The DCIT, (OSD)Circle-8, Ahmedabad V. Suryarath Tradlinks Pvt.Ltd., Ahmedabad

ITA 1601/AHD/2010

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 9811 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 13-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K MADHASUDAN SRDR
• Assessee Lawyers: VARTIK R CHOKSHI
• Keywords: Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD AHMEDABAD B BENCH BEFORE SHRI G.D. AGARWAL, VICE-PRESIDENT (AZ) AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER ITA NO.1601/AHD/2010 [ASSTT.YEAR: 2007-08] DCIT (OSD), CIRCLE-8, -VS- SURYARATH TRADELINKS PV T. LTD. AHMEDABAD B/11,SHREE RANG APT., VIKAS GRUH ROAD, PALDI, AHMEDABAD PAN NO.AAFCS3829P (APPELLANT) (RESPONDENT) REVENUE BY : SHRI K. MADHASUDAN, SR-DR ASSESSEE BY: SHRI VARTIK R CHOKSHI, AR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- THIS APPEAL BY REVENUE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-XIV, AHMEDABAD IN APPEAL NO. C IT(A)-XIV/216/09-01 DATED 17-02-2010. THE ASSESSMENT WAS FRAMED BY DCIT (OSD), CIRCLE-8, AHMEDABAD U/S.143(3) OF THE INCOME-TAX ACT, 1961 (H EREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 22-12-2009 FOR ASSE SSMENT YEAR 2007-08. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) DELETING THE DISALLOWANCE OF INTEREST EXPENSES. FOR THIS, REVENUE HAS RAISED THE FOLLOWING EFFECTIVE GROUND NO.1 :- 1) THE LD. COMMISSIONER OF INCOME-TAX(A)-XIV, AHME DABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS. 813493/- ON ACCOUNT OF DISALLOWANCE OF INTEREST EXPENSES. 3. THE BRIEF FACTS ARE THAT DURING THE COURSE OF AS SESSMENT PROCEEDINGS, ASSESSING OFFICER NOTICED THAT ASSESSEE HAS CLAIMED INTEREST EXPENSES AT ITA NO.1601/AHD/2010 A.Y. 2007-08 DCIT (OSD), CIR-8 ABD V. SURYARATH TRADELINKS P. LT D. PAGE 2 RS.8,13,493/-. ACCORDING TO ASSESSING OFFICER, ASSE SSEE WAS PAYING HIGHER RATE OF INTEREST THAN CHARGING OF RATE OF INTEREST ALTHOUGH THE LOAN OF AMOUNT GIVEN WAS HIGHER THEN LOAN TAKEN BY ASSESSEE-COMPAN Y. ACCORDINGLY, AO MADE DISALLOWANCE. AGGRIEVED, ASSESSEE PREFERRED AP PEAL BEFORE CIT(A) AND STATED THAT ENTIRE ADVANCES GIVEN TO GROUP CONCERNS WERE FOR THE PURPOSE OF BUSINESS AND NO INTEREST CAN BE DISALLOWED U/S.36(1 )(III) OF THE ACT. THE ASSESSEE RELIED ON THE DECISION OF HONBLE APEX COU RT IN THE CASE OF S.A. BUILDERS LTD. V. CIT(A) AND ANOTHER (2007) 288 ITR 1 (SC) WHEREIN IT HAS BEEN HELD THAT THE BORROWED AMOUNT IS NOT UTILIZED BY THE ASSESSEE IN ITS OWN BUSINESS BUT HAD BEEN ADVANCES AS INTEREST FREE LOA N TO SISTER CONCERN IS NOT RELEVANCE. THE REVENUE CANNOT PUT TO ITSELF IN THE ARM CHAIR OF THE BUSINESS MAN OR IN THE POSITION OF THE BOARD OF DIRECTORS AN D ASSUME THE ROLE TO DECIDE HOW MUCH IS REASONABLE EXPENDITURE HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE. NO BUSINESSMAN CAN BE COMPELLED TO MAXIMI ZE HIS PROFIT AND INCOME-TAX AUTHORITIES MUST PUT THEMSELVES IN THE S HOES OF THE ASSESSEE AND SEE HOW A PRUDENT BUSINESSMAN WOULD ACT. AS STATED ABOVE, AO TO FIND THE TRANSFER OF THE BORROWED FUNDS TO A SISTER CONCERN FROM VIEW POINT OF COMMERCIAL EXPEDIENCY AND NOT FROM THE POINT OF VIE W WHETHER THE AMOUNT WAS ADVANCES FOR EARNING PROFIT. ONCE IT IS ESTABLI SHED THAT THERE WAS NEXUS BETWEEN THE EXPENDITURE AND PURPOSE OF BUSINESS WHI CH NEED NOT NECESSARILY BY THE BUSINESS OF ASSESSEE ITSELF, INTEREST CANNOT BE DISALLOWED U/S.36(1)(III) OF THE ACT. THE CIT(A) AFTER CONSIDERING THE ARGUME NTS OF THE ASSESSEE DELETED THE ADDITION BY GIVING FOLLOWING FINDINGS I N PARA-2.2 OF HIS APPELLATE ORDER:- 2.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPEL LANT. I AM INCLINED TO ACCEPT THE CONTENTIONS PUT FORTH BY THE APPELLANT I N THE STATEMENT OF FACTS AND GROUNDS OF APPEAL ON FACTS AND CIRCUMSTAN CES OF THE CASE AND SUPPORTED BY JUDICIAL PRONOUNCEMENT. WHILE MAKING T HE DISALLOWANCE ON ACCOUNT OF INTEREST, THE ASSESSING OFFICER HAS N OT APPRECIATED THE FACTS OF THE CASE. HE HAS ALSO NOT BROUGHT OUT ANY SINGLE CASE FOR MAKING SUCH DISALLOWANCE. IT IS SEEN THAT AS PER SE CTION 36(10(III) FOR ALLOWANCE OF A CLAIM FOR DEDUCTION OF INTEREST PAID IN RESPECT OF CAPITAL BORROWED, THE APPELLANT HAS FULFILLED ALL THE CONDI TIONS AS LAID DOWN IN THE SAID SECTION. I FIND THAT THE CAPITAL IS BORROW ED BY THE APPELLANT TO ITS ITA NO.1601/AHD/2010 A.Y. 2007-08 DCIT (OSD), CIR-8 ABD V. SURYARATH TRADELINKS P. LT D. PAGE 3 SISTER CONCERN FOR THE PURPOSES OF BUSINESS AND IN SUCH A CASE THE APPELLANT IS ENTITLED TO CLAIM THE INTEREST. FURTHE R, ENTIRE ADVANCES GIVEN BY THE APPELLANT TO GROUP CONCERNS WERE FOR THE PUR POSE OF BUSINESS. THEREFORE, HAVING CONSIDERED THE FACTS AND CIRCUMST ANCES OF THE CASE AND FOLLOWING ABOVE DECISIONS, I AM OF THE VIEW THA T THE ASSESSING OFFICER IS NOT JUSTIFIED IN MAKING DISALLOWANCE ON ACCOUNT OF INTEREST. THE ADDITION MADE BY THE A.O OF RS.8,13,493/- IS THEREF ORE, DELETED. THIS GROUND OF APPEAL IS ALLOWED. AGGRIEVED, REVENUE FILED APPEAL BEFORE TRIBUNAL. 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT NOW LD. SR- DR COULD NOT CONTROVERT THE FINDING OF CIT(A) THAT THE LOAN IS BORROWED BY THE ASSESSEE FROM ITS SISTER CONCERN FOR THE PURPOSE OF BUSINESS AND CONSEQUENTL Y THE ASSESSEE IS NOT ENTITLED TO CLAIM THE INTEREST EXPENDITURE. WE FURT HER FIND THAT THE ENTIRE ADVANCES GIVEN BY ASSESSEE TO ITS SISTER CONCERN FO R THE PURPOSE OF BUSINESS AND ONCE THE AMOUNT IS GIVEN FOR BUSINESS PURPOSE, INTEREST CANNOT BE DISALLOWED. ACCORDINGLY, WE CONFIRM THE FINDINGS OF CIT(A) AND THIS ISSUE OF REVENUES APPEAL IS DISMISSED. 5. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED ON THIS DAY OF 24 TH SEPT,2010 SD/- SD/- ( G.D.AGARWAL ) ( MAHAVIR SINGH ) (VICE PRESIDENT) (JUDICIAL MEMBER) AHMEDABAD, DATED : 24/09/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-XIV, AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD