Ito Corporate Ward 1 4 Chennai v. Dsm Soft Pvt Ltd Chennai

In The Income Tax Appellate Tribunal C Smc Bench Chennai Before Shri Abraham P George Accountant Memb Er I T A No 1850 Mds 2017 Assessment Year 2011 2012 The Income Tax Officer Corporate Ward 1 4 Chennai 600 034 Vs M S Dsm Soft Pvt Ltd New No 1 15 Th Cross Street Shastri Nagar Adyar Chennai 600 020 Pan Aaacd 3149 A Appellant Respondent Appellant By Shri B Sagadevan Irs Jcit Respondent By Ms Hemalatha K C A Date Of Hearing 14 12 2017 Date Of Pronouncement 19 12 2017 O R D E R In This Appeal Filed By The Revenue Which Is Directed Against An Order Dated 29 05 2017 Of The Ld Commissioner O F Income Tax Appeals 1 Chennai It Is Aggrieved That The Ld Commissioner Of Income Tax Appeals Deleted The Disallowance U S 3 6 1 Iii Of The Income Tax Act 1961 In Short The Act Ita No 1850 Mds 2017 2 2 Ld Departmental Representative Submitted That Inte Rest Of Rs 46 44 877 Disallowed By The Ld Assessing Off Icer Related To Interest Free Loans Given By The Assessee To Its S Ubsidiaries And Its Affiliates As Per The Ld Departmental Represent Ative Assessee Had Paid Such Interest To Its Directors And Certain Oth Er Parties From Whom It Had Raised Loans Thus According To Him Disal Lowance Was Rightly Made 3 Per Contra Ld Authorised Representative Strongly Supporting The Orders Of The Authorities Below Submitted That Identical Issue Had Come Up Before This Tribunal In Assessees Own Cas E For Assessment Year 2010 2011 In Ita No 863 Mds 2016 As Per The Ld Authorised Representative The Tribunal Had In Its Order Dated 01 09 2016 Followed Its Own Decisions For Assessment Years 200 4 05 2005 06 2008 09 2009 2010 In Ita Nos 11 12 Mds 2010 A Nd Ita Nos 2059 2062 Mds 2015 Dated 11 06 2010 30 03 2016 Respectively Were Also Similar Issue Was Considere D 4 I Have Considered The Rival Contentions And Perused The Orders Of The Authorities Below It Is True That A Ssessee Had Given Interest Free Loans To Its Subsidiaries Affiliates And Also Made Investments In Group Concerns Including Dsm Geo Dat A Ltd Ita No 1850 Mds 2017 3 Rs 5 29 14 596 Dsb Infosystems P Ltd Rs 2 10 44 032 And Dcs Bpo P Ltd Rs 69 15 597 Ld Assessing Officer Had Found That Assessee Had Paid Interest Of Rs 46 44 877 On Lo Ans Borrowed From Directors Others He Had Applied Sec 36 1 Iii O F The Act Ld Commissioner Of Income Tax Appeals Had Followed T He Order The Co Ordinate Bench Of The Tribunal In Assessees Own Case For Assessment Year 2010 2011 It Is Admitted Position That Inter Est Free Loans Given By The Assessee During The Relevant Previous Year W Ere Also To The Same Very Subsidiaries And Its Affiliates As I N The Earlier Years This Is Clear From The Order Dated 30 03 2016 For Assess Ment Years 2008 09 And 2009 2010 In Ita Nos 2059 2062 Mds 2015 Par A 3 Of The Said Decision Is Reproduced Hereunder 3 The Brief Facts Of The Case Are The Assessee I S In The Business Of Software Development And Export And Fil Ed Return Of Income For The Assessment Year 2008 2009 On 30 0 9 2008 Declaring Loss Of 57 15 918 And Was Processed U S 143 1 Of The Act Subsequently Notice U S 148 Was Issued For Reason To Believe That Income Has Escaped Assessment In Compliance To Notice The Ld Authorised Representa Tive Of The Assessee Appeared On Various Dates And Filed Detail S The Assessing Officer On Perusal Of The Financial State Ments Of The Company Found That Assessee Borrowed Secured Loans From Banks And Unsecured Loans From Directors And Others Paid Varying Interest Rates As Per Balance Sheet The As Sessee Is Having Secured Loans Of 15 73 90 542 And Unsecured Loans And Assessee Also Paying Interest On Above Loans As Per Page 2 Of Assessing Officer Order As Under On Bank Loans 1 46 15 759 On Other Loans 27 88 064 Ita No 1850 Mds 2017 4 As Per The Information The Assessee Has Given Inte Rest Free Loans To Subsidiaries And Also Invested In Group Co Ncerns As Under Dsm Geodata Ltd 5 55 69 765 Loan Advance Dsm Infosystems P Lt 2 21 72 376 Loan Advance Dcs Bpo Pvt Ltd 1 79 45 150 Loan Advance Dcs Bpo Pvt Ltd 49 58 877 Investment The Ld Authorised Representative Explained That Th E Assessee Company Made Investment In Subsidiary Comp Any Dsm Geodata Ltd Scotland 2 52 85 072 On Perusal Of The Transaction With Related Parties The Assessee Has Not Received Any Interest From Associate Companies On Further Verification It Was Found That Interest Of 22 70 805 Was Received From Subsidiary Company From Dcs Geodata L Td Which Has Worked Out To 4 26 Interest Rate On Amount Outstanding Balance And Interest Of 1 59 252 From D S M Infosystems P Ltd Worked Out 0 76 On The Outstand Ing Balance And There Was No Income From Other Group C Oncerns The Assessing Officer Has Made A Comparison That Th E Assessee Company Is Paying Interest At A Higher R Ate Than The Interest Received From Its Group Concerns So W Ith These Parameters Of Application Of Loan Funds From Group Concerns And Also Not Charging Interest Made In Subsidiary C Oncerns The Assessing Officer Analyzed Based On The Financi Al Statements That The Assessee Company Has Obtained L Oans From Bank Directors Shareholders And Others And P Aying Higher Rate Of Interest Wereas No Interest Income Was Received From Subsidiaries Except Concessional R Ate Of Interest Receipt From Dsm Geodata Ltd And Dsm Info Systems P Ltd And Issued Show Cause Notice To The Assesse E Company For Proportionate Disallowance Of Interest On Borrowed Funds In Response To Show Cause Notice The Ld Authorised Representative Filed Detailed Submission S And Also Relied On The Decision Of Co Ordinate Bench Tribuna L In Assessees Own Case For The Assessment Year 2004 05 And 2005 06 Were The Tribunal Has Accepted The Contenti On That The Loans And Advance To The Group Concerns Or Subs Idiaries Is For Commercial Expediency And No Interest Disallowa Nce Is Warranted On Such Investments In Subsidiaries The Ld Assessing Officer Perused The Tribunal Order And Fo Und The Department Has Not Accepted The Decision Of The Tri Bunal And Contesting At Higher Forum In High Court The Ld Assessing Officer Has Not Relied On The Decision And Calculat Ed Proportionate Disallowance Of Interest On The Advan Ce Made To Group Concerns And Worked Out The Calculation Of In Terest Component In Is Order And Disallowed 58 87 623 Aggrieved Ita No 1850 Mds 2017 5 By The Order The Assessee Filed An Appeal Before T He Commissioner Of Income Tax Appeals Since Fact Situation Is Similar I Am Of The Opinio N That Ld Cit A Was Justified In Relying On The Decision Of Co Ordinate Bench In Assessees Own Case For Assessment Year 2010 2011 Ita No 863 Mds 2016 Dated 01 09 2016 Which Had Followed The Earlier Tribunal Order For Assessment Years 2008 09 And 2009 2010 The Decisi On Of The Tribunal In Ita Nos 2059 2062 Mds 2015 Supra Wh Ich Appears At Para 7 Of Such Order Is Reproduced Hereunder 7 We Heard The Rival Submissions Perused The Material On Record And Judicial Decisions Cited T He Ld Departmental Representative Contested The Issues That The Commissioner Of Income Tax Appeals Has Not Considered The Facts On The Borrowed Capital And Investment In Equity Of Subsidiary Companies And Applied The Decision Of Apex Court And Also Tribunal Decision Which Has Not Attained Finality For Earlier Assessment Years As Department Has Contested The Issue At Higher Forum This Tribunal Is Of The Considered Opinion That Mer E Pendency Of Appeal Before The Higher Forum Cannot Be A Reason To Take A Different View So Respectfu Lly Following The Decision In Assessees Own In Ita Nos 11 12 Mds 2010 And Ita Nos 366 367 Mds 2010 Upheld The Order Of The Commissioner Of Income Tax Appeals And Dismiss The Ground Of The Revenue Ita No 1850 Mds 2017 6 I Am Of The Opinion That The Issue As On Date Is Squarely Covered In Favour Of The Assessee I Do Not Find Any Reason To Interfere With The Order Of The Ld Commissioner Of Income Tax Appeal S 5 In The Result Appeal Of The Revenue Stands Dismiss Ed Order Pronounced On Tuesday The 19th Day Of Dec Ember 2017 At Chennai Sd Abraham P George Accountant Member Chennai Dated 19th December 2017 Kv Copy To 1 Appellant 3 Cit A 5 Dr 2 Respondent 4 Cit 6 01 Gf