Sidmak Laboratories(India) Pvt.Ltd., Valsad V. The ACIT.,Valsad Circle, Valsad

ITA 1061/AHD/2013

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 6362 (ITAT-SURAT)
• Duration Of Justice: 6 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 26-07-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 16-04-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R P RASTOGI
• Assessee Lawyers: MEHUL K PATEL
• Keywords: Commercial expediency

Judgement Text

PAGE 1 OF 4 SIDMAK LABORATORIES ((INDIA) PVT. LTD. V. ACIT- VALSAD/ I.T.A. NO.1061/AHD/2013/A.Y.09-10 , , IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRIH. S. SIDHU, JUDICIAL MEMBER AND SHRI O. P. MEENA, ACCOUNTANT MEMBER . . ./ I.T.A NO.1061/AHD/2013 / ASSESSMENT YEAR: 2009-10 M/S. SIDMAK LABORATORIES, (INDIA) PVT. LTD., NATIONAL HIGHWAY NO. 8, P. B. NO. 121 ABRAMA, VALSAD-396 001 PAN: AABCS 9914 R V. ASSISTANT COMMISSIONER OF INCOME TAX, VALSAD CIRCLE- VALSAD APPELLANT /RESPONDENT ASSESSEE BY SHRI MEHUL K PATEL, ADVOCATE REVENUE BY SHRI R. P. RASTOGI, SR. D.R. DATE OF HEARING 18.07.2019 DATE OF PRONOUNCEMENT 19.07.2019 /ORDER PER O. P. MEENA, AM 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-VALSAD (IN SHORT THE CIT (A)) DATED 30.12.2012 PERTAINING TO ASSESSMENT YEAR 2009-10. 2. GROUND NO. 1 RELATES TO DISALLOWANCE OF RS. 56,574 OUT OF ADVERTISEMENT AND SALE PROMOTION EXPENSES. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSING OFFICER (IN SHORT THE AO) DISALLOWED THE EXPENSES PAGE 2 OF 4 SIDMAK LABORATORIES ((INDIA) PVT. LTD. V. ACIT- VALSAD/ I.T.A. NO.1061/AHD/2013/A.Y.09-10 UNDER THE HEAD SALE PROMOTION EXPENSES AS THE ASSESSEE WAS NOT ABLE TO JUSTIFY THE EXPENDITURE. HOWEVER, THIS GROUNDS OF APPEAL IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF TRIBUNAL IN THE CASE OF THE ASSESSEE IN I.T.A.NO. 2222/AHD/2006 DATED 27.02.2009. WE FIND THAT THE ISSUE IS DULY COVERED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF TRIBUNAL. FURTHER, DISALLOWANCE MADE ON WRONG FOOTING HENCE, SAME ARE DELETED. THIS GROUND IS ALLOWED. 4. GROUND NO. 2 RELATES TO CONFIRMING OF DISALLOWANCE OF RS.4,63,480 BEING INTEREST EXPENSES. 5. SUCCINCT FACTS ARE THAT THE AO HAS OBSERVED THAT THE ASSESSEE HAS GIVEN ADVANCES OF RS.48,54,000 TO JAXA INFO TECH PVT. LTD. THE TRANSACTION ENTERED IN TO WITH SAID PARTY WERE NOT FOR BUSINESS PURPOSE HENCE, THE AO TREATED IT AS DIVERSION OF INTEREST BEARING FUNDS, HENCE, MADE DISALLOWANCE @12% OF EXPENSES WHICH WORKED OUT TO RS.4,63,480. THE CIT (A) ALSO CONFIRMED THE SAME ON THE GROUND THAT THE ASSESSEE HAS FAILED TO JUSTIFY THAT INTEREST-FREE FUNDS FLOWN BACK TO THE ASSESSEE. 6. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEFORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS INTEREST-FREE FUNDS AMOUNTING TO RS.26.73 CRORES AS RESERVES AND SURPLUS AS PER BALANCE SHEET (PB PAGE NO.-21) AS AGAINST INTEREST FREE ADVANCES OF RS.48.54 LAKHS TO SISTER CONCERN WHICH ARE ALSO FOR THE PURPOSE OF BUSINESS.HENCE, INTEREST-FREE FUNDS PAGE 3 OF 4 SIDMAK LABORATORIES ((INDIA) PVT. LTD. V. ACIT- VALSAD/ I.T.A. NO.1061/AHD/2013/A.Y.09-10 ARE PRESUMED TO HAVE GIVEN OUT OF INTEREST-FREE FUNDS AVAILABLE WITH THE ASSESSEE IN THE LIGHT OF RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V. RAGHUVIR SYNTHETICS LTD. [2013] 354 ITR 227 (GUJ) WHEREIN IT WAS HELD THAT WHERE THE ASSESSEE HAS SUFFICIENT INTEREST-FREE FUNDS AND ADVANCE IS GIVEN ON COMMERCIAL EXPEDIENCY THEN NO DISALLOWANCE OF INTEREST COULD BE MADE AND ALSO RELIED IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWER LTD. (2009)313 ITR 340 (BOM)/ 178 TAXMAN 135 (BOM). 7. PER CONTRA, THE LD. SR. D.R. RELIED ON THE ORDERS OF LOWER AUTHORITIES. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. WE FIND THAT THE ASSESSEE HAD INTEREST-FREE FUNDS OF RS. 26.73 CRORES AS RESERVES AND SURPLUS AS AGAINST INTEREST FREE LOANS OF RS. 48.54 LAKHS GIVEN TO SISTER CONCERN IS ALSO FOR THE PURPOSE OF BUSINESS. THEREFORE, THERE WOULD BE PRESUMPTION THAT INTEREST-FREE FUNDS HAVE BEEN ADVANCED OUT OF INTEREST-FREE FUNDS AVAILABLE WITH THE ASSESSEE. THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT V. RAGHUVIR SYNTHETICS LTD. [2013] 354 ITR 227 (GUJ) WHEREIN IT WAS HELD THAT WHERE THE ASSESSEE HAS SUFFICIENT INTEREST- FREE FUNDS AND ADVANCE IS GIVEN ON COMMERCIAL EXPEDIENCY THEN NO DISALLOWANCE OF INTEREST COULD BE MADE. SIMILAR FINDINGS WERE GIVEN BY THE HON`BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWER LTD. (2009)313 ITR 340 (BOM)/ 178 TAXMAN 135 PAGE 4 OF 4 SIDMAK LABORATORIES ((INDIA) PVT. LTD. V. ACIT- VALSAD/ I.T.A. NO.1061/AHD/2013/A.Y.09-10 (BOM). IN THE LIGHT OF RATIO OF ABOVE JUDGEMENTS, THE DISALLOWANCE OF RS.4,63,480 ARE DELETED. THIS GROUND OF APPEAL IS THEREFORE, ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. 10. THE ORDER PRONOUNCED IN THE OPEN COURT ON 19.07.2019. SD/- SD/- (H. S. SIDHU) (O.P.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER SURAT: DATED:19 TH JULY, 2019/OPM COPY OF ORDER SENT TO- ASSESSEE/AO/PR. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER // TRUE COPY // ASSISTANT REGISTRAR, SURAT