Income Tax Appellate Tribunal - Chennai
South India Travels Pvt. Ltd., Chennai vs Department Of Income Tax on 30 November, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
'A' BENCH, CHENNAI
BEFORE SHRI N.S. SAINI, ACCOUNTANT MEMBER AND
SHRI GEORGE MATHAN, JUDICIAL MEMBER
I.T.A. No. 1518/Mds/2011
(Assessment Year : 2005-06)
The A.C.I.T Vs. M/s South India Travels Pvt. Ltd.,
Company Circle VI(3) Mount View, 111, Anna Salai, Guindy
Chennai Chennai 600 0032.
PAN No. AAACS 3792 E
(Respondent)
(Appellant)
Assessee by : Shri Vikram Vijayaraghavan, Advocate
Department by : Shri Shaji P. Jacob, Sr. DR.
Date of Hearing : 30.11.2011
Date of Pronouncement : 30.11.2011
O R D E R
PER N.S. SAINI, ACCOUNTANT MEMBER :
This is an appeal filed by department for the assessment year 2005-06 against the order dated 20.06.2011 of Commissioner of Income Tax [A]-VI, Chennai by taking the following grounds of appeal:
2 I.T.A. No. 1518/Mds/2011
"2.1 The ld. CIT(A) erred in deleting the disallowance of Rs. 3,40,00,000/- made on account of investment in instruments for the purpose of earning dividend income which is exempt u/s 10(34) and interest free loan to other companies out of interest bearing borrowed funds.
2.2 It is submitted that the issue ahs not become final and appeal has been preferred before the Hon'ble Jurisdictional ITAT in the assessee's own case for the Assessment Years 2001-02, 2003-04 & 2004-05 [ITA No. 89/2004-05 dated 16.3.2007, ITA No. 522/2005-06 dated 17.8.2007 & ITA No. 752/2006-07 dated 17.8.2007]."
2. The only issue involved in this appeal is that the ld. CIT(A) erred in deleting the disallowance of Rs. 3,40,00,000/- made on account of investment in instruments for the purpose of earning dividend income which is exempt u/s 10(34) of the I.T. Act, 1961 and interest free loan to other companies out of interest bearing borrowed funds.
3. The ld. CIT(A) has observed that the assessment was completed after disallowing claim of interest of Rs. 3,40,000/- paid 3 I.T.A. No. 1518/Mds/2011 to HDFC Bank on the ground that the assessee has subsequently made investment in instrument for earning dividend exempt from tax u/s 10(34) of the Act and given interest free loan to other companies. The ld. CIT(A) has further observed in his order that during the appeal proceedings, the ld. A.R. filed copy of the orders of the Tribunal for Assessment Years 2001-02 to 2004-05 in ITA No. 1901/Mds/2007 dated 19.9.2008 and ITA Nos. 2413 & 2414/Mds/2007 dated 21.11.2008 wherein, on identical facts for the earlier years, addition made on the same grounds was deleted. Therefore, following the orders of the Tribunal in assessee's own case for earlier years, deleted the disallowance of Rs. 3,40,00,000/-.
4. Being aggrieved by this order of the ld. CIT(A), the Revenue is in appeal before us.
5. We have heard the rival submissions and perused the orders of the lower authorities and the material available on record. We find 4 I.T.A. No. 1518/Mds/2011 that the Tribunal in Assessment Year 2001-02 in ITA No. 1901/Mds/2007 vide order dated 19.9.2008 has held as under:
"4. The ld. counsel for the assessee, on the other hand submitted that Shri AL Vadivelu was the Chairman of a company known as MCC Finance Ltd. The Assessee was holding, preferential capital of this sister concern. In those days many finance companies were facing problems and even the MCC Finance Ltd. was facing difficulties. In fact, winding up proceedings were initiated against MCC Finance Limited and the Hon'ble Jurisdictional High Court suggested that in any case the depositors should be paid and, therefore, directed that all the allied companies should contribute in making the payments to the deposit holders. He then filed copies of Bank Drafts and pointed out that drafts were directly made in the name of Registrar General of High Court of Madras. He submitted that the amounts were directly. deposited with the High Court and since NCC Finance Ltd., was facing winging up proceedings, the Assessee company could not have entered into any agreement or transaction with that company and, therefore, these amounts were debited in the name of AL Vadivelu. He argued that amounts were advanced to the benefit of AL Vadivelu but the amounts were lent to MCC Finance Ltd that too on the business, thus 5 I.T.A. No. 1518/Mds/2011 eligible to deduction under s. 37(1). The connotation of the term "wholly and exclusively for the purposes of business~ as contained in s. 37(1) does not require that an expenditure must be incurred our of necessity. Even if ITC classic had benefited from the expenditure incurred by the assessee, the same could still be allowed as deduction under s. 37(1) in the hands -of the assessee if it can be established that the same was incurred with a view to promote the business needs of the assessee. ITC Classic was entirely dependent on the brand name of "ITC" as would be evident from the explanatory statement annexed with the notice sent to the shareholders of ITC classic for holding the annual general meeting in. 1993, containing the proposal to change the name of the company from Classic Financial Services & Enterprises Ltd to ITC Classic Finance L td, wherein it was Stated that the change in the name signified a greater and more focused commitment of the ITC brand to the said company. The management of the assessee considered that the closure of ITC classic would have had tremendous negative impact on the several investors who had put money in the said company on the assurance of the same being associated with the brand name ITC and accordingly the business fraternity as a whole would have lost faith in the brand image of ITC of 6 I.T.A. No. 1518/Mds/2011 which the assessee was the flag-bearer which would have affected the general business of the assessee and accordingly, assistance in reviving ITC Classic would have protected the assessee's standing as a promoter and a premier Indian enterprise and accordingly further its business interests in the long run. It is a settled principle of law that business or commercial expediency in the matter of incurring expenditure must be decided from the perspective of the assessee. Judged from the said principle, the decision of the assessee's management in incurring the expenditure with a view to protect or safeguard its goodwill, was backed by sound logic and the same was bonafide Thus, expenditures incurred by the assessee for the asst. yrs. 1998-99 and1999-2000 amounting to Rs. 52.79 crores and Rs. 2.02 crores, respectively should be allowed as deduction under s. 37(1) while computing the business profits for the said assessment years, having been laid out wholly and exclusively for the purposes of the business of the assessee and also being in the nature of revenue expenditures - CIT vs. Delhi Safe Deposits Co. Ltd (1982) 26 CTR (SC) 411: (1982) 133 ITR 756 (SC) CIT vs. National Bank Ltd (1966) 62 ITR 638 (SC) Sassoon David & Co: (P) Ltd vs. CIT (1979) 10CTR (SC) 383:
(1979)118 ITR 261 (5C) and Lawson Johnson 7 I.T.A. No. 1518/Mds/2011 Matthey PIc (1994) 209 ITR 761 (HL) relied on: CIT Vs. Sir Hami M. Mehta (1943) 11 ITR 142 (Bom) distinguished.
Following the above decision and particularly in the light of the judgment of the Hon'ble Supreme Court in the case of SA Builders ltd. Vs. CIT [supra], we find nothing wrong with the order of the CIT(Appeals) on this issue and accordingly, the same is confirmed."
6. The ld. D.R. admitted that the facts of the year under consideration are identical with the facts in the case of the assessee for the Assessment Years 2001-02 to 2004-05. The ld. D.R. could not point out any order of any higher authority wherein relief allowed by the Tribunal to the assessee in the earlier years were varied. No good reason could be pointed out by the ld. D.R. as to why the order passed by the Tribunal in the case of the assessee itself in the earlier year should not be followed in this year also. In these circumstances, we do not find any error in the order of the ld. CIT(A) which has been passed after following the orders of the 8 I.T.A. No. 1518/Mds/2011 Tribunal passed in the case of the assessee in earlier years. Therefore, the grounds of appeal of the Revenue are dismissed.
7. In the result, the appeal of the Revenue is dismissed.
Order pronounced in the court at the close of hearing in the presence of the parties on 30th November, 2011.
Sd/- Sd/-
(George Mathan) (N.S. Saini)
Judicial Member Accountant Member
Chennai,
Dated the 30th November, 2011.
VL Copy to: (1) Appellant
(2) Respondent
(3) CIT(A), Chennai
(4) CIT, Chennai
(5) D.R.
(6) Guard file