The J C I T (Asstt) Sr-1, Suart v. M/S Essar Steel Ltd, Surat

ITA 1068/AHD/2000 | 1996-1997
Pronouncement Date: 25-02-2011 | Result: Dismissed

Appeal Details

RSA Number 106819914 RSA 2000
Bench Mumbai
Appeal Number ITA 1068/AHD/2000
Duration Of Justice 10 year(s) 10 month(s) 4 day(s)
Appellant The J C I T (Asstt) Sr-1, Suart
Respondent M/S Essar Steel Ltd, Surat
Appeal Type Income Tax Appeal
Pronouncement Date 25-02-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Date Of Final Hearing 04-01-2006
Next Hearing Date 04-01-2006
Assessment Year 1996-1997
Appeal Filed On 20-04-2000
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C BEFORE SHRI D.K. AGARWAL (JM) & SHRI B. RAMAKOTAIAH (AM) I.T.A.NO. 1098/MDS/2000 (ASSESSMENT YEAR : 1995-96 ) ESSAR STEEL LIMITED ESSAR HOUSE 14 HADDOWS ROAD CHENNAI-600 006. VS. JCIT SPECIAL RANGE-I SURAT APPELLANT RESPONDENT I.T.A.NO. 1068/AHD/2000 (ASSESSMENT YEAR : 1995-96 ) JCIT SPECIAL RANGE-I ROOM NO. 312 AAYAKAR BHAVAN MAJURAGATE SURAT VS. M/S. ESSAR STEEL LTD. 27 KMS HAZIRA DISTRICT SURAT. APPELLANT RESPONDENT PAN/GIR NO. : 34102-E ASSESSEE BY : SHRI VIJAY MEHTA DEPARTMENT BY : SHRI AJIT KUMAR SINHA ORDER PER B. RAMAKOTAIAH (AM) :- THESE ARE ASSESSEES AND REVENUES APPEALS AGAINST THE ORDERS OF LEARNED CIT(A)-I CHENNAI DATED 29.12.1999. ASSESS EES APPEAL WAS TIME BARRED BY 62 DAYS AND THE ASSESSEE HAS EXPLAINED TH AT THE APPELLATE ORDER WAS RECEIVED AT CHENNAI WHICH WAS SENT TO MUMBAI OFFICE AND THEN FORWARDED TO HAZIRA AS THE FILES RECORDS AND CONCERNED STAFFS W ERE AT HAZIRA. FURTHER LEARNED COUNSEL FOR THE ASSESSEE WAS ALSO BUSY IN HIS NATIV E PLACE AT RAJASTHAN AND HAS TAKEN UNUSUALLY LONG TIME TO COME TO CHENNAI AND FI LING THE APPEAL. IT WAS STATED THAT THE DELAY BE CONDONED. 2. AFTER CONSIDERING THE ARGUMENTS THE DELAY IN FI LING THE APPEAL IS CONDONED. M/S. ESSAR STEEL LTD. 2 ITA NO. 1098/MDS/2000 : 3. ASSESSEE HAS RAISED FOLLOWING TWO GROUNDS : 1) DEDUCTION U/S. 80M : 1.1) LEARNED CIT(A) HAS ERRED IN NOT GIVING A DECIS ION ON THE ALLOWABILITY OF THE DEDUCTION U/S. 80M STATING THAT THERE WOULD BE NO POSITIVE INCOME ON THE BASIS OF HIS APPELLATE OR DER. 1.2) THE LEARNED CIT(A) OUGHT TO HAVE GIVEN HIS DEC ISION ON THE ALLOWABILITY OF THE DEDUCTION SO THAT THIS QUESTION DOES NOT ARISE IN FUTURE WHEN THERE IS ANY POSITIVE INCOME BY ANY CH ANCE. 2) DEDUCTION U/S. 35D : 2.1) LEARNED CIT(A) HAS ERRED IN DECIDING THE ABOVE DEDUCTIONS ARE NOT ALLOWABLE AND HAVE BECOME INFRUCTUOUS. 2.2) LEARNED CIT(A) HAS ERRED IN DECIDING THAT THES E DEDUCTIONS ARE NOT ALLOWABLE FOR THE YEAR JUST BECAUSE IN ONE YEAR HE HAS ALLOWED THE EXPENDITURE TO BE CAPITALISED TO THE COST OF TH E PLANT. HE HAS FAILED TO REALIZE THAT THE DEDUCTION FOR THIS YEAR IS BASED ON THE DEDUCTIONS DETERMINED IN VARIOUS EARLIER YEARS AND ON DIFFERENT ITEMS. 4. WITH REFERENCE TO GROUND NO. 1 IT WAS THE SUBMI SSION THAT LEARNED CIT(A) HAS NOT DECIDED THE ISSUE ON THE REASON THAT THERE WOULD BE NO POSITIVE INCOME ON THE BASIS OF APPELLATE ORDER WHEREAS THERE WAS POSITIVE INCOME AND THE ASSESSEE WAS ELIGIBLE DEDUCTION U/S. 80M OF THE ACT . AS SEEN FROM THE ASSESSMENT ORDER THE ASSESSING OFFICER ALSO HAS NO T CONSIDERED THE ISSUE AND THERE WAS NO DISCUSSION IN THE ORDER. IN VIEW OF TH IS WE ARE OF THE VIEW THAT THE ISSUE CAN BE RESTORED TO THE FILE OF THE ASSESSING OFFICER TO EXAMINE AND ALLOW DEDUCTION U/S. 80M AFTER GIVING AN OPPORTUNITY TO T HE ASSESSEE. WITH THIS DIRECTION THE ISSUE IN GROUND NO. 1 IS RESTORED TO THE FILE OF THE ASSESSING OFFICER. GROUND IS CONSIDERED ALLOWED. 5. GROUND NO. 2 PERTAINS TO THE ISSUE OF DEDUCTION U/S. 35D WHICH WAS NOT PRESSED IN THE LIGHT OF THE SUBSEQUENT RELIEF GRANT ED BY THE ASSESSING OFFICER U/S. 154 OF THE I.T. ACT. ACCORDINGLY GROUND IS TREATED AS WITHDRAWN. 6. IN THE RESULT APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. M/S. ESSAR STEEL LTD. 3 ITA NO. 1068/AHD/2000 : 7. THIS IS A REVENUES APPEAL AND THE REVENUE HAS R AISED FOLLOWING FIVE GROUNDS :- 1) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW LEARNED CIT(A) ERRED IN HOLDING THAT THE INCOME FROM HOUSE PROPERT Y BE COMPUTED ON THE BASIS OF MUNICIPAL RATE RATHER THAT ACTUAL RENT RECEIVABLE. 2) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW LEARNED CIT(A) ERRED IN HOLDING THAT THE EXPENSES LIKE INTEREST AN D OTHER ADMINISTRATIVE EXPENSES BE CONSIDERED AS COST OF PL ANT AND MACHINERY FOR THE COMPUTATION OF CAPITAL GAIN THOUG H THE SAID ASSESSMENT AS WELL AS EXPENSES WERE NOT TRANSFERRED TO ASSETS ACCOUNT. 3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW LEARNED CIT(A) ERRED IN ALLOWING THE COMPENSATION PAID TO TENANTS THOUGH THE SAME WAS HOLD TO BE COLLUSIVE TRANSACTION IN THE CASE OF TENANTS (NAMELY M/S. ESSAR SERVICES LTD.) AND CONFIRMED BY LEARNED CIT(A). 4) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW LEARNED CIT(A) HAS NOT APPRECIATED THAT THE HOT ROLLED COIN DIVISI ON IS NEW LINE OF BUSINESS. 5) ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW LEARNED CIT(A) HAS ERRED IN HOLDING THAT (A) EXPENSES OF HRC DIVIS ION (B) FLOATING RATE NOTE EXPENSES (C) MOBILISATION CHARGES AND ADV ERTISEMENT EXPENSES RELATING TO HRC DIVISION ARE ALLOWABLE EXP ENSES. 8. GROUND NO. 1 IS WITH REFERENCE TO THE ISSUE OF A LV ON HOUSE PROPERTY. 9. BRIEFLY STATED THE ASSESSEE COMPANY LET OUT THE PROPERTY IN THE EARLIER YEARS AND RECEIVED AN INCOME OF ` 87 92 000/- IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR. DURING THE YEAR THE SAID PROPERTY WAS SOLD AND ACCORDING TO THE ASSESSEE NO RENTAL INCOME WAS RECEIVED AND HENC E NOTHING WAS OFFERED AS INCOME FROM HOUSE PROPERTY. THE ASSESSING OFFICER A DOPTED THE RENT RECEIVED IN EARLIER YEARS WHILE WORKING OUT HOUSE PROPERTY INCO ME FOR SIX MONTH PERIOD. LEARNED CIT(A) FOLLOWING THE ORDER IN THE CASE OF C HANDRAKALA RUIA HELD THAT MUNICIPAL RATEABLE VALUE SHOULD BE TAKEN TO FIX THE ANNUAL LETTING VALUE IN THE ABSENCE OF LETTING OUT THE PROPERTY. THE REVENUE I S AGGRIEVED ON THE ABOVE DIRECTION OF LEARNED CIT(A). M/S. ESSAR STEEL LTD. 4 10. AT THE OUTSET IT WAS SUBMITTED THAT HON'BLE ITA T IN CHANDRAKALA RUIA FOR A.Y. 1996-97 IN ITA NO. 251/MUM/2000 VIDE ORDER DAT ED 15.9.2004 HAS DECIDED THE ISSUE AS UNDER AND SUPPORTED THE FINDING OF LEA RNED CIT(A). WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUS ED THE MATERIALS ON RECORD. REGARDING THE RELIANCE PLACED BY LEARNED DR OF THE REVENUE ON THE JUDGEMENT OF HON'BLE MADRAS HIGH COURT IN THE C ASE OF N. NATRAJ VS. DCIT (SUPRA) WE FIND THAT THE RELIANCE OF LEARNED DR IS MISPLACED BECAUSE IN THIS CASE IT WAS FOUND THAT INITIAL LEA SE WAS TO A FIRM IN WHICH THE WIFE AND THE DAUGHTER OF THE KARTA OF THE ASSES SEE HUF WERE PARTNERS AND AFTER THREE MONTHS ONLY THE BUILDING WAS OCCUP IED BY TENANTS AT MUCH HIGHER RENT AND UNDER THESE FACTS IT WAS HELD THAT FIRST LETTING TO THE FIRM WAS RIGHTLY NOT REGARDED BY THE ASSESSING OFFI CER AS A RELIABLE RECORD FOR DETERMINING THE REASONABLE RENT. BUT THE FACTS IN THE PRESENT CASE ARE DIFFERENT AND HENCE THIS JUDGEMENT IS OF NO HELP T O THE REVENUE. WE FIND THAT IN ALL THE CASES THE ACTUAL RENT RECEIVED BY THE ASSESSEES IN RESPECT OF ALL THE PROPERTIES IS HIGHER THAN THE RATABLE VA LUE DETERMINED BY THE MUNICIPAL AUTHORITIES. IN VIEW OF THIS FACT THIS I SSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY THE VARIOUS TRIBUNAL ORDE RS RELIED UPON BY LEARNED AR OF THE ASSESSEE AS ABOVE AND HENCE RES PECTFULLY FOLLOWING THESE TRIBUNAL ORDERS WE DISMISS ALL THESE APPEALS OF THE REVENUE. 11. ACCORDINGLY ISSUE IS TO BE DECIDED AGAINST THE REVENUE. THERE IS NO NEED TO INTERFERE WITH THE ORDER OF CIT(A) BOTH ON FACTS AND LAW. GROUND IS THEREFORE REJECTED. 12. GROUND NO. 2 PERTAINS TO THE ISSUE OF ALLOWING INTEREST AND ADMINISTRATIVE EXPENSES. THIS ISSUE WAS DISCUSSED BY THE ASSESSING OFFICER IN PAGE NO. 3 OF THE ORDER WHEREIN HE WAS OF THE OPINION THAT THE SI TE DEVELOPMENT EXPENSES ETC. SHOULD NOT BE ADDED TO THE COST OF ASSET. ON CONSID ERING THE ASSESSEES SUBMISSIONS LEARNED CIT(A) ALLOWED EXPENDITURE BY S TATING AS UNDER :- I HAVE GIVEN CAREFUL CONSIDERATION TO THE FACTS OF THE ISSUE. THE ASSESSING OFFICER HAS NOT QUESTIONED THE CORRECTNES S OF THE EXPENDITURE. HE DISALLOWED THE CLAIM ON THE GROUND THAT IMMEDIAT ELY AFTER ACQUIRING THESE MACHINERIES THEY WERE PUT TO SALE WHICH WOUL D GO TO SUGGEST THAT THE INTENTION OF THE APPELLANT WAS NOT TO KEEP THES E MACHINERIES AS ASSETS. THE APPELLANT COMPANY KEPT THE COST OF THES E MACHINERIES AS WORK-IN-PROGRESS IN THE BALANCE SHEET INSTEAD OF TR ANSFERRING THEM TO THE ASSET ACCOUNT. BEFORE SUCH A TRANSFER COULD TAKE PL ACE THE MACHINERIES WERE SOLD TO GET THE FINANCE BY ENTERING INTO TRANS ACTION OF SALE AND LEASE BACK. THUS THOUGH TECHNICALLY IT APPEARS THAT THE M ACHINERIES WERE SOLD AWAY IN PRACTICALLY ALL THE MACHINERIES ARE IN THE FACTORY PREMISES OF THE APPELLANT. AS THIS WAS A SALE AND LEASE BACK TRAN SACTION THE SALE COULD NOT HAVE TAKEN PLACE HAD THERE BEEN NO INSTALLATION OF THESE MACHINERIES BECAUSE THE PURCHASER NEVER INTENDED TO PURCHASE TH E MACHINERIES FOR ITS OWN USE. THE PURCHASER WANTED TO PURCHASE THEM ONLY TO MAKE SOME M/S. ESSAR STEEL LTD. 5 FINANCIAL BENEFITS BY WAY OF GETTING LEASE RENT WHI CH WERE MORE THAN THE PREVALENT RATE OF INTEREST IN THE MONEY MARKET. SO THERE WAS NO REAL INTENTION TO SELL THE MACHINERIES AS HAS BEEN BROUG HT OUT BY THE ASSESSING OFFICER. NO DOUBT THESE TRANSACTIONS ARE ENTERED INTO BY SISTER COMPANIES; BUT THEIR FINANCIAL STATUS IS INDEPENDEN T OF EACH OTHER. SO I DO NOT AGREE WITH THE OBSERVATION OF THE ASSESSING OFF ICER THAT THE EXPENSES TOWARDS INSTALLATION ERECTION ETC. WERE REDUNDANT . I DO NOT THINK THAT THE CLAIM CAN BE ALLOWED AS A REVENUE EXPENDITURE AND A S THE EXPENSES DISPUTED NOW WERE NECESSARY FOR CONDUCTING THE SALE AND LEASE BACK I HELD THAT THEY ARE TO BE CAPITALIZED AS INSTALLATIO N EXPENSES TOWARDS COST OF THE ASSETS SOLD. I DIRECT ASSESSING OFFICER TO C OMPUTE PROFIT/LOSS ON SALE OF THESE MACHINERY AFTER ADDING ` 21 30 34 000 AS CLAIMED BY THE APPELLANT . 13. LEARNED DR SUPPORTED ORDER OF THE ASSESSING OFF ICER WHEREAS LEARNED COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF LEA RNED CIT(A). 14. ON EXAMINING THE RECORD AND PERUSING THE ARG UMENTS WE ARE OF THE OPINION THAT THERE IS NO NEED TO DEFER FROM THE FIN DINGS OF LEARNED CIT(A). AS RIGHTLY HELD BY HIM MACHINERY HAS TO BE INSTALLED A ND EVEN THOUGH TRANSACTION WAS CONSIDERED AS SALE AND LEASE BACK THE SALE CO ULD NOT HAVE TAKEN PLACE HAD THERE BEEN NO INSTALLATION OF THESE MACHINERIES. MO REOVER ASSESSEE IS ALSO IN THE SAME BUSINESS AND HAS RIGHTLY CLAIMED EXPENDITU RE AS COST OF ASSET. THEREFORE WE AGREE WITH THE FINDINGS OF LEARNED CI T(A). ACCORDINGLY REVENUES GROUND IS REJECTED. 15. GROUND NO. 3 PERTAINS TO COMPENSATION PAID TO T ENANTS TO VACATE THE PROPERTY SOLD. 16. DURING THE RELEVANT PREVIOUS YEAR THE ASSESSEE SOLD CERTAIN PROPERTIES FOR WHICH IT PAID A COMPENSATION OF ` 14.50 CRORES TO THE TENANTS FOR VACATING THEM. THIS EXPENDITURE WAS CLAIMED AS A DEDUCTION WHILE C OMPUTING CAPITAL GAINS. THE ASSESSING OFFICER DID NOT ALLOW THE EXPENDITURE STA TING THAT THE TENANTS ARE GROUP CONCERNS AND RELYING THE FINDINGS IN THE CASE OF M/ S. ESSAR SERVICES LTD. WHEREIN IT WAS TREATED AS REVENUE RECEIPTS THE ASSESSING O FFICER TREATED IT THAT THERE IS NO COMPELLING CIRCUMSTANCES TO PAY THE TENANTS AND HENCE THE SAME CANNOT BE ALLOWED AS A DEDUCTION WHILE COMPUTING CAPITAL GAIN S. LEARNED CIT(A) GAVE FOLLOWING FINDINGS :- ON GOING THROUGH THE FACTS I FIND THAT THE PROPERT IES WERE TAKEN ON RENT BY A SISTER CONCERN I.E. ESSAR SERVICES LTD. WHICH CLAIMED THE ABOVE M/S. ESSAR STEEL LTD. 6 RECEIPT AS A CAPITAL RECEIPT IN THEIR HANDS. IN THA T CASE THE ASSESSING OFFICER BROUGHT TO TAX THE ABOVE COMPENSATION AS IN COME UNDER SECTION 10(3) WHICH WAS CONFIRMED IN APPEAL BY MY PREDECESS OR FOR A.Y. 1994- 95. IN THIS CASE THE APPELLANT ADDED THE ABOVE AMO UNT TO THE COST OF THE ASSET IN THE BALANCE SHEET FOR THE IMMEDIATELY PREC EDING ASSESSMENT YEAR. IT TOOK THE VALUE OF THE ASSETS (ENHANCED WIT H THE AMOUNT OF COMPENSATION) TO ARRIVE AT THE COST FOR COMPUTING T HE CAPITAL GAIN ON SALE. ON THE OTHER HAND THE ASSESSING OFFICER TOOK THE C OST OF THE PROPERTIES AT ORIGINAL COST WITHOUT ADDING THE AMOUNT OF COMPENSA TION PAID FOR VACATING THE PROPERTIES. THOUGH IT HAS BEEN HELD AS A RECEIP T IN THE HANDS OF ESSAR SERVICES LTD. FOR A.Y. 1994-95. IT CANNOT GET THE T REATMENT AS REVENUE EXPENDITURE IN THE HANDS OF THE APPELLANT AS IT WAS RELATING TO PROPERTY. CONSIDERING ALL THE FACTS OF THE CASE I AM OF THE O PINION THAT THE COMPENSATION PAID FOR VACATING THE PREMISES HAD EFF ECTS IN ENHANCING THE VALUE OF PROPERTY AS COMPARED TO TENANTED PROPERTY. ACCORDINGLY I DIRECT THE ASSESSING OFFICER THAT THE AMOUNT OF COMPENSATI ON ` 14.50 CORES BE ADDED TO THE COST OF PROPERTIES FOR PURPOSE OF COMP UTING CAPITAL GAINS ON SALE OF THOSE PROPERTIES. 17. LEARNED DR REFERRED TO THE FACTS OF OCCUPATION BY THE TENANTS AND SUBMITTED THAT THE PAYMENT IS COLLUSIVE PAYMENT AND RELIED ON THE DECISION OF HON'BLE MADRAS HIGH COURT IN THE CASE OF SMT. RUGMA NI VERMA 222 ITR 357 AND HON'BLE SUPREME COURT DECISION IN THE CASE OF R .M. ARUNACHALAM ETC. VS. CIT 227 ITR 222. 18. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT LEARNED DR CANNOT RAISE ANY NEW ISSUE IN THE ARGUMENTS AS THERE WAS NO ISS UE BEFORE THE ASSESSING OFFICER THAT THESE PAYMENTS ARE COLLUSIVE NATURE. S INCE THIS IS NOT THE CASE OF THE ASSESSING OFFICER THE LEARNED DR CANNOT RAISE NEW ISSUE AND RELIED ON THE PRINCIPLES ESTABLISHED BY HON'BLE SPECIAL BENCH IN THE CASE OF MAHINDRA AND MAHINDRA 313 ITR 263 (AT)(SB). FURTHER IT WAS SUBM ITTED THAT IN THE CASE OF THE TENANTS THE SAME WAS CONSIDERED AND TREATED AS CAPI TAL RECEIPTS BY THE ITAT AND PLACED ON RECORD ORDER OF ITAT IN ITA NO. 241/MDS/9 8 IN THE CASE OF ESSAR SERVICES LIMITED. IT WAS HIS SUBMISSION THAT THE PA YMENT OF COMPENSATION WAS NOT DOUBTED. FOLLOWING THE PRINCIPLES ESTABLISHED B Y HON'BLE BOMBAY HIGH COURT IN THE CASE OF MISS PIROJA C. PATEL 242 ITR 582 C OMPENSATION PAID FOR EVICTION OF TENANTS IS TO BE CONSIDERED AS COST OF IMPROVEME NT U/S. 48(II) AND THEREFORE CLAIM IS ALLOWABLE. 19. WE HAVE CONSIDERED THE ISSUE. THERE IS NO DOUBT ABOUT THE PAYMENT OF COMPENSATION OF ` 14.50 CRORES AND RECIPIENT TREATED IT AS CAPITAL R ECEIPT. THIS ISSUE IS TAKEN UP TO THE ITAT WHO SUPPORTED THE STA ND OF THE ASSESSEE THEREIN. M/S. ESSAR STEEL LTD. 7 AS FAR AS THIS ASSESSEE IS CONCERNED FACTS INDICAT E THAT THERE WAS TENANCY AND THE PROPERTY WAS SOLD TO ANOTHER PARTY (MAY BE A GR OUP CONCERN) AND THE AMOUNT OF ` 14.50 CRORES WAS PAID FOR VACATION OF THE TENANCY . THEREFORE FOLLOWING THE PRINCIPLES ESTABLISHED BY HON'BLE JURISDICTIONAL HI GH COURT IN THE CASE OF MISS PIROJA C. PATEL 242 ITR 582 COMPENSATION PAID FOR EVICTION OF PAYMENT IS TO BE TREATED AS COST OF IMPROVEMENT U/S. 48(II). THE LEA RNED DR RELIED ON CASE LAW WHICH ARE NOT RELEVANT ON THE ISSUE. IN THE CASE OF SMT RUGMANI VERMA 222 ITR 357 THE ISSUE IS WITH REFERENCE TO THE CLAIM OF PAY MENTS TO SISTERS ON THE PROPERTY ACQUIRED BY WAY OF WILL AND THE HONBLE MADRAS HIGH COURT HELD THOSE PAYMENTS CAN NOT BE CONSIDERED AS COST OF ACQUISITION OR IMP ROVEMENT. IN THE CASE OF R M ARUNACHALAM 227 ITR 222 THE AMOUNT CLAIMED WAS ESTA TE DUTY PAYMENT. ON THE FACTS THE HONBLE SUPREME COURT HELD THAT ESTATE DU TY PAID IS NEITHER DEDUCTIBLE AS COST OF ACQUISITION NOR AS COST OF IMPROVEMENT O F THE CAPITAL ASSET. THE ISSUE ON PAYMENT OF COMPENSATION TO TENANTS IS DIRECTLY C OVERED BY THE JURISDICTIONAL HIGH COURT IN THE CASE OF MISS PIROJA PATEL (SUPRA) . THEREFORE THERE IS NO NEED TO DEFER FROM THE FINDINGS OF LEARNED CIT(A) AND ACCO RDINGLY THIS GROUND IS REJECTED. 20. GROUND NO. 4 & 5 PERTAINS TO DISALLOWANCE OF EX PENDITURE ON HRC DIVISION. 21. BRIEFLY STATED THE ASSESSEE CLAIMED VARIOUS EXP ENDITURES IN HRC DIVISION AND FURTHER FLOATING NOTES RATE EXPENSES MOBILIZAT ION CHARGES AND ADVERTISEMENT EXPENSES RELATING TO HRC DIVISION. IT WAS THE ASSES SING OFFICER CLAIM THAT IN A.Y. 1994-95 ASSESSEE HAS NOT COMMENCED PRODUCTION OF HR C DIVISION AND ACCORDINGLY EXPENDITURE CLAIMED IS NOT ALLOWABLE TO THE ASSESSEE IN THAT YEAR. FOLLOWING FINDINGS IN THAT YEAR SIMILAR EXPENDITUR E WAS ALSO DISALLOWED IN THIS ASSESSMENT YEAR WITHOUT MUCH DISCUSSION AS CAN BE SEEN FROM PAGE NO. 8 OF THE ORDER. LEARNED CIT(A) VIDE PARAGRAPH 5 6 7&8 D ISCUSSED THIS ISSUE AND ALLOWED THE SAME BY STATING AS UNDER :- 5 (4) DISALLOWANCE OF CLAIM OF REVENUE EXPENSES OF HO T ROLLED COILS (HRC) DIVISIONS ` 3 08 14 26 000/- A SIMILAR ISSUE CAME FOR MY CONSIDERATION FOR THE A .Y. 1994-95 AND IN MY APPELLATE ORDER IN ITA NO. 74/97-98 I HA VE DISCUSSED THE ISSUE IN DETAIL (PAGES 1 TO 15). ON THE SAME LI NES I DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIM FOR THIS ASSES SMENT YEAR AS REVENUE EXPENDITURE. M/S. ESSAR STEEL LTD. 8 5) DISALLOWANCE OF FLOATING RATE NOTES (BONDS) EXPE NSES ` 19 27 24 518.4 6) THE APPELLANT CLAIMED TO HAVE AN EXPENDITURE OF ` 19 27 24 508 ON ISSUE OF FLOATING RATE NOTE (BONDS). IT WAS STAT ED THAT THE EXPENDITURE HAD BEEN INCURRED FOR RAISING LOANS TO CARRY ON THE BUSINESS OF THE APPELLANT COMPANY AND HENCE ALLOWAB LE AS REVENUE EXPENDITURE. FURTHER IT WAS SUBMITTED THAT THE EXPENSES ON ISSUE OF BONDS SHOULD HAVE BEEN ALLOWED AS REVEN UE EXPENDITURE AS THESE BONDS ARE NOT CONVERTIBLE INTO SHARES AND HENCE DECISION OF THE SUPREME COURT IN THE CASE OF INDIA CEMENTS LTD. 60 ITR 52 WOULD APPLY. THE ASSESSING OFFICER HAS DISALLOWED THE ABOVE EXPENDITURE ON THE GROUND THAT THESE ARE CAPITAL IN NATURE AS RELATES TO HRC BUSINESS WHICH HAS NOT STARTED COMMERCIAL PRODUCTION. I HAVE ALREADY HOLD IN MY AP PELLATE ORDER IN ITA NO. 74/97/98 THAT THE HRC IS BUSINESS IS EXP ANSION OF EXISTING STEEL BUSINESS OF COMPANY AND IS THEREFORE ALL THE EXPENSES ARE ALLOWABLE AS REVENUE EXPENDITURE. I DI RECT THE ASSESSING OFFICER TO ALLOW THESE EXPENDITURES AS RE VENUE EXPENDITURE. 7) (6) DISALLOWANCE OF CLAIM OF MOBILISATION CHARGE S FOR VESSELS TAKEN ON HIRE ` 15 25 00 000/- THE COUNSEL STATED THAT THE COMPANY HAD TO TAKE SOM E VESSELS ON HIRE FOR THE PURPOSE OF TRANSFERRING THE RAW MATERIALS. FOR THE ABOVE PURPOSE IT HAD TO INCUR THE ABOVE EX PENDITURE TOWARDS MOBILIZATION CHARTER FEE FOR THE VESSLES HI RED. ACCORDING TO THE COMPANY LAW SUCH EXPENDITURE COULD BE CLAIM ED AS DEFERRED REVENUE EXPENDITURE. AS EXPLAINED TO ME BY THE COUNSELS I UNDERSTOOD THAT THIS EXPENDITURE WAS IN CURRED TO BRING THE SHIPS TO THE AREA OF OPERATION OF THE APPELLANT FROM THE PLACES IN THE HIGH SEAS IN WHICH THEY WERE STANDING HOLD T HAT THESE EXPENDITURES ARE NOT CAPITAL EXPENDITURE BUT RELATI NG TO BUSINESS. I DIRECT THE ASSESSING OFFICER TO ALLOW THE EXPENDITU RE AS REVENUE BECAUSE THE APPELLANT DID NOT GET ANY BENEFIT OF EN DURING NATURE. THE ASSESSING OFFICER HAS NOT DISPUTED THE QUANTUM OF THE EXPENDITURE. 8 (7) DISALLOWANCE OF CLAIM OF ADVERTISEMENT EXPENS ES ` 4 27 30 585/-. THE COUNSEL SUBMITTED BEFORE ME THAT THE ASSESSING OFFICER FAILED TO APPRECIATE THAT THIS EXPENDITURE WAS INCURRED FOR GENERAL ADVERTISEMENT AND PUBLICITY OF THE APPELLAN T COMPANY AS A WHOLE AND NOT FOR STARTING OF A NEW UNIT (HRC) WHIC H MIGHT HAVE BEEN IN THE BACK OF THE MIND OF THE ASSESSING OFFIC ER. THE DETAILS WERE FILED BEFORE THE ASSESSING OFFICER NO ITEM WAS DISALLOWED BY THE ASSESSING OFFICER. I ALSO FIND THAT THE ASSESSI NG OFFICER HAS NOT RELATED THE ADVERTISEMENT EXPENDITURE WITH THE INSTALLATION OF HRC DIVISION. A MERE STATEMENT IN THE ASSESSMENT OR DER THAT THEY PERTAINED TO HRC DIVISION WAS NOT ENOUGH TO DISALLO W THE SAME. I M/S. ESSAR STEEL LTD. 9 HOLD THESE EXPENDITURES ARE REVENUE AND INCURRED IN THE COURSE OF BUSINESS ARE ALLOWABLE . 22. AT THE OUTSET IT WAS SUBMITTED THAT ITAT IN I TA NO. 807/MDS/99 HAS UPHELD THE ORDER OF LEARNED CIT(A) AND HELD THAT TH E ASSESSEE HAS CORRECTLY CLAIMED EXPENDITURE. THE ORDER WAS PLACED ON RECORD . SINCE THE ISSUE WAS DECIDED IN EARLIER YEAR IN FAVOUR OF THE ASSESSEE B Y LEARNED CIT(A) WHICH WAS INTURN CONFIRMED BY THE ITAT IN THIS YEAR ALSO THE RE IS NO NEED TO DEFER FROM THE FINDINGS OF LEARNED CIT(A) AND ACCORDINGLY ORDER OF LEARNED CIT(A) IN ALL THE ISSUES RAISED IN GROUND NO. 4 & 5 IS CONFIRMED AND THE GROUNDS ARE ACCORDINGLY DISMISSED. 23. IN THE RESULT APPEAL IS DISMISSED. ORDER HAS BEEN PRONOUNCED ON 25 TH DAY OF FEBRUARY 2011. SD/- (D.K. AGARWAL) JUDICIAL MEMBER SD/- (B. RAMAKOTAIAH) ACCOUNTANT MEMBER DATED : 25 TH FEBRUARY 2011. COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-CONCERNED. 4. THE CIT CONCERNED. 5. THE DR CONCERNED MUMBAI 6. GUARD FILE BY ORDER TRUE COPY ASSTT. REGISTRAR ITAT MUMBAI PS