M/s T.S. Pulses Pvt. Ltd., Delhi V. ACIT, New Delhi

CO 65/DEL/2014

• Counselvise Citation: [2014] 122 COUNSELVISE.COM (IT) 9386 (ITAT-DELHI)
• Duration Of Justice: 12 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 07-03-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: H
• Assessment Year: 2008-2009
• Appeal Filed On: 24-02-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: R S MEENA

Judgement Text

ITA NO.2028, 2029/D/2013 CO NO.64, 65/D/2014 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH `H NEW DELHI BEFORE SHRI G.D. AGRAWAL, VICE PRESIDENT AND SHRI CHANDRA MOHAN GARG, JUDICIAL MEMBER I.T.A.NO.2028/DEL/2013 ASSESSMENT YEAR : 2007-08 I.T.A.NO.2029/DEL/2013 ASSESSMENT YEAR : 2008-09 ACIT, VS T.S. PULSES PVT. LTD., CENTRAL CIRCLE 5, 2744, NAYA BA ZAR, NEW DELHI. DELHI-110006 (PAN: AAACT6037B) C.O. NO. 64/DEL/2014 (IN I.T.A.NO.2028/DEL/2013) ASSESSMENT YEAR : 2007-08 C.O. NO. 65/DEL/2014 (IN I.T.A.NO.2029/DEL/2013) ASSESSMENT YEAR : 2008-09 T.S. PULSES PVT. LTD., VS ACIT, CC-5, DELHI. NEW DELHI.6 (APPELLANT) (RESPONDENT) APPELLANT BY: SHRI GAUTA M JAIN RESPONDENT BY : SHRI R.S. MEENA, C.I.T. DR O R D E R PER BENCH THESE APPEALS HAVE BEEN PREFERRED BY THE REVENUE A GAINST THE ORDER OF COMMISSIONER OF INCOME TAX(A)-XXXI, NEW DELHI IN APPEAL NO. ITA NO.2028, 2029/D/2013 CO NO.64, 65/D/2014 2 1205/11-12 (AY 2007-08) AND APPEAL NO. 1222/11-12 ( AY 2008-09) BOTH DATED 23.01.2013. 2. THE SOLE GROUND RAISED BY THE REVENUE IN APPEAL NO. 2028/D/13 READS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN ALLOWING THE RELIEF OF RS.9,36,947/- IN RESPECT OF DISALLOWANCES MADE U/S 36(1)(III) BY NOT CONSIDERING THE FACT GIVEN IN THE ASSESSMENT ORDER. 3. THE SOLE GROUND RAISED BY THE REVENUE IN APPEAL NO. 2029/D/13 READS AS UNDER:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN ALLOWING THE RELIEF OF RS.10,60,293/- IN RESPECT OF DISALLOWANCES MADE U/S 36(1)(III) BY NOT CONSIDERING THE FACT GIVEN IN THE ASSESSMENT ORDER. 4. BRIEFLY STATED THE FACTS GIVING RISE TO THESE AP PEALS ARE THAT THE ASSESSING OFFICER COMPLETED THE ASSESSMENT U/S 153C /143(3) OF THE INCOME TAX ACT, 1961 BY MAKING CERTAIN ADDITIONS INCLUDING DISALLOWANCE U/S 36(1)(II) OF THE ACT OUT OF TOTAL AMOUNT OF INTERES T PAID ON SECURED AND UNSECURED LOANS AMOUNTING TO RS.9,36,947/- BY HOLDI NG THAT THE SAME IS NOT ALLOWABLE FOR DEDUCTION WITHIN THE RELEVANT PROVISI ONS OF THE ACT. THE AGGRIEVED ASSESSEE PREFERRED AN APPEAL BEFORE THE C OMMISSIONER OF INCOME ITA NO.2028, 2029/D/2013 CO NO.64, 65/D/2014 3 TAX(A) WHICH WAS PARTLY ALLOWED ON THE ABOVE ISSUE AND THE ADDITION MADE THEREUNDER WAS DELETED. NOW, THE AGGRIEVED REVENUE IS BEFORE THIS TRIBUNAL WITH THESE APPEALS WITH THE SIMILAR GROUND AS MENTI ONED HEREINABOVE. 5. WE HAVE HEARD RIVAL ARGUMENTS OF BOTH THE PARTIE S AND CAREFULLY PERUSED THE RECORD PLACED BEFORE US. ON CAREFUL PE RUSAL OF ASSESSMENT ORDER, WE OBSERVE THAT THE ASSESSING OFFICER MADE IMPUGNED ADDITION BY HOLDING THAT OUT OF AMOUNT OF INTEREST PAID ON SECURED AND UNSECURED LOAN, AN AMOUNT OF RS. 9,36,947 IS NOT ALLOWABLE AS ELIGIBLE FOR DE DUCTION WITHIN THE PROVISIONS OF SECTION 36(1)(II) OF THE ACT. THE CO MMISSIONER OF INCOME TAX(A) DELETED THE ABOVE ADDITION WITH FOLLOWING OB SERVATIONS:- 3.4.7 FROM THE ABOVE FACTS IT EMERGES THAT THE TOTAL INTEREST PAID FOR THE YEAR WAS RS. 9,48,549/- . ASSESSING OFFICERS ACTION AMOUNTS TO DISALLOWING A LMOST THE ENTIRE INTEREST EXPENDITURE IGNORING THE FACT T HAT ASSESSEE DID CHARGE INTEREST TO MANY OTHERS AND EAR NED INTEREST OF RS. 15.79 LACS ON SUCH ADVANCES. IT IS ALSO FACT THAT THE ASSESSEE HAS NON-INTEREST BEARING FUNDS OF ALMOST RS. 3.53 CRORES. THE INTEREST FREE ADVANCES MADE WE RE RS. 1.80 CRORES WHICH WERE ABOUT HALF OF THE INTERE ST FREE FUNDS AVAILABLE WITH A COMPANY. ADVANCES WITH INTER EST CHARGED AMOUNTED TO RS. 1.37 CRORES. IT MIGHT BE A FACT THAT THE PERSONS WHO HAVE RECEIVED INTEREST FREE AD VANCE MAY NOT HAVE BUSINESS TRANSACTIONS WITH THE ASSESSE E IN THE SENSE THAT THEY MIGHT NOT BE DEALING WITH FOOD GRAINS. THE ASSESSEE IS IN THE FOOD GRAIN AND COMMISSION BUSINESS. IT IS A COMMON PRACTICE TO ADVANCE LOANS AT LOWER RATE TO THE CUSTOMERS TO GET FUTURE BUSINESS. THE ASSESSEE CANNOT BE FAULTED FOR CHARGING INTEREST AT LOWER RATE IF THAT IS DICTATED BY THE BUSINESS NORM. SIMI LARLY IF THE FUNDS RAISED FOR BUSINESS PURPOSE, THOUGH NOT ITA NO.2028, 2029/D/2013 CO NO.64, 65/D/2014 4 REQUIRED IMMEDIATELY, MAY NOT BE KEPT IDLE. THE ASS ESSEE MAY LEND IT AT WHATEVER RATE POSSIBLE, TO BE RE-DEP LOYED ON A LATER DATE. 3.4.8 NO NEXUS HAS BEEN ESTABLISHED BY THE AO TO SHOW THAT THE LOANS TAKEN WERE DIRECTLY LENT AS IN TEREST FREE ADVANCES TO THE GROUP CONCERNS. IN THE ABSENCE OF SUCH NEXUS HAVING BEEN PROVED, IT BECOMES DIFFICULT TO SAY THAT THE INTEREST EXPENDITURE IS NOT RELATED TO THE ASSESSEE'S BUSINESS. JUST AS AO ALLEGES DIVERSION O F INTEREST BEARING FUNDS TO INTEREST FREE ADVANCES, A SSESSEE MAY ALSO ARGUE THE REVERSE WAY. THE CONTENTION OF T HE ASSESSEE THAT NON-INTEREST BEARING FUNDS HAVE BEEN USED TO MAKE INTEREST FREE ADVANCES CANNOT BE IGNORED. T HE AO HAS NOT BEEN ABLE TO ESTABLISH THAT THE FUNDS RA ISED BY THE COMPANY (ON WHICH INTEREST HAS BEEN PAID) WERE EMPLOYED FOR MAKING INTEREST FREE ADVANCES. THIS IS ESPECIALLY SO BECAUSE OF THE WIDE GAP BETWEEN TOTAL UNSECURED LOAN AND THE INTEREST FREE FUNDS AVAILABL E WITH THE COMPANY. IN VIEW OF THIS THE ACTION OF THE AO C ANNOT BE SUSTAINED. THEREFORE, THE ADDITION MADE ON THIS ISSUE OF RS. 9,36,947/- IS DELETED. 6. IN THE ABOVE SET OF FACTS AND CIRCUMSTANCES AND FROM THE ASSESSMENT ORDER, WE CLEARLY OBSERVE THAT THE ASSESSING OFFICE R HAD NOT ESTABLISHED ANY NEXUS TO SHOW THAT THE LOANS TAKEN WERE DIRECTLY LE NT AS INTEREST FREE ADVANCES TO THE GROUP CONCERNS AND IN THE ABSENCE O F SUCH NEXUS, IT IS DIFFICULT TO SAY THAT THE INTEREST EXPENDITURE IS N OT RELATED TO THE ASSESSEES BUSINESS. THE COMMISSIONER OF INCOME TAX(A) RIGHTL Y ACCEPTED THE CONTENTION OF THE ASSESSEE THAT NON-INTEREST BEARIN G FUNDS HAVE BEEN USED TO MAKE INTEREST FREE ADVANCES, SPECIALLY WHEN THE ASS ESSING OFFICER HAD NOT ITA NO.2028, 2029/D/2013 CO NO.64, 65/D/2014 5 BEEN ABLE TO ESTABLISH THAT THE INTEREST BEARING FU NDS RAISED BY THE COMPANY WERE USED FOR MAKING INTEREST FREE ADVANCES. THE C OMMISSIONER OF INCOME TAX(A) RIGHTLY OBSERVED THAT BECAUSE OF THE WIDE GA P BETWEEN THE TOTAL UNSECURED LOAN AND THE INTEREST FREE FUNDS AVAILABL E WITH THE COMPANY, IT CANNOT BE PRESUMED THAT THE INTEREST BEARING FUNDS WERE USED FOR MAKING INTEREST FREE ADVANCES TO THE GROUP CONCERN BY THE ASSESSEE. IN THIS SITUATION, THE ADDITION MADE IN THIS REGARD BY THE ASSESSING O FFICER IS NOT SUSTAINABLE WHICH WAS RIGHTLY DELETED BY THE COMMISSIONER OF IN COME TAX(A). THEREFORE, WE ARE UNABLE TO SEE ANY AMBIGUITY, PERV ERSITY OR ANY VALID REASON TO INTERFERE WITH THE ORDER OF THE COMMISSIO NER OF INCOME TAX(A) AND ONLY RELEVANT PARA OF THE IMPUGNED ORDER ON THI S ISSUE IS UPHELD. ACCORDINGLY, BOTH THE GROUNDS RAISED BY THE REVENUE IN APPEALS OF THE REVENUE BEING DEVOID OF MERITS ARE DISMISSED. C.O. OF THE ASSESSEE FOR BOTH AYS 7. DURING THE ARGUMENTS, LD. ASSESSEES REPRESENTAT IVE FAIRLY SUBMITTED THAT THE ASSESSEE FILED CROSS OBJECTIONS TO SUPPORT THE IMPUGNED ORDERS AND IF REVENUES APPEALS ARE DISMISSED, THEN THE ASSESSEE IS NOT INTERESTED TO PRESS C.O. FILED IN BOTH THE YEARS. ACCORDINGLY, CROSS O BJECTIONS OF THE ASSESSEE IN BOTH THE YEARS ARE DISMISSED AS NOT PRESSED. ITA NO.2028, 2029/D/2013 CO NO.64, 65/D/2014 6 8. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE A S WELL AS CROSS OBJECTIONS OF THE ASSESSEE IN BOTH THE YEARS ARE DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 07.03.2014. SD/- SD/- (G.D. AGRAWAL) (CHANDRA MOHAN GARG) VICE PRESIDENT JUDICIAL MEMBER DT. 7TH MARCH 2014 GS COPY FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT(A) 4. CIT 5. DR BY ORDER ASSTT. REGISTRAR