ITO, New Delhi V. M/s. Zoom Vallabh Steel Ltd., Mumbai

ITA 4786/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 4013 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2009-2010
• Appeal Filed On: 03-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHIVRAJ SINGH
• Keywords: Capital asset

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C, NEW DELHI BEFORE SH. R.S.SYAL, VICE PRESIDENT AND SMT. BEENA A. PILLAI, JUDICIAL MEMBER ITA NO. 4786/DEL/2014 (ASSESSMENT YEAR: 2009-10) ITO WARD-18(4) NEW DELHI VS. ZOOM VALLABH STEEL LTD. C/O. SH. SHARAD KABRA, (DIR), 1401, PANCHWATI, A BLOCK, BEHIND SM SHETTY SCHOOL, NR. HIRANANDANI GARDENS, POWAI, MUMBAI PAN : AABCD7990A (APPELLANT) (RESPONDENT) ASSESSEE BY : NONE REVENUE BY : SH. SHIVRAJ SINGH, SR. DR DATE OF HEARING : 24.01.2018 DATE OF PRONOUNCEMENT : 25.1.2018 O R D E R PER BEENA A. PILLAI, J.M : THE PRESENT APPEAL HAS BEEN FILED BY REVENUE AGA INST ORDER DATED 14/07/14 PASSED BY LD. CIT (A)-XXI, NEW DELHI FOR ASSESSMENT YEAR 2009-10 ON THE FOLLOWING GROUNDS OF APPEAL: 2 ITA NO. 4786.DEL. 2014 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD. CIT(A) ERRED IN DELETING ADDITION OF RS. 86,65,973/- WHICH WAS MADE ON ACCOUNT OF INTEREST EXPENDITURE INCURRED ON CAPITAL ACCOUNT. 2. BRIEF FACTS OF THE CASE ARE AS UNDER : ASSESSEE HAD FILED THE LOSS RETURN OF RS. (-) 9,05,34,282/- AND THE CASE W AS TAKEN UP FOR SCRUTINY. THE ASSESSMENT HAS BEEN COMPLETED AT TAXA BLE INCOME OF RS. 3,01,21,440/-. THE ASSESSEE HAD A DEMERGER P LAN/MOU WITH VARDHAN GROUP WHICH INCLUDED PURCHASE OF SPONG E IRON PLANT (SIP) FROM VALLABH STEEL LIMITED, LUDHIANA AN D STEEL MELTING SHOP (SMS) AND CONTINUOUS CASTING SHOP (CC S) FROM VARDHAMAN INDUSTRIES LTD. DELHI AND THE APPOINTED D ATE FOR THE DEMERGER WAS W.E.F. 01.03.2006. THE DEMERGER PLAN O R SCHEME WAS APPROVED BY THE DELHI HIGH COURT IN THE ORDER D ATED 17.11.2008 AND BY THE PUBJAB & HARYANA HIGH COURT I N THE ORDER DATED 31.03.2009. THE ASSESSEE WAS TO RECEIVE /ACQUIRE ALL THE ASSETS AND LIABILITIES OF THE ABOVE REFERRED T HREE PLANTS FROM THE ABOVE TWO COMPANIES W.E.F. 01.03.2006 AS PER TH E DEMERGER SCHEME. THE ASSESSEE DID NOT RECAST ITS BOOKS OF AC COUNTS TAKING INTO THE ASSETS AND THE LIABILITIES OF THE DEMERGE D PLANTS UP TO A.Y. 2009-10 AS THE DEMERGER PLAN WAS TO BE APPROVE D BY THE RESPECTIVE HIGH COURTS WHICH WOULD HAVE TAKEN ABOUT TWO YEARS TIME AND ACCORDINGLY THE ASSESSEE HAS TAKEN INTO AC COUNT ALL THE ASSETS AND LIABILITIES OF THE DEMERGED PLANTS IN TH E A.Y. 2010-11. 4.2 THE ASSESSEE CLAIMED INTEREST PAYMENT OF RS. 3 ,46,63,895/- ON THE WORKING CAPITAL FACILITY LOAN WHICH WERE TAK EN BY VALLABH STEELS LTD. AND VARDHMAN INDUSTIRES LTD. THE AO DI SALLOWED THE INTEREST PAYMENTS @ 25% OF RS. 86,65,973/- ON THE G ROUND THAT 3 ITA NO. 4786.DEL. 2014 EXPENDITURE OF INTEREST PAYMENTS HAS BEEN DIVERTED FOR THE ACQUISITION OF THE CAPITAL ASSETS. 3. AGGRIEVED BY THE ORDER OF LD. AO, ASSESSEE PREFE RRED APPEAL BEFORE LD. CIT (A). LD. CIT (A) DELETED THE ADDITIO N. 4. AGGRIEVED BY THE ORDER OF LD. CIT (A) ASSESSEE I S IN APPEAL BEFORE US. 5. LD. DR SUBMITTED THAT ASSESSEE HAS NOT SUBMITTED ANY EVIDENCE TO CORROBORATE THE USE OF LOANS FOR THE PU RPOSES OF BUSINESS AND IN THE ABSENCE OF SUCH EVIDENCE 25% OF THE INTEREST ON WORKING CAPITAL LOAN HAS BEEN CORRECTLY TREATED AS REVENUE EXPENSES. SHE PLACED RELIANCE UPON THE ORDER PASSED BY LD. AO. 6. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY LD. DR ON THE BASIS OF THE RECORDS PLACED BEFORE US. IT IS OB SERVED THAT ASSESSING OFFICER DISALLOWED 25% OF INTEREST OUT OF RS.3,46,63,859/-, AS ASSESSEE DID NOT SUBSTANTIATE ANY EVIDENCE TO CORROBORATE THE USE OF WORKING CAPITAL LOAN FOR THE PURPOSES OF NORMAL BUSINESS ACTIVITIES. IT IS FURTHER OBSERVED THAT THESE WORKING CAPITAL LOANS HAVE BEEN SANCTIONED BY BANKS AND THESE ARE USED FOR THE ONGOING ACTIVITIES OF ASSESSEE AS PER THE DEMERGER SCHEME WHICH WAS W.E.F. 14/08/06. UNDER SU CH CIRCUMSTANCES WE DO NOT SEE ANY REASON FOR THE AMOU NT TO HAVE BEEN UTILISED FOR ANY OTHER PURPOSE. 6. AUTHORITIES BELOW HAVE NOT BROUGHT OUT ANY MATER IAL ON RECORD TO ESTABLISH THAT ASSESSEE HAS UTILISED THE WORKING CAPITAL LOAN FOR ANY OTHER ACTIVITY OTHER THAN THE BUSINESS ACTIVITY. IN OUR CONSIDERED OPINION AD HOC DISALLOWANCE IN SUCH MANNER CANNOT BE MADE. WE ARE THEREFORE UPHOLD THE ADDITION BEING DELETED BY 4 ITA NO. 4786.DEL. 2014 LD. CIT (A). ACCORDINGLY THE GROUND RAISED BY THE R EVENUE STANDS DISMISSED. 7. IN THE RESULT APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25.01.2018 . SD/- SD/- (R.S.SYAL) (BEENA A. PILLAI) VICE PRESIDENT JUDICIAL MEMBER DATE: 25.01.2018 BINITA COPY OF ORDER TO: - 1) THE APPELLANT; 2) THE RESPONDENT; 3) THE CIT; 4) THE CIT(A)-, NEW DELHI; 5) THE DR, I.T.A.T., NEW DELHI; TRUE COPY BY ORDER I TAT, NEW DELHI S.NO. DETAILS DATE 1 DRAFT DICTATED ON 24 .0 1 .201 8 2 DRAFT PLACED BEFORE AUTHOR 2 5 .0 1 .201 8 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 2 5 .01.2018 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5 APPROVED DRAFT COMES TO THE SR. PS/PS 6 KEPT FOR PRONOUNCEMENT ON 7 FILE SENT TO BENCH CLERK 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE ON WHICH FILE GOES TO THE A.R. 5 ITA NO. 4786.DEL. 2014 10 DATE OF DISPATCH OF ORDER 6 ITA NO. 4786.DEL. 2014