ALLCARGO GATI LIMITED(FORMALLY KNOWN AS GATI LIMITED),HYDERABAD vs. ACIT,CIRCLE-2(2) HYDERABAD, HYDERABAD

O R D E R PER LALIET KUMAR, J.M:

These two appeals filed by the assessee are directed against separate orders of Commissioner of Income Tax (Appeals) – 9 dated 28.12.2015 for the A.Y. 2010-11 and Commissioner of Income Tax (Appeals) – 2, Hyderabad dt.25.10.2016 for A.Y. 2012- 13. Since, the facts are identical and issues are common but for 2 Allcargo Gati Limited the figures, for the sake of convenience, these two appeals were heard together and are being disposed of, by this consolidated order.

“1. The order of the learned Commissioner of Income tax(Appeals)-9, Hyd. in Ward-2(2)/2015-16 dt.28-12-2015 rejecting the claim of the appellant is contrary to law and facts.

2. It is contended that the disallowance of Rs.35,35,167 being pro-rata premium on Foreign Currency Convertible Bonds (FCCB) is erroneous and arbitrary. In the facts and circumstances of the case, the entire premium is allowable as expenditure as FCCB's were issued for obtaining finance for general business purposes of the entire appellant's business and not for any specific business activity.

3. Without prejudice the appellant contends that both Assessing officer and learned commissioner erred in treating premium to be paid on FCCB bonds as interest falling under section 36(1)(iii) of the IT Act. The appellant contends that the premium payable on redemption of bonds falls to be allowed as a expenditure u/s 37 (1) of the IT Act and not u/s 36(1)(iii) of the I.T. Act.

5. In any event the proportionate premium of Rs.35,35,167 is allowable u/s 37(1) and does not fall under section 36(1)(iii) of the I.T.Act.

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6. The appellant contends that the disallowance of proportionate premium of Rs. 68,19,473 towards amounts utilized for construction of buildings is erroneous.

8. In any event the proportionate premium of Rs.68,19,473 is allowable u/s 37(1) and does not fall under section 36(1)(iii) of the I.t.Act. 9. The appellant contends that the disallowance of proportionate premium of Rs.1,17,34,254 in respect of FCCB funds of Rs.20.54 crores utilized by the appellant for acquiring lands at Chennai and Kolkata is erroneous. The land at Chennai was put to use during the year for parking of the vehicles belonging to the appellant. 10. The appellant contends that the report of the DDIT referred to in the appellate order appears to have been obtained upon inspection made in March, 2013 while appellant sold the property in February, 2012. These lands may have been kept vacant by the purchaser for which the appellant cannot be found fault with. 11. In any event this report was never furnished to the appellant excepting being orally stated. The appellant denies any knowledge of the content of the report excepting to the extent of knowing that it was obtained in Mar, 2013 or thereafter. 12. In any event the proportionate premium of Rs.1,17,34,254 is allowable under section 37(1) of the IT Act and not u/s. 36(1)(iii) of the IT Act. 13. The appellant contends that the disallowance of the proportionate premium of Rs.54,25,585 towards amounts utilized aggregating to Rs.9.50 crores for paying advance under agreement for purchasing land admeasuring 10579 Sq. Yds at Sanant Nagar, Hyderabad is erroneous. 14. In any event the proportionate premium of Rs.54,25,585 is allowable u/s 37(1) and does not fall under section 36(1)(iii) of the Act.

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15. The proportionate premium of Rs.54,25,585 is paid on funds employed for business purposes and it therefore allowable as business expenditure.

16. The appellant contends that the disallowance of proportionate premium of Rs. 12,49,312 on FCCB funds utilized for investment in 100% subsidiary namely (Gati Holdings Ltd) u/s 14A of the IT Act erroneous. The provisions of section 14A are inapplicable as the income receivable from the investments in foreign subsidiary it taxable under the Income Tax Act. The entire disallowance of Rs.12,49,312 u/s 14A of the I.T. Act read with Rule 8D is uncalled for.

17. The Appellant craves leave to add, amend or alter any of the above grounds as the occasion may require. 18. For these and other reasons that will be submitted at the time of hearing of appeal, the appellant prays that the disallowances made may be deleted and the appeal be allowed.”

4. Aggrieved with such assessment order, assessee filed an appeal before the LD.CIT(A), who dismissed the appeal of assessee.

5. Aggrieved with the order of LD.CIT(A), the assessee is now in appeal before us.

With respect to ground nos.1 to 4, the ld.AR for the assessee has drawn our attention to the order passed by the Tribunal in assessee’s own case for the previous year i.e., A.Y. 2009-10 wherein the Tribunal has held as under :

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“11. Heard both the parties and perused the material available on record. From the reading of provisions of Section 115VG of the Act, reproduced hereinabove, it is abundantly clear that once the assessee opts for a Tonnage Tax Scheme, then Tonnage income cannot be set off against any deduction provided under the Act. In the present case, it is admitted that the assessee has opted for Tonnage Income Tax which has been accepted by the Assessing Officer and ld.CIT(A). 11.1 Therefore, the question must be considered whether, after opting for the Tonnage Tax Scheme, the assessee can claim the deduction in derogation of the provision of the Act provided under section 115VG(6) of the Act. In our view, the law is clear and unambiguous, which provides that once specified provisions deal with the subject and have been accepted by the assessee, the assessee is precluded from taking the deduction of any other expenditure under any other provisions of the Act against the Tonnage income. In our view, the provisions of section 115 VG of the Income Tax Act, 1961 are complete, and once the assessee opts for the Tonnage Tax Scheme, the assessee cannot take the shield of taking the deduction of any other expenditure. Hence, we are of the opinion that the assessee is not entitled to deduction as claimed by the assessee towards interest paid being the pro rata term paid on FCCD. 11.2 The argument of the assessee is that the assessee was having free funds is devoid of any merit, as it was not a case before the ld.CIT(A) that the investments were made out of free funds available within it on account of liquidation of the part of the FCCD Bonds. Further, once the specific provision which prohibits the assessee from claiming any deduction, then the question of allowing the deduction of interest on the pretext of availability of mixed funds does not arise. In so far as the case laws relied upon by the assessee, those case laws are not applicable to the present case, as they are on different facts. In light of the above, the ground Nos.2 and 3 raised by the assessee are dismissed.”

7. It was submitted that the issue is covered against the assessee therefore, the co-ordinate Bench of the Tribunal has decided the issue accordingly.

8. Per contra, ld.DR has not raised any objection and submitted that the previous order of the Tribunal in assessee’s own case for A.Y. 2009-10 may be followed.

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9. Since the issue has been adjudicated by the Tribunal in the case of assessee, therefore, respectfully following, the same reasoning, we dismiss ground nos.1 to 4 raised by the assessee.

Ground No.5:

“12. Section 37(1) further requires that the expenditures should not be of a capital nature. In the case of India Cements ltd. v. Commissioner of Income-tax, Madras (1966 60 ITR 52) the appellant-company had obtained a loan of Rs. 40 lakhs from the Industrial Finance Corporation secured by a charge on its fixed assets. In connection with this loan it spent a sum of Rs. 84,633/-, etc., and claimed this amount as business expenditure. This Court considered whether the expenditure so incurred was business expenditure or whether it was capital expenditure. This Court quoted with approval the observations of Shah, J. in Bombay Steam Navigation Co. Ltd. v. Commissioner of Income-tax (1965 56 ITR 52 at 59) that whether a particular expenditure is revenue expenditure incurred for the purpose of business must be determined on a consideration of all the facts and circumstances, and by the application of principles of commercial trading. The question must be viewed i the larger context of business necessity or expediency. If the outgoing or expenditure is so related to the carrying on or conduct of the business, that it may be regarded as an integral part of the profit- making process and not for acquisition of an asset or a right of a permanent character, the possession of which is a condition of the carrying on of the business, the expenditure may be regarded as revenue expenditure. This Court went on t observe that the provisions of the English Income-tax Act in this regard are somewhat different from those of the Indian Income-tax Act. It referred to the English case of Taxes Land and 8 Allcargo Gati Limited mortgage Co. V. William Holtham (1894 3 Tax cases 255, 260) where a mortage company had raised money by the issue of debentures and debentures stock and incurred expenses in this connection. The English High Court said that the expenses would not be deducted as trading expenses because the amount paid was for raising capital. Differing from the observations made therein, this Court observed that a loan is a liability and has to be repaid and in its opinion it is erroneous to consider a liability as an asset or an advantage. This Court disagreed with the English view that borrowing money by the issue of debentures was an acquisition of capital asset and that any commission or expenditure incurred in respect thereof was of a capital nature. It said; "we are of the opinion that (a) the loan obtained is not an asset or advantage of an enduring nature; (b) that the expenditure was made for securing the use of money for a certain period; and (c) that it is irrelevant to consider the object with which the loan was obtained. Consequently, in the circumstances of the case, the expenditure was revenue expenditure within Section 10(2)(xv)", The same ratio would apply here also.

14. The Tribunal, however, held that since the entire liability to pay the discount had been incurred in the accounting year in question, the assessee was entitled to deduct the entire amount of Rs. 3,00,000/- in that accounting year. This conclusion does not appear to be justified looking to the nature of the liability. It is true that the liability has been incurred in the accounting year. But the liability is a continuing liability which stretches over a period of 12 years. It is, therefore, a liability spread over a period of 12 years. Ordinarily, revenue expenditure which is incurred wholly and exclusively for the purpose of business must be allowed in its entirety in the year in which it is incurred. It cannot be spread over a number of year even if the assessee has written it off in his books over a period of years. However, the facts may justify an assessee who has incurred expenditure in a particular year to spread and claim it over a period of ensuing years. In fact, allowing the entire expenditure in one year might give very distorted picture of the profits of a particular year. Thus in the case of Hindustan Aluminium Corporation Ltd. v. Commissioner of Income-tax, Calcutta-I (1983, 144 ITR 474) the Calcutta-High Court upheld the claim of the assessee to spread out a lump sum payment to secure technical assistance and training over a number of years and allowed a proportionate deduction in the accounting year in question.

15. Issuing debentures at a discount is another such instance where, although the assessee has incurred the liability to pay the discount in year of issue of debentures, the payment is to secure a benefit over a number of years. There is a continuing benefit to the business of the company over the entire period. The liability should, therefore, be spread over the period of the debentures.

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16. The appellant, therefore, had, in its return, correctly claimed a deduction only in respect of the proportionate part of discount of Rs. 12,500/- over the relevant accounting period in question. In this connection, we agreed with the reasoning and conclusion of the Madhya Pradesh High Court in the case of M.P. Financial Corporation v. Commissioner of Income-tax (supra). The view that we have taken is also in conformity with accounting practice of showing the discount in "discount on debentures account" which is written off over the period of the debentures.

17. The appellant is, therefore, entitled to deduct a sum of Rs. 12,500/- out of the discount of Rs. 3,00,000/- in the relevant year. The balance expenditure of Rs. 2,87,500/- cannot be deducted in the assessment year in question. Question No. 2 (as reframed) therefore, which is the subject matter of appeal before us, is answered in the negative in so for as it related to the deduction of Rs. 2,87,500/- in the assessment year in question though for reasons entirely different from those given by the High Court. The second part of the reframed question is answered in the affirmative. But only proportionate part of the discount can be deducted in the assessment year in question. Question No. (as reframed) therefore, which is the subject matter of appeal before us, is answered in the negative in so for as it relates to the deduction of Rs. 2,87,500/- in the assessment year in question though for reasons entirely different from those given by the High Court. The second part of the reframed question is answered in the affirmative. But only a proportionate part of the discount as set out earlier. The appeal is disposed of accordingly and the judgment of the High Court is set aside. There will be no order as to costs in the circumstances of the case.”

“3.1 In our view, the Tribunal correctly accepted assessee s version; particularly in view of the decision of the Apex Court in case of Madras Industrial Investment Corporation Limited v. Commissioner of Income Tax, reported in 225 ITR 802. Learned counsel for the assessee brought to our notice a decision of this Court dated 1st February 1998 rendered in Income-Tax Application No. 259 of 1998 in case of Commissioner of Income Tax, Gujarat vs. Anil Starch Products Limited, wherein, it is observed as under :- 4. The question arose for consideration before their Lordship in Supreme Court in Madras Industrial Investments Corporation Limited v. Commission of Income tax 225 ITR 802. it was a case where the appellant company had issued debentures in December 1966, at a discount. The total discount on the issue of Rs.1.5 crores amounted to Rs.3.00 lakhs. For the assessment year 1968-69, the company wrote off Rs.12,500 out of the 10 Allcargo Gati Limited total discount of Rs.3 lakhs being the proportionate amount of discount for the period of six months ending with June 30, 1967, taking into account the period of 12 years which was the period of redemption and dividing the amount of Rs.3 lakhs over the period of 12 years. The Income-tax Officer disallowed the claim but the appellate Assistant Commissioner allowed the deduction of Rs.12,500. The Tribunal held that the entire expenditure of Rs.3,00,000 was allowable as expenditure for the year of issue incurred for the purpose of business. On a reference, the High Court noted that out of the total discount of Rs.3,00,000 an amount of Rs.12,500 had been allowed which the Department had not challenged. Hence, the High Court was concerned only with the balance amount of Rs.2,87,500 which the High Court held, could not be considered as expenditure. On appeal to the Supreme Court, the Supreme Court held that the liability to pay the discounted amount over and above the amount received for the debentures was a liability incurred by the company for the purposes of business in order to generate funds of its business activities. It was therefore revenue expenditure.

“6. After considering the contentions, we are of the opinion that the amount is an allowable deduction. Similar issue was considered by the Hon'ble Supreme Court in the case of Madras Industrial Investment Corporation Limited Vs. CIT [225 ITR 802] (SC), wherein it was held: "Expenditure' is not necessarily confined to the money which has been actually paid out. It covers a liability which has accrued or which has been incurred, although it may have to be discharged at a future date. However, a contingent liability which may have to be- discharged in future cannot be considered as expenditure. Although expenditure primarily denotes the idea of spending' or paying out, it may, in given circumstances,

11 Allcargo Gati Limited also cover an amount of loss which has not gone out of the assessee's pocket but which is all the same, an amount which the assessee has had to give up. It also covers a liability which the assessee has incurred in praesenti although it is payable in futuro. A contingent liability that may arise in future is, however; not 'expenditure'. It would also cover not just a one-time payment but a liability spread out over a number of years. When a company issues debentures at a discount, it incurs a liability to pay a larger amount than what it has borrowed, at a future date. It is not necessary to go into the question whether this additional liability equivalent to the discount, which is incurred in praesenti but is payable in future, represents deferred interest or not. That may depend upon the totality of circumstances relating to the issue of debentures, including its terms. The liability, to pay the discounted amount over and above the amount received for the debentures, is a liability which has been incurred by the company for the purposes of its business in order to generate funds for its business activities. The amounts so obtained by issue of debentures are used by the company for the purposes of its business. This would, therefore, be expenditure. In the light of the ratio laid down by the Court in the case of India Cements Ltd. v. CIT [1966] 160 ITR 52 (SC) liability incurred the purpose of obtaining the loan would be revenue expenditure. The Tribunal, however, held that since the entire liability to pay the discount had been incurred in the accounting year in question, the assessee was entitled to deduct the entire amount of Rs. 3 lakhs in that accounting year. This conclusion was not justified looking to the nature of the liability. It was true that the liability had been incurred in the accounting year. But the liability was a continuing liability which stretched over a period of 12 years. It was, therefore, a liability spread over a period of 12 years. Ordinarily, the revenue expenditure which is incurred wholly and exclusively for the purpose of business must be allowed in its entirety in the year in which it is incurred. It cannot be spread over a number of years even if the assessee has written it off in his books over a period of years. However, the facts may justify an assessee who has incurred expenditure in a particular year to spread and claim it over a period of ensuing years. In fact, allowing the entire expenditure in one year might give a very distorted picture of the profits of a particular year. Issuing debentures at a discount is another such instance where, although the assessee has incurred the liability to-pay the discount in the year of issue of debentures, the payment is to secure a benefit over a number of years. There is a continuing benefit to the business of the company over the entire period. The liability should, therefore, be spread over the period of the debentures. The appellant, therefore, had, in its return, correctly claimed a deduction only in respect of the proportionate part of discount of Rs. 12,500 over the relevant accounting period in question. The view taken is also in conformity with accounting practice of showing the discount in 'discount on debentures account' which is written off over the period of the debentures. The appellant was, therefore, entitled to deduct a sum of Rs. 12,500 out of the discount of Rs. 3 lakhs in the relevant assessment year. The balance expenditure of Rs. 2,87,500 could not be deducted in the assessment year in question".

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6.1. Respectfully following the same, since facts are similar, we allow the assessee's claim. AO is directed to allow the same. Appeal of assessee is allowed.”

13. Per contra, ld.DR has drawn our attention to para 2.2. of the assessment order wherein the contention of issuing FCCB were captured by the Assessing Officer which is to the following effect :

2.2 As could be seen from the FCCB offer document, the assessee has to invest a major portion of the FCCB proceedings in warehousing projects. During the course of hearings, the assessee was asked to furnish the details of utilization of FCCB proceeds received at Rs.85,23,89,442/-. As per the information filed, the utilization details of FCCB so furnished are as under: Investment in lands Rs.60,30,41,370 Buildings Rs.11,94,06,472 Computers and scanners Rs. 3,31,56,058 Vehicles Rs. 1,30,10,548 Vessels & containers purchased Overseas Rs. 6,19,00,000

Investment in overseas subsidiary Companies Rs. 2,18,74,994 Total Rs.85,23,89,442”

14. It was submitted by the ld.DR that the amount was raised by the assessee for carrying out the activities which are in the nature of capital expenditure and therefore, the amount which sought for deduction was not fall u/s 37 of the Act and would fall u/s 36(1)(iii) of the Act.

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“7. Before concluding , it was contended that since an amount is waived off, for which the Respondent is claiming exemption, it actually amounts to income at the hands of the Respondent in the sense that an amount which ought to be paid by it is now not required to be paid. As a result, the case of the Revenue falls within the ambit of Section 28(iv) and, alternatively within Section 41 of the IT Act. Hence, the decision of the High Court is liable to be set aside.

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Section 37: General Expenses (1) Any expenditure (not being expenditure of the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee), laid out or expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head "Profits and gains of business or profession".

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“16. ….. the loan obtained is not an asset or advantage of an enduring nature….. the expenditure was made for securing the use of money for a certain period … and it is irrelevant to consider the object with which the loan was obtained. ….. 17. ….. the act of borrowing money ….. was not incidental to the carrying on of a business. …..” Similarly, the exposition in the case of Empire Jute Co. Ltd.8 is also extracted by the ITAT, which reads thus: − “5.….. it is not a universally true proposition that what may be capital receipt in the hands of the payee must necessarily be capital expenditure in relation to the payer. The fact that a certain payment constitutes income or capital receipt in the hands of the recipient is not material in determining whether the payment is revenue or capital disbursement qua the payer. …..”

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Ground Nos. 6 to 8:

20.1. In this regard, ld.AR has drawn our attention to pages 4 and 5 of the statement of facts annexed to Form 35 of the appeal memo, which is to the following effect :

“13. The assessing officer has made a disallowance of the proportionate amount of Rs.68,19,473/- on account of "buildings shown under work-in- progress" of Rs.11,94,06,472/-. As per the Balance Sheet as at 31st

17 Allcargo Gati Limited March 2010 there is Capital Work in progress of Rs.34,04,22,875/- under schedule 6 of Fixed Assets. The amount of Rs.34,04,22,875 does not include Rs. 11,94,06,472/- as has been incorrectly described as "Building shown under work-in-progress" in the assessment order at para 4. The details of assets of Rs. 11,94,06,472/- which are not included in capital work-in-progress as these have already been capitalized in the books and are being utilized for the purpose of business are as per Annexure -I.

“6.1 Ground numbers 687 relate to the disallowance of proportionate interest of Rs 68,19,473/- with regard to the buildings shown under work in progress. During the course of assessment proceedings, the assessing officer has called for the details of closing work-in-progress amounting to Rs. 34,04,22,875/- out of which Rs. 11,94,06,472/- pertains to buildings which are under construction. As the assessee has utilized the borrowed funds for investing in buildings which are under progress, the proportionate interest on the value of investment in building was disallowed as provisions for Sec 36(1)(iii). 6.2 With regard to this addition, the assessee states that the amounts in respect of these assets were already put to use in the course of the assessee's existing warehousing and express division and supply chain business. The assessee further states that the acquisition of land & building was for the purpose of construction of warehouses for the purpose of warehousing business of the assessee. It is submitted that since the construction & completion of warehouses require long amount

18 Allcargo Gati Limited of time these may be allowed. However the contentions of the assessee GATI LIMITED 2010-11 are not acceptable as interest on borrowed funds cannot be allowed till the asset is put to use for the purposes of business as per the provisions of Sec 30 (1)() Therefore the addition made by the assessing officer by disallowing proportionate interest of Rs. 68,19,473/- out of Rs. 11.94 Crores is upheld. 6.3 Further the assessee's alternative argument is that in case of this disallowance. appropriate depreciation may be allowed. However on any asset, depreciation is allowable only in the year in which the building is put to use. Therefore since the buildings are still under construction, depreciation cannot be allowed in this year. As such, this contention is also not tenable.”

19 Allcargo Gati Limited is required to be sent back to the file of Assessing Officer for verifying and passing the appropriate orders after considering the submissions of the assessee as to whether the amount has been capitalized in the previous year or not. Hence, these grounds of the assessee are allowed for statistical purpose.

Ground Nos.9 to 12

25.1. In this regard, ld.AR has submitted that the assessee has claimed interest on the property, and which has been used for the purpose of parking of their vehicles and therefore, the assessee is entitled for allowing of the said expenditure. In support of its contentions, assessee also filed written submissions and the relevant portion of written submissions filed by the assessee read as under :

“6.7 This land at Chennai was purchased primarily for the construction of warehouse / godown for its already existing Express Distribution and Supply Chain business. The appellant company was hiring number of godowns for storage of material required for transportation. It also needed land for parking of its vehicles and loading and unloading of shipments. The company has on an average several thousands of vehicles (own and hired) for its business. The company was paying lease rents for buildings taken on hire for storage purposes. 6.8 The intent of having own buildings is to do away with rented properties which was causing problems. Pending the construction these lands were used for parking a number of vehicles of the appellant used for transportation. Steps were in fact taken for construction of warthouse at Chennai by conversion of land inte commercial use and drawing the 20 Allcargo Gati Limited building plans etc., Because of slowdown of the economy and adverse conditions, the plan for construction of warchouse become unviable and the Chennai land was sold in Feb, 2012. Till the year Feb, 2012 the land was used for parking of the appellants trucks and loading and unloading of heavy and high dimensioned goods/packages. It would therefore be seen that the land purchased at Chennai was for carrying on the existing business in the normal course and not for its expansion. In any case it was put to use from the date it was purchased for parking of vehicles. 6.9. At para 6.2 of the assessment order it was stated by the AO, the property was inspected. Upon inspection it was found there was construction. The assessing officer borrowed this reasoning from the order of assessment for assessment year 2010-11. The appellant understands that the inspection was made sometime during March 2013 while the land was sold by the appellant in Feb 2012. Therefore, if there was no activity the appellant is not responsible it and it ceased to be the appellant's property. The department may be called upon to produce the inspection report, the date of inspection etc., as no such information was furnished to the appellant till date by the department. 6.10 The land at Chennai was sold out during the financial year 2011- 12 for a consideration of ₹. 26 crores and profit /loss on sale thereof duly offered to tax under the head 'Capital Gains' in assessment year 2012- 13 which is under appeal. Since the asset itself disposed off, the question of put to use does not arise. Hence the disallowance of pro-rata premium of ₹.2,55,21,426 is without any basis andwhich done on routine copying the earlier years orders. The act of the assessing office is wholly incorrect, Kolkata 6.11 The company wanted to purchase land for office and parking of its vehicles. A sum of 2. 3,11,12,500 was paid to M/s. Adhunik Corporation Ltd. towards advance. The sale could not be completed because of certain deficiencies in the seller's title of the land which initially it thought it could purchase. The company could not get back the advance and the matter is under litigation. The fact remains that the advance paid has nothing to do with the expansion of business. It was paid for carrying on the existing business more efficiently.”

Ground No.13 to 15:

28.1. It was submitted by the ld.AR that assessee has paid a sum of Rs.9.50 crore as advances for the purpose of purchase of land and has disallowed the interest on the said amount during the year under consideration. It was further submitted that the assessee is entitled for disallowance under section 36(1)(iii) of the Act. In support of its contentions, assessee also filed written submissions and the relevant portion of written submissions filed by the assessee read as under :

“6.12 A sum of ₹. 9,50,00,000 was paid to M/s.Crown Castings Pvt. Ltd. towards advance. It was intended that the land should be purchased for constructing warehousing godowns for the purpose of appellant's warehousing business. The construction work could not be started because of disputes with the seller. Here again there is no expansion of business. The amount was paid for carrying on the existing business more efficiently. 6.13 From the explanation furnished it is evident that all the assets were put use much earlier itself. In respect of land at Kolkata and Sanathnagar the payment was made to acquire the asset for carrying on the regular business of the company. The payment did not fructify into acquisition of asset. Therefore, even it is assumed that the provisions of section 36(1)(iii) are attracted, the proviso has no application. These expenditure cannot be disallowed.”

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32. The grounds raised by the assessee for A.Y. 2012-13 are all covered by us while deciding the appeal for A.Y.2010-11 except one i.e., “LD.CIT(A) has erred in allowing loss of Rs.1,19,40,368/- on slump sale of shipping business division”.

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