Deepak Chimniram Heda, Amaravati V. ITO WARD-2, Amaravati

ITA 195/NAG/2017

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 4246 (ITAT-NAGPUR)
• Duration Of Justice: 5 year(s) 3 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-09-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 31-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, NAGPUR (AT e-Court, PUNE) BEFORE SHRI R.S. SYAL, VICE PRESIDENT आयकर अपील सं. /ITA No.195/NAG/2017 नधा रण वष / Assessment Year : 2012-13 Deepak Chimniram Heda, Pratap Chowk, Inside Jawahar Gate, Amravati – 444 601 PAN : AACPH5809E Vs. ITO, Ward-2, Amravati Appellant Respondent आदेश / ORDER PER R.S. SYAL, VP: This appeal by the assessee arises out of the order passed by the Commissioner of Income-tax (Appeals)-1, Nagpur on 20-03-2017 in relation to the assessment year 2012-13. 2. The first issue raised in this appeal is against the confirmation of disallowance of interest amounting to Rs.3,34,320/-. Assessee by Shri Mahavir Atal Revenue by Shri G.J. Ninawe Date of hearing 21-09-2022 Date of pronouncement 22-09-2022 ITA No. 195/NAG/2017 Deepak Chimniram Heda 2 3. The facts apropos this addition are that the assessee showed interest free loans given to the tune of Rs.3,38,58,971/- and received interest free loans at Rs.2,48,17,687/-. The AO computed the excess of interest free loans advanced at Rs.90,41,284/- over the interest free loans received. Applying 12% rate of interest on such excess of interest free loans of Rs.90.41 lakh, the AO worked out the addition of Rs.10,84,954/-. The ld. CIT(A) allowed part relief and restricted the addition to Rs.3,34,320/- by applying 12% rate of interest on certain loans and advances made to persons other than the family members. Aggrieved by the partial relief given by the ld. CIT(A), the assessee has approached the Tribunal. 4. After considering the rival submissions and perusing the relevant material on record, it is seen that the assessee contended before the ld. CIT(A), as has been reproduced on page 3 of the impugned order, that his own capital was Rs.93.00 lakh and unsecured interest free loans were to the tune of Rs.2.48 crore making total of interest free funds available at the assessee’s disposal at Rs.3.41 crore. As against that, the AO took the total amount of interest free loans given by the assessee at ITA No. 195/NAG/2017 Deepak Chimniram Heda 3 Rs.3,38,58,971/-. This shows that as against interest free funds available with the assessee to the tune of Rs.3.41 crore, the assessee made interest free loans of Rs.3.38 crore. To put it simply, the AO made the addition by considering interest free loans advanced at Rs.90.41 lakh without considering the assessee’s own capital standing at Rs.93.00 lakh. As such, the capital remained to be considered as available for advancing interest free loans. 5. The Hon'ble Bombay High Court in CIT vs. Reliance Utilities and Power Ltd. (2009) 313 ITR 340 (Bom), has held that where an assessee possessed sufficient interest free funds of its own which were generated in the course of relevant financial year, apart from substantial shareholders’ funds, presumption gets established that the investments in sister concerns were made by the assessee out of interest free funds and, therefore, no part of interest on borrowings can be disallowed on the basis that the investments were made out of interest bearing funds. In reaching this conclusion, the Hon’ble High Court relied on the judgment of the Hon’ble Supreme Court in the case of East India Pharmaceutical Works Ltd. Vs. CIT (1997) 224 ITR 627 (SC). Similar view has been taken by the ITA No. 195/NAG/2017 Deepak Chimniram Heda 4 Hon'ble Dehi High Court in CIT vs. Tin Box Company (2003) 260 ITR 637 (Del), holding that when the capital and interest free unsecured loan with the assessee far exceeded the interest free loan advanced to the sister concern, disallowance of part of interest out of total interest paid by the assessee to the bank was not justified. More recently, the Hon’ble Supreme Court in CIT(LTU) VS. Reliance Industries Ltd. (2019) 410 ITR 466 (SC) has reiterated the same view. 6. When I examine the amount of excess interest free advances made at Rs.90.41 lakh, as against the availability of the assessee’s own capital at Rs.93.00 lakh, it becomes evident that the amount of such advances is less than the amount of interest free funds available with the assessee. I, therefore, order to delete the addition of Rs.3,34,320/-made on this count. 7. The only other ground which survives in this appeal is against the confirmation of addition of Rs.60,000/- out of Labour expenses. The assessee declared Labour expenses at Rs.2,40,000/- During the course of assessment proceedings, the assessee initially admitted that the vouchers were not available, however, on a later ITA No. 195/NAG/2017 Deepak Chimniram Heda 5 date, the assessee produced certain vouchers. The AO added back the amount of Rs.2,40,000/-. The ld. CIT(A) observed that the vouchers produced by the assessee on the later part of the assessment proceedings were self-made. He, therefore, reduced the disallowance to 25% of the amount of expense claimed. Aggrieved thereby, the assessee has come up in appeal before the Tribunal. 8. After considering the rival submissions, it is seen that the assessee made Labour payments at Rs.2.40 lakh but proper vouchers were not maintained, backed by relevant evidence. The assessee initially accepted that the relevant vouchers were not available. However, later on, the assessee furnished certain self- made vouchers. In view of the fact that the Labour payment of Rs.2.40 lakh is not properly backed by the relevant outside evidence, I am of the considered opinion that it would be just and fair if the addition is restricted to 10% of total Labour payment in the given peculiar facts and circumstances of the case. Thus, the addition is reduced from Rs.60,000/- to Rs.24,000/-. ITA No. 195/NAG/2017 Deepak Chimniram Heda 6 9. In the result, the appeal is partly allowed. Order pronounced in the Open Court on 22 nd day of September, 2022 - Sd/- (R.S.SYAL) VICE PRESIDENT प ु णे Pune; दनांक Dated : 22 nd September, 2022 Satish आदेश क त ल प अ े षत/Copy of the Order is forwarded to: 1. अपीलाथ / The Appellant; 2. यथ / The Respondent; 3. The CIT(A)-1, Nagpur 4. 5. The Pr.CIT-1, Nagpur िवभागीय ितिनिध, आयकर अपीलीय अिधकरण, Nagpur / DR, Nagpur 6. गाड फाईल / Guard file आदेशान ु सार/ BY ORDER, // True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune ITA No. 195/NAG/2017 Deepak Chimniram Heda 7 Date 1. Draft dictated on 21-09-2022 Sr.PS 2. Draft placed before author 22-09-2022 Sr.PS 3. Draft proposed & placed before the second member JM 4. Draft discussed/approved by Second Member. JM 5. Approved Draft comes to the Sr.PS/PS Sr.PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *