M/s Shri Laxmikant Flour Industries, Indore V. The DCIT, Indore

ITA 173/IND/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4869 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2003-2004
• Appeal Filed On: 30-03-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: K C AGRAWAL; SANDEEP GARG CAS
• Keywords: Proportionate interest
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL , INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, J.M. AND SHRI R.C.SHARM A, A.M. PAN NO. : AAACS4131K I.T.A.NO. 173/IND/2012 A.Y. : 2003-04 M/S. SHRI LAXMIKANT FLOUR INDUSTRIES LTD. INDORE VS. DY. COMMISSI ONER OF INCOME TAX, CIRCLE 1(2) INDORE APPELLANT RESPONDENT ASSESSEE BY : SHRI K.C.AGRAWAL & SHRI SANDEEP GARG, CAS DEPARTMENT BY : SHRI R.A.VERMA, SR. DR DATE OF HEARING : 30 . 0 8 .201 3 DATE OF PRONOUNCEMENT : 30 . 0 9 .201 3 O R D E R PER R. C. SHARMA, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE CIT(A), DATED 29.7.2011 FOR THE ASSES SMENT YEAR 2003-04 IN THE MATTER OF ORDER PASSED U/S 143(3) OF THE INCOME-TAX ACT, 1961. 2. FIRST GRIEVANCE OF THE ASSESSEE RELATES TO DISALLOW ANCE OF INTEREST EXPENDITURE OF RS. 3,00,600/-. -: 2: - 2 3. FACTS IN BRIEF ARE THAT DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER FOUND THAT THE AS SESSEE HAS GIVEN ADVANCE TO M/S.DEEPA ENTERPRISES, DHAR. BY OB SERVING THAT NO INTEREST HAS BEEN CHARGED ON SUCH ADVANCE, THE ASSESSING OFFICER DISALLOWED PROPORTIONATE INTEREST OF RS. 3,00,600/-. ACTION OF ASSESSING OFFICER WAS CONFIRM ED BY THE LD.CIT(A) AND ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND FOUND FROM RECORD THAT THE ASSESSEE COMPANY IS INVOLVED I N MANUFACTURING OF WHEAT FLOUR, SUJI, MAIDA AND BRAN OUT OF WHEAT AND FOR THE SAME, THE ASSESSEE COMPANY USED T O MAKE SOME OF THE PURCHASES THROUGH M/S. DEEPA ENTERPRISE S, DHAR FOR LAST MANY YEARS. THE SAID PARTY IS NEITHER RELA TED TO ANY OF THE DIRECTORS NOR HAVING INTEREST AS SHAREHOLDER. I T IS NOT THE CASE OF THE ASSESSING OFFICER THAT M/S. DEEPA ENTER PRSIES IS NOT SUPPLIER OF GOODS TO ASSESSEE. EVEN THE CIT(A) HAS OBSERVED IN HIS ORDER THAT THE ASSESSEE HAS CREDITE D ACCOUNT OF PARTY M/S. DEEPA ENTERPRISES ON RECEIPT OF PURCHASE BILL AND DEBITED THE ACCOUNT ON MAKING PAYMENT REGULARLY. IT WAS ALSO OBSERVED THAT CREDIT FOR PURCHASE FROM M/S. DEEPA E NTERPRISES -: 3: - 3 IN THE ACCOUNTING YEAR WERE FULLY SQUARED UP DURING THE YEAR ITSELF BY WAY OF DEBITS ON ACCOUNT OF PAYMENT SO MA DE. ON PERUSAL OF STATEMENT OF ACCOUNT OF M/S. DEEPA ENTER PRISES AS PLACED ON RECORD VIS--VIS FINDING OF THE LD. CIT(A ), WE CAN SAFELY HOLD THAT THE PAYMENT MADE TO DEEPA ENTERPRI SES WAS IN THE NATURE OF TRADE ADVANCE AGAINST PURCHASES AN D NOT LOANS GIVEN WITHOUT ANY BUSINESS PURPOSE. AS PER PR OVISIONS OF SECTION 36(1)(III), DISALLOWANCE OF INTEREST HAS TO BE MADE IF IT IS FOUND THAT ADVANCE HAS BEEN MADE FOR NON-BUSINESS P URPOSES WITHOUT CHARGING INTEREST. IN THE INSTANT CASE, TRA DE ADVANCE WAS GIVEN TO M/S. DEEPA ENTERPRISES AGAINST SUPPLY OF GOODS AND SAME WAS ADJUSTED AGAINST THE PURCHASES. ACCORD INGLY, WE DO NOT FIND ANY JUSTIFICATION FOR THE DISALLOWAN CE OF INTEREST MADE BY THE ASSESSING OFFICER U/S 36(1)(III). 5. OUT OF TRAVELLING EXPENSES OF RS. 85,960/-, THE ASSESSING OFFICER HAS DISALLOWED RS. 10,000/- AND A LSO CLUB MEMBERSHIP FEES OF RS. 3500/- WAS DISALLOWED ON THE PLEA OF PERSONAL EXPENDITURE OF DIRECTOR. THE ASSESSEE COMP ANY BEING A CORPORATE ENTITY, DISALLOWANCE MADE ON TRAVELLING EXPENSES OF DIRECTOR IS NOT JUSTIFIED IN SO FAR AS TRAVELLING W AS UNDERTAKEN -: 4: - 4 FOR THE PURPOSE OF ASSESSEES BUSINESS AND NOT FOR PERSONAL PURPOSE OF DIRECTOR. HOWEVER, THE CLUB MEMBERSHIP F EES IS PERSONAL IN NATURE, ACCORDINGLY, WE CONFIRM THE DIS ALLOWANCE OF CLUB MEMBERSHIP FEE OF RS. 3500/-. 6. THE ASSESSING OFFICER HAS ALSO DISALLOWED RS. 15000 /- OUT OF POSTAGE/TELEPHONE/VEHICLE EXPENSES BY OBSERV ING THAT PERSONAL USE OF THE DIRECTOR AND THEIR FAMILY MEMBE RS CANNOT BE RULED OUT. AS THE ASSESSEE IS A CORPORATE ENTITY , WE DO NOT FIND ANY JUSTIFICATION FOR DISALLOWANCE OF SUCH EXP ENSES ON THE PLEA OF PERSONAL USE. IT IS NOT THE CASE OF THE ASS ESSING OFFICER THAT THE EXPENSES SO INCURRED IS NOT SUPPORTED BY P ROPER BILLS AND VOUCHERS. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE SO MADE. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWE D IN PART. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 30 TH SEPTEMBER, 2013. SD/- SD/- (JOGINDER SI NGH) (R. C. SHARMA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED :30 TH SEPTEMBER, 2013. CPU* 309