DCIT, New Delhi V. M/s. Bharti Ventures Ltd., New Delhi

ITA 6503/DEL/2013

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3630 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 11 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-11-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 11-07-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 05-12-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Business expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDEN T & SHRI K. NARSIMHA CHARY, JUDICIAL MEMBER ITA NO.-6503/DEL/2013 ( ASSESSMENT YEAR: 2008-09) DCIT CIRCLE 2(1), NEW DELHI. VS BHARTI VENTURES LTD. 1, ARAVALI CRESCENT, NELSON MANDELA ROAD, VASANT KUNJ NEW DELHI. AACCB945J ASSESSEE BY SH. ANIL BHALLA, CA REVENUE BY SH. AMIT JAIN, SR. DR ORDER PER SHRI K.N. CHARY, J.M. CHALLENGING THE ORDER DATED 09.09.2013 IN APPEAL N O. 124/11-12 PASSED BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-V, NEW DELHI (HEREINAFTER FOR SHORT REFER RED TO AS THE LD. CIT(A)), REVENUE IS IN APPEAL BEFORE US ON THE FOL LOWING GROUNDS: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT (A) HAS ERRED IN DIRECTING TO ALLOW OF BUSINESS LOSS BE CAUSE: I. THE ASSESSEE COMPANY IS ONLY AN INVESTMENT COMPANY AND IS EARNING INCOME ONLY OUT OF ASSETS CATEGORIZED UNDER THE HEAD INVESTMENTS IN THE BALANCE SHEET I.E. IT IS AN INVE STMENT COMPANY. DATE OF HEARING 14.11.2017 DATE OF PRONOUNCEMENT 16.11.2017 2 ITA NO. 6503/DEL/2013 II. THE INCOME EARNED OUT OF INVESTMENT IN SHARES AND S ECURITIES FROM WHICH ASSESSEE IS EARNING DIVIDEND AND CAPITAL GAINS AND INTEREST INCOME FROM BANK DEPOSITS, LOANS AND ADVAN CES IS NOT ASSESSABLE AS BUSINESS INCOME AND, THEREFORE, CANNO T BE CLAIMED AS BUSINESS LOSS. 2. THE APPELLANT CRAVES LEAVE FOR RESERVING THE RIGHT TO AMEND, MODIFY, ALTER, ADD OR FOREGO ANY GROUNDS OF APPEAL AT ANY T IME BEFORE OR DURING THE HEARING OF THIS APPEAL. 2. FACTS RELEVANT FOR THE DISPOSAL OF THIS APPEAL A RE THAT THE ASSESSEE IS A COMPANY INCORPORATED ON 21.11.2005 CL AIMING TO BE PROMOTING BUSINESS, LIKE RETAIL, INSURANCE, INVESTM ENT AND AGRI BASED. FOR THE AY 2008-09 THE ASSESSEE FILED RETUR N OF INCOME ON 22.09.2008 DECLARING A TOTAL LOSS OF RS. 7,06,24,88 0/-. DURING THE SCRUTINY U/S 143(3) OF THE INCOME TAX ACT, 1961 (FO R SHORT REFERRED AS THE ACT) AO OPINED THAT THE BUSINESS LOSS OF R S. 5,72,77,365/- SHOULD NOT BE ALLOWED AS THERE WAS NO BUSINESS ACTI VITY AND THERE WAS ONLY INVESTMENT ACTIVITY FOR WHICH THE GAINS WI LL GO UNDER THE HEAD CAPITAL GAINS AND INTEREST AND DIVIDEND INCO ME ETC. WILL GO UNDER THE HEAD INCOME FROM OTHER SOURCES. LD. AO WAS NOT SATISFIED WITH THE EXPLANATION OF THE ASSESSEE THAT THE ASSESSEE COMPANY WAS ESTABLISHED WITH THE MAIN OBJECTS TO PR OMOTE, UNDERTAKE, CARRY ON, ACQUIRE THE BUSINESS OF SETTIN G UP/PROVIDING/OPERATING/RUNNING OF CALL CENTERS AND/ OR INFRASTRUCTURAL FACILITIES OR SERVICES SUCH AS TELE COM SERVICES, 3 ITA NO. 6503/DEL/2013 INFORMATION TECHNOLOGY, INTRANET, INTERNET, E-COMME RCE AND RELATED HARDWARE, SOFTWARE, TO PROMOTE, UNDERTAKE, CARRY ON , ACQUIRE THE BUSINESS OF AGRICULTURE, HORTICULTURE AND FLORICULT URE PRODUCE ETC. AND THE EXPENSES HAVE BEEN INCURRED FOR THE PURPOSE OF RUNNING THE BUSINESS OF THE COMPANY, AS SUCH, THE SAME CANN OT BE DISALLOWED. 3. HOWEVER, IN APPEAL THE LD. CIT (A) OBSERVED THAT THE BASIC CONTENTION OF THE ASSESSEE IS THAT WHILE ITS MAIN O BJECTS IS TO PROMOTE, UNDERTAKE, CARRY ON, ACQUIRE THE BUSINESS OF SETTING UP/PROVIDING/RUNNING OF CALL CENTRES/INFRASTRUCTURA L FACILITIES OR SERVICES SUCH AS TELECOM SERVICES AND THAT IT IS TO WARDS THIS LARGER OBJECTS THAT THE ASSESSEE COMPANY HAD UNDERTAKEN IN VESTMENT ACTIVITY IN SUBSIDIARY COMPANIES, WHICH ARE CARRYIN G ON SIMILAR BUSINESS AS SPECIFIED IN ITS MAIN OBJECT. HE ACCEP TED THE CONTENTION OF THE ASSESSEE THAT THE BUSINESS OF THE ASSESSEE WAS SET UP AS SOON AS INVESTMENTS WERE MADE AND, THEREF ORE, ALL THE REVENUE EXPENSES INCURRED AFTER SETTING UP OF THE B USINESS ARE ALLOWABLE AS BUSINESS EXPENDITURE. WHILE PLACING R ELIANCE ON THE DECISION OF THE HONBLE SUPREME COURT IN SA BUILDER S LTD. VS. CIT 4 ITA NO. 6503/DEL/2013 (2007) 288 ITR 1 (SC), LD. COMMISSIONER ACCEPTED T HE CONTENTION OF THE ASSESSEE THAT THE INVESTMENT MADE BY THE ASS ESSEE WAS FOR THE PURPOSE OF BUSINESS AND, THEREFORE, THE EXPENSE S INCURRED THEREON HAVE TO BE ALLOWED AS DEDUCTION. THE SUM A ND SUBSTANCE OF THE FINDINGS OF THE LD. CIT (A) IS THAT THERE IS NO LEGAL OR STATUTORY REQUIREMENT OF DIRECT AND FIRST HAND BUSI NESS OPERATIONS TO BE CONDUCTED BY THE ASSESSEE HIMSELF AND INDULGE NCE IN BUSINESS ACTIVITIES THROUGH SUBSIDIARIES WHO ARE IN SAME LINE OF BUSINESS ACTIVITIES AS STIPULATED IN MEMORANDUM OF ASSOCIATION IS SUFFICIENT TO HOLD THAT THE BUSINESS OF THE ASSESSE E HAS COMMENCED THE MOMENT THE INVESTMENTS WERE MADE. CH ALLENGING THE SAID FINDING THE REVENUE IS IN APPEAL BEFORE US IN THIS APPEAL. 4. HEARD THE COUNSEL ON EITHER SIDE AND PERUSED THE MATERIAL PAPERS ON RECORD. LD. COUNSEL PLACES RELIANCE ON T HE DECISIONS REPORTED IN EICHER MOTORS LTD. ITA NO. 207 & 525 (DEL) 2013, TULIP STAR HOTELS LTD. 338 ITR 482 (DEL), SA BUIL DERS 288 ITR 1 (SC), HERO CYCLES (P) LTD. 379 ITR 347 (SC), SRIS HTI SECURITIES P. LTD. 321 ITR 498 (BOM.) (501), PHIL CORPORATION L TD. 244 CTR 226 (BOM.), JARDINE HENDERSON LTD. 210 ITR 981 (C AL.), 5 ITA NO. 6503/DEL/2013 DISTRIBUTORS BARODA 83 ITR 377 (SC), RAJEEVA LOCH AN KANORIA - 208 ITR 616 (CAL.), LAXMI AGENTS 125 ITR 227 (GUJ .) AND PREMIER POLY SACKS (P) LTD. 321 ITR 450 (MAD.). THE DEC ISIONS RELIED UPON BY THE ASSESSEE ARE TO THE AFFECT THAT THE ACQ UISITION OF CONTROLLING INTEREST IN A COMPANY IS IN FURTHERANCE OF THE BUSINESS PURPOSE OF THE ASSESSEE. IN THE CASE ON HAND THE IN VESTMENT WAS DONE IN THE COMPANIES WHICH ARE IN THE BUSINESS OF THE SAME LINE. LD. CIT (A) NOTED THAT A PERUSAL OF SCHEDULE 3 TO T HE BALANCE SHEET AT PB 44 WILL SHOW THAT INVESTMENT WAS MADE IN TELE TECH SERVICES (INDIA) LIMITED IN THE PREVIOUS YEAR ENDED 31 ST MARCH, 2007 RELEVANT TO AY 2007-08, I.E. IN THE YEAR PRIOR TO T HE YEAR UNDER APPEAL IN TERMS OF OBJECT NO. 1 OF THE MEMORANDUM O F OBJECTS AT PB 5. TELETECH SERVICES (INDIA) LIMITED WERE UNDER TAKING BUSINESS OF CALL CENTRE AND RENDERING SERVICES THROUGH TELEC OM NETWORK. ALSO IN THE YEAR ENDED 31.03.2007 AMOUNT WAS INVEST ED IN BHARTI RESOURCES LIMITED IN TERMS OF OBJECT NO. 4 OF THE M EMORANDUM OF OBJECTS OF THE COMPANY AT PB 6. ALSO INVESTMENT WA S MADE IN THE EARLIER YEAR IN FIRST AMERICAN SECURITIES PVT. LTD. IN TERMS OF OBJECT NO. 9 OF THE MEMORANDUM OF OBJECTS AT PB 7. DURING THE YEAR UNDER APPEAL INVESTMENTS HAVE BEEN MADE IN BHARTI R ETAIL 6 ITA NO. 6503/DEL/2013 HOLDINGS LIMITED AND BHARTI WAL-MART LIMITED IN TER MS OF OBJECT NO. 3 OF THE MEMORANDUM OF OBJECTS, INVESTMENTS IN BHARTI AXA GENERAL INSURANCE COMPANY LIMITED, BHARTI AXA TRUST EE SERVICES COMPANY AND BHARTI AXA INVESTMENT MANAGERS PVT. LTD . IN TERMS OF OBJECT NO. 9 OF THE MEMORANDUM OF OBJECTS AND IN FIELDFRESH FOODS PVT. LTD. IN TERMS OF OBJECT NO. 2 OF THE MEM ORANDUM OF OBJECTS. FURTHER, THERE IS NO DENIAL OF THE FACT T HAT THE INVESTMENTS WERE MADE IN TELETECH SERVICES INDIA LT D., WHICH IS IN THE BUSINESS OF CALL CENTRE AND RENDERING THE SERVI CES THROUGH TELECOM NETWORK, IN BHARTI RESOURCES LTD. AND FIRST AMERICAN SECURITIES WHICH ARE IN CONFORMITY WITH THE OBJECTS NO. 3, 4 & 9 OF THE MEMORANDUM OF ASSOCIATION. 5. IN VIEW OF THE DECISIONS RELIED UPON BY THE ASSE SSEE, IT IS, THEREFORE, CLEAR THAT THE BUSINESS OF THE COMPANY H AD BEEN SET UP IN THE YEAR RELEVANT TO AY 2007-08. WE ARE, THEREF ORE, CONVINCED THAT THE INVESTMENTS MADE BY THE ASSESSEE ARE IN FU RTHERANCE OF THE OBJECTS OF THE MEMORANDUM OF ASSOCIATION, AS SU CH, SUCH INVESTMENT IS FOR THE PURPOSE OF BUSINESS OF THE AS SESSEE AND SQUARELY COVERED BY THE DECISION RELIED UPON BY THE ASSESSEE. WE, 7 ITA NO. 6503/DEL/2013 THEREFORE, HOLD THAT THE ORDER OF THE LD. CIT (A) D OES NOT SUFFER ANY ILLEGALITY OR IRREGULARITY AND DOES NOT WARRANT ANY INTERFERENCE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 16.11.2017 SD/- SD/- (G.D. AGRAWAL) (K. NARSIMHA CHARY ) PRESIDENT JUDICIAL MEMBER DATED: 16.11.2017 *KAVITA ARORA COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI