Sh Rajinder kumar Gupta, Jammu V. The Dy. Commissioner of Income-tax, Jammu

ITA 173/ASR/2014

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 3772 (ITAT-AMRITSAR)
• Duration Of Justice: 5 year(s) 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 26-08-2019
• Assessment Year: 2009-2010
• Appeal Filed On: 18-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: TARUN BANSAL LD
• Keywords: Capital receipt; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TR IBUNAL AMRITSAR BENCH, AMRITS AR BEFORE SH. B.R. BASKARAN, ACCOUNTANT MEMBER A ND SH. N.K.CHOUDHRY, JUDICIAL MEMBER ITA NOS.173 & 174/ASR/2014 ASSESSMENT YEARS: 2009-10 & 2010-11 SH. RAJINDER KUMAR GUPTA PROP. M/S. RAJDHANI INTERNATIONAL, JAMMU [PAN:AHBPG 9111E] VS. DY. CIT CIRCLE-2, JAMMU (APPELLANT) (RESPONDENT) APPELLANT BY : SH. TARUN BANSA L (LD. ADV) RESPONDENT BY: SH. CHARAN DASS (LD. DR) DATE OF HEARING: 26.08.2019 DATE OF PRONOUNCEMENT: 29.10.2019 ORDER PER N.K.CHOUDHRY, JM: THESE APPEALS HAVE BEEN PREFERRED BY THE ASSESSEE AGAINST THE SEPARATE ORDERS DATED 09.01.2014 RELEVANT TO THE ASST. YEARS: 2009- 10 & 2010-11 RESPECTIVELY PASSED BY THE LD. CIT(A), JA MMU U/S 250(6) OF THE INCOME TAX ACT, 1961 (HEREINAFTER CALLED AS THE ACT). 2. THE ISSUES INVOLVED IN BOTH THE APPEALS, ARE SIMILAR AND IDENTICAL, THEREFORE, FOR THE SAKE OF BREVITY AND CONV ENIENCE THE FACTS OF ITA NO.173/ASR/2014 FOR A.Y.2009-10 HAVE BEEN TAK EN INTO CONSIDERATION FOR ADJUDICATION OF THE ISSUES AND RESULT OF THE SAME SHALL BE APPLICABLE MUTATIS MUTANDIS TO ITA NO.174/ASR/2014 FOR A.Y.2010-11. ITA N0S.173 & 174/ASR/ 2014 SH. RAJINDER KUMAR GUPTA VS. DCIT 2 3. THE ASSESSEE BY WAY OF THE APPLICATION DATED 28.06.2016 SOUGHT PERMISSION TO ACCEPT THE AMENDED GROUNDS OF APPEA L, ON WHICH THE LD. DR DID NOT RAISE ANY OBJECTION, HENCE, WE HAVE ACCEPTED THE AMENDED GROUNDS OF APPEAL WHICH ARE REPROD UCED HEREIN BELOW. 1. THAT THE LD. A.O & CIT(A) WRONGLY MADE ADDIT ION BEING FAILED TO PROVE ANY PERSONAL USE OF LOANS OR NEXUS OF INTE REST PAID TO BANK VS. LOAN GIVEN TO SISTER CONCERNS I.E., M/S RAJDHAN I INDUSTRIES & M/S RAJDHANI YARN MILLS, WHEN THERE IS ALREADY EXCE SS BALANCE IN PROPRIETORS CAPITAL A/C, THAN LOANS GIVEN, AS WELL AS, THESE LOANS REPRESENTS INTEREST-INTEREST FREE LOANS, RESULTING INTO COMMERCIAL EXPEDIENCY. (ALSO REFERRED AT PAGE-9 OF CIT(A)S OR DER. 2. THAT LD. CIT(A) HAS WRONGLY IGNORED, ONCE THER E IS A NEXUS BETWEEN EXPENDITURE & PURPOSE OF LOAN FOR BUSINESS, THEN REVENUE COLD NOT JUSTIFIABLY CLAIM TO PUT ITSELF IN THE ARM CHAIR OF BUSINESSMAN & ASSUME THE ROLE TO DECIDE, HOW MUCH I S THE REASONABLE EXPENDITURE, HAVING REGARD TO CIRCUMSTAN CES OF CASE AND APPELLANT CANNOT BE COMPELLED TO MAXIMIZE PROFI TS, IN THIS WAY. 3. THAT LD. CIT(A) HAS WRONGLY TAKEN INTEREST SU BSIDY AS REVENUE RECEIPT (SHREE BALAJIS ALLOYS VS. CIT 333 ITR 335 (J&K). 4. THAT THE ID CIT(A) HAS WRONGLY IGNORED, THAT D ISALLOWED BANK INTEREST EXPENSES WILL DECREASE THE (CLAIMED) LOSS OF THE ASSESSEE, BUT WILL ALSO INCREASE DEDUCTION U/S 80-IB CORRESPO NDINGLY, (WITH THE SAME AMOUNT) AND CANNOT BE ADDED SEPARATELY, AS TAXABLE INCOME, OF THE APPELLANT, AND A COVERED MATTER UNDE R: (A) SUNANDAN AGGARWAL VS. ITO, JAMMU ITA NO. 524/ASR/2014 (AMRITSAR TRIBUNAL) (B) SUN PHARMACEUTICALS ITA NO. 184/ASR/2009 DATED 11.06.10 5. THAT ORDER OF LD AO & LD CIT (A) IS BAD IN LA W, AS WELL AS, ON FACTS. 6. THAT APPELLANT CRAVES TO ADD OR AMEND ANY GRO UND OF APPEAL BEFORE THE APPEAL IS FINALLY HEARD OR DISPOSED-OFF. 7. THAT THE ORDER MAY KINDLY BE MODIFIED OR ANOT HER CONSEQUENTIAL RELIEF BE ALLOWED. ITA N0S.173 & 174/ASR/ 2014 SH. RAJINDER KUMAR GUPTA VS. DCIT 3 4. BY WAY OF GROUND NO.1, THE ASSESSEE HAS RAISED THE ISSUE T HAT LD. A.O & CIT(A) WRONGLY MADE ADDITION BEING FAILED TO PROVE ANY PER SONAL USE OF LOANS OR NEXUS OF INTEREST PAID TO BANK VS. LOAN GIVEN TO SISTER CONCERNS I.E., M/S RAJDHANI INDUSTRIES & M/S RAJDHANI YARN M ILLS, WHEN THERE IS ALREADY EXCESS BALANCE IN PROPRIETORS CAPITAL A/C, THAN LO ANS GIVEN, AS WELL AS, THESE LOANS REPRESENTS INTEREST-INTEREST FREE LOANS, RESU LTING INTO COMMERCIAL EXPEDIENCY. (ALSO REFERRED AT PAGE-9 OF CIT(A)S OR DER. THE ASSESSEE HAS GIVEN INTEREST FREE LOANS OF RS.1,23,36,00 0/- AND RS.95,70,000/- TO ITS SISTER CONCERN NAMELY M/S. RA JDHANI INDUSTRIES AND M/S RAJDHANI YARN MILLS RESPECTIVELY . TH E ASSESSEE HAS ALSO TAKEN LOAN FROM SYNDICATE BANK AND HDFC BANK. THE ASSESSING OFFICER DISALLOWED THIS INTEREST EXPENSES PAID TO THE BANKS ON THE PRETEXT THAT THESE LOANS MAY HAVE BEEN UTILIZE D FOR INTEREST FREE LOANS GIVEN TO ITS SISTER CONCERN. ON APPEAL, THE LD. CIT(A) AFFIRMED THE EXPENDITURE OF INTEREST NOT INCURRED FOR THE PURPOSE OF BUSINESS TO THE TUNE OF RS.14,26,447/. IT WAS FURTHER OBSERVED BY THE LD. CIT(A) THAT LOAN F ROM HDFC WAS TAKEN FOR THE PURPOSE OF CAR AND THE PAYMENT IS MADE D IRECTLY IN THE NAME OF DEALER OF CAR AND THERE IS NO POSSIBILITY THAT THE LOAN TAKEN FROM HDFC BANK WAS UTILIZED AS INTEREST FREE TO THE SISTE R CONCERN, THEREOF, THE ASSESSING OFFICER ALLOWED THE INTEREST OF RS. 39,047/- TO THE ASSESSEE. THE ASSESSEE DURING THE COURSE OF ARGUMENT HAS STATED THA T THE CAPITAL ACCOUNT OF THE ASSESSEE WAS RS.4,53,36,567/- WHEREAS THE TOTAL LOANS AND ADVANCES GIVEN TO ITS SISTER CONCERN WERE ONLY RS.2,19,60,000/- ONLY. THEREFORE, ONCE INTEREST FREE F UNDS AVAILABLE WERE MORE THAN THE LOANS ON ADVANCES THEN NO ADDITION IS CALLED FOR. ITA N0S.173 & 174/ASR/ 2014 SH. RAJINDER KUMAR GUPTA VS. DCIT 4 WE HAVE CONSIDERED THE SUBMISSIONS OF THE ASSESSEE AND OBSERVATIONS OF THE AUTHORITIES BELOW. RECENTLY, THE HON BLE APEX COURT IN THE CASE OF CIT VS. RELIANCE INDUSTRIES LTD. [2019] 102 TAXMANN.COM 52 (SC) HAS AFFIRMED THE VIEW OF THE HIGH COURT TO THE EFFECT THAT IF THE INTEREST FREE FUNDS AVAILABLE TO TH E ASSESSEE WERE SUFFICIENT TO MEET ITS INVESTMENT, THEN IT COULD BE PRE SUMED THAT THE INVESTMENT WERE MADE FROM THE INTEREST FREE FUNDS AVAI LABLE WITH THE ASSESSEE. THE APEX COURT IN THE CASE OF HERO CYCLES LTD. [2010] 379 ITR 347 AND MUNJAL SALES CORPORATION VS. CIT, LUDHIANA (CIVI L APPEAL NO.1378/2008 DATED 19 TH FEB., 2008) ALSO ANALYZED LAID DOWN THE SAME DICTUM. IN THE INSTANT CASE, THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE WERE MORE THAN THE ADVANCE PAID TO ITS SISTER CONCERNS, THEREFORE THE ISSUE IN HAND REMANDED TO THE FILE OF THE LD. ASSESSING OFFICER TO DECIDE ACCORDINGLY AS PER DICTUM OF THE HONBLE APEX COURT. GROUND NO.1 & 2 ARE CO-RELATED AND HENCE ALLOWED FOR STATISTICAL PURPOSES. 5. SECOND ISSUE RAISED BY THE ASSESSEE RELATES TO THE CONSIDERATION OF INTEREST SUBSIDY BY THE REVENUE AUTHORI TIES AS REVENUE RECEIPT. 5.1 THE ASSESSE IS AGGRIEVED THAT THE LD. CIT(A) HAS WRONGLY TAKEN INTEREST SUBSIDY AS REVENUE RECEIPT IN CONTRAVENTION TO THE JUDGMENT OF J&K HIGH COURT IN THE CASE OF SHREE BALAJI ALLOYS VS. CIT, 333 ITR 335 (J&K) . THE LD. CIT(A) HAS OBSERVED THAT THE ADDITIONAL GRO UNDS OF APPEAL RELATES TO TREATMENT OF INTEREST OF SUBSIDY AS CAPITAL RECEIPT. THE APPELLANT HIMSELF HAS SHOWN IN THE AMOUNT OF INTE REST SUBSIDY AS REVENUE RECEIPT IN FINANCIAL STATEMENTS AS WELL AS I N RETURN OF INCOME THEREFORE, THE PLEA OF THE APPELLANT THAT THE LD. A O HAS ERRED IN ITA N0S.173 & 174/ASR/ 2014 SH. RAJINDER KUMAR GUPTA VS. DCIT 5 TREATING THE INTEREST SUBSIDY AS REVENUE RECEIPT INSTEAD OF CAPITAL RECEIPT, IS NOT ACCEPTABLE. 5.2 WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO THE ISSU E RAISED BY THE ASSESSEE AND THE CONCLUSION DRAWN BY THE LD. CIT(A) , THE LD. CIT(A) HAS CORRECTLY OBSERVED THAT THE APPELLANT HAS HIM SELF SHOWN THE AMOUNT OF INTEREST SUBSIDY AS REVENUE RECEIPT HOWEVE R, IT IS A FACT THAT AS PER THE JUDGMENT OF JURISDICTIONAL HIGH CO URT IN THE CASE OF SH. BALAJI ALLOYS (SUPRA), THE INTEREST SUBSIDY HAS B EEN TREATED AS REVENUE RECEIPT, HENCE IN VIEW OF THE SAME, THE ASSESSING OFFICER IS DIRECTED TO CONSIDER THIS ASPECT AFRESH WHILE FOLLOWING TH E JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF SH. BALAJI ALLOYS (SUPRA). RESULTANTLY GROUND NO. 3 IS ALLOWED FOR STATISTICAL PURPOSE. 6. BY GROUND NO.4, THE ASSESSEE HAS RAISED THE ISSUE THAT THE LD. CIT(A) HAS WRONGLY IGNORED THAT THE DISALLOWANCE OF BA NK INTEREST EXPENSES WILL DECREASE THE (CLAIMED) LOSS OF THE ASSESSEE, BU T WILL ALSO INCREASE DEDUCTION U/S 80-IB CORRESPONDINGLY, (WITH T HE SAME AMOUNT) AND CANNOT BE ADDED SEPARATELY, AS TAXABLE INCO ME, OF THE APPELLANT, IN FACT IS A COVERED MATTER BY THESE JUDGME NTS : (A) SUNANDAN AGGARWAL VS. ITO, JAMMU ITA NO. 524/ASR/2014 (AMRITSAR TRIBUNAL) (B) SUN PHARMACEUTICALS ITA NO. 184/ASR/2009 DATED 11.06.10 THE ASSESSE HAS CLAIMED THAT AS PER DICTUM OF TRIBUNAL IN T HE CASE OF SUN PHARMACEUTICALS 184/ASR/2009 DATED 11.06.2010 AND IN THE CASE OF SUNANDAN AGGARWAL VS. ITO, JAMMU ITA NO.524/ASR/201 4 , THE DISALLOWANCES OF INTEREST SHALL RESULT IN DECREASE OF LOSS A ND THEREFORE, CANNOT BE TREATED AS TAXABLE INCOME AS THE SAME WILL NO T CHANGE THE ITA N0S.173 & 174/ASR/ 2014 SH. RAJINDER KUMAR GUPTA VS. DCIT 6 AMOUNT OF DEDUCTION U/S 80-IB OF THE ACT. IN THE INTE REST OF JUSTICE, IN OUR CONSIDERED VIEW, IT WOULD BE APPROPRIATE TO REMAN D THE INSTANT ISSUE TO THE FILE OF ASSESSING OFFICER FOR DECISION AFRESH AS PER DICTUM OF AFORESAID TRIBUNAL'S JUDGMENTS. HENCE, REVISED GROUND NO.4 ALSO STANDS ALLOWED FOR STATISTICAL PURPOSES. 7. GROUND NO.5 TO 7 ARE FORMAL IN NATURE, HENCE DOE S NOT REQUIRE ANY ADJUDICATION INDEPENDENTLY. 8. IN THE RESULT, BOTH THE APPEALS FILED BY THE ASSESSEE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29/1 0/2019. SD/- SD/- (B.R.BASKARAN) (N.K.CHOUDHRY) ACCOUNTANT MEMBER JU DICIAL MEMBER DATED: 29/10/2019. /PK/ PS. COPY FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THEN CIT(APPEALS) 5. SR DR, I.T.A.T. AMRITSAR 6. GUARD FILE TRUE COPY BY ORDER