Income Tax Appellate Tribunal - Hyderabad
Pvp Ventures Ltd. Hyderabad, Hyderabad vs Dcit, Circle-2(3), Range-2, ... on 30 December, 2016
THE INCOME TAX APPELLATE TRIBUNAL
HYDERABAD BENCH "B", HYDERABAD
BEFORE SHRI J SUDHAKAR REDDY, ACCOUNTANT MEMBER
AND SMT P. MADHAVI DEVI, JUDICIAL MEMBER
ITA No. 637/Hyd/2016
Assessment Year: 2007-08
M/s PVP Ventures Pvt., Ltd., vs. DCIT, Circle -2(3)
Hyderabad Hyderabad
PAN -
AAACS3101P/AADCP9954C
(Appellant) (Respondent)
Assessee by : Shri B.Rama Krishna (AR)
Revenue by : Shri K.J. Rao (DR)
Date of hearing: 10-11-2016
Date of pronouncement : 30-12-2016
ORDER
PER P. MADHAVI DEVI, J.M.:
This is assessee's appeal against the order of the CIT(A)-2, Hyderabad, dated 29-02-2016. The CIT(A) had passed the order confirming the consequential order dated 08-08-2014 passed by the A.O. modifying the order passed u/s 147 of the Act for the A.Y 2007-08, while giving effect to order of the ITAT in ITA No. 647/Hyd/2014 dated 24-05-2013.
2. Brief facts of the case are that the assessee company, engaged in the business of development of urban infrastructure, filed its return of in income for the assessment year 2007-08 on 31-10-2003, declaring total income of Rs. Nil. The assessment u/s 143(3) of the Act, was completed on 29-12-2009, assessing the income at Rs. 10,61,71,360/-, being interest received / accrued on debentures. Subsequently, the case was reopened u/s 147 of the Act, and the assessment was completed after adding interest accrued on debentures to the tune of Rs. 50,94,958/-, and also bringing to tax the share premium of Rs. 7,73,27,003/-. The ITA No.637/Hyd/2016 M/s PVP Ventures Ltd.
assessee carried the matter in appeal before the CIT(A) and also before the ITAT, both against the original proceedings as well as re- assessment proceedings. The ITAT vide its order dated 24-05-2013 has directed the A.O. to allow proportionate interest out of Rs. 5,30,31,148/- paid to M/s Platex Ltd, and also the incidental expenditure that might have been incurred towards legal and corporate expenditure allowable u/s 57(1)(iii) of the Act. The Relevant portion of the ITAT order at para 12 is reproduced hereunder for ready reference:
"12 Af ter considering the rival submissions, we are of the opinion that both the A.O. and the CIT(A) erred in not considering the allowance of expenditure, which has a direct nexus with the investments made in subsidiary companies by way of redeemable non-convertible debentures. Out of Rs/ 508.72 cores received from M/s Platex Ltd. Mauritius f rom issue of 14.5% redeemable fully convertible debentures of R/1 lakh each, assessee has invested Rs/ 410.85 crores in subsidiaries as stated earlier. As there is direct nexus to the invest earned, which was brought to tax, assessee's claim of for corresponding proportionate interest and incidental expenditure has to be allowed, not only on f acts, but also under the provisions of S.57. Accordingly, we allow ground No. 11 and 12 of the assessee, and direct the Assessing officer to allow proportionate interest, out of Rs/ 5,30,31,148, paid to M/s Platex Ltd. and also any other incidental expenditure that might have been incurred towards legal and corporate expenditure allowable under S.57(1)(iii) of the Act."
3. In compliance and to give consequential effect to the order of the ITAT, the A.O. required the assessee to furnish the necessary information. On perusal of the information furnished by the assessee, the A.O. noticed that the assessee company has invested in the debentures of M/s New Cyber City Projects Pvt. Ltd. and M/s PVP Ventuers Ltd (Now M/s PVP Ventures Pvt. Ltd) and interest accrued to the assessee company therefrom. Regarding the proportionate interest and the proportionate advisory fee to be allowed, the assessee submitted its workings. On perusal of the claim of the assessee, the A.O. noticed that the investments made by the assessee company on which the interest of Rs.
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10,61,71,760/-, had accrued to the assessee was made in the months of January & February 2007, where as the assessee has received the same from M/s Platex Ltd., towards investments in debentures to the extent of Rs. 132.89 crores only before it made the investments and the remaining amount of Rs. 277.96 crores was received by the assessee company in the month of march 2007, i.e. after the assessee made investments in the debentures of the three companies. Therefore, the A.O. allowed the proportionate expenditure on debentures amounting to Rs. 132.89 crores only which were allotted by the assessee company to M/s Platex Ltd., on 22-03-2007. Aggrieved, assessee preferred an appeal before the CIT(A) contending that the entire funds from M/s Platex Ltd., were received by the assessee company on 26-06-2007 itself and therefore, the finding of the A.O. that the assessee has received the investments from M/s Platex Ltd. to the extent of Rs. 227.96 crores in the month of March 2007, is not correct. It was also brought to the notice of the CIT(A) that the date of allotment of debentures cannot be considered as the date on which the assessee has received the investment. The CIT(A), however, confirmed the order of the A.O. The assessee is in second appeal before us.
4. The ld counsel for the assessee submitted that the premise on which the A.O. has allowed the proportionate interest and expenditure to the extent of Rs. 132.89 crores, is that the remaining amount of Rs. 277.96 crores was received by the assessee company in the month of March 2007 and the basis for coming to this conclusion is the date of allotment of debentures i.e. 22-03-07, whereas the assessee has received all the amounts before 26-02-2007. In support of these contentions, the assessee has also filed before us the copy of the bank statement showing the entries in the bank a/c for the funds received and the payments Page 3 of 5 ITA No.637/Hyd/2016 M/s PVP Ventures Ltd.
made towards subscription of debentures. Ledger extracts of books of accounts for the same are also included in the paper book.
5. The Ld. DR are however, supported the orders of the authorities below.
6. Having regard to the rival contentions and the material placed on record, we find that the ITAT in the earlier proceedings has already held that there is a direct nexus between the interest income received and the interest expenditure and the incidental expenditure incurred by the assessee and has directed the A.O. to allow the proportionate expenditure. The A.O. has taken the date of allotment of debentures by the assessee as the date of receipt of the funds from M/s Platex Ltd. However, as seen from the copy of the bank statement, the assessee has received the entire fund from M/s Platex Ltd., before 26-02-2007, and assessee has also made the investments in debentures of the companies before 26-02-2007. Therefore, there is a clear nexus between the interest income earned and the interest expenditure incurred by the assessee. Therefore, we are of the opinion that the A.O. and CIT(A) have erred in allowing the proportionate expenditure only to the extent of Rs. 132.89 crores. In view of the same, we deem it fit and proper to remit this issue to the file of the A.O. with a direction to recalculate the proportionate interest and expenditure to be allowed on the entire investments made by the assessee and to allow the same.
7. In the result the assessee's appeal is allowed.
Order pronounced in the Open Court on 30 th December, 2016.
SD/- SD/-
(J. SUDHAKAR REDDY) (P. MADHAVI DEVI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, Dated: 30 th December, 2016
krk
Page 4 of 5
ITA No.637/Hyd/2016
M/s PVP Ventures Ltd.
Copy to:-
1) M/s PVP Ventures Ltd.,, Plot No. 83 & 84, 4 th Floor, Punnaiah Plaza, Road No. 2, BanjaraHills, Hyd -34
2) DCIT, Circle-2 (3) Hyderabad.
. 3) CIT ( Appeals)-2, Hyderabad
4) The PCIT-2, Hyderabad
5) The Departmental Representative, I.T.A.T., Hyderabad.
6) Guard File Page 5 of 5