ASIA INVESTMENTS P. LTD, MUMBAI V. JCIT (OSD) 2(1), MUMBAI

ITA 705/MUM/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 49503 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 5 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-07-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 20-04-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 03-02-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS USHA
• Assessee Lawyers: SANTOSH PARAB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH A, MUMBAI BEFORE SHRI R.S. SYAL, A.M. AND SHRI V. DURGA RAO, J.M. ITA NO. 705/MUM/2009 ASSESSMENT YEAR: 2003-04 ASIA INVESTMENT PVT. LTD., . APPELLANT 4 TH FLOOR, MAGNET HOUSE, DOUGALL ROAD, BALLARD ESTATE, MUMBAI 400 038 (PAN AAACA4539K) VS. JT. COMMISSIONER OF INCOME TAX, RESPONDENT (OSD), 2(1), AAYAKAR BHAVAN, MUMBAI. APPELLANT BY : MR. SANTOSH PARAB REVENUE BY : MRS. USHA ORDER PER V. DURGA RAO, J.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF CIT(A)-II, MUMBAI, PASSED ON 24/11/2008 FOR THE ASSESSMENT YEAR 2003-04. 2. GROUND NOS. 1 & 2 REGARDING DISALLOWANCE OF MISC ELLANEOUS EXPENSES TO THE TUNE OF RS. 69,733/- AND STAFF WELF ARE EXPENSES OF RS. 13,209/- HAVE NOT BEEN PRESSED BY THE LEARNED COUNS EL FOR THE ASSESSEE AT THE TIME OF HEARING BEFORE US, THEREFOR E, THE SAME ARE DISMISSED AS NOT PRESSED. 3. THE REMAINING GROUNDS TO BE ADJUDICATED BY US AR E GROUND NOS. 3 & 4, PERTAINING TO DISALLOWANCE OF DEDUCTION OF I NTEREST AMOUNTING TO RS. 4,89,55,754/-. ITA NO. 705/M/2010 ASIA INVESTMENT PVT. LTD. 2 4. BRIEFLY STATED THE FACTS RELATING TO RAISE THESE GROUNDS ARE THAT THE AO, DURING THE COURSE OF ASSESSMENT PROCEEDINGS , OBSERVED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF ACQUIRIN G CONTROLLING INTEREST IN ANAND GROUP OF COMPANIES, FOR FINANCING AND REHABILITATING THE GROUP COMPANIES AND FOR RENDERIN G MANAGEMENT CONSULTANCY TO THESE COMPANIES. THE AO NOTICED THAT SINCE THE INCEPTION OF THE COMPANY IT HAD NOT CARRIED OUT ANY BUSINESS APART FROM THE ACQUIRING THE SHARES OF ANAND GROUP OF CO MPANIES. HE FURTHER NOTED THAT IN P&L ACCOUNT, ASSESSEE HAD DEB ITED A SUM OF RS. 4,89,55,754/- AS FINANCE CHARGES REPRESENTING THE I NTEREST PAYMENTS MADE BY THE ASSESSEE ON BORROWED FUNDS. THE FUNDS H AD BEEN BORROWED AND UTILIZED IN ACQUIRING THE SHARE OF ANA ND GROUP OF COMPANIES. SINCE NO BUSINESS ACTIVITY AS SUCH HAD B EEN CARRIED OUT BY THE ASSESSEE, THE AO ASKED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE FINANCE CHARGES SHOULD NOT BE CONSIDERED S EXPE NSES NOT RELATABLE TO THE ASSESSEES BUSINESS. IN REPLY, THE ASSESSEE SUBMITTED THAT THE COMPANY IS PREDOMINANTLY AN INVESTMENT COMPANY AND FUNDS HAD BEEN UTILIZED FOR THE PURPOSE OF BUSINESS, THEREFOR E, THE INTEREST PAID BY IT ON BORROWED FUNDS IS ALLOWABLE AS DEDUCTION U /S 36(1)(III) OF THE ACT. HOWEVER, THE AO FOLLOWING THE ORDER OF CIT(A) IN AY 2001-02 IN ASSESSEES OWN CASE, DISALLOWED THE FINANCE CHARGES OF RS. 4,89,55,754/- AND ADDED THE SAME TO THE TOTAL INCOM E OF THE ASSESSEE. ON APPEAL, THE CIT(A) CONFIRMED THE ORDER OF THE AO . 5. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD AS WELL AS GONE THROUGH THE ORDE RS OF THE REVENUE AUTHORITIES. WE FIND THAT THE AO AND CIT(A) DISALLO WED THE INTEREST PAID BY THE ASSESSEE ON BORROWED FUNDS FOLLOWING T HE ORDER OF CIT(A) PASSED IN AY 2001-02 IN ASSESSEES OWN CASE. IT IS IMPORTANT TO MENTION THAT THE DIVIDEND INCOME EARNED BY THE ASSE SSEE IN THE YEAR UNDER CONSIDERATION IS RS. 3,37,25,873/-, IS TAXABL E IN THE YEAR IN WHICH THE AMOUNT WAS PROMPTLY INCLUDED BY THE ASSES SEE IN ITS TOTAL INCOME. AS FAR AS THE DIVIDEND INCOME OF PREVIOUS Y EAR RELEVANT TO AY ITA NO. 705/M/2010 ASIA INVESTMENT PVT. LTD. 3 2002-03 AMOUNTING TO RS. 4,60 CRORES, WAS EXEMPT U/ S 10(34) OF THE ACT. THE ABOVE FACT MAKES A DIFFERENCE IN DETERMINI NG THE TOTAL INCOME OF THE ASSESSEE. BOTH THE AUTHORITIES BELOW DECIDED THE ISSUE IN THE YEAR UNDER CONSIDERATION FOLLOWING THE EARLIER YEAR S ORDER AS THE SAME WAS ENTIRELY DIFFERENT FROM THE PRESENT YEAR. IN TH IS VIEW OF THE MATTER, WE SET ASIDE THE ORDER OF THE CIT(A) AND RE MIT THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECTION TO EXAMINE T HE ENTIRE FACTS OF THE CASE AND DECIDE THE ISSUE AFRESH KEEPING IN VIEW OF OUR ABOVE OBSERVATIONS AND AFTER PROVIDING REASONABLE OPPORTU NITY OF HEARING TO THE ASSESSEE IN THE MATTER. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON THIS 15 TH DAY OF JULY, 2011. SD/- SD/- (R.S. SYAL) (V. DUR GA RAO) ACCOUNTANT MEMBER JUDI CIAL MEMBER MUMBAI, DATED: 15 TH JULY, 2011 KV COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, A BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI.