THE ACIT, Circle-4, Ahmedabad V. M/S. GLFL HOUSING FINANCE LTD., Ahmedabad

ITA 4245/AHD/2003

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67566 (ITAT-AHMEDABAD)
• Duration Of Justice: 9 year(s) 8 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 01-08-2013
• Assessment Year: 1996-1997
• Appeal Filed On: 02-12-2003
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P BATHEJA
• Assessee Lawyers: VIJAY RANJAN
• Keywords: Capital asset; Depreciation; Tax effect; Revenue expenditure; Capital expenditure

Judgement Text

, , , , , ,, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD . , ! ' ' ' ' # $%, ! BEFORE SHRI A.MOHAN ALANKAMONY,ACCOUNTANT MEMBER AND SHRI KUL BHARAT, JUDICIAL MEMBER ./ I.T.A. NO.4245/AHD/2003 ( ' '(' ' '(' ' '(' ' '(' / / / / ASSESSMENT YEAR : 1996-97) THE ACIT CIRCLE-4 AHMEDABAD / VS. M/S.GLFL HOUSING FINANCE LTD. HASUBHAI CHAMBERS OPP. TOWN HALL, ASHRAM ROAD AHMEDABAD-380 006 !) ./*+ ./ PAN/GIR NO. : AAACG 5285 G ( ), / // / APPELLANT ) .. ( -.), / RESPONDENT ) ), / / APPELLANT BY : SHRI O.P. BATHEJA, SR.D.R. -.), 0 / / RESPONDENT BY : SHRI VIJAY RANJAN, A.R. #'1 0 %2 / / / / DATE OF HEARING : 1/8/2013 3( 0 %2 / DATE OF PRONOUNCEMENT : 14/8/2013 4 / O R D E R PER SHRI KUL BHARAT, JUDICIAL MEMBER : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST TH E ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-VIII, AHMEDA BAD (CIT(A) FOR SHORT) DATED 19/09/2003 PERTAINING TO ASSESSME NT YEAR (AY) 1996- 97. THE REVENUE HAS RAISED THE FOLLOWING GROUND O F APPEAL:- 1. THE LD.CIT(A) ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING DISALLOWANCE OF BROKERAGE AND COMMISSION OF RS.18,8 0,782/-, DISREGARDING THE FACT THAT THE EXPENDITURE IN QUEST ION, WHICH IS INCURRED FOR AN ENDURING BENEFIT HAS NOT BEEN DEBITED TO P&L ACCOUNT. ITA NO.4245/AHD /2003 THE ACIT VS. GLFL HOUSING FINANCE LTD. ASST.YEAR 1996-97 - 2 - 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE AS SESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT ORDER DA TED 15/03/1999 DETERMINING A TOTAL INCOME OF RS.39,01,170/- WAS PA SSED. AGAINST THIS, ASSESSEE WENT IN APPEAL BEFORE THE CIT(A). THE ORD ER WAS SET ASIDE TO THE ASSESSING OFFICER(AO) BY THE LD.CIT(A) AND SUBS EQUENTLY AN ORDER U/S.143(3) R.W.S. 250 OF THE IT ACT (HEREINAFTER RE FERRED TO AS THE ACT) WAS PASSED ON 12/03/2003. AGAINST THIS, THE ASSESS EE FILED AN APPEAL BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUB MISSIONS, DELETED THE DISALLOWANCE OF COMMISSION/BROKERAGE EXPENSES AMOUN TING TO RS.18,80,782/-. AGAINST THIS, THE REVENUE IS NOW IN APPEAL BEFORE THE TRIBUNAL. THE APPEAL SO FILED WAS SUBSEQUENTLY DIS MISSED BY THE HONBLE CO-ORDINATE BENCH ON THE GROUND OF LOW TAX EFFECT. THE MATTER WAS CARRIED TO THE HONBLE HIGH COURT OF GUJARAT AN D THE HONBLE HIGH COURT IN TAX APPEAL NO.1068 OF 2008, DATED 30/06/20 11 DEMANDED THE APPEAL FOR CONSIDERATION OF APPEAL ON MERITS. 2.1. THE ONLY EFFECTIVE GRIEVANCE IS AGAINST DELETI ON OF DISALLOWANCE OF RS.18,80,782/- CLAIMED AS BROKERAGE AND COMMISSION. 3. THE SR.DR HAS STRONGLY SUPPORTED THE ASSESSMENT ORDER. ON THE CONTRARY, LD.COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THIS ISSUE IS SQUARELY COVERED BY THE DECISION OF HONBLE SPECIAL BENCH OF ITAT AHMEDABAD BENCH B RENDERED IN THE CASE OF ACIT VS . ASHIMA SYNTEX LTD. REPORTED AT (2009) 117 ITD 01 (AHD.)(SB), DATE D 17/10/2008. HE SUBMITTED THAT THE AO OBSERVED THAT THE BROKERAGE P AID ON FIXED DEPOSITS WAS FOR ENDURING BENEFIT AND THESE EXPENSES WERE NO T DEBITED IN P&L ITA NO.4245/AHD /2003 THE ACIT VS. GLFL HOUSING FINANCE LTD. ASST.YEAR 1996-97 - 3 - ACCOUNT, BUT THE DEDUCTION OF THE SAME WAS CLAIMED BY WAY OF A NOTE APPENDED TO THE INCOME-TAX RETURN. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE DECISION OF HONBLE SPECIAL BENCH OF THE TRIBUNAL RENDERED IN THE CASE OF ASHIMA SYN TEX LTD.(SUPRA) VIDE ITS ORDER DATED 17/10/2000 HAD ALLOWED THE CLAIM I N RESPECT OF THE BROKERAGE EXPENSES PAID ON FDR OF THE ASSESSEE. THE HONBLE SPECIAL BENCH HAS DECIDED THIS ISSUE IN FAVOUR OF ASSESSEE IN PARAGRAPH NO.14 OF THE ORDER BY OBSERVING AS UNDER:- 14. TO CONCLUDE, THE POSITION EMERGING FROM THE A BOVE DISCUSSION CAN BE SUMMED UP AS FOLLOWS:- - THE NATURE OF THE EXPENDITURE TREATED AS A DEFE RRED REVENUE EXPENDITURE IN THE BOOKS NEEDS TO BE PROPERLY ANAL YSED BEFORE TAKING A VIEW ON ITS ALLOWABILITY OR OTHERWISE UNDE R THE PROVISIONS OF THE ACT; - WHERE SUCH EXPENDITURE RESULTS IN THE CREATION O F ANY CAPITAL ASSERT (TANGIBLE OR INTANGIBLE), A CASE CAN BE MADE OUT TO TREAT THE SAME AS A CAPITAL EXPENDITURE WITH CORRESPONDING AL LOWABILITY OF DEPRECIATION IN ACCORDANCE WITH LAW; - IN CASES WHERE THE NATURE OF THE REVENUE EXPENDI TURE IS SUCH THAT THE SAME CAN BE CLEARLY AND UNAMBIGUOUSLY IDENTIFIE D OVER SPECIFIED FUTURE TIME PERIODS (E.G., DISCOUNT ON IS SUE OF DEBENTURES) AKIN TO PRE-PAID EXPENSES THE SAME WOULD BE ALLOWAB LE OVER THE PERIOD TO WHICH THESE RELATE PROPORTIONATELY, APPLY ING THE MATCHING PRINCIPLE. - IN OTHER CASES WHERE THE SAME DOES NOT RESULT IN THE CREATION OF ANY CAPITAL ASSET OR WHERE THE SAME IS NOT ALLOCABL E OVER DEFINED FUTURE TIME PERIODS THERE CAN BE NO CASE FOR AMORTI SING THE SAME UNDER THE ACT OVER THE EXPECTED PERIOD OVER WHICH T HE BENEFIT IS LIKELY TO ARISE THEREFROM SINCE IN SUCH CASES THE E XPENDITURE IS ITA NO.4245/AHD /2003 THE ACIT VS. GLFL HOUSING FINANCE LTD. ASST.YEAR 1996-97 - 4 - ESSENTIALLY REVENUE IN NATURE BUT IS AMORTISED IN T HE BOOKS ONLY ON ACCOUNT OF SOME OTHER CONSIDERATIONS. 4.1. IN RESPECT OF THE ISSUE IN QUESTION, THE HONB LE SPECIAL BENCH VIDE PARAGRAPH NO.15(C) HELD AS UNDER:- FIXED DEPOSIT EXPENSES IN RESPECT OF EXPENSES IN CURRED IN OBTAINING FIXED DEPOSITS, THE HONBLE MADRAS HIGH C OURT HELD IN THE CASE OF SOUTHERN PETROCHEMICAL INDUSTRIES CORPN .LTD. (SUPRA) THAT AS FAR AS THE EXPENSES RELATING TO OBTAINING FIXED DEPOSITS ARE CONCERNED, THE ISSUE WAS DECIDED AS REVENUE EXPENDI TURE BY THE DIVISION BENCH OF THIS COURT IN CIT V. SOUTHERN PET ROCHEMICAL INDUSTRIES CORPN.LTD. [2007] 292 ITR 362, WHEREIN T HIS COURT HELD AS FOLLOWS:- FOR DECIDING THE ISSUE THAT THE EXPENSES RELATIN G TO OBTAINING FIXED DEPOSITS ARE CLOSELY LINKED WITH THE BUSINESS REQUIREMENT OF THE ASSESSEE, IT IS APPOSITE TO HAVE A CURSORY LOOK ON THE DECIDED CASE LAW ON THIS POINT. IN INDIA CEMENTS LTD. VS. CIT [1966] 60 ITR 52 (SC), WHILE DECIDING THE NATURE OF THE AMOUN T SPENT TOWARDS STAMPS, REGISTRATION FEES, LAWYERS FEES, E TC. FOR OBTAINING LOAN, THE SUPREME COURT OBSERVED AS FOLLOWS: A LOAN MAY BE INTENDED TO BE USED FOR THE PURCHASE OF RAW MATERIAL WHEN IT IS NEGOTIATED, BUT THE COMPANY MAY , AFTER RAISING THE LOAN, CHANGE ITS MIND AND SPEND IT ON SECURING CAPITAL ASSETS. IS THE PURPOSE AT THE TIME THE LOAN IS NEGOTIATED T O BE TAKEN INTO CONSIDERATION OR THE PURPOSE FOR WHICH IT IS ACTUAL LY USED?... THE PURPOSE FOR WHICH THE NEW LOAN WAS REQUIRED WAS IRR ELEVANT TO THE CONSIDERATION OF THE QUESTION WHETHER THE EXPENDITU RE FOR OBTAINING THE LOAN WAS REVENUE EXPENDITURE OR CAPIT AL EXPENDITURE. TO SUMMARISE THIS PART OF THE CASE, WE ARE OF THE OPINION THAT: (A) THE LOAN OBTAINED IS NOT AN ASSET OR ADVANTAGE OF AN ENDURING NATURE, (B) THAT THE EXPENDITURE WAS MADE FOR SECUR ING THE USE OF ITA NO.4245/AHD /2003 THE ACIT VS. GLFL HOUSING FINANCE LTD. ASST.YEAR 1996-97 - 5 - MONEY FOR A CERTAIN PERIOD: AND (C) THAT IT IS IRRE LEVANT TO CONSIDER THE OBJECT WITH WHICH THE LOAN WAS OBTAINED. OBSERVING SO, THE SUPREME COURT HELD THAT THE ACT O F BORROWING MONEY WAS INCIDENTAL TO THE CARRYING ON OF BUSINESS , THE LOAN OBTAINED WAS NOT AN ASSET OR AN ADVANTAGE OF ENDURI NG NATURE, THE EXPENDITURE WAS MADE FOR SECURING THE USE OF MONEY FOR A CERTAIN PERIOD AND IT WAS IRRELEVANT TO CONSIDER THE OBJECT WITH WHICH THE LOAN WAS OBTAINED AND, THEREFORE, THE AMOUNT SPENT WAS NOT IN THE NATURE OF CAPITAL EXPENDITURE AND WAS LAID OUT OR E XPENDED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE ASSESSEES B USINESS AND WAS, THEREFORE, ALLOWABLE AS A DEDUCTION. THE APEX COUR T ALSO HELD THAT OBTAINING CAPITAL BY ISSUE OF SHARES IS DIFFER ENT FROM OBTAINING LOAN BY DEBENTURES. IN CIT V. INVESTMENT TRUST OF INDIA LTD. [2003] 264 ITR 506 THIS COURT HELD THAT THE EXPENDITURE ON ADVERTISEMENTS I N NEWSPAPERS INVITING FIXED DEPOSITS FROM THE PUBLIC IS ALLOWABL E IN THE WORDS: IN VIEW OF THE PROVISIONS CONTAINED IN SECTION 58A OF THE COMPANIES ACT, 1956, THE ASSESSEE-COMPANY HAD TO A DVERTISE THE NOTICE CALLING FOR DEPOSITS AND IF THERE WAS ANY BR EACH, THE ASSESSEE WAS LIABLE TO BE PROCEEDED AGAINST UNDER T HE RELEVANT PROVISIONS OF THE 1956 ACT. SECTION 37(3A) WAS INT RODUCED TO CURB EXTRAVAGANT AND SOCIALLY WASTEFUL EXPENDITURE ON AD VERTISEMENT AT THE COST OF THE EXCHEQUER. THE ASSESSEE HAD INCURR ED THE EXPENDITURE ON ADVERTISEMENTS FOR COLLECTING FIXED DEPOSITS AND THE ADVERTISEMENTS WERE STATUTORY ADVERTISEMENTS AND, T HEREFORE, THE PROVISIONS OF SECTION 37(3A) READ WITH SECTION 37(3 B) WERE NOT APPLICABLE TO THE SAID EXPENDITURE. CONSIDERING THE RATIO LAID DOWN IN THE ABOVESAID DE CISIONS, WE ARE OF THE VIEW THAT WHEN THE TRIBUNAL HAS RECORDED A F INDING THAT THE EXPENSES RELATING TO OBTAINING FIXED DEPOSITS ARE C LOSELY LINKED WITH THE BUSINESS REQUIREMENT OF THE ASSESSEE, SUCH EXPENSES ARE ALLOWABLE EXPENSES. WE, THEREFORE, HOLD THAT THE T RIBUNAL WAS RIGHT IN HOLDING THAT THE EXPENSES FOR OBTAINING FI XED DEPOSITS FROM ITA NO.4245/AHD /2003 THE ACIT VS. GLFL HOUSING FINANCE LTD. ASST.YEAR 1996-97 - 6 - THE PUBLIC IS REVENUE IN NATURE. ACCORDINGLY, WE A NSWER THE SECOND QUESTION IN THE AFFIRMATIVE AND AGAINST THE REVENUE. IN THE LIGHT OF AFORESAID DECISION, THE EXPENSES I NCURRED FOR OBTAINING FIXED DEPOSITS ARE CLEARLY ALLOWABLE AS REVENUE EXP ENDITURE. 4.2. THE SR.LD.DR COULD NOT CONTROVERT THE ABOVE DE CISION OF THE HONBLE SPECIAL BENCH. THEREFORE, RESPECTFULLY FOL LOWING THE DECISION OF THE HONBLE SPECIAL BENCH OF THE TRIBUNAL IN THE CA SE OF ASHIMA SYNTEX LTD.(SUPRA) REPORTED AT (2009)117 ITD 01(AHD.)(SB), WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD.CIT(A), THE SAME I S HEREBY UPHELD AND GROUND OF REVENUES APPEAL IS REJECTED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE SD/- SD/- (. ) (# $%) ! ! ( A. MOHAN ALANKAMONY ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 14/ 08 /2013 72.., '.../ T.C. NAIR, SR. PS 4 0 -%8 98(% 4 0 -%8 98(% 4 0 -%8 98(% 4 0 -%8 98(%/ COPY OF THE ORDER FORWARDED TO : 1. ), / THE APPELLANT 2. -.), / THE RESPONDENT. 3. % #: / CONCERNED CIT 4. #:() / THE CIT(A)-VIII, AHMEDABAD 5. 8'$; -% , , / DR, ITAT, AHMEDABAD 6. ;<' =1 / GUARD FILE. 4# 4# 4# 4# / BY ORDER, .8% -% //TRUE COPY// > >> >/ // / * * * * ( DY./ASSTT.REGISTRAR) , , , , / ITAT, AHMEDABAD