TMI Blog2013 (2) TMI 919X X X X Extracts X X X X X X X X Extracts X X X X ..... s. During the course of assessment proceedings, Assessing Officer noted that assessee had given loan to one M/s MilleniumAlcobev Pvt. Ltd. (MAL) and to one M/s United Millenium Breweries Ltd. (UMB). MAL was the holding company of the assessee, whereas, UMB was a subsidiary of the assessee. As on 31.3.2007, the amount due from M/s MAL was ₹ 42,24,72,213/- and that due from M/s UMB was ₹ 2,67,24,520/-. As per the A.O., assessee had obtained huge amounts as loan from one M/s BNP Paribas and M/s Yes Bank during the relevant previous year. Such amounts were used for giving loans to above two companies. No interest was received by the assessee from the said companies and loans were given free of interest. Assessee was put on notice regarding diversion of interest bearing loans to sister concerns. Assessee was also required to give work-out of the balance due from M/s MAL. From the details submitted by the assessee, it was noted by the Assessing Officer that assessee had at the beginning of the year loan outstanding of ₹ 46,10,29,661/- to M/s MAL. Such loan was repaid during the relevant previous year periodically and on 30.9.2006, assessee had made a payment of ₹ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the business of subsidiary. Insofar as funds given to M/s MAL was concerned, learned A.R. submitted that as on 1.4.2006, assessee was a debtor to the said company for a sum of ₹ 46,10,29,661/-. During the course of relevant previous year, it had made various payments and as on 29.9.2006, there was still an amount of ₹ 19,13,39,357/- due to them. A sum of ₹ 45 Crores was paid on 30.9.2006, which converted credit balance to debit balance to ₹ 25,88,60,642/-. This position continued upto 29.3.2007 except for a small transaction and the amount due from M/s MAL, as on 29.3.2007, was ₹ 22,24,72,213/-. A further sum of ₹ 20 crores was paid on 30.3.2007 and this was how the balance of ₹ 42,24,72,213/- came into existence. For the amounts due to M/s MAL, no interest was ever paid by the assessee. Assessee had credit balances in account of M/s.MAL for assessment year 2003-04, 2004-05, 2005-06 and 2006-07. In other words, all through assessee owed large sums to M/s MAL and it was only in the second half of the relevant previous year that the credit balance due to M/s MAL got converted into a debit balance. According to him, assessee as a prudent bus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee not to charge interest on the amount due from them to it. We cannot say that the decision taken was not in business interest. We cannot say that assessee suffered any extra loss or claimed any excess charge of interest when funds were given to M/s MAL. It had derived equal if not more benefit by virtue of loans received from same company during the first six months of the relevant previous year. For assessment year 2003-04 to 2006-07, assessee was enjoying funds of said M/s MAL for amounts varying between ₹ 51 to 59 Crores and this position stands unrebutted by Revenue. In such a situation, we are of the opinion that a decision by the assessee in its business interest cannot be equated with the case of a simple diversion of interest bearing funds. Assessee could have charged on the amount loaned, but it would have lost out if a similar charge of interest was made by M/s.MAL. Thus, commercial expediency is visible in this transaction. We cannot say that loans given by the assessee to M/s MAL did not give rise to any benefit for assessee. Assessee had already enjoyed the benefit of interest free loan received from the said concerned for very long time. In such circumstanc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... into two agreements on the same day. Whereas, first agreement mentioned purchase of various assets from M/s Empee Distilleries Ltd. including licences and trademarks, second agreement mentioned that assessee was given a right to use of trademark marco polo by M/s Empee Distilleries Ltd. Second agreement was silent regarding the consideration paid by the assessee for obtaining the right to use of trademark. Assessing Officer had not examined these details at all. According to him, there was an error in the order, which was prejudicial to the interests of Revenue, when the Assessing Officer accepted the value of trademark at a sum of ₹ 22 Crores and allowed depreciation thereof. He, therefore, set aside the assessment order dated 31.12.2009 of the Assessing Officer and directed him to re-consider to allow depreciation on intangible asset claimed by the assessee. 12. Now before us, learned A.R., strongly assailing the order of CIT, submitted that revisionary power under Section 263 could be invoked only when two conditions were satisfied. First condition was that order of the Assessing Officer should be erroneous and second condition was that due to such error, a prejudice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out that the agreement by which assessee acquired the trademarks and licences, was dated 28.2.2002. Assessee had claimed depreciation thereon as early as assessment year 2003-04. Relying on paper-book pages 71 to 75, learned A.R. pointed out that assessee had claimed and was allowed depreciation by the Assessing Officer for all the years starting from assessment year 2003-04. Learned A.R. pointed out that during scrutiny assessment proceedings for assessment year 2003-04, Assessing Officer had considered the agreements entered between assessee with M/s Empee Distilleries Ltd. Assessing Officer had thus taken a lawful view and allowed depreciation on the Written Down Value of the intangible assets and there was no error in the order of the Assessing Officer, which was prejudicial to the interests of Revenue. 14. Per contra, learned D.R. submitted that what the assessee had acquired was not a transferrable asset at all. Licence for manufacturing was with M/s Empee Distilleries Ltd. Such licence could not be transferred, since Tamil Nadu Brewery Rules, 1983 prohibited transfer of licence. Amount paid for acquiring such licence was ₹ 2.5 lakhs. Against this, assessee had va ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der:- THIS AGREEMENT made at Chennai this 28th day of February, 2002 BETWEEN EMPEE BREWERIES LIMITED a company registered under the Companies Act, 1956 and having its registered office at 693 Anna Salai, Chennai 600 006 represented by its Director Ms.NishaPurushothaman India hereinafter called the Licensor (which expression shall unless it be repugnant to the context or meaning thereof mean and include its successors) of the One Par AND EMPEE DISTILLERIES LIMITED a copy registered under the Comlpanies Act, 1956 and having its registered office at 693, Annasalai, Chennai 600 003 represented by its Managing Director Mr. M.P. Purushothaman hereinafter called the Licensee (which expression shall unless it be repugnant to the context or meaning thereof mean and include it successors) of the Other Part: Clearly, the licensor is M/s Empee Breweries Ltd., which is assessee here and licencee is M/s Empee Distilleries Ltd. In other words, assessee had acquired trademarks and licences from M/s Empee Distilleries Ltd. by virtue of the first agreement and thereafter, gave the same company a licence to use a trademark called morco polo . The latter agreement elsewhere clearly state ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es and this was already granted. 18. In any case, assessee was eligible for claiming such depreciation. At no point of time, the genuineness of agreements with M/s Empee Distilleries Ltd. has been doubted. There is no case for the Revenue that the consideration, as mentioned in the said agreement, was never paid by the assessee. Thus the grant of depreciation on the value of trademarks and licences cannot be considered to have been done by overlooking any provisions of the Act. If the value of ₹ 22 Crores was not acceptable to the Assessing Officer, then this was an aspect which ought have been considered in assessment year 2003-04. But for that year, depreciation was allowed after considering the agreements filed by the assessee, as already mentioned by us. In such circumstances, we cannot say that grant of depreciation on Written Down Value of the intangible assets was erroneous. We cannot say the assessment order suffered from any error much less an error which caused prejudicious to the Revenue. We are of the opinion that this is not the case where revisionary power under Section 263 could have been invoked. 19. Before parting with, it would be inappropriate if we d ..... X X X X Extracts X X X X X X X X Extracts X X X X
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