ARTHEON TELEVENTURES P.LTD, MUMBAI V. ITO 6(1)(2), MUMBAI

ITA 6688/MUM/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 8565 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 20-06-2017
• Assessment Year: 2012-2013
• Appeal Filed On: 15-11-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Keywords: Business expenditure; Revenue expenditure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO. 6688 / MUM/20 16 ( ASSESSMENT YEAR 2012 - 13 ) M/S. ARTHEON TELEVENTURES PVT. LTD., 201, SUMER KENDRA, P.B. MARG, WORLI, MUMBAI 400 018 VS. ITO 6(1)(2), MUMBAI 400 020 PAN/GIR NO. AAJCA0374P APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI NIRAJ SETH REVENUE BY SHRI RAM TIWARI DATE OF HEARING 27 / 09 /201 7 DATE OF PRONOUNCEME NT 14 / 11 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) 12, MUMBAI DATED 01/09/2016 FOR A.Y.2012 - 13 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT. 2. THE FOLLOWING GROUNDS HAVE BEEN TAKEN BY THE ASSESSEE: - 'THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 12, MUMBAI (HEREINAFTER REFERRED TO AS THE CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF RS 24,43,886 BEING INTEREST CLAIMED BY YOUR APPELLANTS AS THE BUSINESS EXPENDITU RE . THE CIT (A) FAILED TO APPRECIATE THE SUBMISSION MADE BY YOUR APPELLANT VIDE LETTER DATED 22 ND AUGUST, 2016. THE CIT (A) FAILED TO APPRECIATE THAT THE INVESTMENT MADE BY YOUR APPELLANT WAS NOT FOR THE PURPOSE OF EARNING DIVIDEND BUT THE SAME WAS TRA DE INVESTMENT BASED ON THE TERM SHEET SIGNED WITH FLEXENCLOSURE AB AND ACCORDINGLY A JOINT VENTURE COMPANY WAS FORMED TO CARRY ON THE BUSINESS OF THE COMPANY. ITA NO. 6688/MUM/2016 M/S. ARTHEON TELEVENTURES PVT. LTD., 2 THE CIT(A) FAILED TO CONSIDER THE SUBMISSIONS MADE BY YOUR APPELLANT THAT THE INTEREST EXPENDITU RE WAS INCURRED FOR THE PURPOSE OF BUSINESS AND NOT FOR THE PURPOSE OF INVESTMENT. YOUR APPELLANTS SUBMIT THAT THE EXPENDITURE BY WAY OF INTEREST IS ALLOWABLE AS BUSINESS EXPENDITURE AND THE ASSESSING OFFICER BE DIRECTED TO ALLOW THE SAME AS CLAIMED BY YO UR APPELLANT. GROUND NO. 2 'THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE DISALLOWANCE OF RS 23,967 BEING DEMAT CHARGES CLAIMED BY YOUR APPELLANTS AS THE BUSINESS EXPENDITURE. YOUR APPELLANTS SUBMIT THAT THE EXPENDITURE BY WAY OF DEMAT C HARGES IS ALLOWABLE AS BUSINESS EXPENDITURE AND THE ASSESSING OFFICER BE DIRECTED TO ALLOW THE SAME AS CLAIMED BY YOUR APPELLANT. YOUR APPELLANTS CRAVE LEAVE TO ADD, ALTER, AMEND THE GROUND AS MAY BE ADVISED BEFORE OR AT THE TIME OF HEARING THE APPEAL. 3 . RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT ASSESSEE IS PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS AS ADVISORS AND CONSULTANTS TO OTHER BUSINESSES, COMMERCE, INDUSTRY, GOVERNMENT(S) LOCAL AND STATUTORY BODIES, INCLU DING IN RESPECT OF THE INFRASTRUCTURE SECTOR. ASSESSEE BORROWED FROM THE DIRECTORS OF THE COMPANY A SUM OF RS 6,25,00,000 AND PAID INTEREST OF RS 24,43,886 AND CLAIMED THE SAME AS BUSINESS EXPENDITURE. T HE A. O HAS DISALLOWED THE SAME ON THE PLEA THAT EXPE NDITURE ON ACCOUNT OF INTEREST IS CAPITAL IN NATURE. 4. BY THE IMPUGNED ORDER, CIT(A) CONFIRMED THE ACTION OF THE AO. 5. I HAVE CONSIDERED RIVAL CONTENTIONS AND FOUND FROM RECORD THAT ASSESSEE HAD MADE AN INVESTMENT IN ACQUIRING SHARES OF FLEXENCLOSURE AB WITH A VIEW TO DISTRIBUTE THE PRODUCTS MANUFACTURED BY THEM WHICH ARE USED IN TELECOM TOWERS AND SOLAR BASED POWER PLANTS. THE CIT(A) HAS CONFIRMED THE DISALLOWANCE BY OBSERVING THAT ASSESSEE HAS TAKEN LOAN AND MADE INVESTMENT IN PURCHASE OF SHARES. THERE IS NO BUSINESS OF PURCHASE AND ITA NO. 6688/MUM/2016 M/S. ARTHEON TELEVENTURES PVT. LTD., 3 SALE OF SHARES OF THE ASSESSEE COMPANY. THE ASSESSEE COMPANY S INCOME IS PROFESSIONAL FEES AND OTHER INCO ME. THERE ARE NO SHARES SHOWN AS STOCK IN TRADE IN THE TRADING, AND PROFIT & LOSS ACCOUNT. THE ASSESSEE COMPANY HAS TAK EN LOAN AND MADE INVESTMENT IN PURCHASE OF SHARES OF FLEXENCLOSURE AB WHICH IS PURELY IN THE NATURE OF INVESTMENT. HENCE THE INTEREST PAID ON LOAN WHICH WAS UTILIZED TO ACQUIRE SHARES OF FLEXENCLOSURE AB SHOULD NOT BE ALLOWED AS REVENUE EXPENDITURE BUT ITS OF CAPITAL IN NATURE. HENCE THE INTEREST EXPENDITURE CLAIMED OF AS RS.24,43,886/ - AS DISCUSSED ABOVE, IS HEREBY DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE COMPANY. 6. IT IS CLEAR FROM THE FINDING OF LOWER AUTHORITIES THAT INTEREST HAS BEEN PAID IN RESPECT OF INVESTMENT. IN VIEW OF THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF MITHLESH KUMARI DATED 05/02/1973, THE INTEREST SO PAID HAS BECOME THE PART OF THE COST OF THE INVESTMENT. I, THEREFORE, DIRECT THE AO TO ALLOW THE CAPITALIZAT ION OF THE INTEREST SO THAT ASSESSEE CAN CLAIM CAPITAL GAIN AS PER THE INCREASE VALUE OF INVESTMENT AS AND WHEN THE SAME IS BEING SOLD, I DIRECT ACCORDINGLY. SIMILARLY, THE OTHER EXPENDITURE ON ACCOUNT OF D - MAT CHARGES IS ALSO DIRECTED TO BE CAPITALIZED IN THE COST OF INVESTMENT. 7. IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED IN PART. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 14 / 11 /2017 S D/ - ( R.C.SHARMA ) ACCOUNTANT MEMBER MUMBAI ; DATED 14 / 11 /201 7 KARUNA SR. PS ITA NO. 6688/MUM/2016 M/S. ARTHEON TELEVENTURES PVT. LTD., 4 COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//