ACIT, CHENNAI V. M/s. Lanson Cars P Ltd., CHENNAI

ITA 1890/CHNY/2009

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64562 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 20-11-2012
• Assessment Year: 2003-2004
• Appeal Filed On: 15-12-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T N BETGIRI SR
• Assessee Lawyers: T N SEETHARAMAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI V. DURGA RAO, JUDICIAL MEMBER I.T.A. NO. 1890/MDS/2009 (ASSESSMENT YEAR : 2003-04) THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE II(4), CHENNAI - 600 034. (APPELLANT) V. M/S LANSON CARS P. LTD., 34, PONAMALLEE HIGH ROAD, KOYAMBEDU, CHENNAI - 600 107. PAN : AAACL5983E (RESPONDENT) C.O. NO. 1/MDS/2010 (IN I.T.A. NO. 1890/MDS/2009) (ASSESSMENT YEAR : 2003-04) M/S LANSON CARS P. LTD., 34, PONAMALLEE HIGH ROAD, KOYAMBEDU, CHENNAI - 600 107. (CROSS-OBJECTOR) V. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE II(4), CHENNAI - 600 034. (RESPONDENT) REVENUE BY :SHRI T.N. BETGIRI, SR. AR RESPONDENT BY :SHRI T.N. SEETHARA MAN, ADVOCATE DATE OF HEARING : 20.11.2012 DATE OF PRONOUNCEMENT : 27.11.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THESE ARE APPEAL AND CROSS-OBJECTION FILED BY REV ENUE AND ASSESSEE RESPECTIVELY, DIRECTED AGAINST AN ORDER DA TED 29.9.2009 OF I.T.A. NO. 1890/MDS/09 C.O. NO. 1/MDS/10 2 COMMISSIONER OF INCOME TAX (APPEALS)-III, CHENNAI. REVENUE IS AGGRIEVED REGARDING DELETION OF A DISALLOWANCE OF ` 13,00,844/-. CROSS-OBJECTION IS IN SUPPORT OF THE ORDER OF CIT(A PPEALS). 2. FACTS APROPOS ARE THAT ASSESSEE TRADING IN VEHIC LES AND ACCESSORIES, HAD FILED ITS RETURN FOR IMPUGNED ASSE SSMENT YEAR ON 1.11.2003 DECLARING AN INCOME OF ` 45,68,863/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY THE ASSESSI NG OFFICER THAT ASSESSEE HAD SHOWN AN INTEREST EXPENDITURE OF ` 20,36,129/- IN ITS PROFIT & LOSS ACCOUNT. THE SAID INTEREST WAS SHOWN AS PAYABLE TO ONE M/S KOTAK MAHENDRA P. LTD. ASSESSING OFFICER A LSO NOTED THAT A SUM OF ` 2,01,73,478/- WAS DUE FROM ONE M/S LANSON MOTORS P . LTD., A GROUP CONCERN. AS PER THE A.O., THE ASSESSEE HAS NOT CHARGED INTEREST ON LOAN PROVIDED TO THE SAID M/S LANSON MO TORS P. LTD., WHEREAS, IT HAD PAID INTEREST OF ` 20,36,129/- TO M/S KOTAK MAHENDRA P. LTD. FOR THE LOANS RAISED FROM THEM. AS PER THE A.O., LOANS WERE NOT PROVIDED FROM NON-INTEREST BEARING FUNDS. EXPL ANATION OF THE ASSESSEE WAS SOUGHT. BASED ON SUCH EXPLANATION, AS SESSING OFFICER CAME TO A CONCLUSION THAT A SUM OF ` 13,00,844/-, OUT OF TOTAL INTEREST OF ` 20,36,129/- PAYABLE TO M/S KOTAK MAHENDRA P. LTD., WAS RELATABLE TO INTEREST-FREE FUNDS PROVIDED BY THE AS SESSEE TO M/S I.T.A. NO. 1890/MDS/09 C.O. NO. 1/MDS/10 3 LANSON MOTORS P. LTD. IN THIS VIEW OF THE MATTER, HE MADE A DISALLOWANCE OF ` 13,00,844/-. 3. IN ITS APPEAL BEFORE CIT(APPEALS), ARGUMENT OF T HE ASSESSEE WAS THAT BOTH ASSESSEE AS WELL AS M/S LANSON MOTORS P. LTD. WERE IN THE SAME LINE OF BUSINESS, NAMELY, SELLING CARS. A S PER THE ASSESSEE, WHEN CARS WERE DELIVERED TO CUSTOMERS, BASED ON PRI OR BOOKINGS, SOMETIMES, THE SALES WERE SHOWN BY THE SISTER CONCE RN, IF ASSESSEE WAS NOT HAVING ADEQUATE STOCK. THUS, AS PER THE AS SESSEE, THERE WAS A RUNNING ACCOUNT BETWEEN ASSESSEE AND THE GROU P CONCERN, M/S LANSON MOTORS P. LTD., AND THE AMOUNTS SHOWN DU E FROM THEM, RESULTED OUT OF SUCH RUNNING ACCOUNT AND COULD NOT BE CONSIDERED AS INTEREST-FREE LOAN. FURTHER SUBMISSION WAS THAT M/ S KOTAK MAHENDRA P. LTD., WAS PROVIDING FLOOR FINANCE FOR PURCHASING CARS FROM M/S TOYOTA KIRLOSKAR MOTORS LTD., BOTH TO THE ASSESSEE AS WELL AS M/S LANSON MOTORS P. LTD. SAID M/S KOTAK MAHENDRA P. L TD. HAD APPORTIONED THE INTEREST TO THE ASSESSEE AND GROUP CONCERN M/S LANSON MOTORS P. LTD. IN THE RATIO OF NUMBER OF CAR S FOR WHICH THEY HAD PROVIDED FLOOR FINANCE. THUS, AS PER THE ASSES SEE, WHAT WAS PAID TO M/S KOTAK MAHENDRA P. LTD. WAS NOTHING BUT INTEREST ON FLOOR I.T.A. NO. 1890/MDS/09 C.O. NO. 1/MDS/10 4 FINANCE MADE AVAILABLE BY THE SAID COMPANY FOR PURC HASING CARS FROM M/S TOYOTA KIRLOSKAR MOTORS LTD. 4. CIT(APPEALS) WAS IN AGREEMENT WITH THE CONTENTIO N OF THE ASSESSEE. ACCORDING TO HIM, THE PAYMENTS MADE TO M /S LANSON MOTORS P. LTD. WERE NOT OUT OF ANY BORROWALS FROM M /S KOTAK MAHENDRA P. LTD. ACCORDING TO HIM, M/S KOTAK MAHEN DRA P. LTD. HAD ONLY EXTENDED FLOOR FINANCE AND DEBIT NOTES FOR INT EREST WERE RAISED BY THE SAID COMPANY ON THE ASSESSEE. SUCH FINANCE CHA RGES WERE SHARED BY ASSESSEE AND OTHER SISTER CONCERN M/S LAN SON MOTORS P. LTD. IN THE PROPORTION OF CARS PURCHASED FROM M/S T OYOTA KIRLOSKAR MOTORS LTD. IN ANY CASE, ACCORDING TO HIM, THE MO NEY DUE FROM M/S LANSON MOTORS P. LTD. TO THE ASSESSEE WAS ARISING O UT OF TRANSACTIONS WHICH WERE ALL COMMERCIALLY EXPEDIENT. IN THIS VIE W OF THE MATTER, CIT(APPEALS) DELETED THE ADDITION MADE BY THE ASSES SING OFFICER. 5. NOW BEFORE US, LEARNED D.R., STRONGLY ASSAILING THE ORDER OF CIT(APPEALS), SUBMITTED THAT AN AMOUNT OF ` 2,01,73,478/- WAS ADVANCED BY THE ASSESSEE TO ITS SISTER CONCERN, NAM ELY, M/S LANSON MOTORS P. LTD. FOR WHICH NO INTEREST WAS EVER RECEI VED. AS AGAINST THIS, FOR THE LOANS FROM M/S KOTAK MAHENDRA P. LTD. , ASSESSEE HAD CLAIMED INTEREST PAYMENT OF ` 20,36,129/-. AS PER LEARNED D.R., I.T.A. NO. 1890/MDS/09 C.O. NO. 1/MDS/10 5 ASSESSEE ITSELF HAD ADMITTED BEFORE ASSESSING OFFIC ER THAT THE INTEREST WHICH WARRANTED DISALLOWANCE CAME TO ` 13,00,844/-. IT WAS BASED ON SUCH ADMISSION, THE ASSESSING OFFICER HAD MADE THE ADDITION. RELIANCE WAS PLACED ON THE DECISION OF D ELHI BENCH OF THIS TRIBUNAL IN THE CASE OF ACIT V. PUNJAB STAINLESS ST EEL INDUSTRIES (128 ITD 12). ACCORDING TO HIM, ASSESSEE HAD NO OWN FU NDS FOR GIVING SUCH ADVANCE AND THEREFORE, THE CLAIM OF THE ASSESS EE THAT NO LOAN FUNDS WERE USED FOR THE PURPOSE OF GIVING MONEY TO ITS SISTER CONCERN WAS NOT CORRECT. 6. PER CONTRA, LEARNED A.R. REITERATED THE CONTENTI ON MADE BEFORE THE A.O. HE ALSO BROUGHT TO OUR NOTICE LETTERS FRO M M/S TOYOTA KIRLOSKAR MOTORS LTD., WHO HAD SUPPLIED CARS TO THE ASSESSEE, WHERE IT WAS CLEARLY MENTIONED THAT THE SAID M/S TOYOTA K IRLOSKAR MOTORS LTD. ITSELF HAD ARRANGED FOR FINANCE FROM M/S KOTAK MAHENDRA P. LTD. AS PER LEARNED A.R., FLOOR FINANCE WAS NOTHING BUT FINANCE GIVEN FOR CARS PURCHASED BY THE ASSESSEE FROM M/S TOYOTA KIRL OSKAR MOTORS LTD. THE SHARING PATTERN WAS BASED ON THE PURCHASE QUANTITY. ACCORDINGLY, M/S KOTAK MAHENDRA P. LTD. HAD APPORTI ONED THE INTEREST IN BETWEEN ASSESSEE AND M/S LANSON MOTORS P. LTD. I.T.A. NO. 1890/MDS/09 C.O. NO. 1/MDS/10 6 7. IN REPLY, LEARNED D.R. SUBMITTED THAT IF ON SALE OF CARS, ASSESSEE HAD PAID THE MONEY DUE TO M/S KOTAK MAHEND RA P. LTD., THEN THE LARGE AMOUNT SHOWN AS DUE FROM M/S LANSON MOTORS P. LTD. WOULD NOT HAVE BEEN THERE. 8. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THERE IS NO DISPUTE THAT THE PURCHASE OF CARS FROM M/S TOYOTA KIRLOSKAR MOTORS LTD. WERE FINANCED BY M/S KOTAK MA HENDRA P. LTD. THE SAID M/S KOTAK MAHENDRA P. LTD. HAD OBVIOUSLY M AINTAINED ONLY ONE FOLIO FOR BOTH ASSESSEE AND M/S LANSON MOTORS P . LTD. WE FIND FROM PAPER-BOOK PAGE 6 THAT THE INTEREST FOR THE FL OOR FINANCE PROVIDED BY M/S KOTAK MAHENDRA P. LTD., WAS BIFURCATED BASED ON NUMBER OF CARS PURCHASED BY THE ASSESSEE AND M/S LANSON MOTOR S P. LTD. FROM M/S TOYOTA KIRLOSKAR MOTORS LTD. MIGHT BE IT IS TR UE THAT ON SALE OF THE CARS, ASSESSEE HAD NOT PROMPTLY MADE RE-PAYMENTS OF THE LOANS TAKEN. NEVERTHELESS, IT DOES NOT TAKE OUT THE SHEE N OF THE ARGUMENT OF THE ASSESSEE THAT INTEREST PAID WAS ONLY FOR LOA NS RAISED FOR BUSINESS PURPOSE. BUSINESS OF THE ASSESSEE WAS PUR CHASING AND SELLING OF CARS. ASSESSEE WAS DEALER IN TOYOTA CAR S. THE CARS WERE PURCHASED FROM M/S TOYOTA KIRLOSKAR MOTORS LTD. TH E SAID COMPANY ITSELF HAD ARRANGED M/S KOTAK MAHENDRA P. LTD. FOR FLOOR FINANCE. IN SUCH A SITUATION, IRRESPECTIVE OF THE FACT THAT A L ARGE AMOUNT WAS DUE I.T.A. NO. 1890/MDS/09 C.O. NO. 1/MDS/10 7 TO THE ASSESSEE FROM M/S LANSON MOTORS P. LTD., THE PAYMENT OF INTEREST MADE TO M/S KOTAK MAHENDRA P. LTD. WAS ONL Y FOR PURPOSES OF BUSINESS OF THE ASSESSEE. THE TRANSACTION BETWE EN ASSESSEE AND M/S LANSON MOTORS P. LTD., ITS SISTER CONCERN, HAD NO BEARING ON THE ABOVE CAR PURCHASES. BEING A SISTER CONCERN, THERE MIGHT HAVE BEEN ONGOING TRANSACTIONS BETWEEN THE TWO. HOWEVER, THE DIRECT NEXUS FOR THE INTEREST PAYMENTS MADE BY THE ASSESSEE TO M/S K OTAK MAHENDRA P. LTD. WAS NOTHING BUT THE LOANS RAISED BY THE ASS ESSEE FROM THEM FOR PURCHASING THE CARS AND PURCHASE OF CARS WERE T RADE TRANSACTIONS. IN THIS VIEW OF THE MATTER, WE ARE OF THE VIEW THAT DISALLOWANCE OF ANY PART OF SUCH INTEREST WAS NOT CALLED FOR. 9. VIS--VIS THE CONTENTION OF THE LEARNED D.R. THA T ASSESSEE ITSELF HAD ADMITTED ` 13,00,844/- AS DISALLOWABLE PART OF THE INTEREST, NO DOUBT, ASSESSEE HAD GIVEN A CALCULATION TO THIS EFF ECT IN THE COURSE OF ASSESSMENT PROCEEDINGS TO THE ASSESSING OFFICER. N EVERTHELESS, ALONG WITH THAT, ASSESSEE HAD SUBMITTED A NOTE IN W HICH IT HAD STATED THAT PROPOSAL TO DISALLOW THE PORTION OF INTEREST P AYMENT WAS UNCALLED FOR. JUST BECAUSE ASSESSEE HAD GIVEN A WORK-OUT BA SED ON REQUIREMENT OF ASSESSING OFFICER, WOULD NOT MEAN TH AT ASSESSEE HAD ADMITTED TO THE ADDITION. I.T.A. NO. 1890/MDS/09 C.O. NO. 1/MDS/10 8 10. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISS ED. 11. SINCE THE CROSS-OBJECTION FILED BY THE ASSESSEE IS IN SUPPORT OF THE ORDER OF CIT(APPEALS), THIS BECOMES INFRUCTUOUS AND STANDS DISMISSED. 12. TO SUMMARIZE THE RESULT, BOTH, APPEAL FILED BY THE REVENUE AS WELL AS CROSS-OBJECTION FILED BY THE ASSESSEE ARE D ISMISSED. THE ORDER WAS PRONOUNCED IN THE COURT ON TUESDAY, T HE 27 TH OF NOVEMBER, 2012, AT CHENNAI. SD/- SD/- (V.DURGA RAO) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 27 TH NOVEMBER, 2012. KRI. COPY TO: ASSESSEE/ASSESSING OFFICER/CIT(A)-III, CH ENNAI/ CIT, CHENNAI-I, CHENNAI/D.R./GUARD FILE