Deputy Commissioner Of Income tax Circle - 7(1)(1), Bengaluru vs M/S United Breweries Ltd., Srikakulam District

Last updated: 23 December 2020

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This Income Tax Appellate Tribunal case concerns an appeal by the Deputy Commissioner of Income Tax against M/s. United Breweries Ltd. The Revenue contested the CIT(A)'s decision to delete disallowances made by the AO. Key issues include the utilisation of interest-bearing funds for investments in subsidiary companies and the deletion of an addition for bank guarantee commission.

Court :
ITAT Bangalore

Brief :
This appeal filed by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-2, Visakhapatnam Dt.14.02.2018 for the Assessment Year 2010-11.

Citation :
ITA No.1434/Bang/2018

IN THE INCOME TAX APPELLATE TRIBUNAL
BANGALORE BENCHES “ B ” BENCH: BANGALORE

BEFORE SHRI N.V. VASUDEVAN, VICE PRESIDENT
AND SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER
ITA No.1434/Bang/2018
(Assessment Year: 2010-11)

Dy. Commissioner of Income Tax,
Circle 7(1)(1), Bangalore. ….Appellant

Vs.

M/s. United Breweries Limited,
(Successor to M/s. United Millennium Breweries Ltd.)
Bantupalli Village, Ranasthalam Mandal,
Srikakulam District.
Andhra Pradesh. ……Respondent.
PAN AABCG 4480G

Assessee By:
Shri B.K. Panda,CIT (D.R)
Revenue By:
Shri K.R. Vasudevan, Advocate.

Date of Hearing : 16.12.2020.
Date of Pronouncement : 17.12.2020.

O R D E R

PER SHRI CHANDRA POOJARI, A.M. :

This appeal filed by the Revenue is directed against the order of Commissioner of Income Tax (Appeals)-2, Visakhapatnam Dt.14.02.2018 for the Assessment Year 2010-11.

2. The Revenue has raised the following grounds :

1. “ The order of the Learned CIT(A) is opposed to Low and facts of the case.

2. "Whether the CIT(A) is justified in holding that the disallowance made by the AO is not warranted, ignoring the fact that the interest bearing funds were utilised for making investment in Preference shares of subsidiary companies, the income from which does not form part of total income of the assessee and therefore is clearly diversion of funds?"

3. "Whether the CIT(A) is justified in low in ignoring the ratio of the decision of the Hon'ble Delhi High Court in the case of MAXOPP INVESTMENT LIMITED Vs CIT [15 Taxmann 390] wherein it is held that disallowance of interest u/s. 14A is justified even though the assessee has invested in the subsidiary company "for the sake of managerial control" which is akin to "investment for bailing out" the subsidiary company"?

4. "Whether the CIT(A) is justified in law in deleting the addition made on account of Bank Guarantee Commission paid to M/s. Millenium, Breweries Ltd., for obtaining loon from Axis Bank?'

To know more in details find the attachment file

FAQ :

The main issue is the Revenue's appeal against the CIT(A)'s decision to delete disallowances made by the Assessing Officer (AO) concerning United Breweries Ltd.

The Revenue contested the disallowance of interest on funds used for investments in subsidiary companies and the addition made for bank guarantee commission paid to M/s. Millenium Breweries Ltd.

The Revenue argued that interest-bearing funds were used for investments in preference shares of subsidiary companies, the income from which was not part of the total income, thus constituting a diversion of funds.

The Revenue cited the Delhi High Court's decision in MAXOPP INVESTMENT LIMITED Vs CIT, which held that disallowance of interest under Section 14A is justified even for investments in subsidiary companies made for managerial control.

The Revenue also appealed the deletion of an addition made on account of Bank Guarantee Commission paid to M/s. Millenium Breweries Ltd. for obtaining a loan.