M/s. Associated Electrical Agencies, CHENNAI V. ACIT, CHENNAI

ITA 1497/CHNY/2007

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 52185 (ITAT-CHENNAI)
• Duration Of Justice: 4 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-12-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 28-05-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHAJI P JACOB IRS
• Assessee Lawyers: S SRIDHAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL BENCH A CHENNAI BEFORE SHRI N. S. SAINI, ACCOUNTANT MEMBER AND SHRI GEORGE MATHAN, JUDICIAL MEMBER .. I.T.A. NOS. 1495, 1496 & 1497/MDS/2007 AND I.T.A. NO. 378/MDS/2008 ASSESSMENT YEARS : 1998-99, 1999-2000, 2003-04 & 20 04-05 M/S. ASSOCIATED ELECTRICAL AGENCIES, POTTIPATI PLAZA, NO. 77, NUNGAMBAKKAM HIGH ROAD, CHENNAI-600 034. V. THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-XV, CHENNAI. [PAN: AABFA3270B] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE RESPONDENT BY : SHRI SHAJI P. JACOB, IRS, CIT DATE OF HEARING : 13-12-2011 DATE OF PRONOUNCEMENT : 13-12-2011 O R D E R PER BENCH; ITA NOS. 1495 TO 1497/MDS/2007 ARE APPEALS FILED B Y THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CIT(APPEALS)-XII, CHENNAI IN ITA NOS. 105, 106 & 107/06- 07 DATED 31-01-2007 FOR THE ASSESSMENT YEARS 1009-9 9, 1999-2000 AND 2003-04 AND ITA NO. 378/MDS/2008 IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF I.T.A. NOS. 1495-1497/MDS/2007 & ITA 378/MDS/2008 2 THE LEARNED CIT(APPEALS)-XII, CHENNAI IN ITA NO. 31 2/06-07 DATED 29-10-2007 FOR THE ASSESSMENT YEAR 2004-05. AS ALL THE FOUR APPEA LS RELATE TO THE SAME ASSESSEE AND ARE AGAINST IDENTICAL ISSUES, ALL THE FOUR APPE ALS ARE BEING DISPOSED OF BY THIS COMMON ORDER. 2. SHRI S. SRIDHAR, ADVOCATE REPRESENTED ON BEHALF OF THE ASSESSEE AND SHRI SHAJI P. JACOB, LEARNED SR. DR REPRESENTED ON BEHAL F OF THE REVENUE. 3. IN THE ASSESSEES APPEALS THE ASSESSEE HAS RAISE D GROUNDS AGAINST THE REOPENING OF THE ASSESSMENT AS ALSO GROUNDS THAT TH E ASSESSMENT IS BARRED BY LIMITATION. THESE GROUNDS ARE IN THE APPEALS IN IT A NOS. 1495 TO 1497/MDS/2007. AT THE TIME OF HEARING THE LEARNED AUTHORISED REPRE SENTATIVE SUBMITTED THAT HE DOES NOT WISH TO PRESS THESE GROUNDS. CONSEQUENTLY, THE GROUNDS RELATING TO THE REOPENING OF THE ASSESSMENTS AS ALSO THE GROUNDS RE LATING TO THE TIME BARRING OF THE ASSESSMENT STAND DISMISSED AS NOT PRESSED. 4. IT WAS FURTHER SUBMITTED BY THE LEARNED AUTHORIS ED REPRESENTATIVE THAT ON MERITS THE ISSUE WAS AGAINST THE ACTION OF THE LEAR NED CIT(A) IN CONFIRMING THE DISALLOWANCE OF INTEREST INCURRED BY THE ASSESSEE O N ACCOUNT OF THE INTEREST PAID TO THE SISTER CONCERN M/S. INDO NATIONAL LTD. AS ALSO INTEREST PAID A PRIVATE PARTY, NAMELY NANDALAL MADHAVDAS. IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE ISSUE OF THE INTEREST EXPENDITURE WAS SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE F OR THE ASSESSMENT YEAR 2001-02 I.T.A. NOS. 1495-1497/MDS/2007 & ITA 378/MDS/2008 3 IN ITA NOS. 770 & 792/MDS/2005 DATED 05-10-2007 WHE REIN THE CO-ORDINATE BENCH OF THIS TRIBUNAL HAS HELD AS FOLLOWS : 9. IN ITA NO. 792/MDS/05, THE ASSESSEE HAS TAKEN V ARIOUS GROUNDS. BUT AT THE TIME OF HEARING, THE LEARNED C OUNSEL FOR THE ASSESSEE SUBMITTED THAT THERE ARE ONLY TWO DISPUTES FOR OUR CONSIDERATION VIZ., (I) AGAINST CONFORMATION OF DIS ALLOWANCE OF INTEREST AMOUNTING TO ` 2,25,239/- PAID TO INDO NATIONAL LTD. WHICH WAS HE LD TO BE EXCESSIVE AND ()II) AGAINST CONFIRMATION OF D ISALLOWANCE OF INTEREST AMOUNTING TO ` 9,72,166/- PAID TO BANK TOWARDS OVER-DRAFT ACCOUNT AND ` 10,62,240/- PAID TO NANDALAL MADHAVDAS ON ACCOUNT OF FUNDS DIVERTED TO SISTER CONCERN. 10. WITH REGARD TO THE FIRST GROUND, AFTER HEARING BOTH THE PARTIES WE FIND THAT THE ASSESSING OFFICER HAD DISALLOWED T HE WHOLE OF THE INTEREST PAID TO INDO NATIONAL LTD. AS PER THE ASS ESSING OFFICER, THESE FUNDS WERE DIVERTED TO SISTER CONCERNS, WHEREAS THE CIT(APPEALS) RESTRICTED THE DISALLOWANCE TO ` 2,25,239/- BEING IN EXCESS OF INTEREST RATE AT 18%. WE FIND FORCE IN THE SUBMISSION OF TH E LEARNED COUNSEL FOR THE ASSESSEE THAT FUNDS MAY OR MAY NOT BE AVAIL ABLE AT THE SAME RATE AS IS BEING CHARGED BY THE BANK BECAUSE BANKS WOULD GENERALLY TAKE SOME SECURITY OF THE ADVANCE WHEREAS OTHER PAR TIES DO NOT INSIST ON SECURITY. MOREOVER, THE INTEREST WAS PAID AGAIN ST TRADE SUPPLIES AND THE RATE WAS DETERMINED BY THE SUPPLIER AND THE ASSESSEE COULD NOT HAVE DONE MUCH. THEREFORE, THERE IS NO JUSTIFI CATION IN DISALLOWING THE INTEREST MERELY BECAUSE THE RATE OF INTEREST PA ID DURING DECEMBER 2000 TO MARCH 2001 ON SOME OF THE OVER DUE BILLS WA S CHARGED AT 21%. THEREFORE, WE SET ASIDE THE ORDER OF THE CIT( APPEALS) AND DELETE THIS ADDITION. I.T.A. NOS. 1495-1497/MDS/2007 & ITA 378/MDS/2008 4 11. AS REGARDS THE NEXT GROUND, AFTER HEARING THE SUBMISSIONS OF THE RIVAL PARTIES, WE ARE UNABLE TO AGREE WITH THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE THAT BANK OVER DRA FT SHOULD BE TREATED AS VALID FOR ONE YEAR ONLY IN THE SENSE THA T THE BANK OVER DRAFT STOOD CLOSED AT THE END OF THE YEAR AND, THEREFORE, IT CANNOT BE SAID THAT THE FUNDS HAVE BEEN DIVERTED TO SISTER CONCERN S. WE FIND THAT SUCH SISTER CONCERNS HAVE NOT REPAID ANY MONEY DURI NG THE PERIOD UNDER CONSIDERATION. HOWEVER, WE FIND FORCE IN THE OTHER SUBMISSION THAT THE FUNDS DIVERTED TO THE SISTER CONCERNS HAVE NOT BEEN CALCULATED PROPERLY AND, THEREFORE, THERE SEEMS TO BE SOME CAL CULATION MISTAKE BECAUSE THE LIST OF INTEREST FREE ADVANCE FILED BEF ORE US AT PAGE 46 OF THE PAPER BOOK SHOWS INCREASE ONLY ON ` 3,57,56,595/- WHEREAS THE CIT(APPEALS) HAS TAKEN THE SUM AT ` 6,13,13,964/-. THERE SEEMS TO BE SOME CALCULATION MISTAKE MADE BY THE LOWER AUTHO RITIES. FURTHER WE FIND THAT DURING THE YEAR THERE WAS INCREASE IN CAPITAL BY THE PARTNERS AT ` 3,02,22,134/- AND SOME OTHER INTEREST FREE LOANS W ERE ALSO AVAILABLE AT ` 56,85,137/-. DETAILS OF THESE FIGURES HAVE BEEN F ILED AT PAGE 47 OF THE PAPER BOOK. IT WAS SUBMITTED THA T THESE FIGURES WERE AVAILABLE BEFORE THE ASSESSING OFFICER BUT THE SAME HAVE NOT BEEN CONSIDERED. THEREFORE, IN THE INTEREST OF JUS TICE, WE SET ASIDE THE ORDER OF THE CIT(APPEALS) ON THIS ISSUE AND REMIT T HE MATTER TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO RE-EXA MINE THE ISSUE AFRESH AFTER CONSIDERING THE FRESH INTEREST FREE FUNDS AVA ILABLE TO THE ASSESSEE DURING THE YEAR AND DISALLOWANCE, IF ANY, SHOULD BE MADE AFTER SUCH CONSIDERATION. NEEDLESS TO MENTION THAT THE ASSESS EE SHALL BE GIVEN OPPORTUNITY OF HEARING IN THE MATTER. I.T.A. NOS. 1495-1497/MDS/2007 & ITA 378/MDS/2008 5 5. AS IT IS NOTICED THAT THE ISSUES IN THE APPEALS ARE SQUARELY COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2001-02, REFERRED TO SUPRA, RESPECT FULLY FOLLOWING THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL, THE ISSUE O F DISALLOWANCE OF INTEREST PAID TO SISTER CONCERN M/S. INDO NATIONAL LTD. STANDS DELET ED AND THE ISSUE IN REGARD TO THE DISALLOWANCE OF THE INTEREST EXPENDITURE PAID TO NA NDALAL MADHAVDAS IS RESTORED TO THE FILE OF THE ASSESSING OFFICER WITH IDENTICAL DI RECTIONS AS GIVEN BY THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE ASSESSEES OWN CASE F OR THE ASSESSMENT YEAR 2001-02 WHICH HAVE BEEN EXTRACTED ABOVE. 6. IN THE CIRCUMSTANCES, THE APPEALS OF THE ASSESSE E ARE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 7. THE ORDER WAS PRONOUNCED IN THE COURT ON 13-12-2 011. SD/- SD/- (N. S. SAINI) (GEORGE MATHAN) ACCOUNTANT MEMBER JUDICIAL MEMBER CHENNAI, DATED THE 13 TH DECEMBER, 2011. H. COPY TO: ASSESSEE/AO/CIT (A)/CIT/D.R./GUARD FILE