ACIT 2(3), MUMBAI v. TATA INDUSTRIES LTD, MUMBAI

ITA 5980/MUM/2013 | 2004-2005
Pronouncement Date: 28-09-2016

Appeal Details

RSA Number 598019914 RSA 2013
Assessee PAN AAACT4058L
Bench Mumbai
Appeal Number ITA 5980/MUM/2013
Duration Of Justice 2 year(s) 11 month(s) 19 day(s)
Appellant ACIT 2(3), MUMBAI
Respondent TATA INDUSTRIES LTD, MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 28-09-2016
Appeal Filed By Department
Bench Allotted J
Tribunal Order Date 28-09-2016
Date Of Final Hearing 04-11-2015
Next Hearing Date 04-11-2015
Assessment Year 2004-2005
Appeal Filed On 09-10-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J MUMBAI BEFORE SHRI C.N.PRASAD (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBER) I.T.A. NO.5980/MUM/2013 (ASSESSMENT YEAR: 2004-05) ACIT 2(3) MUMBAI VS M/S TATA INDUSTRIES LTD BOMBAY HOUSE 24 HOMI MODY STREET MUMBAI-1 PAN :AAACT4058L (APPELLANT) (RESPONDENT) APPELLANT BY SHRI SANJAY SINGH CIT-DR RESPONDENT BY SHRI DINESH VYAS SR COUNSEL DATE OF HEARING : 08-09-2016 DATE OF PRONOUNCEMENT : 28 -09-2016 O R D E R PER ASHWANI TANEJA AM: THIS APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (HEREINAFTER CALLED [CIT (A)] DT 29-07-2013 PASSED AGAINST THE PENALTY ORDER OF THE AO U/S 271(1)(C) D T 30-03-2010 FOR A.Y. 2004- 05 ON THE FOLLOWING GROUNDS : ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN IN ALLOWING RELIEF TO THE ASSESSEE TO THE EXTENT I MPUGNED IN THE GROUNDS ENUMERATED BELOW: 1. (I) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE PENALTY U/S 27 1(1)(C) OF THE IT 2 I.T.A. NO.5980/MUM/2013 ACT ON THE DISALLOWANCE OF PROFESSIONAL FEES OF RS. 19 44 000/- PAID TO M/S. S.B. BILLIMORIA & CO. WITHOUT APPRECIA TING THAT FALSE CLAIM OF DEDUCTION WAS DELIBERATE FILING OF I NACCURATE PARTICULARS AND CONCEALMENT OF INCOME AND FURTHER CONCEALMENT OF INCOME COULD NOT HAVE BEEN FOUND IF THERE WERE NO SCRUTINY PROCEEDINGS. (II) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW. THE LD. CIT(A) ERRED IN DELETING THE PENALTY U/S.271(1)(C) OF THE IT ACT ON THE DISALLOWANCE OF PROFESSIONAL FEES OF RS. 19 ) 44 000/- PAID TO M/S. S.B. BILLIMORIA & CO. AND TREATING THE EXPEND ITURE CLAIMED AS REVENUE EXPENDITURE WHEN THE ASSESSEE HAS PAID T HE SUM FOR VALUATION OF SHARES THE INCOME FROM WHICH IS DETER MINED UNDER THE HEAD CAPITAL GAINS. WHENEVER SHARES ARE SOLD. (III) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AN D IN THE LD. CIT(A) ERRED IN DELETING THE PENALTY U/S.271(I) (C) OF THE IT ACT ON THE DISALLOWANCE OF PROFESSIONAL FEES OF RS. 19 44 000/- PAID TO M/S. S.B. BILLIMORIA & CO. WHEN THE QUANTU M APPEAL WAS CONFIRMED ON THE SAID ISSUE. 2 . (I) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW. THE LD. CIT(A) ERRED IN DELETING THE PENALTY U /S.27 I ( 1 )(C) OF THE IT ACT ON THE DISALLOWANCE OF PROCESSING FEES O F RS. 27 50 000/- PAID TO VARIOUS BANKS FOR ACQUIRING TERM LOAN WITH OUT APPRECIATING THE FACT THAT THE EXPENSES ON LOAN WER E CLAIMED BY THE ASSESSEE AS REVENUE EXPENDITURE WHEN THE ASSESS EE FAILED TO EXPLAIN THE PURPOSE OF LOAN. (II) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW THE LD. CIT(A) ERRED IN DELETING THE PENALTY U/S.27 1(I)(C) OF THE IT ACT ON THE DISALLOWANCE OF PROCESSING FEES OF RS. 2 7 50 000/- PAID TO VARIOUS BANKS FOR ACQUIRING TERM LOAN WITHOUT A PPRECIATING THAT THE LOAN FUNDS ARE INVARIABLY UTILIZED FOR THE PURP OSE PROMOTING NEW COMPANIES AND THE SAME CANNOT BE BUSINESS / REV ENUE EXPENDITURE. (III) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW THE LD. CIT(A) ERRED IN DELETING THE PENALTY U /S 271(1)(C) OF THE IT ACT ON THE DISALLOWANCE OF PROCESSING FEE S OF RS.27 50 000/- PAID TO VARIOUS BANKS FOR ACQUIRING TERM LOAN WHEN THE QUANTUM APPEAL WAS CONFIRMED ON THE SAID I SSUE. 3.(I) ON THE FACT AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE PENASLTY U/S 271(1)(C) OF THE IT ACT ON THE DISALLOWANCE OF PROCESSING FEE S OF 3 I.T.A. NO.5980/MUM/2013 RS.4 85 000/- AND TREATING THE EXPENDITURE AS REVEN UE EXPENDITURE AND TREATING THE EXPENDITURE AS REVENU E EXPENDITURE WHEN THE AO HAS CORRECTLY DISALLOWED TH E EXPENSES SINCE THESE WERE INCURRED TO THE NEW BUSIN ESS VENTURE HELD TO BE CAPITAL IN NATURE. (II) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE PENALTY U/S.271(1)(C) OF THE IT ACT ON THE DISALLOWANCE OF PROCESSING FEES O F RS.4 85 000/- AND TREATING THE EXPENDITURE AS REVE NUE EXPENDITURE WHEN THE QUANTUM APPEAL WAS CONFIRMED ON THE SAID ISSUED. 4.(I) ON THE FACT AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE PENALTY U/S.27 1(1)(C) OF THE IT ACT ON THE DISALLOWANCE OF EXCESS CARRIED FORWARD O F LOSS AND NOT ACCEPTING THE BASIS OF FACT THAT NEITHER IN SECTION 10A SECTION 36 NOR THE SECTION IN CHAPTER VI PRESCRIBE ANYWHERE THAT T HE DEDUCTION U/S. 1 OA IS TO BE COMPLETELY REDUCED FROM THE BUSINESS INCOME. (II) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW. THE LD. CIT(A) ERRED IN DELETING THE PENALTY U /S.271(1)(C) OF THE IT ACT ON THE DISALLOWANCE OF EXCESS CARRIED FORWARD OF LOSS WHEN THE QUANTUM APPEAL WAS CONFIRMED ON THE SAID ISSUED. 5. (I) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE PENALTY U /S.271(1)(C) OF THE IT ACT ON DISALLOWANCE OF CLAIM OF RS. 38.84 CR ORE BEING PROVISION FOR DIMINUTION IN VALUE OF INVESTMENTS WR ITTEN BACK FOR THE PURPOSE OF CALCULATION OF BOOK PROFIT U/S I I 5JB WITHOUT APPRECIATING THAT NONE OF THE CLAUSES UNDER EXPLANA TION TO SECTION 1 I5JB PROVIDE FOR REDUCTION OF THE WRITE B ACK OF PROVISION OF INVESTMENTS FROM THE NET PROFITS TO AR RIVE AT THE BOOK PROFIT. (II) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW. THE LD. CIT(A) ERRED IN DELETING THE PENALTY U /S.271(1)(C) OF THE IT ACT ON DISALLOWANCE OF CLAIM OF RS. 38.84 CR ORE BEING PROVISION FOR DIMINUTION IN VALUE OF INVESTMENTS WR ITTEN BACK FOR THE PURPOSE OF CALCULATION OF BOOK PROFIT U/S I I 5JB WHEN THE QUANTUM APPEAL WAS CONFIRMED ON THE SAID ISSUED. (III) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW THE LD. CIT(A) ERRED IN DELETING THE PENALTY U /S.271(1)(C) OF THE IT ACT ON DISALLOWANCE OF CLAIM OF RS. 38.84 CR ORE BEING PROVISION FOR DIMINUTION IN VALUE OF INVESTMENTS WR ITTEN BACK P. 4 I.T.A. NO.5980/MUM/2013 FOR THE PURPOSE OF CALCULATION OF BOOK PROFIT U/S I I5JB WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE HAD NOT CON TESTED AGAINST LEVY OF PENALTY ON THE SIMILAR ISSUE FOR A.Y. 2000-01. 6. (I) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE PENALTY U /S.271(!)(C) OF THE IT ACT ON DISALLOWANCE OF RS. 9 CRORES BEING PROVISION FOR CONTINGENCY WITHOUT APPRECIATING THAT NONE OF THE CLAUSES UNDER EXPLANATION TO SECTION 1 I5JB PROVIDE FOR REDUCTION OF THE WRITE BACK OF PROVISION OF CONTINGENCY FROM THE NET PROFI TS TO ARRIVE AT THE BOOK PROFIT. (II) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE PENALTY U /S.271(L)(C) OF THE IT ACT ON DISALLOWANCE OF RS. 9 CRORES BEING PR OVISION FOR CONTINGENCY WHEN THE QUANTUM APPEAL WAS CONFIRMED ON THE SAID ISSUED. 7. (I) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW. THE LD. CIT(A) ERRED IN DELETING THE PENALTY U /S.271(I)(C) OF THE IT ACT ON DISALLOWANCE OF EXPENDITURE OF RS.22 14 030/- INCURRED FOR ISSUE OF DEBENTURES/BON DS WITHOUT APPRECIATING THAT THE EXPENSES INCURRED WAS CAPITAL IN NATURE AND NOT REVENUE. II. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE PENALTY U/S.27 I (I)(C) OF THE IT ACT ON THE DISALLOWANCE OF PROCESSING FEES OF RS. 2 2 14 030/- INCURRED FOR ISSUE OF DEBENTURES / BONDS WHEN THE QUANTUM APPEAL WAS CONFIRMED ON THE SAID ISSUE. III. ON THE FACT AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LD. CIT(A) ERRED IN DELETING THE PENALTY U/S 27 1(1)(C) OF THE IT ACT ON DISALLOWANCE OF EXPENDITURE OF RS.22 14 030/ - INCURRED FOR ISSUE OF DEBENTURES / BONDS WITHOUT APPRECIATING T HAT FALSE CLAIM OF DEDUCTION WAS DELIBERATE FILING OF INACCUR ATE PARTICULARS AND CONCEALMENT OF INCOME AND FURTHER CONCEALMENT O F INCOME COULD NOT HAVE BEEN FOUND IF THERE WERE NO SCRUTINY PROCEEDINGS. 2. DURING THE COURSE OF HEARING LD. SENIOR COUNSEL O F THE ASSESSEE SUBMITTED THAT IN THIS CASE QUANTUM ORDER HAS BEEN PASSED BY THE TRIBUNAL FOR A.Y. 2004-05 DT 20-07-2016 IN ITA NO. 4894/MUM/2008 WHEREIN MOST OF THE DISALLOWANCES / ADDITIONS MADE BY THE AO HAVE 5 I.T.A. NO.5980/MUM/2013 BEEN DELETED. IT WAS INFORMED THAT THE ADDITIONS / DISALLOWANCES HAVE BEEN DELETED BY THE ASSESSING OFFICER EITHER IN ORD ER PASSED U/S 154 OR IN THE ORDER GIVING EFFECT TO THE APPEAL ORDER. PE R CONTRA LD. DR RELIED UPON THE ORDERS OF THE LOWER AUTHORITIES. WITH THE ASSISTANCE OF BOTH THE PARTIES WE HAVE GO NE THROUGH THE ORDERS PASSED BY THE LOWER AUTHORITIES AS WELL AS T HE ORDER OF THE TRIBUNAL PASSED IN QUANTUM APPEAL AND DECIDE THE GR OUNDS RAISED BY THE REVENUE WITH RESPECT TO LEVY OF PENALTY ON VARI OUS ADDITIONS / DISALLOWANCES AS UNDER:- 3. GROUND 1: IN THIS GROUND THE REVENUE HAS CHALLENGED THE ACTI ON OF LD. CIT(A) IN DELETING THE PENALTY LEVIED BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF PROFESSIONAL FEE OF RS.1 9 44 000 PAID TO M/S S.B. BILLIMORIA & CO. IT IS NOTED THAT THE AFORESA ID AMOUNT OF PROFESSIONAL FEES WAS DISALLOWED BY THE ASSESSING O FFICER ON THE GROUND THAT IT WAS NOT ALLOWABLE AS BUSINESS EXPENS ES U/S 37. BUT OUT OF THE SAID AMOUNT A SUM OF RS.16 20 000 HAS BEEN DIRECTED TO BE ALLOWED BY LD.CIT(A) IN THE QUANTUM APPELLATE ORDER IN COMPUTING THE CAPITAL GAIN ON SALE OF SHARES OF TATA AUTOCOMP SYS TEMS LTD IN A.Y. 2003-04 VIDE PARA 14 OF HIS ORDER DT 19-01-2007. IT IS FURTHER SHOWN TO US THAT BALANCE SUM OF RS/-3 24 000 HAD BEEN ALLOWE D BY THE ASSESSING OFFICER HIMSELF IN THE ASSESSMENT ORDER FOR A.Y. 20 04-05 IN COMPUTING THE CAPITAL LOSS ON SALE OF SHARES OF AUTOMOTIVE ST AMPING & ASSEMBLIES LTD. UNDER THESE CIRCUMSTANCES WE FIND THAT THOUG H THE EXPENSES WERE DISALLOWED AS BUSINESS EXPENSES BUT THE SAME HAVE BEEN ALLOWED AS EXPENSES WHILE COMPUTING TAXABLE AMOUNT OF CAPIT AL GAINS / LOSS. IT IS FURTHER NOTED BY US THAT ENTIRE CLAIM WAS MADE B Y THE ASSESSEE 6 I.T.A. NO.5980/MUM/2013 MAKING FULL DISCLOSURE AND NO FACTS WERE CONCEALED OR HIDDEN. THOUGH THE DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER AS IN HIS OPINION THESE EXPENSES WERE NOT ALLOWABLE U/S 37 BUT ULTIM ATELY THESE HAVE BEEN FOUND TO BE ALLOWABLE UNDER THE HEAD CAPITAL GAINS. UNDER THESE CIRCUMSTANCES WE FIND THAT THE LD. CIT(A) HA S RIGHTLY DELETED THE PENALTY. NOTHING WRONG COULD BE POINTED OUT BY THE LD. DR IN THE REASONING GIVEN BY THE LD. CIT(A) AND THEREFORE N O INTERFERENCE IS CALLED FOR IN THE ORDER OF THE LD.CIT(A) AND THERE FORE GROUND 1 IS DISMISSED. 4. GROUND 2: IN THIS GROUND THE REVENUE HAS CHALLENGED THE ACTI ON OF LD. CIT(A) IN DELETING THE PENALTY LEVIED BY THE ASSESS ING OFFICER ON THE DISALLOWANCE OF PROCESSING FEE OF RS 27 50 000/- PA ID TO VARIOUS BANKS FOR ACQUIRING TERM LOANS ETC. IT IS BROUGHT TO OUR NO TICE THAT THIS DISALLOWANCE HAS BEEN DELETED BY THE TRIBUNAL VIDE PARAS 33 & 34 OF ITS ORDER WHICH READS AS UNDER: 33. GROUND NO. 6: DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE H AD PAID PROCESSING FEES FOR ACQUIRING THE TERM LOANS FROM THE BANKS. T HE ASSESSEE CLAIMED THE SAID FEES AS BUSINESS EXPENDITURE. THE AO HOWEV ER HELD THAT THE LOAN FUNDS WERE USED FOR MAKING INVESTMENTS IN GROU P COMPANIES AND FOR PROMOTING NEW COMPANIES HENCE THE PROCESSING FE ES PAID WAS CAPITAL EXPENDITURE. THE LD. DR WHILE RELYING UPON THE PROVISIONS OF SECTION 2 (28) OF THE ACT HAS CONTENDED THAT THE IN TEREST INCLUDES PROCESSING FEES ALSO. 34. WE HAVE ALREADY HELD IN THE EARLIER PARAGRAPHS OF THIS ORDER THAT THE ASSESSEE BEING AN INVESTMENT & FINANCE COMPANY AND A PROMOTER OF NEW COMPANIES AND HAVING INTEREST IN THE BUSINESS O F THESE COMPANIES HAS MADE THE INVESTMENTS FOR BUSINESS PURPOSES FOR HAVING CONTROL OVER THESE SUBSIDIARY AND ASSOCIATED COMPANIES HENCE I N THE LIGHT OF THE PROPOSITION OF LAW LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT PANAJI GOA VS. PHIL CORPN. LTD.(SUP RA) HONBLE DELHI HIGH 7 I.T.A. NO.5980/MUM/2013 COURT IN THE CASE OF EICHER GOODEARTH LTD. VS. CIT (SUPRA) AND THE HONBLE SUPREME COURT IN S.A. BUILDERS VS. CIT (S UPRA) NO INTEREST DISALLOWANCE IS ATTRACTED U/S 36(III) OF THE ACT. O N THE SAME ANALOGY THE PROCESSING FEES PAID BY THE ASSESSEE FOR OBTAINING SUCH LOANS IS ALSO ALLOWABLE AS BUSINESS EXPENDITURE. MORE OVER THE IS SUE IS COVERED WITH THE DECISION OF THE HONBLE SUPREME COURT IN THE C ASE OF INDIA CEMENTS LTD. V. CIT [1966] 60 ITR 52 WHEREIN THE SUPREME C OURT HELD THAT THE EXPENDITURE IN RAISING LOANS OR ISSUING 52 ITA NO.4 894/MUM/2008 DEBENTURES WOULD BE REVENUE IN NATURE IRRESPECTIVE OF WHETHER THE BORROWING IS A LONG TERM OR SHORT TERM ONE. THIS IS SUE IS ACCORDINGLY DECIDED IN FAVOUR OF THE ASSESSEE. THUS FROM THE ABOVE IT IS CLEAR THAT THE DISALLOW ANCE HAS BEEN DELETED. WHEN THE BASIS OF LEVY OF PENALTY NO MORE EXISTS THE PE NALTY ALSO CANNOT SURVIVE ANYMORE AND THEREFORE PENALTY ON THIS ISSUE IS DI RECTED TO BE DELETED. GROUND 2 OF THE REVENUES APPEAL IS DISMISSED. 4. GROUND 3: IN THIS GROUND THE REVENUE HAS CHALLENGED THE ORD ER OF THE LD. CIT(A) IN DELETING THE PENALTY ON THE DISALLOWA NCE OF PROCESSING FEE OF RS.4 85 000/-. IT HAS BEEN STATED BY THE LD. SENIO R COUNSEL THAT THOUGH THE NATURE OF PROCESSING FEE INVOLVED IN THIS GROUND IS SIMILAR AND IDENTICAL TO THE PROCESSING FEE COVERED IN GROUND 2 ABOVE WHICH HAS BEEN HELD TO BE ALLOWABLE BY THE TRIBUNAL BUT INADVERTENTLY THE TRIBUNAL HAS NOT DECIDED THIS ISSUE UNDER SOME ERRONEOUS IMPRESSIONS THAT THIS GROUND WAS NOT PRESSED BEFORE THE TRIBUNAL BY THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT IN ANY CASE NO PENALTY WAS CALLED FOR ON THIS DISALLOWANCE IN VIEW OF THE ORDER OF THE TRIBUNAL DELETING SIMILAR DISALLOWANCE. FURTHER LD. CIT(A) HAS RIGH TLY DELETED THE PENALTY AND NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD.CIT(A ). 5. PER CONTRA THE LD. DR SUBMITTED THAT THE AO HAD DI SALLOWED THESE EXPENSES FOR TWO REASONS- IT WAS CAPITAL EXPENDITU RE AND IN ANY CASE IT WAS PRIOR PERIOD EXPENSES BUT WHILE DELETING THE PENAL TY LD.CIT(A) HAD TAKEN INTO 8 I.T.A. NO.5980/MUM/2013 ACCOUNT ONLY ONE OF THE REASONS I.E. IT WAS CAPITA L EXPENDITURE AND THUS HIS ORDER IS NOT SUSTAINABLE. 6. WE HAVE GONE THROUGH THE ORDER OF THE LD. CIT(A) AS WELL AS THE ORDER OF THE TRIBUNAL ISSUE ON THE ISSUE OF QUANTUM. IT IS NOTED THAT THE TRIBUNAL HAS EXAMINED THE FACTS OF THE CASE AND NATURE OF THESE EXPENSES AND IN THE CASE OF SIMILAR EXPENSES IT WAS FOUND BY THE TRIBUNAL THAT DISALLOWANCE WAS UNJUSTIFIED AND ACCORDINGLY DISALLOWANCE WAS DELETED. IT IS FU RTHER NOTED BY US THAT THE ASSESSEE HAS MADE FULL DISCLOSURE IN ITS P&L ACCOUN T AND RETURN OF INCOME. THE EXPENSE HAS BEEN DISALLOWED ONLY ON THE GROUND THAT IN THE OPINION OF THE ASSESSING OFFICER THE IMPUGNED EXPENSES PERTAINED TO PRIOR PERIOD AND IT WAS CAPITAL IN NATURE WHEREAS THE ASSESSEE SUBMITTED I N DETAIL THAT THE EXPENSES GOT CRYSTALLIZED DURING THE YEAR AND THEREFORE IT PERTAINED TO THE YEAR UNDER CONSIDERATION. FURTHER IT WAS SUBMITTED THAT THE EXPENSE WAS REVENUE IN NATURE AS THE MAIN BUSINESS OF THE ASSESSEE COMPANY WAS TO ASSIST THE OTHER GROUP COMPANIES BY FULFILLING ALL THEIR NEEDS RELAT ED TO FINANCING ETC. THE TRIBUNAL HAS HELD SIMILAR EXPENSES TO BE REVENUE IN NATURE. IN ANY CASE THE DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER DUE TO DIFFERENCE IN OPINION OF THE ASSESSEE AND THE ASSESSING OFFICER. IN OUR VIE W THE EXPLANATION GIVEN BY THE ASSESSEE IS PLAUSIBLE EXPLANATION. MOREOVER T HE EXPENSES HAVE NOT BEEN FOUND TO BE IN-GENUINE OR NON-BONAFIDE. LD. CIT(A ) HAS ALSO EXAMINED THE NATURE OF THE DISALLOWANCE IN DETAIL AND FOUND THAT IT WAS NOT A CASE OF ANY CONCEALMENT OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. AFTER TAKING INTO ACCOUNT ALL FACTS AND CIRCUMSTANCES OF THIS CASE W E FIND THAT THE LD. CIT(A) HAS RIGHTLY DELETED THE PENALTY. NO INTERFERENCE IS CA LLED FOR IN THE ORDER OF THE LD. CIT(A). THUS GROUND 3 IS DISMISSED. 7. GROUND 4 : IN THIS GROUND REVENUE HAS SUPPORTED LEVY OF THE PENALTY ON 9 I.T.A. NO.5980/MUM/2013 THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON A CCOUNT OF EXCESS CARRY FORWARD OF LOSSES. WITH THE ASSISTANCE OF PARTIES IT IS NOTED BY US THAT THE TRIBUNAL HAS DELETED THE DISALLOWANCE MADE BY THE A SSESSING OFFICER VIDE PARAS 40 & 41 OF ITS ORDER WHICH READS AS UNDER:- 40. GROUNDS NO. 11 & 12 : THE ISSUES RAISED VIDE GROUNDS NO.11 & 12 ARE AS TO AT WHAT STAGE THE DEDUCTION UNDER SECTION 10A CAN BE ALLOWED. THE ASSESSEE DEDUCTED THE INCOME FROM ITS ELIGIBLE UNIT U/S SECTION 10A AT THE FIRST STAGE I.E. PRIOR TO THE SE TTING OFF OF THE UNABSORBED BROUGHT FORWARD LOSSES. THE AO HOWEVER HELD THAT THE DEDUCTION AVAILABLE U/S 10 A IS TO BE SET OFF AGAIN ST BROUGHT FORWARD LOSSES. HE ACCORDINGLY SET OFF THE DEDUCTION AVAILA BLE U/S 10A AGAINST THE AVAILABLE UNABSORBED LOSSES AND DISALLOWED THE CARRY FORWARD OF BUSINESS LOSS OF RS. 6.59 CRORES. THE LD. CIT (A) U PHELD THE ACTION OF THE AO IN THIS RESPECT. THE ASSESSEE THUS HAS COME IN APPEAL BEFORE US ON THIS ISSUE. 41. THE LD. A.R. OF THE ASSESSEE AT THE OUTSET HA S STATED THAT THIS ISSUE IS SQUARELY COVERED WITH THE DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. BLACK & VEATCH CONSUL TING PVT. LTD. (2012) 348 ITR 72 (BOM) WHEREIN THE HONBLE BOMBAY HIGH COURT HAS CATEGORICALLY HELD THAT THE DEDUCTION UNDER SECTION 10A HAS TO BE GIVEN AT THE STAGE WHEN THE PROFITS AND GAINS OF BU SINESS ARE COMPUTED IN THE FIRST INSTANCE AND THUS THE BROUGHT FORWARD UNABSORBED LOSSES CANNOT BE SET OFF AGAINST CURRENT PROFIT OF THE SECTION 10A ELIGIBLE UNIT FOR COMPUTING THE INCOME OF THE ASSESSEE. THAT THE UNABSORBED LOSSES HAVE TO BE DEDUCTED ONLY FROM THE PROFIT AVAILABLE AFTER ALLOWING DEDUCTION U/S 10A. THE 54 ITA NO.4894 LD. D.R. HAS NOT BROUGHT ANY DECISION CONTRARY TO THE A BOVE DECISION OF THE HONBLE BOMBAY HIGH COURT. HENCE RESPECTFULLY FOLLOWING THE DECISION OF THE JURISDICTIONAL HIGH COURT THIS ISS UE IS ACCORDINGLY DECIDED IN FAVOUR OF THE ASSESSEE. THUS FROM THE ABOVE WE FIND THAT DISALLOWANCE MAD E BY THE ASSESSING OFFICER HAS BEEN DELETED BY THE TRIBUNAL. THEREFORE THERE IS NO BASIS TO CONTINUE WITH THE PENALTY AND THUS WE FIND THAT THE PENALTY ON T HE SAME HAS RIGHTLY BEEN DELETED BY LD. CIT(A). GROUND 4 IS DISMISSED. 10 I.T.A. NO.5980/MUM/2013 8. GROUND 5 : IN THIS GROUND THE REVENUE HAS CHALLENGED THE ACTI ON OF LD.CIT(A) IN DELETING THE PENALTY LEVIED BY THE ASS ESSING OFFICER ON DISALLOWANCE OF CLAIM OF RS 38.84 CRORES BEING PROVISION FOR DIM INUTION IN VALUE OF INVESTMENT WRITTEN BACK FOR PURPOSE OF CALCULATION OF BOOK PROFITS U/S 115JB OF THE ACT. DURING THE COURSE OF HEARING LD. SENIOR COUNSEL SUBMITTED THAT THIS CLAIM WAS MADE IN THE YEAR UNDER CONSIDERATION BECA USE IN THE EARLIER YEARS DISALLOWANCE ON THIS ISSUE WAS MADE BY THE ASSESSIN G OFFICER WHEN THE PROVISION WAS MADE. THE CLAIM WAS MADE IN THE YEAR UNDER CONSIDERATION IN THE RETURN OF INCOME BY WAY OF A SUBSEQUENT NOTE ST ATING THAT ALLOWBILITY OF THIS CLAIM IS DEPENDENT UPON THE OUTCOME OF THE DIS ALLOWANCE MADE IN THE EARLIER YEAR BY THE ASSESSING OFFICER WHICH HAS BEE N CONTESTED IN THE APPEAL BY THE ASSESSEE. IT WAS INFORMED THAT SINCE RELIEF WA S GIVEN IN EARLIER YEARS THEREFORE THE CLAIM WAS NOT PRESSED IN THIS YEAR. IT WAS CONTENDED THAT SINCE COMPLETE DISCLOSURE HAS BEEN MADE THEREFORE IT WA S CERTAINLY NOT A CASE OF CONCEALMENT OR SUBMISSION OF INACCURATE PARTICULARS OF INCOME AND CLAIM WAS MADE IN GENUINE CIRCUMSTANCES IN A BONAFIDE MANNER THEREFORE PENALTY HAS RIGHTLY BEEN DELETED BY THE LD. CIT(A). 9. PER CONTRA THE LD. DR RELIED UPON THE ORDER OF LD. CIT(A) IN THE QUANTUM APPEAL ON THIS ISSUE. 10. WE HAVE GONE THROUGH THE FACTS OF THIS CASE AND ORD ERS PASSED BY THE LOWER AUTHORITIES. IT IS NOTED BY US WITH THE ASSI STANCE OF THE PARTIES THAT IN THE RETURN OF INCOME WHILE MAKING THIS CLAIM ON ACCOUN T OF PROVISION FOR INVESTMENTS WRITTEN BACK AMOUNTING TO RS.38.84 CROR ES FOLLOWING NOTE HAS BEEN APPENDED IN THE COMPUTATION SHEET:- PROVISION FOR DIMINUTION IN THE VALUE OF INVESTMEN TS WRITTEN BACK HAS BEEN DEDUCTED FOR THE PURPOSE OF CALCULATING TAXABL E PROFITS AS THE 11 I.T.A. NO.5980/MUM/2013 ASSESSING OFFICER IN HIS EARLIER ASSESSMENTS HAS AD DED BACK THE PROVISION FOR INVESTMENTS WHILST CALCULATING TAXABL E INCOME U/S 115JB. THIS ADDITION HAS BEEN APPEALED AGAINST BY THE COMP ANY AND IN THE EVENT THE APPEAL IS UPHELD THE CURRENT DEDUCTION O F RS.38.84 CRORES WILL HAVE TO BE IGNORED. IN SUCH AN EVENT THE TAX ABLE PROFIT WILL INCREASE TO RSA.26 83 64 896/- AND THE TAX PAYABLE THEREON WILL BE RS.2 06 30 550/-. 11. THUS IT TRANSPIRES FROM THE PERUSAL OF THE ABOVE N OTE THAT THE ASSESSEE HAD CONSPICUOUSLY STATED IN THE RETURN ITSELF WHILE MAKING THIS CLAIM THAT THIS CLAIM WAS DEPENDENT UPON THE OUTCOME OF THE APPEAL OF EARLIER YEAR. SINCE RELIEF WAS GIVEN IN EARLIER YEAR THIS AMOUNT BECAM E DISALLOWABLE IN THE YEAR BEFORE US AND THEREFORE IT WAS HELD TO BE RIGHTLY DISALLOWED BY THE AO. BUT IN OUR VIEW IT IS NOT A CASE OF CONCEALMENT OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THE CIRCUMSTANCES WAS SUCH THAT IF ASSESSEE WOULD NOT HAVE MADE THIS CLAIM IN THE IMPUGNED YEAR (THOUGH M ADE ON CONDITIONAL BASIS) AND IF NO RELIEF WOULD HAVE BEEN GIVEN IN THE APPEA L IN EARLIER YEARS THEN ASSESSEE WOULD HAVE LOST THE BENEFIT IN ALL THE YEA RS. THEREFORE KEEPING IN VIEW THE COMPLEXITIES OF THE PROVISIONS OF THE ACT AND INTRICACIES ARISING IN THE PREVAILING FACTS AND CIRCUMSTANCES WE FIND THAT TH E ASSESSEE HAD MADE THE CLAIM IN MOST TRANSPARENT AND BEFITTING MANNER. UN DER THESE CIRCUMSTANCES IT WILL BE HARSH AND UNJUSTIFIED TO FASTEN THE ASSESSE E WITH THE LIABILITY OF PENALTY. WE FIND THAT THE LD. CIT(A) HAS RIGHTLY DELETED TH E PENALTY BY OBSERVING AS UNDER:- 8.3 THE APPELLANT HAD DEDUCTED AN AMOUNT OF RS. 38 .84 CRORES WHILE COMPUTING THE PROFITS AS PER THE PROV ISIONS OF SECTION 115JB. SINCE THIS AMOUNT WAS DISALLOWED IN EARLIER YEARS AND HENCE WRITTEN BACK AS INCOME IN THE CURRE NT YEAR THE APPELLANT REDUCED THE SAME IN THE COMPUTATION W HILE COMPUTING THE PROFITS UNDER SECTION 115JB. HOWEVER THE AO DISALLOWED THE SAME AND ADDED BACK THE SAID AMOUNT TO THE 12 I.T.A. NO.5980/MUM/2013 INCOME OF THE APPELLANT. THE APPELLANT DID NOT PREF ER ANY APPEAL IN REGARD TO THIS DISALLOWANCE BECAUSE IN EARLIER YEARS THE APPELLANT HAD SUCCEEDED BEFORE THE HIGHER APPELLATE AUTHORITIES. IT IS THUS EVIDENT THAT THE AMOUNT OF RS. 38.84 CRORES HAS BEEN CORRECTLY DISALLOWED BY THE AO AND CONFIRMED BY LD. CIT(A). HOWEVER IT WILL BE SEEN THAT THERE IS NO ELEMENT OF ANY CONCEALMENT OF PARTICULARS OF INCOME OR FURNISHING OF INACCURATE PARTICULARS OF INCOME. THERE IS THEREFO RE NO CASE FOR IMPOSITION OF PENALTY UNDER SECTION 271(1)(C) OF TH E ACT. THE AO IS DIRECTED TO DELETE THE PENALTY LEVIED IN THIS REGAR D. 11.1. FURTHER IT IS NOTED THAT NOTHING WRONG COULD BE P OINTED OUT BY LD. DR IN THE WELL REASONED FINDINGS OF THE LD.CIT(A) THEREF ORE IN VIEW OF THE DISCUSSION MADE BY US IN THE EARLIER PART OF OUR ORDER AND AFO RESAID ORDER OF LD.CIT(A) WE FIND THAT THE PENALTY HAS RIGHTLY BEEN DELETED BY T HE CIT(A) AND NO INTERFERENCE IS CALLED FOR IN THE ORDER OF LD.CIT(A) AND THEREF ORE GROUND 5 OF REVENUES APPEAL IS DISMISSED. 12. GROUND 6: IN THIS GROUND THE REVENUE HAS CHALLENGED THE ACTI ON OF LD. CIT(A) IN DELETING THE PENALTY LEVIED BY THE ASSESS ING OFFICER ON ACCOUNT OF DISALLOWANCE OF RS.9 CRORES BEING THE AMOUNT OF PRO VISION FOR CONTINGENCY. IT IS NOTED WITH THE ASSISTANCE OF THE PARTIES THAT SUBSE QUENT TO THE PASSING OF THE ASSESSMENT ORDER THE ASSESSING OFFICER PASSED AN O RDER U/S 154 DT 31-01-2007 WHEREIN THE AFORESAID ADDITION WAS DELETED. COPY O F THE ORDER PASSED U/S 154 HAS BEEN PLACED BEFORE US AND RELEVANT PORTION OF T HE SAME READS AS UNDER:- C(II) THE ASSESSEE HAS STATED THAT DURING THE YEAR RS.90000000/- WAS WRITTEN BACK ON ACCOUNT OF PROVISION FOR CONTINGENC Y RESULTING IN AN INCREASE IN THE PROFIT BEFORE TAXES; THAT THIS AMOU NT WAS ERRONEOUSLY ADDED BACK U/S 115JB. IT IS SEEN FROM THE RECORDS THAT THE OUT OF THE TOT AL PROVISION OF RS.12 70 00 000/- THE ASSESSEE HAS ALREADY REDUCED RS.90000000/- IN THE PROFIT & LOSS ACCOUNT AND DEBITED THE NET AMOUN T THEREBY 13 I.T.A. NO.5980/MUM/2013 INCREASING THE NET PROFIT AND THE QUANTIFIABLE BOOK PROFIT. THE ADDITION OF RS.90000000/- HAS INCREASED THE PROFITS BY THE AMOUNT NOT CLAIMED AS REDUCTION OF THE INITIAL STAGE. SIN CE THIS IS A MISTAKE APPARENT FROM THE RECORDS THE ADDITION OF RS.90000 000/- MADE TO INCREASE THE BOOK PROFIT IS RECTIFIED AND THE PROVI SION AS PER PARA 16 OF THE ASSESSMENT ORDER U/S 1433)(II) DATED 19/12/2 006 IS NOW RECTIFIED AS RS.NIL. 12.1. THUS IT IS NOTED FROM THE ABOVE THAT THE ADDITION ITSELF HAS BEEN DELETED AND THEREFORE THERE ARE NO BASIS TO CONTINUE WITH THE PENALTY. UNDER THESE CIRCUMSTANCES WE FIND THAT NO INTERFERENCE IS CALL ED FOR IN THE ORDER OF THE LD. CIT(A) WHEREIN PENALTY HAS BEEN DELETED. THUS THI S GROUND IS DISMISSED. 13. GROUND 7: IN THIS GROUND THE REVENUE HAS CHALLENGED THE ACT ION OF THE LD. CIT(A) IN DELETING THE PENALTY BY THE ASSESSING OFFICER ON ACCOUNT OF DISALLOWANCE OF EXPENDITURE OF RS.22 14 030/- INCUR RED FOR ISSUE OF DEBENTURES / BONDS. WITH THE ASSISTANCE OF THE PAR TIES IT IS NOTED BY US THAT THIS DISALLOWANCE HAS BEEN DELETED BY THE TRIBUNAL BY OBSERVING AS UNDER:- 35. GROUND NO. 7: GROUND NO. 7 RELATES TO THE ISSUE OF DISALLOWANCE O F EXPENDITURE IN THE SHAPE OF UPFRONT FEES AND BROKERAGE ETC. PAID F OR ISSUING THE NON- CONVERTIBLE DEBENTURES. THE AO CONCLUDED THAT SINCE THE TERM OF THE DEBENTURES WAS SPREAD OVER TWO YEARS HENCE BENEFIT ARRIVED AT BY THE ASSESSEE WAS OF ENDURING NATURE SPREAD OVER TWO YEARS. THE AO THEREFORE CALCULATED THE EXPENSES PERTAINING TO THE YEAR UNDER CONSIDERATION AND DISALLOWED THE REMAINING EXPENSES . 36. WE FIND THAT THIS ISSUE IS ALSO COVERED WITH TH E DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF INDIA CEMENTS LTD. V. CIT [1966] 60 ITR 52 WHEREIN THE SUPREME COURT HELD THAT THE EXPENDITURE IN RAISING LOANS OR ISSUING DEBENTURES WOULD BE REVENU E IN NATURE IRRESPECTIVE OF WHETHER THE BORROWAL IS A LONG TERM OR SHORT TERM ONE. IT WAS HELD THAT THE ACT OF BORROWING MONEY WAS INC IDENTAL TO THE CARRYING ON OF BUSINESS THE LOAN OBTAINED WAS NOT AN ASSET OR AN ADVANTAGE OF ENDURING NATURE THE EXPENDITURE WAS M ADE FOR SECURING THE USE OF MONEY FOR A CERTAIN PERIOD AND IT WAS IRRELEVANT TO 14 I.T.A. NO.5980/MUM/2013 CONSIDER THE OBJECT WITH WHICH THE LOAN WAS OBTAINE D. THIS ISSUE IS ACCORDINGLY DECIDED IN FAVOUR OF THE ASSESSEE. 13.1. THUS IT IS NOTED FROM THE ABOVE THAT THE DISALLOW ANCE ITSELF HAS BEEN DELETED BY THE TRIBUNAL. UNDER THE CIRCUMSTANCES WE DO NOT FIND ANY JUSTIFICATION TO CONTINUE WITH THE PENALTY AND THE REFORE HOLD THAT THE SAME HAS RIGHTLY BEEN DELETED BY THE LD. CIT(A). GROUND 7 IS ACCORDINGLY DISMISSED. 14. AS A RESULT APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON THIS 28 TH DAY OF SEPTEMBER 2016. SD/- SD/- (C.N. PRASAD) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI DT: 28 TH SEPTEMBER 2016 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE J -BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR ITAT MUMBAI BENCHES