1 ITA No. 5502/Del/2016
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH: `B' NEW DELHI
BEFORE MS SUCHITRA KAMBLE, JUDICIAL MEMBER
AND
SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER
I.T.A. No. 5502/DEL/2016 (A.Y. 2012-13)
DCIT Vs. M/s.Diageo Distilleries Pvt. Ltd.
Circle 7 (2), Block-E, 2nd Floor, MIRA, Plot 1
New Delhi & 2,
Ishwar Nagar, Mathura Road,
New Delhi- 110065
PAN : AAKCS4614F
(APPELLANT) (RESPONDENT)
Appellant by Sh. Surendra Meena, Sr.DR
Respondent by None
Date of Hearing 06.08.2019
Date of Pronouncement 23.09.2019
ORDER
PER SUCHITRA KAMBLE, JM
This appeal is filed against the order dated 29.07.2016 passed by CIT(A)-
30, New Delhi for Assessment Year 2012-13.
2. The grounds of appeal are as under :
1. "Ld. CIT(A) erred in law and on facts of the case in deleting the
disallowance of Rs.2,79,11,315/- made by AO on account of bank interest
expenses. "
2. "Ld. CIT(A) erred in law and on facts of the case in deleting the
disallowance of Rs. 44,74,729/- made by the AO on account legal &
Professional Fee Expenses."
3. "Ld. CIT(A) erred in law and on facts of the case in deleting the
disallowance of Rs.25,27,483/- made by the AO on account warehousing and
demurrage charges."
2 ITA No. 5502/Del/2016
4. "The appellant craves leave, modify, add or forego any ground(s) of appeal at
any time before or during the hearing o f this appeal."
3. The assessee filed its return of income on 27.11.2012, declaring loss of
Rs. 3,62,52,720/-, under normal provisions of the Act. The Assessment u/s
143(3) of the Act, was completed by the order dated 16.03.2015, which was
rectified u/s 154 vide order dated 19.08.2015, at total loss of Rs. 13,39,193/-,
as against the returned loss of Rs. 3,62,52,720/-, after making the following
additions on account of:
i) Disallowance of interest paid on loan :Rs.2,79,11,315/-
ii) Disallowance of legal & professional charges :Rs. 61,87,589/-
iii) Disallowance of warehouse & demurrage charges:Rs. 27,67,483/-
4. Being aggrieved by the Assessment Order, the assessee filed appeal
before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.
5. The Ld. DR submitted that as regards to ground no. 1, the CIT(A) erred
in deleting the disallowance of Rs. 2,79,11,315/- made by the Assessing Officer
on account of bank interest expenses as the assessee failed to prove direct
nexus between the expenses wholly and exclusively laid out for its own
business purpose as articulated u/s 36 & 37 of the Income Tax Act. Besides
that other CBU's are separate and distinct entity. As regards to Ground No. 2
and 3, the Ld. DR submitted that before the Assessing Officer, the assessee
failed to explain as to how these huge expenses have been incurred fully and
exclusively for its business purposes particularly when there was no business
activity during the year.
3 ITA No. 5502/Del/2016
6. None appeared at the time of hearing on behalf of the assessee despite
giving notice. Therefore, we are taking into account the submissions of the
assessee before the CIT(A) as submissions before us.
7. We have heard the Ld. DR and perused all the relevant material available
on record. As regards to Ground No. 1, from the perusal of the records it can be
seen that the loan procured was utilized by the assessee wholly and exclusively
for its business as per clause 14 of the arrangement between third party
contract bottling units (CBUs). The working capital is advanced to these CBUs
so as to enable them to procure material, undertake manufacturing and
maintain stocks and debtors for the assessee. The assessee's profit earning
source is the arrangement with the CBUs wherein the assessee provides
working capital to these CBUs to enable them to procure materials and carry
out large scale manufacturing of alcoholic beverages and deliver the same to
the assessee's customers on its behalf. Thus, from this it is clear that working
capital loan was taken by the assessee for its business purpose and use for
business purposes only. Therefore, the CIT(A) was right in deleting this
disallowance. Ground No. 1 of the Revenue's appeal is dismissed. As regards to
Ground Nos. 2 and 3, it can be seen that it is an admitted position that during
the year there was no business activity, but during the said period the assessee
incurred expenses on the maintenance of its business establishment. During
the said year, the Assessing Officer has not pointed out any bogus or
expenditure of personal nature, which will warrant any disallowance. The
CIT(A) rightly held that by simply mentioning that the expenditures are not
commensurate with the turnover, will not automatically prove that they have
not been incurred wholly and exclusively for business purposes. Thus, there is
no need to interfere with the findings of the CIT(A). Ground Nos. 2 and 3 are
dismissed.
4 ITA No. 5502/Del/2016
8. In result, appeal of the Revenue is dismissed.
Order pronounced in the Open Court on 23rd September, 2019.
Sd/- Sd/-
(PRASHANT MAHARISHI) (SUCHITRA KAMBLE)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 23/09/2019
*Binita*
Copy forwarded to:
1. Appellant
2. Respondent
3. CIT
4. CIT(Appeals)
5. DR: ITAT
ASSISTANT REGISTRAR
ITAT NEW DELHI
5 ITA No. 5502/Del/2016
Date of dictation 06.08.2019
Date on which the typed draft is placed before the 06.08.2019
dictating Member
Date on which the typed draft is placed before the
Other Member
Date on which the approved draft comes to the Sr.
PS/PS
Date on which the fair order is placed before the
Dictating Member for pronouncement
Date on which the fair order comes back to the Sr.
PS/PS
Date on which the final order is uploaded on the
website of ITAT
Date on which the file goes to the Bench Clerk
Date on which the file goes to the Head Clerk
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