ATHENA HOLDINGS(I) P. LTD, MUMBAI v. ITO 5(1)(1), MUMBAI

ITA 4728/MUM/2008 | 2004-2005
Pronouncement Date: 07-03-2011 | Result: Partly Allowed

Appeal Details

RSA Number 472819914 RSA 2008
Assessee PAN AAACA6842R
Bench Mumbai
Appeal Number ITA 4728/MUM/2008
Duration Of Justice 2 year(s) 7 month(s) 22 day(s)
Appellant ATHENA HOLDINGS(I) P. LTD, MUMBAI
Respondent ITO 5(1)(1), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 07-03-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted SMC
Tribunal Order Date 07-03-2011
Date Of Final Hearing 07-03-2011
Next Hearing Date 07-03-2011
Assessment Year 2004-2005
Appeal Filed On 16-07-2008
Judgment Text
1 ITA NO.4728/MUM/2008 IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI MUMBAI MUMBAI MUMBAI SMC SMC SMC SMC BENCH BENCH BENCH BENCH MUMBAI BENCHES MUMBAI MUMBAI BENCHES MUMBAI MUMBAI BENCHES MUMBAI MUMBAI BENCHES MUMBAI BEFORE SHRI R K PANDA AM BEFORE SHRI R K PANDA AM BEFORE SHRI R K PANDA AM BEFORE SHRI R K PANDA AM ITA NO. ITA NO. ITA NO. ITA NO. 4728/MUM/2008 4728/MUM/2008 4728/MUM/2008 4728/MUM/2008 (ASST YEAR (ASST YEAR (ASST YEAR (ASST YEAR 2004 2004 2004 2004- -- -05 0505 05 ) )) ) ATHENA HOLDINGS (I) P LTD S M BANARJI BLDG - NO.1 BELOW SBI 49 FORJETT STREET MUMBAI 36 VS THE INCOME TAX OFFICER WARD 5(1)(1) MUMBAI ( (( (APPELLANT APPELLANT APPELLANT APPELLANT) )) ) (RESPONDENT) (RESPONDENT) (RESPONDENT) (RESPONDENT) PAN NO. PAN NO. PAN NO. PAN NO.AAACA6842R AAACA6842R AAACA6842R AAACA6842R A SSESSEE BY SHRI CHETAN I SHAH REVENUE BY SHRI R K GUPTA-DR PER R K PANDA AM PER R K PANDA AM PER R K PANDA AM PER R K PANDA AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 22.5.2008 OF THE CIT(A)-V MUMBAI RELATING TO ASSES SMENT YEAR 2004-05. 2 THIS APPEAL WAS EARLIER DISMISSED BY THE TRIBUNAL FOR NON PROSECUTION. SUBSEQUENTLY THE TRIBUNAL VIDE ORDER DATED 7.1.201 1 RECALLED ITS ORDER. THEREFORE THIS IS A RECALLED MATTER. 3 GROUNDS OF APPEAL NOS 1 & 2 BY THE ASSESSEE READS AS UNDER: I. THE LD CIT(A) ERRED IN NOT ALLOWING THE APPELLAN T A DEDUCTION FOR RS. 677 589/- BEING INTEREST PAID AND IN NOT APPRECIATING THE NAT URE OF THE LOANS TAKEN AND THE SUBSTANCE OF THE TRANSACTIONS. II) IN NOT GIVING ANY REASONS WHY THE SAID INTEREST DISALLOWANCE WAS TO BE CONFIRMED WHILST DISMISSING THE APPEAL. 3.1 FACTS OF THE CASE IN BRIEF ARE THAT THE ASSES SEE IS ENGAGED IN THE BUSINESS OF CONSULTANCY AND SERVICES FOR INSURANCE SECTOR ETC. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NO TED FROM THE P&L ACCOUNT THAT THE ASSESSEE HAS DEBITED RS.6.81 351/- BEING THE FINANCE CHARGES 2 ITA NO.4728/MUM/2008 WHICH INCLUDES INTEREST OF RS. 6 77 589/-. THE A SSESSING OFFICER ASKED THE ASSESSEE TO FURNISH THE DETAILS OF INTEREST PAID DU RING THE YEAR WHICH WAS DULY FURNISHED BY THE ASSESSEE. THE ASSESSING OFFICER A SKED THE ASSESSEE TO JUSTIFY THE CLAIM OF ALLOWANCE OF INTEREST IN RESPECT OF LO ANS UTILIZED FOR INVESTMENT IN SUBSIDIARY COMPANY. REJECTING THE VARIOUS EXPLANA TIONS GIVEN BY THE ASSESSEE THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS N OT EARNED ANY INCOME FROM THE ABOVE INVESTMENT DURING THE YEAR. HE OBSERVED THAT AS PER PROVISIONS OF SEC. 36(1)(III) OF THE ACT THE INTEREST PAID ON CAP ITAL BORROWED IS ALLOWABLE AS DEDUCTION IF THE AMOUNT OF INTEREST PAID IS IN RES PECT OF CAPITAL BORROWED FOR THE PURPOSE OF BUSINESS OR PROFESSION. FROM THE SUBMIS SIONS OF THE ASSESSEE HE NOTED THAT THE BORROWED FUND HAS BEEN UTILIZED BY THE ASSESSEE COMPANY FOR THE PURPOSE OF BUSINESS OF SUBSIDIARY COMPANY AND NOT F OR ITS OWN BUSINESS. FURTHER THE SUBSIDIARY COMPANY HAS ALREADY STARTED MAKING PROFIT AND IS LIKELY TO REWARD THE HOLDING COMPANY BY WAY OF DIVIDEND ETC. SINCE THE DIVIDEND INCOME IS EXEMPT FROM TAX AND SINCE THE ASSESSEE HAS SHOWN THE ABOVE AMOUNT OF CAPITAL BORROWED AS INVESTMENT IN SUBSIDIARY COMPAN Y THE PROFIT ON SALE OF SUCH INVESTMENT WILL BE TAXABLE UNDER THE HEAD CAPITAL GAIN AND BY NO MEANS IT WILL BE ASSESSED AS BUSINESS INCOME. HE ACCORDINGLY D ISALLOWED THE CLAIM OF INTEREST AMOUNTING TO RS. 6 77 589/-. 3.2 IN APPEAL THE CIT(A) UPHELD THE ACTION OF THE ASSESSING OFFICER. 4 THE LD COUNSEL FOR THE ASSESSEE AT THE OUTSET S UBMITTED THAT THE VARIOUS SUBMISSIONS GIVEN BY THE ASSESSEE BEFORE THE CIT(A) WAS NOT AT ALL CONSIDERED BY HIM WHO SIMPLY REPRODUCED THE ORDER OF THE ASSE SSING OFFICER AND UPHELD THE ADDITION. HE SUBMITTED THAT IN THE INTEREST OF JUST ICE THE MATTER MAY EITHER BE RESTORED TO THE FILE OF THE CITIA) OR TO THE ASSESS ING OFFICER FOR FRESH ADJUDICATION. 3 ITA NO.4728/MUM/2008 4.1 THE LD DR FAIRLY CONCEDED THAT THE CIT(A) HAS N OT CONSIDERED THE ARGUMENTS ADVANCED BY THE ASSESSEE AND HAS REPRODUC ED THE ORDER OF THE ASSESSING OFFICER. THEREFORE HE HAS NO OBJECTION IF THE MATTER IS RESTORED TO THE FILE OF THE CIT(A). 5 AFTER HEARING THE RIVAL ARGUMENTS ADVANCED BY BOT H THE SIDES WE FIND THE CIT(A) HAS REPRODUCED THE OBSERVATIONS OF THE ASSES SING OFFICER AND HAS NOT CONSIDERED THE ARGUMENTS ADVANCED BY THE ASSESSEE W HILE DECIDING THE ISSUE. I THEREFORE DEEM IT PROPER TO RESTORE THE ISSUE B ACK TO THE FILE OF THE CIT(A) WITH A DIRECTION TO DECIDE THE ISSUE AFRESH IN ACCORDANC E WITH LAW AFTER GIVING DUE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THE GR OUNDS RAISED BY THE ASSESSEE ARE ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSE. 6 THE LD COUNSEL FOR THE ASSESSEE DID NOT PRESS THE GROUNDS OF APPEAL NO.3 FOR WHICH THE LD DR HAS NO OBJECTION. ACCORDINGLY THE SAME IS DISMISSED AS NOT PRESSED. 7 IN THE RESULT THE APPEAL FILED BY THE ASSESSEE I S PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF H EARING I.E. ON 7 TH MAR 2011. SD/- ( R K PANDA ) ( R K PANDA ) ( R K PANDA ) ( R K PANDA ) ACCOUNTANT MEMBER PLACE: MUMBAI : DATED: 7 TH MAR 2011 RAJ* 4 ITA NO.4728/MUM/2008 COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR ITAT MUMBAI