BY HIGH COURT AND BY ACCEPTING THE ORDER OF HIGH COURT SIMILAR REVISION PROCEEDINGS INITIATED ON SIMILAR SHOW CAUSE NOTICE FOR THREE SUBSEQUENT ASSESSMENT YEARS, HAS ALREADY BEEN DROPPED BY REVENUE, THEREFORE THE ISSUES RAISED IN THE PRESENT APPEAL IS SQUARELY COVERED IN FAVOUR OF ASSESSEE. THE CONTENTION OF LEARNED DR FOR THE REVENUE THAT THE DECISION OF DIRECTORATE OF INCOME TAX (L& R), CBDT OR PRINCIPAL CIT IS NOT BINDING ON TRIBUNAL. THE CONTENTION OF LEARNED DR FOR THE REVENUE IS FAIR THAT THE DECISIONS OF DIRECTORATE OF INCOME TAX (L& R), CBDT OR PRINCIPAL CIT IS NOT BINDING ON TRIBUNAL, HOWEVER, THOSE DECISION ARE BINDING ON PRINCIPAL CIT AND LEARNED DR OF REVENUE. ONCE, THE ORDER OF HIGH COURT ON IDENTICAL ISSUES FOR ASSESSMENT YEAR 2009-10 IS ACCEPTED BY HIGHER AUTHORITIES OF REVENUE, NOW IT IS NOT OPEN FOR LEARNED DR FOR REVENUE OR TO LEARNED PCIT TO DEVIATE FROM SUCH DECISIONS. THUS, IN OUR VIEW THE CONTENTION OF LEARNED DR IS MISPLACED. NO CONTRARY FACTS OR LAW TO TAKE OTHER VIEW IS BROUGHT TO OUR NOTICE. IN THE RESULT IN THE GROUNDS OF APPEAL RAISED BY ASSESSEE ARE ALLOWED. HUBERGROUP INDIA PVT. LTD.VS. PCIT, VALSAD/ ITA NO.385/SRT/2018 FOR A.Y. 2011-12 12 11. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 04-12-2020 BY PLACING RESULT ON NOTICE BOARD. SD/- SD/- (DR.ARJUN LAL SAINI) (PAWAN SINGH) ( /ACCOUNTANT MEMBER ( /JUDICIAL MEMBER) / SURAT, DATED : 4 TH DEC , 2020 S.GANGADHARA RAO, SR.PS COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER / / TRUE COPY / / ASSISTANT REGISTRAR, SURAT