The DCIT, Circle-10, Ahmedabad V. M/s. Intercontinental India, Ahmedabad

ITA 1251/AHD/2011

• Counselvise Citation: 125120514 RSA 2011
• Duration Of Justice: 4 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 10-06-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 27-04-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Assessee Lawyers: P M MEHTA WITH G M THAKOR
• Keywords: Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI G.D. AGRAWAL VICE PRESIDENT AND SHRI S.S. GODARA JUDICIAL MEMBER ITA S NO . 1251 /AHD/ 2011 A. Y .20 0 8 - 09 ACIT, CIRCLE - 10, AHMEDABAD. VS M/S. INTERCONTINENTAL (INDIA) (NOW KNOWN AS M/S. ADANI TRADELINKS) 8 TH FLOOR, SHIKHAR COMPLEX, MITHAKALI, NAVRANGPURA, AHMEDABAD. PAN: AAAFI 5170K (APPELLANT) (RESPONDENT) REVENUE BY : S HRI DINESH SINGH , S R. D.R. , ASSESSEE(S) BY : S/ SHRI P.M. MEHTA WITH G.M. THAKOR , A.R. / DATE OF HEARING : 10 / 06 /201 5 / DATE OF PRONOUNCEMENT: 12 / 0 6 /201 5 / O R D E R PER S.S. GODARA , JUDICIAL MEMBER THIS REVENUE S APPEAL FOR A.Y. 200 8 - 0 9 , ARISE S FROM ORDER OF CI T(A) - XVI AHMEDABAD DATED 1.3.2011 PASSED I N CASE NO . CIT(A) - XVI/DCIT.CIR.10/051/10 - 11 DELETING INTEREST DISALLOWANCE OF RS.14,49,380/ - MADE U/S.36(1)(III) IN PROCEEDING UNDER SECTION 143(3 ) OF THE INCOME TAX ACT , 1961 IN SHORT THE ACT . ITA NO. 125 1 /AHD/20 1 1 M/S. INTERCONTINENTAL (INDIA) FOR A.Y. 200 8 - 0 9 - 2 - 2. FACTS OF THE CA SE ARE IN A NARROW COMPASS. THE ASSESSEE - FIRM DEBITED NET INTEREST EXPENSES OF RS.15,61,582/ - IN ITS PROFIT AND LOSS ACCOUNT . THE SAID OUTGO PERTAINED TO ITS UNSECURED LOANS. THE ASSESSING OFFICER IN THE COURSE OF SCRUTINY FOUND IT TO HAVE ADVANCED A SUM O F RS.5,91,27,260/ - TO M/S. BHANSALI BULLION OF RS.6,38,41,289/ - (OPENING BALANCE) AND PAID DURING THE YEAR, M/S. GAYATRI & CO. RS.15 LACS, SHRI JAYESHBHAI N. PATEL OF RS.90,57,607/ - (OPENING BALANCE) AND NET CLOSING BALANCE AT THE END OF FINANCIAL YEAR IS OF RS.84,82,937/ - AND SHRI SANJAY GUPTA TO THE TUNE OF RS.1,70,00,000/ - (OPENING BALANCE) AND THE NET CLOSING BALANCE AT THE END OF THE YEAR WAS RS.70 LACS; RESPECTIVELY WITHOUT CHARGING ANY INTEREST . THE ASSESSING OFFICER WAS OF THE VIEW THAT ON THE ONE H AND THE ASSESSEE HAD INCURRED THE IMPUGNED INTEREST OUTGO AND ON THE OTHER HAND, IT HAD BEEN ADVANCING INTEREST FREE LOANS TO THE AFORESAID PARTIES. 3. THE ASSESSEE FILED REPLY. IT STATED TO HAVE BEEN ENGAGED IN EXPORT / IMPORT, COMMISSION AGENT AND TRADI NG IN AGRO COMMODITIES BUSINESSES . A ND THE IMPUGNED BORROWING S WERE CLAIMED TO BE FOR THE PURPOSE OF ITS BUSINESS AND NOT FOR GRANTING INTEREST FREE LOANS AND ADVANCES. IT QUOTED SECTION 36(1)( III ) OF THE ACT AND PRAYED FOR ACCEPTANCE OF ITS INTEREST CLAIM . NECESSARY DETAILS OF INTEREST FREE FUNDS AVAILABLE IN THE FORM OF SHARE CAPITAL AND INTEREST FREE BORROWINGS WERE ALSO FURNISHED. THE ASSESSEE SUBMIT TED THAT ONCE THE SAID INTEREST FREE FUNDS WERE AVAILABLE, NO PROPORTIONATE DISALLOWANCE OF THE INTEREST EXPENDITURE COULD BE MADE. THE ITA NO. 125 1 /AHD/20 1 1 M/S. INTERCONTINENTAL (INDIA) FOR A.Y. 200 8 - 0 9 - 3 - ASSESSING OFFICER DID NOT AGREE. HE OBSERVED IN ASSESSMENT ORDER DATED 10.5.2010 THAT THE ASSESSEE HAD NEITHER FURNISHED REASONS OF MAKING INTEREST FREE ADVANCES NOR THOSE FOR NOT CHARGING INTEREST. HE FOUND THAT THESE LOANS WERE MADE IN ASSESSMENT YEAR 2001 - 02 AND WERE INTEREST BEARING TILL ASSESSMENT YEAR 2002 - 03. HE WOULD OPINE THAT THE ASSESSEE HAD STOPPED CHARGING INTEREST THEREAFTER. THE ASSESSEE S FURTHER CASE WAS THAT INITIALLY, IT HAD BEEN CHARGING INTEREST ON THE ABO VESAID ADVANCES. LATER ON, IT STATED TO HAVE AGREED FOR SHARE IN PROFITS OR LUMP SUM AMOUNT S . THE ASSESSING OFFICER WAS OF THE VIEW THAT SINCE THE ASSESSEE HAD AVAILED THESE INTEREST BEARING FUNDS FOR THE PURPOSE OF ITS BUSINESS, IT OUGHT TO HAVE UTILIZED THE SAME ACCORDINGLY. HE ALSO QUOTED ASSESSEE S FAILURE IN ESTABLISHING DIRECT NEXUS BETWEEN ITS INTEREST FREE FUNDS AND IMPUGNED ADVANCES . IN THE END, HE REFERRED TO ASSESSMENT ORDER DATED 26.11.2009 FOR PRECEDING ASSESSMENT YEAR AND INVOKED IMPUGNED DISA LLOWANCE OF RS.14,49,380/ - . 4. THE ASSESSEE PREFERRED AN APPEAL. THE CIT(A) HAS FOLLOWED HIS ORDER FOR PRECEDING ASSESSMENT YEARS ON IDENTICAL FACTS FOR DELETING THE IMPUGNED DISALLOWANCE. THEREFORE, THE REVENUE IS IN APPEAL. 5. WE HAVE HEARD BOTH SIDES . RECORDS PERUSED. THE SOLE DISPUTE BETWEEN THE PARTIES IS ABOUT THE CORRECTNESS OF THE IMPUGNED INTEREST DISALLOWANCE OF RS.14,49,380/ - MADE BY THE ASSESSING OFFICER AND DELETED IN THE LOWER APPELLATE ORDER. THE REVENUE DRAWS SUPPORT ITA NO. 125 1 /AHD/20 1 1 M/S. INTERCONTINENTAL (INDIA) FOR A.Y. 200 8 - 0 9 - 4 - FROM THE ASSESSMENT O RDER. THE ASSESSEE HAS QUOTED THE TRIBUNAL S ORDERS IN ITS OWN CASES FOR ASSESSMENT YEARS 2006 - 07 AND 2007 - 08. WE FIND FROM THE CASE FILE THAT THE ASSESSING OFFICER HAD INVOKED SIMILAR INTEREST DISALLOWANCE IN ASSESSMENT YEAR 2006 - 07 QUA ADVANCES MADE TO T HE SAME VERY PARTIES. IT STAND CONCLUDED UPTO THE TRIBUNAL THAT THE SAME WERE IN FURTHERANCE TO COMMERCIAL EXPEDIENCY ELEMENT FOR THE PURPOSE OF ASSESSEE S BUSINESS . THE REVENUE FAILS TO DRAW ANY DISTINCTION ON FACTS. WE CONCLUDE IN THESE CIRCUMSTANCES T HAT WHATEVER COMMERCIAL EXPEDIENCY EXIST ED IN ASSESSMENT YEAR 2006 - 07 IN MAKING THE IMPUGNED ADVANCES TO THE ABOVESTATED PA RTIES, THE SAME CONTINUED IN THIS ASSESSMENT YEAR AS WELL. WE UPHOLD THE CIT(A) FINDINGS UNDER CHALLENGE IN THESE CIRCUMSTANCES. THE REVENUE S SOLE SUBSTANTIVE GROUND FAILS. 6. THE REVENUE S APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON THIS DAY, THE 12 TH JUNE ,201 5 AT AHMEDABAD . SD/ - SD/ - ( G.D. AGRAWAL ) ( S.S. GODARA ) VICE PRESIDENT JUDICIAL MEMBER AHMEDABAD; DATED 12 / 06 / 20 1 5 PRABHAT KR. KESARWANI , SR. P . S . / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / CONCERNED CIT 4. ( ) / THE CIT(A) - III, AHMEDABAD ITA NO. 125 1 /AHD/20 1 1 M/S. INTERCONTINENTAL (INDIA) FOR A.Y. 200 8 - 0 9 - 5 - 5. , , / DR, ITAT, AHMEDABAD 6. / GUARD FILE . / BY ORDER, / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD