DCIT, C-1, Ludhiana V. M/s BBF Industries Limited (Formerly know as Bharat Box Factory Ltd.), Ludhiana

ITA 1197/CHANDI/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0004 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-05-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 11-03-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 04-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: Q MS NEHA CHAUDHARY SR DR
• Keywords: Earning of tax free income
• Section: 14A

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BEN CH A, CHANDIGARH !, ' # . %.., & , '( # BEFORE: SMT. DIVA SINGH, JM & DR. B.R.R. KUMAR, AM ITA NO. 1196 & 1197/CHD/2017 ASSESSMENT YEARS : 2011-12 & 2013-14 THE DCIT, CIRCLE-1 LUDHIANA M/S BBF INDUSTRIES LIMITED (FORMERLY KNOWN AS BHARAT BOX FACTORY LTD.) 181- BEANTPURA, CHANDIGARH ROAD LUDHIANA PAN NO: AAACB9276E APPELLANT RESPONDENT !' ASSESSEE BY : SHRI. SUDHIR SEHGAL, ADVOCATE #!' REVENUE BY Q : MS. NEHA CHAUDHARY, SR. DR $ %! & DATE OF HEARING : 11/03/2019 '()*! & DATE OF PRONOUNCEMENT : 28/05/2019 ')/ ORDER PER DR. B.R.R. KUMAR, A.M BOTH THE ABOVE APPEALS HAVE BEEN FILED BY THE REVEN UE AGAINST THE SEPARATE ORDERS OF LD. CIT(A)-2 LUDHIANA FOR A.Y 20 11-12 DT. 27/05/2017 AND FOR A.Y. 2013-14 DT. 28/06/2017 RESPECTIVELY. 2. SINCE THE ISSUES RAISED IN BOTH THE ABOVE APPEAL S ARE COMMON AND WERE HEARD TOGETHER THEREFORE THEY ARE BEING DISPOSED OF F BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 3. FURTHER TO THE ORDER OF THE LD. CIT(A), AND HAVI NG HEARD THE ARGUMENTS OF BOTH THE PARTIES, WE FIND THAT THE ISSUE TO BE ADJU DICATED IN THE INSTANT CASE IS WHETHER ANY DISALLOWANCE OF INTEREST ON THE CAPITAL WORK IN PROGRESS, ON THE INTEREST FREE ADVANCES GIVEN FOR CAPITAL PURPOSE AN D INTEREST ON INVESTMENTS IS IN CONSONANCE WITH THE ESTABLISHED JUDICIAL PRECEDENCE OR NOT. 4. THE ASSESSEE HAS INCURRED CAPITAL WORK IN PROGRE SS AND CAPITAL ADVANCE GIVEN AS UNDER: SR. NO. PARTICULARS OF ASSETS AMOUNT AS ON 31.03.20 11 (IN RS.) 1. BUILDING UNDER CONSTRUCTION 12,61,52,146/- 2 MACHINERY UNDER INSTALLATION 1,03,84,496 3 CAPITAL ADVANCES 4,41,47,435/- TOTAL 18,06,884,077 2 THE ASSESSING OFFICER HAS DISALLOWED AN AMOUNT OF RS. 53,70,247/- OUT OF THE INTEREST DEBITED UNDER SECTION 36(1)(III) AGAINST T HE ABOVE EXPENDITURE. ANOTHER SIMILAR ISSUE IS THAT THE ASSESSING OFFICER HAS DIS ALLOWED AN AMOUNT OF RS. 33,75,694/- UNDER SECTION 36(1)(III) ON THE INVESTM ENTS MADE BY THE ASSESSEE WHICH ARE PURPORTED TO BE FOR NON BUSINESS PURPOSES . THE ASSESSEE HAS SHOWN INVESTMENT OF RS. 301,67,771/- IN THE BALANCE SHEET AS ON 31/03/2011 WHICH WAS FOUND OUT TO BE THE BROUGHT FORWARD AMOUNT FROM THE PREVIOUS YEARS ON WHICH THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE UND ER SECTION 36(1)(III). 5. WHILE DISALLOWING THE INTEREST, THE ASSESSING OF FICER HAS RELIED ON THE JUDGMENT OF JURISDICTIONAL HIGH COURT IN THE CASE O F ABHISHEK INDUSTRIES 286 ITR 1, AND APPLIED THE THEORY OF MIXED FUNDS. 6. MUCH WATER HAS BEEN FLOWN AFTER THE JUDGMENT QUO TED BY THE ASSESSING OFFICER AND FOLLOWING PROPOSITIONS OF THE LAW HAVE BEEN LAID OUT TO DETERMINE THE DISALLOWANCE UNDER SECTION 36(1)(III). I. THE ASSESSEE SHOULD HAVE SUFFICIENT INTEREST FREE F UNDS AVAILABLE II. THE ONUS IS ON THE DEPARTMENT TO PROVE THAT INTERES T BEARING FUNDS HAVE BEEN REPLACED FOR NON BUSINESS PURPOSE III. THE ASSESSEE HAS TO ESTABLISH THE UTILIZATION OF IN TEREST BEARING FUNDS FOR BUSINESS PURPOSE. IV. IN THE CASE OF FAILURE TO ESTABLISH THE NEXUS BETWE EN INTEREST BEARING FUNDS AND ITS MIS-UTILIZATION THEREOF A PRESUMPTION WOULD ARISE THAT THE ADVANCES HAVE BEEN MADE OUT OF THE INTEREST FREE FUNDS. 7. THE FACTS ON RECORD SHOWS THAT THE ASSESSEE IS F OUND TO BE HAVING THE OWN FUNDS IN THE FORM OF SHARE CAPITAL AND RESERVES AND SURPLUS AS UNDER: ASSESSMENT YEAR OWN CAPITAL INCLUDING SHARE CAPITAL AND RESERVES & SURPLUS (IN LACS) 2010-11 12,992.47 2009-10 10,402.87 2008-09 8,281.74 3 7.1 IN THE INSTANT CASE, FURTHER WE FIND THAT THE L OANS RECEIVED FROM THE BANK IN THE UTILIZATION THEREOF IS AS UNDER: NATURE OF LOAN BALANCE AS ON 31.03.2011 (IN LACS) UTILIZATION/REMARKS TERM LOANS FROM VARIOUS BANK 13,478.16 THE SAID LOANS WERE TAKEN IN EARLIER YEARS FOR THE PURCHASE OF ASSETS/CWIP AND RELATED INTEREST HAS ALREADY BEEN CAPITALIZED IN EARLIER AS WELL AS DURI NG THE YEAR UNDER C ONSIDERATION. FURTHER, THE INTEREST RELATED TO LOANS TAKEN FOR THE PURCHASE OF ASSETS WHICH HAS BEEN PUT TO USE IS CLAIMED IN THE PROFIT & LOSS ACCOUNT. CASH CREDIT LIMIT FROM VARIOUS BANKS 10,582.03 THE SAID LIMIT HAS BEEN USED TO MEET THE DAILY WORK ING CAPITAL NEEDS OF THE BUSINESS AND DURING THE YEAR UNDER CONSIDERATION WORKING CAPITAL LOANS HAVE BEEN REDUCED TO RS. 10582.03 LAKHS IN FY 2010- 11 FROM RS. 12120.84 LAKHS IN THE F.Y 2009-10.LT MEANS INSTEAD OF USING BORROWED FUNDS TO MEET REGULAR PURPOSE NEEDS, THE ASSESSEE HAS REPAID THE BORROWINGS AND OWN FUNDS HAVE BEEN UTILIZED IN THE BUSINESS. VEHICLE LOANS 13.06 THE SAID LOANS HAVE BEEN UTILIZED FOR THE PURCHASE OF VEHICLES AND DIRECT DISBURSEMENT IS MADE BY THE FINANCE COMPANIES/BANKS TO THE CONCERNED VENDORS. UNSECURED LOANS 2659.07 THESE LOANS WERE RAISED IN THE EARLIER YEARS AND DU RING THE YEAR UNDER CONSIDERATION, THERE IS AN INCREASE OF RS. 1301.62 LAKHS WHICH IS LESS THAN THE INCREASE I N THE NET CURRENT ASSETS OF RS. 3158.03 LAKHS DURING THE YEAR UNDER CONSIDERATION. IT MEANS UNSECURED LOANS HAVE BEEN FULLY UTILIZED FOR THE BUSINESS PURPOSES BEING THE WORKING CAPITAL REQUIREMENTS OF THE COMPANY. FROM THE ABOVE TABLE, IT CAN BE FOUND THAT THE INTE REST BEARING FUNDS HAVE BEEN UTILIZED FOR THE BUSINESS PURPOSE ONLY AS PER THE TERMS OF THE LOAN. NOTHING CONTRA HAS BEEN BROUGHT ON RECORD TO PROVE THE FACT THAT THE INTEREST BEARING FUNDS SHOWN ABOVE HAVE BEEN UTILIZED FOR NON BUSINE SS PURPOSE BY THE REVENUE. WE ALSO RELY ON THE LEGAL PROPORTION ESPOU SED IN THE FOLLOWING JUDGMENTS: HON'BLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. R L KALTHIA ENGINEERING & AUTOMOBILES P. LTD. (2013), HON'BLE ITAT CHANDIGARH BENCH IN THE CASE OF ACIT V . UPPER INDIA STEEL IN ITA NO.920/CHD/2009 ORDER DATED 08.02.12, HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RE LIANCE UTILITIES AND POWER LTD. 313 ITR 340, BRIGHT ENTERPRISES PVT. LTD VS. CIT 381 ITR 107, HON'BLE ITAT CHANDIGARH BENCH IN THE CASE ACIT VS. M/S DEEPAK BUILDERS AS REPORTED IN ITA NO. 1000/CHD/2013 DATED 26.02.20 16 ACIT VS. M/S OMAX BIKES LTD IN ITA NO. 1085/CHD/201 3 DATED 06.08.2015 4 SINCE THE ASSESSEE HAS BEEN FOUND TO BE HAVING SUFF ICIENT OWN FUNDS AND THE LOAN FUNDS HAVE BEEN UTILIZED FOR THE BUSINESS PURP OSE, KEEPING IN VIEW THE ESTABLISHED LEGAL POSITION NARRATED ABOVE WE DECLIN E TO INTERFERE IN THE ORDER OF THE LD. CIT(A) ON THE ISSUE OF DISALLOWANCE UNDER S ECTION 36(1)(III). GROUND NO. 3 OF THE ITA NO. 1196/CHD/2017: 8. THE GROUND NO. 3 OF THE ITA NO. 1196/CHD/2017 PE RTAINS TO DISALLOWANCE UNDER SECTION 14A OF THE INCOME TAX ACT,1961 R.W.R 8D, WHEREIN THE ASSESSEE HAS INVESTED AN AMOUNT OF RS. 3,01,67,771/- ON WHICH TH E ASSESSING OFFICER HAS DISALLOWED AN AMOUNT OF RS. 1,22,13,515/- UNDER SEC TION 14A. 8.1 ON PERUSAL OF THE RECORDS WE FIND THAT, A) THE ASSESSEE HAS NOT RECEIVED ANY DIVIDEND FROM SUCH INVESTMENTS B) THE ASSESSEE HAS MADE INVESTMENTS IN THE SHARES OF THE SUBSIDIARY FOR STRATEGIC INVESTMENTS. C) THE ASSESSEE HAD SUFFICIENT OWN FUNDS IN THE FOR M OF CAPITAL, RESERVES & SURPLUS. 9. IN THE JUDGMENTS OF THE FOLLOWING CASES, IT HAS BEEN CONTINUOUSLY HELD THAT NO DISALLOWANCE UNDER SECTION 14A IS CALLED FOR WHE REIN THE ASSESSEE HAS NOT RECEIVED THE DIVIDEND, HAVING OWN RESOURCES. COMMISSIONER OF INCOME TAX VS. LAKHANI MARKETING IN CL. 111 DTR 149(P&H) CIT V DELITE ENTERPRISES ITA NO.110/2009, THE BOMBA Y HIGH COURT (BOM) PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS K APSONS ASSOCIATES AS REPORTED N 381 ITR 204, CIT VS. SHIVAM MOTORS PVT LTD ITA NO.88/2014, (ORDE R DT.05.05.2014) THE ALLAHABAD HIGH COURT 230 TAXMAN 0063 ITAT CHANDIGARH BENCH IN THE CASE OF M/S EMPIRE PAC KAGES (P) LTD. VS DCIT IN ITA NO. 1186/CHD/2013 DECLARED ON 23.05.201 6 AND JUDGMENT OF ITAT CHANDIGARH BENCH IN THE CASE OF GA NESHAY OVERSEAS LTD. IN ITA NO. 186/CHD/2015 VIDE ORDER DATED 19.10 .2015 HON'BLE ITAT DELHI BENCH IN THE CASE OF INTERGLOBE ENTERPRISES LTD. VS. DCIT IN I.T.A. NO.1580/DEL/2013 VIDE ORDER DATED 04.04.2 014, 10. HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD, WE HOLD THAT IN THE PECULIAR FACTS AND CIRCUMSTANCE S OF THE CASE, WHEREIN THE ASSESSEE HAS RECEIVED NO EXEMPT INCOME, NO DISALLOW ANCE CAN BE MADE UNDER SECTION 14A OF THE INCOME TAX ACT,1961, IN V IEW OF THE POSITION OF LAW AS 5 CONSIDERED BY THE VARIOUS COURTS. HENCE, WE FIND NO REASON TO INTERFERE IN THE ORDER OF THE LD. CIT(A) WHICH IS RIGHTLY BASED ON T HE JUDICIAL PRONOUNCEMENTS. 11. IN THE RESULT, BOTH THE ABOVE APPEALS OF THE RE VENUE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- ! . %.., & , (DIVA SINGH ) ( DR. B.R.R. KUMA R, AM) ' #/ JUDICIAL MEMBER '( #/ ACCOUNTANT MEMBER AG DATE: 28/05/2019 (+! ,-.- COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. $ / CIT 4. $ / 01 THE CIT(A) -2 45&456789 DR, ITAT, CHANDIGARH