Jewel Consumer Care Pvt. Limited, Vadodara V. The Asstt. Commissioner of Income Tax, Circle-1(1)(2), Baroda

ITA 1008/AHD/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 6942 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 26-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: APOORVA BHARADWAJ
• Section: 143(3); 142(1); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & MS. MADHUMITA ROY, JUDICIAL MEMBER I.T.A. NO.1008/AHD/2017 (ASSESSMENT YEAR : 2013-14) M/S. JEWEL CONSUMER CARE PVT. LTD., SUBHAAG, B- 15/16 RAMIN PARK, OLD PADRA ROAD, VADODARA 390 020. VS. ACIT, CIRCLE 1(1)(2), BARODA. [PAN NO. AAACB 8634 Q] ( APPELLANT ) .. ( RESPONDENT ) APPELLANT BY : SHRI PARIN SHAH, A.R. RESPONDENT BY : SHRI APOORVA BHARADWAJ, SR.D.R. DATE OF HEARING 25.02.2019 DATE OF PRONOUNCEMENT 03.05.2019 O R D E R PER MS. MADHUMITA ROY - JM: THE INSTANT APPEAL FILED BY THE ASSESSEE IS AGAINS T THE ORDER DATED 07.02.2017 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-1, VADODARA UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) AR ISING OUT OF THE ORDER DATED 09.02.2016 PASSED BY THE ASS T. COMMISSIONER OF INCOME TAX, CIRCLE 1(1)(2), BARODA FOR THE ASSESSMENT YE AR 2013-14. 2. THE ASSESSEE, A PRIVATE LIMITED COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF VARIOUS HOUSEHOLD PLASTIC PRODUCTS AND ORAL CARE PRODUCTS, FILED ITS RETURN OF INCOME ON 30.09.2013 DECLARING TOTAL INCOME AT ITA NO.1008/AHD/2017 JEWEL CONSUMER CARE PVT. LTD. VS. ACIT ASST.YEAR 2013-14 - 2 - RS.45,93,140/- UPON SCRUTINY NOTICE DATED 01.09.201 4 U/S 143(2) OF THE ACT WAS ISSUED FOLLOWED BY A NOTICE U/S 142(1) DATED 05 .01.2015 ALONG WITH A DETAILED QUESTIONNAIRE AND SERVED UPON THE ASSESSEE . THE ASSESSEE HAS GIVEN INTEREST FREE ADVANCES TO ITS SISTER CONCERN M/S. A MIGO DISPENSING SOLUTIONS PVT. LTD. FOR BUSINESS PURPOSE, WHICH WAS FROM ITS BORROWED FUNDS. THE SAME WAS PROVIDED WITH A CLEAR INTENTION OF COMMERCIAL P URPOSE. THE ASSESSEE IS ALSO HAVING SUFFICIENT INTEREST FREE FUND TO COVER THE SAID INTEREST FREE ADVANCES. HOWEVER, THE LEARNED AO DISALLOWED SUCH INTEREST EX PENSES TO THE TUNE OF RS.4,61,419/- ON THE GROUND THAT THE SAID INTEREST RELATED TO BORROWED FUND, WHICH WERE NOT USED FOR BUSINESS PURPOSE. THE LEARN ED CIT(A) IN APPEAL RELYING UPON THE DECISION PASSED BY HIS PREDECESSOR IN APPELLANTS OWN CASE FOR A.Y. 2011-12 UPHELD SUCH DISALLOWANCE, HENCE APPEAL PREFERRED BY THE ASSESSEE IS BEFORE US. 3. AT THE VERY OUTSET OF THE MATTER, THE LEARNED CO UNSEL APPEARING FOR THE ASSESSEE SUBMITTED BEFORE US THAT LEARNED TRIBUNAL IN ITA NO.3436 & 3437/AHD/2014 FOR A.Y. 2010-11 & 2011-12 IN ASSESSE ES OWN APPEAL DEALT WITH THE SIMILAR ISSUE AND DECIDED THE SAME IN FAVO UR OF THE ASSESSEE BY DELETING SUCH DISALLOWANCE. HE THEREFORE, PRAYS FOR THE SIMILAR RELIEF BEFORE US. HOWEVER, THE LEARNED DR HAS NOT MADE ANY RELEVANT A RGUMENT CONTRADICTING THE CONTENTIONS MADE BY THE ASSESSEE IN SUPPORT OF HIS CASE. 4. HEARD THE REPRESENTATIVE OF THE RESPECTIVE PARTI ES, PERUSED THE RELEVANT MATERIALS AVAILABLE ON RECORD. WE HAVE ALSO CAREFUL LY CONSIDERED THE ORDER PASSED BY THE LEARNED TRIBUNAL IN ITA NO.3436 & 343 7/AHD/2014 FOR A.Y. ITA NO.1008/AHD/2017 JEWEL CONSUMER CARE PVT. LTD. VS. ACIT ASST.YEAR 2013-14 - 3 - 2010-11 & 2011-12 IN ASSESSEES OWN CASE. THE RELEV ANT PORTION WHEREOF IS AS FOLLOWS: 3. BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSE SSMENT PROCEEDINGS IT REVEALED TO THE AO THAT THE ASSESSEE HAD ADVANCED I NTEREST FREE LOAN AMOUNTING TO RS.61 LAKHS TO M/S.AMIGO DISPENSING SO LUTIONS P.LTD. THE AO HAS CONFRONTED THE ASSESSEE TO SHOW AS TO WHY INTER EST INCOME OF THE INTEREST FREE LOANS AND ADVANCED SHOULD NOT BE DISALLOWED. IN RESPONSE TO THE QUERY OF THE AO, ASSESSEE FILED A DETAILED REPLY WHEREIN IT TOOK TWO FOLD PLEAS. IN THE FIRST FOLD OF CONTENTIONS, IT WAS SUBMITTED THAT AD VANCES WERE GIVEN TO THE SISTER CONCERNS ON ACCOUNT OF BUSINESS EXIGENCY AND IN THE SECOND FOLD, IT WAS CONTENDED THAT THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS, OUT OF WHICH, IT COULD BE CONSTRUED THAT, THESE ADVANCES WERE GIVEN. THE LD.AO DID NOT ACCEPT THESE CONTENTIONS OF THE ASSESSEE AND MADE DISALLOW ANCE OF RS.9,42,268/- IN THE ASSTT.YEAR 2010-11 AND RS.6,82,954/- IN THE ASS TT.YEAR 2011-12. APPEAL TO THE LD.CIT(A) DID NOT BRING ANY RELIEF TO THE AS SESSEE. 4. THE LD.COUNSEL FOR THE ASSESSEE AT THE VERY OUTS ET SUBMITTED THAT SIMILAR DISALLOWANCES WERE MADE IN THE ASSESSMENT Y EARS 2007-08 AND 2008- 09. THE ISSUE TRAVELLED UPTO THE TRIBUNAL AND THE TRIBUNAL UPHELD DELETION OF DISALLOWANCE VIDE ITS ORDER DATED 8.3.2013 PASSED I N ITA NO.2618/AHD/2010 AND 757/AHD/2012 AND APPEALS OF THE REVENUE HAVE BE EN DISMISSED BY THE TRIBUNAL. COPY OF THE TRIBUNALS ORDER HAS BEEN PLA CED ON PAGE NOS.85 TO 93 OF THE PAPER BOOK. 5. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. IT IS PERTINENT TO OBSERVE THAT BEFORE THE LD.REVENUE AUTHORITIES THE ASSESSEE HAS DEMONSTRATED AVAILABIL ITY OF SHARE CAPITAL AT RS.1.71 CRORES. RESERVES AND SURPLUS OF RS.23.73 L AKHS AND INTEREST FREE DEPOSITS OF RS.4.33 CRORES. THUS, THERE IS NO DISP UTE WITH REGARD TO THE FACT THAT THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUND S OUT OF WHICH IT COULD BE ASSUMED THAT THESE AMOUNTS HAVE BEEN ADVANCED. WHE N THIS PLEA WAS EXAMINED BY THE LD.CIT(A), THEN THE LD.CIT(A) HAS O BSERVED THAT THESE INTEREST FREE FUNDS CAME TO THE ASSESSEE AS ON 1.4.2006. PR IOR TO THAT, THE ASSESSEE FAILED TO DEMONSTRATE AVAILABILITY OF INTEREST FREE FUNDS. SHE FURTHER OBSERVED THAT THE ASSESSEE HAS ADVANCED THE LOANS PRIOR TO 1 .4.2006 AND IT WAS CHARGING INTEREST. THEREFORE, IT SHOULD CONTINUE W ITH CHARGING OF INTEREST. IN OUR OPINION, THIS REASONING OF THE LD.CIT(A) IS MIS PLACED. ONCE AN ASSESSEE DEMONSTRATED THAT ON A PARTICULAR DATE OF ACCOUNTIN G PERIOD IT HAS AVAILED INTEREST FREE FUNDS AND IT WANTS TO CHARACTERIZE IT AS INTEREST FREE ADVANCE OUT OF THIS INTEREST FREE FUND, THEN THE LD.AO CANNOT A SSUME INTEREST INCOME BY ITA NO.1008/AHD/2017 JEWEL CONSUMER CARE PVT. LTD. VS. ACIT ASST.YEAR 2013-14 - 4 - MERELY OBSERVING THAT LOANS WERE GIVEN BEFORE AVAIL ABILITY OF INTEREST FREE FUNDS. WE ARE IN ASSESSMENT YEARS 2010-11 AND 2011 -12. FROM 1.4.2006, ASSESSEE HAS BEEN SHOWING EXCESS INTEREST FREE FUND S. OUT OF WHICH IT COULD BE ASSUMED THAT THESE ADVANCES WERE MADE. THIS PLEA O F THE ASSESSEE CANNOT BE REJECTED MERELY BY OBSERVING THAT LOANS WERE GIVEN BEFORE 1.4.2006. THERE IS NO LOGIC IN THE STAND POINT OF THE LD.CIT(A). EVER Y YEAR IS AN INDEPENDENT ASSESSMENT YEAR AND EVEN IF THE ASSESSEE HAS BEEN C HARGING INTEREST ON THE ADVANCES GIVEN BY HIM, BUT AFTER A PARTICULAR DATE, IT CAN STOP CHARGING INTEREST BY TREATING THE ADVANCE AS GIVEN FROM INTE REST FREE FUNDS. IN THE PRESENT CASE, THE ASSESSEE HAS DEMONSTRATED THAT IT IS HAVING SUFFICIENT INTEREST FREE FUNDS OUT OF WHICH THE LOANS GIVEN EVEN IN EAR LIER YEARS CAN BE CHARACTERIZED AS GIVEN IN THE PRESENT YEAR. ACCORD INGLY, WE ALLOW HIS GROUND OF APPEAL AND DELETE THE DISALLOWANCE. RESPECTFULLY RELYING UPON THE JUDGMENT PASSED BY TH E CO-ORDINATE BENCH, WE FIND NO REASON TO MAKE SUCH DISALLOWANCE BY THE AUTHORITIES BELOW HENCE, THE ADDITION MADE BY THE AUTHORITIES IS HERE BY DELETED. 5. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 03 / 0 5 /201 9 SD/- SD/- ( WASEEM AHMED ) ( MS. MADHUMITA ROY ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED /05/2019 PRITI YADAV, SR.PS ITA NO.1008/AHD/2017 JEWEL CONSUMER CARE PVT. LTD. VS. ACIT ASST.YEAR 2013-14 - 5 - / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. () / THE CIT(A)-1, VADODARA. 5. , ! ', #$%% / DR, ITAT, AHMEDABAD 6. &' () / GUARD FILE. / BY ORDER , //TRUE COPY// / (DY./ASSTT.REGISTRAR) !, #$ / ITAT, AHMEDABAD 1. DATE OF DICTATION 02/05/2019 (DICTATION PAGES 3) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 03/05/2019 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S. 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER