THE DY CIT RG 8(3), MUMBAI V. M/S. SHREYA LIFE SCIENCES PVT. LTD, MUMBAI

ITA 39/MUM/2008

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 8118 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2011
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 22-02-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 02-01-2008
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS KUSUM INGLE
• Keywords: Depreciation; Rule of consistency; Wholly owned subsidiary; Revenue expenditure; Capital expenditure; Set aside
• Section: 191; 32; 37; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J : MUMBAI BEFORE SHRI R.V. EASWAR, HONBLE PRESIDENT AND SHRI B.RAMAKOTAIAH, ACCOUNTANT MEMBER ITA. NO. 39/MUM/2008 ASSESSMENT YEAR 2004-2005 DCIT, RANGE 8 (3) MUMBAI 400 020 VS. M/S. SHREYA LIFE SCIENCES PVT. LTD. MUMBAI 400 099 PAN AADCS9890C (APPELLANT) (RESPONDENT) FOR APPELLANT : MRS. KUSUM INGLE, CIT-DR FOR RESPONDENT : SHRI SATISH MODY ORDER PER B.RAMAKOTAIAH, A.M. 1. THIS IS AN APPEAL BY THE REVENUE AGAINST THE OR DER OF THE CIT(A)-XXIX, MUMBAI DATED 9-10-2007. THE REVENUE HA S RAISED THE FOLLOWING GROUNDS : 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.2.50 CRORES BEING 1/4 TH OF RS.10 CRORES PAID TO M/S. RALLIES INDIA LTD. AS NON-COMPETE FEES TREATED BY THE A.O. AS CAPITAL EXPENDITURE WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE A.O. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN CONSIDERING THE GRACE PERIOD AND DELETING THE DISALLOWANCE OF RS.32.57 LAKHS BEING DELAYED PAYMENT OF EMPLOYEES CONTRIBUTION TO PF/ESIC. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS.51.89 LAKHS FOR INTEREST ITA.NO.39/MUM/2008 M/S. SHREYA LIFE SCIENCES PVT. LTD. 2 FREE ADVANCES TO SISTER CONCERNS WITHOUT APPRECIATING THE FACTS BROUGHT ON RECORD BY THE A.O. AND IGNORING THAT RS.3.19 CRORES WAS GIVEN TO SHREYA BIOTECH LTD. ON ACCOUNT OF SHARE APPLICATION MONEY. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION OF RS.145A OF RS.51.73 LAKHS ON ACCOUNT OF UNUTILISED MODVAT CREDIT. 2. WE HAVE HEARD THE LEARNED CIT-DR AND LEARNED CO UNSEL IN DETAIL AND THEIR ARGUMENTS WERE CONSIDERED. 3. GROUND NO.1 : THE ISSUE IN THIS GROUND IS WITH REFERENCE TO THE AMOUNT OF RS.2.50 CRORES BEING 1/4 TH OF RS.10 CRORES PAID AS NON-COMPETE FEES ALLOWED BY THE CIT(A), WHEREAS T HE ASSESSING OFFICER TREATED THE SAME AS CAPITAL EXPENDITURE 3.1. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT THE ASSESSEE ACQUIRED THE PHARMA BUSINESS UNDERTAKING OF RALLIS, INCLUDING ALL THE ASSETS, PROPERTIES, RIGHTS, BENEFITS AND LIABILITIE S, AS A GOING CONCERN, W.E.F. 12-6-2001. THE CONSIDERATION OF RS. 49 CRORE S PAID BY IT WAS DULY APPORTIONED INTO VARIOUS ASSET HEADS AND ACCOU NTED IN THE BOOKS OF THE ASSESSEE, UNDER THE RESPECTIVE HEADS OF ACCO UNT SUCH AS PLANT AND MACHINERY ETC., THE CAPITAL ITEMS WERE CAPITALI SED AND THE NON- CAPITAL ITEMS WERE NOT. THE ASSESSEE PAID A SUM OF RS. 10 CRORES (INCLUDED IN THE AFORESAID CONSIDERATION) TO RALLIS , TOWARDS NON- COMPETE FEES, FOR WHICH A NON-COMPETE AGREEMENT DAT ED 30-6-2001 WAS EXECUTED BETWEEN THE PARTIES. EVENTHOUGH THE EN TIRE AMOUNT OF RS. 10 CRORES WAS PAID AT THE TIME OF ACQUIRING THE PHARMA BUSINESS, THE ASSESSEE TREATED THE AMOUNT AS DEFERRED REVENUE EXPENDITURE AND CLAIMED RS. 2.5 CRORES IN EACH OF THE ASSESSMENT YE ARS FROM AY 2002- 2003 TO AY 2005-2006. THE ASSESSING OFFICER EXAMINE D THE CLAIM AND WAS OF THE OPINION THAT THE ASSESSEE OBTAINED AN EN DURING BENEFIT AND ITA.NO.39/MUM/2008 M/S. SHREYA LIFE SCIENCES PVT. LTD. 3 SO THE AMOUNT IS OF CAPITAL IN NATURE AND CANNOT BE ALLOWED AS DEDUCTION. THE ASSESSING OFFICER RELIED ON FOLLOWIN G DECISIONS : (I) CHELPARK COMPANY LTD. VS. CIT 191 ITR 249 (GUJ) (HC ) (II) CIT VS. SAROJ KUMAR PODDAR 279 ITR 573 (CAL) (HC) (III) CIT VS. COAL SHIPMENTS P. LTD. 82 ITR 902 (SC) THE ASSESSING OFFICER HELD THAT THE PAYMENT OF RS. 10 CRORES MADE TO RALLIS INDIA LTD. IS OF CAPITAL NATURE. AN AMOUNT O F RS. 2.50 CRORES DEBITED BY THE ASSESSEE WAS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 3.2. BEFORE THE CIT(A), THE ASSESSEE MADE DETAILED SUBMISSIONS WHICH ARE EXTRACTED IN PARA 4.3 OF THE CIT(A) ORDER. IT WAS CONTENDED THAT THE ASSESSEE HAD NOT DERIVED ANY ENDURING BENEFIT AND FURTHER THE ASSESSING OFFICER IN EARLIER TWO AS SESSMENT YEARS ALLOWED THE CLAIM AFTER SCRUTINY AND RULE OF CONSIS TENCY SHOULD BE FOLLOWED. ACCEPTING THE CONTENTION OF THE ASSESSEE, THE CIT(A) VIDE PARA 4.4 HELD THAT THE BENEFIT WAS ONLY FOR 4 YEARS , THE BRAND NAME OF RALLIS WAS NOT TRANSFERRED AND THE EXPENDITURE W AS INCURRED FOR AUGMENTING THE PROFIT. THUS, HE ALLOWED THE CLAIM. 3.3. LEARNED CIT-DR REFERRING TO THE FACTS OF THE CASE SUBMITTED THAT THE FACTS ARE EXACTLY SIMILAR TO THE FACTS IN THE CASE OF TECUMSEH INDIA (P.) LTD. VS. ADDL. CIT CONSIDERED B Y THE SPECIAL BENCH OF ITAT, DELHI 127 ITD 1 (S.B.) WHEREIN THE S AID CLAIM OF NON- COMPETE FEES WAS CONSIDERED AND HELD AS CAPITAL IN NATURE. IT WAS THE SUBMISSION THAT THE CIT(A) ERRED IN ALLOWING THE SA ME AS REVENUE EXPENDITURE. 3.4. WHILE ADMITTING THAT THE FACTS IN THIS CASE A RE SIMILAR TO THE FACTS CONSIDERED BY SPECIAL BENCH, LEARNED COUN SEL HOWEVER VEHEMENTLY ARGUED THAT THE EXPENDITURE IS OF REVENU E IN NATURE. IT WAS HIS SUBMISSION THAT THE ASSESSING OFFICER IN EARLIE R TWO YEARS ALLOWED ITA.NO.39/MUM/2008 M/S. SHREYA LIFE SCIENCES PVT. LTD. 4 THE AMOUNTS AS REVENUE EXPENDITURE ON EXAMINATION A ND THERE IS NO CHANGE IN FACTS TO TAKE A DIFFERENT VIEW. IT WAS HI S SUBMISSION THAT EVEN THE HONBLE BOMBAY HIGH COURT IN THE CASE OF C IT VS. ZODIAC CLOTHING CO. LTD. IN ITA. NO. 576 OF 2008 HAS FOLLO WED THE PRINCIPLE OF CONSISTENCY AND SO THE ORDER OF CIT(A) HAS TO BE UP HELD. INVOKING RULE 27, IT WAS ALTERNATE CONTENTION THAT THE ASSESSEE I S ENTITLED FOR DEPRECIATION ON THE INTANGIBLE ASSET AND IF THE E NTIRE AMOUNT OF RS. 10 CRORES IS CONSIDERED AS COST, THE SAME AMOUNT HA S TO BE ALLOWED AS DEPRECIATION @ 25% AS THE RIGHT TO NON-COMPETE WAS ONLY FOR 4 YEARS. HE PLACED ON RECORD THE ORDER OF THE CHENNAI BENCH IN THE CASE OF ACIT VS REAL IMAGE TECH P LTD120 TTJ 983 (CHE.) FOR THE PROPOSITION THAT THE NON-COMPETE FEES CAN BE CONSIDERED AS INTA NGIBLE ASSET AS IT IS A BUSINESS RIGHT. THE LD. COUNSEL ALSO RELIED ON THE DECISION OF TECHNO SHARES AND STOCKS LTD 327 ITR 323. 3.5. THE LEARNED CIT-DR IN REPLY SUBMITTED THAT TH E NON- COMPETE FEE DOES NOT RESULT IN ANY ASSET AND DEPREC IATION CANNOT BE ALLOWED ON THE SAME AND RELIED ON ITAT DECISION AB MAURIA INDIA P. LTD. IN ITA 1293/MDS/2006 DT.23/11/2007 (2008 TIOL 107) THAT IT IS NOT A BUSINESS RIGHT OF SIMILAR NATURE TO BE CONS IDERED U/S. 32 (I) (II). 3.6. WE HAVE CONSIDERED THE ISSUE AND THE ARGUMENT S. AS THE FACTS INDICATE THE ASSESSEE HAD ACQUIRED PHARMA BUS INESS BY PAYING RS. 49 CRORES OUT OF WHICH RS. 10 CRORES IS FOR NON -COMPETE FEES PAID AT THE TIME OF ACQUISITION, EVEN THOUGH CLAIMED 1/4 TH EACH IN 4 ASSESSMENT YEARS. IT IS ALSO ON RECORD THAT THE ASS ESSING OFFICER DID NOT MAKE IT AN ISSUE IN EARLIER YEARS AND ALLOWED T HE CLAIM. HOWEVER, IN THIS YEAR THE ASSESSING OFFICER EXAMINED AND HEL D THAT THERE IS AN ENDURING BENEFIT AND THE EXPENDITURE IS IN THE NATU RE OF CAPITAL EXPENDITURE. THE FACTS ARE SIMILAR TO THE FACTS CON SIDERED BY THE SPECIAL BENCH OF THE ITAT, DELHI IN THE CASE OF TEC UMSEH INDIA (P.) LTD. VS. ADDL. CIT (2010) 127 ITD 1 (S.B.) (DEL.). AS PER THE HEAD NOTE THE ISSUE WAS DECIDED AS UNDER : ITA.NO.39/MUM/2008 M/S. SHREYA LIFE SCIENCES PVT. LTD. 5 ASSESSEE WAS A WHOLLY OWNED SUBSIDIARY OF TECUMSE H- USA. TECUMSEH-USA BEING A GLOBAL COMPRESSOR MANUFACTURER WAS INTERESTED IN ENTERING INTO INDIAN COMPRESSOR MARKET. IN SAID PROCESS, TECUMSEH-USA ENTERED INTO MEMORANDUM OF UNDERSTANDING (MOU) WITH WHIRLPOOL INDIA LTD. THROUGH WHICH WHIRLPOOL-INDIA HAD DECIDED TO SELL COMPRESSORS AND RELATED OPERATIONS OWNED BY IT AT FARIDABAD AND BALLABGARH FACILITIES. IN AC CORDANCE WITH TERMS OF MOU, BOTH PARTIES ENTERED INTO AN AS SET PURCHASE AGREEMENT, WHEREBY TECUMSEH-USA THROUGH ASSESSEE-COMPANY AGREED TO PURCHASE ALL COMPRESSOR MACHINERIES, EQUIPMENTS AND TOOLING LOCATED AT WHIR LPOOL- INDIAS FARIDABAD FACILITY AS WELL AS RELATED COMPR ESSOR COMPONENT ASSETS LOCATED AT WHIRLPOOL-INDIAS BALLA BGARH FACILITY. TOTAL AMOUNT PAID BY ASSESSEE TO WHIRLPOO L INDIA WAS AN AMOUNT OF RS.52.50 CRORES WHICH INCLUDED A S UM OF RS. 2.65 CRORES PAID TOWARDS NON-COMPETE FEE. AS SESSEE CLAIMED DEDUCTION OF NON-COMPETE FEE BEING REVENUE EXPENDITURE BY SEPARATING SAID AMOUNT FROM MAIN AGREEMENT. REVENUE AUTHORITIES REJECTED ASSESSEES CLAIM. WHETHER, WHEN AN EXPENDITURE IS MADE FOR INITIAL OU TLAY OR FOR EXPANSION OF BUSINESS OR FOR A SUBSTANTIAL REPL ACEMENT OF EQUIPMENT, THEN IT WOULD FALL UNDER CAPITAL EXPE NDITURE. HELD, YES WHETHER SINCE, IN INSTANT CASE, IT WAS AP PARENT FROM RECORDS THAT NON-COMPETE AGREEMENT WAS PART AN D PARCEL OF WHOLE TRANSACTION (I.E., MAIN AGREEMENT E NTERED INTO BETWEEN ASSESSEE AND WHIRLPOOL), IT COULD BE CONCLUDED THAT NON-COMPETE FEE WAS PAID AS A PART O F INITIAL OUTLAY, AND, THEREFORE, IT WAS TO BE DISALL OWED BEING IN NATURE OF CAPITAL EXPENDITURE HELD, YES. SECTION 37 (1) OF THE INCOME TAX ACT, 1961, BUSINES S EXPENDITURE, ALLOWABILITY OF ASSESSMENT YEAR 1998-9 9, WHETHER AN EXPENDITURE INCURRED ON WARDING OFF ITA.NO.39/MUM/2008 M/S. SHREYA LIFE SCIENCES PVT. LTD. 6 COMPETITION IN BUSINESS FROM A RIVAL DEALER WILL CO NSTITUTE A CAPITAL EXPENDITURE AND TO HOLD IT AS CAPITAL EXPEN DITURE, IT IS NOT NECESSARY THAT NON-COMPETE FEE IS PAID TO CR EATE MONOPOLY RIGHTS. HELD, YES. 3.7. AS THE FACTS ARE SIMILAR, RESPECTFULLY FOLLOW ING THE ABOVE DECISION OF THE SPECIAL BENCH WHICH IS BINDING ON U S, AND FURTHER AS THE NON-COMPETE FEE WAS PART AND PARCEL OF WHOLE TR ANSACTION OF ACQUIRING THE PHARMA BUSINESS, IT COULD BE CONCLUDE D THAT NON- COMPETE FEE WAS PAID AS PART OF INITIAL OUTLAY AND THEREFORE, IT WAS TO BE DISALLOWED BEING IN CAPITAL EXPENDITURE. 3.8. RULE OF CONSISTENCY AS A PRINCIPLE HAS TO BE FOLLOWED BUT THE JUDICIAL FORUM LIKE THIS CANNOT ALLOW A WRONG C LAIM ON THE PRINCIPLE OF CONSISTENCY. SINCE THE ASSESSING OFFIC ER MADE OUT A CASE FOR DISALLOWANCE OF THE CLAIM MADE IN THIS YEAR, TH E CLAIM TO THE EXTENT OF RS. 2.5 CRORES CLAIM CANNOT BE ALLOWED, AS WE AR E BOUND BY THE PRINCIPLES ESTABLISHED BY THE SPECIAL BENCH ON THE SAME SET OF FACTS. 3.9. THE ALTERNATE CONTENTION OF CLAIM OF DEPRECIA TION CANNOT BE CONSIDERED AT THIS STAGE AS THE NATURE OF INTANG IBLE ASSET ACQUIRED BY THE ASSESSE COULD NOT BE VERIFIED. ADMITTEDLY TH E AMOUNT WAS PAID IN AY 2002-03. THE AGREEMENTS AND THE RIGHTS ACQUIR ED ARE NOT DISCUSSED NOR THE ASSESSE MADE ANY ALTERNATE CLAIM BEFORE THE REVENUE AUTHORITIES. AS FAR AS LEGAL PRINCIPLES ARE CONCERNED, BOTH THE PARTIES RELIED ON THE ORDERS OF THE ITAT FOR THE RE SPECTIVE CLAIMS. IN THE CASE OF AB MAURIA INDIA P LTD(SUPRA) RELIED ON BY THE REVENUE THE ISSUE WAS WITH REFERENCE TO THE JURISDICTION UNDER SECTION 263 TO REVISE THE ORDER OF AO, WHO WITHOUT EXAMINATION ALL OWED THE DEPRECIATION CLAIMED. IN THAT CONTEXT THE BENCH NOT ED THAT THERE IS NO DISCUSSION ABOUT CLAIM OF DEPRECIATION ON PAYMENT O F NON-COMPETE FEE WHICH CAN NOT BE AN ASSET SO AS TO ALLOW WITH OUT E XAMINATION. T HE SPECIAL BENCH IN THE ABOVE REFERRED CASE OF TEECUMS EH(SUPRA) HAS ALSO HELD THAT IT IS NOT NECESSARY THAT NON-COMPETE FEES PAID HAS TO ITA.NO.39/MUM/2008 M/S. SHREYA LIFE SCIENCES PVT. LTD. 7 CREATE MONOPOLY RIGHTS. RELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF TECHNO SHARES AND STOC KS LTD (SUPRA) IS ALSO NOT CORRECT AS THE SAID DECISION WAS RENDERED IN THE CONTEXT OF BSE MEMBERSHIP RULES AND THE HONBLE SUPREME COURT IS CATEGORICAL IN STATING THAT OUR JUDGEMENT SHOULD NOT BE UNDERS TOOD TO MEAN THAT EVERY BUSINESS OR COMMERCIAL RIGHT WOULD CONSTITUTE A LICENCE OR FRANCHISE IN TERMS OF SECTION 32(1)(II) OF THE 19 61 ACT. . HOWEVER IN THE CASE OF ACIT VS REAL IMAGE TECH P LTD 120 TTJ 9 83 IT WAS HELD THAT A COMMERCIAL RIGHT WILL COME IN TO EXISTENCE W HICH IS ELIGIBLE FOR DEPRECIATION. IN VIEW OF THIS, WE ARE OF THE OPINIO N THAT THE CLAIM OF DEPRECIATION CAN BE EXAMINED BY THE AO AFTER ASCERT AINING THE FACTS AND ACCORDING TO THE APPLICABLE LAW. THEREFORE, THE ORDER OF THE CIT(A) TO THE EXTENT OF ALLOWING THE AMOUNT AS REVENUE EXP ENDITURE IS REVERSED AND THAT OF ASSESSING OFFICER IS RESTORED. THE ISSUE OF CLAIM OF DEPRECIATION ON THE ABOVE AMOUNT, IN THE INTERES T OF JUSTICE, IS RESTORED TO THE FILE OF AO WHO SHOULD EXAMINE THE I SSUE, AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE. THE GROUND 1 OF RE VENUE IS THEREFORE CONSIDERED ALLOWED. 4. THE GROUND NO.2 IS WITH REFERENCE TO THE ALLOWA NCE OF PF/ESIC PAID WITHIN THE GRACE PERIOD. WHILE UPHOLDI NG THE DISALLOWANCE OF PAYMENTS MADE BEYOND GRACE PERIOD, THE CIT(A) ALLOWED THE DELAYED PAYMENT OF PF/ESIC WHICH ARE PA ID WITHIN THE GRACE PERIOD. THIS ISSUE IS CRYSTALLISED BY THE JUR ISDICTIONAL HIGH COURT IN THE CASE OF CIT VS WMI CRANES LTD 326 ITR 523 (B OM.). RESPECTFULLY FOLLOWING, THE GROUND RAISED BY THE REVENUE IS REJE CTED. 5. THE GROUND NO.3 PERTAINS TO THE ISSUE OF DISALL OWANCE OF INTEREST UNDER SECTION 36 (I) (III). ON NOTICING TH AT THE ASSESSEE HAD ADVANCED AN AMOUNT OF RS.11,25,77,000/- TO SISTER C ONCERNS OUT OF THE BORROWALS OF RS.51,08,40,000/- THE INTEREST CLA IM TO AN EXTENT OF RS.51,89,780/- WAS DISALLOWED BY THE A.O. IT WAS TH E CONTENTION THAT THE ASSESSEE HAD OWN RESERVES AND FUNDS AND THE ADV ANCES ARE TRADE ADVANCES BUT NOT INTEREST FREE LOANS AND MADE DETAI LED SUBMISSIONS ITA.NO.39/MUM/2008 M/S. SHREYA LIFE SCIENCES PVT. LTD. 8 BEFORE CIT(A). SIMILAR ISSUE WAS ALSO CONSIDERED BY THE ASSESSING OFFICER IN ASSESSMENT YEAR 2003-2004. ON EXAMINATIO N OF FACTS AND ARGUMENTS THE CIT(A) ALLOWED CLAIM OF THE ASSESSEE BY STATING AS UNDER : 7.4. I HAVE CONSIDERED THE FACTS OF THE CASE FINDINGS O F THE A.O. AS ALSO SUBMISSION MADE BY THE APPELLANT. THE FACTS OF THE CASE AS NOTED ABOVE IS THAT THE A.O. HAS DISALLOWED PROPORTIONATE AMOUNT OF INTEREST FROM INTEREST FREE ADVANCES GIVEN TO SUBSIDIARIES AND ASSOCIATE CONCERNS. IT HAS BEEN STATED BY THE APPELLANT THAT NO LOANS WERE GIVEN TO THE SUBSIDIARIES OR ASSOCIATE CONCERNS AND THE BALANCE WAS ONLY THE BUILD UP OF THE REGULAR TRADE TRANSACTION WITH THOSE CONCERNS. THE APPELLANT HAS FILED DETAILS SHOWING THAT THERE WERE REGULAR TRANSACTION WITH THOSE CONCERNS INCLUDING PURCHASES MADE OR ADVANCES GIVEN AGAINST PURCHASES INCLUDING BILL DISCOUNTING AND REIMBURSEMENT OF EXPENDITURE. THE APPELLANT HAS FURTHER DRAWN MY ATTENTION TO THE SUPREME COURT DECISION IN THE CASE OF S.A. BUILDERS 288 ITR 1. IN MY CONSIDERED OPINION, AS THE FACTS OF THE CASE IS COVERED BY SUPREME COURT DECISION IN THE ABOVE REFERRED CASE AND THEREFORE, THIS GROUND IS ALLOWED . 5.1. AT THE OUTSET IT WAS SUBMITTED THAT SIMILAR I SSUE CAME UP IN EARLIER YEAR ON SAME FACTS AND THE FINDINGS OF T HE CIT(A) WERE UPHELD BY THE ITAT IN ITA. NO. 4011/MUM/2007 DATED 3-2-2009 VIDE PARA 4.7 AS UNDER : THE LEARNED CIT(A) THUS ALLOWED THE CLAIM OF INTER EST U/S. 36(1) (III) OF THE ACT. AS ON THE ISSUE OF DIS ALLOWANCE U/S. 40(A)(I) THE LEARNED COMMISSIONER-DRS ARGUMENT IS ITA.NO.39/MUM/2008 M/S. SHREYA LIFE SCIENCES PVT. LTD. 9 BASED ON THE GROUND THAT THE FACTS AS NARRATED BY T HE CIT(A) WERE NOT BEFORE THE ASSESSING OFFICER AND TH US, THE ISSUE SHOULD BE SET ASIDE TO THE FILE OF THE ASSESS ING OFFICER. BY MAKING THIS SUBMISSION, NO MATERIAL IS BROUGHT ON RECORD BY THE REVENUE TO CONTRADICT THE FACTUAL OBSERVATIONS MADE BY THE ASSESSING OFFICER. IT IS N EITHER THE GROUND OF THE REVENUE THAT THE FACTUAL RECORDIN GS BY THE CIT(A) WERE WRONG AND THE ISSUE SHOULD BE SET A SIDE TO THE ASSESSING OFFICER FOR FRESH ADJUDICATION ON THESE FACTS. THE ASSESSING OFFICER AT PARAGRAPH 11.6 OF H IS ORDER HAS NOT GIVEN ANY FACTUAL FINDING ON THE CLAI M OF THE ASSESSEE, THAT IT HAS ADVANCED LOANS IN THE NORMAL COURSE OF BUSINESS IS FACTUALLY INCORRECT. THE ONLY GROUND OF DISALLOWANCE SEEMS TO BE THAT THE ASSESSEE COMPA NY HAS GIVEN LOANS AND ADVANCES TO ITS SUBSIDIARIES AN D RELATED PARTIES WITHOUT CHARGING ANY INTEREST. THE TEST LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF SA BUILDERS (SUPRA) HAS BEEN CORRECTLY APPLIED BY T HE FIRST APPELLATE AUTHORITY. ON THIS FACTUAL MATRIX, WE REJ ECT THE CONTENTIONS OF THE LEARNED DEPARTMENTAL REPRESENTAT IVE AND REJECT GROUND NO.4 OF THE REVENUE. 5.2. RESPECTFULLY FOLLOWING THE FINDINGS IN EARLIE R YEARS, AS THE CIT(A) EXAMINED THE FACTS AND AS REVENUE FAILED TO COUNTER THE FACTS AS STATED, THE ORDER OF THE CIT(A) IS UPHELD. THE G ROUND IS REJECTED. 6. COMING TO GROUND NO.4 OF THE REVENUE IT IS AGAI NST THE DELETION OF AN ADDITION ON ACCOUNT OF UNUTILISED MO DVAT CREDIT OF RS.51,73,812. THE FIRST APPELLATE AUTHORITY HAS VER IFIED THE ENTRIES MADE BY THE ASSESSEE AND AS THE ASSESSEE REDUCED TH E UNUTILISED MODVAT CREDIT FROM THE PURCHASE ACCOUNT, THE ADDITI ON TO THE CLOSING STOCK DOES NOT SURVIVE. AT PARAGRAPH 8.2 THE FIRST APPELLATE AUTHORITY HAS RIGHTLY OBSERVED THAT BY VIRTUE OF THE REGULAR ACCOUNTING POLICY BEING FOLLOWED BY THE ASSESSEE AND ON VERIFICATION OF THE ENTRIES ITA.NO.39/MUM/2008 M/S. SHREYA LIFE SCIENCES PVT. LTD. 10 PASSED, THERE IS NO WARRANT FOR ADDING THE AMOUNT I N QUESTION. WE AGREE WITH THESE FINDINGS AND UPHOLD THE SAME. IT W AS SUBMITTED THAT SIMILAR ISSUE CAME UP IN EARLIER YEAR ON SAME FACTS AND THE FINDINGS OF THE CIT(A) WERE UPHELD BY THE ITAT IN ITA. NO. 4011 /MUM/2007 DATED 3/2/2009. RESPECTFULLY FOLLOWING THE FINDING IN EARLIER YEAR, AS THE CIT(A) EXAMINED THE FACTS AND REVENUE FAILED TO COUNTER THE FACTS AS STATED, THE ORDER OF THE CIT(A) IS UPHELD. THE G ROUND 4 IS REJECTED. 7. IN THE RESULT, THE REVENUE APPEAL IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT, ON THIS THE 2 8 TH DAY OF FEBRUARY, 2011. SD/- SD/- (R.V.EASWAR) (B.RAMAKOTAIAH) PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATE 28 TH FEBRUARY, 2011 VBP/- COPY TO 1. DCIT, RANGE 8 (3), ROOM NO. 204, 2 ND FLOOR, AAYAKAR BHAVAN, M.K.ROAD, MUMBAI 400020. 2. M/S. SHREYA LIFE SCIENCES PVT. LTD. SHREYA HOUSE , 301A, PEREIRA HILL ROAD, ANDHERI (EAST), MUMBAI 400 099 PAN AADCS9890C 3. CIT(A)-XXIX, MUMBAI. 4. CIT-8, MUMBAI. 5. DR J BENCH 6. GUARD FILE. (TRUE COPY) BY ORDER ASST. REGISTRAR, ITAT, MUMBAI BENCHES MUMBAI.