M/S BLUESCOPE STEEL INDIA PVT. LTD.,,PUNE vs. DCIT, NEW DELHI

The Appellant, Blue Scope Steel India P. Ltd. (hereinafter referred to as ‘the Assessee’) by filing the present appeal sought to set aside the impugned order dated 29.01.2016 passed by the Commissioner of Income-tax (Appeals)-2, New Delhi qua the assessment year 2012-13.

Briefly stated that facts necessary for adjudication of the controversy at hand are : Blue Scope Steel India Pvt. Ltd., assessee a subsidiary of Blue Scope Ltd. Australia (holding company), was into manufacturing of roll form zinc/aluminum coated steel sheets which it has not pursued further . From April, 2004 onwards assessee started rendering business support services to its holding company. Assessee has sold project to Tata Blue Scope Steel Ltd. (TBSL). After sale the assessee also rendered technical services to TBSL. The Assessing Officer disallowed an amount of Rs. 25,71,961/- claimed by the assessee as expenses debited to P/L account by invoking the provisions contained u/s 37(1) by treating the same as non-business expenditure. Assessing Officer also treated other income shown in P/L account amounting to Rs. 78,52,967/- as income from other sources to be taxed the same.

Assessee carried the matter before Ld. CIT(A) by way of filing the appeal who has confirmed the addition by dismissing the appeal.

We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.

Ground no. 1 Undisputedly assessee has discontinued its business a number of years prior to the year under assessment. It is also not in dispute that there is no receipt in the P/L account on account rendering business support services it is also not in dispute that the receipt of the assessee are only on account of sale of assets, balances return back, interest etc. It is also not in dispute that the Ld. CIT(A) confirmed the disallowance made by the AO claimed by the assessee on account of expenditure by following assessment year 2010-11.

In the backdrop of the aforesaid undisputed facts and circumstances of the case it is brought to our notice by the Ld. AR for the assessee that this issue is covered in case of the assessee in its own case for AY 2010-11 in ITA no. 6847/Del/2014. Identical issue in controversy has been decided in favour of the assessee by the Co-ordinate bench of Tribunal by returning following findings :-

When undisputedly no services have been rendered by the assessee to its holding company TBSL. There is no business income towards such services during the year under assessment. AO has disallowed the expenses debited to P/L account by the assessee on the ground that the assessee has failed to proceed with the main object of its own company i.e. the business has not been set up / not commenced, the expenses claimed are not allowable. This issue has been decided in favour of the assessee by the Co-ordinate bench of the Tribunal in assessee’s own case for AY 2010-11 “that though there was no receipt from the two sources during the year under assessment but it was a case of Lull Phase of business in which normal business expenses to keep the status of company as a going concern had to be incurred”.

So following the decision rendered by the co-ordinate bench of Tribunal in assessee’s own case for AY 2010-11. We are of the considered view that all these expenses appearing in the P/L account by the assessee are necessary to retain the status of the assessee company, hence allowable. So Ld. CIT(A) has erred in disallowing the expenses which are ordered to be allowed. Consequently ground no. 1 is determined in favour of the assessee.

Ground no. 2 Assessee has claimed the benefit of brought forward losses / unabsorbed depreciation for determining the taxable income and requested to allow the amount u/s 40(a). Undisputedly this amount was disallowed in the earlier years. The Ld. CIT(A) had directed the Assessing Officer to decide the issue in accordance with law on the basis of the material available on record. Since the Ld. CIT(A) has already directed to AO to decide this issue as per law on the basis of material available on record, there is no need to make further discussion on this issue. So AO is directed to decide the same in accordance with law. Accordingly ground number 2 is determined in favour of the assessee for statistical purposes.

In view of what has been discussed above, appeal filed by the assessee is partly allowed.