ACIT 22(3), NAVI MUMBAI V. GALAXY CHEMICALS, NAVI MUMBAI

ITA 1832/MUM/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 83533 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Next Hearing Date: 25-08-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 07-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARMINDER
• Assessee Lawyers: DR C P RAMASWAMI
• Keywords: Proportionate interest
• Section: 14A

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL G B ENCH, MUMBAI ! , ' #$ % % % % , &' . % . () . % . #$ * BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND DR. S.T.M. PAVALAN, JUICIAL MEMBER ./ I.T.A. NO.1832/MUM/2013 ( + + + + / ASSESSMENT YEAR :2001-02 THE ACIT 22(3), 3 RD FLOOR, TOWER NO. 6, VASHI RLY. STATION COMPLEX, VASHI, NAVI MUMBAI / VS. GALAXY CHEMICALS, C-49/2, ITC INDL. AREA, PAWANE, NAVI MUMBAI NAVI MUMBAI-400 703 $, ' ./ - ./ PAN/GIR NO. : AAAFG 0860G ( ,. / APPELLANT ) .. ( /0,. / RESPONDENT ) ,. 1 / APPELLANT BY: SMT. PARMINDER /0,. 2 1 / RESPONDENT BY: DR. C.P. RAMASWAMI 2 3)' / DATE OF HEARING :25.08.2014 45+ 2 3)' / DATE OF PRONOUNCEMENT :25.08.2014 #6 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST T HE ORDER OF THE LD. CIT(A)-33, MUMBAI DT. 10.12.2012 PERTAINING TO A.Y.2009-10. 2. THE SOLE GRIEVANCE OF THE REVENUE IS THAT THE LD . CIT(A) ERRED IN RESTRICTING THE ADDITION MADE TO RS. 16,35,716/- BE ING INTEREST ON ITA NO. 1832/M/2013 2 BORROWED FUNDS AGAINST ADDITIONS MADE OF RS. 55,96, 024/- U/S. 14A OF THE ACT. 3. IN THIS CASE, IN THE FIRST ROUND OF LITIGATION, THE ENTIRE INTEREST PAID ON FIXED DEPOSITS AMOUNTING TO RS. 55,96,024/- WAS DISALLOWED. THE LD. CIT(A) DELETED THE DISALLOWANCE OF INTEREST. THE O RDER OF THE LD. CIT(A) WAS CONFIRMED BY THE TRIBUNAL. 4. THE REVENUE PREFERRED AN APPEAL BEFORE THE HIGH COURT. THE HONBLE HIGH COURT REMANDED THE ASSESSMENT BACK TO AO WITH A DIRECTION TO CONSIDER AFRESH THE APPLICATION OF SEC . 14A IN THE LIGHT OF THE JUDGEMENT IN THE CASE OF GODREJ & BOYCE MANUFACTURI NG CO. LTD. IN THE SECOND ROUND OF ASSESSMENT, THE AO ONCE AGAIN DISAL LOWED ENTIRE INTEREST PAID ON FIXED DEPOSITS AMOUNTING TO RS. 55,96,024/- . 5. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A). AFTER CONSIDERING THE FACTS AND THE SUBMISSIONS AND THE D ECISION OF THE HONBLE JURISDICTIONAL HIGH COURT AT PARA-3.5 OF ITS ORDER, THE LD. CIT(A) OBSERVED THAT THE ASSESSEE IS MAINLY IN THE BUSINES S OF ADVANCING LOAN FOR WHICH THEY TAKE DEPOSIT FROM OUTSIDE PARTIES AND PA Y INTEREST ON THE SAME. AT PARA 3.7 OF HIS ORDER, THE LD. CIT(A) FURTHER OB SERVED THAT IF DIRECT NEXUS IS NOT PROVED, DISALLOWANCES CANNOT BE MADE. THE LD. CIT(A) WAS CONVINCED THAT NO DIRECT NEXUS HAVE BEEN ESTAB LISHED BETWEEN BORROWED FUNDS AND DIRECTED THE AO TO RESTRICT THE DISALLOWANCE TO RS. 16,35,716/-. 6. AGGRIEVED BY THIS, REVENUE IS BEFORE US. ITA NO. 1832/M/2013 3 7. THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED TH E ASSESSMENT ORDER. 8. THE LD. COUNSEL FOR THE ASSESSEE REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE LOWER AUTHORITIES. 9. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTH ORITIES BELOW. WE FIND THAT THE AO HAS TAKEN A VIEW THAT THE ENTIRE M ONIES BORROWED WERE USED FOR FINANCING THE ACQUISITION OF THE SHARES WI THOUT PROPERLY APPRECIATING THE FACTS. THE AO HAS NOT CONSIDERED THE FOLLOWING WORKING GIVEN BY THE ASSESSEE. A .LOANS/FD BALANCE AS AT 31.3.2001 2,76,00,000.00 B. LESS: BORROWED FUNDS UTILIZED A) ORIGINAL COST OF EQUIPMENT PURCHASED & GIVEN ON HIRE (F.Y. 1996-97 & 1997-98 B) AMOUNT SETTLED WITH LEGAL HEIRS OF DECEASED PARTNER (F.Y. 1998-99 & 1999-2000 C) AMOUNT BEING UTILIZED FOR DISCOUNTING/FINANCE BUSINESS (BALANCE LYING IN BANK IN CURRENT A/C & FD) 88,04,547.00 93,13,489.00 14,14,495.00 1,95,32,531.00 C) BALANCE AMOUNT WHICH MAY BE CONSIDERED AS INDIRECTLY UTILIZED FOR ACQUIRING SHARES (A-B) 80,67,469.00 D. INTEREST PAID ON LOANS/FD 55,96,024.00 E. PROPORTIONATE INTEREST WHICH MAY BE CONSIDERED AS INDIRECTLY UTILIZED FOR ACQUIRING SHARES (D C/A) 55,96,024X80,67,469 2,76,00,000 16,35,716.00 ITA NO. 1832/M/2013 4 10. WE FIND THAT THE LD. CIT(A) HAS PROPERLY APPREC IATED THE AFORESTATED WORKING OF THE ASSESSEE AND RESTRICTED THE DISALLOWANCE TO RS. 16,35,716/-. WE, THEREFORE DO NOT FIND ANY ERROR O R INFIRMITY IN THE FINDINGS OF THE LD. CIT(A). 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH AUGUST, 2014 SD/- SD/- (S.T.M. PAVALAN ) (N.K. BILLAIYA) #$ / JUDICIAL MEMBER ' #$ / ACCOUNTANT MEMBER MUMBAI; 7# DATED : 25 TH AUGUST, 2014 . . ./ RJ , SR. PS #6 #6 #6 #6 2 22 2 /3 /3 /3 /3 8+3 8+3 8+3 8+3 / COPY OF THE ORDER FORWARDED TO : 1. ,. / THE APPELLANT 2. /0,. / THE RESPONDENT. 3. 9 ( ) / THE CIT(A)- 4. 9 / CIT 5. :; /3 , , / DR, ITAT, MUMBAI 6. ;& < / GUARD FILE. #6 #6 #6 #6 / BY ORDER, 03 /3 //TRUE COPY// = == = / > > > > (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI