ITO, WD-13(1), KOLKATA, Kolkata V. M/s Abhinand Investment Ltd., Kolkata

CO 39/KOL/2016

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3585 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 3 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 07-02-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2004-2005
• Appeal Filed On: 04-07-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARINDAM BHATTACHARJEE
• Assessee Lawyers: V N PUROHIT
• Keywords: Business expenditure; Proportionate interest
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH : KOLKATA [BEFORE HONBLE SHRI M.BALAGANESH, AM & HONBLE S HRI S.S.VISWANETHRA RAVI, JM] I.T.A NO. 982/KOL/201 6 ASSESSMENT YEAR : 2004-0 5 ITO, WARD-13(1), KOLKATA -VS- M/S ABHIN AND INVESTMENT LTD. [PAN: AACCA 7452 M] (APPELLANT) (RESPONDENT) C.O. NO. 39/KOL/2016 (ARISING OUT OF I.T.A NO. 982/KOL/2016) ASSESSMENT YEAR : 2004-0 5 M/S ABHINAND INVESTMENT LTD. -VS- ITO, WARD-13( 1), KOLKATA [PAN: AACCA 7452 M] (APPELLANT) (RESPONDENT) FOR THE APPELLANT : SHRI ARINDAM BHATT ACHARJEE, ADDL. CIT FOR THE RESPONDENT : SHRI V.N. PUROHIT, A DVOCATE DATE OF HEARING : 10.01.2018 DATE OF PRONOUNCEMENT : 07.02.2018 ORDER PER M.BALAGANESH, AM 1. THIS APPEAL BY THE REVENUE AND THE CROSS OBJECTI ON BY THE ASSESSEE ARISE OUT OF THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX(APPEALS)-23, KOLKATA [IN SHORT THE LD CIT(A)] IN APPEAL NO.50/CIT(A)-23/ WD-3(4)/14-15 DATED 04.03.2016 AGAINST THE ORDER PASSED BY THE ITO, WAR D-3(2), KOLKATA[ IN SHORT THE 2 ITA NO.982/KOL/2016& C.O. NO. 30/KOL/2016 M/S ABINAND INVESTMENT LTD. A.YR. 2004-05 2 LD AO] UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) DATED 23.11.2006 FOR THE ASSESSMENT YEAR 2004-05. 2. THE ONLY ISSUE INVOLVED IN THE APPEAL OF THE RE VENUE IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN DELETING THE DISALLOWANCE OF DIMIN UTION IN VALUE OF CLOSING STOCK OF RS. 30,76,750/-, IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSESS EE IS A LIMITED COMPANY ENGAGED IN THE BUSINESS OF DEALING IN SHARES. THE ASSESSEE IS ALSO A REGISTERED NON-BANKING FINANCE COMPANY AND IS DUTY BOUND TO COMPLY WITH THE PRUDEN TIAL NORMS AS NOTIFIED BY THE RESERVE BANK OF INDIA WITH REGARD TO DISCLOSURE AND PRESENTATION OF ITS FINANCIAL STATEMENTS. THE LD. AO DURING THE COURSE OF ASSESSM ENT PROCEEDINGS NOTICED THAT THE ASSESSEE COMPANY DERIVED INCOME FROM PROFIT IN SHAR E DIFFERENCE FOR RS. 15,00,052/- AND DIVIDEND OF RS. 40,750/-. THE LD. AO FROM THE P ROFIT AND LOSS ACCOUNT OF THE ASSESSEE NOTICED THAT THE ASSESSEE HAD INCURRED NET LOSS OF RS. 35,22,062/-. HE FURTHER NOTICED THAT THE SAID LOSS HAD APPARENTLY AROSE DUE TO DIMINUTION IN VALUE OF CLOSING STOCK OF SHARES AS ON 31.03.2004. THE ASSESSEE HAD THE CLOSING STOCK OF SHARES COMPRISING OF BOTH QUOTED AS WELL AS UNQUOTED SHARE S. IN RESPECT OF QUOTED SHARES, THE ASSESSEE HAD VALUED THE CLOSING STOCK AT THE LOWER OF COST OR MARKET PRICE. IN RESPECT OF UNQUOTED SHARES, AS DIRECTED BY THE RESERVE BANK OF INDIA PRUDENTIAL NORMS VIDE NOTIFICATION NO. DFC.119/DG(SPT)-98(AS AMENDED UP T O 01.10.2002) DATED 31.01.1998, THE ASSESSEE HAD VALUED THE CLOSING STOCK OF UNQUOT ED SHARES AT LOWER OF COST OR BREAK UP VALUE PER SHARE AS ON 31.03.2004. PURSUANT TO THIS VALUATION, THE ASSESSEE HAD INCURRED LOSS ARISING DUE TO DIMINUTION IN VALUE OF CLOSING STOCK AMOUNTING TO RS. 30,76,750/- IN RESPECT OF UNQUOTED SHARES. THE LD. AO DID NOT ALLO W THIS LOSS ARISING DUE TO DIMINUTION IN VALUE OF CLOSING STOCK OF UNQUOTED SHARES IN THE ASSESSMENT. HOWEVER, THE LD. AO OBSERVED IN THE ASSESSMENT ORDER THAT THE DIMINUTIO N IN VALUE OF CLOSING STOCK OF QUOTED SHARE IS ALLOWABLE. 3 ITA NO.982/KOL/2016& C.O. NO. 30/KOL/2016 M/S ABINAND INVESTMENT LTD. A.YR. 2004-05 3 4. BEFORE THE FIRST APPELLATE AUTHORITY, THE ASSESS EE CONTENDED THAT THE FINDING GIVEN BY THE LD. AO HAS NO BASIS IN VIEW OF THE SPECIFIC PRO VISIONS CONTAINED IN SECTION 145A OF THE ACT WHICH STATES THAT NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED IN SECTION 145, THE VALUATION OF PURCHASE AND SALE OF GOODS AN D INVENTORY FOR THE PURPOSE OF DETERMINING THE INCOME CHARGEABLE UNDER THE HEAD P ROFITS AND GAINS OF BUSINESS OR PROFESSION SHALL BE INCREASED WITH THE METHOD OF A CCOUNTING REGULARLY EMPLOYED BY THE ASSESSEE ... THE ASSESSEE PLEADED THAT AS PE R THE REQUIREMENT OF LAW, THE VALUATION OF INVENTORY SHOULD BE DONE IN A CONSISTE NT METHOD REGULARLY EMPLOYED BY THE ASSESSEE. THE ASSESSEE FURTHER PLEADED THAT THERE I S NO DISPUTE OVER THE PERIOD AND OVER THE FACT THAT THE ASSESSEE HAS BEEN CONSISTENTLY VA LUING ITS CLOSING STOCK OF SHARES AT THE LOWER OF COST OR MARKET VALUE IN CASE OF QUOTED SHA RES AND AT LOWER OF COST OR BREAK UP VALUE IN RESPECT OF UNQUOTED SHARES. THE ASSESSEE F URTHER PLACED RELIANCE ON THE DECISIONS OF HON'BLE SUPREME COURT IN THE CASE OF I) CIT VS. BRITISH PAINTS INDIA LIMITED REPORTED IN [1991]88 ITR 44 (S C) II) CHAINRUP SAMPATRAM VS. CIT REPORTED IN [1953] 2 4 ITR 481 (S C) THE ASSESSEE PLEADED THAT THERE IS ABSOLUTELY NO DE VIATION FROM THE REGULAR METHOD OF ACCOUNTING FOLLOWED BY IT OVER THE YEARS WITH REGAR D TO VALUATION OF CLOSING STOCK OF UNQUOTED SHARES WHICH WAS IN ACCORDANCE WITH UNIVER SALLY APPLICABLE ACCOUNTING PRINCIPLES AND METHODS. IT WAS FURTHER PLEADED THAT THE LAW DOES NOT DIFFERENTIATE BETWEEN THE VALUATION OF QUOTED SHARES OR UNQUOTED SHARES. THE VERY FACT THAT THE LD. AO HAD ACCEPTED THE VALUATION OF QUOTED SHARES AT L OWER OF COST OR MARKET VALUE OUGHT TO HAVE ACCEPTED THE VALUATION OF UNQUOTED SHARES A LSO AT LOWER COST OR BREAKUP VALUE WHICH WAS DONE AS PER THE MANDATE PROVIDED IN RBI P RUDENTIAL NORMS VIDE ITS NOTIFICATION DATED 31.01.1998. IT WAS FURTHER PLEAD ED THAT CHARTERED ACCOUNTANT IN HIS REPORT HAD CATEGORICALLY MENTIONED THAT THERE WAS N O CHANGE IN THE METHOD OF VALUATION OF CLOSING STOCK ADOPTED BY THE ASSESSEE DURING TH E YEAR AS COMPARED TO EARLIER YEARS. 4 ITA NO.982/KOL/2016& C.O. NO. 30/KOL/2016 M/S ABINAND INVESTMENT LTD. A.YR. 2004-05 4 5. THE LD. CIT(A) APPRECIATED THE CONTENTIONS OF TH E ASSESSEE AND GRANTED RELIEF TO THE ASSESSEE BY OBSERVING AS UNDER: HAVING CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND THE CASE LAWS RELIED UPON I FIND THAT THERE IS MERIT ON THE CONTENTIONS OF THE ASSESSEE, AND THE AO CANNOT DISCRIMINATE UNQUOTED SHARES AND QUOTED SHARES WHEN IT COMES TO VALUATION FOR THE PURPOSE OF CLOSING STOCK, AS THERE ARE NO SUCH PROV ISIONS WHICH ALLOW HIM TO DO SO. I FIND MERIT IN THE CONTENTION OF THE ASSESSEE-APPELL ANT THAT THE REQUIREMENT OF LAW IS THAT FOR THE VALUE OF THE INVENTORY, THE METHOD REGULARL Y EMPLOYED IS TO BE FOLLOWED, AS THAT THERE IS NO DISPUTE OVER THE FACT THAT ASSESSEES M ETHOD OF VALUATION OF STOCK HAS BEEN, LOWER OF COST AND MARKET VALUE WHICHEVER IS LOWER AND THAT THE ASSESSEE COMPANY HAS REGULARLY FOLLOWED THE SAME METHOD OF VALUATION OF STOCK ALL ALONG IN THE PAST. THAT THE SAID METHOD HAS BEEN REGULARLY FOLLOWED BY THE APPELLANT-COMPANY HAS ALSO BEEN CERTIFIED BY THE CHARTERED ACCOUNTANTS, AS IT APPEA RS FROM THE RECORDS. IN THE SAID SITUATION, AND CONSIDERING THE JUDICIAL PRECEDENTS, I AM UNABLE TO SUSTAIN THE ADDITION/ DISALLOWANCE MADE BY THE AO, AND THE SAME IS DIREC TED TO BE DELETED. 6. AGGRIEVED THE REVENUE IS IN APPEAL BEFORE US ON THE FOLLOWING GROUNDS: 1. THAT THE ORDER DATED 04.03.2016 OF THE LD. CIT(A) - 23, KOLKATA IS UNJUSTIFIED, ARBITRARY, PREJUDGED AGAINST THE WEIGHT OF THE EVID ENCE ON RECORD AND BAD IN LAW. 2. THAT THE LD. CIT(A)-23, KOLKATA HAS ERRED IN NOT SU STAINING THE DISALLOWANCE OF NOTIONAL DIMINUTIVE VALUATION OF CLOSING STOCK O F RS. 30,76,750/- MADE BY THE AO WITHOUT APPRECIATING THE FACTS THAT UNQUOTED SHARES AND QUOTED SHARES ARE DIFFERENT IN NATURE AND IN ALL SPHERES, THEY AR E TREATED IN DIFFERENT WAYS AND DIMINUTIVE VALUE OF SHARES IN STOCK IS ONLY ALL OWABLE IN CASES OF QUOTED SHARES THIS IS NOT ALLOWABLE. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD, TO AMEND AN Y OF THESE GROUNDS BEFORE OR AT THE TIME OF HEARING. 7. WE HAVE HEARD THE RIVAL SUBMISSIONS. WE FIND THA T THE ASSESSING OFFICER HAS ACCEPTED THE METHOD OF VALUATION OF CLOSING STOCK OF QUOTED SHARES. WITH REGARD TO VALUATION OF UNQUOTED SHARES, SINCE IT RESULTED IN A LOSS OF RS. 30,76,750/- DUE TO DIMINUTION IN VALUE OF CLOSING STOCK THEREON, THE LD. AO STATED IN HIS ORDER THAT THE VALUATION OF CLOSING STOCK AT LOWER OF COST OR BREAKUP VALUE CANNOT BE APPLIED IN CASE OF UNQUOTED SHARES. IN THIS REGARD, WE FIND THAT THE RESERVE BANK OF INDIA VID E ITS NOTIFICATION DATED 31.01.1998 5 ITA NO.982/KOL/2016& C.O. NO. 30/KOL/2016 M/S ABINAND INVESTMENT LTD. A.YR. 2004-05 5 HAD CLEARLY MANDATED ALL THE NON-BANKING FINANCE CO MPANIES TO VALUE ITS UNQUOTED SHARES AS UNDER: UNQUOTED EQUITY SHARES IN THE NATURE OF CURRENT IN VESTMENTS SHALL BE VALUED AT COST OR BREAKUP VALUE, WHICHEVER IS LOWER. HOWEVER, NBFCS M AY SUBSTITUTE FAIR VALUE FOR THE BREAKUP VALUE OF THE SHARES, IF CONSIDERED NECESSAR Y. WHERE THE BALANCE SHEET OF THE INVESTEE COMPANY IS NOT AVAILABLE FOR TWO YEARS, SU CH SHARES SHALL BE VALUED AT ONE RUPEE ONLY. THE ASSESSEE IN THE INSTANT CASE HAS CLEARLY FOLLOW ED THE MANDATE PRESCRIBED BY THE RESERVE BANK OF INDIA IN ITS NOTIFICATION DATED 31. 01.1998, WHICH IS BINDING AND MANDATORY IN NATURE FOR THE ASSESSEE. WE HAVE ALSO GONE THROUGH THE PAGE NOS. 64 AND 65 OF THE PAPER BOOK CONTAINING THE CAS CERTIFICAT E FOR ARRIVING AT THE BREAKUP VALUE PER SHARE TOGETHER WITH ITS WORKINGS. WE FIND THAT THE ASSESSEE HAD PLACED RELIANCE ON THE SAID CAS CERTIFICATE AND HAD ACCORDINGLY VALUE D ITS CLOSING STOCK BY ADOPTING THE BREAKUP VALUE PER SHARE AS ON 31.03.2004, AS IT WA S LOWER THAN COST OF THE UNQUOTED SHARES. WE ALSO FIND FROM THE ACCOUNTING POLICY OF THE ASSESSEE COMPANY WHICH ARE PART OF THE AUDITED FINANCIAL STATEMENTS AND FROM POINT 1C ENCLOSED IN PAGE 32 OF THE PAPER BOOK ON THE ACCOUNTING POLICY FOLLOWED FOR STOCK-I N-TRADE, THE ASSESSEE HAD REPORTED AS UNDER: CURRENT INVESTMENTS ARE CLASSIFIED AS STOCK OF SH ARES UNDER CURRENT ASSETS. QUOTED EQUITY SHARES ARE VALUED AT LOWER OF COST AND MARKE T VALUE AND UNQUOTED EQUITY SHARES ARE VALUED AT LOWER OF COST & BREAKUP VALUE IN ACCO RDANCE WITH PRUDENTIAL NORMS PRESCRIBED BY RBI. WE ALSO FIND THAT THE ASSESSEE HAS BEEN CONSISTENTL Y FOLLOWING THIS METHOD OF VALUATION OF CLOSING STOCK OF UNQUOTED SHARES WITHOUT ANY DEV IATION THEREON AS HAS BEEN CATEGORICALLY MENTIONED BY THE LD. CIT(A) IN HIS OR DER, WHICH REMAINED UNCONTROVERTED BY THE REVENUE BEFORE US. IN VIEW OF THE AFORESAID FACTS AND FINDINGS WE DO NOT FIND ANY JUSTIFIABLE REASON TO INTERFERE IN THE ORDER OF THE LD. CIT(A) IN THIS REGARD AND HENCE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. C IT(A) WITH REGARD TO THE ISSUE. ACCORDINGLY, GROUNDS RAISED BY THE REVENUE ARE DISM ISSED. 6 ITA NO.982/KOL/2016& C.O. NO. 30/KOL/2016 M/S ABINAND INVESTMENT LTD. A.YR. 2004-05 6 8. NOW LET US COME TO CROSS OBJECTIONS RAISED BY THE ASSESSEE. 9. THE ONLY ISSUE RAISED BY THE ASSESSEE IN ITS CRO SS OBJECTIONS IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF INTEREST OF RS. 5,31,000/- PAID ON LOAN TAKEN FOR PURCHASE OF SHARES OF GANPATI SUGAR INDUSTRIES LTD., WHICH WAS PART AND PARCEL OF THE STOCK-IN-TRADE, IN THE FACTS AND CIRC UMSTANCES OF THE CASE. 10. THE BRIEF FACTS OF THIS ISSUE IS THAT THE ASSES SEE BEING A DEALER IN SHARES HAD BEEN PURCHASING AND SELLING THE SHARES OF VARIOUS COMPAN IES. THE ASSESSEE WAS ALREADY HOLDING 11,30,000 SHARES OF M/S GANPATI SUGAR INDUS TRIES LTD. THE ASSESSEE BORROWED MONIES IN THE EARLIER YEARS AND UTILIZED PARTLY TOW ARDS ADVANCE FOR SHARE APPLICATION MONEY IN GANPATI SUGAR INDUSTRIES LIMITED TO THE TU NE OF RS. 90 LACS. THE LOAN BORROWED BY THE ASSESSEE IN THE EARLIER YEARS HAD B EEN CARRIED OVER DURING THE YEAR UNDER APPEAL ALSO. THE AMOUNT ADVANCED TOWARDS SHAR E APPLICATION MONEY IN GANPATI SUGAR INDUSTRIES LIMITED WERE ALSO LYING AS ON 31.0 3.2004 AND SHARES WERE INDEED ALLOTTED TO THE ASSESSEE IN THE SAID COMPANY IN ASS ESSMENT YEAR 2005-06 I.E. IN THE NEXT ASSESSMENT YEAR. THE ASSESSEE PAID INTEREST ON ITS BORROWINGS TO THE TUNE OF RS. 15,70,914/-. THE LD. AO OBSERVED THAT BORROWED FUND S UTILIZED FOR THE PURPOSE OF ADVANCING MONIES TOWARDS SHARE APPLICATION MONIES I S NOT MADE FOR BUSINESS PURPOSES OF THE ASSESSEE AND ACCORDINGLY SOUGHT TO DISALLOW PROPORTIONATE INTEREST THEREON U/S 36(1)(III) OF THE ACT IN THE SUM OF RS. 5,31,000/-. IT WAS PLEADED BY THE ASSESSEE THAT THE ASSESSEE MADE BORROWINGS DURING THE FINANCIAL YEAR 2001-02 RELEVANT TO ASSESSMENT YEAR 2002-03 AND HAD ADVANCED THE SAME TOWARDS SHARE APP LICATION MONEY IN M/S GANPATI SUGAR INDUSTRIES LTD.. IT WAS PLEADED THAT THE SAID AMOUNT OF INVESTMENT IN SHARE APPLICATION MONEY WAS PART AND PARCEL OF ITS TRADIN G BUSINESS BY THE ASSESSEE. IT WAS FURTHER PLEADED THAT THE SAID ADVANCE WAS MADE TO F URTHER INCREASE THE INVESTMENT OF THE ASSESSEE IN THE SAID COMPANY IN ADDITION TO THE EXI STING INVESTMENT OF 11,30,000 SHARES ALREADY HELD BY THE ASSESSEE IN THE SAID COMPANY. T HE LD. CIT(A) HOWEVER DID NOT HEED 7 ITA NO.982/KOL/2016& C.O. NO. 30/KOL/2016 M/S ABINAND INVESTMENT LTD. A.YR. 2004-05 7 TO THE CONTENTIONS OF THE ASSESSEE AND PROCEEDED TO UPHOLD THE DISALLOWANCE MADE BY THE LD. AO IN THIS REGARD. AGGRIEVED, THE ASSESSEE IS I N APPEAL BEFORE US ON THE FOLLOWING GROUNDS: 1. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE C ASE, THE LEARNED COMMISSIONER OF INCOME TAX(A)-23, KOLKATA ERRED IN SUSTAINING TH E DISALLOWANCE OF INTEREST OF RS. 5,31,000/- PAID ON LOAN USED FOR PURCHASE OF SH ARES OF GANPATI SUGAR INDUSTRIES LTD. WHICH WAS PART AND PARCEL OF STOCK- IN-TRADE. 2. FOR THAT THE LEARNED COMMISSIONER OF INCOME TAX( A) SHOULD HAVE HELD THAT THE BORROWED MONEY WAS USED ONLY FOR PURCHASE OF SHARES BEING PART OF STOCK IN TRADE AS SUCH THE INTEREST PAID ON SUCH BUSINESS BO RROWING SHOULD HAVE BEEN ALLOWED AS PART OF BUSINESS EXPENDITURE U/S 36(1)(I II) OF THE I.T. ACT, 1961. 3. FOR THAT THE APPELLANT CRAVES TO PUT IN ADDITION AL GROUND BEFORE OR AT THE TIME OF HEARING OF APPEAL. 11. WE HAVE HEARD THE RIVAL SUBMISSIONS. IT IS NOT IN DISPUTE THAT THE BORROWINGS WERE MADE BY THE ASSESSEE IN THE EARLIER YEARS. IT IS NO T IN DISPUTE THAT SUCH BORROWED FUNDS TO THE TUNE OF RS. 90 LACS. WERE USED BY THE ASSESSEE FOR MAKING ADVANCE TOWARDS SHARE APPLICATION MONEY IN M/S GANPATI SUGAR INDUSTRIES L TD. AND SUCH ADVANCE WAS LYING AS ON 31.03.2004. HENCE, IT COULD BE SAFELY CONCLUDED THAT THE ASSESSEE HAD PAID INTEREST ON THE LOANS BORROWED IN THE EARLIER YEARS WHICH WERE UTILIZED FOR ADVANCE TOWARDS SHARE APPLICATION MONEY IN GANPATI SUGAR INDUSTRIES LIMIT ED. IN OUR CONSIDERED OPINION, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEALING IN S HARES. IT IS NOT IN DISPUTE THAT THE ASSESSEE IS ALREADY HOLDING 11,30,000 SHARES OF M/S GANPATI SUGAR INDUSTRIES LIMITED AND WHICH IS PART AND PARCEL OF ITS STOCK-IN-TRADE OF THE TRADING BUSINESS. HENCE, IT COULD BE SAFELY CONCLUDED THAT THE ADDITIONAL INVESTMENT WHICH WAS MADE BY THE ASSESSEE OUT OF BORROWED FUNDS WERE ALSO MADE ONLY FOR THE PURPO SE OF BUSINESS. THE LD. AO HAD OBSERVED IN THE ASSESSMENT ORDER THAT THE ASSESSEE HAS BEEN ALLOTTED BY M/S GANPATI SUGAR INDUSTRIES LIMITED BY CONVERTING THE SHARE AP PLICATION MONEY INTO SHARE CAPITAL IN ASSESSMENT YEAR 2005-06. IN ANY CASE, ONCE THE BORR OWING HAS BEEN ACCEPTED AS BEING USED FOR BUSINESS PURPOSES IN THE YEAR OF BORROWING , THEN ANY INTEREST PAID THEREON IN 8 ITA NO.982/KOL/2016& C.O. NO. 30/KOL/2016 M/S ABINAND INVESTMENT LTD. A.YR. 2004-05 8 SUBSEQUENT YEARS CANNOT BE THE SUBJECT MATTER OF DI SALLOWANCE AS THE CLOSING BALANCE OF BORROWINGS AT THE END OF EARLIER YEAR WOULD BECOME THE OPENING BALANCE OF BORROWINGS AT THE BEGINNING OF THIS YEAR. THE DEPARTMENT CANNO T TAKE DIFFERENT STAND DURING THE YEAR UNDER APPEAL WHEN THEY HAD ACCEPTED THE BORROWING B EING USED FOR BUSINESS PURPOSES IN THE EARLIER YEAR. THIS RATIO HAS BEEN LAID DOWN BY THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SRIDEV ENTERPRICES REPORTED IN 192 ITR 165 (KAR.). 12. IN VIEW OF THE AFORESAID FACTS AND FINDINGS AND RESPECTFULLY FOLLOWING THE DECISION REFERRED TO SUPRA WE HAVE NO HESITATION IN DIRECTIN G THE LD. AO TO DELETE THE DISALLOWANCE MADE IN THE SUM OF RS. 5,31,000/- TOWA RDS INTEREST PAID ON BORROWINGS. ACCORDINGLY, THE GROUNDS RAISED BY THE ASSESSEE IN ITS CROSS OBJECTIONS ARE ALLOWED. 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED AND THE CROSS OBJECTION OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 07.02.2018 SD/- SD/- [S.S. VISWANETHRA RAVI] [ M.BAL AGANESH ] JUDICIAL MEMBER ACCOUNTANT MEM BER DATED : 07.02.2018 SB, SR. PS 9 ITA NO.982/KOL/2016& C.O. NO. 30/KOL/2016 M/S ABINAND INVESTMENT LTD. A.YR. 2004-05 9 COPY OF THE ORDER FORWARDED TO: 1. ITO, WARD-13(1), KOLKATA, 3 RD FLOOR, 110, SHANTI PALLY, AAYAKAR BHAWAN, (POORVA) , KOLKATA-700107. 2. M/S ABHINAND INVESTMENT LTD, 20B, ADBUL HAMID ST REET, KOLKATA-700069. 3..C.I.T.- 4. C.I.T.- KOLKATA. 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVAT E SECRETARY HEAD OF OFFICE/D.D.O., ITAT, KOLKATA BENCHE S