M/s Prakash Distillery & Chemical Co Pvt Ltd, Siliguri V. D.C.I.T.Cir - 1,Siliguri, Siliguri

ITA 1026/KOL/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 9596 (ITAT-KOLKATA)
• Duration Of Justice: 3 year(s) 8 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2017
• Appeal Filed By: Assessee
• Bench Allotted: B
• Next Hearing Date: 29-08-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 30-04-2013
• Court: TRIBUNAL
• Assessee Lawyers: MIHIR BANDYOPADHYAY
• Keywords: Earning of tax free income
• Section: 143(3); 14A

Judgement Text

I.T.A. NO. 1026/KOL./2013 ASSESSMENT YEAR: 2008-2009 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA B BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI N.V. VASUDEVAN, JUDICIAL MEMBER I.T.A. NO. 1026/KOL/ 2013 ASSESSMENT YEAR: 2008-2009 M/S. PRAKASH DISTILLERY & CHEMICAL CO. PVT. LIMITE D,...........APPELLANT HOTEL PRAKASH BUILDING, HILLCART ROAD, SILIGURI [PAN: AABCP 8268 M] -VS.- DEPUTY COMMISSIONER OF INCOME TAX,................. ....................RESPONDENT CIRCLE-I, SILIGURI, PARIBHAN NAGAR, MATIGARA-734 001, SILIGURI APPEARANCES BY: SHRI MIHIR BANDYOPADHYAY, A.R., FOR THE ASSESSEE SHRI S. VENKATRAMANI, JCIT, SR. D.R., FOR THE DEPARTMENT DATE OF CONCLUDING THE HEARING : NOVEMBER 29, 2016 DATE OF PRONOUNCING THE ORDER : JANUARY 06, 2017 O R D E R PER SHRI P.M. JAGTAP, A.M .: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS), SILIGURI DATE D 27.02.2013. 2. THE ISSUE INVOLVED IN GROUNDS NO. 1 & 2 OF THIS APPEAL RELATES TO THE DISALLOWANCE OF RS.5,88,061/- MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPEALS) UNDER SECTION 14A OF THE ACT ON ACCOUNT OF INTEREST PAID BY THE ASSESSEE ON THE BOR ROWED FUNDS. 3. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF MANUFACTURING AND RESELLING OF RECT IFIED COUNTRY SPIRIT. THE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATI ON WAS FILED BY IT ON I.T.A. NO. 1026/KOL./2013 ASSESSMENT YEAR: 2008-2009 PAGE 2 OF 5 07.11.2008 DECLARING TOTAL INCOME OF RS.3,42,455/-. IN THE SAID RETURN, DEDUCTION OF RS.31,48,756/- WAS CLAIMED BY THE ASSE SSEE ON ACCOUNT OF INTEREST PAID ON SECURED LOANS. DURING THE COURSE O F ASSESSMENT PROCEEDINGS, THE ASSESSEE WAS CALLED UPON BY THE AS SESSING OFFICER TO ESTABLISH THE USAGE OF THE SAID LOANS IN ITS REGULA R BUSINESS AND SINCE THE ASSESSEE FAILED TO ESTABLISH SUCH USAGE TO THE SATI SFACTION OF THE ASSESSING OFFICER, THE LATER HELD THAT PROPORTIONATE DISALLOW ANCE OUT OF INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE WAS REQUIRED TO BE MADE AS PER THE PROVISIONS OF SECTION 14A OF THE ACT TO THE EXTENT IT WAS ATTRIBUTABLE TO THE CORRESPONDING INVESTMENT MADE BY THE ASSESSEE I N SHARES, THE DIVIDEND INCOME OF WHICH WAS EXEMPT FROM TAX. ACCOR DINGLY, SUCH INTEREST ATTRIBUTABLE TO THE INVESTMENT MADE IN SHA RES WAS WORKED OUT BY THE ASSESSING OFFICER AT RS.5,88,011/- BY APPLYING RULE 8D AND DISALLOWANCE TO THAT EXTENT WAS MADE BY HIM UNDER S ECTION 14A OF THE ACT. ON APPEAL, THE LD. CIT(APPEALS) CONFIRMED THE SAID DISALLOWANCE MADE BY THE ASSESSING OFFICER BY OBSERVING THAT IN THE ABSENCE OF SATISFACTORY EXPLANATION OFFERED BY THE ASSESSEE RE GARDING ACTUAL USAGE OF THESE SECURED LOANS FOR THE PURPOSE OF ITS REGULAR BUSINESS, THE ASSESSING OFFICER WAS FULLY JUSTIFIED IN MAKING PROPORTIONATE DISALLOWANCE OUT OF INTEREST EXPENDITURE BY INVOKING THE PROVISIONS OF SECTION 14A. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON REC ORD. AS POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE FROM THE COPY OF B ALANCE-SHEET OF THE ASSESSEE-COMPANY AS ON 31.03.2008 PLACED AT PAGE NO . 6 OF THE PAPER BOOK, SUFFICIENT OWN FUNDS OF RS.6.09 CRORES IN THE FORM OF SHARE CAPITAL AND RESERVES WERE AVAILABLE WITH THE ASSESSEE-COMPA NY AT THE RELEVANT POINT AND SINCE THE SAME WERE SUFFICIENT TO COVER C ORRESPONDING INVESTMENT OF RS.1.50 CRORES IN SHARES, IT CAN SAFE LY BE PRESUMED THAT THE INVESTMENT IN SHARES WAS MADE BY THE ASSESSEE OUT O F ITS OWN FUNDS. THERE WAS THUS NO DIVERSION OF FUNDS BORROWED BY TH E ASSESSEE-COMPANY ON INTEREST FOR MAKING INVESTMENT IN SHARES AND DIS ALLOWANCE ON ACCOUNT OF INTEREST UNDER SECTION 14A WAS NOT CALLED FOR AS NO EXPENDITURE ON I.T.A. NO. 1026/KOL./2013 ASSESSMENT YEAR: 2008-2009 PAGE 3 OF 5 ACCOUNT OF INTEREST WAS INCURRED BY THE ASSESSEE IN RELATION TO THE EARNING OF ANY EXEMPT INCOME. WE, THEREFORE, FIND M ERIT IN THE CONTENTION OF THE LD. COUNSEL FOR THE ASSESSEE THAT THERE WAS NO JUSTIFICATION IN THE DISALLOWANCE MADE BY THE ASSESSING OFFICER UNDER SE CTION 14A AND CONFIRMED BY THE LD. CIT(APPEALS) ON ACCOUNT OF INT EREST AND DELETING THE SAME, WE ALLOW GROUNDS NO. 1 & 2 OF THE ASSESSEES APPEAL. 5. THE ISSUE RAISED IN GROUND NO. 3 RELATES TO THE DISALLOWANCE OF RS.24,641/- MADE BY THE ASSESSING OFFICER AND CONFI RMED BY THE LD. CIT(APPEALS) UNDER SECTION 40(A)(IA) FOR THE FAILUR E OF THE ASSESSEE TO DEDUCT TAX AT SOURCE FROM THE INTEREST PAID ON UNSE CURED LOANS. 6. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS NOT DEDUCTE D TAX AT SOURCE FROM THE INTEREST OF RS.24,641/- PAID ON UNSECURED LOANS AS REQUIRED BY THE RELEVANT PROVISIONS OF THE ACT. SINCE NO SATISFACTO RY EXPLANATION IN THIS REGARD COULD BE OFFERED BY THE ASSESSEE, THE ASSESS ING OFFICER INVOKED THE PROVISIONS OF SECTION 40(A)(IA) AND MADE A DISALLOW ANCE OF RS.24,641/- ON ACCOUNT OF INTEREST. ON APPEAL, THE LD. CIT(APPEALS ) CONFIRMED THE SAID DISALLOWANCE AFTER HAVING FOUND THAT NO DOCUMENTARY EVIDENCE WAS FILED BY THE ASSESSEE TO SHOW THAT TAX AT SOURCE WAS DEDU CTED FROM THE PAYMENT OF INTEREST AS REQUIRED BY THE RELEVANT PRO VISIONS OF THE ACT. 7. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES ON THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON REC ORD. EVEN BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN SATISFACTORILY THE REASON FOR THE FAILURE OF THE ASSESSEE TO DEDUC T TAX AT SOURCE FROM THE INTEREST IN QUESTION PAID ON UNSECURED LOANS. HE HA S ALSO FAILED TO FILE ANY DOCUMENTARY EVIDENCE TO SHOW THAT SUCH TDS WAS MADE AS PER REQUIREMENT OF THE RELEVANT PROVISION. WE, THEREFOR E, FIND NO JUSTIFIABLE REASON TO INTERFERE WITH THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) CONFIRMING THE DISALLOWANCE MADE BY THE ASSESSING O FFICER ON ACCOUNT OF I.T.A. NO. 1026/KOL./2013 ASSESSMENT YEAR: 2008-2009 PAGE 4 OF 5 INTEREST AMOUNTING TO RS.24,641/- UNDER SECTION 40( A)(IA) OF THE ACT AND UPHOLDING THE SAME, WE DISMISS GROUND NO. 3 OF THE ASSESSEES APPEAL. 8. THE ISSUE RAISED IN GROUND NO. 4 RELATES TO THE ASSESSEES CLAIM FOR CARRY FORWARD OF EARLIER YEARS LOSS, WHICH HAS BEEN DISALLOWED BY THE ASSESSING OFFICER AND CONFIRMED BY THE LD. CIT(APPE ALS). 9. IN THE RETURN OF INCOME FILED FOR THE YEAR UNDER CONSIDERATION, BROUGHT FORWARD LOSS OF RS.7,66,939/- FROM THE EARL IER YEARS WAS SET OFF BY THE ASSESSEE AGAINST THE INCOME FOR THE YEAR UND ER CONSIDERATION. FROM THE RETURN OF INCOME FILED ELECTRONICALLY BY T HE ASSESSEE FOR A.Y. 2007-08, IT WAS NOTICED BY THE ASSESSING OFFICER TH AT NO SUCH CARRY FORWARD OF LOSS WAS MENTIONED BY THE ASSESSEE. HE, THEREFORE, DISALLOWED THE CLAIM OF THE ASSESSEE FOR THE SET OFF OF SUCH B ROUGHT FORWARD LOSS. ON APPEAL, THE LD. CIT(APPEALS) UPHELD THE ACTION OF T HE ASSESSING OFFICER ON THIS ISSUE AFTER HAVING FOUND FROM THE ASSESSMENT O RDER PASSED UNDER SECTION 143(3) FOR A.Y. 2007-08 THAT NO SUCH CARRY FORWARD OF LOSS WAS ALLOWED BY THE ASSESSING OFFICER. 10. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES O N THIS ISSUE AND ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON REC ORD. THE LD. COUNSEL FOR THE ASSESSEE HAS PLACED ON RECORD BEFORE US A COPY OF SCHEDULE CFL FILED ALONG WITH THE RETURN OF INCOME FOR A.Y. 2007-08 TO SHOW THAT THE LOSS TO THE EXTENT OF RS.7,66,939/- PERTAINING TO THE EARLI ER YEARS WAS CARRIED FORWARD BY THE ASSESSEE. HE HAS SUBMITTED THAT ALTH OUGH SUCH LOSS WAS NOT INDICATED BY THE ASSESSING OFFICER IN THE ASSES SMENT ORDER PASSED FOR A.Y. 2007-08, THE FACT THAT THERE WAS SUCH A CARRY FORWARD LOSS, CAN BE VERIFIED BY THE ASSESSING OFFICER FROM THE RELEVANT RECORD BEFORE ALLOWING THE CLAIM OF THE ASSESSEE FOR SET OFF OF THE SAME A GAINST THE INCOME OF THE YEAR UNDER CONSIDERATION. ACCORDINGLY, WE RESTORE T HIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR VERIFYING THE CLAIM OF TH E ASSESSEE FROM THE RELEVANT RECORD AND ALLOWING APPROPRIATE RELIEF TO THE ASSESSEE ON SUCH I.T.A. NO. 1026/KOL./2013 ASSESSMENT YEAR: 2008-2009 PAGE 5 OF 5 VERIFICATION. GROUND NO. 4 OF THE ASSESSEES APPEAL IS ACCORDINGLY TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, THE APPEAL FILED BY THE ASSESESE IS ALLOWED IN PART AS INDICATED ABOVE. ORDER PRONOUNCED IN THE OPEN COURT ON JANUARY 06, 2 017. SD/- SD/- (N.V. VASUDEVAN) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT ME MBER KOLKATA, THE 6 TH DAY OF JANUARY, 2017 COPIES TO : (1) M/S. PRAKASH DISTILLERY & CHEMICAL CO. PVT. LIMI TED, HOTEL PRAKASH BUILDING, HILLCART ROAD, SILIGURI (2) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-I, SILIGURI, PARIBHAN NAGAR, MATIGARA-734 001, SILIGURI (3) COMMISSIONER OF INCOME TAX(APPEALS), SILIGURI; (4) COMMISSIONER OF INCOME TAX- , KOLKATA, (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.