SETO TEKNOLOG P.LTD, V. ITO 10(20(2),

MA 566/MUM/2012

• Counselvise Citation: [2013] 124 COUNSELVISE.COM (IT) 0018 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 18 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 22-03-2013
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2007-2008
• Appeal Filed On: 04-09-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: C G K NAIR
• Assessee Lawyers: JIGNESH R SHAH
• Section: 37

Judgement Text

1 MA NO. 566/MUM/ 2012 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES G BEFORE SHRI P.M. JAGTAP, AM AND DR. S.T.M. PAVALAN, JM MA NO. 566/MUM/2012 ARISING OUT OF ITA NO. 4195/MUM/2010 ASSESSMENT YEAR 2007-08 M/S SETO TEKNOLOG PRIVATE LIMITED, EL-79, ELECTRONIC ZONE, MIDC, TTC INDUSTRIAL AREA, MAHAPE, NAVI MUMBAI 400 710. PAN AABCS4066J VS. INCOME TAX OFFICER -10(2)(2), MUMBAI. APPLICANT RESPONDENT APPLICANT BY SHRI JIGNESH R. SHA H RESPONDENT BY SHRI C.G.K. NAIR ORDER PER P.M. JAGTAP, A.M. BY THIS MISC. APPLICATION, THE ASSESSEE IS SEEKING RECTIFICATION OF THE MISTAKES ALLEGED TO HAVE CREPT IN THE ORDER OF THE TRIBUNAL DTD. 31-1-2012 PASSED IN ITA NO. 4195/MUM/2010 FOR A.Y 2007-08. 2. AS SUBMITTED BY THE ASSESSEE IN THE PRESENT MISC . APPLICATION AND FURTHER REITERATED BY THE LD. COUNSEL FOR THE ASSES SEE AT THE TIME OF HEARING BEFORE US, THE FOLLOWING TWO GROUNDS I.E. GROUND NO . 1 & 2 WERE RAISED BY THE ASSESSEE IN ITS APPEAL FILED BEFORE THE TRIBUNAL:- 1. THE LEARNED CIT(A) ERRED IN UPHOLDING THE DISALL OWANCE OF INTEREST COST OF RS. 16,91,958/- ON THE ALLEGED GROUND THAT INTEREST COST WAS INCURRED FOR THE PURPOSE OF MAKING AN INVESTMENT IN THE SHARES O F SAMEERA 2 MA NO. 566/MUM/ 2012 ELECTRONICS PVT. LTD. (SAMEERA) AND NOT INCURRED FO R THE PURPOSE OF THE BUSINESS OF THE APPELLANT. 2. THE CIT(A) ERRED IN UPHOLDING DISALLOWANCE OF LE GAL AND PROFESSIONAL CHARGES AGGREGATING TO RS. 10,71,684/- ON THE ALLEG ED GROUND THAT THE SAID EXPENDITURE WAS INCURRED FOR THE PURPOSE OF MA KING INVESTMENT IN SHARES OF SAMEERA AND NOT INCURRED FOR THE PURPOSE OF BUSINESS OF APPELLANT. 3. THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ISSUE RAISED IN GROUND NO. 1 HAS BEEN DECIDED BY THE TRIBUNAL VIDE ITS ORDER DTD. 31-01-2012 HOLDING THAT THE ACQUISITION OF SHARES IN SAMEERA E LECTRONICS PVT. LTD. BY THE ASSESSEE WAS NOT FOR THE PURPOSE OF ITS BUSINESS AN D THEREFORE THE CORRESPONDING INTEREST COST OF RS. 16,91,958/- WAS NOT ALLOWABLE AS DEDUCTION EITHER U/S 36(1)(III) OR SECTION 37 OF THE INCOME T AX ACT, 1961. HE SUBMITTED THAT WHILE COMING TO THIS CONCLUSION, THE TRIBUNAL HAS NOT CONSIDERED THE FOLLOWING TWO MATERIAL FACTS :- (I) THERE WAS NECESSITY TO UTILIZE PREMISES AND SALES T AX INCENTIVE OF SAMEERS AND (II) THE PRECONDITIONS IN SIDBI LOAN AGREEMENT NECE SSITATED ACQUISITION OF SHARES OF SAMEERA PRIOR TO DISBURSEMENT OF SIDBI LO AN. HE SUBMITTED THAT THE ABOVE ASPECTS WERE MATERIAL T O SHOW THAT THE ACQUISITION OF SHARES OF SAMEERA BY THE ASSESSEE WAS VERY MUCH FOR BUSINESS PURPOSE AND NON-CONSIDERATION OF THE SAME BY THE TRIBUNAL HAS G IVEN RISE TO A MISTAKE APPARENT FROM RECORD IN THE ORDER OF THE TRIBUNAL D TD. 31-01-2012. HE FURTHER SUBMITTED THAT EVEN THE ISSUE RAISED BY THE ASSESSE E IN GROUND NO. 2 RELATING TO ITS CLAIM FOR DEDUCTION ON ACCOUNT OF LEGAL AND PROFESSIONAL CHARGES HAS BEEN DECIDED BY THE TRIBUNAL RELYING ON ITS DECISION REN DERED ON GROUND NO. 1 WHICH 3 MA NO. 566/MUM/ 2012 BY ITSELF IS RENDERED BY THE TRIBUNAL WITHOUT TAKIN G COGNIZANCE OF THE MATERIAL FACTS RELEVANT TO IT. HE CONTENDED THAT THE ORDER DTD. 31-01-2012 THUS SUFFERS FROM MISTAKE APPARENT FROM RECORD AND THE SAME NEED S TO BE RECTIFIED U/S 254(2) OF THE ACT BY PASSING AN APPROPRIATE ORDER M AY BE DEEMED FIT. 4. THE LD. D.R., ON THE OTHER HAND, INVITED OUR ATTENT ION TO THE RELEVANT PARA NO. 9 OF THE TRIBUNALS ORDER DTD. 31-01-2012 AND S UBMITTED THAT A WELL CONSIDERED AND WELL DISCUSSED DECISION HAS BEEN REN DERED BY THE TRIBUNAL ON THE ISSUES RAISED IN GROUND NO. 1 & 2 OF THE APPEAL OF THE ASSESSEE AFTER TAKING INTO CONSIDERATION ALL THE RELEVANT FACTS OF THE CA SE AS WELL AS SUBMISSIONS MADE BY BOTH THE SIDES. HE CONTENDED THAT WHAT THE ASSESSEE IS NOW SEEKING BY WAY OF PRESENT MISC. APPLICATION IS REVIEW OF TH E DECISION OF THE TRIBUNAL WHICH IS NOT PERMISSIBLE U/S 254(2) OF THE ACT. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND A LSO PERUSED THE RELEVANT MATERIAL ON RECORD. IT IS OBSERVED THAT THE ISSUE RAISED IN GROUND NO. 1 RELATING TO DISALLOWANCE OF INTEREST WAS CONSIDERED AND DEAL T WITH BY THE TRIBUNAL IN PARA 9 OF ITS ORDER, THE RELEVANT PORTION OF WHICH IS EXTRACTED BELOW :- 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS, PERU SED THE RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS DECISIONS CITED. THE QUESTION FOR CONSIDERATION BEFORE US IS WHETHER INTEREST PAID BY THE ASSESSEE ON THE BORROWINGS FOR ACQUISITION O F SHARES OF SAMEERA ELECTRONICS PVT. LTD. FOR THE PURPOSE OF BUSINESS O R NOT ? THE CASE OF THE ASSESSEE IS THAT THE ASSESSEE IS IN THE BUSINESS OF MANUFACTURING AND DEALING OF ELECTRICAL, ELECTRONICS AND COMPUTER HAR DWARE AND SOFTWARE. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE H AD ACQUIRED SHARES OF M/S SAMERA ELECTRONICS PVT. LTD., A 100% SUBSIDI ARY OF THE ASSESSEE COMPANY, FOR WHICH IT HAD PAID RS. 16,91,958/- TO T HE SIDBI FROM WHOM THE ASSESSEE BORROWED THE MONEY AND TO THIS EFFECT THE ASSESSEE REFERRED PAGES 58 & 59 WHERE THE SCHEDULES OF THE PROJECT, F INANCE PLAN, AND 4 MA NO. 566/MUM/ 2012 AMORTIZATION SCHEDULE AND LETTER OF INTENT FROM SDB I FOR FINANCIAL ASSISTANCE. THE MAIN CONTENTION OF THE ASSESSEE IS THAT THE ABOVE STATED SHARES ACQUIRED BY THE ASSESSEE FOR THE EFFECTIVE C ONTROL IN THE ELECTRONICS AND THEREBY USING THE PREMISES OF THE S AMEERA PURPOSE OF IMMEDIATE NECESSITY OF ASSESSEES BUSINESS. THE ASS ESSEE HAS EXPLAINED THE SAME BEFORE THE AO AND CIT(A) AND ULTIMATELY TH EY HAVE REJECTED THE EXPLANATION OFFERED BY THE ASSESSEE. TO THIS EFFECT , THE ASSESSEE REFERRED PAGES 31 & 32 OF THE PAPER BOOK TO ESTABLISH THAT T HE SAID SUBMISSIONS MADE BEFORE THE REVENUE AUTHORITIES. THE ASSESSEE H AD ACQUIRED SHARES IN SAMEERA ELECTRONICS PVT. LTD., WHICH IS A LOSS M AKING COMPANY IS THE SISTER CONCERN OF THE ASSESSEE COMPANY IN WHICH THE ASSESSEE IS HAVING INTEREST. THE ASSESSEE HAD ALSO GIVEN INTEREST FREE LOANS TO ITS SISTER CONCERN SAMEERA ELECTRONICS PVT. LTD. THE ASSESSEE IN ONE OF ITS SUBMISSIONS BEFORE US STATED THAT NOBODY IS INTERES TED IN ACQUIRING SHARES IN SAMEERA BECAUSE IT IS A LOSS MAKING COMPA NY. WHEN THE SAMEERA ELECTRONICS PVT. LTD. IS LOSS MAKING COMPAN Y WHERE ASSESSEE IS ALSO HAVING INTEREST, WE ARE UNABLE TO UNDERSTAND T HAT WHAT IS THE NECESSITY OF ACQUIRING THE SHARES IN SAMEERA TO EFF ECTIVE CONTROL IN THAT COMPANY. IT IS A FACT THAT THE ASSESSEE HAS ENTERED INTO A SEPARATE AGREEMENT WITH M/S SAMEERA ELECTRONICS PVT. LTD. FO R UTILIZATION OF PREMISES AND RENT WAS ALSO PAID. WHEN THE ASSESSEE HAS PAID CHARGES FOR USING OF THE PREMISES, IT CANNOT BE SAID THAT THE S HARES ACQUIRED BY THE ASSESSEE IS FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE AND, THEREFORE, ALLOWABLE U/S 36(L)(III) OF THE ACT. THE REFORE, IN OUR CONSIDERED OPINION, ACQUIRING SHARES IN SAMEERA ELECTRONICS PV T. LTD. BY THE ASSESSEE IS NOT CONNECTED FOR THE PURPOSE OF BUSINE SS. THEREFORE, THE ACQUISITION OF SHARES IN SAMEERA ELECTRONICS PVT. L TD. IS NOT FOR THE PURPOSE OF THE BUSINESS AND THE INTEREST PAID THERE ON IS NOT ALLOWABLE EITHER IN THE SECTION 36(L)(III) OR SECTION 37 OF T HE ACT. AS IS CLEARLY EVIDENT FROM THE RELEVANT PORTION OF THE TRIBUNALS ORDER EXTRACTED ABOVE, ALL THE RELEVANT FACTS AS WELL AS SUBMISSION S MADE BY BOTH THE SIDES INCLUDING THE MAIN CONTENTION OF THE ASSESSEE THAT THE SHARES OF SAMEERA WERE ACQUIRED FOR THE EFFECTIVE CONTROL OF THE SAID COMP ANY AND THEREBY USING THE PREMISES FOR THE PURPOSE OF BUSINESS WERE DULY CONS IDERED BY THE TRIBUNAL. THE FACT THAT THE ASSESSEE HAD AVAILED LOAN FROM SI DBI AS WELL AS THE LETTER OF INTENT FROM SIDBI STIPULATING THE TERMS AND CONDITI ONS FOR FINANCIAL ASSISTANCE WAS ALSO TAKEN INTO CONSIDERATION BY THE TRIBUNAL. THE DECISION ON THE ISSUE RAISED IN GROUND NO. 1 THUS WAS RENDERED BY THE TRI BUNAL AFTER TAKING INTO 5 MA NO. 566/MUM/ 2012 CONSIDERATION ALL THE RELEVANT FACTS OF THE CASE AN D IN OUR OPINION, THERE IS NO CASE OF NON-CONSIDERATION OF ANY MATERIAL FACTS BY THE TRIBUNAL WHILE RENDERING THE SAID DECISION AS ALLEGED BY THE ASSESSEE IN THE PRESENT MISC. APPLICATION. SINCE THE ISSUE INVOLVED IN GROUND NO. 2 WAS VERY M UCH INTERLINKED WITH THE ISSUE RAISED IN GROUND NO. 1, THE TRIBUNAL FOLLOWED ITS CONCLUSION DRAWN ON THE ISSUE RAISED IN GROUND NO. 1 AND DECIDED THE ISSUE INVOLVED IN GROUND NO. 2. IN OUR OPINION, THE TRIBUNAL HAS PASSED A WELL DISC USSED AND WELL REASONED ORDER ON BOTH THE ISSUES RAISED BY THE ASSESSEE IN GROUND NO. 1 & 2 OF ITS APPEAL AFTER TAKING INTO CONSIDERATION ALL THE RELE VANT FACTS AS WELL AS SUBMISSIONS OF THE ASSESSEE AND WHAT THE ASSESSEE I S NOW SEEKING BY WAY OF PRESENT MISC. APPLICATION IS NOTHING BUT RE-APPRECI ATION OF THE SAME FACTS AND REVIEW OF THE WELL CONSIDERED DECISION OF THE TRIBU NAL BASED ON SUCH RE- APPRECIATION, WHICH IS NOT PERMISSIBLE U/S 254(2) O F THE ACT. WE THEREFORE FIND NO MERIT IN THE SAID MISC. APPLICATION AND DISMISS THE SAME. 6. IN THE RESULT, THE MISC. APPLICATION FILED BY T HE ASSESSEE IS DISMISSED. ORDER PRONOUNCED ON 22-3-2013. SD/- SD/- (DR. S.T.M. PAVALAN) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DATED 22-3-2013. RK 6 MA NO. 566/MUM/ 2012 COPY TO 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) CONCERNED - MUMBAI 4. THE CIT- CONCERNED, MUMBAI 5. THE DR BENCH, G 6. MASTER FILE // TUE COPY// BY ORDER DY/ASSTT. REGISTRAR ITAT, MUMBAI