Income Tax Officer -1, RAJNANDGAON V. M/s. Radius Water Limited, RAJNANDGAON

ITA 195/BIL/2011

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 9078 (ITAT-RAIPUR)
• Duration Of Justice: 6 year(s) 2 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 19-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K JAIN
• Assessee Lawyers: P C MALOOABHISEK MALOO JAIN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAIPUR BENCH, RAIPUR BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 195/RPR/2011 ASSESSMENT YEAR : 2008-09 INCOME TAX OFFICER-1, RAJNANDNGAON, C.G. VS. M/S. RADIUS WATER LTD., VERDHAMAN NAGAR, |RAJNANDGAON, .C.G. PAN/GIR NO.AABCR 5617 G (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI P.C.MALOO/ABHISEK MALOO JAIN, AR REVENUE BY : SHRI D.K.JAIN, DR DATE OF HEARING : 08/01/ 2018 DATE OF PRONOUNCEMENT : 10/01/ 2018 O R D E R PER PAVAN KUMAR GADALE, JM THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE OR DER OF THE CIT(A)- RAIPUR, DATED 14.7.2011 FOR THE ASSESSMENT YEAR 2008-0 9. 2. GROUND NO.1 OF APPEAL READS AS UNDER: WHETHER IN LAW AND ON FACTS AND CIRCUMSTANCES OF THE CASE, THE CIT(A) WAS RIGHT IN DELETING THE ADDITION OF RS.6,00, 000/- MADE BY THE AO BY TREATING AGRICULTURAL INCOME AS OTHER INCO ME AS THE ASSESSEE FAILED TO SUBSTANTIATE THE SAME PROPERLY. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE COMPANY I S ENGAGED IN THE BUSINESS OF WATER SUPPLY TO INDUSTRIES SITUATED IN B ORAL INDUSTRIAL GROWTH 2 ITA NO. 195/RPR/2011 ASSESSMENT YEAR : 2008-09 CENTRE UNDER BOOT AGREEMENT. THE ASSESSEE HAS FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME OF RS.6,48,400/- AND AGRICULTURA L INCOME OF RS.6,00,000/-. DURING THE COURSE OF ASSESSMENT PROCEEDING S, THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS CLAIMED A RECEIPT OF RENT OF RS.6,00,000/-[ FROM LETTING OUT THE PLOT TO ITS HOLDI NG COMPANY, M/S. RADIUS CORPORATION LTD. THE LESSER COMPANY HAS CARRIED PLANTAT ION WORKS AND THE INCOME DERIVED THEREFROM WAS CLAIMED EXEMPT AS AGRICULTU RAL INCOME. THE ASSESSING OFFICER WAS OF THE VIEW THAT SINCE THE ASSESSEE DOES N OT FULFILL THE CONDITIONS FOR TERMING THE INCOME AS AGRICULTURAL INCOME , THEREFORE, HE TREATED THE INCOME OF RS.6,00,000/- AS INCOME FROM OTH ER SOURCES AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. 4. ON APPEAL, THE CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. 5. BEING AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 6. BEFORE US, LD D.R. SUBMITTED THAT THE ASSESSEE HAS GIV EN THE LAND TO ITS SISTER CONCERN AND RECEIVED RENT OF RS.6,00,000/-, WH ICH CANNOT BE TERMED AS AGRICULTURAL INCOME AS CLAIMED BY THE ASSESSEE. 7. LD A.,R. OF THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A) AND SUBMITTED THAT THE INCOME OF THE SISTER CONCERN I.E. M/S . RADIUS CORPORATION 3 ITA NO. 195/RPR/2011 ASSESSMENT YEAR : 2008-09 LTD., IS ASSESSED AS AGRICULTURAL INCOME BY THE SAME ASSESSI NG OFFICER, AS IN THE CASE OF THE PRESENT ASSESSEE AND THE CIT(A) HAS GIVEN CL EAR CUT FINDING IN THE IMPUGNED ORDER BY TREATING THE INCOME AS AGRI CULTURAL INCOME 8. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE OR DERS OF LOWER AUTHORITIES AND MATERIALS AVAILABLE ON RECORD. WE FIN D THAT THE CIT(A) IN PARA 4.3 OF HIS ORDER HAS GIVEN A CLEAR CUT FINDING TH AT THE INCOME OF RS.6,00,000/- DERIVED BY THE ASSESSEE FROM ITS SISTER CONCER N IS AGRICULTURAL INCOME, BY OBSERVING AS UNDER; I HAVE GONE THROUGH THE ORDER OF THE A.O. AND THE SUBMISSION MADE BY THE APPELLANT. THE APPELLANT HAS DERIVED REN T OF RS.6,00,000/- FROM LETTING OUT OF PLOT TO ITS HOLDING COMPANY AND CLAIMED IT AS AGRICULTURE INCOME TO WHICH THE A.O. HAD T REATED AS 'OTHER INCOME'. THE A.O. HAD NOT STATED THE CONDITIONS WHICH HAD NOT BEEN FULFILLED BY THE APPELLANT TO CLAIM THE INCOME AS AGRICULTURE INCOME. AGRICULTURAL INCOME HAS BEEN DEFINE D BY SECTION 2(1A) WHICH MEANS ANY RENT OR REVENUE DERIVED FROM LAND WHICH IS SITUATED IN INDIA AND IS USED FOR AGRICULT URAL PURPOSES IS AGRICULTURAL INCOME. IN THE PRESENT CASE, TH E APPELLANT HAS LEASED OUT ABOUT 40 ACRES OF LAND ON LEASE RENT OF RS.6,00,000/- PER ANNUM. THE LAND WAS USED BY THE LESSEE COMPANY FOR AGRICULTURAL PURPOSES AND THE INCOME DERIVED FROM SUCH LAND WAS ASSESSED AS AGRICULTURAL INCOME BY THE SAME A.O. BY ASSESSMENT ORDER OF EVEN DATE. THUS, THE CONDITIONS PRESCRIBED BY SECTION 2(1A) THAT THERE SHOULD BE RENT OR REVENUE DERIVED FROM LAND AND THE LAND SHOULD BE USED FOR AGR ICULTURAL PURPOSES HAVE BEEN FULLY COMPLIED WITH. THE A.O. HAS NO T MENTIONED ANY REASON FOR HOLDING THAT THE APPELLANT COMPANY HAS NOT COMPLIED ANY OF THE CONDITIONS PRESCRIBED BY SECTI ON 2(1A). THE CASE LAW RELIED UPON BY THE A.O. IS NOT AP PLICABLE ON 4 ITA NO. 195/RPR/2011 ASSESSMENT YEAR : 2008-09 THE FACTS OF PRESENT CASE. IN THAT CASE, I.E., PAPAYA FARM S (P) LTD. VS DCIT (2010) 46 DTR 367(MAD) AGRICULTURAL OPERATIO NS ON LAND WERE NOT ESTABLISHED. THE CASE LAW RELIED UPON BY THE APPELLANT SUPPORT THE VIEW ADVANCED BY THE APPELLANT. IN CASE OF COMMISSIONER -OF INCOME TAX VS. HAROOCHARAI TEA COMPANY 1977 CTR (GAU) 229 : (1978) 111 ITR 495 (GA U), IT WAS HELD THAT ASSESSEE ENGAGED IN GROWING AND MANUFACTUR ING OF TEA. LEASE GIVEN TO A FIRM FOR 10 YEARS FOR MANAGI NG THE TEA ESTATE. LEASE RENT RECEIVED ALSO COMES WITHIN THE DEFINIT ION OF AGRICULTURAL INCOME WHICH IS EXCLUDED IN COMPUTING TOTAL INCOME UNDER S,10(1)- SUCH INCOME DERIVED IN PART FROM AGRICU LTURE AND PART FROM BUSINESS WITHIN THE MEANING OF R.W RELEASE RE NT ASSESSABLE AT THE RATE OF 40 PER CENT. IN VIEW OF ABOVE FACT, I AM OF THE CONSIDERED OPINION THAT THE APPELLANT HAD D ULY COMPLIED WITH THE CONDITION LAID DOWN BY SECTION 2(1A ) I.E. THE APPELLANT HAD RECEIVED A RENT OR ANY REVENUE FROM LA ND AND THE LAND HAS BEEN USED FOR AGRICULTURAL PURPOSES. CONSIDERIN G THE FACTS OF THE CASE, THE ADDITION MADE BY THE AO CANNOT BE SUSTAINED SINCE THERE IS NO POSITIVE MATERIAL TO HOLD THA T THE LEASE RENT RECEIVED BY THE APPELLANT IS NOT AN AGRICUL TURAL INCOME. THEREFORE, THE ADDITION MADE BY THE AO IS DE LETED. 9. LD D.R. COULD NOT CONTROVERT THE ABOVE FINDINGS O F THE CIT(A). SINCE THE INCOME OF THE SISTER CONCERN IS ASSESSED AS AGRICULTURAL IN COME BY THE SAME ASSESSING OFFICER, A CONTRARY VIEW CANNOT BE TAKEN BY THE SAME ASSESSING OFFICER TO THE SAID INCOME, WHICH HAS EARNED IN TH E CASE OF THE ASSESSEE. THEREFORE, WE CONFIRM THE ORDER OF THE CIT(A) ON THIS ISSUE AND REJECT THE GROUND OF APPEAL OF THE REVENUE. 10. GROUND NO.2 OF APPEAL READS AS UNDER: 5 ITA NO. 195/RPR/2011 ASSESSMENT YEAR : 2008-09 WHETHER IN LAWS AND ON FACTS & CIRCUMSTANCES OF THE CASE, T HE CIT(A) WAS RIGHT IN DELETING DISALLOWANCE OF RS.27,56, 474/- MADE BY THE AO ON ACCOUNT OF EXCESS INTEREST PAID THAN IT HAD CHARGED FROM ITS HOLDING COMPANY. 11. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE COMPANY H AS CHARGED INTEREST @ 9% TO RADIUS CORPORATION LTD., FOR BELATED PAYMENT WHERE AS ASSESSEE HAS MADE INTEREST PAYMENT TO ITS BANK @ 1 2.5%. IN VIEW OF ABOVE BACKDROP, THE ASSESSING OFFICER DISALLOWED THE EXCESS PAYMENT OF INTEREST OF 3.5% TO ITS BANK THAN THE INTE REST RECEIVED FROM ITS SISTER CONCERNED. 12. ON APPEAL, THE CIT(A) DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSING OFFICER HAS NOT M ADE OUT A CASE THAT THE LOAN HAS BEEN OBTAINED FOR NON-BUSINESS PURPO SES. 13. LD D.R. SUPPORTED THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE ASSESSEE HAS MADE EXCESS PAYMENT OF INTEREST TO THE BANK THAN THE INTEREST RECEIVED FROM ITS SISTER CONCERNED AND, THEREFOR E, THE CIT(A) HAS ERRED IN DELETING THE ADDITION WITHOUT CONSIDERING T HE FACTS THAT THE ASSESSEE COMPANY AND THE SISTER CONCERN ARE HAVING SEPARATE PERCENT AGE OF SHAREHOLDING, WHICH THE ASSESSING OFFICER HAS CONSIDERED IN HIS ORDER. 14. LD D.R. SUBMITTED THAT THOUGH THE ASSESSEE AND M/S. R ADIUS CORPORATION LTD., ARE SISTER CONCERN BUT THEIR BUSINESS AC TIVITIES AND INTEREST 6 ITA NO. 195/RPR/2011 ASSESSMENT YEAR : 2008-09 COMPONENT IS PART OF COMMERCIAL ASPECTS AND ALSO RELIED ON THE FINDINGS OF THE CIT(A). 15. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND PERUSING T HE ORDERS OF LOWER AUTHORITIES, WE FIND THAT THE CIT(A) HAS DELETE D THE ADDITION BY OBSERVING AS UNDER: I HAVE GONE THROUGH THE ORDER OF THE A.O. AND THE SUBMISSION MADE BY THE APPELLANT. PERUSAL OF ASSESSMENT ORDER REVEA LS THAT INTEREST HAS BEEN DISALLOWED FOR THE REASON THAT THE AP PELLANT HAS PAID INTEREST TO BANKS @12.5% P.A.; WHEREAS HE HAS CHARGED INTEREST TO SISTER CONCERN @9% P.A.. THE APPELLAN T HAS CONTENDED THAT THE A.O. HAD OVER LOOKED THE FACT THAT TRANSACTION IS FOR CONSIDERATION OF PROFIT AND NOT FOR ACCOMMODATION OF FUNDS WITHOUT CONSIDERATION. THERE IS PR IMA- FACIE NEXUS BETWEEN THE BORROWING AND THE BUSINESS PURPO SE. THE A.O. HAS NOT PROVED THAT THE LOAN HAS BEEN OBTAIN ED FOR NON BUSINESS PURPOSES. THE CONTENTION OF THE APPELLANT IS ACC EPTED. INTEREST IS ALLOWABLE U/S 36(L)(III), IF THE BORROWING IS FOR THE PURPOSE OF BUSINESS. THE A.O. HAS NOT LOOKED INTO THE N ATURE OF TRANSACTION, WHETHER IT IS A LOAN OR ADVANCE OR A TRADI NG TRANSACTION. THIS IS A CASE OF TRADING TRANSACTIONS BETWEEN TWO COMPANIES AND NOT ADVANCEMENT OF ANY LOAN. IT IS UNDIS PUTED FACT THAT THE TRADING TRANSACTION CANNOT BE TREATED AS F OR NON BUSINESS PURPOSES AND, THEREFORE, EVEN IF THE APPELLANT HAS NOT CHARGED ANY INTEREST ON TRADE DEBTORS, NO INTEREST PAYM ENT CAN BE DISALLOWED. IN PRESENT CASE, THE APPELLANT HIMSELF HA S CHARGED INTEREST ON TRADE DEBT @9% P.A. THUS, THE APPE LLANT HAS EARNED PROFIT ON TRADING TRANSACTION AS WELL AS EARNED INTEREST FOR DELAYED PAYMENT. IN VIEW OF THIS FACT, IT CANNOT BE SAI D THAT THE PAYMENT OF INTEREST SOUGHT TO BE DISALLOWED IS FOR NON BUSINESS PURPOSES. IN CASE OF CIT VS. INDO KOPP LTD. (2008) 167 T AXMAN 172 (DEL.), IT HAS BEEN HELD THAT CONSIDERATION FOR PAYING INTEREST 7 ITA NO. 195/RPR/2011 ASSESSMENT YEAR : 2008-09 TO TRADE CREDITORS AND FOR NOT CHARGING INTEREST FROM T HE TRADE DEBTORS CAN BE DIFFERENT AND, THEREFORE, JUST BECAUSE TH E ASSESSEE HAS NOT CHARGED INTEREST FROM ITS TRADE DEBTORS, INTEREST PAID BY IT TO ITS TRADE CREDITORS COULD NOT BE DISALLOWED AS A DEDUCTION ESPECIALLY WHEN THERE IS NO DISPUTE ABOUT THE GENUINENESS OF THE PAYMENT. IN CASE OF CITY MOTOR SERVI CE LTD. VS. CIT (1966) 61 ITR 426 (MAD.), IT HAS BEEN HELD TH AT WHEN THE LOAN IS ADVANCED IN THE COURSE OF BUSINESS MERELY BECAU SE INTEREST OF SUCH ADVANTAGES MADE TO DEBTORS HAVE BEEN W AIVED SUBSEQUENTLY, INTEREST PAID BY THE ASSESSEE ON BORROWED M ONEY CANNOT BE DISALLOWED AS LONG AS BORROWAL IS FOR THE PURP OSE OF BUSINESS. IN VIEW OF ABOVE FACTS AND THE LEGAL POSITION, I AM OF THE CONSIDERED OPINION THAT THE A.O. HAS NOT ESTABLISHED THE UTILIZATION OF FUNDS FOR NON BUSINESS PURPOSES AND, THE REFORE, DISALLOWANCE OF INTEREST AMOUNTING TO RS.27,56,474/- CAN NOT BE SUSTAINED AND SAME IS HEREBY DELETED. 16. LD D.,R. COULD NOT CONTROVERT THE ABOVE FINDINGS O F THE LD CIT(A) OR SHOW ANY JUSTIFIED REASON TO TAKE ANY CONTRARY VIEW IN THE MATTER. HENCE, WE CONFIRM THE FINDINGS OF THE CIT(A) AND ALSO DISMISS TH E GROUND OF APPEAL OF THE REVENUE. 17. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DIS MISSED. ORDER PRONOUNCED ON 10/01/2018. SD/- SD/- (N.S SAINI) ( PAVAN KUMAR GADALE) ACCOUNTANT MEMBER JUDICIALMEMBER RAIPUR; DATED 10 /01/2018 B.K.PARIDA, SPS 8 ITA NO. 195/RPR/2011 ASSESSMENT YEAR : 2008-09 COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, RAIPUR 1. THE APPELLANT : INCOME TAX OFFICER-1, RAJNANDNGAON, C.G 2. M/S. RADIUS WATER LTD., VERDHAMAN NAGAR, |RAJNANDGAON, .C.G. 3. THE CIT(A)- RAIPUR 4. PR.CIT- RAIPUR 5. DR, ITAT, RAIPUR 6. GUARD FILE. //TRUE COPY//