The ACIT,Bharuch Circle, Bharuch V. Gujarat Insecticides Limited, Bharuch

ITA 1807/AHD/2013

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 0256 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-10-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 14-10-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 20-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Notional interest; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER) ITA. NO: 1807/AHD/2013 (ASSESSMENT YEAR: 2008-09) ASSISTANT COMMISIONER OF INCOME-TAX, BHARUCH CIRCLE, BHARUCH V/S GUJARAT INSECTICIDES LTD, PLOT NO. 805-806, GIDC INDL.ESTATE, ANKLESHWAR, DIST. BHARUCH-393002 (APPELLANT) (RESPONDENT) PAN: AAACK8054D APPELLANT BY : SHRI JAMESH KURIAN SR. D.R ,. RESPONDENT BY : SHRI ARTI N. SHAH, A.R. ( )/ ORDER DATE OF HEARING : 14 -10-201 6 DATE OF PRONOUNCEMENT : 20 -10-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF LD. CIT(A)-II, BARODA DATED 14.03.2013 PERTAINING TO A.Y. 2008-09. ITA NO. 1807 /AHD/2013 . A.Y. 2008-0 9 2 2. THE SOLE GRIEVANCE OF THE REVENUE IS THAT THE LD. C IT(A) ERRED IN DIRECTING TO CANCEL DISALLOWANCE OF INTEREST ON INTEREST FREE CR EDIT TO GHARDA CHEMICALS LIMITED. 3. AT THE VERY OUTSET, THE LD. COUNSEL FOR THE ASSESSE E POINTED OUT THAT THE GRIEVANCE OF THE REVENUE IS DECIDED BY THE TRIBUNAL IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. THE LD. D.R. COUL D NOT BRING ANY DISTINGUISHING DECISION IN FAVOUR OF THE REVENUE NO R THE LD. D.R. COULD CONTROVERT THE SUBMISSIONS MADE BY THE LD. COUNSEL. 4. WE HAVE CONSIDERED THE CONTENTIONS OF THE LD. COUNS EL AND HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTHORITIES BELOW. WE FIN D FORCE IN THE CONTENTION OF THE LD. COUNSEL. TRANSACTIONS WITH GH ARDA CHEMICALS LTD. WERE CONSIDERED IN EARLIER YEARS ALSO WHEN SIMILAR DISALLOWANCE ON ACCOUNT OF INTEREST WAS MADE. THE SAME FINDS SUPPORT FROM T HE FINDINGS OF THE LD. CIT(A) WHICH READS AS UNDER:- 1.6. SIMILAR ISSUE WAS INVOLVED IN EARLIER YEAR AND THE HONBLE ITAT B BENCH, AHMEDABAD VIDE ORDER DATED 31.05.2011 (COMMON ORDER FOR A.Y. 2001-02 AND 2002-03) HAS ALLOWED OUR APPEAL AND DISMISSED APPEA L FILED BY THE DEPARTMENT. COPY OF THE ORDER IS PLACED ON PAGE 28 TO 70 OF THE PAPER BOOK. RELEVANT PARAS ARE ON PAGE 29 AND 35 TO 37 OF THE PAPER BOOK. LEAR NED CIT(A)-VI, BARODA HAS ALSO DELETED SUCH ADDITION FOLLOWING THIS ITAT ORDE R IN CASE OF APPELLANT FOR A.Y. 2009-10. COPY OF ORDER IS ON PAGE NO. 18 TO 27 OF T HE PAPER BOOK. ITA NO. 1807 /AHD/2013 . A.Y. 2008-0 9 3 5. WE ALSO FIND THAT THE CO-ORDINATE BENCH IN ASSESSEE S OWN CASE IN A.Y. 2001-02 & 2002-03 IN ITA NOS. 460 & 461/AHD/2008 AN D 499 & 500/AHD/2008 HAS CONSIDERED A SIMILAR DISALLOWANCE MADE BY THE A.O. THE RELEVANT FINDINGS OF THE TRIBUNAL WHICH READ AS UND ER:- 5. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH. WE HAVE ALSO CAREFULLY PERUSED SEVERAL EVIDENCES PLACED ON RECORD. IT IS NOT IN DI SPUTE THAT THE SALES MADE TO GCL REMAINED OUTSTANDING AND ON THE OTHER HAND, THE ASS ESSEE HAD A BANK LIABILITY. THE FUNDAMENTAL OBJECTION OF THE AO WAS THAT HAD TH E ASSESSEE RECOVERED THE OUTSTANDING DUES FROM GCL, THEN THERE WOULD NOT BE THE LIABILITY OF THAT EXTENT OF INTEREST OF THE BANK AS IT WAS DEBITED TO PROFIT & LOSS ACCOUNT UNDER THE HEAD 'INTEREST AND FINANCIAL CHARGES'. THAT OBJECTION WA S DEALT WITH IN THE FOLLOWING MANNER. THAT AS FAR AS THE LIABILITY TOWARDS BANK W AS CONCERNED, THE LD.AR HAS PLACED ON RECORD CERTAIN FIGURES TO DEMONSTRATE THA T THE SAID BANK LIABILITY HAD GONE DOWN IN COMPARISON TO THE LAST YEAR. THAT IT H AS ALSO BEEN ARGUED BEFORE US THAT EVEN THE NOTIONAL INTEREST @ 15% WAS INCORRECT BECAUSE THE PREVAILING RATE CHARGED BY THE BANK WAS ONLY 11.25% DURING THE YEAR . THAT THE ASSESSEE WAS OTHERWISE HAVING A REGULAR BUSINESS TRANSACTIONS OF PURCHASE AND SALES WITH GCL. THAT THE SAID GCL WAS THE MAJOR CUSTOMER DURIN G THAT YEAR. THAT IT HAS ALSO BEEN PLACED ON RECORD THAT THE ASSESSEE WAS PU RCHASING CERTAIN RAW-MATERIAL FROM GCL WHICH WAS ITS MONOPOLY PRODUCT. THAT THE V EHEMENT CONTENTION WAS THAT IN THE LIKE MANNER THE ASSESSEE WAS ALSO ENJOY ING CREDIT FACILITY AGAINST PURCHASES MADE FROM GCL. THAT IT WAS NOT A CASE OF MERE PURCHASE AND SALE AS IT HAS HAPPENED WITH OTHER DEBTORS OR CUSTOMERS ITA NO S.460 & 461/AHD/2008 (BY ASSESSEE) & ITA NOS.499 & 500/AHD/2008 (BY REVENUE) M/S.GUJARAT INSECTICIDES LTD. VS. DY.CIT ASST.YEARS - 2001-02 & 2002-03 BUT THE BUSINESS RELATIONSHIP WITH GCL WAS ON DIFFERENT TERMS BEING A HOLDING COM PANY AND IN THAT CAPACITY GCL HAS PROVIDED SPECIALIZED SERVICES TO ASSESSEE I N THE FIELD OF MANUFACTURING AND MARKETING. ALL THESE FACTS WERE NARRATED TO LD. CIT(A) THROUGH WRITTEN SUBMISSIONS WHICH WERE PLACED BEFORE US ON PAGE NOS .138 TO 190 OF PAPER-BOOK. FROM THIS DISCUSSION, IT IS EVIDENT THAT THE ASSESS EE-COMPANY HAD A REGULAR ITA NO. 1807 /AHD/2013 . A.Y. 2008-0 9 4 BUSINESS TRANSACTION AND IT WAS NOT FOR ANY EXTRANE OUS CONSIDERATION. IN THE REGULAR COURSE OF BUSINESS PURCHASES AND SALES HAVE BEEN MADE WITH THE SAID CONCERN AND NOT WITH THE INTENTION TO SIPHON OUT TH E BORROWED FUNDS. THE FACTUM OF THE CASE THUS DEMONSTRATED THAT THE ASSESSEE HAS TAKEN A COMMERCIAL DECISION KEEPING IN MIND THE INTEREST OF ITS BUSINESS AND TH E OTHER SURROUNDING CIRCUMSTANCES UNDER WHICH THE ASSESSEE WAS GETTING FACILITIES. ONCE IT WAS A COMMERCIAL DECISION, THEN THE COURTS HAVE HELD THAT IT IS NOT PROPER FOR THE REVENUE AUTHORITIES TO STEP INTO THE SHOES OF A BUS INESS MAN TO DECIDE WHETHER SUCH A COMMERCIAL DECISION WAS ADVANTAGEOUS OR NOT. RATHER, WE ARE OF THE VIEW THAT THE AO HAS PROCEEDED MERELY ON THIS PRESUMPTIO N THAT THE BORROWED FUNDS OF BANK OF BARODA HAVE BEEN SIPHONED TO GCL, BUT NO SP ECIFIC INSTANCE OR TRANSACTION WAS DEMONSTRATED. AS FAR AS THE LD.CIT( A)'S VIEW WAS CONCERNED, THE GRANT OF FOUR MONTHS CREDIT FACILITY ALSO APPEARED TO BE ON PRESUMPTION BECAUSE THAT FACILITY MUST NOT BE APPLIED IN UNIFORM MANNER TO ALL THE PARTIES. IN GENERAL, AS PER THE BUSINESS TREND, EACH CUSTOMER HAS ITS OW N TERMS AND CONDITION AND, THEREFORE, THE TERMS OF PAYMENT DIFFER FROM ONE PAR TY TO ANOTHER PARTY. A BUSINESSMAN'S VIEW POINT MUST BE SEEN AND FOR THAT, THE TEST OF COMMERCIAL EXPEDIENCY TO BE ADJUDGED FROM BUSINESS BENEFIT. TH EREFORE BY ONE SINGLE YARD- STICK ALL THE TRANSACTIONS HAVING DIFFERENT NATURE OF CHARACTER OR MODALITIES MUST NOT BE MEASURED. WE ARE OF THE VIEW THAT THIS IS NO T THE CASE WHERE SOME UNDUE ADVANTAGE WAS PASSED ON TO THE SAID HOLDING COMPANY . IN THE LIGHT OF THE ABOVE DISCUSSION, WE THEREFORE CONCLUDE THAT THE DISALLOW ANCE WAS MADE MERELY ON CERTAIN PRESUMPTIONS WHICH COULD NOT BE SUBSTANTIAT ED THROUGH SOME COGENT EVIDENCE THEREFORE THE VIEW TAKEN BY THE AO DESERVE S TO BE REVERSED. LIKEWISE, WE ARE ALSO OF THE VIEW THAT THE PART RELIEF GRANTED B Y THE LD.CIT(A) WAS ALSO ON A PRESUMPTION THAT THE CREDIT FACILITY TO ALL THE CUS TOMERS AGAINST SALES WAS UNIFORM, SO THE ASSESSEE SHOULD HAVE GIVEN THE CREDIT FACILI TY OF FOUR MONTHS TO GCL AS WELL. THIS PRESUMPTION HAD NO SUBSTANCE, THEREFORE, CONSIDERING THE TOTALITY OF THE CIRCUMSTANCES OF THE CASE, WE HEREBY REVERSE THE SA ID VIEW OF THE LD.CIT(A) AS WELL. THIS GROUND OF THE ASSESSEE IS, THEREFORE, AL LOWED. ITA NO. 1807 /AHD/2013 . A.Y. 2008-0 9 5 6. IN THE LIGHT OF THE AFOREMENTIONED FINDINGS OF THE CO-ORDINATE BENCH, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 20 - 10- 2016. SD/- SD/- (S. S. GODARA) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD