ACIT Corporate Circle 2 , Madurai V. Sri Jayajothi Textile Mills Private Limited , Rajapalayam

ITA 1896/CHNY/2017

• Counselvise Citation: [2018] 121 COUNSELVISE.COM (IT) 5249 (ITAT-CHENNAI)
• Duration Of Justice: 8 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-05-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 04-08-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SAILENDRA MAMMIDI
• Assessee Lawyers: V SRIKRISHNAN
• Keywords: Commercial expediency

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH: CHENNAI , , % BEFORE SHRI GEORGE MATHAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER ./ ITA NO.1896/CHNY/2017 /ASSESSMENT YEAR: 2013-14 THE ASST. COMMISSIONER OF- INCOME TAX, CORPORATE CIRCLE-2, MADURAI. VS. M/S. SRI JAYAJOTHI TEXTILE MILLS PVT. LTD., 154, REDDIAPATTI ROAD, KEELARAJAKULARAMAN, RAJAPALAYAM-626 136. [PAN: AABCS 5352 B] ( ' /APPELLANT) ( ()' /RESPONDENT) DEPARTMENT BY : MR.SAILENDRA MAMMIDI, CIT ASSESSEE BY : MR.V.SRIKRISHNAN, CA + /DATE OF HEARING : 02.05.2018 + / DATE OF PRONOUNCEMENT : 02.05.2018 / O R D E R PER GEORGE MATHAN , JUDICIAL MEMBER : ITA NO.1896/CHNY/2017 IS AN APPEAL FILED BY THE RE VENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-1 , MADURAI, IN ITA NO.61/2016-17 DATED 08.05.2017 FOR THE AY 2013-14. 2. SHRI SAILENDRA MAMMIDI, CIT, REPRESENTED ON BEHA LF OF THE REVENUE AND SHRI V. SRIKRISHNAN, CA, REPRESENTED ON BEHALF OF THE ASSESSEE. ITA NO.1896/CHNY/2017 :- 2 -: 3. IN THE REVENUES APPEAL, THE REVENUE HAS RAISED THE FOLLOWING GROUNDS: 1. THE ORDER OF THE CIT(A) IS OPPOSED TO LAW ON THE FA CTS AND IN THE CIRCUMSTANCES OF THE CASE. 2. THE CIT(A) ERRED IN DELETING THE ADDITION OF RS.7,5 4,67,359/- MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THERE IS NO SC OPE FOR ADDITION AS ADVANCE BY THE ASSESSEE TO ITS SISTER CONCERN HAS BEEN MADE ONLY AS A MEASURE OF COMMERCIAL EXPEDIENCY. 3. THE CIT(A) OUGHT TO HAVE SEEN THAT THE TOTAL BORROW ING OF THE ASSESSEE EXCEEDS THE RESERVES AND SURPLUS OF RS.46.19 CRORES EVIDENCING THAT THE BORROWED FUNDS WERE UTILIZED FOR MAKING INTEREST FR EE ADVANCE TO THE SISTER CONCERN AND THE AO HAS CORRECTLY ADOPTED INTEREST A T 12% FOR MAKING DISALLOWANCE ON THE GROUND THAT THE BORROWED FUNDS WERE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ASSESSEES BUSIN ESS AND HENCE OUGHT TO HAVE SUSTAINED THE ADDITION MADE BY THE ASSESSING O FFICER. 4. FOR THESE AND SUCH OTHER GROUNDS THAT MAY BE ADDUCE D AT THE TIME OF HEARING IT IS PRAYED THAT THE ORDER OF THE CIT(A) MAY BE RE VERSED AND THAT OF THE ASSESSING OFFICER RESTORED. 4. IT WAS SUBMITTED BY THE LD.DR THAT THE ASSESSEE IS A COMPANY WHICH IS DOING THE BUSINESS OF MANUFACTURING TEXTILES. D URING THE RELEVANT ASSESSMENT YEAR, THE ASSESSEE HAD MADE ADVANCES TO SISTER CONCERN, M/S.SREE ISWARYA TEXTILES MILLS PVT. LTD., TO AN E XTENT OF RS.53.16 CRS. AND FOR THE PERIOD FROM THE ASSESSMENT YEAR 2007-08 TO 2013-14, THE TOTAL ADVANCES WAS MADE TO AN EXTENT OF RS.114.75 C RS. THE ASSESSEES RESERVES AND SURPLUS WAS ONLY RS.46.19 CRS. IT WAS A SUBMISSION THAT NO INTEREST HAD BEEN CHARGED. CONSEQUENTLY, THE AO HA D MADE A DISALLOWANCE @12% ON THE ADVANCES MADE TO SISTER CO NCERN. IT WAS A SUBMISSION THAT THE LD.CIT(A) HAD DELETED THE SAME BY ACCEPTING THE CLAIM OF COMMERCIAL EXPEDIENCY. IT WAS A SUBMISSIO N THAT THE ORDER OF THE LD.CIT(A) WAS LIABLE TO BE REVERSED. ITA NO.1896/CHNY/2017 :- 3 -: 5. IN REPLY, THE LD.AR SUBMITTED THAT THE ADVANCES HAD BEEN GIVEN TO M/S.SREE ISWARYA TEXTILES MILLS PVT. LTD., FOR THE PURPOSE OF SETTING UP OF WINDMILL FARM. THE ASSESSEE HAD ALSO ENTERED INTO TRI-PARTY AGREEMENT WITH THE SAID SISTER CONCERN FOR THE USE OF THE POW ER GENERATED BY THE WIND FARMS OF M/S.SREE ISWARYA TEXTILES MILLS PVT. LTD. IT WAS A SUBMISSION THAT THE PURCHASE OF THE POWER HELPED TH E ASSESSEE IN LOWERING ITS COST AS ALSO IN HAVING UNINTERRUPTED P OWER SUPPLY. IT WAS A SUBMISSION THAT THERE WAS SEVERE POWER CRISIS IN TA MIL NADU PRIOR TO 2013 AND THE ENTIRE POWER GENERATED BY M/S.SREE ISWARYA TEXTILES MILLS PVT. LTD., WAS CONSUMED BY THE ASSESSEE FOR RUNNING THE TEXTILE MILLS. IT WAS A SUBMISSION THAT THE SISTER CONCERN WAS A SUBSIDIARY AND UNDER THE CONTROL OF THE ASSESSEE COMPANY AND CONSEQUENTLY, THE LD.CI T(A) HAD RIGHTLY DELETED THE DISALLOWANCE BY APPLYING THE PRINCIPLES LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF M/S.SA BUILDER S LTD., REPORTED IN 288 ITR 1. THE LD.AR VEHEMENTLY SUPPORTED THE ORDE R OF THE LD.CIT(A). 6. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. 7. A PERUSAL OF THE ORDER OF THE LD.CIT(A) CLEARLY SHOWS THAT THE LD.CIT(A) HAS TAKEN INTO CONSIDERATION THE FACT OF THE COMMERCIAL EXPEDIENCY IN RESPECT OF PROVIDING INTEREST FREE LO ANS BY THE ASSESSEE TO ITS SISTER CONCERN. IN FACT, A PERUSAL OF THE ASSE SSMENT ORDER CLEARLY SHOWS THAT THIS ISSUE WAS ALSO BEFORE THE AO AND IN PAGE NO.3 OF THE ASSESSMENT ORDER, THE AO HAS RECOGNIZED THAT THE AS SESSEE HAS DONE A ITA NO.1896/CHNY/2017 :- 4 -: TOTAL VALUE OF POWER PURCHASED FROM M/S.SREE ISWARY A TEXTILES MILLS PVT. LTD., FROM 2006 TO 2013 AT RS.53.16 CRS. THIS BEIN G SO, CLEARLY THE ADVANCE HAS BEEN GIVEN ONLY FOR THE PURPOSE OF COMM ERCIAL EXPEDIENCY. FURTHER, AS THE REVENUE HAS NOT BEEN ABLE TO DISLOD GE ANY OF THE FINDINGS ON THE FACT AS ARRIVED BY THE LD.CIT(A) IN HIS ORDE R, WE FIND NO REASON TO INTERFERE IN THE SAME. CONSEQUENTLY, THE FINDINGS OF THE LD.CIT(A) ON THIS ISSUE STANDS CONFIRMED. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON MAY 02, 2018 , AT CHENNAI. SD/- SD/- ( ) ( S. JAYARAMAN ) /ACCOUNTANT MEMBER ( ) (GEORGE MATHAN) /JUDICIAL MEMBER /CHENNAI, 0 /DATED: MAY 02, 2018. TLN + (12 32 /COPY TO: 1. ' /APPELLANT 4. 4 /CIT 2. ()' /RESPONDENT 5. 2 ( /DR 3. 4 ( ) /CIT(A) 6. /GF