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TMI Blog2018 (8) TMI 1136X X X X Extracts X X X X X X X X Extracts X X X X ..... vocates ORDER Per L.P. Sahu, A.M.: This is an appeal filed by the assessee against the order of ld. CIT(A)-18 New Delhi dated 30.06.2014 for the assessment year 2011-12 on the following grounds : 1. Whether on the facts and circumstances of the case in law, the Ld. CIT(A) erred in deleting the disallowance of ₹ 3,78,40,423/- made by the AO on account of that the assessee has given interest free loans to its subsidiary company? 2. Whether on the facts and circumstances of the case in law, the Ld. CIT(A) erred in deleting the disallowance of ₹ 49,54,769/- made by the AO on account of Section 14A.w.rule 8D? 3. Whether on the facts and circumstances of the case in law, the Ld. CIT(A) erred in deleting the disallowances of ₹ 15,85,,719/- made by the AO on account of depreciation claimed being 40% on Aircraft as the Aircraft was currently not in use.? 4. Whether on the facts and circumstances of the case in law, the Ld. CIT(A) in deleting the disallowances of ₹ 4,95,74,440/- made by the AO on account of unpaid operational charges to M/s ONGC.? 5. Whether on the facts and circumstances of the case in law ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Assessing Officer further found from the schedule of fixed assets and depreciation that the assessee has claimed 40% depreciation on its Air Craft amounting to ₹ 15,85,719/-. In this regard, the assessee submitted that presently, the Air Craft is not in running condition and also not fetching any income. The Air Craft is kept for sale, but no buyer was available despite all efforts. The assessee has not shown any income from operating of the aircraft. Therefore, the depreciation claimed on the said aircraft was disallowed and added to the income of the assessee. 5. The Assessing Officer further observed that the assessee had claimed expenses of ₹ 4,95,74,440/- on account of unpaid operational charges to M/s. ONGC. In this regard, the assessee submitted complete ledger account of such expenses. The assessee further submitted written reply, but the Assessing Officer was not convinced therewith. The Assessing Officer noted that no such expenses were debited in earlier years although business of the assessee remained the same with ONGC. He accordingly disallowed the entire operational charges claimed and added the same to the total income of the assessee. 6. It was f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on of the assessee on the ground that the assessee's ship Deepsea Matdrill is not a ship but a drilling rig which is not covered under the definition of qualifying ships as the same is an offshore installation. It was also held that the ship was not registered under the Merchant Shipping Act, 1958 and assessee's main object of business was not carrying on the business of the operation of the ships It was also seen that the assessee did not have the license which was to be Issued by the Director General of Shipping under section 407 of Merchant Shipping Act, 1958. On this issue the assessee preferred an appeal before Ld CIT (A) who vide order dated 16.3.2007 in appeal no. 44/2006-07 allowed the appeal of assessee and directed the AO to consider the rigs as 'qualifying ships' under section 115VD of the Income Tax Act and allow its application for exercising option for tonnage tax scheme u/s 115VP/115VR of the Act. Aggrieved with the order of Ld. CIT(A), the revenue preferred an appeal before Hon'ble ITAT who has however vide order dated 20.112009 in ITA no. 2979/Del of 2007 dismissed the appeal of revenue Now the revenue has preferred an appeal before Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ough the entire material available on record and we find that most of the issues involved in this appeal are covered in favour of the assessee by various decisions of Tribunal and Delhi High Court. 13. As far as the first issue regarding disallowance of notional interest on interest free loans given to subsidiary company, we find that this issue has been settled by the Tribunal in assessee s own case for the assessment year 2010-11 vide order dated 11th May, 2018. The relevant observations of the Tribunal read as under : 12. Ground No. 1 by the Revenue reads as under :- Whether on the facts and circumstances of the case, the learned CIT (Appeals) erred in deleting proportionate disallowance of interest of ₹ 2,53,61,633/- on account of advancing of interest free loans to sister concern ? 12.1 Facts of the case, in brief, are that during the course of assessment proceedings the Assessing Officer observed that assessee has given interest free loans to its subsidiary company M/s. Jagson Airlines Ltd. of ₹ 26,38,69,280/-. Since these funds are interest bearing in nature and the assessee has incurred financial charge of ₹ 2,53,61,633/- the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en advance from Jagson Airlines Ltd for the business purposes whenever required. M/s. Jagson Airlines Ltd has never charged any interest on such advances. Further, it is also not in dispute that the assessee has incurred financial charges of ₹ 2,53,61,633/- during the year under consideration. It is also seen from the Annexure B that more than 69% shares in Jagson Airlines Ltd belong to the assessee company and assessee company also given its Aircrafts to M/s Jagson Airlines Ltd on lease. 3.4 I find that the Assessing Officer has disallowed the interest on loans without recording Ist any finding to the effect that the loans on which interest was paid by the assessee was diverted by the assessee for providing interest free advances to its sister concerns. It is not the case that the interest free funds available with the assessee were not sufficient to advance interest free money in question to its sister concerns as the appellant company has shown a profit of ₹ 38,97,52,337/- which was sufficient to advance the money to its sister concern. The Assessing Officer has failed to appreciate that the assessee company is a major investor in Jagson Airlines Ltd and they ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsideration. Referring to the decision of Hon ble Delhi High Court in the case of Punjab Stainless Steel Ltd. Vs. CIT reported in 324 ITR 396 (Del.) he submitted that the onus is on the assessee to establish the commercial expediency. He submitted that the learned CIT (Appeals) in para 4.4 of his order has shifted this onus to the Assessing Officer regarding the establishment of nexus between interest free funds and amount of advance which is not correct. Without prejudice to the above he submitted that the profit accrues on the last day of the financial year and cannot be a source of loan advanced during the year. He accordingly submitted that the order of the learned CIT (Appeals) not being in consonance with law should be reversed. 12.6 The learned counsel for the assessee, on the other hand, strongly supported the order of the learned CIT (Appeals). He submitted that when the interest free funds available with the assessee are sufficient to advance interest free loan to the sister concerns, therefore, in view of the decision of Hon ble Bombay High Court in the case of CIT Vs. Reliance Utilities and Power Ltd. 2009-TIOL-27- HC-MUM-IT, no disallowance is called for. 12.7 We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4.4 I have gone through the record and perused the material available on record. I find that similar issue arose in Assessment Year 2008-09 dealt by my predecessor and also by me in Assessment Year 2009-10 in appeal No 400/2011-12. The AR of the appellant has produced a copy of the Hon ble Delhi High Court decision in ITA No 1395/2010 in assessee s own case wherein the Hon ble Jurisdictional high court has held that the assessee possess a Ship not a rig and thereby allowed the tonnage tax benefit. Respectfully following the jurisdictional high court decision in assessee s own case, I had allowed the appeal in Assessment Year 2009-10 following the same I hereby direct the Assessing Officer to delete the addition of ₹ 13,83,209/-. Since the appellant gets Tonnage Tax benefit under section 115VP / 115VR, the addition u/s 14A/Rule 8 D is not at all required. Thus, Ground No 2 is allowed. 13.3 Aggrieved with such order of the learned CIT (Appeals) the Revenue is in appeal before the Tribunal. 13.4 After hearing both the sides we find the above ground raised by the Revenue is identical to ground of appeal No. 2 in ITA. No. 5915 (Del) of 2013. We have already de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee and against the Revenue. The appeals are consequently dismissed. 2.7 Since the learned CIT (Appeals) while deciding the issue in favour of the assessee has followed the decision of the Tribunal in assessee s own case as well as the decision of Hon ble Jurisdictional High Court, therefore, in absence of any contrary material brought to our notice by the learned Departmental Representative, we find no infirmity in the order of the learned CIT (Appeals) allowing the ground raised by the assessee. The ground raised by the Revenue is accordingly dismissed. Not only this, the ld. CIT(A) has also decided these issues in A.Y. 2007-08 to 2010-11 in favour of the assessee. The additions which have been challenged in ground No. 5 6 also deserve to be deleted in view of the fact that since the assessee gets tonnage Tax benefit u/s. 115VP/VR. Therefore, the additions of ₹ 90,89,065 on account of administration and other expenses and ₹ 4,42,355/- on account of provision for gratuity is not required at all. In view of above discussion, we observe that the ld. CIT(A) has rightly deleted the additions, challenged by Revenue by way of grounds Nos. 5, 6 7 of appea ..... X X X X Extracts X X X X X X X X Extracts X X X X
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