ITO 19(2)(3), R.No.311, 3rd Floor, Piramal Chambers, Lalbaug, Parel, Mumbai-400012 Vs. M/s Lupin International, 159, CST Road, kalian, Santacruz (E), Mumbai-98
April, 10th 2015
INCOME TAX APPELLATE TRIBUNAL,MUMBAI - A BENCH
[^ , Û Û],
Before S/Sh. I P Bansal,Judicial Member & Rajendra,Accountant Member
/.ITA No.5553/Mum/2009,[ [/Assessment Year-1998-99
ITO 19(2)(3), M/s Lupin International, 159, CST
R.No.311, 3rd Floor, Road, kalian, Santacruz (E),
Piramal Chambers, Lalbaug, Parel, Vs Mumbai-98
( /Assessee) (× / Respondent)
/ Revenue by :Shri Sachchidanand Dube
[ /Assessee by :Ms. Vasanti Patel
/ Date of Hearing : 09 - 04 -2015
/ Date of Pronouncement : 09 -04-2015
, 1961 254 ( 1 ) Û[
Order u/s.254(1)of the Income-tax Act,1961(Act)
Û] PER RAJENDRA, AM-
Challenging the order dt.04.08.2009 of the CIT(A)-XIX, Mumbai, Assessing Officer (AO) has
raised following Grounds of Appeal:
1.On the facts and in the circumstances of the case and in law, the Learned CIT(A) has
erred in deleting the addition of Rs.1,32,08,738/-on account of discount charges made by A.O.
2.On the facts and in the circumstances of the case and in law, the learned CIT(A)
failed to appreciate that the assessee firm had not been able to prove that the
discounting charges have been paid wh o lly and exclu sively fo r the p u rp o se o f th e
bu siness of th e assessee.
3.On the facts and in the circumstances of the case and in law, the learned CIT(A)
failed to appreciate that the assessee was given opportunity to produce the copies of
bills of discounting/finance charges which were not produced at the time of original
assessment as well as at the time of fresh assessment.
4.The appellant prays that the order of the CIT(A) on the above ground be set aside and that
of the AO be restored.
5.The appellant craves leave to amend or alter any ground or add a new ground which
may be necessary.
2.Assessee-firm,engaged in the business of trading and investment in shares,filed its return of
income on 02.11.1998,declaring total income of Rs. (-)1,33,47,190/-.The AO completed the
assessment u/s.143(3) of the Act on 18.01.2001,determining the income of the assessee at Rs.
(-)58,538/-.The AO disallowed assessee's claim of interest expense of Rs.1.32 Crores.Matter
travelled up to the Tribunal and vide its order dated 26.06.2007,Tribunal restored back the matter
to the file of the AO with following direction:
"If the position is that the assessee is continuously offering the same amount for taxation
in earlier years, the principle of consistency would not permit to take a different
view.However,if the facts of the instant case are similar those of M/s.Delta International and
M/s.Alpha Corporation then the issue would require examination a t t h e A . O ' s e n d i n
t h e l i g h t o f t h e d i r e c t i o n c o n t a i n e d i n s u c h order.We,therefore,set aside the
impugned order and restore the matter to the file of the AO,who will decide this matter afresh in
the light of our above observations."
However,the AO disallowed the discounting charges of Rs.1.32 Crores.
3.Aggrieved by the order of the AO,the assessee preferred an appeal before the First Appellate
Authority (FAA).Before him it was contented that the finding of the AO were in contradiction
with the directions of the Tribunal,that the it had actually incurred finance charges and other
expenses,that bill discounting transactions were in the nature of financial transactions,that all the
transactions were routed through banking channels,that it had repaid the principle amount of
funds borrowed from time to time,that it had produced the necessary documentary evidences in
support of the claim,that the discounting charges were in nature of interest paid on monies
borrowed,that same had to be allowed as a deduction u/s.36(1)(iii)of the Act, that the facts in
the present appea1 were identical to the case of M/s. Delta International,that under
identical circumstances disallowance of discounting charges/finance charges had
been deleted in group cases by the FAA.After considering the submissions of the
assessee and the assessment order,he held that that the issue for the appeal under consideration
was identical to the facts of the c a s e o f M / s . D e l t a i n t e r n a t i o n a l - a g r o u p c o n c e r n ,
t h a t w h i l e d e c i d i n g t h e a p p e a l o f t h a t a s s e s s e e f o r t h e A Y . 1 9 9 6 - 9 7 the disallo -
wance of discounting charges was deleted.Following the same,the FAA allowed the
appeal filed by the assessee.
4.Before us,Departmental Representative(DR) left the issue to the discretion of the Bench.
Authorised Representative (AR)stated that in the case of Delta International and East West
Corporation and other group concerns the Tribunal had decided the identical issue in favour of the
assessees.He referred to the orders of the Tribunal delivered on 25.09.2013, 24.07.2013
(ITA/5340 & others/Mum/2011-AY.1997-98 and others.-Paper book pg.6-12.)
5.We have heard the rival submissions and perused the material before us.We find that the
issue of discounting charges have been extensively deliberated upon by the Tribunal in the group
cases and it had dismissed the appeals filed by the AO.s for the AY.1997-98.We would like to
reproduce the decisions of Delta International,delivered by the Tribunal on 25.09.2013(supra)
and it reads as under:
"Ground Nos. I to 3 relate to disallowance of discounting charges/ interest of Rs. 46, 32,
752.Briefly stated the facts of the case are that the original assessment in this case was completed, making
addition, inter-alia, of Rs.46,32,752/- on account of discounting charges/interest.When the matter finally
came up before the Tribunal, the Tribunal vide order dated 28.11.2006 passed in ITA No.639/M12004
restored the issue to the file of A.O. with a direction to examine as to whether such discount/interest was
incurred by the assessee in carrying on of its business. This order was passed by the Tribunal by
following another order by the Tribunal in the case of another group concern of the assessee
the"Fellowship corporation vs.JCIT[ITA No.4352/MumI2001]. Pursuant to the direction given by the
Tribunal, the Assessing Officer repeated the addition towards finance charges in the present case.
The learned CIT(A), however deleted the said addition. The Revenue has come up in appeal against such
deletion.The ld. AR has brought to our notice that the issue under consideration is squarely covered with the
findings of the co-ordinate bench of the tribunal given in the own case of the assessee for A.Y.1996-97
passed in ITA No.5028/Mum/2009 vide order dt.24.07.2013. The operating part of the order,for the sake of
convenience is reproduced as under:
"From the body of the assessment order it can be seen that the Assessing Officer simply repeated
the assessment and first appellate authority's order without discussing anything new about the
matter on which the Tribunal gave direction.He simply noticed that the assessee did not produce
any additional evidence to co-relate the financing charges with the business expenditure.As
against that, the learned AR invited our attention towards various details furnished before the
Assessing Officer during the course of such fresh proceedings. First letter of the assessee in the
fresh proceedings is dated 05.09.2006 by which it furnished Fund flow statement, Balance sheet
and profit and loss account for the year in question and for the earlier year,details of discount
charges paid,statement of account, parties in support of receipt payment of discounting charges,
copies of account of parties tracing the original funds, user of funds and repayment of charges
with discounting charges etc. Another letter was filed before the Assessing Officer on
24.11.2006 producing complete books of account, details of finance charges paid with
bifurcation of parties and rate of interest and a copy of assessment order passed by the A.O. for
the preceding year in which similar deduction was allowed.The present assessment order
was passed by the AO on 18.12.2006 after filing of the above referred documents by the
assessee.It is surprising that the Assessing Officer did not make a whisper, in the
assessment order of such details having been filed by the assessee What to talk of adversely
commenting ,the A.0.even did not bother to incorporate or discuss such facts in the assessment
order. This fact has been elaborately considered by the learned CIT(A), the discussion on which
has been made in par as 1.10 to 1.14 of the impugned order. On the appreciation of the entire
material /evidence placed by the assessee before the A.O. in the fresh round of proceedings,the
learned CIT(A) has recorded a categorical finding that these expenses were incurred during the
course of business. Apart from relying on the assessment order, the learned Departmental
Representative could not controvert the findings given by the learned CIT(A)in support of the
grant of deduction. We, therefore, uphold the impugned order in deleting the said addition."
3.Ld. D.R. has not brought before us any distinguishable fact which may justify departure from the
flndings of the co-ordinate bench of the tribunal given for the preceding year based on similar facts
and circumstances. So respectfully following the findings of the co ordinate bench of the tribunal for the
earlier year, the issue is decided against the Revenue and the order of the Id. CIT(A) deleting the
disallowance relating to the issue is upheld."
As the facts of the case under appeal and that of Delta International are identical,therefore,
respectfully,following it we are upholding the order of the FAA.Effective ground of appeal is
decided against the AO.
As a result,appeal filed by the AO stands dismissed.
Order pronounced in the open court on 9th,April,2015.
Û 9 ,2015
( /I P Bansal) (Û] / RAJENDRA)
Û / JUDICIAL MEMBER / ACCOUNTANT MEMBER
/Copy of the Order forwarded to :
1.Appellant / 2. Respondent /×
3.The concerned CIT(A)/ , 4.The concerned CIT /
5.DR "A" Bench, ITAT, Mumbai / , ,..Û.
× //True Copy//
/ BY ORDER,
/ Dy./Asst. Registrar
, /ITAT, Mumbai.