MESRES K.C EDUCATIONAL WELFARE SOCIETY, HIMACHAL PRADESH V. DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-II, JALANDHAR

ITA 176/ASR/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7096 (ITAT-AMRITSAR)
• Duration Of Justice: 9 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 08-01-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 02-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANKIT KUMAR AGGARWAL
• Assessee Lawyers: BHAGAT
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 143(3)

Judgement Text

PAGE | 1 ITA NO. 176/ASR/2018 AY 2012-13 M/S K.C EDUCATIONAL SOCIAL WELFARE SOCIETY. VS. DCIT, CENTRAL CIRCLE-II IN THE INCOME TAX APPELLATE TRIBUNAL CAMP BENCH AT JALANDHAR BEFORE SHRI. N.K. SAINI, VICE PRESIDENT AND SHRI. RAVISH SOOD, JUDICIAL MEMBER ITA NO. 176/ASR/2018 (ASSESSMENT YEAR: 2014-15) M/S K.C EDUCATIONAL SOCIAL WELFARE SOCIETY, VILLAGE PANDOGA, UNA (HP). PAN AJWPM1931B VS. DY. COMMISSIONER OF INCOME TAX CENTRAL CIRCLE-II JALANDHAR. ( A PPELLANT) ( R ESPONDENT) ASSESSEE BY: SHRI. M.R. BHAGAT, A.R REVENUE BY: SHRI ANKIT KUMAR AGGARWAL, D.R DATE OF HEARING: 11.01.2019 DATE OF PRONOUNCEMENT: 15.01.2019 O R D E R PER RAVISH SOOD, JM THE PRESENT APPEAL FILED BY THE ASSESSEE SOCIETY IS DIRECTED AGAINST THE ORDER PASSED BY THE CIT(APPEALS)-5, LUDHIANA, DATED 08.01.2018, WHICH IN TURN ARISES FROM THE ASSESSMENT ORDER PASSED BY THE A.O UNDER SEC. 143(3) OF THE INCOME TAX ACT, 1961(FOR SHORT I.T. ACT) FOR A.Y. 2012-13, DATED 16.02.2015 FOR A.Y. 2012-13. THE ASSESSEE ASSAILING THE ORDER OF THE CIT(A) HAS RAISED BEFORE US THE FOLLOWING GROUNDS OF APPEAL:- 1. THE LD. CIT(A) ERRED TO CONFIRM ADDITION OF RS. 2,07,000/- BY CALCULATING INTEREST ON RS. 11,50,000/- AT THE RATE OF 18% PER ANNUM WITHOUT TAKING INTO CONSIDERATION THAT INTEREST COULD BE DISALLOWED AT THE BANK RATE AND FOR THE NUMBER OF DAYS FOR WHICH LOAN WAS USED BY SMT. KAMAL GANDHI. THE ADDITION IS PRAYED TO BE DELETED. PAGE | 2 ITA NO. 176/ASR/2018 AY 2012-13 M/S K.C EDUCATIONAL SOCIAL WELFARE SOCIETY. VS. DCIT, CENTRAL CIRCLE-II 2. THE LD. CIT(A) CONFIRMED THE ADDITION WITHOUT TAKING INTO CONSIDERATION THAT THE APPELLANT WAS HAVING HUGE INTEREST FREE ADVANCES FROM RELATIVES OF SMT. KAMAL GANDHI AND OTHERS AND WITHOUT ESTABLISHING NEXUS WITH BANK LOANS. RELIANCE IS PLACED ON RATIO OF THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF HERO CYCLES PVT. LTD. THE ADDITION IS PRAYED TO BE DELETED. 3. THE APPELLANT CRAVES LEAVE TO AMEND ANY GROUND(S) OR ADD ANY NEW GROUND(S) BEFORE THE APPEAL IS FINALLY DISPOSED OFF. 2. BRIEFLY STATED, THE ASSESSEE WHICH IS AN EDUCATIONAL SOCIAL WELFARE SOCIETY HAD FILED ITS RETURN OF INCOME FOR A.Y. 2012-13 ON 26.09.2012, DECLARING TOTAL INCOME AT RS. NIL. SUBSEQUENTLY, THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT UNDER SEC. 143(2) OF THE I.T. ACT. 3. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS THE A.O MADE AN ADDITION/DISALLOWANCE UNDER SEC. 36(1)(III) OF THE INTEREST OF RS. 1,35,07,925/- PERTAINING THE INTEREST BEARING FUNDS WHICH WERE UTILIZED BY THE ASSESSEE FOR ADVANCING INTEREST FREE FUNDS OF RS. 13,35,47,780/- TO ITS SISTER CONCERNS. ON THE BASIS OF THE AFORESAID DELIBERATIONS THE A.O ASSESSED THE INCOME OF THE ASSESSEE SOCIETY AT RS. NIL (AFTER SETTING OFF THE B/FORWARD UNABSORBED DEPRECIATION FOR THE PRECEDING YEARS). 4. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A). THE CIT(A) AFTER DELIBERATING AT LENGTH ON THE CONTENTIONS ADVANCED BY THE ASSESSEE VACATED THE DISALLOWANCE MADE BY THE A.O UNDER SEC. 36(1)(III) IN RESPECT OF INTEREST ON BORROWED CAPITAL TO THE EXTENT THE SAME PERTAINED TO AN AMOUNT AGGREGATING TO RS. 13,23,97,780/- (OUT OF TOTAL ADVANCES OF RS. 13,35,47,780/-) THAT WAS ADVANCED BY THE ASSESSEE TO FOUR PARTIES, VIZ (I) K.C LAND AND FINANCE LTD. (RS. 1,25,18,000/-); (II) K.C WELFARE TRUST (RS. 3,71,43,174/-); (III) WALIA TRADERS LTD. (RS. 7,83,96,000/-); AND (IV) FARADAYS (RS. 43,40,606/-). HOWEVER, THE CIT(A) NOT BEING PERSUADED TO SUBSCRIBE TO PAGE | 3 ITA NO. 176/ASR/2018 AY 2012-13 M/S K.C EDUCATIONAL SOCIAL WELFARE SOCIETY. VS. DCIT, CENTRAL CIRCLE-II THE CONTENTIONS ADVANCED BY THE ASSESSEE IN RESPECT OF DISALLOWANCE UNDER SEC. 36(1)(III) OF RS. 2,07,000/- MADE IN CONTEXT OF THE ADVANCE OF RS. 11,50,000/- THAT WAS GIVEN BY THE ASSESSEE TO SMT. KAMAL GANDHI, CONFIRMED THE SAID ADDITION/DISALLOWANCE. 5. THE ASSESSEE BEING AGGRIEVED WITH THE ORDER OF THE CIT(A) HAS CARRIED THE MATTER IN APPEAL BEFORE US. THE LEARNED AUTHORIZED REPRESENTATIVE (FOR SHORT A.R) FOR THE ASSESSEE SUBMITTED THAT NO DISALLOWANCE UNDER SEC. 36(1)(III) IN RESPECT OF THE ADVANCE OF RS. 11,50,000/- BY THE ASSESSEE TO SMT. KAMAL GANDHI WAS LIABLE TO BE MADE. THE LD. A.R IN SUPPORT OF HIS AFORESAID CLAIM PLACED BEFORE US TWO FOLD CONTENTIONS VIZ. (I) THAT AS THE ASSESSEE HAD SUFFICIENT SELF OWNED FUNDS, HENCE NO DISALLOWANCE UNDER SEC. 36(1)(III) IN RESPECT OF THE AFORESAID AMOUNT OF RS. 11,50,000/- WAS LIABLE TO BE MADE IN THE HANDS OF THE ASSESSEE; AND (II) THAT AS THE AMOUNT IN ITSELF WAS ADVANCED ON THE LAST DAY OF THE YEAR UNDER CONSIDERATION I.E. ON 31.03.2012, HENCE NO DISALLOWANCE UNDER SEC. 36(1)(III) WAS CALLED FOR IN THE HANDS OF THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THE LD. A.R IN ORDER TO FORTIFY HIS CONTENTION THAT THE AMOUNT WAS ADVANCED TO SMT. KAMAL GANDHI ONLY AS ON 31.03.2012, HAD THEREIN PLACED ON RECORD A COPY OF HER LEDGER ACCOUNT AS APPEARING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION. IT WAS THUS THE CONTENTION OF THE LD. A.R THAT THE CIT(A) HAD ERRED IN SUSTAINING THE ADDITION/DISALLOWANCE MADE BY THE A.O UNDER SEC. 36(1)(III) IN RESPECT OF THE AMOUNT ADVANCED BY THE ASSESSEE TO SMT. KAMAL GANDHI AS ON 31.03.2012. 6. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE (FOR SHORT D.R) RELIED ON THE ORDERS OF THE LOWER AUTHORITIES PAGE | 4 ITA NO. 176/ASR/2018 AY 2012-13 M/S K.C EDUCATIONAL SOCIAL WELFARE SOCIETY. VS. DCIT, CENTRAL CIRCLE-II 7. WE HAVE HEARD THE AUTHORIZED REPRESENTATIVES FOR BOTH THE PARTIES, PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE MATERIAL AVAILABLE ON RECORD. ADMITTEDLY, AS IS DISCERNIBLE FROM A PERUSAL OF THE COPY OF LEDGER ACCOUNT OF SMT. KAMAL GANDHI (AS APPEARING IN THE BOOKS OF ACCOUNT OF THE ASSESSEE FOR THE YEAR UNDER CONSIDERATION), AN AMOUNT OF RS. 15 LAC WAS DEBITED IN HER ACCOUNT ONLY AS ON 31.03.2012. INTERESTINGLY, PRIOR TO THE DEBIT OF THE AFORESAID AMOUNT THERE WAS A CREDIT BALANCE OF RS. 3,50,000/- (CR.) IN THE ACCOUNT OF SMT. KAMAL GANDHI ON THE VERY SAME DATE I.E. ON 31.03.2012. IN THE BACKDROP OF THE AFORESAID FACTS, WE ARE OF A STRONG CONVICTION THAT NOW WHEN THE AMOUNT OF RS. 15 LAC IN ITSELF WAS ADVANCED ON THE LAST DATE OF THE FINANCIAL YEAR I.E. 31.03.2012, THEREFORE, IT IS BEYOND COMPREHENSION AS TO HOW A DISALLOWANCE OF THE INTEREST PERTAINING TO THE SAME COULD HAVE BEEN MADE BY THE A.O AND THEREAFTER SUSTAINED BY THE CIT(A) FOR THE ENTIRE YEAR. BE THAT AS IT MAY, WE ARE OF THE CONSIDERED VIEW THAT ON THE BASIS OF THE AFORESAID PECULIAR FACTS, NO DISALLOWANCE UNDER SEC. 36(1)(III) COULD HAVE BEEN MADE IN THE HANDS OF THE ASSESSEE. WE THUS IN TERMS OF OUR AFORESAID OBSERVATIONS DELETE THE ADDITION/DISALLOWANCE OF RS. 2,07,000/- MADE BY THE A.O UNDER SEC. 36(1)(III) OF THE I.T. ACT. 8. BEFORE PARTING, WE MAY HEREIN OBSERVE THAT AS WE HAVE DELETED THE AFORESAID ADDITION/DISALLOWANCE OF RS. 2,07,000/- MADE BY THE A.O UNDER SEC. 36(1)(III) IN TERMS OF OUR AFORESAID OBSERVATION, THUS WE REFRAIN FROM ADVERTING TO AND THEREIN ADJUDICATING THE ALTERNATIVE CONTENTION OF THE ASSESSEE THAT NO SUCH ADDITION/DISALLOWANCE COULD HAVE BEEN MADE KEEPING IN VIEW THE SELF OWNED FUNDS AVAILABLE WITH THE ASSESSEE. PAGE | 5 ITA NO. 176/ASR/2018 AY 2012-13 M/S K.C EDUCATIONAL SOCIAL WELFARE SOCIETY. VS. DCIT, CENTRAL CIRCLE-II 9. WE THUS SET ASIDE THE ORDER OF THE CIT(A) AND DELETE THE ADDITION/DISALLOWANCE OF RS. 2,07,000/- MADE BY THE A.O UNDER SEC. 36(1)(III) OF THE I.T. ACT. 10. THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15.01/2019 SD/- SD/- ( N.K. SAINI) (RAVISH SOOD) VICE PRESIDENT JUDICIAL MEMBER PLACE : JALANDHAR; DATED 15 .01.2019 PS. ROHIT / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A)- 4. / CIT 5. DR, ITAT, CAMP BENCH, JALANDHAR 6. [ / GUARD FILE. //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , /ITAT, CAMP BENCH, JALANDHAR PAGE | 6 ITA NO. 176/ASR/2018 AY 2012-13 M/S K.C EDUCATIONAL SOCIAL WELFARE SOCIETY. VS. DCIT, CENTRAL CIRCLE-II SR.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON SR.PS/PS 2 DRAFT PLACED BEFORE AUTHOR SR.PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS 15.1.19 SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON 15.1.19 SR.PS/PS 7 FILE SENT TO THE BENCH CLERK 15.1.19 SR.PS/PS 8 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 9 DATE ON WHICH FILE GOES TO THE AR 10 DATE OF DISPATCH OF ORDER