Sri. Babulal Genaji, Bangalore V. ITO, Bangalore

ITA 18/BANG/2012

• Counselvise Citation: 1821114 RSA 2012
• Duration Of Justice: 8 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 06-01-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCH A BEFORE SMT. P MADHAVI DEVI, JUDICIAL MEMBER AND SHRI JASON P BOAZ, ACCOUNTANT MEMBER ITA NO.18/BANG /2012 (ASST. YEAR - 2008-09) SHRI BABULAL GENAJI, PROP : PUSHPJOTHI, NO.761/4, IST FLOOR, K.R MARKET, CHICKPET, BANGALORE. . APPELLANT PAN NO.AALPB 0113 A. VS. THE INCOME-TAX OFFICER, WARD-5(3), BANGALORE. . RESPONDENT APPELLANT BY : SHRI BALRAM R RAO, ADVOCATE RESPONDENT BY : SHRI SARAVANAN, JCIT DATE OF HEARING : 11-09-2012 DATE OF PRONOUNCEMENT : 11-09-2012 O R D E R PER P MADHAVI DEVI, JUDICIAL MEMBER : THIS APPEAL IS FILED BY THE ASSESSEE. THE RELEVANT ASSESSMENT YEAR IS 2008-09. THE APPEAL IS DIRECTED AGAINST TH E ORDER OF THE ITA NO.18/ B/12 2 COMMISSIONER OF INCOME-TAX - (APPEALS) II AT BANGA LORE DATED 10.2.2011. THE APPEAL ARISES OUT OF THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOME-TAX ACT, 1961. 2. THE ASSESSEE HAS FILED THE FOLLOWING GROUND OF A PPEAL AND HAS ALSO FILED THE FOLLOWING ADDITIONAL GROUND OF APPEA L: I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) ERRED IN UPHOLDING DISALLOWANCE OF I NTEREST PAID AMOUNTING TO RS.1,62,078/- U/S 40A(IA) WITHOUT APPRECIATING THE FACT THAT ALL THE FOUR PARTIES DID NOT HAVE ANY TAXABLE INCOME IN THE RELEVANT PERIOD AND, THER EFORE, THERE WAS NO REQUIREMENT OF TDS TO BE MADE. II) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LD. CIT(A) OUGHT TO HAVE PROVIDED SUFFICIENT OPPORTUNITIES TO THE APPELLANT TO PUT FORTH HIS SUB MISSION, WHICH HE FAILED TO DO. III) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN UPHOLDING THE FACT TH AT THE TRUST WAS DISCRETIONARY IN NATURE AND NOT BENEFICIA RY. IV) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN UPHOLDING INTEREST LU /S 234B AND 234C OF THE ACT. ITA NO.18/ B/12 3 ADDITIONAL GROUND OF APPEAL I) THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT THE DISALLOWANCE U/S 40A(IA) IS POSSIBLE ONLY ON THE AM OUNT WHICH IS PAYABLE AS ON 31 ST MARCH OF THE RELEVANT ACCOUNTING YEAR AND NOT ON THE AMOUNTS THAT HAVE ALREADY BEEN PAID, AS HELD BY THE ITAT VISAKHAPATNA M SPECIAL BENCH IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS VS. ADDL. CIT (2012) 16 ITR (TRIB) 1 (VISAKHAPATNAM) (SB). 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E WHO IS AN INDIVIDUAL IS IN THE BUSINESS OF WHOLESALER IN TEXT ILE. HE FILED HIS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR A ND THE SAME WAS TAKEN UP FOR SCRUTINY U/S 143(3) OF THE INCOME-TAX ACT. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE INCOME-TAX ACT, THE AO OBSERVED THAT THE ASSESSEE HAD CLAIMED A DEDUCTION TOWARDS INTEREST PAID OF RS.1,98,005/- WHICH PERTAINS TO PERSONAL BO RROWINGS OF RS.20,91,007/- NOT REFLECTED IN THE BOOKS OF THE SA ID BUSINESS. HE OBSERVED THAT THESE LOANS HAVE BEEN SHOWN IN THE PE RSONAL BALANCE SHEET AND HENCE HAVE NO DIRECT NEXUS WITH FUNDS INV ESTED IN THE BUSINESS. HE ALSO OBSERVE D THAT THE ASSESSEE HAS N OT DEDUCTED TAX AT SOURCE ON INTEREST PAYMENT OF RS.1,62,078/- OUT OF RS.1,98,005/- AND ITA NO.18/ B/12 4 THEREFORE, THE SAME CANNOT BE ALLOWED AS DEDUCTION AS PER THE SEC. 40A(IA) OF THE INCOME-TAX ACT FOR NOT COMPLYING WIT H THE PROVISIONS OF CHAPTER XVII-B OF THE ACT. 4. AGGRIEVED THE ASSESSEE PREFERRED AN APPEAL BEFOR E THE CIT(A) WHO AFTER CONSIDERING THE DETAILS OF THE BORROWINGS , HELD THAT BORROWED FUNDS HAVE BEEN USED FOR BUSINESS PURPOSES OF THE ASSESSEE AND, THEREFORE, INTEREST PAID OR ACCRUED THEREON IS CLAIMED AGAINST BUSINESS INCOME. BUT SINCE NO TDS HAS BEEN MADE AT THE TIME OF PAYMENT OR CREDIT OF INTEREST ON THESE LOANS, HE HE LD THAT THE SAME IS LIABLE TO BE DISALLOWED U/S 40A(IA). AFTER TAKING CONSIDERATION, THE COPIES OF FORM 15G DATED 31.3.2008 GIVING THE NAMES , ADDRESSES AND PAN NUMBERS OF LOAN CREDITORS, THE CIT(A), CONFIRME D THE ORDER OF THE AO AND THE ASSESSEE IS IN SECOND APPEAL BEFORE US. 5. AS REGARDS ORIGINAL GROUNDS OF APPEAL, THE LEARN ED COUNSEL FOR THE ASSEESSEE REITERATED THE SUBMISSIONS MADE BY HI M BEFORE THE AUTHORITIES BELOW AND AS REGARDS ADDITIONAL GROUND OF APPEAL, THE LEARNED COUNSEL FOR THE ASSESSEE PLACED RELIANCE UP ON THE DECISION OF THE SPL. BENCH OF THE TRIBUNAL IN THE CASE OF MERIL YN SHIPPING AND ITA NO.18/ B/12 5 TRANSPORTS VS. ACIT REPORTED IN (2012) 16 ITR (TRIB ) (VISAKHAPATNAM SB). 6. HAVING HEARD BOTH THE PARTIES AND HAVING CONSIDE RED THEIR RIVAL CONTENTIONS, WE FIND THAT THE CIT(A) HAS HELD THAT THE BORROWED FUNDS HAVE BEEN UTILIZED FOR BUSINESS PURPOSES OF THE ASS ESSEE. THEREFORE, THE INTEREST PAYMENT IS ALSO FOR BUSINESS PURPOSES. HOWEVER, WHETHER THE ASSESEE IS LIABLE FOR DISALLOWANCE U/S 40A(IA) OF THE INTEREST PAID WITHOUT TDS IS TO BE SEEN. THE ASSESSEE HAS RAISED THE ADDITIONAL GROUND OF APPEAL REGARDING THIS ISSUE. WE FIND THA T THIS ISSUE IS COVERED BY THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILYN SHIPPING AND TRANSPORTS (CITED SUPR A), WHEREIN IT WAS HELD THAT THE PROVISIONS OF SEC. 40A(IA) ARE AP PLICABLE ONLY ON THE AMOUNT WHICH IS PAYABLE AS ON 31 ST MARCH OF RELEVANT ACCOUNTING YEAR AND NOT ON THE AMOUNTS THAT HAVE ALREADY BEEN PAID. IT IS THE SUBMISSION OF THE ASSESSEE THAT THIS AMOUNT HAS ALR EADY BEEN PAID AS ON 31.3.2008. THEREFORE, WITHOUT GOING INTO THE ME RITS OF THE ALLOWABILITY OF INTEREST PAYMENT, WE DEEM IT FIT AN D PROPER TO REMAND THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO VERIFY WHETHER THE SAID PAYMENT OF INTEREST IS MADE ON OR BEFORE 31 ST OF MARCH 2008 AND IF IT IS FOUND TO HAVE BEEN PAID AS ON THAT DATE, THE SAME SHALL NOT BE DISALLOWED U/S 40A(IA) OF THE ACT AS HELD BY THE ITA NO.18/ B/12 6 SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MERILY N SHIPPING AND TRANSPORTS (CITED SUPRA) 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 11TH SEPT, 2012. SD/- SD/- (JASON P BOAZ) (MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER VMS. BANGALORE DATED : 11 /09/2012 COPY TO : 1. THE ASSESSEE 2. THE REVENUE 3.THE CIT CONCERNED. 4.THE CIT(A) CONCERNED. 5.DR 6.GF BY ORDER SR. PRIVATE SECRETA RY, ITAT, BANGALORE.