The ACIT,B.K. Circle, Palanpur V. Shri Vasudev Kedarmal Agrawal, Deesa

ITA 1670/AHD/2011

• Counselvise Citation: 167020514 RSA 2011
• Duration Of Justice: 4 year(s) 2 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-08-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 19-08-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 20-06-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VILAS SHINDE
• Assessee Lawyers: GAURAV NAHATA
• Keywords: Business income; Depreciation; Source of fund; Proportionate interest
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH AHMEDABAD BEFORE S/SHRI G. D. AGARWAL, VP AND S. S. GODARA, JM ITA NO. 167 0 /AHD/2011 ASST. YEAR 2008 - 09 ACIT, B.K.CIRCLE, PALANPUR VS SHRI VASUDEV KEDARMAL AGRAWAL, LATI BAZAR, DEESA (APPELLANT) (RESPONDENT) PA NO. A B KPA0593K APPELLANT BY SHRI VILAS SHINDE, SR. D.R. RESPONDENT BY SHRI GAURAV NAHATA , A. R . DATE OF HEARING: 19. 8 .2015 DATE OF PRONOUNCEMENT : 20/8/15 O R D E R PER S.S. GODARA, JUDICIAL MEMBER THIS REVENUES APPEAL FOR ASSESSMENT YEAR A.Y. 2008 - 09 ARISE FROM ORDER DATED 27 - 04 - 2011 PASSED BY THE CIT(A) - XX , AHMEDABAD IN APPEAL NO.CIT(A) - XX/618 / 1 0 - 1 1 , DELETING INTEREST DISALLOWANCE OF RS.23,77,337/ - MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST EXPENSES, IN PROCEEDINGS UNDER S ECTION 143(3) OF THE INCOME TAX ACT, 1961, IN SHORT THE ACT. 2. THE ASSESSEE - INDIVIDUAL FILED HIS RETURN ON 29. - 05.2009 ADMITTING INCOME OF RS.32,91,940/ - . THE ASSESSING OFFICER TOOK UP SCRUTINY. HE NOTICED THE ASSESSEES COMPUTATION OF INCOME DEMONSTRA TING INTEREST EXPENSES TO THE TUNE OF RS.29,21,357/ - AS ITA NO. 1670 /AHD/2011 ASST. YEAR_ 2008 - 09 2 AGAINST INTEREST INCOME OF RS.65,529/ - . HE SOUGHT FOR THE RELEVANT DETAILS. THE ASSESSING OFFICER CREDIT INTEREST FREE CREDITORS OF RS.1,02,83,398/ - AND INTEREST FREE SISTER CONCERN LOANS OF RS.13,8 3,850/ - TO HAVE BEEN USED FOR BUSINESS PURPOSES AS WELL AS IN EARNING RENTAL INCOME. HE WOULD HIGHLIGHT OUTSTANDING BALANCE WITH HIS PROPRIETARY CONCERN WITH M/S. BHAIRAV ROADWAYS AS ON 31.03.2008 OF RS. 39,87,429.60 . THE ASSESSING OFFICER IN ASSESSMENT ORDER DATED 30.12.2010 REJECTED THE ASSESSEES ABOVE PLEAS AND HELD THAT THE ABOVE STATED LOANS HAD NOT BEEN INCURRED EITHER FOR BUSINESS PURPOSES OR IN EARNING THE IMPUGNED INTEREST INCOME. HE AG REED TO A LIMITED EXTENT QUA INTEREST AMOUNT RELATING TO M /S. BHAIRAV TRANSPORT. ALL THIS RESULTED IN PROPORTIONATE INTEREST DISALLOWANCE OF RS.23,77,337/ - OUT OF THE INTEREST EXPENDITURE OF RS.28,55,828/ - BEING ADDED IN THE ASSESSABLE INCOME. 3. THE CIT(A) HAS REVERSED THE ASSESSING OFFICERS FINDINGS AS UND ER: 3.3 I HAVE GONE THROUGH THE SUBMISSION OF THE AR AND THE ASSESSMENT ORDER CAREFULLY. IT IS SEEN THAT THE AO HAS HELD IN THE ASSESSMENT ORDER THAT THE ENTIRE INTEREST EXPENSES HAVE BEEN CLAIMED AGAINST THE INTEREST INCOME EARNED BY THE APPELLANT. THE AO HAS HENCE PROCEEDED ON THE PREMISE THAT THE CLAIM OF INTEREST EXPENSES IS UNDER SECTION 57(III) OF THE IT ACT 1961. THIS PRESUMPTION OF THE AO IS NOT JUSTIFIED. IT IS SEEN THAT THE APPELLANT HAS TRANSPORTATION INCOME AS ALSO INCOME FROM HOUSE PROP ERTY, CAPITAL GAINS APART FROM THE INCOME OF INTEREST ON LOANS GIVEN. IT IS ALSO SEEN THAT THE APPELLANT HAS CLAIMED DEPRECIATION ON TRUCK NO. GJ - 8U - 1768 AND OTHER ASSETS AMOUNTING TO RS.9,31,422/ - . WHEREAS THE DEPRECIATION CLAIM IN RESPECT OF M/S BHAIRA V ROADWAYS IS CLAIMED AT ONLY RS.573/ - . THUS IT IS CLEAR THAT THE APPELLANT HAS OTHER BUSINESS INCOME OF TRANSPORTATION AGAINST WHICH THE INTEREST EXPENSES WERE ALSO ALLOWABLE. IT IS NOT THE CASE OF THE ASSESSING OFFICER THAT THE APPELLANT HAS GIVEN INTE REST FREE ADVANCES OUT OF INTEREST BEARING FUNDS. FROM THE DETAILS FILED IT IS SEEN THAT THE OPENING CAPITAL OF THE APPELLANT WAS RS.2,12,66,323/ - THE LOANS TAKEN ON INTEREST WERE RS.3,00,62,036/ - AS AGAINST THE ABOVE ITA NO. 1670 /AHD/2011 ASST. YEAR_ 2008 - 09 3 THE ENTIRE AMOUNT OF LOANS GIVEN INTE REST FREE IS ONLY RS.8,47,716/ - . IN VIEW OF THE OPENING CAPITAL BALANCE OF RS.2,12,66,323/ - IT CANNOT BE SAID THAT THE APPELLANT DID NOT HAVE SUFFICIENT INTEREST FREE FUNDS TO ADVANCE RS.8,47,716/ - INTEREST FREE. THE HON. GUJARAT HIGH COURT IN TAX APPEAL NUMBER 111 OF 2009 HAS HELD THAT THE DISALLOWANCE OF INTEREST UNDER SECTION 36(1)(III) WAS NOT JUSTIFIED IF THE APPELLANT HAD SUFFICIENT INTEREST FREE FUNDS TO MAKE ADVANCES INTEREST FREE. FOR MAKING A DISALLOWANCE U/S36(1)(III) THE ONUS IS ON THE ASSESS ING AUTHORITY TO PROVE THAT INTEREST BEARING FUNDS WERE UTILIZED IN MAKING INTEREST FREE ADVANCES. IN THE INSTANT CASE THE AO HAS NOT MADE ANY ANALYSIS OF THE FUNDS AVAILABLE WITH THE APPELLANT AND THE SOURCES OF FUNDS ADVANCED AS LOANS INTEREST FREE. IN VIEW OF THE ABOVE THE AO IS NOT JUSTIFIED IN MAKING THE DISALLOWANCE OF INTEREST OF RS.23,77,337/ - . THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS HENCE NOT ON SOUND FOOTING. THE SAME IS DELETED. 4. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE CASE FILE. THE REVENUES SOLE ARGUMENT SEEKS TO RESTORE THE ASSESSING OFFICERS ACTION IN DISALLOWING THE ASSESSEES INTEREST EXPENDITURE IN QUESTION. THE CIT(A) HOLDS THE ASSESSEE T O BE CARRYING TRANSPORT AS WELL AS OTHER BUSINESSES. AVAILABILITY OF SURPLUS NON INTEREST BEARING FUNDS IS ALSO HIGHLIGHTED WHICH ARE STATED TO HAVE BEEN GIVEN TO SISTER CONCERNS. THE LOW E R APPELLATE AUTHORITY DRAW S SUPPORT FROM HONBLE JURISDICTIONAL HIGH COURT AS APPEAL NO. OF THE CASE DECISION IS SPECIFICALLY MENTION ED. THERE IS ALSO NO QUARREL TO THE SETTLED PROPOSITION THAT WHEN SUFFICIENT NON INTEREST BEARING FUNDS ARE AVAILABLE, IT IS PRESUMED THAT THE SAME ARE ADVANCED IN INTEREST FREE LOANS. CASE LAW OF CIT VS. RELIANCE UTILITIES & POWER LTD. [2009] 313 ITR 34 0 IS QUOTED IN SUPPORT. A PERUSAL OF THE PAPER BOOK REVEALS AT PAGES NO.8 & 9 THAT THE ASSESSEE EARNS INCOME FROM HOUSE PROPERTY, BUSINESS OR PROFESSION, LONG TERM CAPITAL GAINS AND FROM OTHER SOURCES. HIS GROSS INCOME READS RS.85,48,778/ - AS PER HIS AUD IT REPORT FOR M ING PART OF THE PAPER BOOK. THE REVENUE FAILS TO REBUT ALL THIS MATERIAL EVIDENCE AVAILABLE ON RECORD. WE UPHOLD THE CIT(A)S ITA NO. 1670 /AHD/2011 ASST. YEAR_ 2008 - 09 4 FINDING HOLDING THE ASSESSEE TO HAVE UTILIZED THE IMPUGNED INTEREST AMOUNT FOR THE PURPOSE OF HIS BUSINESS ONLY AN D ALSO THAT HE IS HAVING OTHER SOURCES OF INCOME(SUPRA) AS WELL. THE REVENUES SOLE SUBSTANTIVE GROUND IS ACCORDINGLY REJECTED. 5 . THIS REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20/8/15 SD/ - SD/ - ( G. D. AGARWAL ) VICE PRESIDENT ( S. S. GODARA ) JUDICIAL M EMBER TRUE COPY S K SINHA COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER DY. REGISTRAR, ITAT, AHMEDABAD