ACIT, Chandigarh V. M/s B.D. Vij & Sons Pvt. Ltd., Chandigarh

ITA 1039/CHANDI/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 51511 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 2 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 03-10-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 27-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Assessee Lawyers: ASHWANI KUMAR
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL: CHANDIGARH BENCH A BEFORE SHRI H.L. KARWA, HONBLE VICE PRESIDENTAND SHRI MEHAR SINGH, HONBLE ACCOUNTANT MEMBER ITA NO. 1039/CHANDI/2010 ASSESSMENT YEAR 2006-07 A.C.I.T. C-1(1), CHANDIGARH V. M/S B.D. VIJ & SONS P LTD C/0 2218, SECTOR 15-C CHANDIGARH AATPG 4961 D (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N.K. SAINI RESPONDENT BY: SHRI ASHWANI KUMAR DATE OF HEARING: 03.10.2011 DATE OF PRONOUNCEMENT: .10.2011 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE ASSESSEE FOR ASSES SMENT YEAR 2006- 07, IS DIRECTED AGAINST THE ORDER OF LD. CIT(A), CH ANDIGARH DATED 19.4.2010 U/S 250 (6) OF THE INCOME-TAX ACT (IN SH ORT THE ACT). 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF A PPEAL:- 1 WHETHER OF THE FACTS AND CIRCUMSTANCES OF THE CA SE LD. CIT(A) WAS RIGHT IN DELETING THE ADDITION MADE BY THE AO B Y DISALLOWING OF INTEREST CLAIMED TO BE PAID TO BANK AMOUNTING TO RS . 11,86,615/- WITHOUT APPRECIATING THE FACTS MENTIONED BY THE AO IN HIS ORDER. 2 THE APPELLANT CRAVES TO ADD OR AMEND ANY GROUND ANY GROUNDS OF APPEAL BEFORE THE APPEAL IS HEARD. 3 IT IS PRAYED THAT THE ORDER OF LD. CIT(A) BE CAN CELLED AND THAT OF THE AO BE RESTORED. 3. THE REVENUE CHALLENGED IN THE SOLD SUBSTANTIAL G ROUND OF APPEAL THAT THE LD. CIT(A) WAS NOT RIGHT IN DELETING THE A DDITION MADE BY THE AO BY DISALLOWING OF INTEREST CLAIMED TO BE PAID TO TH E BANK AMOUNTING TO RS. 11,86,615/- WITHOUT APPRECIATING THE FACTS MENTIONE D IN THE ASSESSMENT ORDER. ITA NO. 1039/CHANDI/2010 ACIT V. B.D. VIJ & SONS P LTD 2 4. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IS RUNNING A THEATRE BY THE NAME OF SURAJ THEATRE SEC 1, PANCH KULA. THE INCOME OF THE ASSESSEE INCLUDES INCOME FROM ADMISSION FEES FO R WATCHING MOVIES, HIRE CHARGES FROM THEATRE, PARKING LOTS AND CANTEEN ETC. THE ASSESSEE ALSO HAS RENTAL INCOME AND INCOME FROM ADVERTISING. THE EXPENDITURE OF THE ASSESSEE IS MAINLY ON FILM HIRE EXPENSES, DEPRECIAT ION AND DAY-TO-DAY ADMINISTRATIVE EXPENSES. 5. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS, THE DR PLACED RELIANCE ON THE ORDER OF THE AO. HOWEVER, THE AR FOR THE ASSESSEE PLACED RELIANCE ON THE ORDER OF LD. CIT(A). 6. WE HAVE PERUSED THE RIVAL SUBMISSIONS AND THE FI NDINGS OF LOWER AUTHORITIES. THE AO DISALLOWED THE INTEREST PAID TO THE BANK BY THE ASSESSEE AMOUNTING TO RS. 11,86,615/- AS ONE TIME SETTLEMENT ON THE MERE GROUND THAT THE ASSESSEE SHOULD HAVE PROVIDED BI-FU RCATION OF THE INTEREST PAID TO THE BANK FOR THE CURRENT YEAR AND EARLIER Y EARS. HOWEVER, THE SAME BI-FURCATION WAS NOT FURNISHED BY THE ASSESSEE, THE REFORE, ENTIRE EXPENSES CLAIMED BY THE ASSESSEE ON ACCOUNT OF INTEREST PAYM ENT AMOUNTING TO RS. 11,86,615/- WERE TREATED AS NOT ALLOWABLE EXPENSES BY THE AO. THE FINDINGS OF LD. CIT(A) ALONG WITH THE RELEVANT SUBM ISSIONS MADE BEFORE HER, ARE REPRODUCED HEREIN FOR THE PURPOSE OF APPRE CIATION AND FACTUAL MATRIX OF THE CASE. THE SAME ARE GIVEN HEREUNDER:- 5 A CASE FOR RECOVERY WAS FILED BY BANK OF INDIA I N DRT, JAIPUR AND SUBSEQUENTLY APPEAL AGAINST THE ORDER OF DRT, JAIPUR WAS FILED BEFORE DRAT, MUMBAI. ONE TIME SETTLEMENT WAS ARRIVED AT WITH BANK OF INDIA AND THE PAYMENT WAS MADE AS P ER THE TERMS AND CONDITIONS OF ONE TIME SETTLEMENT. THE COMPANY HAD BEEN SANCTIONED A LOAN OF RS. 21 LAKHS ON 7.5.1987. NOW REGARDING THE DEBIT OF RS. 11,86,615/- AS INTE REST ON BANK LOAN IN THE PROFIT AND LOSS ACCOUNT WE SUBMIT AS UNDER:- AS ALREADY STATED THAT THE COMPANY MADE A ONE TIME SETTLEMENT WITH BANK OF INDIA. ONE TIME SETTLEMENT AGREEMENT IS ENCLOSED PER ANNEXURE (II). IN ACCORDANCE THEREWIT H RS. 16,75,000/- WAS PAID DURING THE ASSESSMENT YEAR 200 5-06 AND RS. 55,00,000/- WAS PAID IN ASSESSMENT YEAR 2006-07. W E WOULD LIKE TO BRING TO YOUR KIND NOTICE THAT ONE TIME SETTLEME NT WITH BANKERS CONSISTS OF REPAYMENT OF PRINCIPAL AMOUNT DUE AND T HE INTEREST ON THE PRINCIPAL AMOUNT TILL THE DATE OF SETTLEMENT. AS PER THE BALANCE SHEET AS ON 31.3.2005 SUBMITTED PER ANNEXURE (I) THE PRINCIPAL AND INTEREST DUE PROVIDE D IN THE BOOKS OF ACCOUNT STANDS AT RS. 43,13,885/- AND HENCE THIS IS THE LIABILITY ON THE OPENING DAY OF FINANCIAL YEAR 2005-06. ITA NO. 1039/CHANDI/2010 ACIT V. B.D. VIJ & SONS P LTD 3 THE COMPANY HAS NOT BEEN REGULARLY PROVIDING INTER EST IN THE BOOKS OF ACCOUNT AS THERE WAS DISPUTE WITH THE BANK ER AND THE BANKER WAS CHARGING PENAL INTEREST AND OTHER CHARGE S ARBITRARILY. DURING THE YEAR UNDER CONSIDERATION THE COMPANY PA ID A SUM OF RS. 55,05,510/- AS PER ANNEXURE (II) AND AS ALRE ADY INTIMATED TO AO VIDE OUR LETTER DATED 6.11.2008. HENCE AFTER DED UCTING RS. 43,13,885/- ALREADY PROVIDED FOR IN BOOKS THERE REM AINS A BALANCE OF RS. 11,91,625/-. OUT OF THIS A SUM OF RS. 11,86 ,615/- HAS BEEN DEBITED TO INTEREST PAID ON BANK CHARGES. SINCE THE COMPANY PAID RS. 11,86,615/- INTEREST TO THE BANK ON ACCOUNT OF ONE TIME SETTLEMENT DEAL SO IN ACCORDAN CE WITH THE EXPLANATION 3D READ WITH CLAUSE (E) OF SECTION 43B BEING THE AMOUNT OF ACTUAL INTEREST PAID TO THE BANK SHOULD B E ALLOWED AS ALLOWABLE EXPENDITURE. 6 AFTER CONSIDERING THE RIVAL CONTENTIONS AS WELL AS MATERIAL ON RECORD, I FIND THAT THE COMPANY HAD INFACT MADE A O NETIME SETTLEMENT WITH THE BANK OF INDIA FOR THE LOAN AMOU NTING TO RS. 21 LAKHS TAKEN ON 7.5.1987. AS PER THE AGREEMENT RS. 16,75,000/- WAS PAID DURING THE ASSESSMENT YEAR 2005-06 AND RS. 55, 00,000/- WAS PAID IN ASSESSMENT YEAR 2006-07. 7 FURTHER, APPELLANT COMPANY PROVIDED AN AMOUNT OF RS. 43,13,885/- IN THE BOOKS OF ACCOUNT SHOWN AS LIABIL ITY ON THE OPENING DAY OF FINANCIAL YEAR 2005-06. 8 THE APPELLANT COMPANY PAID RS. 55,05,510/- DURING THE YEAR UNDER CONSIDERATION, WHICH CONSISTS OF RS. 43,13,88 5/- ALREADY PROVIDED IN THE BOOKS OF ACCOUNT AND REMAINDER BALA NCE OF RS. 11,91,625/- DEBITED TO INTEREST PAID ON BANK LOAN A ND BALANCE AMOUNT OF RS. 5010/- DEBITED TO BANK CHARGES. 9 AL DISALLOWED THE EXPENSES CLAIMED BY ASSESSEE ON ACCOUNT OF INTEREST PAYMENT AMOUNTING TO RS. 11,86,615/- ON TH E GROUND THAT ASSESSEE HAD FAILED TO PROVIDE THE BIFURCATION OF T HE INTEREST PAID TO THE BANK FOR THE CURRENT YEAR AND EARLIER YEARS. 10 FROM THE PERUSAL OF THE LETTER DATED 17 TH AUGUST 2005 REGARDING COMPROMISE SETTLEMENT BETWEEN THE BANK OF INDIA AND THE APPELLANT COMPANY, IT WAS SEEN THAT A LUMP SUM SETTLEMENT HAD BEEN MADE BUT NO DETAILS REGARDING INTEREST CHARGED ON THE AMOUNT OF LOAN HAD BEEN MENTIONED. IN ORDER TO VERIFY THE CLAIM OF THE APPELLANT, LETTER WAS SENT TO BANK OF INDIA ON 22.4 .2010 CALLING FOR THE FOLLOWING DETAILS:- PLEASE REFER TO YOUR COMPROMISE SETTLEMENT DATED 1 7.8.2005 (COPY ENCLOSED FOR READY REFERENCE) WITH M/S B.D. VIJ & S ONS PVT LTD VIDE WHICH SETTLEMENT HAS BEEN MADE AT RS. 55 LACS. IN THIS REGARD, YOU ARE REQUESTED TO GIVE THE BIFUR CATION OF RS. 55 LACS IN TERMS OF PRINCIPLE AMOUNT, INTEREST,, PENAL TY AND ANY OTHER. PLEASE SEND THE ABOVE SAID INFORMATION WITHIN 10 DA YS OF RECEIPT OF THIS LETTER. ITA NO. 1039/CHANDI/2010 ACIT V. B.D. VIJ & SONS P LTD 4 11 IN RESPONSE OF ABOVE, FOLLOWING REPLY WAS RECEIV ED FROM THE BANK:- WE REQUEST REFERENCE TO YOUR LETTER NO. CIT(A)/CH D/2010- 11/60 DATED 22.4.2010 ON THE CAPTIONED SUBJECT. WE MAY INFORM YOU THAT THE SETTLEMENT AMOUNT OF RS. 55.00 LACS RECEIVED FROM M/S B.D. VIJ & SONS PERTAINS TO UNCHA RGED INTEREST ONLY. THIS FOR YOUR INFORMATION PLEASE. 12 IN VIEW OF THE ABOVE IT IS VERY CLEAR THAT RS. 5 5 LACS PERTAINS TO UNCHARGED INTEREST ONLY OUT OF WHICH RS. 43,13,8 85/- WAS ALREADY PROVIDED IN THE BOOKS OF ACCOUNT AND BALANCE RS. 11 ,91,625/-HAD BEEN DEBITED ON ACCOUNT OF BANK INTEREST AND BANK CHARGES. THIS AMOUNT OF INTEREST EXPENDITURE AND BANK CHARGES HAV E BEEN CLAIMED U/S 43B BY THE APPELLANT, WHICH IN MY VIEW IS IN AC CORDANCE WITH THE PROVISIONS OF SECTION 43B. 13 THE ADDITION OF RS. 11,91,625/- (RS. 11,86,615/- + RS. 5010) SO MADE IS THEREFORE, DELETED, ALLOWING ASSESSEES APPEAL ON THESE GROUNDS. 6.1 A BARE PERUSAL OF THE FINDINGS OF LD. CIT(A) RE PRODUCED ABOVE, CLEARLY REVEALS THAT THE IMPUGNED DISALLOWANCES IS CONTRARY TO THE STATUTORY PROVISIONS AS HIGHLIGHTED BY THE LD. CIT( A). THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE FINDINGS OF LD. CIT(A ) AND, HENCE THE SAME ARE UPHELD. 7. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED ON 05 .10.2011 SD/- SD/- (H.L. KARWA) (MEHAR SINGH) VICE PRESIDENT ACCOUNANT MEMBER CHANDIGARH, THE 05.10.2011 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE CIT(A) / THE DR ITA NO. 1039/CHANDI/2010 ACIT V. B.D. VIJ & SONS P LTD 5