ACIT, CHENNAI V. Tenneco RC India Pvt. Ltd., Hosur

ITA 903/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86268 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 06-01-2015
• Assessment Year: 2004-2005
• Appeal Filed On: 10-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A V SREEKANTH
• Assessee Lawyers: R KUMAR
• Keywords: Question of law; Commercial expediency
• Section: 263

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ! # $ , % & BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./I.T.A.NOS. 903 & 904/MDS/2014 ( / ASSESSMENT YEARS:2004-05 & 2005-06) ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-III(2) NEW BLOCK, 4 TH FLOOR, CHENNAI - 600 034. VS M/S. TENNECO RC INDIA PVT. LTD. 122, SIPCOT INDUSTRIAL ESTATE, HOSUR - 635 126. PAN: AAACH8303E ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. A.V.SREEKANTH, JCIT /RESPONDENT BY : MR. R.KUMAR, ADVOCATE /DATE OF HEARING : 6 TH JANUARY, 2015 /DATE OF PRONOUNCEMENT : 30 TH JANUARY, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: BOTH THESE APPEALS ARE FILED BY THE REVENUE AGAINST THE COMMON ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-III, CHENNAI DATED 26.12.2013 FOR THE AS SESSMENT YEARS 2004-05 AND 2005-06. THE ONLY ISSUE IN BOTH T HESE APPEALS OF THE REVENUE IS THAT COMMISSIONER OF INCO ME TAX (APPEALS) ERRED IN DELETING THE DISALLOWANCE OF INT EREST ON DIVERSION OF INTEREST BEARING LOAN TO NON-INTEREST BEARING ADVANCES TO SUBSIDIARY COMPANY. 2 ITA NOS. 903 & 904/MDS/2014 2. AT THE TIME OF HEARING, COUNSEL FOR THE ASSESSEE SUBMITS THAT THE ISSUE IN BOTH THESE APPEALS HAS B EEN DECIDED IN FAVOUR OF THE ASSESSEE IN ASSESSEES OWN CASE BY THE HONBLE MADRAS HIGH COURT IN THE CASE OF TAX CA SE APPEAL NO.18 OF 2010 DATED 01.07.2013 ON AN IDENTIC AL ISSUE AFFIRMING THE ORDER OF THE ITAT IN HOLDING THAT LOA N ADVANCED WAS ON ACCOUNT OF COMMERCIAL EXPEDIENCY. HE PLACES A COPY OF THE ORDER ON RECORD AND RELIES ON THE SAID ORDER . 3. DEPARTMENTAL REPRESENTATIVE PLACES RELIANCE ON T HE ORDER OF THE ASSESSING OFFICER. 4. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES. THE ASSESSING OFFICER WHILE COMPLETING THE ASSESSME NT DISALLOWED INTEREST OF ` 72,86,479/- AND ` 23,35,732/- RESPECTIVELY FOR THE ASSESSMENT YEARS 2004-05 AND 2 005-06 ON THE GROUND THAT ASSESSEE HAS DIVERTED INTEREST B EARING FUNDS TO ITS SUBSIDIARY COMPANY AND NOT CHARGED ANY INTEREST, IGNORING THE SUBMISSIONS OF THE ASSESSEE THAT DUE T O COMMERCIAL EXPEDIENCY THE ASSESSEE HAD TO INVEST IN ITS SUBSIDIARY COMPANY AS THE SUBSIDIARY HAS BECOME SIC K 3 ITA NOS. 903 & 904/MDS/2014 COMPANY AND ALSO IN VIEW OF THE BIFR ORDER, THE AS SESSEE HAD TO INVEST IN ITS SUBSIDIARY COMPANY FOR ITS REV IVAL. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) DE LETED THE DISALLOWANCE FOLLOWING THE ORDERS OF THE TRIBUN AL IN ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT YEAR AND ALSO THE DECISION OF THE HONBLE MADRAS HIGH COURT WHICH AFFIRMED THE DECISION OF THE TRIBUNAL FOR THE IMMED IATELY PRECEDING ASSESSMENT YEAR I.E. 2003-04 OBSERVING AS UNDER:- 6. I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT ORDER CONSIDERED THE STATEMENTS OF FACTS, THE GROUN DS OF APPEAL AND THE WRITTEN SUBMISSIONS. THE IDENTICAL I SSUE INVOLVED IN THE PRESENT APPEAL FOR BOTH THE ASSESSM ENT YEARS IS THE DISALLOWANCE OF INTEREST ON DIVERSION OF INTEREST BEARING LOAN TO THE TUNE OF ` 72,86,479/- FOR THE ASSESSMENT YEAR 2004-05 AND ` 23,35,732/- FOR THE ASSESSMENT YEAR 2005-06. THE COMPANY IS REPRESENTED BY SHRI R.KUMAR, ADVOCATE WHO STATED THAT THE ISSUE WAS SQUARELY COVERED BY THE ORDERS OF THE HONBLE H IGH COURT/ ITAT IN THE ASSESSEES OWN CASE IN THE EARLI ER YEARS. IT IS SEEN FROM THE ASSESSING OFFICERS ORDE R ITSELF THAT THE ADDITION HAS BEEN MADE AS THE DEPARTMENT H AS CONTESTED THE ISSUE BEFORE THE HONBLE ITAT WHICH I S ALLOWED BY THE COMMISSIONER OF INCOME TAX (APPEALS) FOR THE ASSESSMENT YEAR 2003-04. THE HONBLE ITAT I N ITS ORDER FOR THE A.Y. 2003-04 IN ITA NO.1895/MDS/2 009 HAS CONSIDERED THE SUBMISSIONS AND HAS DISMISSED TH E REVENUE APPEAL THEREBY UPHOLDING THE CIT(A)S ORDER . RESPECTFULLY FOLLOWING THE ORDERS OF THE HONBLE HI GH COURT OF MADRAS AND THE ITAT, THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITION MADE ON THIS GROUND . THIS GROUND IS ALLOWED. 5. WE HAVE ALSO GONE THROUGH THE ORDER OF THE HONB LE MADRAS HIGH COURT IN ASSESSEES OWN CASE DATED 1.7. 2013 4 ITA NOS. 903 & 904/MDS/2014 WHEREIN IT AFFIRMED THE DECISION OF THIS TRIBUNAL W HICH HELD THAT LOAN ADVANCED WAS ON ACCOUNT OF COMMERCIAL EXPEDIENCY, THE HONBLE HIGH COURT WHILE AFFIRMING THE ORDER OF THE TRIBUNAL OBSERVED AS UNDER:- 11. HOWEVER, ON MERITS, ON THE BASIS OF MATERIALS, ONCE THE TRIBUNAL HAD COME TO THE CONCLUSION THAT THE LOAN ADVANCED WAS ON ACCOUNT OF COMMERCIAL EXPEDIENCY AS WELL AS IN THE ORDERS OF THE BIFR, WE DO NOT FIND ANY GROUND TO DISTURB THE SAID FINDING. RIGHTLY THE REVENUE HAD NOT RAISED ANY QUESTION OF LAW ON THIS. EVEN THOUGH ON THE ASPECT OF JURISDICTION, THE REVENUE SUCCEEDS YET, THE FURTHER QUESTION ON THE MERITS BEING A PURE QUESTION OF FACT AND RIGHTLY NOT RAISED, WE DO NOT FIND ANY USEFUL PURPOSE WOULD BE ACHIEVED IN SETTING ASIDE THE ORDER OF THE TRIBUNAL AND FURTHER REMANDING THE MATTER . IN THE CIRCUMSTANCES, EXCEPT FOR HOLDING THAT THE REVENUE IS JUSTIFIED IN ITS PLEA IN INVOKI NG JURISDICTION UNDER SECTION 263 OF THE ACT, WE DO NOT THINK, THE ORDER CALLS FOR ANY INTERFERENCE TO REMAND THE MATTER. 12. IN THE DECISION REPORTED IN (2007) 288 ITR 1(SC) (S.A.BUILDDERS LTD. VS. CIT) THE APEX COURT POINTED OUT THAT IN CONSIDERING THE QUESTION AS TO WHETHER THE AMOUNT ADVANCED WAS A MEASURE OF COMMERCIAL EXPEDIENCY, THE AUTHORITIES AND THE COURTS SHOULD EXAMINE THE PURPOSE FOR WHICH THE ASSESSEE ADVANCED THE MONEY AND WHAT THE SISTER CONCERN DID WITH THE MONEY. THE APEX COURT FURTHER OBSERVED THAT IN CONSIDERING THE QUESTION THAT THE BORROWED AMOUNT WAS NOT UTILIZED BY THE ASSESSEE IN ITS OWN BUSINESS BUT HAD BEEN ADVANCED AS INTEREST FREE LOAN TO ITS SISTER CONCERN IS NOT RELEVANT, WHAT IS RELEVANT IS WHETHER THE AMOUNT WAS ADVANCED AS A MEASURE OF COMMERCIAL 5 ITA NOS. 903 & 904/MDS/2014 EXPEDIENCY AND NOT FROM THE POINT OF VIEW WHETHER THE AMOUNT WAS ADVANCED FOR EARNING PROFITS. 13. THE REVENUE DOES NOT DISPUTE THE FACT THAT THE ADVANCING OF FUNDS BY THE ASSESSEE INTO THE SISTER CONCERN WAS IN TERMS OF THE BIFRS ORDER. THAT BEING THE CASE, NO USEFUL PURPOSE WOULD BE SERVED BY AGAIN DIRECTING A REMAND ON THE MERITS OF THE CLAIM OF THE ASSESSEE. IN THE CIRCUMSTANCES, THE TAX CASE IS ALLOWED ONLY FOR STATISTICAL PURPOSES. NO COSTS. RESPECTFULLY FOLLOWING THE SAID DECISION, WE UPHOLD THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND REJ ECT THE GROUNDS RAISED BY THE REVENUE. 6. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A RE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON FRIDAY, THE 30 TH DAY OF JANUARY, 2015 AT CHENNAI. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDRA PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 30 TH JANUARY, 2015 SOMU 12 32 /COPY TO: 1. APPELLANT 2. RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .