Appeal details
Counselvise Citation
[2010] 135 COUNSELVISE.COM (IT) 9935 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 month(s) 6 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
09-09-2010
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
SMC
Next Hearing Date
09-09-2010
Assessment Year
2006-2007
Appeal Filed On
03-05-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH SMC AHMEDABAD BEFORE SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.1409/AHD/2010 ASSESSMENT YEAR: 2006-07 DATE OF HEARING:9.9.10 DRAFTED: 13.9. 10 CORONATION FLOUR MILLS, 403, KARMA COMPLEX, KAUSAMBI APARTMENT, NR. MAHALAXMI CHAR RASTA,A PALDI, AHMEDABAD-380007, PAN NO.AABFC4095J V/S . INCOME TAX OFFICER, WARD-6(4), AHMEDABAD (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI TUSHAR P HEMANI, AR RESPONDENT BY:- SHRI S.K. JHA, SR-DR O R D E R THIS APPEAL BY ASSESSEE IS ARISING OUT OF THE ORDE R OF COMMISSIONER OF INCOME-TAX (APPEALS)-XXI, AHMEDABAD IN APPEAL NO. C IT(A)-XXI/ 250 /WD.6 (4) /09-10 DATED 25-03-2010. THE ASSESSMENT WAS FRA MED BY ITO WARD-6(4), AHMEDABAD U/S.143(3) OF THE INCOME-TAX ACT, 1961 (H EREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 27-03-2008 FOR ASSE SSMENT YEAR 2006-07. 2. THE FIRST ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE CONFIRMATION OF DISALLOWANCE BY CIT(A) OF INTEREST U/S.36(1)(III) O F THE ACT AMOUNTING TO RS.84,032/-. 3. THE BRIEF FACTS ARE THAT THE ASSESSING OFFICER D URING THE COURSE OF ASSESSMENT PROCEEDINGS DISALLOWED INTEREST ON THE B ASIS THAT ASSESSEE HAS PAID INTEREST @ 12% TO 18% ON LOANS RECEIVED AS AGA INST RECEIVED INTEREST ON ITA NO.1409/AHD/2010 A.Y. 2006-07 CORONATION FLOUR MILLS V. ITO WD-6(4)ABD PAGE 2 ADVANCES GIVEN AT 5% TO CHANDAN TRADING CO. ACCORDI NG TO ASSESSING OFFICER, ASSESSEE HAS RECEIVED INTEREST ON THE DEPO SITS GIVEN TO CHANDAN TRADING CO. AT 5% ON AMOUNT OF RS.11,73,862/- AND I NTEREST RECEIVED WAS RS.57,002/-. THE ASSESSEE CLAIMED BEFORE THE AO THA T IT HAS INTEREST FREE DEPOSITS AVAILABLE AT RS.10,23,079/- AND AO NOTED I N HIS ASSESSMENT ORDER THAT ASSESSEE HAS INTEREST FREE FUNDS AVAILABLE WIT H THE ASSESSEE AT RS.10,23,079/- IN PARA-3.4 OF HIS ASSESSMENT ORDER, WHICH READS AS UNDER:- 3.4 AS PER THE PROVISIONS OF SECTION 36(1)(III), T O CLAIM THE INTEREST EXPENSES ON BORROWED CAPITAL, THE DEBT MUST BE USED FOR THE PURPOSES OF BUSINESS ONLY. HERE THE ASSESSEE HAS ACCEPTED DE POSITS @ OF15% (AVERAGE) INTEREST P.A. AND ADVANCED THE SAME @ OF 5% INTEREST P.A. WHICH CANNOT BE SAID TO BE FOR THE PURPOSE OF BUSIN ESS. IT IS ALSO A SETTLED LAW THAT THE PRIMARY BURDEN LIES ON THE ASS ESSEE FOR ESTABLISHING THE FACT THAT THE ADVANCES MADE OAT A LOW RATE OF I NTEREST AS COMPARED TO MARKET RATE, IS EXCLUSIVELY OUT OF THE INTEREST FREE FUNDS AVAILABLE WITH THEM. HERE THE ASSESSEE HAS NOT A SUBMITTED ANY SAT ISFACTORY EXPLANATION OR EVIDENCE TO PROVE THE SAID FACT. IT IS ALSO PERTINENT TO NOTE HERE THAT AS PER THE DETAILS SUBMITTED BY THE ASSES SEE, THE TOTAL INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE COMES TO ONL Y RS.10,03,079/-. THUS, IN THE ABSENCE OF ANY SUCH EXPLANATION, CLARI FICATION OR EVIDENCE THE CONTENTION OF THE ASSESSEE IS HEREBY REJECTED. IN VIEW OF THE ABOVE DISCUSSION, IT CANNOT BE PRESUMED THAT THE LOAN GIV EN BY THE ASSESSEE TO CHANDAN TRADING CO. AT LOWER RATE, IS EXCLUSIVEL Y OUT OF THE INTEREST FREE FUND LYING WITH IT. THE ASSESSEE ALSO TAKEN THE SAME PLEA BEFORE CIT(A) THAT TO THE EXTENT OF DIFFERENTIAL OF INTEREST FREE FUNDS, THE BALANCE BE DISALLOWED AND REBATE BE ALLOWED TO THE EXTENT OF INTEREST FREE FUNDS AVAILA BLE WITH THE ASSESSEE. THE CIT(A) WITHOUT CONSIDERING ANY PLEA DISMISSED THE A PPEAL OF THE ASSESSEE. 4. I FIND FROM THE FACTS AND CIRCUMSTANCES OF THE C ASE AND ARGUMENTS BY BOTH THE SIDES THAT ASSESSEES INTEREST FREE FUNDS AS AGAINST ADVANCE GIVEN TO CHANDAN TRADING CO. @ 5% AMOUNTING TO RS.11,73,862/ - ON WHICH INTEREST EARNED RS.57,000/- AND I AM OF THE VIEW THAT AO CAN DISALLOW INTEREST ONLY ON DIFFERENTIAL AMOUNT FOR ADVANCE TO CHANDAN TRADING CO, WHICH IS OUT OF INTEREST BEARING FUNDS AND TO THE EXTENT INTEREST F REE DEPOSITS AVAILABLE WITH ITA NO.1409/AHD/2010 A.Y. 2006-07 CORONATION FLOUR MILLS V. ITO WD-6(4)ABD PAGE 3 THE ASSESSEE, AO WILL NOT DISALLOW THE INTEREST. I N VIEW OF THE ABOVE I DIRECT THE AO TO RE-COMPUTE AND ALLOW RELIEF TO THE ASSESS EE. 5. AS REGARDS TO NEXT ISSUE, THE DISALLOWANCES OF M OTOR CAR EXPENSES, OF DEPRECIATION AND OF TELEPHONE EXPENSES AT RS.10,797 /-, 14,115/- & 4,440/- RESPECTIVELY. 6. AT THE OUTSET, IT IS NOTICED THAT THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF 1/5 TH OF THESE EXPENSES. THE ASSESSEE BEFORE ME AS WELL AS LOWER AUTHORITIES CONTENDED THAT THERE IS NO PERSON AL USE OF THESE ASSETS. HENCE, NO DISALLOWANCE SHOULD BE MADE. 7. AFTER HEARING BOTH THE SIDES, I FIND THAT REASON ABLE DISALLOWANCE OF 10% I.E. 1/10 TH WILL MEET THE ENDS OF JUSTICE AND ACCORDINGLY, I D IRECT THE ASSESSING OFFICER TO RE-COMPUTE THE DISALLOWANCE BY TAKING 1/ 10 TH OF THESE EXPENSES. THIS ISSUE OF ASSESSEES APPEAL IS PARTLY ALLOWED. 8. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 09 /09/2010 SD/- (MAHAVIR SINGH) (JUDICIAL MEMBER) AHMEDABAD, DATED : 09/09/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)-XXI, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD
