DCIT, New Delhi V. M/s Diageo Distilleries Pvt. Ltd., New Delhi

ITA 5502/DEL/2016

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 9654 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 25-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3); 37; 154

Judgement Text

1 ITA NO. 5502/DEL/2016 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE MS SUCHITRA KAMBLE, JU DICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT MEM BER I.T.A. NO. 5502/DEL/2 016 (A.Y. 2012-13) DCIT CIRCLE 7 (2), NEW DELHI (APPELLANT) VS . M/S.DIAGEO DISTILLERIES PVT. LTD. BLOCK-E, 2 ND FLOOR, MIRA, PLOT 1 & 2, ISHWAR NAGAR, MATHURA ROAD, NEW DELHI- 110065 PAN : AAKCS4614F (RESPONDENT) ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED AGAINST THE ORDER DATED 29.07. 2016 PASSED BY CIT(A)- 30, NEW DELHI FOR ASSESSMENT YEAR 2012-13. 2. THE GROUNDS OF APPEAL ARE AS UNDER : 1. 'LD. CIT(A) ERRED IN LAW AND ON FACTS OF THE CASE IN DELETING THE DISALLOWANCE OF RS.2,79,11,315/- MADE BY AO ON ACCO UNT OF BANK INTEREST EXPENSES. ' 2. 'LD. CIT(A) ERRED IN LAW AND ON FACTS OF THE CASE I N DELETING THE DISALLOWANCE OF RS. 44,74,729/- MADE BY THE AO ON A CCOUNT LEGAL & PROFESSIONAL FEE EXPENSES.' 3. 'LD. CIT(A) ERRED IN LAW AND ON FACTS OF THE CASE I N DELETING THE DISALLOWANCE OF RS.25,27,483/- MADE BY THE AO ON AC COUNT WAREHOUSING AND DEMURRAGE CHARGES.' APPELLANT BY SH. SURENDRA MEENA, SR.DR RESPONDENT BY NONE DATE OF HEARING 06.08.2019 DATE OF PRONOUNCEMENT 23.09.2019 2 ITA NO. 5502/DEL/2016 4. 'THE APPELLANT CRAVES LEAVE, MODIFY, ADD OR FOREGO ANY GROUND(S) OF APPEAL AT ANY TIME BEFORE OR DURING THE HEARING O F THIS APPE AL.' 3. THE ASSESSEE FILED ITS RETURN OF INCOME ON 27.11 .2012, DECLARING LOSS OF RS. 3,62,52,720/-, UNDER NORMAL PROVISIONS OF THE A CT. THE ASSESSMENT U/S 143(3) OF THE ACT, WAS COMPLETED BY THE ORDER DATED 16.03.2015, WHICH WAS RECTIFIED U/S 154 VIDE ORDER DATED 19.08.2015, AT T OTAL LOSS OF RS. 13,39,193/-, AS AGAINST THE RETURNED LOSS OF RS. 3,62,52,720/-, AFTER MAKING THE FOLLOWING ADDITIONS ON ACCOUNT OF: I) DISALLOWANCE OF INTEREST PAID ON LOAN :RS.2,79 ,11,315/- II) DISALLOWANCE OF LEGAL & PROFESSIONAL CHARGES :R S. 61,87,589/- III) DISALLOWANCE OF WAREHOUSE & DEMURRAGE CHARGES: RS. 27,67,483/- 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) PARTLY ALLOWED THE AP PEAL OF THE ASSESSEE. 5. THE LD. DR SUBMITTED THAT AS REGARDS TO GROUND N O. 1, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF RS. 2,79,11,315/- M ADE BY THE ASSESSING OFFICER ON ACCOUNT OF BANK INTEREST EXPENSES AS THE ASSESSE E FAILED TO PROVE DIRECT NEXUS BETWEEN THE EXPENSES WHOLLY AND EXCLUSIVELY L AID OUT FOR ITS OWN BUSINESS PURPOSE AS ARTICULATED U/S 36 & 37 OF THE INCOME TAX ACT. BESIDES THAT OTHER CBUS ARE SEPARATE AND DISTINCT ENTITY. AS REGARDS TO GROUND NO. 2 AND 3, THE LD. DR SUBMITTED THAT BEFORE THE ASSESSI NG OFFICER, THE ASSESSEE FAILED TO EXPLAIN AS TO HOW THESE HUGE EXPENSES HAV E BEEN INCURRED FULLY AND EXCLUSIVELY FOR ITS BUSINESS PURPOSES PARTICULARLY WHEN THERE WAS NO BUSINESS ACTIVITY DURING THE YEAR. 3 ITA NO. 5502/DEL/2016 6. NONE APPEARED AT THE TIME OF HEARING ON BEHALF O F THE ASSESSEE DESPITE GIVING NOTICE. THEREFORE, WE ARE TAKING INTO ACCOUN T THE SUBMISSIONS OF THE ASSESSEE BEFORE THE CIT(A) AS SUBMISSIONS BEFORE US . 7. WE HAVE HEARD THE LD. DR AND PERUSED ALL THE REL EVANT MATERIAL AVAILABLE ON RECORD. AS REGARDS TO GROUND NO. 1, FROM THE PER USAL OF THE RECORDS IT CAN BE SEEN THAT THE LOAN PROCURED WAS UTILIZED BY THE ASS ESSEE WHOLLY AND EXCLUSIVELY FOR ITS BUSINESS AS PER CLAUSE 14 OF THE ARRANGEMEN T BETWEEN THIRD PARTY CONTRACT BOTTLING UNITS (CBUS). THE WORKING CAPITAL IS ADVANCED TO THESE CBUS SO AS TO ENABLE THEM TO PROCURE MATERIAL, UNDERTAKE MANUFACTURING AND MAINTAIN STOCKS AND DEBTORS FOR THE ASSESSEE. THE A SSESSEES PROFIT EARNING SOURCE IS THE ARRANGEMENT WITH THE CBUS WHEREIN THE ASSESSEE PROVIDES WORKING CAPITAL TO THESE CBUS TO ENABLE THEM TO PRO CURE MATERIALS AND CARRY OUT LARGE SCALE MANUFACTURING OF ALCOHOLIC BEVERAGE S AND DELIVER THE SAME TO THE ASSESSEES CUSTOMERS ON ITS BEHALF. THUS, FROM THIS IT IS CLEAR THAT WORKING CAPITAL LOAN WAS TAKEN BY THE ASSESSEE FOR ITS BUSI NESS PURPOSE AND USE FOR BUSINESS PURPOSES ONLY. THEREFORE, THE CIT(A) WAS R IGHT IN DELETING THIS DISALLOWANCE. GROUND NO. 1 OF THE REVENUES APPEAL IS DISMISSED. AS REGARDS TO GROUND NOS. 2 AND 3, IT CAN BE SEEN THAT IT IS AN A DMITTED POSITION THAT DURING THE YEAR THERE WAS NO BUSINESS ACTIVITY, BUT DURING THE SAID PERIOD THE ASSESSEE INCURRED EXPENSES ON THE MAINTENANCE OF ITS BUSINES S ESTABLISHMENT. DURING THE SAID YEAR, THE ASSESSING OFFICER HAS NOT POINTE D OUT ANY BOGUS OR EXPENDITURE OF PERSONAL NATURE, WHICH WILL WARRANT ANY DISALLOWANCE. THE CIT(A) RIGHTLY HELD THAT BY SIMPLY MENTIONING THAT THE EXPENDITURES ARE NOT COMMENSURATE WITH THE TURNOVER, WILL NOT AUTOMATICA LLY PROVE THAT THEY HAVE NOT BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR BUSINE SS PURPOSES. THUS, THERE IS NO NEED TO INTERFERE WITH THE FINDINGS OF THE CIT(A ). GROUND NOS. 2 AND 3 ARE DISMISSED. 4 ITA NO. 5502/DEL/2016 8. IN RESULT, APPEAL OF THE REVENUE IS DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON 23 RD SEPTEMBER, 2019 . SD/- SD/- (PRASHANT MAHARISHI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIA L MEMBER DATED: 23/09/2019 *BINITA* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI 5 ITA NO. 5502/DEL/2016 DATE OF DICTATION 06 .0 8 .2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 06 .08.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK