Income Tax Appellate Tribunal - Chennai
Ashok Leyland Finance Ltd., Chennai vs Acit, Chennai on 15 December, 2017
आयकर अपील य अ धकरण, "डी" यायपीठ, चे नई
IN THE INCOME-TAX APPELLATE TRIBUNAL 'D' BENCH, CHENNAI
ी ए. मोहन अलंकामणी, लेखा सद य एवं ी धु वु आर.एल रे डी, या यक सद य के सम
Before Shri A. Mohan Alankamony, Accountant Member &
Shri Duvvuru RL Reddy, Judicial Member
W.T.A.Nos.34 and 25/Mds/2017
Assessment Year s :2002- 03 & 2001-02
M/s. Ashok Leyland Finance Ltd. The Assistant Commissioner of
(Now) IndusInd Bank Limited, Vs. Income Tax, Company Circle 1(1),
115/116, G.N. Chetty Road, T. Nagar, 121 Mahathma Gandhi Road,
Chennai 600 017. Nungambakkam, Chennai 600 034.
[PAN: AAACA4656P]
(अपीलाथ /Appellant) ( यथ /Respondent)
अपीलाथ क ओर से / Appellant by : Shri R. Vijayaraghavan, Advocate
यथ क ओर से/Respondent by : Mrs. S. Vijayaprabha, JCIT
सुनवाई क तार ख/ Date of he a ring : 16.11.2017
घोषणा क तार ख /Date of Pronoun cement : 15.12.2017
आदेश /O R D E R
PER DUVVURU RL REDDY, JUDICIAL MEMBER:
Both the appeals filed by the assessee are directed against the common order of the ld. Commissioner of Income Tax (Appeals) 5, Chennai dated 17.02.2017 relevant to the assessment years 2002-03 and 2001-02. Besides challenging reopening of assessment for both the assessment years, the assessee also challenged the confirmation of disallowance of 2 W.T.A. Nos.34 & 25/M/17 claim for deduction of debts incurred in relation to the taxable assets from gross wealth.
2. Both the appeals of the assessee are time barred by 25 days in filing the appeals before the Tribunal. The assessee has filed condonation petition in support of affidavit requesting to condone the delay. By referring to the contents therein, the ld. Counsel for the assessee has submitted that the assessee was under bonafide impression that as the CWT(A) had passed a single order for two assessment years, it will be sufficient to file a single appeal against the common order. However, since the assessee was advised to file separate appeals for each assessment years, for preparation of appeal papers, etc. and its filing, the delay was occurred. Thus, the ld. Counsel has submitted that the delay was neither wilful nor wanton and prayed to condone the delay. We have gone through affidavit filed by the assessee and of the opinion that the assessee was prevented by sufficient cause. The ld. DR could not seriously object to condone the delay. Accordingly, we condone the delay of 25 days in filing the appeal and admit the same for hearing.
3. Brief facts of the case are that the assessee filed its return of wealth for the assessment year 2001-02 declaring net wealth of ₹.1,38,60,441/- on 30.10.2001 and for the assessment year 2002-03 declaring net wealth of 3 W.T.A. Nos.34 & 25/M/17 ₹.1,05,28,568/- on 29.10.2002. The Assessing Officer passed order under section 16(3) r.w.s. 17 of the Wealth Tax Act, 1957 ["Act" in short] vide order dated 28.07.2009 determining the total wealth at ₹.7,60,34,579/- for the assessment year 2001-02 and ₹.7,53,44,145/- for the assessment year 2002-03 after disallowing debts incurred in both the assessment years. On appeal, the ld. CIT(A) confirmed the disallowance made by the Assessing Officer.
4. On being aggrieved, the assessee is in appeal before the Tribunal. In the grounds of appeal, the assessee has challenged reopening of the wealth tax assessment was bad in law for both the assessment years. However, during the course of hearing, the ld. Counsel for the assessee has submitted that the assessee is not pressing the ground of reopening of wealth tax assessment and accordingly, the ground raised by the assessee is dismissed as 'not pressed'.
5. The next common ground raised in both the appeals of the assessee is with regard to confirmation of disallowance of debts incurred and claimed as deduction by the assessee. On perusal of the computation of wealth filed by the assessee, the Assessing Officer has observed that the assessee has reduced an amount of ₹. 6,21,74,138/- for the assessment year 2001-02 and an amount of ₹.6,48,15,577/- for the assessment year 2002-03 from the gross assets as debts incurred in relation to the taxable assets. The above 4 W.T.A. Nos.34 & 25/M/17 sum was worked out as a proportion of debt to total funds viz., 80.1%. As per the provisions of section 2(m) of the Act defining "Net Wealth", only the debts owed by the assessee on the valuation date incurred in relation to the said assets are deductible. The assessee has not shown that the amount deducted as debts are incurred in relation to the assets included in the gross wealth. Since the provisions of Wealth Tax Act do not permit a proportionate deduction in the ratio of the debts to total funds of the company, the Assessing Officer issued a notice under section 17 of the Act dated 31.03.2008, which was served on the assessee on 03.04.2008. The assessee, vide its letter dated 10.04.2008 requested that the original return filed be treated as a return filed in response to notice under section 17 of the Act. Subsequently, a notice under section 16(2) of the Act was also issued on 22.04.2008. After considering the submissions of the assessee, the Assessing Officer has observed that as per the provisions of 2(m) of the Act, only debts incurred in relation to the assets forming part of the gross wealth are deductible. However, the assessee has taken the total debts incurred and worked out a proportion of it to claim a deduction against the gross wealth and moreover, the assessee has not shown that such debts have been incurred directly in relation to the assets forming part of the gross wealth. Therefore, the assessee was asked to explain why this deduction should not be disallowed. The assessee vide, its letter dated 07.07.2009, submitted that the assessee has taken working capital loan from a 5 W.T.A. Nos.34 & 25/M/17 consortium of 23 banks for which a charge has been created on all the assets of the company. The assessee's authorised representative explained that the charge on the assets have been created both on movable and immovable properties of the company. He further explained that the vehicles offered as part of gross wealth are also forming part of the movable property of the company which has been offered as security for the loan. Therefore he submitted that the debt has to be allowed in working out the wealth tax liability. After considering the submissions of the assessee and on perusal of the agreement of loan entered into by the company with a consortium of banks, the Assessing Officer noticed from the agreement that the loan has been taken only to meet the working capital requirements of the assessee company and not to purchase vehicles. Only debts which have been incurred for the purchase of taxable asset are to be allowed as a deduction. Since the debts have been incurred after the purchase of the taxable assets and moreover, the assets have been purchased without utilising borrowed funds, the debts claimed as deduction was disallowed for both the assessment years.
6. The assessee carried the matter in appeal before the ld. CIT(A). After considering the facts of the case as well as submissions of the assessee, the ld. CIT(A) dismissed the appeals by holding that the debts were not incurred for acquiring the assets.
6 W.T.A. Nos.34 & 25/M/17
7. On being aggrieved, the assessee is in appeal before the Tribunal. By reiterating the submissions as made before the authorities below, the ld. Counsel for the assessee has prayed for deletion of addition made for both the assessment years. On the other hand, the ld. DR strongly supported the orders of authorities below.
8. We have heard both sides, perused the materials available on record and gone through the orders of authorities below. The Assessing Officer has observed that the assessee has not acquired the assets with the borrowed funds for claiming debts as deduction. However, it was the submissions of the ld. Counsel for the assessee that the assessee is engaged in the business of leasing and hire purchase finance and the assets (which are business assets) excluded from net wealth were acquired only out of credit facilities from banks or out of other borrowings such as commercial papers, short term loans and advances, fixed deposits, etc. It was further argued that the assets were neither unproductive assets/ostentatious assets which were acquired out of the above mentioned borrowings but were only business assets purchased by utilizing the said borrowings. Accordingly, in the computation of net wealth, the assessee has reduced the sum from the gross assets as debts incurred in relation to the taxable assets by working out as a proportion of debt to total funds viz., 80.1%. As per the provisions of section 2(m) of the Act defining "Net Wealth", only the debts owed by the 7 W.T.A. Nos.34 & 25/M/17 assessee on the valuation date incurred in relation to the said assets are deductible.
9. So far as adoption of "proportionate basis" for determination of the debts utilized for acquiring taxable assets is concerned, the same may be accepted, where it is not possible to calculate the amount of debt that was utilized for the purposes of acquiring each of the assets. Admittedly, the assessee is engaged in hire purchase and leasing the vehicles.
"Proportionate basis" for determination of the debt can be adopted if multiple assets were brought under wealth tax. In the computation of wealth, the assessee has declared value of own vehicles as well as value of leased vehicles and no other assets exist or compounded with any other assets so as to find difficult to determine the debt on proportionate basis. Thus, adoption of proportionate basis for determination of the debts does not arise in this case as rightly held by the ld. CIT(A).
9.1 The ld. Counsel for the assessee has vehemently argued that the assessee is not engaged in the business of any manufacturing/trading activity, but dealing in hire purchase and leasing the vehicles. After taking leased vehicles for lease financing, the assessee has borrowed loans from various banks and utilized the funds. There was no finding of the authorities below that the assessee has acquired any other assets by utilizing the borrowed funds. Under the above facts and circumstances, we find no fault if 8 W.T.A. Nos.34 & 25/M/17 the assessee has borrowed the funds for acquiring capital assets, which is exactly, nothing but leased vehicles. However, the assessee has not brought on record and cogent evidences as to whether the borrowed funds were utilized for leased vehicles. From the above, the stated fact is that the assessee has, initially, acquired leased vehicles and thereafter borrowed funds from Banks and utilized. To accept the above contention of the assessee, the assessee is required to file complete details of acquisition of leased vehicles, utilization of borrowed funds for both the assessment years before the Assessing Officer and accordingly, the Assessing Officer is directed to verify the details as may be filed and decide the issue afresh in accordance with law after allowing sufficient opportunity of being heard to the assessee.
10. In the result, both the appeals filed by the assessee are partly allowed for statistical purposes.
Order pronounced on the 15th December, 2017 at Chennai.
Sd/- Sd/-
(A. MOHAN ALANKAMONY) (DUVVURU RL REDDY)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Chennai, Dated, the 15.12.2017
Vm/-
आदेश क त ल प अ े षत/Copy to: 1. अपीलाथ /Appellant, 2. यथ /
Respondent, 3. आयकर आयु त (अपील)/CIT(A), 4. आयकर आयु त/CIT,
5. वभागीय त न ध/DR & 6. गाड फाईल/GF.