MSEB HOLDING CO. LTD,MUMBAI vs. DCIT CIR 10(1), MUMBAI

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ITA 3999/MUM/2016Status: DisposedITAT Mumbai22 June 2018AY 2011-125 pages
AI SummaryPartly Allowed

What did the Tribunal hold?

The Tribunal held that the disallowance of interest and finance expenses was to be confirmed, following its own prior decisions. However, it upheld the deletion of disallowance for repairs and maintenance, and the set-off of brought forward losses, also based on previous rulings.

What were the facts?

The assessee's appeal concerned the disallowance of interest and finance expenses, while the Revenue's appeal challenged the deletion of disallowance for repairs and maintenance, and the set-off of brought forward losses. The Tribunal had previously ruled on similar issues for earlier assessment years.

What were the issues?

The key issues were the allowability of interest and finance expenses, the deductibility of repairs and maintenance expenses, and the eligibility for set-off of brought forward losses and unabsorbed depreciation.

Which sections of the Income-tax Act were involved?

Section 36(1)(iii),Section 37(1),Section 72A(4)(b)

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Cases cited in this judgment(6)Show list

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Income Tax Appellate Tribunal, MUMBAI BENCH “F”, MUMBAI

Before: SHRI C.N. PRASAD, HONBLE & SHRI N.K. PRADHAN, HONBLEHongkong Bank Building

For Appellant: Shri K.K. Ved
For Respondent: Shri Rajesh Yadav
Hearing: 10.04.2018Pronounced: 22.06.2018

2 & 3492/MUM/2016 (A.Y: 2011-12) M/s. MSEB Holding Co. Ltd O R D E R PER C.N. PRASAD (JM) 1. These two appeals are filed by the assessee and Revenue against the order of the of the Learned Commissioner of Income Tax (Appeals)– 22 Mumbai dated 16.02.2016 for the Assessment Year 2011-12.

2.

The only ground in the appeal of the assessee is with regard to confirmation of disallowance of interest and finance expenses.

3.

At the outset, the Learned Counsel for the assessee submitted that an identical ground has been decided against the assessee in assessee’s own case by the Tribunal for the Assessment Years 2006-07 to 2010-11. Copy of the order is placed on record.

4.

We have perused the common order of the Coordinate Bench for Assessment Years 2006-07 to 2010-11 dated 21.04.2017 and in ITA.No. 7725/Mum/2011 for Assessment Year 2006-07, we find that the issue of allowability of interest expenditure on loan liability u/s. 36(1)(iii) of the Act has been decided against the assessee holding that assessee is not entitled for deduction. Respectfully following the same, the ground raised by the assessee is rejected.

3 & 3492/MUM/2016 (A.Y: 2011-12) M/s. MSEB Holding Co. Ltd 5. Coming to Revenue’s appeal, the first issue is that Ld.CIT(A) is not justified in deleting the disallowance of expenditure on day to day maintenance and repairs to keep the company running its business.

6.

Ld. DR submitted that, Assessing Officer while completing the assessment disallowed repairs and maintenance, administrative and general expenses, since assessee has not earned any income under the head income from business during the year. Ld. DR submitted that, Ld.CIT(A) however allowed the expenses incurred towards repairs and maintenance, administrative and general expenses considering the submissions of the assessee.

7.

Learned Counsel for the assessee submitted that these expenses were incurred for day to day maintenance and to keep the company running. Therefore, the expenses have to be allowed.

8.

We have heard the rival submissions, perused the orders of the authorities below. The assessee before the Ld.CIT(A) submitted that allowance contemplated u/s. 37(1) was not necessarily an allowance for amounts expended to increase profits only so long as it was for the purpose of the business. It was judicially accepted that it was also not necessary that profits should be earned by each and every expenditure. Reliance was placed on the following decisions: -

4 & 3492/MUM/2016 (A.Y: 2011-12) M/s. MSEB Holding Co. Ltd (i) CIT v. Rajendra Prasad Moody [115 ITR 419 (SC.)] (ii) R.B. Bansilal Abirchand Spg. & Wvg. Mills v. CIT [81 ITR 34 (Bom.) (FB)] (iii) F. E. Dinshaw Ltd. v. CIT [36 ITR 114 (Bom.)] (iv) Delhi Cloth & General Mills Co. Ltd. v. CIT [85 ITR (Delhi)] (v) CIT v. Dalmia Cement Ltd. [254 ITR 377] (vi) CIT v. Navsari Cotton and Silk Mills Ltd. [135 ITR 546] (vii) Ravi Marketing (P) Ltd. v. CIT [280 ITR 519] (viii) CIT v. Malayalam Plantations Ltd. [53 ITR 140] 9. Assessee further submitted that in view of the foregoing and considering the facts and circumstances of the assessee’s case and the law on the subject, the expenditure incurred by the assessee during the year under consideration was allowable while computing its total income for the year as it was not necessary that profits should be earned by each and every expenditure. Considering the submissions of the assessee the Ld.CIT(A) allowed the claim of the assessee and we see no infirmity in the decision of the Ld.CIT(A) in allowing the claim of the assessee. Hence, this ground is dismissed.

10.

Coming to next ground of appeal i.e. whether Ld.CIT(A) was correct in allowing the set off of brought forward losses and unabsorbed depreciation without considering the provisions of section 72A(4)(b) of the Act do not provide for carry forward of losses in case of any provisional apportionment of assets of the demerged company.

11. Learned Counsel for the assessee submitted that this ground is decided in favour of the assessee in assessee’s own case by the Tribunal for the Assessment Years 2006-07 to 2010-11.

5 & 3492/MUM/2016 (A.Y: 2011-12) M/s. MSEB Holding Co. Ltd 12. We have perused the common order of the Tribunal for the Assessment Year 2006-07 to 2010-11 and find that the Tribunal in ITA.No. 7830/Mum/2011 for the Assessment Year 2006-07 decided this issue in favour of the assessee. Respectfully following the said decision, we uphold the order of the Ld.CIT(A) and dismiss the ground of Revenue.

13.

In the result, appeal of the assessee as well as the Revenue are dismissed.

Order pronounced in the open court on the 22nd June, 2018.

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