ASK INVESTMENT HOLDINGS P.LTD, MUMBAI V. DCIT CIR 6(1)(2), MUMBAI

ITA 5547/MUM/2015

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8213 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 08-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST DATED PASSED
• Keywords: Commercial expediency; Capital expenditure
• Section: 142(1)

Judgement Text

IN T HE INCOME TAX APPELLATE TRIBUNA L A BENCH, MUMBAI BEFORE SHRI G. S. PANNU , AM AND SHRI AMARJIT SINGH , JM / I .T.A. NO. 5547 / M/ 20 1 5 ( / ASSESSMENT YEAR: 20 10 - 11 ) ASK INVESTMENT HOLDINGS P. LTD.(NOW MERGED WITH ASK INVESTMENT MANAGERS P. LTD. 1 ST FLOOR, BAND BOX HOUSE, 254 - D, DR. ANNIE BEASANT ROAD, WORLI, MUMBAI PIN:400030 / VS. DCIT, CIRCLE 6(1)(2), MUMBAI ./ ./ PAN/GIR NO. : AAFCA 2302 P ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING : 13 .0 9 .2017 / DATE OF PRONOUNCEMENT : . 30.11 . 2017 / O R D E R PER AMARJIT SINGH, JM: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 29 .0 9 .201 5 PASSED BY THE COMMIS SIONER OF INCOME TAX (A) (CENTRAL) - 12 , MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE ASSESSMENT YEAR 20 10 - 11 . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - ASSESSEE BY: SHRI SHRE YAM B. SHAH & N. KRISHNA KUMAR (AR) DEPARTMENT BY: SHRI SAURABH DESHPANDE (DR) ITA. NO. 5547/M/2015 A.Y.2010 - 11 2 I. DISALLOWANCE OF INTEREST EXPENDITURE UNDER SECTION 36(1) (III) OF THE 71COME TAX ACT, 1961 KS, 27,34,0531 - A. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HONBLE COMMISSIONER OF INCOME TAX (APPEA1S) 12 ['THE CIT (A)' ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST EXPENDITURE UNDER SECTION 36(1)(II) OF THE INCOME TAX ACT, 1961 (THE ACT')TO THE EXTENT OF RS.27,34,055/ - . B. THE CIT (A) FAILED TO APPRECIATE THE FACT THAT, THE INTEREST EXPENDITURE WHICH HAS BEEN CONFIRMED FOR DISA LLOWANCE UNDER SECTION 36(L)(III) OF THE ACT, HAS BEEN: I. INCURRED FOR BUSINESS PURPOSES OF THE APPELLANT.; AND II. THE INTEREST - FREE WORKING CAPITAL CURRENT ACCOUNT FUND SUPPORT PROVIDED TO SUBSIDIARIES DURING THE CAPTIONED YEAR IS EXTENDED WHOLLY AND EX CLUSIVELY OUT OF BUSINESS NEEDS, COMMERCIAL EXIGENCIES, AND SOLELY IN THE FURTHERANCE OF BUSINESS AND COMMERCIAL INTERESTS OF THE APPELLANT. C. THE CIT (A) FURTHER FAILED TO APPRECIATE THAT, THE FUND SUPPORT PROVIDED TO SUBSIDIARIES WAS USED BY THE SUBSIDI ARIES FOR BUSINESS PURPOSES; HENCE THE APPELLANT BEING THE HOLDING COMPANY IS ENTITLED TO THE DEDUCTION OF INTEREST EXPENDITURE CII ITS BORROWED FUNDS, AS CLAIMED IN THE RETURN OF INCOME FILED. D. IN VIEW OF' THE ABOVE, THE CIT (A) BE DIRECTED TO DELETE TH E DISALLOWANCE OF INTEREST EXPENDITURE UNDER 36(1)(III) OF THE ACT OFRS.27,34,055/ - . 2. GENERAL A. ALL THE ABOVE GROUNDS OF APPEAL ARE INDEPENDENT OF AND WITHOUT PREJUDICE TO, EACH OTHER. B. THE CIT (A)'S ORDER BEING CONTRARY TO THE LAW, EVIDENCE AND FACT S OF THE CASE, SHOULD BE SET ASIDE, QUASHED OR MODIFIED ON THE WOUNDS DEDUCED ABOVE. C. THE APPELLANT CRAVES LEAVE TO ADD, MODIFY OR DELETE ANY GROUND AT OR BEFORE THE HEARINGS. 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 29.09.2010 DECLARING TOTAL INCOME TO THE TUNE OF RS. NIL. THE RETURN WAS PROCESSED U/S 143(1) OF THE ACT, 1961 ON 26.05.2011. THEREAFTER, THE CASE WAS SELECTED FOR SCRUTINY. NOTICE U/S 143(2) OF THE ITA. NO. 5547/M/2015 A.Y.2010 - 11 3 ACT DATED 19.0 .2011 AND NOTICE U/S 142(1) OF THE ACT DATED 08.10.2012 WERE ISSUED AND SERVED UPON THE ASSESSEE. THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF FINANCIAL ADVISORY AND SUPPORT SERVICES. THE ASSESSEE TOOK THE LOAN TO THE TUNE OF RS.48.14 CRORES AND PAID THE INTEREST TO THE TUNE OF RS.36,78,853/ - . THE ASSESSEE PROVIDED THE LOAN TO THE TUNE OF RS.65.72 CRORE TO VARIOUS PARTY WHICH WAS NOT FOUND FOR THE BUSINESS PURPOSE. THEREFORE, THE INTEREST TO THE TUNE OF RS.36,78,853/ - WAS DISALLOWED AND ADDED TO THE I NCOME OF THE ASSESSEE. THE ASSESSEE ALSO PAID THE LEGAL AND PROFESSIONAL EXPENSES OF RS. 22,59,220/ - FOR OBTAINING THE LOAN OF RS.15 CRORES FROM HDFC BANK LTD. SINCE, THE LOAN WAS TAKEN FOR CAPITAL EXPENDITURE , THEREFORE, THE SAME WAS DISALLOWED AND THE INC OME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS.59,38,070/ - THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO ALLOWED THE CLAIM OF THE ASSESSEE IN CONNECTION WITH LEGAL AND PROFESSIONAL EXPENSES TO THE TUNE OF RS.22,59,220/ - AND ALSO ALLOWED THE INTERE ST UPON THE PURCHASE OF VEHICLE TO THE TUNE OF RS.9,44,798/ - . HOWEVER, THE INTEREST TO THE TUNE OF RS.27,34,055/ - WAS NOT FOUND FOR THE PURPOSE OF BUSINESS , THEREFORE, THE SAME WAS DECLINED. THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. GROUND NO.1: - 4 . UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE DISALLOWANCE OF INTEREST TO THE TUNE OF RS.27,34,055/ - . THE LD. REPRESENTATIVE OF THE ITA. NO. 5547/M/2015 A.Y.2010 - 11 4 ASSESSEE HAS ARGUED THAT THE ASSESSEE HAS GIVEN THE LOAN TO THE TUNE OF RS.18,52,993/ - TOWARDS OF ITS SU BSIDIARY ASK WEALTH ADVISORY PRIVATE LIMITED., THEREFORE, THE INTEREST UPON THE LOAN GIVEN TO THESE COMPANIES ARE NOT LIABLE TO BE DISALLOWED IN THE INTEREST OF JUSTICE. IT IS ALSO ARGUED THAT THE ASSESSEE COMPANY WAS ALSO PROVIDING THE LOAN TO SUBSIDIARY COMPANY BY WAY OF WORKING CAPITAL S UPPORTS O N REQUIRED BUSINESS NEEDS BASIS, T HEREFORE, THE INTEREST IS NOT LIABLE TO BE DISALLOWED. IT IS ALSO ARGUED THAT THE INTEREST ON BORROWED FUNDS IS NOT LIABLE TO BE DECLINED , IF ANY, FUNDS WERE ADVANCES TO THE SUBS IDIARY COMPANY AND SUCH INTEREST IS DEDUCTIBLE ADVANCES ARE GIVEN FOR COMMERCIAL EXPEDIENCY . I N THIS REGARD. THE LD. REPRESENTATIVE OF THE ASSESSEE HAS PLACED RELIANCE UPON THE LAW IN THE CASE OF S. A. BUILDERS LTD. VS. CIT (288 ITR 1) . HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE DEPARTMENT HAS REFUTED THE SAID CONTENTION. WITH DUE REGARDS THE CONTENTION RAISED THE LD. REPRESENTATIVE OF THE PARTIES AND PERUSING THE RECORD CAREFULLY, WE NO TICED THAT THE ASSESSEE ADVANCED INTEREST FREE LOAN T O ITS SUBSIDIARY . |I T IS TO BE EXAMINED WHETHER THE SAID LOAN HAS BEEN GIVEN TO ITS SUBSIDIARY FOR COMMERCIAL EXPEDIENCY OR NOT. THE ASSESSING OFFICER DECLINED THE CLAIM OF THE ASSESSEE ON THE GROUND OF THAT THE ASSESSEE FAILED TO ESTABLISH THE BUSINESS AC TIVITY/COMMERCIAL EXPEDIENCY. THE APPELLANT GOT THE TERM LOAN FROM HDFC BANK ON 6 TH FEBRUARY 2010 AMOUNTING TO RS.16,68,32,055/ - . THE ASSESSEE UTILIZED THE FUNDS BY PAYING AN AMOUNT OF RS.12,50,00,000/ - TO HOUSE WORK CAPITAL WORKING ACCOUNT ITA. NO. 5547/M/2015 A.Y.2010 - 11 5 LOAN DEBITED IN THE APPELLANT BANK LOAN ON 8 TH FEBRUARY 2010. THE ASSESSEE ADVANCE D AN AMOUNT OF RS.10,00,000/ - TO WORK CAPITAL CURRENT ACCOUNT FUNDS SUPPORT PROVIDED TO ONE SUBSIDIARY ASK WEALTH ADVISORY P. LTD., DEBITED IN THE APPELLANT BANK ON 8 TH FEBRUARY 2010. THE ASS ESSEE ALSO ADVANCED A SUM OF RS.1,70,00,000/ - TOWARDS WORKING CAPITAL CURRENT ACCOUNT FUNDS SUPPORT PROVIDED TO ONE SUBSIDIARY ASK PROPERTY INVESTMENT ADVISORY P. LTD. DEBITED IN THE APPELLANT BANK LOAN ON 8 TH FEBRUARY 2010. THE ASSESSEE ALSO PAID AN AMOUNT OF RS.1,29,79,062/ - TOWARDS THE PAYMENT OF OUTSTANDING LOAN TAKEN FROM DIRECTORS AND OTHER EXPENSES DEBITED IN THE APPELLANT BANK ACCOUNT ON 9 TH FEBRUARY 2010. THE APPELLANT COMPANY IS A HOLDING COMPANY BUT PROVIDED THE LO AN TO ITS SUBSIDIARY . T HE OBJECT OF THE APPELLANT COMPANY IS OF FINANCIAL ADVISORY AND SUPPORT SERVICES. THE APPELLANT COMPANY STARTED THE SUBSIDIARY COMPANY WITH THE NAME AND S TYLE OF COMPANY PROPERTY INVESTMENT P. LTD. AND ASK WEALTH ADVISORY P. LTD TO D O THE BUSINESS THROUGH THE WHOLLY OWNED VEHICLE . T HE ASK PIA COMPANY WAS INCORPORATED ON 19 TH JANUARY, 2009 WHICH WAS NEW AND ONE YEAR OLD BEFORE ADVANCING THE LOAN . T HE ASK PIA WAS ALSO ENGAGED IN THE BUSINESS OF ASSISTING IN REAL ESTATE COMPANY /PROPERTY RELATED COMPANY ENTERPRISES AND FUNDS IN MOBILIZING INVESTMENT AND PROVIDING ADVISORY AND CONSULTANCY SERVICES IN THE AREA OF DEVELOPMENT MANAGEMENT AND INVESTMENT IN THE REAL ESTATE, INFRASTRUCTURE AND UTILITY DEVELOPMENT AND PROJECT FINANCE . THE OBJECT OF THE SAID COMPANY IS QUITE CLOSED TO THE OBJECT OF ITA. NO. 5547/M/2015 A.Y.2010 - 11 6 THE ASSESSEE COMPANY. THE OTHER SUBSIDIARY COMPANY ASK WEALTH ADVISORY WAS ENGAGED IN THE PROVIDING THE FINANCIAL PLANNING AND WEALTH ADVISORY SERVICES. THE OBJECT AND PURPOSE OF THE BUSINESS OF THESE S UBS IDIARY COMPANIES ARE VERY CLOSE TO THE OBJECT OF THE ASSESSEE COMPANY AND PROVIDING INTEREST FREE LOAN TO THESE COMPANIES NOWHERE BENEFITED ANY OTHER PERSONS SUCH AS DIRECTOR ETC. IF, IT IS NOT PROVING ON RECORD THESE FUNDS ARE TO BE SIPHONED FOR ANY OTHER PURPOSE FOR THE BENEFIT OF ANY OTHER PURPOSE , THEREFORE, THE INTEREST IS NOT LIABLE TO BE DECLINED IN VIEW OF THE LAW SETTLED IN S. A. BUILDERS LTD. VS. CIT (288 ITR 1). MERELY, PROVIDING THE INTEREST FREE LOAN TO THE SUBSIDIARY COMPANY DOES NOT ENTITLED THE REVENUE TO DECLINE THE CLAIM OF THE ASSESSEE UNLESS IT IS PROVE D ON RECORD THAT THE ASSESSEE UTILIZING THE FUNDS FOR ANY OTHER PURPOSE EXCLUDING THE BUSINESS. ACCORDINGLY, WE ARE OF THE VIEW THAT T HE CLAIM OF THE ASSESSEE WITH REGARD TO THE INTEREST EXPENDITURE HAS WRONGLY BEEN DISALLOWED AND WE ACCORDINGLY SET ASIDE THE FINDING OF THE CIT(A) ON THIS ISSUE AND DELETE THE SAID ADDITION. ACCORDINGLY, THIS ISSUE IS BEING DECIDING IN FAVOUR OF THE ASSES SEE AGAINST THE REVENUE. ITA. NO. 5547/M/2015 A.Y.2010 - 11 7 5 . IN THE RESULT , APPEAL OF THE ASSESSEE IS HEREBY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 30.11. 2017 SD/ - SD/ - ( G. S. PANNU ) (AMARJIT SINGH) / ACCOUNTANT MEMBER / JUDICIAL MEMBER MUMBAI; DATED : 30.11 . 201 7 V.P.SINGH / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI