MUMBAI SEZ LTD, MUMBAI V. DCIT CEN CIR 39, MUMBAI

ITA 4939/MUM/2014

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 7369 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 28-07-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: D G
• Keywords: Business income; Business expenditure; Earning of tax free income; Commercial expediency; Rule 8D
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI SAKTIJIT DEY , JUDICIAL MEMBER AND SHR I N.K. PRADHAN, ACCOUNTANT MEMBER ITA NO. 4939 / MUM . /201 4 ( ASSESSMENT YEAR : 20 10 11 ) MUMBAI SEZ LIMITED 1 ST FLOOR, JAI CENTRE, 34, P. DMELLO ROAD OPP. RED GATE, MASJID MUMBAI 400 009 PAN AABCG2739C . APPELLANT V/S DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 39, MUMBAI . RESPONDENT ITA NO. 2830 /MUM. /2017 ( ASSESSMENT YEAR : 20 11 12 ) DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 6(4), MUMBAI . APPELLANT V/S MUMBAI SEZ LIMITED 1 ST FLOOR, JAI CENTRE, 34, P. DMELLO ROAD OPP. RED GATE, MASJID MUMBAI 400 009 PAN AABCG2739C . RESPONDENT 2 MUMBAI SEZ LIMITED ITA NO. 3073 /MUM. /2017 ( ASSESSMENT YEAR : 20 11 12 ) MUMBAI SEZ LIMITED 1 ST FLOOR, JAI CENTRE, 34, P. DMELLO ROAD OPP. RED GATE, MASJID MUMBAI 400 009 PAN AABCG2739C . APPELLANT V/S DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 39, MUMBAI . RESPONDENT ITA NO. 5515 /MUM. /2017 ( ASSESSMENT YEAR : 20 12 13 ) MUMBAI SEZ LIMITED 1 ST FLOOR, JAI CENTRE, 34, P. DMELLO ROAD OPP. RED GATE, MASJID MUMBAI 400 009 PAN AABCG2739C . APPELLANT V/S ASSTT. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE 6(4), MUMBAI . RESPONDENT REVENUE BY : SHRI MADHUR AGARWAL ASSESSEE BY : SHRI D.G. PANSARI DATE OF HEARING 09.07.2019 DATE OF ORDER O R D E R PER SAKTIJIT DEY, J.M. A FORESAID APPEALS, THREE BY THE ASSESSEE AND ONE BY THE REVENUE, ARISE OUT OF SEPARATE ORDERS PASSED BY THE LEARNED 3 MUMBAI SEZ LIMITED COMMISSIONER OF INCOME TAX (APPEALS), MUMBAI. F OR THE ASSESSMENT YEAR S 2010 12 AND 2 012 13 ARE BY THE ASSESSEE ONLY, W HEREAS, THERE ARE CROSS APPEALS FOR THE ASSESSMENT YEAR 2011 12. ITA NO. 4939 /MUM./201 4 ASSESSEES APPEAL A.Y. 2010 11 2 . IN GROUND NO.1, THE ASSESSEE HAS CHALLENGED THE DECISION OF LEARNED COMMISSIONER (APPEALS) IN HOLDING THAT INTEREST EARNED ON INTER CORPORATE DEPOSITS (ICDS) IS TO BE TREATED AS INCOME FROM OTHER SOURCES. 3 . BRIEF FACTS ARE, THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF SET TING UP AND DEVELOPMENT OF INFRASTRUCTURE FACILITIES IN INDIA. FOR THE ASSE SSMENT YEAR UNDER CONSIDERATION THE ASSESSEE FILED ITS RETURN OF INCOME ON 25 TH SEPTEMBER 2010, DECLARING INCOME OF ` 16,14,158. IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER, AFTER CALLING FOR VARIOUS DETAILS AND EXAMINING THEM, OBSER VED THAT THE ASSESSEE WAS IN THE PR OCESS OF DEVELOPING SPECIAL ECONOMIC ZONE (SEZ), HOWEVER, EVEN IN THE IMPUGNED ASSESSMENT YEAR THE WHOLE PROJECT IS AT THE STAGE OF WORK IN PROGRESS. THUS, HE WAS OF THE VIEW THAT ASSESSEES BUSINESS OPERATION HAS NOT YET COMMENCED. FURTHER, HE OBSERVED , A SSESSEES CLAIM OF COMMENCEMENT OF BUSINESS WAS NOT ACCEPTED WHILE COMPLETING THE ASSESSMENT S IN ASSESSMENT YEAR S 2008 09 AND 2009 10. FURTHER, HE OBSERVED , EXCEPT INTEREST INCOME 4 MUMBAI SEZ LIMITED AND PROFIT ON REDEMPTION OF CURRENT INVESTMENT, NO OTHER INCOME HAS BEEN CRE DITED TO THE PROFIT & LOSS ACCOUNT. THUS, ULTIMATELY, HE CONCLUDED THAT THE INTEREST INCOME CREDITED TO THE PROFIT & LOSS ACCOUNT CANNOT BE TREATED AS BUSINESS INCOME, BUT HAS TO BE ASSESSED AS INCOME FROM OTHER SOURCES. CONSEQUENTLY, HE DISALLOWED VARIOUS EXPENDITURE S CLAIMED BY THE ASSESSEE. BEING AGGRIEVED WITH THE AFORESAID DECISION OF THE ASSESSING OFFICER, THE ASSESSEE PREFERRED APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4 . A FTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE CONTEXT OF FACTS AND MATERIAL ON RECORD, LEARNED COMMISSIONER (APPEALS) HAVING FOUND THAT WHILE DECIDING ASSESSEES APPEAL IN ASSESSMENT YEAR 2003 04, THE TRIBUNAL HAS HELD THAT ASSESSEES BUSINESS HAS COMMENCED, ACCEPTED ASSESSEES CLAIM THAT ITS BUSINESS HAS COMMENCED. FURTH ER, HE OBSERVED , SINCE ASSESSEES BUSINESS HAS COMMENCED, THE EXPENDITURE DEBITED TO THE PROFIT & LOSS ACCOUNT TOWARDS DEVELOPMENT OF SEZ AND OTHER RELATED EXPENDITURES HAVE TO ALLOWED. AS REGARDS THE INTEREST BE EARNED BY THE ASSESSEE , WHETHER IS TO BE AS SESSED AS BUSINESS INCOME OR INCOME FROM OTHER SOURCES, LEARNED COMMISSIONER (APPEALS) FOUND THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD EARNED INTEREST ON FIXED DEPOSIT WITH BANK AMOUNTING TO ` 53,61,204, AND INTEREST ON ICDS AT ` 1,32,71,507. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, 5 MUMBAI SEZ LIMITED LEARNED COMMISSIONER (APPEALS) , THOUGH , ALLOWED ASSESSEES CLAIM THAT INTEREST ON FIXED DEPOSIT WITH B ANK IS TO BE TREATED AS BUSINESS INCOME, HOWEVER, HE DID NOT ACCEPT SUCH CLAIM OF THE ASS ESSEE WITH REGARD TO INTEREST ON ICDS. THE REA S ON FOR DOING SO AS STATED BY THE LEARNED COMMISSIONER (APPEALS) IS, SINCE THE ASSESSEE IS NOT ENGAGED IN THE BUSINESS OF FI NANCING AND MONEY LENDING, THE INTEREST ON ICDS WITH TWO SISTER CONCERN S AT CONCESSION AL RATE OF INTEREST CANNOT BE REGARDED AS BUSINESS INCOME. 5 . SHRI MADHUR AGARWAL, THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED , SURPLUS FUNDS WHICH WERE NOT IMMEDIATELY REQUIRED BY THE ASSESSEE FOR UTILIZATION IN ITS BUSINESS PROJECT WAS INVE STED IN SHORT TERM DEPOSITS IN B ANK AND ICDS SINCE THE ASSESSEE DID NOT WANT TO KEEP THE FUND S IDLE . A S A PRUDENT BUSINESSMAN ASSESSEE WANTED TO EARN SOME INCOME BY INVESTING THE SURPLUS FUNDS. HE SUBMITTED , SINCE SUCH FUNDS ARE BUSINESS FUNDS AND FOR THE PURPOSE OF EARNING SOME INCOME DURING THE PERIOD WHEN IT WAS NOT REQUIRED TO BE INVESTED IN THE BUSINESS, IT HAS TO BE TREATED AS BUSINESS INCOME. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , SINCE THE NATURE CHARACTER OF DEPOSITS BOTH IN THE FIXE D DEPOSITS AND ICDS ARE SIMILAR, THERE IS NO REASON TO TREAT THE INTEREST EARNED ON ICDS AS INCOME FROM OTHER SOURCES. 6 MUMBAI SEZ LIMITED 6 . SHRI D.G. PANSARI , THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE LEARNED COMMISSIONER (APPEALS). 7 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THOUGH , THE ASSESSING OFFICER HAS TREATED THE INTEREST INCOME RECEIVED BY THE ASSESSEE AS INCOME FROM OTHER SOURCES ON THE REASON ING THAT ASSESSEES BUSINESS HAS NOT YET COMMENCED, HOWEVER, LEARNED COMMISSIONER (APPEALS) HAS GIVEN A FACTUAL FINDING THAT ASSESSEES BUSINESS HAS COMMENCED. FURTHER, LEARNED COMMISSIONER (APPEALS) HAS ALSO ACCEPTED ASSESSEES CLAIM OF INTEREST EARNED ON FIXED DEPOSITS WITH BANK AS BUSINESS INCOME. THE ONLY REASON ON WHICH HE HAS REJECTED ASSESSEES CLAIM OF INTEREST EARNED ON ICDS AS BUSINESS INCOME IS , THE ASSESSEE IS NOT IN MONEY LENDING BUSINESS. IN OUR VIEW, THE AFORESAID REASONING OF THE LEARNED COMMISSIONER (APPEALS) DEFIES LOGIC. THERE IS NO DISPUTE THAT TH E ASSESSEE HAS PARKED SURPLUS BUSINESS FUNDS , WHICH IS NOT IMMEDIATELY REQUIRED FOR UTILIZATION IN BUSINESS , IN SHORT TERM DEPOSITS WITH BANK OR IDCS. THE ENTIRE PURPOSE OF SUCH DEPOSITS WAS NOT TO KEEP THE FUNDS IDLE AND EARN SOME INCOME. IF THE AFORESAID REASONING OF THE ASSESSEE IS VALID FOR THE INTEREST EARNED ON FIXED DEPOSITS , THE SAME CANNOT BE INVALID OR UNACCEPTABLE IN CASE OF INTEREST EARNED ON ICDS. WHEN IT IS ACCEPTED THAT THE ASSESSEE HAS TAKEN A PRUDENT BUSINESS DECISION TO EARN SOME INCOME BY UTILIZING THE IDLE BUSINESS FUNDS , NO DIFFERENTIATION CAN BE 7 MUMBAI SEZ LIMITED MADE BETWEEN THE INVESTMENTS MADE IN BANKS AND ICDS. IN VIEW OF THE AFORESAID, WE HOLD THAT THE INTEREST INCOME EARNED ON ICDS SHOULD BE TREATED AS INCOME FROM BUSINESS. THIS GROUND IS ALLOWED . 8 . GROUND NO.2, IS NOT PRESSED, HENCE, DISMISSED. 9 . IN GROUND NO.3, THE ASSESSEE HAS CHALLENGED THE DECISION OF LEARNED COMMISSIONER (APPEALS) IN DISALLOWING EXPENDITURE INCURRED FOR EARNING INTEREST AND OTHER INCOME. 10 . AS DISCUSSED EARLIER, WHILE COMPLETING THE ASSESSMENT THE ASSESSING OFFICER DID NOT ALLOW VARIOUS EXPENDITURE S CLAIMED BY THE ASSESSEE ON THE GROUND THAT ASSESSEES BUSINESS HAS NOT COMMENCED . HOWEVER, LEARNED COMMISSIONER (APPEALS) ALLOWED CERTAIN EXPENDITURE DEBITED TO THE PROFIT & LOSS ACC OU NT TOWARDS DEVELOPMENT OF SEZ, THOUGH , HE DID NOT ALLOW ASSESSEES CLAIM OF EXPENDITURE INCURRED TOWARDS EARNING INTEREST INCOME . WHILE DOING SO, HE OBSERVED, FOR CLAIMING DEDUCT ION UNDER SECTION 57 OF THE ACT THE ASSESSEE HAS TO PROVE THAT THE EXPENDITURE WAS WHOLLY AND EXCLUSIVELY INCURRED FOR EARNING THE INCOME . 11 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , LEARNED COMMISSIONER (APPEALS) HAS COMPLETELY MISCONSTRUED THE SUBMISSIONS OF THE ASSESSEE AS THE DEDUCTION CLAIMED UNDER SECTION 57 OF THE ACT IS BY W AY OF AN ALTERNATIVE SUBMISSION . HE SUBMITTED , THE MAIN 8 MUMBAI SEZ LIMITED CONTENTION OF THE ASSESSEE WAS , THE INTEREST EXPENDITURE INCURRED TOWARDS BORROWAL OF FUNDS BEING WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS, IT SHOULD BE ALLOWED AS EXPENDITURE. HE SUB MITTED , LEARNED COMMISSIONER (APPEALS) HAS FAILED TO ADJUDICATE THE AFORESAID MAIN CLAIM OF THE ASSESSEE. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , SINCE LEARNED COMMISSIONER (APPEALS) HAS ACCEPTED THAT ASSESSEES BUSINESS HAS COMMENCED , THE EXPENDI TURE CLAIMED SHOULD HAVE BEEN ALLOWED AS BUSINESS EXPENDITURE. HE SUBMITTED , IN ASSESSMENT YEAR 2013 14, LEARNED COMMISSIONER (APPEALS) HAS ALLOWED SIMILAR EXPENDITURE CLAIMED BY THE ASSESSEE. IN THIS CONTEXT, HE FURNISHED A COPY OF THE ORDER PASSED BY THE LEARNED COMMISSIONER (APPEALS) FOR THE ASSESSMENT YEAR 2013 14. THUS, HE SU BMITTED , THE ASSESSEES CLAIM SHOULD BE ALLOWED. 12 . THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON THE OBSERVATIONS OF THE ASSESSING OFFICER AND LEARNED COMMISSIONER (APPEALS). 13 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. UN DISPUTEDLY, LEARNED COMMISSIONER (APPEALS) HAS ACCEPTED ASSESSEES CLAIM THAT ITS BUSINESS HAS ALREADY COMMENCED . THE ONLY REASON ON WHICH THE LEARNED COMMISSIONER (APPEALS) HAS DISALLOWED INTEREST EXPENDITURE ON BORROWED FUND IS, IT IS NOT DIRECTLY RELATE D TO THE INTEREST INCOME EARNED ON ICDS. IT IS A FACT ON RECORD 9 MUMBAI SEZ LIMITED THAT THE ASSESSEE HAD BORROWED THE FUNDS FOR DEVELOPMENT OF THE SEZ PROJECT. THEREFORE, THE INTEREST ON SUCH BORROWED FUNDS IS ALLOWABLE AS BUSINESS EXPENDITURE. IT IS ALSO RELEVANT TO OBSERVE , LEARNED COMMISSIONER (APPEALS) HAS ACCEPTED THAT THE ASSESSEE HAD MIXED FUNDS. ON A CAREFUL PERUSAL OF THE ORDER OF LEARNED COMMISSIONER (APPEALS), IT IS ALSO NOTICED THAT HE HAS COMPLETELY OVERLOOKED ASSESSEES MAIN CLAIM THAT THE INTEREST EXPENDITURE S HOULD BE ALLOWED AS BUSINESS EXPENDITURE. WHEN THERE IS NO DISPUTE THAT THE BORROWED FUNDS WERE UTILIZED FOR THE PURPOSE OF BUSINESS , THE INTEREST EXPENDITURE ON SUCH BORROWED FUNDS HAS TO BE ALLOWED AS BUSINESS EXPENDITURE. IN ANY CASE OF THE MATTER, SINC E WHILE DECIDING GROUND NO.1, WE HAVE HELD THAT THE INTEREST EARNED ON ICDS IS TO BE TREATED AS BUSINESS INCOME OF THE ASSESSEE, L OGICALLY, THE INTEREST EXPENDITURE HAS TO BE ALLOWED. ACCORDINGLY, THE GROUND RAISED IS ALLOWED. 14 . GROUND NO.4, IS CONSEQUENTIA L TO GROUND NO.3 IN THE SENSE THAT IN THIS GROUND, THE ASSESSEE HAS MADE AN ALTERNATIVE CLAIM OF DEDUCTION UNDER SECTION 57(III) OF THE ACT IN RESPECT OF INTEREST EXPENDITURE OF ` 1,27,22,576. AS DISCUSSED EARLIER, INCOME EARNED FROM ICDS WAS HELD BY THE D EPARTMENTAL AUTHORITIES AS INCOME FROM OTHER SOURCE AS AGAINST BUSINESS INCOME CLAIMED BY THE ASSESSEE. THE ALTERNATIVE CLAIM MADE BY THE ASSESSEE FOR DEDUCTION OF INTEREST EXPENDITURE UNDER SECTION 57(III) OF THE ACT IN RESPECT OF SUCH INCOME WAS REJECTED 10 MUMBAI SEZ LIMITED ON THE GROUND THAT SUCH INTEREST EXPENDITURE HAS NO NEXUS WITH THE INTEREST EARNED ON ICDS. WHILE DECIDING GROUNDS NO.1 AND 3, OF ASSESSEES APPEAL, WE HAVE HELD THAT INTEREST EARNED ON ICDS ARE TO BE TREATED AS INCOME FROM BUSINESS. CONSEQUENTLY, THE INT EREST EXPENDITURE CLAIMED BY THE AS SESSEE HAS TO BE ALLOWED. THEREFORE, THE ALTERNATIVE CLAIM OF DEDUCTION UNDER SECTION 57(III) OF THE ACT BECOMES REDUNDANT. SUFFICE IT TO SAY, ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 57(III) OF THE ACT IN RESP ECT OF I NTEREST EXPENDITURE HAS BEEN ALLOWED BY LEARNED COMMISSIONER (APPEALS) IN ASSESSMENT YEAR S 2009 10 AND 2010 11 AND THE ISSUE H AS ATTAINED FINALITY AS NEITHER THE ASSESSEE NOR THE REVENUE HAS CONTESTED THE ORDER OF LEARNED COMMISSIONER (APPEALS). THEREFORE, EVEN OTHERWISE ALSO, ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 57(III) OF THE ACT IS ALLOW ABLE. THE GROUND IS DISPOSED OF ACCORDINGLY. 15 . IN GROUND NO.5 THE ASSESSEE HAS CHALLENGED DISALLOWANCE OF ` 46,50,272, UNDER SECTION 14A R/W RULE 8D. 16 . IT IS THE CON TENTION OF THE LEARNED AUTHORISED REPRESENTATIVE BEFORE US THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD NOT EARNED ANY EXEMPT INCOME, THEREFORE, QUESTION OF MAKING ANY DISALLOWANCE UNDER SECTION 14A R/W RULE 8D DOES NOT ARISE. 11 MUMBAI SEZ LIMITED 17 . HAVING CONSIDE RED RIVAL SUBMISSIONS AND PERUSED MATERIAL ON RECORD, THE FACTUAL POSITION WHICH EMERGES IS, IN THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS NOT EARNED ANY EXEMPT. THAT BEING THE CASE, AS PER SETTLED PRINCIPLE OF LAW, NO DISALLOWANCE UNDER SECTION 14A R/W RULE 8D CAN BE MADE. IN THIS CONTEXT, WE MAY REFER TO THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN PCIT V/S RIVIAN INTERNATIONAL PVT. LTD., ITA NO.693 OF 2015, JUDGMENT DATED 21 ST NOVEMBER 2017. IN VIEW OF THE AFORESAID, WE DELETE THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND SUSTAINED BY LEARNED COMMISSIONER (APPEALS). THIS GROUND IS ALLOWED. 18 . GROUNDS NO.6, 7 AND 8, BEING GENERAL IN NATURE, NO SEPARATE ADJUDICATION IS REQUIRED, HENCE, DISMISSED. 19 . IN ADDITION TO THE AFORESAID GROUNDS, THE ASSESSEE, VIDE LETTER DATED 4 TH JULY 2019, HAS RAISED THE FOLLOWING ADDITIONAL GROUNDS: THE CIT(A) ERRED IN CONFIRMING THE VIEW OF THE ASSESSING OFFICER IN DISALLOWING DIFFERENTIAL INTEREST OF ` 44,23,836 , WITHOUT APPRECIATING THE FACTS OF THE CASE PLACED BEFORE HIM DURING THE APPELLANT PROCEEDINGS . 20 . AT THE OUTSET, WE MUST OBSERVE THAT THE ISSUE RAISED IN TH E ADDITIONAL GROUND ARISES OUT OF THE ORDER OF THE DEPARTMENTAL AUTHORITIES. T HEREFORE, THE ADDITIONAL GROUND IS ADMITTED FOR ADJUDICATION. 12 MUMBAI SEZ LIMITED 21 . BRIEF FACTS ARE, DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT WHILE THE ASSESSEE HAS BORROW ED FUNDS BY PAYING INTEREST @ 8%, IT HAS MADE INVESTMENT BY WAY OF ICDS IN A SISTER CONCERN VIZ. DHARTI INVESTMENTS AND HOLDINGS LTD. @ 6%. RELYING UPON THE ASSESSMENT ORDER PASSED FOR THE ASSESSMENT YEAR 2007 08, WHEREIN , IT WAS HELD THAT ADVANCE GIVEN TO THE SISTER CONCERN IS NOT OUT OF COMMERCIAL EXPEDIENCY, HENCE, DIFFERENTIAL RATE OF INTEREST AMOUNTING TO 2% CANNOT BE CAPITALIZED BUT HAS TO BE REDUCED FROM THE WORK IN PROGRESS, THE ASSESSING OFFICER FOLLOWED THE SAME AND DID NOT CAPITALIZED THE DIFFERENTIAL AMOUNT OF INTEREST OF 2% WO RKED OUT AT ` 44,23,836. THE AFORESAID DECISION OF THE ASSESSING OFFICER WAS ALSO UPHELD BY THE LEARNED COMMISSIONER (APPEALS). 22 . THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE QUESTION OF CAPITALIZATION OF INTEREST WOULD ARISE ONLY IN CASE ASSESSEES BUSINESS WOULD NOT HAVE COMMENCED. HE SUBMITTED , WHEN IT HAS BEEN ACCEPTED THAT ASSESSEES BUSINESS HAS COMMENCED, THE EXPENDITURE DEBITED TO THE PROFIT & LOSS ACCOUNT HAS TO BE ALLOWED. HE SUBMITTED , THE INTEREST EXPENDITURE DEBITED TO THE PROFIT & LOSS ACCOUNT BEING THE SAME AS THE COST OF BORROWING OF 8% , IT SHOULD BE ALLOWED. 23 . THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED , SINCE THE ASSESSEE HAS BORROWED @ 8% AND ADVANCED LOAN TO THE SISTER CONCERN 13 MUMBAI SEZ LIMITED @ 6% , DISALLOWANCE HAS TO BE MADE BY APPLYING THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. 24 . IN REJOINDER, THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED , THE ASSESSMENT ORDER DOES NOT REVEAL APPLICATION OF SECTION 40A(2)(B). 25 . WE HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. UND ISPUTEDLY, THE ASSESSING OFFICER HAD OBSERVED THAT ASSESS EES BUSINESS HAS NOT COMMENCED. HOWEVER, LEARNED COMMISSIONER (APPEALS) HAS HELD THAT ASSESSEES BUSINESS HAS COMMENCED F ROM THE ASSESSMENT YEAR 2003 04. THEREFORE , WHEN ASSESSEES BUSINESS HAS ALRE ADY COMMENCED, THERE IS NO QUESTION OF ALLOWING OR DISALLOWING CAPITALIZATION OF INTEREST EXPENDITURE. UNDISPUTEDLY, THE ASSESSEE HAS DEBITED THE INTEREST EXPENDITURE TO THE PROFIT & LOSS ACCOUNT. THEREFORE, SUCH EXPENDITURE HAS TO BE SET OFF AGAINST THE B USINESS IN COME. AS REGARDS THE SUBMISSION OF THE LEARNED DEPARTMENTAL REPRESENTATIVE THAT THE ASSESSING OFFICER HAS APPLIED SECTION 40A(2)(B) OF THE ACT, WE DO NOT FIND SUCH SUBMISSION TO BE FACTUALLY CORRECT. NEITHER THE ASSESSING OFFICER NOR LEARNED COMM ISSIONER (APPEALS) HAS MADE ANY REFERENCE TO THE PROVISIONS OF SECTION 40A(2)(B) OF THE ACT. ON THE CONTRARY, THE DEPARTMENTAL AUTHORITIES HAVE SIMPLY DISALLOWED CAPITALIZATION OF THE INTEREST EXPENDITURE. IN VIEW OF THE AFORESAID, ASSESSEES CLAIM IS ALLO WED. ADDITIONAL GROUND IS ALLOWED. 14 MUMBAI SEZ LIMITED 26 . IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ITA NO. 2830 /MUM./201 7 REVENUES APPEAL A.Y. 2011 12 27 . THE REVENUE HAS FILED THIS APPEAL BEING AGGRIEVED WITH THE DECISION OF LEARNED COMMISSIONER (APPEALS) IN HOLDING THAT ASSESSEES BUSINESS HAS COMMENCED. 28 . IT IS RELEVANT TO OBSERVE , WHILE DECIDING ASSESSEES APPEAL IN ASSESSMENT YEAR 2003 04, THE TRIBUNAL HAS HELD THAT ASSESSEES BUSINESS HAS ALREADY COMMENCED . FOLLOWING THE AFORESAID DECISION OF THE TRIBUNAL, LEARNED COMMISSIONER (APPEALS) WHILE DECIDING THE ASSESSEES APPEAL FOR THE ASSE SSMENT YEAR 2010 11 AND 2011 12 HAS HELD THAT ASSESSEES BUSINESS HAS COMMENCED SINCE THE ASSESSMENT YEAR 2003 04. IN FACT, THE AFORESAID DECISION OF LEARNED COMMISSIONER (APPEALS) HAS BEEN ACCEPTED BY THE REVENUE IN ASSESSMENT YEAR 2010 11. IN VIEW OF THE AFORESAID, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED COMMISSIONER (APPEALS). GROUND IS DISMISSED. 29 . IN THE RE SULT, REVENUES APPEAL IS DISMISSED. ITA NO. 3073 /MUM./201 7 ASSESSEES APPEAL A.Y. 2011 12 30 . GROUND NO.1, IS IDENTICAL TO GROUND NO.1 OF ITA NO.4939/MUM./ 2014, DECIDED IN THE EARLIER PART OF THE ORDER. FOLLOWING OUR DECISION THEREIN, WE ALLOW ASSESSEES CLAIM. THIS GROUND IS ALLOWED. 15 MUMBAI SEZ LIMITED 31 . GROUND NO.2, IS NOT PRESSED, HENCE, DISMISSED. 32 . GROUNDS NO.3 AND 4, AR E SIMILAR TO GROUNDS NO.3 AND 4 RAISED IN ITA NO.4939/MUM./2014. OUR DECISION THEREON WILL APPLY MUTATIS MUTANDIS TO THIS GROUND AS WELL. 33 . THE ISSUE RAISE D IN GROUND NO.5, IS IDENTICAL TO THE ISSUE RAISED IN THE ADDITIONAL GROUND OF ITA NO.4939/MUM./2014. FOLLOWING OUR DECISION THERE, WE ALLOW THIS GROUND. 34 . GROUNDS NO.6, 7 AND 8, BEING GENERAL IN NATURE, DO NOT REQUIRE ADJUDICATION, HENCE, DISMISSED. 35 . IN TH E RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ITA NO. 5515 /MUM./201 7 ASSESSEES APPEAL A.Y. 2012 123 36 . GROUNDS NO.1, 3, 4 AND 5 ARE IDENTICAL TO GROUNDS NO.1, 3, 4 AND 5 OF ITA NO.4939/MUM./ 2014. OUR DECISION THEREIN WOULD APPLY MUTATIS MUTANDIS TO THESE GROUNDS ALSO. ACCORDINGLY, THESE GROUNDS ARE DISPOSED OFF IN TERMS OF OUR DECISION IN GROUNDS NO.1, 3, 4 AND 5 OF ITA NO.4939/M UM./2014. 37 . GROUNDS NO.6, 7 AND 8 BEING GENERAL IN NATURE, HENCE, DO NOT REQUIRE SEPARATE ADJUDICATION. 16 MUMBAI SEZ LIMITED 38 . IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. 39 . TO SUM UP, ASSESSEES APPEALS ARE PARTLY ALLOWED AND REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCE D IN THE OPEN C OURT ON 26.07.2019 SD/ - N.K. PRADHAN ACCOUNTANT MEMBER SD/ - SAKTIJIT DEY JUDICIAL MEMBER MUMBAI, DATED: 26.07.2019 COPY OF THE ORDER FORWARDED TO : ( 1 ) THE ASSESSEE ; ( 2 ) THE REVENUE; ( 3 ) THE CIT(A); ( 4 ) THE CIT, MUMBAI CITY CONCERNED; ( 5 ) THE DR, ITAT, MUMBAI; ( 6 ) GUARD FILE . TRUE COPY BY ORDER PRADEEP J. CHOWDHURY SR. PRIVATE SECRETARY ASSISTANT REGISTRAR ITAT, MUMBAI