The ITO, Ward-5(3), Ahmedabad V. R.L. Kalathia Engineering & Automobiles Pvt.Ltd., Ahmedabad

ITA 1460/AHD/2008

• Counselvise Citation: 146020514 RSA 2008
• Duration Of Justice: 3 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 01-02-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 25-04-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B L YADAV SR DR
• Assessee Lawyers: M J SHAH

Judgement Text

, , , , , IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, D BENCH . .. . . .. . , !! '#$ !! '#$ !! '#$ !! '#$, , , , %& %& %& %& '() * +! '() * +! '() * +! '() * +!, , , , (, - (, - (, - (, - ( $ ( $ ( $ ( $ BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND B.P. JAIN, ACCOUNTANT MEMBER) ITA NO.1460/AHD/2008 [ASSTT.YEAR : 2005-2006] ITO, WARD-5(3) AHMEDABAD. ! /VS. R.L. KALTHIA ENGINEERING & AUTOMOBILES PVT. LTD. ABOVE KUSH AUTOMOBILES NILAMBAUG, BHAVNAGAR PIN 364 001. ( (( (/0 /0 /0 /0 / APPELLANT) ( (( (12/0 12/0 12/0 12/0 / RESPONDENT) - 3 4 (/ REVENUE BY : SHRI B.L.YADAV, SR.DR ! 67 3 4 (/ ASSESSEE BY : SHRI M.J. SHAH !8 3 7,/ DATE OF HEARING : 1 ST FEBRUARY, 2012 9:; 3 7,/ DATE OF PRONOUNCEMENT : 02-03-2012 (< / O R D E R PER G.C. GUPTA, VICE-PRESIDENT: THIS APPEAL OF THE REVENUE FOR A.Y.2005-2006 IS DIRECTED AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-XI, AHMEDABAD. 2. THE ONLY EFFECTIVE GROUND OF THE REVENUES APPEA L READS AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION MADE OF RS.28,68,776/- ON ACCOUNT OF DISAL LOWANCE OF INTEREST UNDER SECTION 36(I)(III) OF THE INCOME TAX ACT, 1961. 3. THE LEARNED DR SUBMITTED THAT THE CIT(A) DELETED THE ADDITION ON THE BASIS OF THE APPELLATE ORDER OF THE CIT(A) IN T HE CASE OF THE SISTER CONCERN OF THE ASSESSEE VIZ. M/S.KALTHIA ENGINEERIN G & CONSTRUCTION LTD. (KE&CL FOR SHORT). HE SUBMITTED THAT THE REVENUE HAS PREFERRED AN APPEAL BEFORE THE TRIBUNAL IN THE CASE OF SISTER CO NCERN, KE&CL. HE ITA NO.1460/AHD/2008 -2- RELIED ON THE ORDER OF THE AO. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT SIMILAR DISALLOWANCE MADE BY THE AO IN THE CASE OF THE SISTER CONCERN OF THE ASSESSEE, KE&CL WAS DELETED BY THE CIT(A) VIDE HIS ORDER DATED 30-11-2007 FOR A.Y.2004-2005. HE SU BMITTED THAT FURTHER APPEAL TO THE TRIBUNAL PREFERRED BY THE REVENUE IN THE CASE OF THE SISTER CONCERN, KE&CL WAS DISMISSED BY THE TRIBUNAL VIDE ITS ORDER IN ITA NO.508/AHD/2008 DATED 30-4-2008. THE LEARNED COUNS EL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE HAS TOTAL INTER EST FREE FUNDS OF RS.1.74 CRORES AND THE ADVANCES AND INVESTMENTS WERE AT RS. 1.59 CRORES, AND THEREFORE NO CASE OF DISALLOWANCE ON ACCOUNT OF INT EREST IS MADE OUT BY THE REVENUE. 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS CAREFULLY. WE FIND THAT IN SIMILAR FACTS, THE ISSUE OF DISALLOWANCE OF INTERES T IN THE CASE OF SISTER CONCERN OF THE ASSESSEE, KE&CL WAS DELETED BY THE CIT(A) VIDE ITS ORDER DATED 30-11-2007 AND THE REVENUES IN APPEAL BEFORE THE TRIBUNAL AGAINST THE ORDER OF THE CIT(A) HAS BEEN DISMISSED BY THE TRIBUNAL VIDE ITS ORDER DATED 30-4-2008 (SUPRA). MOREOVER, WE FI ND THAT NEXUS BETWEEN THE BORROWED FUNDS AND FUNDS LENT OUT WAS NOT ESTAB LISHED. THE APPELLANT HAS INTEREST FREE FUNDS IN THE FORM OF CAPITAL, RES ERVE AND SURPLUS, INTEREST FREE LOANS TOTALING TO RS.1.74 CRORES AND INTEREST FREE ADVANCES AND INVESTMENT MADE BY THE ASSESSEE STOOD AT RS.1.59 C RORES FOR THE RELEVANT PERIOD. IN THESE FACTS OF THE CASE, SINCE THE INTE REST FREE FUNDS AVAILABLE WITH THE ASSESSEE WERE MORE THAN THE INTEREST FREE ADVANCES AND INVESTMENT MADE BY THE ASSESSEE, NO PART OF THE INT EREST PAID BY THE ASSESSEE COULD BE DISALLOWED. ACCORDINGLY, WE CONF IRM THE ORDER OF THE CIT(A) ON THIS ISSUE AND GROUND OF THE APPEAL OF TH E REVENUE IS DISMISSED. ITA NO.1460/AHD/2008 -3- 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( '() * +! '() * +! '() * +! '() * +! /B.P. JAIN) (, - (, - (, - (, - /ACCOUNTANT MEMBER ( . .. . . .. . /G.C. GUPTA) '#$ '#$ '#$ '#$ /VICE-PRESIDENT C OPY OF THE ORDER FORWARDED TO: 1) : APPELLANT 2) : RESPONDENT 3) : CIT(A) 4) : CIT CONCERNED 5) : DR, ITAT. BY ORDER DR/AR, ITAT, AHMEDABAD