Ram Chander Banarsi Dass, SRIGANGANAGAR V. ITO, SRIGANGANAGAR

CO 11/JODH/2014

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9713 (ITAT-JODHPUR)
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 18-07-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 16-07-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 16-04-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: AND CROSS OBJECTION CO
• Assessee Lawyers: ARE DIRECTED A GAINST
• Keywords: Source of fund; Notional interest; Commercial expediency
• Section: 44AD

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA , JUDICIAL MEMBER AND SHRI N.K.SAINI, ACCOUNTANT MEMBER ITA NO. 5 3 / JU/ 20 1 4 ASSESSMENT YEAR: 200 9 - 10 THE INCOME - TAX OFFICER VS. M/S RAM CHANDRA BANARASI DASS WARD - 3 130, NEW DHAN MANDI SRIGANGANAGAR SRIGANGANAGAR PAN NO. AA B F R 5 9 1 39 Q (APPELLANT) (RESPONDENT) CO NO. 11 /JU /201 4 A/O ITA NO. 5 3 / JU/20 1 4 ASSESSMENT YEAR: 200 9 - 10 M/S RAM CHANDRA BANARASI DASS VS. THE INCOME - TAX OFFICER 130, NEW DHAN MANDI WARD - 3 SRIGANGANAGAR SRIGANGANAGAR PAN NO. AABFR 59139 Q (APPELLANT) (RESPONDENT) A SSESSEE B Y : SHRI VIKAS CHHABRA DEPARTMENT B Y : SHRI N.A. JOSHI , DR DATE OF H EARING : 1 6 . 0 7 .201 4 DATE OF PRONOUNCEMENT : 18. 0 7 . 201 4 2 ORDER PER HARI OM MARATHA , J .M. TH IS APPEAL BY THE REVENUE AND CROSS OBJECTION [CO] BY THE ASSESSEE ARE DIRECTED A GAINST THE ORDER OF THE CIT (A) , BIKANER DATED 25 . 11 .20 1 3 PERTAINING TO A.Y 2 00 9 - 20 1 0 . 2. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS A FIRM AND F OR A.Y. 2009 - 10, THE FIRM FILED ITS RETURN OF INCOME [ROI] ON 19 .9.2009 DECLARING TOTAL INCOME OF RS. 6, 64 , 02 0/ - FROM ITS BUSINESS OF AD H ATH AND WHOLE SALE OF AGRICUL TURAL PRODUCE. THE ASSESSEE FIRM COMPRISES OF FOUR PARTNERS. ON TOTAL TURNOVER OF RS. 21,80,45,204/ - THE ASSESSEE - FIRM HAS DECLARED GROSS PROFIT OF RS. 58,03,556/ - AND NET PROFIT OF RS. 6,48,973/ - GIVING GROSS PROFIT OF 2.66% AND NET PROFIT OF RS. 0.30% . THE ASSESSEE FIRM MAINTAINED BOOKS OF ACCOUNT WHICH ARE AUDITED AS PER THE PROVISIONS OF SECTION 44AD OF THE INCOME - TAX ACT, 1961 ['THE ACT', FOR SHORT]. THE A.O. HAS 3 ACCEPTED THE BOOKS OF ACCOUNT PRODUCED BY THE ASSESSEE IN TOTO AND HAS NOT MADE ANY A DVERSE OBSERVATIONS REGARDING THE SAME. IN THE ASSESSMENT ORDER FRAMED ON 27.12.201, THE A.O. HAS MADE ADDITION OF RS. 7,64,379/ - ON ACCOUNT OF INCREASE IN PAYMENT OF INTEREST TO CREDITORS IN NOTIONAL INTEREST WHICH SHOULD HAVE BEEN CHARGED FROM THE DEBTO RS, INTER ALIA. 3. THE ASSESSEE HAS FILED CROSS OBJECTION, WHICH SIMPLY SUPPORTS THE FINDING OF THE LD. CIT(A). HENCE IT STANDS DISMISSED. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE ENTIRE MATERIAL ON RECORD. BOTH THE PARTIES HAVE REITERATED THEIR EARLIER ARGUMENTS FOR AND AGAINST THIS ADDITION. WE HAVE FOUND THAT THIS ADDITION IS MADE ON ACCOUNT OF INTEREST FROM DEBTORS. AS PER THE A.O., THE ASSESSEE HAS PAID INTEREST TO CREDITORS AND BANKS DID NOT CHARGE INTEREST FROM ITS DEBTORS. ACCORDING TO 4 HIM, THE ASSESSEE DIVERTED FUNDS FOR NON BUSINESS PURPOSES AND HENCE PROPORTIONATE DISALLOWANCE HAS BEEN MADE OUT OF INTEREST PAID BY WAY OF ARRIVING AT NOTIONAL INTEREST @ 15% WHICH COMES TO RS. 7,22,473/ - . HOWEVER, THE ASSESSEE PR ODUCED DETAIL ED ANALYSIS OF THE SOURCE OF FUNDS AND INTEREST DUE THEREON AND WITH REFERENCE TO THE AVERMENTS IN THE ASSESSMENT ORDER THAT THESE ARE OLD OUTSTANDING LOAN/ADVANCES AND NO FRESH LOAN/ADVANCE WAS GIVEN DURING THE YEAR AND THE LOANS WERE REQUIRE D TO BE GIVEN IN THE INTEREST OF ASSESSEES BUSINESS. AFTER CONSIDERING THE SAME, THE LD. CIT(A) HAS DELETED THE IMPUGNED ADDITION IN THE LIGHT OF THE DECISION OF THE HON'BLE SUPREME COURT RENDERED IN THE CASES OF S.A BUILDERS VS. CIT REPORTED IN 158 TAXM ANN 74 AND CIT VS. WALCHAND & CO. P. LTD. REPORTED IN 65 ITR 381 [SC]. HE HAS FOUND THAT COMMERCIAL EXPEDIENCY EXISTED AND AS A PRUDENT BUSINESS MAN, THE ASSESSEE HAS ADVANCED LOANS IN QUESTION. ACCORDINGLY, HE DELETE D THE ENTIRE ADDITION. 5 5. WE HAVE ALSO CONSIDERED THE SAME AND SIMILAR ARGUMENTS RAISED BEFORE US. IT IS NOTICED THAT THE ASSESSEE HAS TAKEN UNSECURED LOANS FROM ONE COMPANY NAMED AS FERTICHEM COTSPIN LTD. THE ASSESSEE HAD MADE INTEREST FREE ADVANCES TO ITS PARTNERS. THE INTEREST FREE ADVANCES TO THESE PERSONS ARE OUT OF FUNDS AVAILABLE AND ADVANCES HAVE BEEN MADE AS COMMERCIAL EXPEDIENCY DEMANDED THE SAME. NO FRESH LOAN/ADVANCES WERE MADE DURING THE YEAR AND FOR MAINTAINING LOANS AT LOWER RATES, THE ADVANCES WERE GIVEN. ACCORDINGLY, THE DELETION OF THE IMPUGNED ADDITION OF RS. 7,22,473/ - IS QUITE IN ORDER AND WE CONFIRM THE SAME. 6. THE SECOND ISSUE REGARDING THE DELETION OF ADDITION OF RS. 7,64,379/ - ADDED ON ACCOUNT OF INADEQUATE INTEREST CHARGED ON LOANS GIVEN TO ITS SISTER CONCER NS. 7. THE ASSESSEE HAS GIVEN LOAN @ 12%. AGAIN, THE CASE OF THE ASSESSEE IS THAT THESE LOANS HAVE BEEN GIVEN TO 6 SISTER CONCERNS ON ACCOUNT OF COMMERCIAL EXPEDIENCY ONLY WHEN THE SALE TRANSACTIONS HAVE BEEN ENTERED INTO BY THE ASSESSEE. WE HAVE FOUND TH AT NO NEXUS HAS BEEN ESTABLISHED BY THE A.O. BETWEEN INTEREST BEARING FUNDS AND THE ADVANCES TO JUST IF Y THE DISALLOWANCE ON THE CLAIMED INTEREST PAYMENT. THEREFORE, IN THE TOTALITY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY INFIRMITY I N THE DELETION OF THIS ADDITION AS WELL. ACCORDINGLY, WE CONFIRM THE SAME AND DISMISS THIS GROUND OF APPEAL. 8 . IN THE RESULT, THE APPEAL OF THE REVENUE AS WELL AS THE CROSS OBJECTION OF THE ASSESSEE STAND DISMISSED . ORDER PRON OUNCED IN THE COURT ON 18 TH JU LY , 2014. SD/ - SD/ - (N.K.SAINI) [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEM B ER DATED : 18 TH JU LY , 201 4 VL/ - 7 COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT BY ORDER 4. THE CIT(A) 5. THE DR ASSISTANT REGISTRAR ITAT, JODHPUR