9911796707
TMI Blog2018 (7) TMI 1082X X X X Extracts X X X X X X X X Extracts X X X X ..... equisite balance sheet, only stating that the issue is covered by the decision of Tribunal and Hon’ble High Court. We are, therefore, unable to ascertain whether the loans given by the assessee during the year under consideration were out of owns funds or from borrowed funds. Therefore, we deem it expedient in the interest of justice that this matter should go back to the file of the AO to decide the issue afresh after due verification, as observed above from the books of assessee. Similar is the position with respect to the disallowance of interest made by A.O. of ₹ 26,86,443/- on the expenditure incurred by assessee as capital work in progress of ₹ 2,23,87,021/-. This expenditure also needs verification to the extent whether this amount was expended by the assessee out of own funds or out of borrowed funds. Therefore, this issue is also sent back to the Assessing Officer for deciding the same afresh after due verification. - ITA Nos. 5660 And 5661/Del/2015 - - - Dated:- 12-7-2018 - Shri Amit Shukla, Judicial Member And Shri L.P. Sahu, Accountant Member For The Revenue : Shri R.M. Mehta, C.A. For The Assessee : Shri Sujit Kumar, Sr. DR ORDER ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3. The brief facts of the case are that the assessee filed its return of income on 12.10.2010, which was subsequently revised on 05.04.2011 30.01.2012, declaring total income at ₹ 41,71,52748/-. In the assessment proceedings, the AO observed that the assessee has advanced to its subsidiary/fellow subsidiary, a sum of ₹ 102.69 crores odds. These loans include the following loans : (i) Loan to subsidiary Rs.14,55,00,000/- (ii) Loans to fellow subsidiary Rs.6,41,69,218/- Total : Rs.20,96,69,218 The Assessing Officer observed from schedule-21 of financial expenses that the assessee company had paid huge interest amounting toRs.1,40,54,902/-. In view of this, the Assessing Officer asked the assessee to show cause why the provisions of section 36(1)(iii) of the Act should not be invoked as the assessee on one hand was paying huge interest on loan and on the other hand has made advances to subsidiary and fellow subsidiary without charging any interest. The assessee submitted the details of loa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the same name was formed at Chandigarh on 11.11.1999. Whereas the Delhi society had charitable objects and its income was exempt u/s 10(21), the Chandigarh society did not have the object of relief to the poor. Both the societies merged on 01.04.2000. On 30.05.2000 Chandigarh society was registered as a company, namely, Escorts Heart Institute and Research Centre Ltd. Upon such conversion, the assets of the erstwhile Chandigarh and Delhi societies came to be considered as the assets of the assessee company. The assessee claimed depreciation, inter alia, on the assets acquired from Delhi Society. The Assessing Officer opined that since full deduction of the cost of these assets was allowed as application of income u/s 11 of the Act, the written down value of this asset in the hands of the society was only a notional book value. The Assessing Officer canvassed a view that by taking over of the assets and liabilities of the Society on the book value of these assets, an artificial enhanced value of these assets was shown by the assessee company on which the depreciation could not be allowed. The Assessing Officer, therefore, disallowed the depreciation on such assets amounting to ͅ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de order dated 18.04.2017. The findings reached by the Tribunal read as under : 4. We have heard both the sides and perused the relevant material on record. There is no dispute on the fact that a sum of ₹ 2.84 crore was given as share application money. This amount was given in an earlier year and for this year, it was an opening brought forward balance. It is a matter of record that no disallowance of interest has been made in any of the earlier years on such money given to subsidiary companies. Once it has been accepted in the earlier years that this money was not given out of any interest free funds, a new case cannot be set up in the instant year, as it would impliedly reverse the settled position in earlier years in this regard. Going by the rule of consistency, we hold that no disallowance is warranted to this extent. As regards the major amount of interest free loan of ₹ 24.19 crore, we find that the assessee obtained fresh loan amounting to ₹ 32.78 crore during the year which was utilised for specific business purpose, namely, acquisition of fixed assets. As against the interest free loans amounting to ₹ 24.19 crore given by the assessee to its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee was left with no reserve or own funds for making investment in the sister concern. Thus, it was argued that the borrowed funds had been utilized for the purpose of making investment in the sister concern and the disallowance of interest was rightly called for. The Tribunal, on appreciation of facts, recorded a finding that the assessee had sufficient funds of its own for making investment without using the interest bearing funds. Accordingly, the order of CIT(A) was upheld. When the matter came up before the Hon ble High Court, it was contended by the Department that the shareholders funds stood utilized in the purchase of fixed assets and hence could not be construed as available for investment in sister concern. Repelling this contention, the Hon ble High Court observed that : In our opinion, the very basis on which the Revenue had sought to contend or argue their case that the shareholders fund to the tune of over ₹ 172 crore was utilized for the purpose of fixed assets in terms of the balance-sheet as on March 31, 1999, is fallacious. In upholding the order of the Tribunal, the Hon ble High Court held that : If there be interest free funds available to an asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ehi) is not relevant in view of the fact the addition has been instantly deleted because of the availability of surplus interest free funds available with the assessee and not on account of the user of funds for business or nonbusiness purpose. 8. The only other ground raised in this appeal is against the deletion of disallowance of depreciation amounting to ₹ 1,00,30,472/- on assets which were received without any consideration. The facts apropos this ground are that a society in the name of Escorts Heart Institute and Research Centre was formed at Delhi on 21.10.1981. Another society with the same name was formed at Chandigarh on 11.11.1999. Whereas the Delhi society had charitable objects and its income was exempt u/s 10(21), the Chandigarh society did not have the object of relief to the poor. Both the societies merged on 01.04.2000. On 30.05.2000 Chandigarh society was registered as a company, namely, Escorts Heart Institute and Research Centre Ltd. Upon such conversion, the assets of the erstwhile Chandigarh and Delhi societies came to be considered as the assets of the assessee company. The assessee claimed depreciation, inter alia, on the assets acquired from De ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as held that insertion of subsection (6) to section 11 is prospective and, hence, no disallowance on account of depreciation can be made in years prior to the assessment year 2015-16. 12. It is noticed that the Hon ble Delhi High Court in an earlier case in DIT (Exemption) vs. Charanjiv Charitable Trust (2014) 267 CTR 305 (Del) vide its judgment dated 18th March, 2014 has held that depreciation is not allowable in respect of assets, cost of which was earlier allowed as deduction as application of income of trust. However, the Hon ble Delhi High Court vide its later judgment dated 18th November, 2014 in Indraprastha Cancer Society (supra) has held that Capital assets purchased by charitable institution and treated amount spent on purchase of capital asset as application of income, were entitled to claim depreciation on same capital asset utilised for business. Thus, the judgment in Indraprastha Cancer Society (supra), being latest in the point of time and also considering amendment to section 11(6), has more binding force. As the assessment year before us is 2008-09, the ratio of the decision in the Indraprastha Cancer Society (supra) would apply enabling the assessee to claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as the question on account of depreciation rule is concerned, the Court notices that firstly, similar disallowances were not permitted - when re-assessment was sought to be made. 8. Furthermore, such depreciation is also permissible in accordance with the principles enunciated in CIT versus Sheth Manilal Ranchhoddas Vishram Bhavan Trust, 198 ITR 598(Guj.) and other subsequent decisions. 9. In the light of the foregoing discussions, this Court is of the opinion that no substantial question of law arises. 12. Respectfully following the above decisions, Grounds Nos. 1 3 for A.Y. 2010-11 and ground No. 3 of A.Y. 2011-12 of the Revenue are dismissed. 13. Adverting to ground No. 2, We find that the ld. CIT(A) has discussed and examined this issue in detail. The findings reached by the ld. CIT(A) in the impugned order read as under : I have considered the submissions of the appellant as well as the findings of the Ld. A.O. Keeping into consideration the various case laws of the higher appellate authorities and the Hon'ble Courts, I found that the Ld. AO is not justified for making the disallowance of ₹ 12,07,349/- out of interest corresponding to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 15. Coming to ground No. 1 2 in appeal for the assessment year 2011-12, we observe that the Assessing Officer has calculated the interest of ₹ 1,05,00,000/- on the loans outstanding as on 31.03.2011 of ₹ 8,75,00,000/-, which was given to Amritsar Subsidiary. From the perusal of assessment order for A.Y. 2010-11, we observe that the Assessing Officer has himself accepted that the loan of ₹ 12,75,00,000/- was given out of assesee s own funds to Amritsar Subsidiary and was outstanding as on 31.03.2010. The Assessing Officer had not applied the provisions of section 36(1)(iii) in A.Y. 2010-11. However, on perusal of the details of loans given to Subsidiaries, submitted at page 9 of the paper book, we find that there was opening balance of ₹ 12,75,00,000/- of Amritsar subsidiary and the assessee has given fresh loan during the year to the tune of ₹ 3,50,00,000/-. The assessee is also shown to have received the loans back during the year to the extent of ₹ 7,50,00,000/-. As such there was a closing balance as on 31.03.2011 of ₹ 8,75,00,000/-. In view of these facts, the Assessing Officer has invoked the provisions of section 36(1)(iii) on t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... However, the ld. AR did not agree to produce the requisite balance sheet, only stating that the issue is covered by the decision of Tribunal and Hon ble High Court. We are, therefore, unable to ascertain whether the loans given by the assessee during the year under consideration were out of owns funds or from borrowed funds. Therefore, we deem it expedient in the interest of justice that this matter should go back to the file of the AO to decide the issue afresh after due verification, as observed above from the books of assessee. Similar is the position with respect to the disallowance of interest made by A.O. of ₹ 26,86,443/- on the expenditure incurred by assessee as capital work in progress of ₹ 2,23,87,021/-. This expenditure also needs verification to the extent whether this amount was expended by the assessee out of own funds or out of borrowed funds. Therefore, this issue is also sent back to the Assessing Officer for deciding the same afresh after due verification. Needless to say, the assessee shall be given reasonable opportunity of being heard. Accordingly, grounds Nos. 1 2 of appeal for A.Y. 2011-12 deserve to be allowed for statistical purposes. 17. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
