ACIT, Chandigarh V. M/s Punjab State Civil Supplies Corporation Ltd., Chandigarh

ITA 1183/CHANDI/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 60840 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-05-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 08-05-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 07-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: JYOTI KUMARI
• Assessee Lawyers: MUNISH KHULLAR
• Keywords: Proportionate interest; Notional interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE, VICE PRESIDENT AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 1183/CHD/2011 ASSESSMENT YEAR: 2007-08 THE ACIT, VS M/S PUNJAB STATE CIVIL SUPPLIES CIRCLE-4(1), CORPORATION LTD., CHANDIGARH CHANDIGARH PAN NO.AACCP8100F (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. JYOTI KUMARI, CIT,DR RESPONDENT BY : SHRI MUNISH KHULLAR DATE OF HEARING : 8.5.2012 DATE OF PRONOUNCEMENT : 11.5.2012 ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINS T THE ORDER OF CIT(A), CHANDIGARH DATED 22.1.2010 RELATING TO ASSE SSMENT YEAR 2007-08. 2. GROUND NO.1 OF THE APPEAL RAISED AS UNDER:- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) HAS ERRED IN DELETING ADDITION OF RS . 4.72 CRORES MADE FOR NON MAKING OF PROVISION OF INTEREST FOR THE YEAR ON LOSSES INCURRED BY THE CORPORATION TO T HE TUNE OF RS. 39.30 CRORES ON THE BASIS OF DIRECTORS REPORT. 2 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE HAD AMOUNT OF RS. 39.30 CRORES OUTSTANDING TO THE STATE GOVT. AND NO INTEREST HAD BEEN CHARGED BY THE ASSESSEE INSPITE OF THE FACT THAT TH E ASSESSEE WAS FOLLOWING MERCANTILE SYSTEM OF ACCOUNTING. THE ASSESSING OFF ICER HELD THAT THE ASSESSEE HAD NOT DONE ANY BUSINESS WITH THE STATE G OVT., INSTEAD PAID AMOUNT ON BEHALF OF THE STATE GOVT. WHICH IS RECOVERABLE A ND THE TOTAL AMOUNT IS RS. 39.30 CRORES. THE ASSESSING OFFICER ACCORDINGLY ADD ED INTEREST @ 12% ON RS. 4.72 CRORES ON THE OUTSTANDING AMOUNT OF 39.30 CROR ES. 4. ON APPEAL, THE CIT(A) DELETED THE ADDITION RELYI NG ON THE ORDER OF HIS PREDECESSOR IN ASSESSEES CASE DATED 15.6.2009 IN A PPEAL NO. 350/2008-09 FOR THE ASSESSMENT YEAR 2006-07. 5. GROUND NO.2 OF THE APPEAL READS AS UNDER:- 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE A ND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING ADDITION OF RS. 12.72 CRORES MADE FOR NON-MAKING OF PROVISION OF INTEREST ON OUTSTANDING AMOUNT OF RS. 106.03 CRORES RECEIVABLE FORM M/S FOOD CORPORATION OF INDIA . 6. THE FACTS NOTED BY THE AUTHORITIES BELOW ARE THA T AS PER DIRECTORS REPORT, SUNDRY DEBTORS INCLUDED RS. 106.03 CRORES A S AMOUNT DEDUCTED / RETAINED BY FOOD CORPORATION OF INDIA (FCI) FOR ONE REASON OR OTHER. THE ASSESSEE HAD EXPLAINED BEFORE THE ASSESSING OFFICER THAT THE AMOUNT WAS DUE AGAINST SUPPLIES MADE FROM VARIOUS OFFICES OF THE A SSESSEES CORPORATION IN PUNJAB STATE AND WHILE REALIZING THE PAYMENT AGAINS T THESE BILLS, FCI MADE THE DEDUCTION. THE ASSESSEE HAD ALSO EXPLAINED THA T AS AND WHEN THE PAYMENT 3 WAS RELEASED BY THE FCI, IT IS GIVEN ALONGWITH INTE REST AT THE PREVAILING RATE. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN AS TO WHY PROPORTIONATE INTEREST ON THE OUTSTANDING AMOUNT SHOULD NOT BE DI SALLOWED TO WHICH ASSESSEE HAD REPLIED THAT FCI WAS A SUNDRY DEBTOR A ND INTEREST COULD NOT BE CHARGED. THE ASSESSING OFFICER WAS NOT SATISFIED W ITH THE REPLY OF THE ASSESSEE AND DISALLOWED INTEREST OF RS. 12.72 CORRE S. 7. ON APPEAL, THE CIT(A) DELETED THE ADDITION FOLLO WING THE ORDER OF HIS PREDECESSOR PASSED IN ASSESSEES CASE DATED 15.6.20 09 IN APPEAL NO. 350/2008-09 FOR THE ASSESSMENT YEAR 2006-07. 8. AFTER HEARING THE LD. REPRESENTATIVES OF BOTH TH E PARTIES, WE FIND THAT BOTH THE ISSUES RAISED VIDE GROUND NOS.1 & 2 OF THE APPEAL ARE COVERED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE BY T HE DECISION OF THIS BENCH OF THE TRIBUNAL DATED 30.6.2010 PASSED IN ASSESSEE S CASE IN ITA NO. 875/CHD/2009 RELATING TO ASSESSMENT YEAR 2006-07. IN THAT YEAR, A SUM OF RS. 1,71,20,58,413/- WAS OUTSTANDING FROM THE PUNJA B GOVERNMENT WHEREAS RS. 6,25,87,18,142/- WAS RECOVERABLE FROM FCI. THE ASSESSING OFFICER DISALLOWED NOTIONAL INTEREST AMOUNTING TO RS. 11,98 ,43,089/- AND RS. 43,53,42,284/- ON ACCOUNT OF SAID INTEREST-FREE OUT STANDINGS / RECOVERABLES FROM PUNJAB GOVT. AND FCI RESPECTIVELY. ON APPEAL, THE CIT(A) OPINED THAT THE AMOUNTS RECOVERABLE WERE TRADE DEBITS AND THERE FORE, THE ACTION OF THE ASSESSING OFFICER WAS SET ASIDE AND THE ADDITIONS M ADE WERE DELETED. 9. IN SECOND APPEAL, THE TRIBUNAL UPHELD THE ORDER OF CIT(A) ON BOTH THE ISSUES OBSERVING AS UNDER:- 4 22. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREF ULLY. THE ASSESSEE BEFORE US IS A CO-OPERATIVE SOCIETY, W HICH IS AN AGENCY OF THE STATE GOVERNMENT FOR PROCUREMENT OF W HEAT AND PADDY. IT ALSO UNDERTAKES SUCH ACTIVITIES FOR F CI. IN THE COURSE OF CARRYING ON OF SUCH ACTIVITIES, IT INCURR ED AMOUNTS WHICH WERE RECOVERABLE FROM THE STATE GOVERNMENT AN D FCI. QUITE CLEARLY, SUCH RECOVERIES ARE ON ACCOUNT OF TR ADING ACTIVITIES CARRIED OUT BY THE ASSESSEE. THEREFORE, THE AMOUNT OUTSTANDING FOR RECOVERY AT THE END OF THE YEAR ON ACCOUNT OF SUCH ACTIVITIES CANNOT BE EQUATED TO INTEREST-FREE ADVANCES SO AS TO REQUIRE THE SAME TO BE DECIDED IN TERMS OF SE CTION 36(1)(III) OF THE ACT. IN THIS REGARD, THE CIT(APPE ALS) HAS CATEGORICALLY HELD THAT THE PUNJAB GOVERNMENT AND F CI ARE TRADE DEBTORS AND INCOMES THEREOF HAVE BEEN OFFERED FOR TAXATION IN THE EARLIER ASSESSMENT YEARS. IN THE FA CE OF SUCH A FACT SITUATION, WE FIND NO JUSTIFICATION FOR THE AS SESSING OFFICER TO MAKE ANY DISALLOWANCE OUT OF INTEREST EX PENDITURE CLAIMED BY THE ASSESSEE ON ACCOUNT OF IMPUGNED DEBI TS. HENCE, IN THIS BACKGROUND, WE HEREBY AFFIRM THE ORD ER OF THE CIT(APPEALS). THUS, GROUND NOS. 3 & 4 RAISED ARE DISMISSED. 10. THE FACTS OF THE PRESENT YEAR ARE SIMILAR TO TH AT OF ASSESSMENT YEAR 2006-07. RESPECTFULLY FOLLOWING THE ORDER OF THE T RIBUNAL PASSED IN ASSESSEES CASE FOR ASSESSMENT YEAR 2006-07 (SUPRA) , WE DO NOT FIND ANY MERIT IN THE APPEAL PREFERRED BY THE REVENUE. ACCORDINGL Y, WE DISMISS THE SAME. 11. IN THE RESULT, APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 11 TH DAY OF MAY, 2012 SD/- SD/- (T. R. SOOD) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED : 11 TH MAY, 2012 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR 5