ACIT 13(3)(2), MUMBAI V. TATVA GLOBAL ENVIORNMENT LTD, MUMBAI

ITA 6958/MUM/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5534 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2012-2013
• Appeal Filed On: 29-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES E, MUMBAI BEFORE SHRI C.N. PRASAD (JM) AND SHRI RAJESH KUMAR (AM) ITA NO. 6958/MUM/2016 ASSESSMENT YEAR: 2012-13 THE ACIT - 13(3)(2), ROOM NO. 229, 2 ND FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 20 VS. M/S TATVA GLOBAL ENVIRONMENT LTD., UNIPHOS HOUSE C D MARG, 11 TH ROAD, NEAR MADHU PARK, KHAR (WEST), MUMBAI - 400052 PAN: AAICS1718A (APPELLANT) (RESPONDENT) REVENUE : SHRI V. JUSTIN (DR) ASSESSEE BY : SHRI KIRIT KAMDAR (AR) DATE OF HEARING: 27 /06 /201 8 DATE OF PRONOUNCEMENT: 24/07/201 8 O R D E R PER RAJESH KUMAR, AM THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENU E AGAINST THE ORDER DATED 21.09.2016 OF THE COMMISSIO NER OF INCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS TH E CIT(A)] RELEVANT TO ASSESSMENT YEAR 2012-13. 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF A PPEAL: 1. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE ID. CIT (A) ERRED IN DELETING THE ADDITION OF RS. 5,43, 77,047/- MADE ON ACCOUNT OF INTEREST EXPENDITURE U/S. 37 OF I.T. ACT, 2. WHETHER ON THE FACTS AND THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE LD.CIT(A) WAS RIGHT IN DELETING THE ADDITION WITHOU T APPRECIATING THE FACT THAT THE ASSESSEE COMPANY DID NOT HAVE SUFFICIENT FUNDS TO MAKE THE INVESTMENTS AND THEREFORE THE FUNDS FOR INVESTMENTS WERE FROM BORRO WED CAPITAL ON WHICH INTEREST 2 ITA NO.6958/MUM/2016 ASSESSMENT YEAR: 2012-13 WAS PAD. 3. THE APPELLANT PRAYS THAT THE ORDER OF THE CIT(A) ON THE ABOVE GROUND BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE REST ORED. 4. THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUNDS OR ADD A NEW GROUND WHICH MAY BE NECESSARY. 3. THE ONLY ISSUE RAISED BY THE REVENUE IS AGAINST THE DELETION OF ADDITION OF RS.5,43,77,047/- BY CIT(A) AS MADE B Y THE AO TOWARDS THE INTEREST EXPENDITURE U/S 37 OF THE I.T. ACT. THE REVENUE HAS CHALLENGED IN THE GROUND NO. 2 THAT TH E LD. CIT (A) HAS DELETED THE ADDITION WITHOUT APPRECIATING THE F ACT THAT THE ASSESSEE WAS NOT HAVING SUFFICIENT FUNDS TO MAKE IN VESTMENTS AND THEREFORE INVESTMENTS WERE MADE OUT OF BORROWED FUNDS ON WHICH INTEREST WAS PAID. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE AO HAD NOTICED IN THE ASSESSMENT PROCEEDINGS THAT THE ASSESSEE HAS CHA RGED A SUM OF RS. 8,18,59,138/- ON ACCOUNT OF INTEREST EXPENSE S IN THE PROFIT AND LOSS ACCOUNT. THE AO FURTHER NOTICE THAT THE A SSESSEE HAS MADE INVESTMENTS IN THE SUBSIDIARY COMPANIES AND T HUS CAME TO THE CONCLUSION THAT INTEREST BEARING FUNDS WERE DIV ERTED TOWARDS INVESTMENTS IN THE SUBSIDIARY COMPANIES AND FINALLY DISALLOWED A SUM OF RS. 5,43,77,047/- U/S 37 OF THE ACT AS NOT BEING FULLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINES S. 5. LD. CIT (A) ALLOWED THE APPEAL OF THE ASSESSEE B Y FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH IN ASSESSEES OWN CASE IN 3 ITA NO.6958/MUM/2016 ASSESSMENT YEAR: 2012-13 A.Y. 2009-10 AND 2010-11 AND NOW THE REVENUE IS IN APPEAL BEFORE US CHALLENGING THE ORDER OF THE CIT (A). 6. AT THE OUTSET, THE LD. AR POINTED OUT THAT THE IS SUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF T HE CO-ORDINATE BENCH IN ITA NO. 2173/MUM/2013, A.Y. 2009-10 AND IT A NO. 470/MUM/2014, A.Y. 2010-11 BY THE CONSOLIDATED ORDE R DATED 10.09.2015. THE AR SUBMITTED THAT IN VIEW OF THE OR DER OF THE CO-ORDINATE BENCH, APPEAL OF THE REVENUE SHOULD BE DISMISSED. THE LD. DR ON THE OTHER HAND RELIED ON THE GROUNDS OF APPEALS. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSE D THE MATERIALS AS PLACED BEFORE US INCLUDING DECISIONS CITED BY THE LD. AR. AFTER PERUSAL TO THE SAID ORDER WE FIND TH AT IDENTICAL ISSUE HAS BEEN DECIDED BY THE CO-ORDINATE BENCH IN ITA NO. 2173/MUM/2013 IN FAVOUR OF THE ASSESSEE. THE RELEVA NT PARA ARE REPRODUCED AS UNDER:- 14. GROUND NO. 2 RELATES TO THE DISALLOWANCE IN I NTEREST EXPENSES AMOUNTING TO RS. 1,10,83,572/- U/S 37 OF THE ACT. 14.1 AS MENTIONED ELSEWHERE, THE INVESTMENTS MADE BY THE ASSESSEE HAVE TO BE SEEN IN THE LIGHT OF THE STRATEGIC INVESTMENT IN EXTRICABLY LINKED WITH THE MAIN BUSINESS OPERATIONS OF THE ASSESSEE AND THE MAIN OB JECT OF THE ASSESSEE COMPANY READS AS UNDER: TO UNDERTAKE, DESIGN, MANUFACTURE AND SUPPLY OF PO LLUTION CONTROL EQUIPMENT AS WELL AS COMPLETE PLANTS AND THEIR OPERATION AND DETAILED DESIGN AND ENGINEERING RELATING TO ENVIRONMENTAL PROTECTION PR OJECTS, TO SET UP AND/OR OPERATE FACILITIES FOR COMMON EFFLUENT TREATMENT PL ANTS, TO SET UP AND/OR OPERATE FACILITIES FOR SAFE DISPOSAL OF INDUSTRIAL WATERS SUCH AS LANDFILL FOR SOLID WASTES AND INCINERATOR FOR HAZARDOUS SOLID/LIQUID W ASTES, TO SET UP FACILITIES AND/OR OPERATE FOR CONVERSION OF ORGANIC WASTES INT O ORGANIC MANURE USING SUITABLE PROCESSES INCLUDING BIOCONVERSION, TO UNDE RTAKE ACTIVITIES FOR CREATION OF 4 ITA NO.6958/MUM/2016 ASSESSMENT YEAR: 2012-13 PUBLIC AWARENESS ABOUT ENVIRONMENTAL ISSUES, TO TAK E UP AND COORDINATE WITH CONCERNED STATE, NATIONAL AND INTERNATIONAL ORGANIZ ATION, AGENCIES AND AUTHORITIES ON MATTERS RELATED TO ENVIRONMENTAL ISS UES FOR THE IMPROVEMENT AND BETTERMENT OF ENVIRONMENT AND TO SUBSCRIBE FOR, TAK E OR OTHERWISE ACQUIRE AND HOLD SHARES, STOCKS, DEBENTURES OR OTHER SECURITIES OF ANY OTHER COMPANY HAVING OBJECTS ALTOGETHER OR IN PART SIMILAR TO THOSE OF T HE COMPANY. 14.1 IN ORDER TO CARRY OUT THE AFOREMENTIONED MAI N OBJECT, THE ASSESSEE HAS MADE INVESTMENTS IN SUBSIDIARY COMPANIES AND ASSOCI ATED COMPANIES WHICH ARE SPECIAL PURPOSE VEHICLES FORMED TO EXECUTE SPECIFIC PROJECTS. THUS, THE ALLEGATION OF THE AO THAT ASSESSEE HAS DIVERTED AND APPLIED BO RROWED FUNDS IN NON- BUSINESS ACTIVITIES DO NOT HOLD ANY WATER. THE HON BLE HIGH COURT OF MADRAS IN THE CASE OF CIT VS SPENCER & CO. LTD. 359 ITR 644 H AVE HELD THAT THE INTEREST ON BORROWED CAPITAL WERE INVESTMENTS IN SHARES UTILIZI NG BORROWED CAPITAL FOR STRATEGIC BUSINESS PURPOSES IN COMPANIES PROMOTED A S SPECIAL PURPOSE TO STRENGTHEN AND PROMOTE ASSESSEES EXISTING BUSINESS INTEREST WAS ALLOWABLE. A SIMILAR VIEW WAS TAKEN BY THE HONBLE HIGH COURT OF MADRAS IN THE CASE OF RPG TRANSMISSIONS LTD. IN 359 ITR 673. RESPECTFULLY FOL LOWING THE DECISIONS OF THE HONBLE HIGH COURT (SUPRA), IN THE LIGHT OF IDENTIC AL FACTS OF THE CASE IN HAND, WE DO NOT FIND ANY REASON FOR THE DISALLOWANCE OF RS. 1,10,83,572/-. WE, ACCORDINGLY, DIRECT THE AO TO DELETE THE SAME. GROU ND NO. 2 IS ACCORDINGLY ALLOWED. 8. WE THEREFORE MAINTAINING THE CONSISTENCY WITH TH E EARLIER ORDER AND RESPECTFULLY FOLLOWING THE DECISION OF TH E CO-ORDINATE BENCH AS STATED HEREIN ABOVE DISMISS THE APPEAL FIL ED BY THE REVENUE. 9. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DISMI SSED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JULY, 2018. SD/- SD/- (C.N. PRASAD) (RAJESH KUMAR) JUDICIAL MEMBER ACCOUNTANT M EMBER MUMBAI; DATED: 24/07/2018 A.K. PS 5 ITA NO.6958/MUM/2016 ASSESSMENT YEAR: 2012-13 / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// / // / (DY./ASSTT. REGISTRAR) , , , , / ITAT, MUMBAI