DCIT. (OSD) CIR .-3(3), MUMBAI v. M/s. PETROCON INDIA LTD., MUMBAI

ITA 4741/MUM/2008 | 2004-2005
Pronouncement Date: 29-07-2011 | Result: Dismissed

Appeal Details

RSA Number 474119914 RSA 2008
Assessee PAN AAACV1513G
Bench Mumbai
Appeal Number ITA 4741/MUM/2008
Duration Of Justice 3 year(s) 12 day(s)
Appellant DCIT. (OSD) CIR .-3(3), MUMBAI
Respondent M/s. PETROCON INDIA LTD., MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 29-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted C
Tribunal Order Date 29-07-2011
Date Of Final Hearing 04-07-2011
Next Hearing Date 04-07-2011
Assessment Year 2004-2005
Appeal Filed On 17-07-2008
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL 'C' BENCH MUMBAI BEFORE SHRI D.K. AGARWAL JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH ACCOUNTANT MEMBER ITA NO. 4741/MUM/2008 (ASSESSMENT YEAR: 2004-05) DCIT CIRCLE 3(3) M/S. PETROCON INDIA LTD. ROOM NO. 609 6TH FLOOR 17TH FLOOR C-WING MITTTAL COURT AAYAKAR BHAVAN M.K. ROAD VS. NARIMAN POINT MUMBAI 400021 MUMBAI 400020 PAN - AAACV 1513 G APPELLANT RESPONDENT APPELLANT BY: SHRI PAWAN VED RESPONDENT BY: SHRI SHAILESH S. SHAH DATE OF HEARING: 04.07.2011 DATE OF PRONOUNCEMENT: 29.07.2011 O R D E R PER B. RAMAKOTAIAH A.M. THIS APPEAL BY THE REVENUE IS AGAINST THE ORDER OF THE CIT(A) XXXII MUMBAI DATED 31.03.2008. 2. IN THE COURSE OF HEARING THE LEARNED COUNSEL SUBMIT TED THAT THERE IS NO CROSS APPEAL AND WHATEVER DISALLOWANCES WERE CON FIRMED BY THE CIT(A) WERE ACCEPTED BY THE ASSESSEE. ACCORDINGLY THE REVE NUE APPEAL IS TAKEN UP FOR HEARING AS THERE IS NO CROSS APPEAL. 3. WE HAVE HEARD THE LEARNED D.R. AND THE LEARNED COUN SEL IN DETAIL. 4. REVENUE HAS RAISED THE FOLLOWING FIVE GROUNDS: - 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A) HA ERRED IN DELETING PROPORTIONATE I NTEREST OF RS.13 57 79 908/- WITHOUT APPRECIATING THE FACT THA T THE ASSESSEE HAD NOT CHARGED INTEREST ON THE ICDS GIVE N TO THE RESPECTIVE PARTIES. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A) ERRED IN DELETING INTEREST OF RS.3 8 5 193/- BEING PROPORTIONATE INTEREST ON ADVANCES WITHOUT APPRECIA TING THE FACT THAT THE ASSESSEE HAD NOT CHARGED INTEREST ON SUCH ADVANCES. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSING OFF ICER TO ITA NO. 4741/MUM/2008 M/S. PETROCON INDIA LTD. 2 DISALLOW AN AMOUNT OF RS.1 50 000/- U/S. 14A OF THE ACT AS AGAINST RS.79 39 214/- DISALLOWED BY THE ASSESSING OFFICER. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A) ERRED IN DIRECTING THE ASSESSING OFF ICER TO DISALLOW RS.5 00 000/- OUT OF ADMINISTRATIVE AND GE NERAL EXPENSES AS AGAINST RS.50.74 205/- DISALLOWED BY TH E ASSESSING OFFICER. 5. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A) ERRED IN ALLOWING CREDIT FOR THE TDS OF RS.1 22 183/- WITHOUT APPRECIATING THE FACT THAT RE LEVANT INTEREST INCOME HAS BEEN EXCLUDED FROM THE TOTAL INCOME. 5. GROUND NO. 1 IS WITH REFERENCE TO DISALLOWANCE OF P ROPORTIONATE INTEREST OF ` 13 57 79 908/-. THIS AMOUNT WAS DISALLOWED OUT OF T HE TOTAL INTEREST CLAIM ON THE REASON THAT ASSESSEE HAS NOT CHARGED ANY INTEREST AND THE INTEREST BEARING BORROWED FUNDS WERE DIVERTED F OR NON-BUSINESS PURPOSES IN THE FORM OF INTER CORPORATE DEPOSITS. I T WAS THE SUBMISSION OF THE ASSESSEE BEFORE THE CIT(A) THAT ASSESSEE IS IN THE FINANCE BUSINESS. THE AMOUNTS WERE ADVANCED IN EARLIER YEARS AND THEY HAV E BECOME NON- PERFORMING. ACCORDINGLY NO INTEREST WAS CHARGED. AC CORDING TO THE ACCOUNTING POLICIES REVENUE RAN BE RECOGNISED ONLY WHEN THERE IS REASONABLE CERTAINTY THAT INCOME WILL BE REALISED AND NO BORRO WED FUNDS WERE DIVERTED FOR MAKING THE ICDS AS THE ASSESSEE HAS ITS OWN FUN DS AND FURTHER PROVISIONS OF SECTION 40A(2)(B) CANNOT BE INVOKED A S NONE OF THE PARTIES ARE RELATED CONCERNS. AFTER CONSIDERING THE SUBMISSIONS AND OBTAINING A REMAND REPORT FROM THE A.O. ON THE ADDITIONAL EVIDENCES FI LED THE CIT(A) DELETED THE SAID DISALLOWANCE OF INTEREST BY GIVING THE FOLLOWI NG FINDING: - 4.4.12 AFTER CAREFUL CONSIDERATION OF FACTS ON REC ORD THE SUBMISSIONS OF THE APPELLANT AND THE ASSESSMENT ORD ER IT IS SEEN THAT ICDS WERE GIVEN IN EARLIER YEARS (EXCEPT 2 PAR TIES TRAMBAK SHIPPING PVT. LTD. AND PUSHYA PROPERTIES PVT. LTD. WHICH WERE NOT ICD BUT ADVANCE FOR PURCHASE OF PROPERTY) DURING THE CO URSE OF ITS FINANCING ACTIVITY AT THE RATE OF INTEREST PREVAILI NG AT THE RELEVANT TIME. IT IS NOT IN DISPUTE THAT THE APPELLANT COMPANY HAS ADVANCED SAID ICDS ON INTEREST. COPIES OF PROMISSORY NOTES OBTAI NED FROM THOSE PARTIES EVIDENCING THE SAID FACT HAVE ALSO BEEN FU RNISHED. BUT SUBSEQUENTLY THESE ENTITIES STARTED DEFAULTING THE PAYMENTS OF THE INTEREST. AS THESE LOANS/ADVANCES BECAME NON PERFOR MING ASSETS OF THE COMPANY NO INTEREST COULD BE REALIZED THEREON AND HENCE NO NOTIONAL INTEREST INCOME WAS CREDITED OR RECOGNIZED IN THE BOOKS OF THE APPELLANT COMPANY. I AGREE WITH THE CONTENTION OF THE AR THAT THE ASSESSEE CAN BE BROUGHT TO TAX ONLY IN RESPECT OF H IS REAL INCOME. ITA NO. 4741/MUM/2008 M/S. PETROCON INDIA LTD. 3 THESE COMPANIES HAVE NOT MADE THE REPAYMENTS OF THE OUTSTANDING BALANCES WHICH IS EVIDENT FROM THE LEDGER ACCOUNTS (LEDGER ACCOUNTS OF THESE COMPANIES ARE REPRODUCED IN ASSESSMENT ORD ER). AS PER ACCOUNTING STANDARD 9 ON RECOGNITION OF REVENUE (AS -9) AND POLICY THE REVENUE/INCOME IS RECOGNIZED IN THE BOOKS WHEN THERE IS REASONABLE CERTAINTY THAT THE INCOME WILL BE REALIZ ED. IN THE PRESENT CASE THE APPELLANT WAS DOUBTFUL OF THE RECOVERABIL ITY OF THE PRINCIPAL AND INTEREST ACCRUED ON THESE LOANS AND HENCE NO IN TEREST COULD BE RECOGNIZED OR CHARGED. COPIES OF THE BOARD RESOLUTI ONS DATED 30/03/2003 TO THE SAID EFFECT ARE ALSO FURNISHED. A NY INTEREST CHARGED ON DOUBTFUL ASSETS AND SHOWN AS RECEIVABLE WOULD GIVE AN INFLATIONARY PICTURE OF FINANCIAL POSITION OF THE C OMPANY AND WILL BE AGAINST THE ACCOUNTING STANDARD ON RECOGNITION OF R EVENUE AND HENCE THE APPELLANT COMPANY WAS JUSTIFIED IN NOT CHARGING INTEREST ON THOSE LOANS AND ADVANCES DURING THE YEAR. 4.4.13 I AGREE WITH THE CONTENTIONS OF THE AR THAT AS PAR THE ACCRUAL METHOD OF ACCOUNTING; IT IS ONLY THE ACCRUA L OF REAL INCOME WHICH IS TO BE ACCOUNTED FOR AS INCOME. IT IS A MAT TER OF FACT THAT NO INTEREST HAS BEEN RECEIVED BY THE APPELLANT FROM TH E SAID ICDS. ACCRUAL IS A MATTER OF SUBSTANCE AND IT IS TO BE DE CIDED ON COMMERCIAL PRINCIPLE HAVING REGARD TO THE BUSINESS CHARACTER O F THE TRANSACTIONS AND THE REALITIES OF THE SITUATION AND CANNOT BE DE TERMINED BUT ADOPTING A PURELY THEORETICAL OR DOCTRINAIRE APPROA CH. IN THE INSTANT CASE AS THE RECOVERY OF THE PRINCIPAL AMOUNTS OF L OANS AND ADVANCES HAD BECOME DOUBTFUL THE INTEREST THEREON WAS NOT A REAL INCOME ON THE ACCRUAL BASIS OF ACCOUNTING. UNDER THESE CIRCUM STANCES THE INTEREST INCOME DOES NOT ACCRUE TILL IT IS ACTUALLY REALIZED AND HENCE THE APPELLANT COMPANY DID NOT CREDIT NOTIONAL INTER EST IN ITS BOOKS OF ACCOUNT. IN THIS CONTEXT THE FOLLOWING DECISIONS A RE RELEVANT: 1. INDIA FINANCE AND CONSTRUCTION CO. P. LTD. V. D CIT 200 ITR 710 (BOM) 2. CIT V. MOTOR CREDIT COMPANY PVT. LTD. 127 ITR 572 (MAD): 3. UCO BANK V. CIT 237 ITR 889 (SC): 4. CIT V. METHOD TRADING AND INVESTMENT LTD. 246 ITR 588 (CAL.) 6. IN VIEW OF THE CLEAR FINDINGS OF THE CIT(A) WITH W HICH WE AGREE WE DO NOT SEE ANY REASON TO ALLOW REVENUES GROUND. THE A .O. HAS NOT MADE OUT ANY CASE THAT ASSESSEE HAS DIVERTED FUNDS FOR NON-B USINESS PURPOSES. AS SUBMITTED ASSESSEE HAS ADVANCED FUNDS IN EARLIER YE ARS AND IN THE IMMEDIATELY PRECEDING YEAR THIS ISSUE WAS EXAMINED IN ITA NO. 6832/MUM/2007 AND WE CONCURED WITH THE FINDINGS OF THE CIT(A) THAT FUNDS WERE NOT DIVERTED FOR NON-BUSINESS PURPOSE OU T OF THE LOANS BORROWED DURING THE YEAR. IN VIEW OF THIS AND AGREEING WITH THE FININGS IN THE EARLIER ITA NO. 4741/MUM/2008 M/S. PETROCON INDIA LTD. 4 YEAR ON THE SAME ISSUE OF INTEREST ON ICDS WE REJ ECT THE GROUND RAISED BY THE REVENUE ON THIS ISSUE. 7. GROUND NO. 2 PERTAINS TO PROPORTIONATE INTEREST ON ADVANCES OF ` 3 85 193/-. THE FACTS IN BRIEF ARE THAT THE ASSESSE E HAS GIVEN OTHER ADVANCES OF ` 27 50 000/- TO THE FOLLOWING PARTIES WHICH WERE LAT ER IRRECOVERABLE: KJMC FINANCIAL SERVICES LTD ` 15 00 000/- ANISH P.S. ` 10 00 000/- MAYANK VIJAY ` 2 50 000/- ` 27 50 000/- =========== THE A.O. CALCULATED INTEREST @14.007% ON THE ABOVE AMOUNT AND DISALLOWED A SUM OF ` 3 85 193/- ON THE SAME TERMS AND DISCUSSED IN GROUN D ABOVE. IN DISPUTING THE CONTENTIONS OF THE A.O. THE ASSESSEE COMPANY MADE THE FOLLOWING SUBMISSIONS: A) THE ABOVE AMOUNTS WERE GIVEN BY THE APPELLANT AS AD VANCE TOWARDS CONSULTANCY AND FINANCIAL SERVICES TO BE PR OVIDED BY THESE PARTIES. B) HOWEVER THESE PARTIES DID NOT RENDER THE ENTIRE SE RVICES FOR WHICH SAID ADVANCES WERE MADE AND ALSO DID NOT REFUND THE AMOUNTS. C) IT IS SUBMITTED THAT THESE ADVANCES WERE MADE FOR B USINESS PURPOSES AND HENCE THE QUESTION OF DISALLOWANCE OF PROPORTIONATE INTEREST ON THE SAME DOES NOT ARISE. 8. THE CIT(A) DELETED THE DISALLOWANCE BY STATING AS U NDER: - 4.5.3 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF THE APPELLANTS AR AND THE FACTS OF THE CASE. IT IS SEEN THE APPELL ANT HAD ADVANCED MONEY TO THE ABOVE PARTIES FOR RENDERING CONSULTANC Y AND FINANCIAL SERVICES. THESE PARTIES ARE ALSO NOT RELATED TO THE APPELLANT NEITHER ARE THEY ASSOCIATE CONCERNS. HOWEVER LATER ON THES E PARTIES DEFAULTED IN RENDERING OF ENTIRE SERVICES AND EVEN PAYMENTS. AS THE SAID AMOUNTS WERE ADVANCED FOR FINANCIAL AND CONSUL TANCY SERVICES WHICH IS THE NECESSITY OF AN ENTERPRISE THE MONEY ADVANCED CANNOT BE SAID FOR NON BUSINESS PURPOSE. THUS THE ADVANCE GIVEN WAS WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSE. IN VIE W OF THE ABOVE THE ACTION OF THE AO IN DISALLOWING THE PROPORTIONA TE INTEREST ON THESE OTHER ADVANCES RECEIVABLE IS NOT TENABLE. THE MONEY S WERE ADVANCED ONLY FOR THE PURPOSE OF BUSINESS AND DURING THE COU RSE OF FINANCING BUSINESS AND CANNOT BE CALLED TO BE FOR NON BUSINE SS PURPOSE AND NO INTEREST PAYMENT CAN BE ALLOCATED WITHOUT ANY NEXUS WITH THE ITA NO. 4741/MUM/2008 M/S. PETROCON INDIA LTD. 5 BORROWED FUNDS AS SUCH THE DISALLOWANCE OF PROPORTI ONATE INTEREST OF RS.3 85 193/- IS REQUIRED TO BE DELETED. 9. ON CONSIDERING THE FACTS OF THE CASE WE DO NOT SEE ANY REASON TO INTERFERE WITH THE FINDINGS OF THE CIT(A). THE A.O. HAS NOT MADE OUT A CASE THAT INTEREST HAS TO BE DISALLOWED WHEN THE FACTS I NDICATE THAT FUNDS WERE ADVANCED FOR BUSINESS PURPOSE. IT IS ALSO NOT A CAS E OF DIVERSION OF BORROWED FUNDS. ACCORDINGLY WE REJECT THE GROUND. 10. GROUND NO. 3 PERTAINS TO RESTRICTION OF DISALLOWANC E UNDER SECTION 14A OF ` 1 50 000/- AS AGAINST ` 79 39 214/- DISALLOWED BY THE A.O. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY HAS CLAIMED DIVIDEND INCOME OF ` 94 73 288/- AS EXEMPT UNDER SECTION 10(34) OF THE I .T. ACT 1961. IT HAS DEBITED INTEREST OF ` 118.9 CRORES TO THE P & L ACCOUNT. THE A.O. HAS DISALLOWED PROPORTIONATE INTEREST @14.007% AMOUNTIN G TO ` 79 39 214/- CLAIMED UNDER SECTION 36(1)(III) ON THE GROUND THAT THE SAME HAS BEEN INCURRED IN RELATION TO EARNING OF THE DIVIDEND INC OME BY UTILIZING THE BORROWED FUNDS FOR INVESTMENT PURPOSES AND NOT FOR EARNING ANY TAXABLE INCOME. ACCORDINGLY THE A.O. HELD THAT THE PROPORT IONATE INTEREST PAID ON AMOUNT INVESTED INTO INVESTMENTS REPRESENTS EXPENDI TURE INCURRED TO EARN DIVIDEND INCOME WHICH IS AN EXEMPT INCOME AND HENCE DISALLOWABLE UNDER SECTION 14A OF THE ACT. 11. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE T HE CIT(A) RESTRICTED THE DISALLOWANCE TO ` 1 50 000/- BY STATING AS UNDER: - 6.4 I HAVE DULY CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND THE ASSESSMENT ORDER. ADMITTEDLY INVESTMENTS I N SHARES WERE MADE DURING THE COURSE OF CARRYING ON THE BUSINESS OF EXPLORATION EXTRACTION OF CRUDE OIL AND GAS FINANCE TRADING I N SHARE & SECURITIES CONSUMER ELECTRONICS AND HOME APPLIANCES AND AS IS EVIDENT FROM THE RECORD SUBSTANTIAL INVESTMENTS HAVE BEEN MADE BY T HE ASSESSEE IN EARLIER YEARS. 6.5. IN ORDER TO APPLY THE PROVISIONS OF SECTION 14 A OF THE ACT THE EXPENDITURE WHICH IS RELATED TO EXEMPTED INCOME HAS TO BE IDENTIFIED. ON PERUSAL TO THE ASSESSEES PROFIT AND LOSS ACCOUN T AND THE EXPENDITURE DEBITED BY THE ASSESSEE IN THE PROFIT A ND LOSS ACCOUNT SHOWED THAT ONLY THE EMPLOYEES REMUNERATION ADMIN ISTRATIVE EXPENSES COULD BE IF AT ALL SAID TO HAVE BE INCUR RED IN PART TOWARDS EARNING OF THE DIVIDEND INCOME. NORMALLY APART FROM MERE INVESTMENT IN THE SHARES THERE WAS NOTHING WHICH THE ASSESSEE POSSIBLY DID TO EARN THE DIVIDEND INCOME. THE INVESTMENTS IN THE SH ARES MADE IN THE ITA NO. 4741/MUM/2008 M/S. PETROCON INDIA LTD. 6 EARLIER YEARS HAD NOT BEEN SHOWN TO HAVE COME OUT O F BORROWED FUNDS SO THAT ANY INTEREST (FINANCE CHARGES) COULD BE SAI D TO HAVE BEEN INCURRED IN RELATION TO THE DIVIDEND INCOME. FURTHE R THE TRADING IN SHARES IS ONE OF THE BUSINESS ACTIVITIES OF THE APP ELLANT. SO FAR AS THE EMPLOYEES REMUNERATION ADMINISTRATIVE EXPENSES WE RE CONCERNED; IT IS A MATTER OF SPECULATION AS TO HOW MUCH OF THESE EXPENSES COULD BE ATTRIBUTED TO THE EARNING OF THE DIVIDEND INCOME. N ORMALLY THE EFFORT REQUIRED TO REALIZE THE DIVIDEND INCOME IS MERELY T O SEND SOME EMPLOYEE TO THE BANK TO DEPOSIT THE DIVIDEND WARRAN T. HE WOULD POSSIBLY GO TO THE BANK AS MANY TIMES AS THERE ARE DIVIDEND WARRANTS. IN SUCH A CASE THE EFFORT MADE BY HIM HA S TO BE EVALUATED IN MONETARY TERMS AND MAY CONSTITUTE EXPENDITURE IN CURRED IN RELATION TO THE EARNING OF THE DIVIDEND INCOME TOGETHER WIT H THE CONVEYANCE EXPENSES INCURRED TO GO TO THE BANK. SOME EXPENDITU RE HAS TO BE ATTRIBUTED TO THE MANAGEMENT OF THE INVESTMENT PORT FOLIO. THE ASSESSEES INVESTMENT CONSISTED OF ONLY TWO COMPANI ES VIDEOCON APPLIANCES LTD. AND INDUSIND BANK WHICH WERE ALSO S OLD OFF IN THE CURRENT YEAR. THE ASSESSEE IN THIS CASE WAS JUST RE QUIRED TO DEPOSIT THE DIVIDEND WARRANT. THERE WAS ALSO NO NEED TO MAINTAI N ANY INVESTMENT PORTFOLIO DIVISION SINCE EXCEPT ONE THE INDUSIND BANK THE OTHER COMPANY WAS OF THE SAME GROUP. THUS A VERY SMALL A MOUNT OF TIME EFFORT AND EXPENDITURE WAS REQUIRED TO EARN THE DIV IDEND INCOME. ACCORDINGLY A SUM OF ` 1 50 000/- IS DISALLOWED FROM THE ADMINISTRATIVE EXPENSES. 12. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND EXAMINI NG THE RECORD WE AGREE WITH THE FINDINGS OF THE CIT(A). AS RIGHTLY P OINTED OUT ASSESSEE HAD ONLY TO INVESTMENTS THAT TOO OF GROUP CONCERNS AND THE REASONABLE AMOUNT FOR EARNING THAT EXEMPT INCOME WAS RIGHTLY DISALLOW ED BY THE CIT(A) AT A SUM OF ` 1 50 000/-. THE A.O. WAS ALSO NOT CORRECT IN CONSID ERING THE ENTIRE INTEREST DEBITED IN THE P & L ACCOUNT AT THE AVERAG E RATE OF BORROWINGS AT 14% WITHOUT ESTABLISHING THAT BORROWED FUNDS WERE U TILISED IN INVESTING IN SHARES. INSTEAD OF EXAMINING WHETHER ASSESSEE HAS S PENT ANY AMOUNT FOR EARNING THE DIVIDEND INCOME WHICH IS EXEMPT THE A. O. MECHANICALLY DISALLOWED 14% ON THE INVESTMENTS MADE BY THE ASSES SEE IN THE TWO COMPANIES. THIS METHOD IS ALSO NOT CORRECT IN VIEW OF JUDGEMENT BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF GODREJ & B OYCE MFG. CO. LTD. VS. DCIT 328 ITR 81. THE WORKING OF RULE 8D IN CONSIDER ING THE INVESTMENT DOES NOT APPLY TO THE ASSESSMENT YEAR UNDER CONSIDERATIO N. SINCE THE CIT(A) HAS CONSIDERED A REASONABLE AMOUNT OF ` 1 50 000/- ON THE BASIS OF THE TIME AND EFFORTS TO THE EARN THE DIVIDEND INCOME WE SEE NO REASON TO INTERFERE WITH THE SAID FINDING AND ACCORDINGLY THE GROUND IS REJE CTED. ITA NO. 4741/MUM/2008 M/S. PETROCON INDIA LTD. 7 13. GROUND NO. 4 PERTAINS TO RESTRING THE DISALLOWANCE TO ` 5 00 000/- OUT OF ADMINISTRATIVE AND GENERAL EXPENSES AS AGAINST ` 50 74 205/- DISALLOWED BY THE A.O. THE FACTS ARE THAT THE ASSESSEE COMPANY IN ITS REVISED RETURN OF INCOME HAS MADE CERTAIN ADJUSTMENTS IN FIGURES OF S ALES PURCHASES STOCK INTEREST ETC. BUT HAS NOT MADE CHANGES IN THE ADMI NISTRATIVE AND GENERAL EXPENSES ACCORDINGLY AFTER ITS AMALGAMATION WITH VI DEOCON INDUSTRIES LTD. THE A.O. HAS DISALLOWED A SUM OF ` 50 74 205/- AS THE ADMINISTRATIVE AND GENERAL EXPENDITURE PERTAINING TO THE LAST DAY (I.E . 31.03.2004) ON THE REASONING THAT NO EVIDENCE TO PROVE THAT NO SUCH EX PENSES ARE INCURRED ON 31.03.2004 HAS BEEN FURNISHED BY THE ASSESSEE COMPA NY. 14. IT WAS CONTENDED BEFORE THE CIT(A) THAT ADJUSTMENT OF ADMINISTRATIVE AND OTHER EXPENDITURES ARE NOT POSSIBLE WHICH ARE O N MONTHLY OR PERIOD BOUND BASIS AND NO SPECIFIC EXPENSES WERE INCURRED ON 31.03.2004 ON WHICH DATE THE SALES/INCOMES WERE TRANSFERRED TO TH E AMALGAMATED COMPANY. IT WAS FURTHER SUBMITTED THAT ASSESSEE HAS ADJUSTED THE INSURANCE EXPENSES FOR ONE DAY IN THE REVISED ACCOUNTS WHICH WAS NOT CONSIDERED BY THE A.O. THE CIT(A) RESTRICTED THE DISALLOWANCE BY STATING AS UNDER: - 7.3 I HAVE DULY CONSIDERED THE SUBMISSIONS MADE BY THE APPELLANT AND THE ASSESSMENT ORDER. ON PERUSAL OF T HE DETAILS OF ALL THE EXPENSES IT IS SEEN THAT ADMINISTRATIVE AND OTH ER SUCH EXPENSES CANNOT BE APPORTIONED AS THEY ARE ON MONTHLY OR PER IODICAL BASIS. THE EXPENSES ON OIL EXPLORATION/ EXTRACTION INCURRE D ON 31.03.2004 HAVE BEEN EXCLUDED. THE EXPENSES INCURRED ON SALE O F ELECTRONIC ITEMS DID NOT REQUIRE SUCH ADJUSTMENTS AS THEY WERE NO SA LES ON 31.03.2004. FURTHER DETAILS OF TRAVELLING EXPENSES TELEPHONE EXPENSES LEGAL AND PROFESSIONAL CHARGES ADVERTISE MENT SALES PROMOTION MISCELLANEOUS EXPENSES LOSS ON SALE OF ASSETS ETC. HAVE ALSO BEEN SUBMITTED. THEREFORE AS NO SPECIFIC EXPE NSES HAVE BEEN INCURRED ON THE LAST DAY I.E. 31.03.2004 NO APPORT IONMENT OF ANY EXPENSES FOR A PERIOD OF 1 DAY CAN BE DONE. HOWEVER IT IS CLEAR THAT A PART OF THE ADMINISTRATIVE EXPENSES RELATES FOR T HE PERIOD OF 1 DAY BUT THE EXACT AMOUNT OF THE SAME CANNOT BE COMPUTED . HENCE AN ADHOC AMOUNT OF RS.5 00 000/- IS DIRECTED TO BE DIS ALLOWED AND BALANCE IS DELETED. 15. WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDE R OF THE CIT(A) AS THE A.O. DISALLOWED THE AMOUNT ON ADHOC BASIS WITHO UT ANY RATIONALE. HE DISALLOWED 1/366 OF THE ENTIRE EXPENDITURE OF ` 1 80 571 CRORES AND DISALLOWED THE AMOUNT AT ` 50 74 205/- WITHOUT CONSIDERING NATURE OF ITA NO. 4741/MUM/2008 M/S. PETROCON INDIA LTD. 8 EXPENDITURE AND RATIOS OF ADJUSTMENTS ALREADY MADE . IN OUR VIEW THE ORDER OF THE CIT(A) DOES NOT REQUIRE ANY INTERFERENCE AS IT HAS REASONABLY CONSIDERED VARIOUS PARAMETERS IN DISALLOWING THE AM OUNT PERTAINING TO ADMINISTRATIVE AND GENERAL EXPENSES OF ONE DAY. THE GROUND IS REJECTED. 16. GROUND NO. 5 PERTAINS TO THE CLAIM OF TDS PERTAININ G TO THE PROPORTIONATE INTEREST TO VIDEOCON INDUSTRIES. THE A.O. HAS NOT GIVEN CREDIT TO TDS OF ` 1 22 183/-. THE CIT(A) CONSIDERED THE SUBMISSIONS A ND DIRECTED THE A.O. TO ALLOW TDS. THE SUBMISSIONS AND THE FIND INGS OF THE CIT(A) ARE AS UNDER: - 8.1 IT WAS SUBMITTED THAT THE ASSESSING OFFICER HA S ALSO ERRED IN NOT GIVING THE CREDIT FOR THE TDS OF RS.1 22 183/- WORKED OUT BY HIM ON THE INTEREST INCOME OF RS.5 96 014/- WHICH HAS B EEN REDUCED IN THE REVISED RETURN OF INCOME DUE TO THE AMALGAMATIO N OF THE COMPANY W.E.F. 31 ST MARCH 2004. HE HAS NOT EVEN GIVEN THE DIRECTIONS F OR GRANTING THE CREDIT OF THE SAID AMOUNT OF TDS IN TH E HANDS OF AMALGAMATED COMPANY WHERE THE INCOME HAS BEEN INCLU DED. 8.2 I HAVE CONSIDERED THE SUBMISSIONS MADE OF THE A PPELLANT AND THE FACTS OF THE CASE. IT IS LOGICAL THAT THE ASSES SING OFFICER SHOULD ALLOW CREDIT TDS OF RS.1 22 183/- ON THE INTEREST I NCOME OF THE APPELLANT COMPANY. I THEREFORE DIRECT THE A.O. TO G RANT THE TDS OF RS.1 22 183/- ON THE INTEREST INCOME. 17. WE DO NOT SEE ANY REASON TO INTERFERE WITH THE DIRE CTIONS AS HE HAS RIGHTLY DIRECTED THE A.O. TO ALLOW THE TDS. TDS HAS TO BE GIVEN CREDIT BY THE A.O. EITHER IN THE HANDS OF THE ASSESSEE OR IN THE HANDS OF THE AMALGAMATING COMPANY. THE DIRECTIONS OF THE CIT(A) DOES NOT REQU IRE ANY MODIFICATION. ACCORDINGLY THIS GROUND IS ALSO REJECTED. 18. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JULY 2011. SD/- SD/- (D.K. AGARWAL) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DATED: 29 TH JULY 2011 ITA NO. 4741/MUM/2008 M/S. PETROCON INDIA LTD. 9 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) XXXII MUMBAI 4. THE CIT III MUMBAI CITY 5. THE DR C BENCH ITAT MUMBAI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT MUMBAI BENCHES MUMBAI N.P.