M/s Hindustan Vegetables Oils Corporation Ltd., New Delhi V. DCIT, New Delhi

ITA 6424/DEL/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6952 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 7 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 03-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AGAINST IMPUGNED DATED PASSED
• Keywords: Revenue expenditure
• Section: 143(3)

Judgement Text

INCOME TAX APPELLATE TRIBUNAL DELHI BENCH D: NEW DELHI BEFORE SHRI AMIT SHUKLA, JUDICIAL MEMBER AND SHRI PRASHANT MAHARISHI, ACCOUNTANT M EMBER ITA NO. 6424/DEL/2015 ASSTT. YEAR: 2011-12 O R D E R PER AMIT SHUKLA, J.M. THE AFORESAID APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST IMPUGNED ORDER DATED 18.9.2015, PASSED BY LD. CIT (APPEALS)-4, NEW DELHI FOR THE QUANTUM OF ASSESSMENT PASSED U/S 143(3) FOR THE A.Y. 2011-12. IN THE GROUNDS OF APPEAL ASSESSEE HAS CHAL LENGED THE DISALLOWANCE OF INTEREST ON GOVT. LOAN OF RS. 19,95,2 5,149/- MADE U/S 36(1)(III). 2. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THIS ISSUE NOW STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF HINDUSTAN VEGETABLES OILS CORPORATION LTD. 64-65, SATGURU RAM SINGH MARG, KIRTI NAGAR, NEW DELHI-110 015 PAN AAACH0631D VS. DCIT CIRCLE-11(2) NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI MUKESH SHARMA, CA DEPARTMENT BY : SHRI VIJAY VARMA, CIT (DR) DATE OF HEARING 25/07/2018 DATE OF PRONOUNCEMENT 26/07/2018 2 THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMEN T YEAR 2009-10 PASSED IN ITA NO. 4965/DEL/2013; AND THEREFORE, FOLL OWING THE EARLIER PRECEDENCE THIS ISSUE IS DECIDED IN FAVOUR OF THE ASS ESSEE. ON THE OTHER HAND LD. DR STRONGLY RELIED UPON THE ORDER OF T HE AO AND LD. CIT (A). 3. THE FACTS IN BRIEF ARE THAT ASSESSEE IS A FUL LY OWNED GOVT. COMPANY FORMED IN 1984 AND IT WAS UNDER LIQUIDATION PROCESS BEFORE THE HONBLE DELHI HIGH COURT. DUE TO HUGE LOSSES MADE FOR CONTINUOUSLY SEVERAL ASSESSMENT YEARS ITS ENTIRE NET WO RTH GOT ERODED AND WAS REFERRED TO BIFR. THE COMPANY COULD NOT MAKE PAYMENT OF ITS EXPENDITURE AND NOW THE SAME IS BEING PAID BY THE OFF ICIAL LIQUIDATOR OF THE COMPANY. THE GOVT. OF INDIA SANCTIONED LOAN TO THE ASSESSEE FOR RUNNING OF THE COMPANY AND FOR MEETING DAY TO DAY EX PENSES OF THE COMPANY. THE SAID LOAN WAS NOT RECEIVED FOR ANY CAPI TAL EXPENDITURE ALBEIT F OR RUNNING OF THE COMPANY AND THEREFORE, THE BORROWING COST WAS NOT CAPITALISED AND INTEREST CHARGED TO THE PROFIT AND LOSS ACCOUNT WAS DEBITED AS REVENUE EXPENDITURE. LD. AO NOTED THAT A SSESSEE HAS CHARGED AN AMOUNT OF RS. 19,95,25,149/- WHICH ALSO I NCLUDE PENAL INTEREST AND SUCH INTEREST HAS BEEN DEBITED ONLY ON AC CRUAL BASIS AND NO ACTUAL INTEREST HAS BEEN PAID. LD. AO HELD THAT SINCE INTEREST HAS NOT ACTUALLY BEEN PAID TO THE GOVT. OF INDIA AND HE NCE THE SAME CANNOT BE ALLOWED AS EXPENSES IN VIEW OF THE PROVISIO N OF SECTION 36(1)(III). LD. CIT(A), TOO HAS CONFIRMED THE SAID DI SALLOWANCE ON THE GROUND THAT ASSESSEE IS NOT PAYING ANY INTEREST FOR LAS T SEVERAL YEARS AND ALSO DOES NOT HAVE ABILITY TO PAY EVEN ON THE CO MING YEARS AND FURTHER OBSERVED THAT EVEN IF IT IS RECEIVING THE MONEY AS LOAN FROM GOVT. OF INDIA, IT BECOMES ITS REVENUE INCOME AND IF S UCH EXPENSES ARE DEBITED TO THE PROFIT AND LOSS ACCOUNT AND NOT ACTUALLY INCURRED, AO HAS RIGHTLY DISALLOWED THE SAID INTEREST. 3 4. WE FIND THIS ISSUE HAS BEEN DECIDED BY THE TRIB UNAL IN THE FOLLOWING MANNER:- 11. UNDISPUTEDLY DURING ASSTT. YEAR 2012-13 LD. CI T(A) HAS ALLOWED THE INTEREST OF RS.20,29,38,031/- BEING INT EREST ON THE LOAN FROM GOVT. OF INDIA BY FOLLOWING THE DECISION RENDE RED BY COORDINATE BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE BEARI NG ITA NO. 212/15-16 FOR ASSTT. YEAR 2005-06. WHEN THE INTERES T ON THE SAME COMPONENT OF LOAN TAKEN BY THE ASSESSEE COMPANY FRO M GOVT. OF INDIA FOR DAY TO DAY RUNNING OF THE COMPANY AND THE LOAN REPAYABLE ON INTEREST HAS BEEN ALLOWED IN ASSTT. YE AR 2005-06 AND 2012-13, THERE IS NO GROUND TO DISALLOW THE INTERES T CLAIMED BY THE ASSESSEE DURING THE YEAR UNDER ASSESSMENT. MOREOVER , THE REVENUE ITSELF HAS NOT CHALLENGED THE ORDER PASSED BY THE L D. CIT(A) IN ASSESSEES OWN CASE FOR ASSTT. YEAR 2012-13 BY FOLL OWING ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL PASSED IN ASSE SSEES OWN CASE FOR ASSTT. YEAR 2005-06 (SUPRA), DISALLOWANCE OF INTEREST FOR THE YEAR UNDER ASSESSMENT IS NOT SUSTAINABLE. 12. HONBLE BOMBAY HIGH COURT IN CASE CITED AS BHOR INDUSTRIES 264 ITR 180 (BOM) HELD THAT VRS EXPENDITURE WAS INCURRED TO SAVE THE EXPENSES AND IT WAS TO BE ALLO WED IN ITS ENTIRETY IN THE YEAR IN WHICH IT WAS INCURRED AND E XPENDITURE COULD NOT BE SPREAD OVER THE NUMBER OF YEARS AND AS SUCH THE ALLOWABLE EXPENDITURE IN THE INSTANT CASE AS THE MA JOR COMPONENTS OF THE INTEREST CLAIMED BY ASSESSEE I.E . RS. 14,87,50,000/- IS ON ACCOUNT OF LOAN TAKEN FROM THE GOVT. OF INDIA FOR MAKING PAYMENT TO THE EMPLOYEE UNDER VOLUNTARY RETIREMENT SCHEME (VRS). SO CERTAINLY THIS IS ALLOWABLE EXPEND ITURE. 13. FURTHERMORE WHEN WINDING UP PROCEEDINGS ARE UND ISPUTEDLY PENDING BEFORE THE HONBLE HIGH COURT LOAN TAKEN BY THE ASSESSEE 4 COMPANY IS TO BE TREATED AS A LOAN TO RUN THE ENTIR E BUSINESS AND THE INTEREST COMPONENT CANNOT BE RESTRICTED TO BFF UNIT AS HAS BEEN DONE BY AO/CIT(A). SO THERE IS NOT IOTA OF EVI DENCE OF RECORD THAT THE LOAN TAKEN ON WHICH INTEREST HAS BEEN CLAI MED AND DISALLOWED BY THE REVENUE WAS NOT UTILIZED FOR RUNN ING DAY TO DAY BUSINESS OF THE COMPANY AND THE LOAN IS REPAYABLE A LONGWITH INTEREST AND AS SUCH ARE REVENUE EXPENSES FOR ALL I NTENTS AND PURPOSES SO WE HEREBY DELETE THE ADDITION ON ACCOUN T OF INTEREST TO THE TUNE OF RS. 1,661,03,405/- BY DETERMINING TH E GROUND NO. 1 IN FAVOUR OF THE ASSESSEE COMPANY. 5. THUS, RESPECTFULLY FOLLOWING THE EARLIER YEAR ORDE R WHICH IS APPLICABLE MUTATIS MUTANDIS ON THE FACTS OF THE PRESENT CASE ALSO, WE HOLD THAT DISALLOWANCE OF INTEREST MADE BY THE AO CANNO T BE SUSTAINED AND SAME IS DIRECTED TO BE DELETED. ACCORDINGLY, GRO UND RAISED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH JULY, 2018. SD/- SD/- (PRASHANT MAHARISHI) (AMIT SHUKLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 26/ 07/2018 VEENA COPY FORWARDED TO 1. APPLICANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR:ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI 5