ACIT,Circle - V, Ludhiana V. M/s.Avery Cycle Inds.Ltd, Ludhiana

ITA 1125/CHANDI/2010

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5452 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-05-2011
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-05-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 03-09-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: N K SAINI
• Assessee Lawyers: SUBHASH AGGARWAL
• Keywords: Commercial expediency; Onus to prove
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI D.K.SRIVASTAVA, ACCOUNTANT MEMBER AND MS SUSHMA CHOWLA, JUDICIAL MEMBER ITA NO. 1125/CHD/2010 ASSESSMENT YEAR: 2005-06 THE ACIT, VS. M/S AVERY CYCLE INDUSTRIES LTD., CRICLE-V, LUDHIANA LUDHIANA PAN NO. AABCA4141Q (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI N.K.SAINI RESPONDENT BY: SHRI SUBHASH AGGARWAL ORDER PER SUSHMA CHOWLA, JM THE APPEAL BY THE REVENUE IS AGAINST THE ORDER OF C IT(A)-II. LUDHIANA DATED 2.6.2010 RELATING TO ASSESSMENT YEAR 2005-06 AGAINST THE ORDER PASSED UNDER SECTION 143(3) OF THE I.T. ACT, 1961. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL:- 1. THAT THE LD. CIT(A)-II HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 16,22,569/- MADE BY THE ASSESSING OFFICER BY MAKING DISALLOWANCE U/S 36(1)(III) OF THE INCOME TAX ACT, 1961. 2. THAT THE LD. CIT(A)-II HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 16,22,569/- B Y FOLLOWING HIS OWN ORDER PASSED IN APPEAL NO.. 314/IT/CIT(A)-II/LUDHIANA/06-07 DATED 7.12.2007 IN ASSESSEES OWN CASE WHICH WAS LATER ON REVERSED AND DECIDED IN FAVOUR OF THE DEPARTMENT BY HON'BLE 2 ITAT, CHANDIGARH BENCH IN ITA NO. 177/CHD/2008 DATED 26.6.2008. 3. THE ONLY ISSUE ARISING IN THE PRESENT APPEAL IS THAT THE DISALLOWANCE MADE U/S 36(1)(III) OF THE ACT ON ACCOUNT OF LOAN A DVANCED TO S. NIHAL SINGH PAHWA (TRUST). THE OPENING BALANCE IN THE AC COUNT OF WAS RS. 1,19,11,287 AND THE CLOSING BALANCE WAS RS. 1,30,51 ,310/-. THE CONTENTION OF THE ASSESSEE THAT NO BORROWED FUNDS W ERE UTILIZED FOR ADVANCING THE INTEREST FREE LOAN TO THE TRUST WAS R EJECTED BY THE ASSESSING OFFICER AND DISALLOWANCE OF RS. 16,22,569/- WAS MAD E FOLLOWING THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COUR T IN M/S ABHISHEK INDUSTRIES LTD. [286 ITR 1 (P&H)]. THE ASSESSEE DUR ING THE PERIOD UNDER CONSIDERATION HAD CLAIMED EXPENDITURE ON ACCOUNT OF INTEREST TOTALING RS. 15.48 CRORES. THE CIT(A) DELETED THE SAID ADDITION IN VIEW OF THE SIMILAR ISSUE BEING DECIDED IN ASSESSEES OWN CASE IN ASSES SMENT YEAR 2004-05. THE REVENUE IS IN APPEAL AGAINST THE SAID ORDER OF CIT(A) AS THE ORDER PASSED BY CIT(A) RELATING TO ASSESSMENT YEAR 2004-0 5 HAS BEEN SET ASIDE BY THE TRIBUNAL. 4. THE LD. DR FOR THE REVENUE PLACING RELIANCE ON T HE ORDER OF THE TRIBUNAL RELATING TO ASSESSMENT YEAR 2004-05 POINTE D OUT THAT THE ISSUE HAS BEEN SET ASIDE TO THE FILE OF ASSESSING OFFICER BY THE TRIBUNAL. THE LD. AR FOR THE ASSESSEE STRESSED THAT THE ISSUE NOW STANDS SETTLED BY THE CONSEQUENT ORDER PASSED IN ASSESSMENT YEAR 2002-03 WHEREIN THE ISSUE HAS BEEN ALLOWED IN FAVOUR OF THE ASSESSEE AFTER SETTIN G ASIDE OF THE ORDER BY THE TRIBUNAL. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORDS. THE ISSUE RAISED IN THE PRESENT CASE IS IN CONNECTION W ITH THE DISALLOWANCE OF 3 INTEREST BY INVOKING THE PROVISIONS OF SECTION 36(1 )(III) OF THE ACT. THE ASSESSEE HAD MADE INTEREST FREE ADVANCES TO S. NIHA L SINGH PAHWA (TRUST), INTEREST ON WHICH WAS DISALLOWED BY THE ASSESSING O FFICER AS THE ASSESSEE WAS FOUND TO HAVE BORROWED FUNDS ON WHICH INTEREST WAS BEING PAID. THE ASSESSING OFFICER HAD FOLLOWED THE RATIO LAID DOWN BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN ABHISHEK INDUSTRIES LTD (SU PRA) AND WORKED OUT THE PROPORTIONATE DISALLOWANCE. 6. WE FIND THAT SIMILAR ISSUE OF THE APPLICATION OF THE PROVISIONS OF SECTION 36(I) (III) AROSE BEFORE THE TRIBUNAL IN TH E ASSESSEES OWN CASE IN ASSESSMENT YEAR 2004-05 IN RESPECT OF SAME ADVANCES MADE TO S. NIHAL SINGH PAHWA (TRUST). THE TRIBUNAL IN ITA NO. 177/ CHANDI/2008 RELATING TO ASSESSMENT YEAR 2004-05 VIDE ORDER DATED 26.6.20 08 HAD VIDE PARAS 6 & 7 HELD AS UNDER:- 6. WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE RIVAL CONTENTIONS. THE HON'BLE SUPREME COURT IN TH E CASE OF S.A. BUILDERS LTD. VS. CIT & ANOTHER, 288 I TR 1 HELD THAT IF ANY INTEREST FREE ADVANCE IS GIVEN TO SISTER CONCERNS BY WAY OF COMMERCIAL EXPEDIENCY, NO DISALLOWANCE OF INTEREST WOULD BE JUSTIFIED. THE COMMISSIONER OF INCOME-TAX (A) HAS POINTED OUT THAT THE ASSESSEE HAD ADVANCED LOANS TO S. NIHAL SINGH PAHWA (TRUST) AS THE EMPLOYEES OF THE ASSESSEE WERE GETTI NG CONCESSIONAL TREATMENT FROM THE HOSPITAL RUN BY THE TRUST AND IT WAS, THEREFORE, ON ACCOUNT OF BUSINESS EXPEDIENCY. HOWEVER, IT IS OBSERVED BY US THAT HU GE AMOUNT OF RS.77,11,287/- HAD BEEN ADVANCED TO THE T RUST IN EARLIER YEARS AND THE SAME HAD GONE UP TO RS.1,19,11,287/- IN THE YEAR UNDER APPEAL. THE CLA IM THAT S. NIHAL SINGH PAHWA (TRUST) IS RUNNING A HOSP ITAL AND THE EMPLOYEES OF THE ASSESSEE ARE GETTING THE TREATMENT FROM THE HOSPITAL AT CONCESSIONAL RATES M AY NOT HAVE BEEN DISPUTED. SO HOWEVER, THE COMMISSION ER OF INCOME-TAX (A) HAS NOT CONSIDERED AS TO WHETHER THE SUBSTANTIAL ADVANCE GIVEN TO THE TRUST WAS COMMENSU RATE WITH THE CONCESSIONAL TREATMENT PROVIDED TO THE EMPLOYEES. THE DECISION OF THE TRIBUNAL IN THE CAS E OF AVON CYCLES LTD. (SUPRA) RELIED UPON BY THE LEARNED COUNSEL FOR ASSESSEE IS DISTINGUISHABLE ON FACTS. IN 4 THAT CASE, THE ADVANCE AS ON 1.4.2003 WAS RS. 1,05, 887/- WHICH HAD BEEN REDUCED TO RS.35,191 AT THE END OF T HE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2004-05. WHEREAS THE PRINCIPLE OF LAW THAT WHERE THE ADVANCE IS GIVEN ON ACCOUNT OF BUSINESS EXPEDIENCY NO DISALLOWANCE IS WARRANTED IS SUPPORTED BY THE DECIS ION OF THE HON'BLE SUPREME COURT IN THE CASE OF S.A. BUILDERS LTD. (SUPRA), THE ISSUE HAS GOT TO BE DECI DED ON THE BASIS OF FACTS OF EACH CASE TO RECORD A FINDING RELATING TO BUSINESS EXPEDIENCY. THE COMMISSIONER OF INCOME-TAX (A) HAS NOT VERIFIED THE CLAIM OF THE AS SESSEE ABOUT THE NEXUS OF THE ADVANCES VIS--VIS THE BUSIN ESS EXPEDIENCY CLAIMED BY THE ASSESSEE. WE ACCORDINGLY SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFIC ER WITH THE DIRECTION TO DECIDE THE SAME AFRESH IN ACCORDAN CE WITH LAW AFTER GIVING REASONABLE OPPORTUNITY OF BEI NG HEARD TO THE ASSESSEE. 7. IT MAY BE PERTINENT TO MENTION THAT THE ONUS TO PROVE THAT THE ADVANCES GIVEN TO S.NIHAL SINGH PAHW A (TRUST) WAS ON ACCOUNT OF BUSINESS EXPEDIENCY IS UP ON THE ASSESSEE. THE ISSUE SHALL HAVE TO BE DECIDED A LSO KEEPING IN VIEW THE SUBSTANTIAL ADVANCES GIVEN BY T HE ASSESSEE VIS--VIS THE BENEFIT DERIVED BY THE EMPLO YEES ON CONCESIONAL TREATMENT. WE DIRECT ACCORDINGLY. 1 ST GROUND OF APPEAL RAISED BY THE REVENUE IS THUS ALLO WED FOR STATISTICAL PURPOSES. 7. THE ISSUE RAISED BEFORE US IS IDENTICAL TO THE I SSUE RAISED BEFORE THE TRIBUNAL IN ASSESSMENT YEAR 2004-05. EVEN THE CIT( A) HAD ALLOWED THE CLAIM OF THE ASSESSEE FOLLOWING HIS ORDER IN ASSESS MENT YEAR 2004-05, WHICH HAS BEEN LATER SET ASIDE BY THE TRIBUNAL. WE FIND NO MERIT IN THE SUBMISSIONS OF THE LD. AR THAT THE ISSUE NOW STANDS COVERED BY THE ORDER RELATING TO THE ASSESSMENT YEAR 2002-03 AS SUBSTANT IAL ADVANCES WERE MADE BY THE ASSESSEE AND DIRECTION WERE GIVEN VIS-A -VIS SUCH ADVANCES BY THE TRIBUNAL IN ASSESSMENT YEAR 2004-05. FOLLOWING THE RATIO LAID DOWN BY THE TRIBUNAL IN ASSESSMENT YEAR 2004-05, AS THE FACTS BEFORE US ARE IDENTICAL TO THE FACTS BEFORE THE TRIBUNAL IN ASSES SMENT YEAR 2004-05, WE REMIT THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE SAME IN LINE WITH THE DIRECTIONS IN PARAS 6 & 7 OF THE ORDER DATED 5 26.62008. THE GROUND OF APPEAL RAISED BY THE REVENU E ARE THUS ALLOWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 13 TH DAY OF MAY, 2011. SD/- SD/- (D.K.SRIVASTAVA) (SUSHMA CHOWLA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 13 TH MAY, 2011 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH