DCIT 10(1), MUMBAI V. CITICORP MARUTI FINANCE LTD, GURGAON

ITA 5410/MUM/2013

• Counselvise Citation: 541019914 RSA 2013
• Duration Of Justice: 1 year(s) 5 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2007-2008
• Appeal Filed On: 07-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PREMANAND J
• Assessee Lawyers: ARVIND SONDE
• Keywords: Revenue expenditure; Capital expenditure
• Section: 143(3)

Judgement Text

C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER & SHRI SANJAY GARG, JUDICIAL MEMBER ./ I.T.A. NO.5410 /MUM/2013 ( / ASSESSMENT YEAR : 2007-2008 D CIT 1 0 ( I ), 455, AAYAKAR BHAVAN, 4 TH FLOOR, M.K. MARG, MUMBAI 400 020. / VS. M/S CITICORP MARUTI FINANCE LTD., 5 TH FLOOR, DLF SQUARE, M BLOCK, JACARANDA MARG, DLF CITY PGHASE II, GURGAON 122 002. ./ PAN : AAACC5029L ( / APPELLANT ) .. ( / RESPONDENT ) A PPELLANT BY SHRI PREMANAND J R E SPONDENT BY : SHRI ARVIND SONDE / DATE OF HEARING : 10-12-2014 / DATE OF PRONOUNCEMENT : 21-01-2015 [ !' / O R D E R PER R.C. SHARMA, A.M . : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF LD. CIT(A) -VI NEW DELHI DATED 02-05-2013 FOR THE A .Y. 2008-09 WHEREIN THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE REVENU E: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) ERRED IN DELETING ADDITION OF RS. 20,73, 060/- HOLDING IT AS REVENUE EXPENDITURE AND FAILED TO APPRECIATE THE FA CTS BROUGHT OUT BY THE AO TO HOLD IT CAPITAL EXPENDITURE. 2. THE APPELLANT PRAYS THAT THE ORDER OF CIT (APPEA LS) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFIC ER RESTORED. ITA 5410/M/13 2 3. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY I.E, M/S CITICORP MARUTI FINANCE LIMITED (C MFL) WAS A JOINT VENTURE BETWEEN CITICORP FINANCE (INDIA) LIM ITED ('CFIL') AND MARUTI UDYOG LIMITED WHEREIN 74 %OF THE STAKE W AS HELD BY CFIL AND THE REMAINING 26 % WAS HELD BY MARUTI UDYO G LIMITED. THE COMPANY WAS ENGAGED IN THE BUSINESS OF FINANCING VEHICLES MANUFACTURED BY MARUTI UDYOG LIMITED. THE COMPANY WAS ALSO REGISTERED WITH THE RESERVE BANK OF INDIA (RBI') AS A NON BANKING FINANCIAL COMPANY ('NBFC). FOR THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE COMPANY (CMFL) FILED ITS ORIGINA L RETURN OF INCOME ON 30 SEPTEMBER 2008 DECLARING A LOSS OF RS 5,76,23,50 0. THE SAID RETURN OF INCOME WAS PROCESSED UNDER SECTION 143(1) OF THE ACT. THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY AND THE ASSESSME NT OF THE COMPANY COMPLETED U/S 143(3) OF THE ACT VIDE ASSESSMENT ORD ER DATED 26 THE DECEMBER, 2011 AFTER MAKING THE DISALLOWANCE OF RS. 20,73,060 ON ACCOUNT OF LOAN SOURCING FEES THEREBY ASSESSING THE LOSS OF THE COMPANY AT RS. 5,55,50,440. BY THE IMPUGNED ORDER, THE LD. CIT(A) DELETED THE DISALLOWANCE AFTER HAVING FOLLOWING OBSERVATION:- I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MADE BY THE AR AND HAVE GONE THROUGH THE ASSESSMENT ORDER. IT IS OBSE RVED THAT THE EXPENDITURE UNDER DISPUTE IS NOTHING BUT AMORTIZATI ON OF PAYMENT MADE IN EARLIER YEARS. SINCE THE AMORTIZATION HAS BEEN ALLOWED IN EARLIER YEARS BY THE AO, THE SAME SHOULD ALSO BE ALLOWED IN THE C URRENT YEAR BY FOLLOWING THE PRINCIPLES OF CONSISTENCY AS LAID DOW N BY THE HONBLE SUPREME COURT IN THE DECISION OF RADHASOAMI SASANG VS. CIT (1992) 193 ITR 321 (SC). FURTHER THE EXPENDITURE DEBITED IN T HE BOOKS OF ACCOUNTS IS NEITHER CAPITAL IN NATURE NOR RESULTED IN ANY ENDUR ING BENEFIT FOR THE APPELLANT. ACCORDINGLY, KEEPING IN VIEW THE ABOVE DECISION, THE SAID EXPENDITURE IS ALLOWABLE AS REVENUE EXPENDITURE. T HEREFORE, I AM OF THE OPINION THAT THE ACTION OF THE AO IN DISALLOWING LO AN SOURCING FEES IS ERRONEOUS AND IN COMPLETE DISREGARD TO THE FACTS OF THE CASE. THEREFORE, THE A.O. IS DIRECTED TO DELETE THE IMPUGNED DISALLO WANCE MADE IN THIS REGARD. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS, GO NE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THA T THE ASSESSEE ITA 5410/M/13 3 COMPANY WAS MAKING QUARTERLY PAYMENTS OF 0,35% OF L OAN AMOUNT ON ALL LOANS DISBURSED BY IT, FOR PURCHASE O F BOTH NEW AND USED MARUTI VEHICLES, TO MARUTI UDYOG LIMITED UNDER THE TERMS OF THE JOINT VENTURE AGREEMENT. THE QUARTERLY PAYMENT MADE BY THE ASSESSEE COMPANY TO ITS JOINT VENTURE PARTNER WAS I N LIEU OF THE SUPPORT EXTENDED TO THE ASSESSEE IN CARRYING ON ITS BUSINESS. THE SAID PAYMENT WAS BEING AMORTIZED BY THE COMPANY IN ITS BOOKS OF ACCOUNTS OVER THE PERIOD OF LOAN GRANTED AND ONLY T HE AMORTIZED COMPONENT WAS BEING CHARGED TO THE PROFIT AND LOSS ACCOUNT EVERY YEAR AND NOT THE ENTIRE EXPENDITURE. THE AMOUNT DEBITED TO THE PROFIT AND LOSS ACCOUNT IN THE YEAR UNDER CONSIDERATION WAS NOTHING BUT AMORTIZATION OF PAYMENT MADE IN EARLIER YEARS. SINCE PART OF THE A MORTIZATION HAS ALREADY BEEN ALLOWED IN EARLIER YEARS, THE REMAINING PORTIO N WAS CLAIMED IN THE CURRENT YEAR. IN ORDER TO SUBSTANTIATE THE SAME, AU DITED FINANCIAL STATEMENTS, ACCOUNTING POLICY AND AGREEMENTS WERE A LSO SUBMITTED. WE FOUND THAT SIMILAR EXPENDITURE WAS ALLOWED BY THE A .O. IN ALL THE EARLIER YEARS I.E ASSESSMENT YEARS 2003-04 TO 2006-07. IN A LL THESE YEARS, THE A.O. HAD ALLOWED THE ENTIRE EXPENDITURE CLAIMED AS REVENUE IN NATURE. 5. IN VIEW OF THE ABOVE, SINCE THE FINDINGS REC ORDED BY THE LD. CIT(A) HAS NOT BEEN CONTROVERTED, WE DO NOT FIND ANY ERROR IN THE IMPUGNED ORDER OF LD. CIT(A) DELETING THE DISALLOWANCE MADE BY THE A. O. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COU RT ON 21 ST JANUARY, 2015 !' # $% &! ' 21-01-2015 ( ) SD/- S D/- (SANJAY GARG) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER $ 5 MUMBAI ; &! DATED 21-01-2015 [ .;../ RK , SR. PS ITA 5410/M/13 4 ! '#$% &%# / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. < () / THE CIT(A) 3,, MUMBAI 4. < / CIT II, MUMBAI 5. ?@( ;;AB , AB , $ 5 / DR, ITAT, MUMBAI H BENCH 6. (DE F / GUARD FILE. ' / BY ORDER, ? ; //TRUE COPY// (/') * ( DY./ASSTT. REGISTRAR) , $ 5 / ITAT, MUMBAI