INOX LEISURE LTD.,,VADODARA vs. THE PR. CIT- VADODARA-1,, VADODARA

आदेश/ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:-

This assessee’s appeal for A.Y. 2010-11, arises from order of the Principal CIT, Vadodara-1 dated 30-03-2015, in proceedings under section 263 of the Income Tax Act, 1961; in short “the Act”. 2. The assessee has raised following grounds of appeal:- “1. In respect of proceedings u/s 263:

I.T.A No. 1074/Ahd/2015 A.Y. 2010-11 Page No 2 Inox Leisure Ltd. vs. Principal CIT

a) He ought to have dropped the proceedings initiated u/s 263 in view of the legal and factual position obtained in this case and elaborately stated in the written submissions made before him being the matter covered by order of CIT(A) or the Assessing Officer having considered the issue b) In setting aside the assessment order for A.Y. 2010-2011 to be framed afresh c) In concluding that "the provisions of 263 would come into operation precisely when the order is erroneous and prejudicial to the revenue and it does not matter whether such error has been made after an apparent application of mind" d) In concluding that the assessment order u/s 143(3) passed by the assessing officer for A.Y. 2010-2011 allowing the assessee's claim is erroneous in so far as it is prejudicial to the interest of the Revenue 2. In respect of matter regarding disallowance u/s 14A: a) In not appreciating that the issue was duly deliberated in the assessment order and was subject matter of appeal before Commissioner of Income-tax (Appeals) and had been considered and decided in appeal b) In concluding that the issue was not the subject matter of appeal before the Commissioner of Income-Tax (Appeals). c) In not appreciating and mere holding of different view does not justify revision proceedings. 3. In respect of matter regarding disallowance u/s 36(1 )(iii): a) In not appreciating that the matter was considered by the Assessing Officer b) In not appreciating and mere holding of different view does not justify revision proceedings”

I.T.A No. 1074/Ahd/2015 A.Y. 2010-11 Page No 3 Inox Leisure Ltd. vs. Principal CIT

for pre-operative expenses for starting multiplexes at various mails located at different places. As no revenue was generated from such multiplexes during the A.Y, 2010-11, interest payment of Rs 63,52,554/- was required to be capitalized. However, the same has been allowed as revenue expenditure by the A.O.” During the course of assessment the assessee explained that it has not received any dividend on the investment and also not claimed any exempt income in the current year in the form of dividend therefore the provision of section 14A r.w. rule 8D were not applicable. In respect of interest expenditure of term loan from City Bank, the assessee has explained that assessee company has already capitalized interest of Rs. 9,37,926/-and the balance amount was utilized for the purpose of running the business. The assessee has also furnished the details of information during the course of assessment proceedings. The ld. principal CIT has not accepted the explanation of the assessee. The ld. CIT held that the issue in respect of quantification of disallowance u/s. 14A r.w. rule 8D is required to be verified by the assessing officer. In respect of interest of Rs. 63,52,554/- of City Bank Loan, it is stated that as per sanction letter of the bank, the purpose of loan was financing term requirement including long term security deposit to be given to mall owner and pre-operating expenses etc.. In view of the mentioned reason the ld. principal CIT held that the order passed by the assessing officer was erroneous and prejudicial to the interest of revenue and objection of the assessee against invoking of provision of section 263 was not applicable.

I.T.A No. 1074/Ahd/2015 A.Y. 2010-11 Page No 4 Inox Leisure Ltd. vs. Principal CIT

CIT(A) u/s. 263 of the act. It is noticed that the Ld. principal CIT has passed order 263 of the act on 30-03-2015 holding that assessment order u/s. 143(3) of the act passed on 26-02-2013 by the assessing officer was erroneous and prejudicial to the interest to Revenue on the following two issues: (i) Short disallowance u/s. 14A r.w.r. 8D. (ii) Interest expenses of Rs. 63,52,554/- on the City bank loan On the perusal of the record, it is noticed that the assessing officer has made detailed discussion in respect of disallowance u/s. 14A of the act after duly examination of the information and material he has restricted the disallowance to the amount of Rs. 83,58,350/-. Subsequently, on merit the issue has also been decided in favour of the assessee by the ITAT Ahmedabad vide ITA No. 3475/Ahd/2016 dated 30-10-2018 after following the decision of Hon’ble jurisdictional High Court in the case of the Corrtech Energy Pvt. Ltd. We observe that in spite of having detailed discussion on this matter in the assessment order and the availability of relevant detail on record, the ld. Principal CIT has held without merit that the assessing officer has not examined the issue accordingly to the provision of Rule 8D of the I.T. Rule. In the light of the above fact, we are not inclined with the findings of the ld. Principal CIT on his issue therefore action of the PCIT u/s. 263 on this issues is not justified. Regarding other issue of interest expenses on City Bank Loan, the ld. PCIT in proceedings u/s. 263 of the act has observed from the sanction letter of the bank that purpose of loan was financing its term requirement including refundable long term security deposits to be given to mall owners. He has further observed from the above facts that the term loan was to be utilized for pre-operative expenses which was required to be capitalized.

I.T.A No. 1074/Ahd/2015 A.Y. 2010-11 Page No 5 Inox Leisure Ltd. vs. Principal CIT

Therefore, he has held that the assessment made by the assessing officer was erroneous and prejudicial to the revenue. It is also brought to our notice by the ld. counsel during the course of appellate proceedings that the ITAT vide order ITA No. 3475/Ahd/2016 dated 16-11-2018 has decided this issue on merit in favour of the assessee. We have perused the material on record it is noticed that the during the course of proceedings u/s 263 of the act the Ld. PCIT has reported the submission of the assessee at page 3 of his order that the matter was also subject matter of the discussion during the assessment proceedings and the company has submitted its reply that the interest of Rs.9,37,926 was capitalized for capital expenditure and the assessing officer had already considered the payment of interest, purpose of loan, sanction letter etc during the course of assessment proceedings for the year under consideration. After perusal of the above facts and submission of the assessee made during the course of assessment proceedings we observe that the Ld. PCIT has not contradicted the aforesaid facts reported by the assessee , therefore, we are not inclined with the findings of the ld. Principal CIT for invoking proceedings u/s. 263 of the act.

Order pronounced in the open court on 16-01-2019

Sd/- Sd/- (MADHUMITA ROY) (AMARJIT SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad : Dated 16/01/2019

I.T.A No. 1074/Ahd/2015 A.Y. 2010-11 Page No 6 Inox Leisure Ltd. vs. Principal CIT

आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से, उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद