Prima Paper & Engineering Pvt. Ltd., Pune V. DCIT, Pune, Pune

ITA 1239/PUN/2009

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 56394 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-08-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 17-06-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 26-10-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI I.C.SUDHIR, JUDICIAL M EMBER AND SHRI G.S.PANNU, ACCOUNTANT M EMBER ITA NOS. 1239 AND 1240/PN/2009 (ASSESSMENT YEARS: 2005-06 TO 2006-07) PRIMA PAPER & ENGG.PVT.LTD. T-73, MIDC, PUNE APPELLANT PAN AABPC1938J VS. DY.COMMISSIONER OF INCOME TAX CIRCLE 10, PUNE RESPONDENT APPELLANT BY: SHRI M.R.BHAGWAT, AR RESPONDENT BY: ANN KAPTH UAMA ORDER PER G.S. PANNU, A.M .: BOTH THESE ARE APPEALS BY THE ASSESSEE, DIRECTED AG AINST THE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX ( APPEALS) III, PUNE DT. 27-7-2009 FOR THE ASSESSMENT YEARS 2005-06 AND 2006-07. 2. IN BOTH THE APPEALS, THE FIRST COMMON ISSUE RELA TES TO DENIAL OF DEDUCTION CLAIMED BY THE ASSESSEE U/S 80IA OF TH E INCOME TAX ACT, 1961 (THE ACT) IN RELATION TO THE PROFITS OF T HE WINDMILL ACTIVITY. 3. AT THE OUTSET, THE LEARNED COUNSEL FOR THE ASSES SEE FAIRLY SUBMITTED THAT THIS ISSUE IS SIMILAR TO THAT CONSID ERED BY THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2002-03 AND 2003-04 VIDE ITA NOS. 1755 AND 1205/PN/07 DT. 31-1- 2011. HOWEVER, IT IS POINTED OUT THAT THE CIT(A) HAS NOT ADJUDICATED A SPECIFIC GROUND RAISED BEFORE HIM TO THE EFFECT THA T EACH OF THE WINDMILL INSTALLED BY THE ASSESSEE WAS LIABLE TO BE HELD AS A SEPARATE ENTITY AND DEDUCTION U/S 80IA WAS REQUIRED TO BE DETERMINED ACCORDINGLY. THE LEARNED COUNSEL FOR TH E ASSESSEE POINTED OUT THAT ON THIS ASPECT THE CIT(A) HAS WRON GLY OBSERVED IN PARA 6 AND 6.1 OF THE IMPUGNED ORDER THAT SUCH DISP UTE HAS BEEN ADJUDICATED IN THE EARLIER YEAR IT WAS POINTED OUT BY THE LEARNED /PN/2009 PRIMA PAPE R & ENGG.PVT.LTD. COUNSEL THAT THE SAID MATTER HAS NOT BEEN ADJUDICAT ED AND, THEREFORE, THE MATTER MAY BE RESTORED TO THE FILE O F THE CIT(A) TO ADJUDICATE ON THIS ASPECT AND THEREAFTER APPLY THE PRECEDENT IN THE ASSESSEES OWN CASE. 4. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE WHILE RELYING ON THE PRECEDENT IN THE ASSESSEES OW N CASE DID NOT HAVE ANY SERIOUS OBJECTION TO THE PRAYER OF THE ASS ESSEE FOR ADJUDICATION AFRESH BEFORE THE CIT(A) ON THE STATED ASPECT. 5. IN THE BACKGROUND OF THE AFORESAID PLEA SET UP B Y THE ASSESSEE, WE HAVE PERUSED THE IMPUGNED ORDER AND FI ND THAT THE ASSESSEE HAD SPECIFICALLY RAISED THE ISSUE THAT EAC H OF THE WINDMILL INSTALLED WAS LIABLE TO BE CONSIDERED AS A SEPARATE UNIT. IN THE ABSENCE OF ANY DETERMINATION ON THIS ASPECT, WE DEE M IT FIT AND PROPER TO SET ASIDE THE ORDER OF THE CIT(A) TO DECI DE THE ISSUE RELATING TO THE CLAIM OF THE ASSESSEE U/S 80IA AFRE SH IN ACCORDANCE WITH LAW AND KEEPING IN MIND THE PRECEDENT IN THE A SSESSEES OWN CASE. NEEDLESS TO MENTION THAT THE CIT(A) SHALL ADJ UDICATE THE ISSUE AFRESH AFTER ALLOWING REASONABLE OPPORTUNITY OF BEI NG HEARD TO THE ASSESSEE. IN THIS MANNER, THE GROUND NOS. 1, 3 AND 4 RAISE BY THE ASSESSEE IN THE RESPECTIVE APPEALS ARE DISPOSED OF. 6. THE ONLY OTHER GROUND RAISED AND WHICH IS ALSO C OMMON IN BOTH THE APPEALS RELATES TO DISALLOWANCE OF INTERES T AMOUNTING TO RS.1,26,173/-. IN BRIEF, THE FACTS ARE THAT ASSESS EE WAS FOUND TO HAVE GIVEN ADVANCE OF RS.14,01,918 TO A SISTER CONC ERN WITHOUT CHARGING OF INTEREST WHEREAS THE ASSESSEE WAS INCUR RING INTEREST EXPENDITURE ON A LOAN RAISED FROM THE BANK. ON BEI NG SHOW CAUSED BY THE ASSESSING OFFICER AS TO WHY PROPORTIONATE IN TEREST BE NOT DISALLOWED, THE ASSESSEE SUBMITTED THAT THE INTERES T FREE ADVANCE WAS GIVEN OUT OF NON-INTEREST BEARING FUNDS AND, TH EREFORE, NO DISALLOWANCE WAS CALLED FOR. THE ASSESSING OFFICER DID NOT ACCEPT THE PLEA OF THE ASSESSEE ON THE GROUND THAT THE SAME CO ULD NOT BE SUBSTANTIATED. BEFORE THE CIT(A) ASSESSEE SUBMITTE D THAT HE HAD INTEREST-FREE DEPOSITS FROM THE DIRECTOR AND THE FA MILY MEMBERS AMOUNTING TO RS.16,44,175/- AS ALSO RESERVES AND SU RPLUS OF RS.10,30,61,138 AT THE END OF THE YEAR. IT WAS SUB MITTED THAT IN ADDITION, THE ASSESSEE HAD A SHARE CAPITAL OF RS.32 ,98,750 AND IN THIS BACKGROUND, IT WAS CONTENDED THAT SUFFICIENT I NTEREST FREE FUNDS /PN/2009 PRIMA PAPE R & ENGG.PVT.LTD. WERE AVAILABLE SO AS TO JUSTIFY THE INTEREST-FREE A DVANCE OF RS.14,01,918 PAID TO THE SISTER CONCERN. THE CIT(A ) HAS ALSO UPHELD THE PLEA OF THE ASSESSING OFFICER BY NOTICING THAT ASSESSEE HAS NOT ESTABLISHED ANY DIRECT NEXUS TO PROVE THAT BORROWED MONEY HAS NOT BEEN UTILIZED FOR GIVING INTEREST-FREE ADVANCE TO T HE SISTER CONCERN. 7. BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE HAS REITERATED THE SUBMISSIONS RAISED BEFORE THE LOWER AUTHORITIES . APART THERE FROM, RELIANCE HAS BEEN PLACED ON THE FOLLOWING JUD GEMENTS. A) CIT V. RELIANCE UTILITIES AND POWER LTD. 313 ITR 340 (BOM) B) CIT V. TIN BOX CO. 260 ITR 637 (DEL) 8. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE, APPEARING FOR THE REVENUE HAS RELIED UPON THE ORDER S OF THE LOWER AUTHORITIES IN SUPPORT OF THE CASE OF THE REVENUE. 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. IN THIS CASE, FACTUALLY SPEAKING IT IS CLEAR THAT ASSESSEE HAS BOTH INTEREST BEARING BORROWINGS AS ALSO INTEREST-FREE FUNDS IN T HE SHAPE OF SHARE CAPITAL/RESERVE AND SURPLUS/DEPOSITS FROM DIRECTORS ETC. RESPECTIVELY. IT IS ALSO QUITE EVIDENT FROM THE AS SERTIONS MADE BY THE ASSESSEE BEFORE THE LOWER AUTHORITIES THAT THE INTEREST-FREE FUNDS ARE SUFFICIENT TO COVER THE INTEREST-FREE ADV ANCES MADE TO THE SISTER CONCERN. IN THIS FACTUAL BACKGROUND, IN OU R VIEW, THE JUDGMENT OF THE HONOURABLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD. 313 ITR 340 (BOM) SUPRA IS CLEARLY ATTRACTED. AS PER THE HONOURABLE HIGH COURT, IF TH ERE ARE FUNDS AVAILABLE BOTH INTEREST-FREE AND OVERDRAFT/ LOANS T AKEN, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE O UT OF INTEREST- FREE FUNDS GENERATED OR AVAILABLE WITH THE COMPANY, IF THE INTEREST FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS. AS PER THE HONOURABLE HIGH COURT IN SUCH A SITUATION, NO DISAL LOWANCE WAS CALLED FOR IN TERMS OF SEC. 36(1) (III) OF THE ACT. IN THE PRESENT CASE ALSO, IT IS EVIDENT THAT INTEREST-FREE FUNDS AVAILA BLE WITH THE ASSESSEE ARE SUFFICIENT TO COVER THE IMPUGNED INTEREST FREE ADVANCE TO THE SISTER CONCERN AND, THEREFORE, THE PRESUMPTION WOUL D ARISE THAT SUCH ADVANCE TO THE SISTER CONCERN IS OUT OF INTEREST-FR EE FUNDS AND ACCORDINGLY, THE DISALLOWANCE MADE BY THE INCOME TA X AUTHORITIES IS UNSUSTAINABLE, FOLLOWING THE PARITY OF REASONING LA ID DOWN BY THE /PN/2009 PRIMA PAPE R & ENGG.PVT.LTD. HONOURABLE BOMBAY HIGH COURT IN THE CASE OF RELIANC E UTILITIES AND POWER LTD. SUPRA. THUS, ON THIS ASPECT, THE ASSESS EE SUCCEEDS. 10. IN THE RESULT, THE ABOVE CAPTIONED APPEALS OF T HE ASSESSEE ARE TREATED AS ALLOWED. ORDER PRONOUNCED IN THE COURT ON 24-8-2011. SD/- SD/- ( I.C.SUDHIR ) ( G.S.PANNU ) JUDICIAL MEMBER ACCOU NTANT MEMBER PUNE, DATED: 24-8- 2011 COPY TO:- 1) ASSESSEE 2) THE DCIT, CIRCLE-10, PUNE 3) THE CIT (A) III, PUNE 4) THE CIT CONCERNED 5) THE DEPARTMENTAL REPRESENTATIVE, B BENCH, I.T.A.T., PUNE. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., PUNE