CHEMTEX ENGINEERING OF INDIA LTD, MUMBAI V. ITO 10(3)(1), MUMBAI

ITA 582/MUM/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 3550 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 14-12-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 22-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SU RENDRA KUMAR
• Assessee Lawyers: H P SUTAR
• Keywords: Wholly owned subsidiary
• Section: 271(1)(c)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH, MUMBAI BEFORE SHRI R.S. PADVEKAR, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA NO. 582/MUM/2010 (ASSESSMENT YEAR: 2003-04) CHEMTEX ENGINEERING OF INDIA LTD. INCOME TAX OFFICE R - 10(3)(1) CHEMTEX HOUSE, HIRANANDANI AAYAKAR BHAVAN, M.K. ROA D GARDENS, MAIN STREET, POWAI VS. MUMBAI 400020 MUMBAI 400076 PAN - AABCC 2061 M APPELLANT RESPONDENT APPELLANT BY: SHRI H.P. SUTAR RESPONDENT BY: SHRI SURENDRA KUMAR O R D E R PER B. RAM AKOTAIAH, A.M. THIS APPEAL BY THE ASSESSEE IS AGAINST THE ORDER OF THE CIT(A)- XXII, MUMBAI DATED 11.11.2009 CONFIRMING THE PENALTY UNDE R SECTION 271(1)(C) LEVIED BY THE A.O. ON DISALLOWANCE OF INTEREST OF ` 19,26,000/-. 2. BRIEFLY STATED, DURING THE ASSESSMENT PROCEEDINGS T HE A.O. MADE AN ADDITION OF ` 19,26,000/- ON ACCOUNT OF INTEREST UNDER SECTION 36 (1)(III) HOLDING THAT THE ASSESSEE HAS DIVERTED INTEREST BEA RING FUNDS FOR NON- BUSINESS PURPOSES BY GIVING INTEREST FREE LOANS TO ITS SUBSIDIARIES. HAVING THE DISALLOWANCE CONFIRMED BY THE CIT(A) THE A.O. F INALISED THE PENALTY PROCEEDINGS UNDER SECTION 271(1)(C) AND LEVIED PENA LTY HOLDING THAT THE ASSESSEE HAS CONCEALED PARTICULARS OF INCOME AND TH E CIT(A) CONFIRMED THE SAME STATING THAT THE CLAIM IS NOT FOUND BONAFIDE. 3. AT THE OUTSET THE LEARNED COUNSEL SUBMITTED THAT TH E ISSUE IN QUANTUM PROCEEDINGS HAVE BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY ALLOWING THE AMOUNT BY THE ITAT IN ITA NO. 6464/MUM /2008 DATED 15 TH JANUARY 2010 HOLDING THAT ADVANCING INTEREST FREE F UNDS TO ITS 100% SUBSIDIARY IS FOR THE PURPOSE OF COMMERCIAL EXPEDIE NCY, FOLLOWING THE DECISION OF THE APEX COURT IN THE CASE OF S.A. BUIL DERS 288 ITR 1. SINCE THE ADDITION, ON THE BASIS OF WHICH THE PENALTY WAS LEV IED, WAS NO LONGER ITA NO. 582/MUM/2010 CHEMTEX ENGINEERING OF INDIA LTD. 2 SUSTAINED THERE IS NO QUESTION OF LEVYING PENALTY U NDER SECTION 271(1)(C). IN VIEW OF THIS, THE PENALTY IS CANCELLED. 4. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND DECEMBER 2010. SD/- SD/- (R.S. PADVEKAR) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED: 22 ND DECEMBER 2010 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXII, MUMBAI 4. THE CIT X, MUMBAI CITY 5. THE DR, C BENCH, ITAT, MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI N.P.