ACIT, CHENNAI V. M/s. Vestas Wind technology India Pvt. Ltd., CHENNAI

ITA 68/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86374 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 2 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 08-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR NISCHAL
• Assessee Lawyers: B RAMAKRISHNAN
• Keywords: Commercial expediency

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , A B ENCH, CHENNAI . , ! # $ , % & BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NO. 68/MDS/2014 ( / ASSESSMENT YEAR: 2007-08) ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-III(4), CHENNAI-34. VS M/S. VESTAS WIND TECHNOLOGY INDIA PVT.LTD. 298, OLD MAHABALIPURAM ROAD,SHOLINGANALLUR, CHENNAI-600 119. PAN:AAACA9274F ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : DR .NISCHAL, JCIT /RESPONDENT BY : MR. B.RAMAKRISHNAN, C.A /DATE OF HEARING : 5 TH MARCH, 2015 /DATE OF PRONOUNCEMENT : 27 TH MARCH, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THIS APPEAL IS FILED BY THE REVENUE AGAINST THE ORD ER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-III, CHENN AI DATED 10.9.2013 FOR THE ASSESSMENT YEAR 2007-08. THE ONLY GRIEVANCE OF THE REVENUE IN ITS APPEAL IS THAT COMM ISSIONER OF INCOME TAX (APPEALS) ERRED IN DELETING THE DISAL LOWANCE OF INTEREST UNDER SECTION 36(1)(III) OF THE ACT. 2. BRIEF FACTS ARE THAT ASSESSING OFFICER WHILE COM PLETING THE ASSESSMENT NOTICED THAT ASSESSEE HAS MADE ADVAN CES TO ITS SUBSIDIARY COMPANIES AND NO INTEREST WAS CHARG ED ON 2 ITA NO.68/MDS/2014 SUCH ADVANCES. WHEN QUESTIONED AS TO WHY INTEREST S HOULD NOT BE DISALLOWED AS NO INTEREST WAS CHARGED ON THE ADVANCES MADE TO SUBSIDIARY COMPANIES, IT WAS THE SUBMISSION OF THE ASSESSEE THAT SUBSIDIARY COMPANIE S HAVE ACQUIRED LANDS IN THE STATE OF KARNATAKA FOR ERECTI ON OF WIND TURBINE GENERATORS OF THE ASSESSEES CUSTOMERS AS I T IS STATE LEGISLATION IN THAT STATE ONLY COMPANIES REGISTERED THEREIN CAN ACQUIRE LAND AND IT IS IN COMMERCIAL EXPEDIENCY ADVANCES ARE GRANTED. HOWEVER, ASSESSING OFFICER DI D NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND DISALLOWE D CORRESPONDING TO INTEREST FREE LOANS HOLDING THAT T HERE IS NO COMMERCIAL EXPEDIENCY. ON APPEAL, COMMISSIONER OF I NCOME TAX (APPEALS) FOLLOWING THE ORDER OF THE CO-ORDINAT E BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESS MENT YEAR 2005-06 AND 2006-07 IN ITA NOS.928 & 927/MDS/2011 D ATED 31.01.2012 DELETED THE DISALLOWANCES AGAINST WHICH REVENUE IS IN APPEAL BEFORE US. 3. DEPARTMENTAL REPRESENTATIVE PLACES RELIANCE ON T HE ASSESSMENT ORDER. 3 ITA NO.68/MDS/2014 4. COUNSEL FOR THE ASSESSEE PLACES RELIANCE ON THE ORDER OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR THE EAR LIER ASSESSMENT YEARS AND SUBMITS THAT THE ISSUE IN APPE AL IS IDENTICAL TO THE ISSUE DECIDED IN EARLIER ASSESSMEN T YEARS AND THE COUNSEL FURTHER SUBMITS THAT THERE WERE NO FRES H LOANS DURING THE ASSESSMENT YEAR UNDER CONSIDERATION AND THE ASSESSEE HAS NOT BORROWED ANY LOANS AND THE ADVANCE S GIVEN BY THE ASSESSEE ARE ALL OUT OF OWN FUNDS. 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE DECISION OF THIS TRIBUNAL RELIED ON. THE CO -ORDINATE BENCH OF THIS TRIBUNAL IN ASSESSEES OWN CASE FOR T HE EARLIER AY CONSIDERED THIS ISSUE ELABORATELY IN PARA 22 OB SERVING AS UNDER:- 22 . WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. NO DOUBT, THE LOANS WERE GIVEN T O SUBSIDIARY COMPANIES. ALSO, WITHOUT DOUBT, SUCH SUBSIDIARY COMPANIES WERE ALL IN KARNATAKA AND HAD ACQUIRED LANDS FOR THE PURPOSE OF ERECTION OF WIND FARMS AND THE ASSESSEE'S BUSINESS WAS TO ERECT, COMMISSION AND SELL WINDMILLS. IN OUR OPINION , COMMERCIAL INTEREST OF THE ASSESSEE IN ITS SUBSIDIARIES STOOD WELL DEMONSTRATED. THE ROLE PERFORMED BY SUBSIDIARY COMPANIES MIGHT HAVE BEEN DIFFERENT FROM THAT OF THE ASSESSEE- COMPANY BUT TH IS EFFECTUATED THE BUSINESS INTERESTS OF THE ASSESSEE . THERE IS ALSO NO DISPUTE THAT THE TAXABLE INCOME OF THE ASSESSEE FOR ASSESSMENT YEAR 2001 - 02 TO 2006- 07 TOTALLED TO MORE THAN ` 317 CRORES . ASSESSEE THUS HAD MORE THAN SUFFICIENT OWN FUNDS WITH IT FOR 4 ITA NO.68/MDS/2014 GIVING ADVANCE OF ` 21,78 , 46,000/-. IN THE CASE OF S . A . BUILDERS ( SUPRA) , HON'BLE APEX COURT CLEARLY HELD THAT 'COMMERCIAL EXPEDIENCY ' IS AN EXPRESSION OF WIDE IMPORT AND INCLUDES SUCH EXPENDITURE AS A PRUDENT BUSINESSMAN INCURS FOR THE PURPOSE OF HIS BUSINESS . ONCE IT IS ESTABLISHED THAT THERE WAS NEXUS BETWEEN THE EXPENDITURE AND PURPOSE OF BUSINESS, HON ' BLE APEX COURT HELD , REVENUE COULD NOT ASSUME THE ROLE OF THE BUSINESSMAN TO DECIDE WHAT WAS REASONABLE EXPENDITURE HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE. WE ARE THEREFORE, OF THE OPINION THAT LD.CIT(A) WAS WELL JUSTIFIED IN RELYIN G ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF S.A.BUILDERS (SUPRA) FOR DELETING THE DISALLOWANCE. 6. RESPECTFULLY FOLLOWING THE SAID DECISION OF THIS TRIBUNAL, WE AFFIRM THE ORDER OF THE COMMISSIONER OF INCOME T AX (APPEALS) IN DELETING THE INTEREST FOR THIS ASSESSM ENT YEAR ALSO AND REJECT THE GROUNDS RAISED BY THE REVENUE. 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH MARCH, 2015 AT CHENNAI. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 27 TH MARCH, 2015 SOMU 12 32 /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .