Citicorp Maruti Finance Ltd, Mumbai vs Department Of Income Tax

IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH, MUMBAI BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER & SHRI SANJAY GARG, JUDICIAL MEMBER

आयकर अपील सं./I.T.A. No.5410 /Mum/2013 ( नधारण वष / Assessment Year : 2007-2008

DCIT - 10(I), बनाम/ M/s Citicorp Maruti 455, Aayakar Bhavan, Finance Ltd., Vs. 4 t h floor, M.K. Marg, 5 t h floor, DLF Square, Mumbai - 400 020. M Block, Jacaranda Marg, DLF City Pghase I I, Gurgaon - 122 002. थायी ले खा सं . /PAN : AAACC5029L (अपीलाथ /Appellant) .. ( यथ / Respondent)

Appellant by Shri Premanand J Respondent by : Shri Arvind Sonde

ु वाई क तार ख / Date of Hearing सन : 10-12-2014 घोषणा क तार ख /Date of Pronouncement : 21-01-2015 [

आदे श / O R D E R PER R.C. SHARMA, A.M. :

This appeal filed by the Revenue is directed against the order of ld. CIT(A) -VI New Delhi dated 02-05-2013 for the A.Y. 2008-09 wherein the following grounds have been taken by the revenue:

"1. On the facts and in the circumstances of the case and in law, the ld. CIT(A) erred in deleting addition of Rs. 20,73,060/- holding it as revenue expenditure and failed to appreciate the facts brought out by the AO to hold it capital expenditure.

2. The appellant prays that the order of CIT (Appeals) on the above ground be set aside and that of the Assessing Officer restored."

2 ITA 5410/M/13

3. Briefly stated facts of the case are that the assessee company i.e, M/s Citicorp Maruti Finance Limited (CMFL) was a joint venture between Citicorp Finance (India) Limited ('CFIL') and Maruti Udyog Limited wherein 74 %of the stake was held by CFIL and the remaining 26 % was held by Maruti Udyog Limited. The Company was engaged in the business of financing vehicles manufactured by Maruti Udyog Limited. The Company was also registered with the Reserve Bank of India (RBI') as a Non Banking Financial Company ('NBFC). For the relevant assessment year, the assessee company (CMFL) filed its original return of income on 30 September 2008 declaring a loss of Rs 5,76,23,500. The said return of income was processed under section 143(1) of the Act. Thereafter, the case was selected for scrutiny and the assessment of the company completed u/s 143(3) of the Act vide assessment order dated 26 the December, 2011 after making the disallowance of Rs. 20,73,060 on account of loan sourcing fees thereby assessing the loss of the company at Rs. 5,55,50,440. By the impugned order, the ld. CIT(A) deleted the disallowance after having following observation:-

"I have carefully considered the submissions made by the AR and have gone through the assessment order. It is observed that the expenditure under dispute is nothing but amortization of payment made in earlier years. Since the amortization has been allowed in earlier years by the AO, the same should also be allowed in the current year by following the principles of consistency as laid down by the Hon'ble Supreme Court in the decision of Radhasoami Sasang vs. CIT (1992) 193 ITR 321 (SC). Further the expenditure debited in the books of accounts is neither capital in nature nor resulted in any enduring benefit for the appellant. Accordingly, keeping in view the above decision, the said expenditure is allowable as revenue expenditure. Therefore, I am of the opinion that the action of the AO in disallowing loan sourcing fees is erroneous and in complete disregard to the facts of the case. Therefore, the A.O. is directed to delete the impugned disallowance made in this regard."

4. We have considered the rival contentions, gone through the orders of the authorities below and found from the record that the assessee 3 ITA 5410/M/13

Company was making quarterly payments of 0,35% of loan amount on all loans disbursed by it, for purchase of both new and used Maruti vehicles, to Maruti Udyog Limited under the terms of the joint venture agreement. The quarterly payment made by the assessee Company to its joint venture partner was in lieu of the support extended to the assessee in carrying on its business. The said payment was being amortized by the Company in its books of accounts over the period of loan granted and only the amortized component was being charged to the profit and loss account every year and not the entire expenditure. The amount debited to the Profit and Loss Account in the year under consideration was nothing but amortization of payment made in earlier years. Since part of the amortization has already been allowed in earlier years, the remaining portion was claimed in the current year. In order to substantiate the same, audited financial statements, accounting policy and agreements were also submitted. We found that similar expenditure was allowed by the A.O. in all the earlier years i.e assessment years 2003-04 to 2006-07. In all these years, the A.O. had allowed the entire expenditure claimed as revenue in nature.

5. In view of the above, since the findings recorded by the ld. CIT(A) has not been controverted, we do not find any error in the impugned order of ld. CIT(A) deleting the disallowance made by the A.O.

6. In the result, appeal of the Revenue is dismissed.

Order pronounced in the open court on 21st January, 2015 आदे श क घोषणा खल ु े यायालय म दनांकः 21-01-2015 को क गई ।

Sd/- sd/- (SANJAY GARG) (R.C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER मुंबई Mumbai; दनांक Dated 21-01-2015 [ व. न.स./ RK , Sr. PS 4 ITA 5410/M/13

आदे श क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. आयकर आयु त(अपील) / The CIT(A) -3,, Mumbai 4. आयकर आयु त / CIT -II, Mumbai 5. वभागीय त न ध, आयकर अपील य अ धकरण, मुंबई / DR, ITAT, Mumbai H Bench

6. गाड फाईल / Guard file. ु ार/ BY ORDER, आदे शानस

स या पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, मुंबई / ITAT, Mumbai