ACIT, CHENNAI V. Bharat Scans Pvt. Ltd., CHENNAI

ITA 1461/CHNY/2014

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7150 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 28-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S DASGUPTA
• Assessee Lawyers: V SRINIVASAN ITP
• Keywords: Depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNALA BENCH, CHEN NAI . , ! '! ! #, $ % BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER . / I.T.A. NO. 1461/MDS/2014 / ASSESSMENT YEAR : 2008-09 THE ASST. COMMISSIONER OF INCOME TAX, COMPANY CIRCLE-I(2), CHENNAI 34. ( #& /APPELLANT) VS M/S.BHARAT SCANS PVT. LTD., 197, PETERS ROAD, ROYAPETTAH, CHENNAI 14 [PAN: AABCB 2272 Q] ( '(#& /RESPONDENT) REVENUE BY : SHRI S.DAS GUPTA, JCIT ASSESSEE BY : SHRI V.SRINIVASAN, ITP / DATE OF HEARING : 04-08-2014 / DATE OF PRONOUNCEMENT : 22-08-2014 ) / O R D E R PER VIKAS AWASTHY, J.M: THE APPEAL HAS BEEN FILED BY THE REVENUE ASSAILING THE ORDER OF COMMISSIONER OF INCOME TAX(APPEALS)(C)-II, CHENNAI DATED 14-02-2014 RELEVANT TO THE ASSESSMENT YEAR (A Y) 2008-09. THE ONLY ISSUE RAISED IN APPEAL BY THE REVENUE IS D ELETING OF DIS-ALLOWANCE OF INTEREST U/S.37(1) OF INCOME TAX A CT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT). ITA NO. 1461/MDS/2014 2 2. THE ASSESSEE IS RUNNING A SCAN CENTRE AND A LABO RATORY. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE AY. 2008-09 ON 31-10-2008 DECLARING INCOME OF ` 1,84,31,470/-. THE CASE OF ASSESSEE WAS SELECTED FOR SCRUTINY AND NOTICE U/S. 143(2) WAS ISSUED TO THE ASSESSEE ON 03-09-2009. THE ASSESSIN G OFFICER VIDE ORDER DT.31-12-2010 MADE DIS-ALLOWANCES IN THE INCOME RETURNED BY THE ASSESSEE ON ACCOUNT OF LOSS ON SALE OF ASSETS, EXCESSIVE DEPRECIATION, INTEREST COST U/S.37 AND CE RTAIN EXPENDITURE CLAIMED AS CAPITAL IN NATURE. AGGRIEVED BY THE ASSESSMENT ORDER, THE ASSESSEE PRE FERRED AN APPEAL BEFORE THE CIT(APPEALS). THE CIT(APPEALS ) VIDE IMPUGNED ORDER, DELETED THE DIS-ALLOWANCE OF INTERE ST U/S.37(1) AMOUNTING TO ` 15,46,235/- MADE BY THE ASSESSING OFFICER. THE REVENUE HAS COME IN APPEAL IMPUGNING THE FINDINGS O F CIT(APPEALS) IN DELETING OF THE INTEREST. 3. SHRI S.DAS GUPTA, APPEARING ON BEHALF OF THE REV ENUE SUBMITTED THAT, FROM THE DOCUMENTS ON RECORD IT IS CLEAR THAT THERE WERE LOANS TO DIRECTORS WHICH WERE OUTSTANDING AT T HE END OF THE YEAR. THERE WAS UN-REASONABLE DELAY IN REPAYMENT OF THE LOAN ITA NO. 1461/MDS/2014 3 AMOUNTS BY THE DIRECTORS. ON THE OTHER HAND, THE A SSESSEE- COMPANY HAD TO BORROW FUNDS TO FINANCE ITS ACTIVITI ES. 4. ON THE OTHER HAND SHRI V.SRINIVASAN, APPEARING O N BEHALF OF THE ASSESSEE SUBMITTED THAT SIMILAR ISSUE HAD COME UP BEFORE THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE AYS.2005-06 , 2006-07 & 2007-08 IN ITA NOS.222, 223 & 2204/MDS/2011 RESPECTIVELY. THE CO-ORDINATE BENCH OF THE TRIBUNAL VIDE ORDER DT.01- 03-2012 HAD RETURNED THE FINDINGS ON THE ISSUE IN FAVOUR OF THE ASSESSEE. THE LD.AR PLACED ON RECORD A COPY OF THE ORDER OF TRIBU NAL IN THE AFORESAID APPEALS. 5. BOTH SIDES HEARD. THE ORDERS OF AUTHORITIES BEL OW PERUSED. THE ONLY ISSUE IN APPEAL IS THE INTEREST PAYMENT OF ` 15,46,235/- BY THE ASSESSEE. THE ASSESSEE HAS CLAIMED THE PAYMENT OF INTEREST AS EXPENDITURE U/S.37(1). THE OBJECTION OF THE REV ENUE IS, THE ASSESSEE HAS ADVANCED INTEREST FREE LOANS TO THE DI RECTORS, THE ASSESSEE-COMPANY IS DEPRIVED OF ITS OWN FUNDS AND I S FORCED TO BORROW FUNDS AT HIGHER RATE OF INTEREST. THEREFORE , THE INTEREST ON BORROWED FUNDS IS NOT ALLOWABLE AS EXPENDITURE. WE FIND THAT SIMILAR ISSUE HAD COME UP BEFORE THE TRIBUNAL IN TH E CASE OF THE ITA NO. 1461/MDS/2014 4 ASSESSEE IN EARLIER AYS I.E., 2005-06, 2006-07 & 20 07-08. THE TRIBUNAL VIDE ORDER DT.01-03-2012 HELD AS UNDER: 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. AS I T IS SPECIFICALLY NOTICED THAT THE REVENUE HAS NOT CHALL ENGED THE FINDING OF THE LD.C.I.T.(A) THAT THE INTEREST FREE LOANS GIVEN TO THE DIRECTORS OF ASSESSEE COMPANY HAD BEEN USED FOR ACQUIRING THE PROPERTIES FOR THE BENEFIT OF THE ASS ESSEE COMPANY. OBVIOUSLY, IN VIEW OF THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF S.A.BUILDERS REFERRED TO SUPRA, NO DISALLOWANCE CAN BE MADE OF THE FINANCIAL CHARGE S PAID TO THE FINANCIAL INSTITUTIONS. THE INTEREST FREE AMOU NTS GIVEN TO THE DIRECTORS HAVE BEEN USED FOR THE BENEFIT OF THE ASSESSEE COMPANY AND THERE IS NO EVIDENCE BEFORE US TO SUPPO RT THE SUBMISSIONS OR FINDING OF THE ASSESSING OFFICER THA T THE AMOUNTS HAVE BEEN USED FOR THE PERSONAL USE OF THE DIRECTORS. FURTHER, THERE IS ALSO NO FINDING THAT THE SUBMISSI ON OF THE ASSESSEE THAT THE INTEREST BEARING LOANS TAKEN FROM THE FINANCIAL INSTITUTIONS HAD BEEN USED FOR THE PURCHA SE OF PLANT AND MACHINERY IN THE EARLIER YEARS, WAS ALSO FALSE. IN THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE FINDING OF THE C.I.T.(A) ON THE ISSUE IN THE APPEALS ARE ON A RIGH T FOOTING AND DOES NOT CALL FOR ANY INTERFERENCE. IN THESE CIRCU MSTANCES, THE APPEALS OF THE REVENUE ARE DISMISSED. SINCE, THE ISSUE IN APPEAL IS IDENTICAL TO THE ONE ALREADY ADJUDICATED BY THE CO-ORDINATE BENCH OF THE TRIBUNA L, WE FOLLOW THE ITA NO. 1461/MDS/2014 5 EARLIER ORDER OF THE TRIBUNAL AND FOR THE REASONS S TATED THEREIN, DISMISS THE APPEAL OF THE REVENUE. ORDER PRONOUNCED ON FRIDAY, THE 22 ND AUGUST, 2014 AT CHENNAI. SD/- SD/- ( . ) ('! ! #) (A. MOHAN ALANKAMONY) / ACCOUNTANT MEMBER (VIKAS AWASTHY) $ / JUDICIAL MEMBER /CHENNAI, /DATED: 22 ND AUGUST, 2014 TNMM ! ' #$ %$ /COPY TO: 1. &' /APPELLANT 2. '(&' /RESPONDENT 3. ) () /CIT(A) 4. ) /CIT 5. $,- ' . /DR 6. -/ 0 /GF