TMI Blog2017 (8) TMI 1440X X X X Extracts X X X X X X X X Extracts X X X X ..... lable with the assessee. This position clearly emerges from the record and for the current assessment year as well. We do not see how a different view in the facts and circumstances can be taken. If the Tribunal had followed the earlier view and on facts, then, there is no perversity when nothing contrary to the factual material was brought on record by the Revenue. In such circumstances, the concurrent view on disallowance of interest was reversed and the appeal of the assessee to that extent was partly allowed. We do not see any substantial question of law arising from such a view of the Tribunal. Claim of depreciation - whether Hon'ble Tribunal was right in holding that prior to insertion of Explanation-5 to section 32 the claim of depreciation was optional and could not be thrust on the assessee, if it had not claimed it? - Held that:- The Tribunal found that going by the wording of the ground and which is identical to question No.6.6, reproduced above, it is not permissible to apply the Explanation and, therefore, the claim of depreciation which was optional could not be thrust on the assessee for the prior period. This is an attempt made by the Revenue even in the assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ficer based on external comparables was not justified. - IT Appeal Nos.1550, 1592, 1775 & 1811 of 2014 - - - Dated:- 23-8-2017 - S.C. DHARMADHIKARI AND Smt. Vibha Kankanwadi, JJ. For the Appellant : A.R. Malhotra and N.A. Kazi. For the Respondent : J.D. Mistri, Sr. Counsel, Raj Darak and P.C. Tripathi. ORDER S.C. Dharmadhikari, J. These appeals of the Revenue challenge the order of the Income Tax Appellate Tribunal for the Assesment Years 2003-04, 2004-05, 2005-06 and 2006-07, all of which have been decided by a common order of the Tribunal dated 13-9-2013. 2. The Department/Revenue is aggrieved and dissatisfied with the allowing of some of the grounds in the assessee's appeals before the Tribunal. The assessee filed Income Tax Appeal Nos.4475 of 2007, 884, 885 1559 of 2009. 3. The Revenue filed Income Tax Appeal Nos.4537 of 2007, 1724, 1725 2813 of 2009. 4. This batch of appeals having been disposed of by the above common order, the Revenue has filed these separate appeals. The challenge is to the Tribunal's order, where the assessee's appeals for the Assessment Years have been allowed in part. The Revenue's appeals for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nexure-C. 10. The Tribunal was approached, as above, by both and the order of the Tribunal is impugned in the instant appeals filed by the Revenue. The questions of law proposed as substantial questions of law read as under:- 6.1 Whether on the facts and circumstances of the case and in law, the Hon'ble Tribunal was right in holding that interest of ₹ 4,39,20,619/- being the interest referable to funds given to subsidiaries is allowable, when this interest at least to this extent would not have been payable to banks, if funds were not provided to subsidiaries? 6.2 Whether on the facts and circumstances of the case and in law, the Hon'ble Tribunal was right in restricting the disallowance of administrative expenses u/s 14A to 1% of exempt income when the A.O. had disallowed it on the basis of exempt income to total income? 6.3 Whether on the facts and circumstances of the case and in law, the Hon'ble Tribunal was right in deleting the disallowance made by A.O. u/s 14A of interest on funds utilized for exempt investment on the basis that own funds are more than investments made? 6.4 Whether on the facts and circumstances of the case and in law, the H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ome Tax (Appeals) in confirming the disallowance of interest of ₹ 4,39,20,619/- being the interest referable to interest free loans and advances given to subsidiary companies. 14. Mr. Malhotra, in criticising the approach of the Tribunal, would contend that the reasons which the Tribunal applied for the preceding Assessment Year 2002-03 would not apply in the facts and circumstances of the present case. He would submit that the decision in the case of Reliance Utilities Power Limited rendered by this Court is of no assistance to the assessee, and equally that of the Hon'ble Calcutta High Court in the case of Woolcombers of India Ltd. v. CIT [1982] 134 ITR 219/[1981] 7 Taxman 188 (Cal.). 15. As far as the questions are concerned, Mr. Malhotra would submit that the Revenue has rightly proposed question No.6.1 as a substantial question of law. 16. As far as question No.6.2 is concerned, there also Mr. Malhotra, after inviting our attention to the Tribunal's order and that of the Assessing Officer, contended that the Assessing Officer had rightly disallowed the administrative expenses under Section 14A and the Tribunal erred in bringing it down to 1% of the exe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onal question proposed by the Revenue which reads as under:- 6.7 Whether on the facts and circumstances of the case and in law, the Hon'ble Tribunal was right in sustaining the deletion made by CIT (A) of the Transfer Pricing adjustment made to consultancy charges, especially when the TPO had adopted the same mark up in relation to its Europe associate, what the assessee itself had adopted in relation to USA associate? 22. Mr. Mistri, learned Senior Counsel appearing on behalf of the assessee, on the other hand, would submit that none of these questions can be termed as substantial question of law. The Tribunal, as the last fact finding authority, has performed its duty and, therefore, its findings, which are consistent with the materials placed on record, need not be disturbed in our further appellate jurisdiction. It is urged that reappreciation and reappraisal of the same materials is impermissible in our limited appellate jurisdiction. It is also contended that if the facts and claims were identical to the Assessment Year 2002-03, in which as well the Tribunal interfered at the instance of the assessee with regard to certain claims and deduction, and an appeal of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oning therein. 31. The facts were that, the assessee had given interest free loans to its subsidiaries aggregating to the sum specified in para 7.2 as on 31-3-2003 and the corresponding figures of such interest free loans as on 31-3-2002 stood at ₹ 2988.98 crores. Thus, the differential loans given to the subsidiaries during the year under consideration were worth ₹ 3,727.14 crores. The net profit after tax and before depreciation was arrived at by the Tribunal and which exceeded not only the differential/incremental loan given to subsidiaries during the year but also exceeds the total interest free loans of ₹ 6,716.12 crores given to the subsidiaries as on 31-3-2003. Considering these facts, the Tribunal found that the position is no different from the prior Assessment Year 2002-03. 32. The reasoning in paragraph 5.6 of the order dated 28-5-2012 of the Tribunal for the prior assessment year has been reproduced. 33. We do not see how when the Assessing Officer's views are that in cases of the interest free loans and interest given by the assessee to its subsidiary companies are in the above sums, still, the principle laid down by this Court that if th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ior Counsel, would submit that arguments have been noted on ground No.2 of the appeal of the Revenue at running page No.262 of the paper-book in Income Tax Appeal No.1775 of 2014. The Tribunal referred to a Judgment of the Hon'ble Supreme Court in the case of CIT v. Mahendra Mills [2000] 243 ITR 56/109 Taxman 225 (SC). The Tribunal was aware of the fact that the same position, as had emerged from the records of the prior Assessment Year 2002-03, is to be found even in the relevant or subject assessment year. It is pointed out in the reasoning of the Tribunal that the issue was considered by it earlier. The issue was considered also with reference to the original written down value and the reduced one. In such circumstances, it is urged that a finding of fact, identical to the assessment year prior to the relevant one, would bind the Revenue. 38. We have noted this contention and found from the order, and particularly the discussion in paras 19, 19.1 and 19.2 of the order under appeal that the Hon'ble Supreme Court had considered the matter and laid down a principle. In the assessment year under consideration, the Assessing Officer allowed depreciation relating to these p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estion No.6.7 which is in relation to pre-operative expenses of ₹ 3,99,96,448/- incurred in connection with creation of plant and machinery in units which have not commenced production 43. Whether such expenses are revenue expenses was the issue before the Tribunal. That was arising out of ground No.3 of the Revenue's appeal before the Tribunal. The First Appellate Authority deleted this disallowance of pre-operative expenses and aggrieved by that exercise the matter was carried to the Tribunal. In para 20.1, after noting the facts, in para 20.2 the findings of the First Appellate Authority, in para 20.3 the arguments of the Departmental representative and that of the assessee's representative and finally in para 20.4 the Tribunal held that it has considered identical issue on facts in the prior assessment year 2002-03 and its order dated 28-5-2012 in the appeal pertaining to that assessment year, it had turned down the Revenue's request and answered the issue in favour of the assessee. Therefore, when identical issue arose and on similar facts for the assessment year under consideration, it is on facts that the earlier view was followed. Once the earlier view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s in not accepting the ground of the Revenue (ground No.9) in its appeal. We see no reason to differ with it and particularly when the concurrent finding of fact is based on the requisite factual materials placed before the authorities. 51. Then what remains for consideration is question No.6.10 at page 7 of the paper-book. In relation to that it was noted by the Tribunal that the Transfer Pricing Officer/Assessing Officer had attempted a similar exercise and on facts. Para 52 of the order under appeal (page 294) refers to ground No.9 in the assessee's appeal before the Tribunal. There the Commissioner of Income Tax (Appeals) having taken a peculiar view confirmed the order of the Assessing Officer. The assessee was aggrieved and thus approached the Tribunal. The assessee was aggrieved with the claim for commission expenses but we would prefer to deal with it in a separate appeal of the Revenue. 52. As far as the issue at hand is concerned and namely, question No.6.10, what we find is that the Assessing Officer had applied a certain principle. That principle has been extensively referred by the Tribunal. The ground No.3 of the Department's appeal pertains to the order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee for advancing loan to its associated concern. 58. The relevant facts are noted in para 52.2. There was a corporate guarantee provided by the assessee to Bank of America in connection with loans of Euro 80 Million taken by its Associated Enterprise, viz., Trevira GmbH. The Assessing Officer/TPO had stated that the assessee has not charged any guarantee fee/commission to this entity for providing the guarantee. The assessee stated that the guarantees have been provided by it to Bank and not to the Associated Enterprise. Therefore, the assessee has not incurred any cost for providing guarantees and the same have been provided as part of normal commercial practice followed by Bank of taking guarantee of parent company and/or its Directors. 59. We are spared consideration of the larger issue, namely, whether this is an international transaction under Section 92B of the I.T. Act, 1961, for the year under consideration. The parties proceeded on the footing that it is an international transaction. Therefore, all that remained for decision was whether the guarantee commission should be at the rate of 0.38% in place of 2.5% and in consideration thereof the Tribunal found f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that disallowance u/s 14A cannot be imported into provisions of section 115JB in view of clause (f) to Explanation (1) to the section? 6.5 Whether on the facts and circumstances of the case and in law, the Hon'ble Tribunal was right in holding that the notional sales tax of ₹ 1252,83,84,360/- is capital in nature and not liable to tax? 65. The argument of Mr. Malhotra is that even the question in relation to pre-operative expenses and which have been termed as revenue expenses is a substantial question of law. That question of law in Income Tax Appeal No.1018 of 2010 relating to the same assessee has been admitted by this Court. He relies upon para 2 of the order dated 1-2-2016 in Income Tax Appeal No.1018 of 2010 {Question E }. From a reading of that order, we find that, in that case the Tribunal had not only considered the pre-operative expenses but also the trial run expenses which were capitalised in the books of account of the assessee. Whether that is revenue expenditure when it was so capitalised in the books of account. It is not only in relation to pre-operative expenses but trial run expenses as well that the Revenue's question arising out of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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