D.C.I.T Cir - 4,kolkata, Kolkata V. M/s Kanoi Plantations Pvt Ltd, Kolkata

ITA 1463/KOL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5008 (ITAT-KOLKATA)
• Duration Of Justice: 2 year(s) 9 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-03-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2003-2004
• Appeal Filed On: 22-05-2013
• Court: TRIBUNAL
• Keywords: Proportionate interest

Judgement Text

I.T.A. NO. 1463/KOL./2013 ASSESSMENT YEAR: 2003-2004 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA C BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 1463/KOL/ 2013 ASSESSMENT YEAR: 2003-2004 DEPUTY COMMISSIONER OF INCOME TAX,................. ..................APPELLANT CIRCLE-4, KOLKATA, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 -VS.- M/S. KANOI PLANTATIONS PVT. LIMITED,............... ....................RESPONDENT 4, HASTINGS PARK ROAD, KOLKATA-700 027 [PAN : AABCK 3128 R] APPEARANCES BY: SHRI PRABAL CHOWDHURY, JCIT, D.R., FOR THE DEPARTMENT N O N E, FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : MARCH 08, 2016 DATE OF PRONOUNCING THE ORDER : MARCH 11, 2016 O R D E R PER SHRI P.M. JAGTAP :- THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-IV, KOLKATA DA TED 01.02.2013 FOR THE ASSESSMENT YEAR 2003-04, WHEREBY HE RESTRICTED THE DISALLOWANCE OF RS.1,19,62,858/- MADE BY THE ASSESSING OFFICER ON A CCOUNT OF INTEREST TO RS.18,69,154/-. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY, W HICH IS ENGAGED IN THE BUSINESS OF GROWING AND MANUFACTURING OF TEA. T HE RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 01.12.2003 DECLARING A LOSS OF RS.1,27,47,600/-. DURING THE COURSE OF ASSE SSMENT PROCEEDINGS, IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSES SEE HAS CLAIMED DEDUCTION ON ACCOUNT OF INTEREST OF RS.1,19,62,858/ - ON THE ONE HAND AND I.T.A. NO. 1463/KOL./2013 ASSESSMENT YEAR: 2003-2004 PAGE 2 OF 4 ON THE OTHER, HAS ADVANCED INTEREST-FREE LOANS OF R S.8,50,04,739/- TO ITS SISTER CONCERN. HE, THEREFORE, REQUIRED THE ASSESES E TO SHOW-CAUSE AS TO WHY PROPORTIONATE INTEREST ATTRIBUTABLE TO THE LOAN S GIVEN TO SISTER CONCERN FREE OF INTEREST SHOULD NOT BE DISALLOWED. SINCE THE EXPLANATION OFFERED BY THE ASSESSEE IN THIS REGARD WAS NOT FOUN D ACCEPTABLE BY HIM, THE ASSESSING OFFICER WORKED OUT THE INTEREST ATTRI BUTABLE TO INTEREST-FREE LOANS GIVEN BY THE ASSESSEE-COMPANY TO ITS SISTER C ONCERN BY APPLYING THE RATE OF 15% AT RS.1,27,50,710/- AND SINCE THE SAID AMOUNT WAS MORE THAN THE INTEREST EXPENDITURE OF RS.1,19,62,858/- CLAIME D BY THE ASSESSEE, HE DISALLOWED THE CLAIM OF THE ASSESSEE FOR THE ENTIRE INTEREST EXPENDITURE. 3. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER O N ACCOUNT OF INTEREST WAS CHALLENGED BY THE ASSESSEE IN THE APPE AL FILED BEFORE THE LD. CIT(APPEALS). DURING THE COURSE OF APPELLATE PROCEE DINGS, RELIANCE WAS PLACED BY THE ASSESSEE ON THE DECISION OF THE TRIBU NAL IN ITS OWN CASE FOR A.Y. 2002-03 RENDERED VIDE ITS ORDER DATED 26.03.20 08 WHEREIN, A SIMILAR DISALLOWANCE MADE ON ACCOUNT OF INTEREST WAS HELD T O BE UNSUSTAINABLE BY THE TRIBUNAL AFTER HAVING FOUND THAT TOTAL INTEREST BEARING LOANS TAKEN BY THE ASSESSEE AT RS.10,23,65,456/- WERE LESS THAN TH E NET INVESTMENT MADE BY THE ASSESSEE IN THE BUSINESS ASSETS AT THE RELEV ANT TIME. IT WAS HELD BY THE TRIBUNAL THAT THE INVESTMENT IN BUSINESS ASSETS (EXCLUDING GRANTING OF INTEREST FREE LOANS GIVEN BY THE ASSESSEE-COMPANY T O ITS SISTER CONCERN) THUS WAS MORE THAN THE INTEREST BEARING FUNDS BORRO WED BY THE ASSESSEE AND IT COULD NOT BE SAID THAT THE INTEREST FREE LOA NS GIVEN BY THE ASSESSEE- COMPANY TO ITS SISTER CONCERN WERE OUT OF BORROWED FUNDS. KEEPING IN VIEW THIS DECISION OF THE TRIBUNAL IN ASSESSEES OW N CASE FOR A.Y. 2002-03, THE LD. CIT(APPEALS) VERIFIED THE RELEVANT FACTS IN VOLVED IN THE YEAR UNDER CONSIDERATION, I.E. A.Y. 2003-04 AND FOUND THAT THE NET INVESTMENT MADE BY THE ASSESSEE-COMPANY IN THE BUSINESS ASSETS WAS TO THE TUNE OF RS.12,42,08,145/-, WHEREAS THE TOTAL INTEREST BEARI NG LOANS WERE TO THE EXTENT OF RS.13,66,69,174/-. HE, THEREFORE, HELD TH AT THE INTEREST BEARING FUNDS ONLY TO THE EXTENT OF RS.12,42,08,145/- WERE UTILIZED BY THE ASSESSEE-COMPANY FOR THE PURPOSE OF ITS BUSINESS WH ILE THE BALANCE I.T.A. NO. 1463/KOL./2013 ASSESSMENT YEAR: 2003-2004 PAGE 3 OF 4 AMOUNT OF RS.1,24,61,029/- WAS NOT UTILIZED FOR BUS INESS PURPOSE. ACCORDINGLY, INTEREST ATTRIBUTABLE TO THE SAID AMOU NT CALCULATED BY APPLYING THE INTEREST RATE OF 15% AT RS.18,69,154/- WAS HELD TO BE NOT ALLOWABLE BY THE LD. CIT(APPEALS) AND THE DISALLOWA NCE OF RS.1,19,62.858/- MADE BY THE ASSESSING OFFICER ON T HIS ISSUE WAS RESTRICTED BY HIM TO RS.18,69,154/-. AGGRIEVED BY T HIS RELIEF GIVEN BY THE LD. CIT(APPEALS) TO THE ASSESSEE, THE REVENUE HAS P REFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. AT THE TIME OF HEARING BEFORE US, NOBODY HAS APP EARED ON BEHALF OF THE ASSESSEE DESPITE THE FACT THAT NOTICE OF THE SA ID HEARING IS DULY SERVED ON THE ASSESSEE, THE PROOF OF WHICH IS PLACED ON RE CORD. THIS APPEAL OF THE REVENUE IS, THEREFORE, BEING DISPOSED OF EX-PARTE QUA THE RESPONDENT- ASSESSEE AFTER PERUSING THE RELEVANT MATERIAL AVAIL ABLE ON RECORD AND CONSIDERING THE SUBMISSIONS MADE BY THE LD. D.R., W HO HAS MAINLY RELIED ON THE ORDER OF THE ASSESSING OFFICER IN SUPPORT OF THE REVENUES CASE ON THE ISSUE UNDER CONSIDERATION. IT IS OBSERVED THAT A SIMILAR ISSUE WAS INVOLVED IN ASSESSEES OWN CASE FOR AY 2002-03 AND VIDE ITS ORDER DATED 26.03.2008, THE TRIBUNAL DELETED THE ENTIRE DISALLO WANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST AFTER HAVI NG FOUND THAT THE TOTAL INTEREST BEARING LOANS WERE UTILIZED BY THE ASSESSE E FOR THE PURPOSE OF ITS BUSINESS. AS FOUND BY THE LD. CIT(APPEALS), THE FAC T SITUATION INVOLVED IN THE YEAR UNDER CONSIDERATION I.E. AY 2003-04, HOWEV ER, IS SLIGHTLY DIFFERENT, INASMUCH AS, OUT OF THE TOTAL INTEREST B EARING LOANS OF RS.13,66,69,174/-, A SUM OF RS.12,42,08,145/- WAS A CTUALLY UTILIZED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS AND ACCORD INGLY THE LD. CIT(APPEALS) BY FOLLOWING THE DECISION OF THE TRIBU NAL IN ASSESSEES OWN CASE FOR AY 2002-03, DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST TO THE EXTENT IT WAS ATTRIBUTABLE TO THE AMOUNT OF LOAN OF RS.12,42,08,145/- FOUND TO BE UTI LIZED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS. AT THE TIME OF HEA RING BEFORE US, THE LD. D.R. HAS NOT BEEN ABLE TO DISPUTE OR CONTROVERT THE FINDING RECORDED BY THE LD. CIT(APPEALS) THAT THE INTEREST BEARING LOAN S TO THE EXTENT OF I.T.A. NO. 1463/KOL./2013 ASSESSMENT YEAR: 2003-2004 PAGE 4 OF 4 RS.12,42,08,145/- WERE UTILIZED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS. WE, THEREFORE, FIND NO JUSTIFIABLE REASON TO INTERFERE WITH THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST TO THE EXTENT OF RS.1,00,93,704/- AND UPHOLDING THE SAME, WE DISMISS THIS APPEAL FILED BY THE REVENUE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON MARCH 11, 201 6. SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, THE 11 TH DAY OF MARCH, 2016 COPIES TO : (1) DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-4, KOLKATA, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 (2) M/S. KANOI PLANTATIONS PVT. LIMITED, 4, HASTINGS PARK ROAD, KOLKATA-700 027 (3) COMMISSIONER OF INCOME-TAX (APPEALS)-IV, KOLKA TA (4) COMMISSIONER OF INCOME TAX, KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.