Turakhia Overseas Pvt.Ltd., Ahmedabad V. The ACIT.,Circle-8, Ahmedabad

ITA 1563/AHD/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9834 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 01-12-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 28-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Commercial expediency

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD .., , BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO.1563/AHD/2013 ( / ASSESSMENT YEAR : 2009-10) TURAKHIA OVERSEAS PVT.LTD. B-203, PUSHPAVAN APARTMENTS OPP. RUCHI BUNGLOWS, BODAKDEV AHMEDABAD / VS. THE ACIT CIRCLE-8 AHMEDABAD 380 054 $ ./ ./ PAN/GIR NO. : AAACT 5636 N ( $' / APPELLANT ) .. ( ($' / RESPONDENT ) $') / APPELLANT BY : SHRI PARIN SHAH, AR ($'*) / RESPONDENT BY : SHRI K. MADHUSUDAN, SR.DR +,*- / DATE OF HEARING 01/12/2016 ./0*- / DATE OF PRONOUNCEMENT 16/12/2016 / O R D E R PER PRADIP KUMAR KEDIA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-XIV, AHMEDABAD DATED 25/04/2013 FOR ASSESSMENT YEAR (AY) 2009-10. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS O F APPEAL:- ITA NO. 1563/AH D/2013 TURAKHIA OVERSEAS PVT.LTD. VS. THE ACIT ASST.YEAR 2009-10 - 2 - (1) THE LEARNED COMMISSIONER OF INCOME TAX (APPEAL S) XIV AHMEDABAD HAS ERRED BOTH IN LAW AND ON FACTS OF THE CASE IN PASSING AN APPELLATE ORDER FOR A.Y. 2009-2010 ON 25.04.2013. (2) THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DIS ALLOWANCE OF INTEREST OF RS.2,25,890/-. (3) THE LEARNED CIT(A) AHMEDABAD HAS ERRED IN NOT ADJUDICATING GROUND RELATING TO INITIATION OF PENALTY PROCEEDING S. 3. BRIEFLY STATED, THE ASSESSEE IS ENGAGED IN THE B USINESS OF MANUFACTURING OF DECORATIVE VENEERS, PLYWOODS AND R ELATED PRODUCTS. THE ASSESSEE FILED THE RETURN OF INCOME FOR AY 2009 -10 AT RS.3,33,95,601/-. THE RETURN FILED BY THE ASSESSEE WAS SUBJECTED TO SCRUTINY ASSESSMENT. IN THE COURSE OF ASSESSMENT P ROCEEDINGS, THE ASSESSING OFFICER (AO) NOTICED THAT THE ASSESSEE HA S PAID INTEREST ON BORROWED FUNDS @15% WHEREAS NO INTEREST WAS CHARGED FOR THE ADVANCES GIVEN TO THE FOLLOWING PARTIES:- SR.NO. PARTICULARS AMOUNT ( ) (I) AMIBEN B.SHAH 18,50,000 (II) SMITABEN D.TURAKHIA 2,16,038 (III) VASUMATIBEN P. TURAKHIA 40,076 (IV) ARPAN D.TURAKHIA 4,546 4. THE AO FOUND THAT THE ASSESSEE HAD ADVANCED CERT AIN FUNDS NOTED ABOVE WITHOUT ANY INTEREST WHILE IT INCURRED LIABIL ITY TO PAY INTEREST AND THEREFORE THE ADVANCES MADE AS AFORESAID WERE FOR N ON-BUSINESS PURPOSES. HE ACCORDINGLY OBSERVED THAT INTEREST @ 15% P.A. ON ADVANCES ITA NO. 1563/AH D/2013 TURAKHIA OVERSEAS PVT.LTD. VS. THE ACIT ASST.YEAR 2009-10 - 3 - GIVEN TO VARIOUS PARTIES ON WHICH NO INTEREST HAS B EEN CHARGED WHICH WORKS OUT TO RS.3,16,599/- REQUIRES TO BE DISALLOWE D. HE ACCORDINGLY ENHANCED THE RETURNED INCOME OF THE ASSESSEE TO THI S EXTENT. 5. THE CIT(A) IN FIRST APPEAL ENDORSED THE ACTION O F AO IN MAKING DISALLOWANCE BY RESTORING TO SECTION 36(1)(III)OF T HE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT'). HOW EVER, THE ASSESSEE REMAINED AGGRIEVED BY THE DISALLOWANCE AMOUNT TO RS .2,25,890/- REWORKED BY THE AO AS PER THE DIRECTION OF THE CIT (A) BASED ON DATE- WISE WORKING OF FUNDS DEPLOYED AND INTEREST THEREON . 6. THE LD.AR FOR THE ASSESSEE MR.PARIN SHAH SUBMIT TED THAT OUT OF TOTAL ADVANCE OF RS.21.10 LAKHS, THE ADVANCE TO ONE PARTY, NAMELY, AMIBEN B.SHAH IS OF RS.18,50,000/- WHO HAPPENS TO B E WIFE OF ONE OF OUR EMPLOYEES MR.BHARGAV SHAH SERVING THE COMPANY F OR MORE THAN 16 YEARS. THE LD.AR CONTENDED THAT INTEREST-FREE ADVA NCES TO STAFF IS NORMAL FEATURE OF A CORPORATE EMPLOYER. SUCH ACTIO N ON THE PART OF THE ASSESSEE HAS IMPROVED THE CONFIDENCE AND MUTUAL TRU ST BETWEEN THE EMPLOYER AND THE EMPLOYEES. SINCE THE INTEREST-FRE E ADVANCE GIVEN TO THESE PARTIES, HAS INDIRECTLY SERVED FOR INTEREST O F ASSESSEE, IT OUGHT TO HAVE BEEN ACCEPTED AS PART OF NORMAL BUSINESS FEATU RE. THE LD.AR FOR THE ASSESSEE THEREAFTER CONTENDED THAT THE ASSESSEE IS HAVING ITS OWN FUND OF RS.507.94 LAKHS AGAINST WHICH A MEAGER ADVANCE O F RS.21.10 LAKHS ITA NO. 1563/AH D/2013 TURAKHIA OVERSEAS PVT.LTD. VS. THE ACIT ASST.YEAR 2009-10 - 4 - HAVE BEEN EXTENDED WITHOUT CHARGING INTEREST AND TH EREFORE IN VIEW OF LONG LINE OF JUDICIAL PRECEDENTS REFERRED TO BY THE COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF PARESH LALCHAND SHAH VS . ITO IN ITA NO.3408/AHD/2010 FOR AY 2007-08, DATED 29/04/2013, THE DISALLOWANCE UNDER SECTION 36(1)(III) OF THE ACT SUSTAINED BY TH E CIT(A) IS NOT JUSTIFIED AT ALL. 7. THE LD.DR, ON THE OTHER HAND, SUBMITTED THAT TH E ADVANCE WAS GIVEN TO THE WIFE OF DIRECTOR OF THE ASSESSEE-COMPA NY AND WAS THUS THE ADVANCE EXTENDED WAS IN THE PERSONAL BENEFIT OF THE DIRECTOR WITHOUT ANY TRACES OF COMMERCIAL EXPEDIENCY IN SUCH ADVANCE. H E ACCORDINGLY SUBMITTED THAT THE REASONS CITED BY THE CIT(A) IN S USTAINING THE DISALLOWANCE DOES NOT CALL FOR ANY INTERFERENCE. 8. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS AN D PERUSED THE ORDERS OF AUTHORITIES BELOW. AT THE OUTSET, WE NOT E THAT THE INTEREST-FREE OWN FUNDS AVAILABLE AT THE DISPOSAL OF THE ASSESSEE STANDS AT RS.352.91 LAKHS AS ON 31/03/2008 AND RS.507.94 LAKHS AS ON 31 /03/2009. THE CORRESPONDING INTEREST-FREE ADVANCE AS ON 31/03/200 9 STANDS AT RS.21.10 LAKHS. IN SUCH A SITUATION, WHERE INTEREST-FREE O WN FUNDS AVAILABLE TO THE ASSESSEE ARE FAR IN EXCESS OF THE INTEREST-FREE ADV ANCE, THE PRESUMPTION WOULD ARISE IN FAVOUR OF ASSESSEE THAT THE ADVANCE S WERE MADE FROM ITA NO. 1563/AH D/2013 TURAKHIA OVERSEAS PVT.LTD. VS. THE ACIT ASST.YEAR 2009-10 - 5 - INTEREST-FREE FUNDS AVAILABLE WITH THE ASSESSEE. ON THIS ISSUE, WE FIND GUIDANCE FROM THE JUDGEMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES AND POWER LTD. REPORT ED IN (2009) 313 ITR 340 (BOM). HONBLE JURISDICTIONAL HIGH COURT IS ALSO IN PARITY WITH THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF CIT VS. RAGHUVIR SYNTHETICS LTD. (JUDGEMENT DATED 05/12/201 1 IN TAX APPEAL NO.829 OF 2007). IN VIEW OF THE HUGE FUNDS AVAILAB LE WITH THE ASSESSEE WITHOUT ANY INTEREST LIABILITY, WE FIND THAT THE IS SUE IS SQUARELY COVERED BY THE AFORESAID DECISIONS. THUS, THE DISALLOWANCE OF INTEREST TOWARDS INTEREST-FREE ADVANCE IS UNCALLED FOR. ACCORDINGLY , WE FIND MERIT IN THE GRIEVANCE OF THE ASSESSEE. GROUND NO.2 IS ACCORDIN GLY ALLOWED. 9. OTHER GROUNDS OF APPEAL RAISED BY THE ASSESSE E ARE EITHER GENERAL IN NATURE OR PREMATURE OR CONSEQUENTIAL AND THEREFORE DOES NOT REQUIRE ANY SPECIFIC ADJUDICATION. 10. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 16 / 1 2 /2016 SD/- SD/- (..) ( ) ( S.S. GODARA ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 16/ 12 /2016 4..+,.+../ T.C. NAIR, SR. PS ITA NO. 1563/AH D/2013 TURAKHIA OVERSEAS PVT.LTD. VS. THE ACIT ASST.YEAR 2009-10 - 6 - !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. $' / THE APPELLANT 2. ($' / THE RESPONDENT. 3. 567- 8- / CONCERNED CIT 4. 8- ( ) / THE CIT(A)-XIV, AHMEDABAD 5. 9:-+67 , 670 , 5 / DR, ITAT, AHMEDABAD 6. <, / GUARD FILE. / BY ORDER, (9-- //TRUE COPY // / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 15.12.16 (DICTATION-PAD 10- PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 16.12.16 3. OTHER MEMBER 4. 5. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 6. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.16.12.2016 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 16.12.2016 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER