Chindia Granites Private Limited, Sivakasi V. DCIT, Madurai

ITA 1306/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96539 (ITAT-CHENNAI)
• Duration Of Justice: 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-12-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 10-12-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 29-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR MILIND BHUSARI
• Assessee Lawyers: V RAJASEKARAN

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL , C B ENCH, CHENNAI . , ! # $ , % & BEFORE SHRI A.MOHAN ALANKAMONY ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER ./ I.T.A.NOS.1304 TO 1306/MDS/2015 ( / ASSESSMENT YEARS: 2007-08 TO 2009-10) M/S.CHINDIA GRANITES PVT. LTD., 74A, VELAYUTHAM ROAD, SIVAKASI. VS DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-III MADURAI. PAN: AABCC5839M ( /APPELLANT) ( /RESPONDENT) / APPELLANT BY : MR. V.RAJASEKARAN, C.A. /RESPONDENT BY : DR. MILIND BHUSARI, CIT DR /DATE OF HEARING : 10 TH DECEMBER, 2015 /DATE OF PRONOUNCEMENT : 18 TH DECEMBER, 2015 / O R D E R PER CHALLA NAGENDRA PRASAD, JM: THESE THREE APPEALS ARE FILED BY THE ASSESSEE AGA INST THE COMMON ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-19, CHENNAI DATED 24.12.2015 FOR THE ASSE SSMENT YEARS 2007-08, 2008-09 AND 2009-10 RESPECTIVELY. IN ALL THESE APPEALS, ASSESSEE IS CHALLENGING THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) IN SUSTAINING THE DISALLOWANCE TOWARDS INTEREST AND ALSO FURTHER ENHA NCING THE INTEREST TO BE DISALLOWED. 2. BRIEF FACTS ARE THAT THE ASSESSING OFFICER IN TH E COURSE OF ASSESSMENT PROCEEDINGS IN ALL THESE ASSESSMENT Y EARS 2 ITA NOS.1304 TO 1306/MDS/2015 NOTICED THAT THE ASSESSEE ADVANCED MONIES TO ITS SI STER CONCERN M/S.SQNY STONES P.LTD., AND ASSESSEE HAS NO T CHARGED INTEREST ON THESE ADVANCES. ASSESSING OFFIC ER ALSO NOTICED THAT ASSESSEE IN ITS PROFIT AND LOSS ACCOUN T DEBITED THE INTEREST ON ADVANCES RECEIVED BY THE ASSESSEE. THUS THE ASSESSING OFFICER WAS OF THE VIEW THAT INTEREST @ 6 % SHOULD BE DISALLOWED ON THE ADVANCES MADE BY THE ASSESSEE TO ITS SISTER CONCERN M/S. SQNY STONES P.LTD. ACCORDINGLY ASSESSMENTS WERE COMPLETED BY MAKING DISALLOWANCE O F INTEREST CALCULATED @ 6% ON THE AMOUNTS ADVANCED. ON APPEAL, THE COMMISSIONER OF INCOME TAX (APPEALS) NO T ONLY SUSTAINED THE DISALLOWANCE BUT ALSO ENHANCED THE DISALLOWANCE OF INTEREST BY DIRECTING THE ASSESSING OFFICER TO DISALLOW THE INTEREST @ 12.5% AS AGAINST 6% ADOPT ED BY THE ASSESSING OFFICER. 3. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITS T HAT THE AMOUNTS ADVANCED TO M/S. SQNY STONES P.LTD., WERE OUT OF CAPITAL AS WELL AS INTEREST FREE AMOUNTS BORROWED F ROM OTHER SISTER CONCERNS. THUS, HE SUBMITS THAT SINCE INTERE ST BEARING FUNDS WERE NOT UTILIZED FOR DIVERSION TO SISTER CON CERNS, THE 3 ITA NOS.1304 TO 1306/MDS/2015 DISALLOWANCE OF INTEREST EXPENDITURE MADE UNDER SE CTION 36(1)(III) IS NOT JUSTIFIED. REFERRING TO THE BAL ANCE SHEET FILED AT PAGE 23 OF THE PAPER BOOK, COUNSEL SUBMITS THAT ASSESSEE IS HAVING CAPITAL TO THE EXTENT OF ` 50,00,000/- AND BORROWED INTEREST FREE LOANS OF ` 92,00,000/- FROM SISTER CONCERNS INCLUDED IN CURRENT LIABILITY AND PROVISION AND SUB MITS THAT THESE AMOUNTS WERE UTILIZED FOR ADVANCING MONEY TO ITS SISTER CONCERN M/S. SQNY STONES P. LTD. THEREFORE, COUNSEL SUBMITS THAT THERE IS NO JUSTIFICATION IN DISALLOWING INTER EST UNDER SECTION 36 (1)(III) OF THE ACT. 4. DEPARTMENTAL REPRESENTATIVE WHILE SUPPORTING THE ORDERS OF LOWER AUTHORITIES SUBMITS THAT THIS ASPEC T OF THE MATTER HAS NOT BEEN CONSIDERED AND THUS IT HAS TO B E EXAMINED BY THE ASSESSING OFFICER. 5. HEARD BOTH SIDES. PERUSED ORDERS OF LOWER AUTHOR ITIES AND THE MATERIALS FURNISHED BEFORE US. IT IS THE S UBMISSION OF THE ASSESSEE THAT ADVANCES MADE TO M/S.SQNY STONES P.LTD., ARE FROM OUT OF CAPITAL AND INTEREST FREE LOANS OBT AINED FROM OTHER SISTER CONCERNS AND THEREFORE NO DISALLOWANCE IS 4 ITA NOS.1304 TO 1306/MDS/2015 REQUIRED TO BE MADE UNDER SECTION 36 (1)(III) OF TH E ACT AS THE BORROWED FUNDS HAVE NOT BEEN DIVERTED TO SISTER CON CERNS. WE FIND THAT THIS ASPECT OF THE MATTER HAS NOT BEEN CONSIDERED BY THE LOWER AUTHORITIES. IN THE CIRCUMS TANCES, WE FEEL THAT THIS MATTER HAS TO BE LOOKED INTO AFRESH BY THE ASSESSING OFFICER, AFTER PROVIDING ADEQUATE OPPORTU NITY OF BEING HEARD TO THE ASSESSEE. THUS, WE RESTORE ALL T HESE THREE APPEALS TO THE FILE OF THE ASSESSING OFFICER, WHO S HALL EXAMINE THE ISSUE IN THE LIGHT OF THE SUBMISSIONS O F THE ASSESSEE AND ASSESSEE SHALL FURNISH NECESSARY DETAI LS IN SUPPORT OF ITS CONTENTIONS. 6. IN THE RESULT, APPEALS OF THE ASSESSEE ARE ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 18 TH DECEMBER, 2015. SD/- SD/- ( . ) ( ( *+ ) ( A.MOHAN ALANKAMONY ) ( CHALLA NAGENDR A PRASAD ) - / ACCOUNTANT MEMBER * - / JUDICIAL MEMBER * /CHENNAI, / /DATED 18 TH DECEMBER, 2015 SOMU 12 32 /COPY TO: 1. APPELLANT 2.RESPONDENT 3. 4 () /CIT(A) 4. 4 /CIT 5. 2 7 /DR 6. /GF .