M/s. Maa Kamakhya Herbals Ltd., Haridwar V. Addl. CIT, Haridwar

ITA 1415/DEL/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6470 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 14-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASHIMA NEB
• Assessee Lawyers: RAKESH K SEHGAL

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, DELHI B BENCH, NEW DELHI BEFORE SHRI N.K. BILLAIYA , ACCOUNTANT MEMBER, AND MS. SUCHITRA KAMBLE , JUDICIAL MEMBER ITA NO. 14 15 /DEL/20 1 6 [A.Y 20 1 1 - 1 2 ] M/S KAMAKHYA HERBALS LTD VS. THE ADDL. CIT D - 28, INDUSTRIAL AREA RANGE HARIDWAR HARIDWAR PAN : A AACY 0582 A [APPELLANT] [RESPONDENT] DATE OF HEARING : 1 5 . 0 1 .201 9 DATE OF PRONOUNCEMENT : 1 7 . 0 1 .201 9 ASSESSEE BY : SHRI RAKESH K. SEHGAL, CA REVENUE BY : MS. ASHIMA NEB , SR. DR ORDER PER N.K. BILLAIYA , ACCOUNTANT MEMBER, THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST THE ORDER OF THE CIT(A) , DEHRADUN DATED 0 3 . 1 2 . 201 5 PERTAINING TO A.Y 20 1 1 - 1 2 . 2 2. THE SOLITARY GRIEVANCE RAISED BY THE ASSESSEE IS THAT THE CIT(A) ERRED IN CONFIRMING THE ADDITION OF RS. 16.67 LAKHS MADE TOWARDS DISALLOWING THE INTEREST CHARGED BY THE BANK AND DEBITED TO THE PROFIT AND LOSS ACCOUNT. 3. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEEDINGS AND ON PERUSAL OF THE BALANCE SHEET, THE ASSESSING OFFICER FOUND THAT THE ASSESSEE HAS SHOWN LOANS AND ADVANCES OF RS. 2.41 CRORES. T HE ASSESSEE WAS ASKED TO GIVE DETAILS OF THE SAID LOANS AND ADVANCES AND WAS ASKED TO SHOW CAUSE AS TO WHY INTEREST @ 12% BE NOT DISALLOWED AGAINST THE INTEREST PAID BY THE ASSESSEE ON UNSECURED LOANS. 4. IN ITS REPLY, THE ASSESSEE STATED THAT THE ADVANCE S HAVE BEEN MADE AGAINST BUSINESS ACTIVITIES AND, THEREFORE, NO DISALLOWANCE MAY BE MADE. 5. THE CONTENTION OF THE ASSESSEE WAS DISMISSED BY THE ASSESSING OFFICER. THE ASSESSING OFFICER WAS OF THE OPINION THAT THE INTEREST DEBITED BY THE ASSESSEE AMOUNTI NG TO RS. 17.50 LAKHS ON UNSECURED LOANS NEEDS TO BE DISALLOWED AS THE ASSESSEE HAS GIVEN INTEREST FREE 3 LOANS AND ADVANCES AND, ACCORDINGLY, MADE THE DISALLOWANCE OF RS. 16.67 LAKHS. 6. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A) BUT WITHOUT ANY SUCCESS. 7. BEFORE US, THE LD. AR VEHEMENTLY STATED THAT THE ASSESSING OFFICER HAS GROSSLY FAILED IN DEMONSTRATING ANY NEXUS BETWEEN THE BORROWINGS AND THE INTEREST FREE ADVANCES MADE BY THE ASSESSEE. IT IS THE SAY OF THE LD. AR THAT MO S T OF THE ADVANCES WERE MADE IN EARLIER A.YS AND NO SUCH ADVERSE INFERENCE HAS BEEN DRAWN BY THE ASSESSING OFFICER. THE LD. AR FURTHER STATED THAT THE ALLEGED INTEREST FREE ADVANCES HAVE BEEN GIVEN OUT OF INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE AND, THEREFORE, NO P ART OF THE BORROWING S HAVE BEEN ADVANCED INTEREST FREE, HENCE NO DISALLOWANCE SHOULD HAVE BEEN MADE BY THE ASSESSING OFFICER. 8. PER CONTRA, THE LD. DR STRONGLY SUPPORTED THE FINDINGS OF THE ASSESSING OFFICER AND IN SUPPORT, RELIED UPON THE DECISION OF TH E HON'BLE DELHI HIGH COURT IN THE CASE OF M/S PUNJAB STAINLESS STEEL INDS. IN TAX APPEAL NO. 47 OF 2008 AND THE DECISION OF THE HON'BLE PUNJAB & 4 HARYANA HIGH COURT IN THE CASE OF CIT VS. ABHISHEK INDUSTRIES LTD. 286 ITR 1. 9. WE HAVE GIVEN THOUGHTFUL CON SIDERATION TO THE ORDERS OF THE AUTHORITIES BELOW. THE LOANS AND ADVANCES GIVEN BY THE ASSESSEE CAN BE UNDERSTOOD FROM THE CHART ANNEXED TO THE ORDER. 10. FROM THE CHART ANNEXED , IT CAN BE SEEN THAT THE LOANS AND ADVANCES ARE COMING FROM EARLIER A.YS. T OTAL OUTSTANDING BALANCE AS ON 31.03.2011 IS RS. 2.38 CRORES. THE PAID UP CAPITAL AND AVAILABLE RESERVES AND SURPLUS AS ON 31.03.2011 IS 10.99 CRORES. THEREFOR E , IT CAN BE SAFELY CONCLUDED THAT THE ASSESSEE WAS HAVING SUFFICIENT FREE FUNDS TO MAKE ADVANC ES. MOREOVER, IT CA N BE SEEN FROM THE CHART ANNEXED THAT IN EVERY F.Y, THE ASSESSEE WAS HAVING SURPLUS OWN FUNDS TO MAKE ADVANCES. ON THE GIVEN FACTS, THE RATIO LAID DOWN BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD 31 3 ITR 340 FOLLOWED IN HDFC BANK LTD 366 ITR 505 SQUARELY APPLY . RESPECTFULLY FOLLOWING THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT [SUPRA] WE DO NOT FIND ANY MERIT IN THE DISALLOWANCE MADE BY THE ASSESSING OFFICER AND CONFIRMED BY THE CIT(A). WE DIRECT THE A O TO DELETE THE IMPUGNED DISALLOWANCE. 5 11. BEFORE CLOSING, THE DECISIONS RELIED UPON BY THE LD. DR ARE MISPLACED IN AS MUCH AS IN THE CASE OF PUNJAB STAINLESS STEEL [SUPRA] THE REVENUE HAS DEMONSTRATED THAT THE BORROWED CAPITAL WAS USED FOR GIVING IN TEREST FREE ADVANCES WHICH IS NOT THE FACT OF THE CASE IN HAND. SIMILAR IS THE POSITION IN THE CASE OF ABHISHEK INDUSTRIES [SUPRA] 12 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IN ITA NO. 1415 /DEL/201 6 IS ALLOWED. THE ORDER IS PRON OUNCED IN THE OPEN COURT ON 1 7 . 0 1 .201 9 . S D / - S D / - [ SUCHITRA KAMBLE ] [ N.K. BILLAIYA ] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 1 7 T H JANUARY , 201 9 VL/ COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5. DR ASST. REGISTRAR, ITAT, NEW DELHI 6 DATE OF DICTATION DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.PS/PS DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT DATE ON WHICH THE FILE GOES TO THE BENCH CLERK DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER