M/s Karam Udyog, Agra V. A.C.I.T., Circle-1, Agra

ITA 196/AGR/2013

• Counselvise Citation: 19620314 RSA 2013
• Duration Of Justice: 2 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 21-08-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 10-06-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KK MISHRA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI A.L. GEHLOT, ACCOUNTANT MEMBER ITA NO.196/AGRA/2013 ASSESSMENT YEAR: 2008-09 KARAM UDYOG, VS. ASSTT. COMMISSIONER OF INCOME TAX, 9, GAILANA ROAD, CIRCLE-1, AGRA. AGRA. (PAN : AABFK 0897 L). (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUSHIL MAHESHWARI, C.A. RESPONDENT BY : SHRI K.K. MISHRA, JR. D.R. DATE OF HEARING : 21.08.2013 DATE OF PRONOUNCEMENT : 23.08.2013 ORDER PER A.L. GEHLOT, ACCOUNTANT MEMBER: THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER DATED 30.01.2013 PASSED BY THE LD. CIT(A)-I, AGRA FOR THE A.Y. 2008- 09. 2. THE EFFECTIVE GROUND RAISED IN THE APPEAL IS IN RESPECT OF CONFIRMING DISALLOWANCE OF RS.3,12,500/- UNDER SECTION 36(1)(I II) OF THE INCOME TAX ACT, 1961 (THE ACT HEREINAFTER). 2 ITA NO.196/AGRA/2013 A.Y. 2008-09 3. THE BRIEF FACTS OF THE CASE ARE THAT DURING THE ASSESSMENT PROCEEDINGS THE A.O. NOTICED THAT THE ASSESSEE HAS GIVEN INTEREST-F REE FUNDS TO THE FOLLOWING PARTIES:- (1) UPSIDC RS.3782202/- (2) MANJEET SINGH RS.250000/- (3) SH. VISHNU TRADERS (P) LTD. RS.146000/- (4) M.N. STOCK & SHARES SERVICES PVT. LTD. RS.15000 00/- (5) KARAM IMPEX PVT. LTD. RS.1100000/- 4. THE A.O. CALCULATED THE AMOUNT OF DISALLOWANCE O F INTEREST ON THE ABOVE AMOUNTS APPLYING 12% RATE OF INTEREST AND ADDITION OF RS.7,56,037/- WAS MADE. THE CIT(A), AFTER CONSIDERING THE ASSESSEES SUBMIS SION AND REMAND REPORT, FOUND THAT THE AMOUNTS OF RS.37,82,202/- TO UPSIDC, RS.2 ,50,000/- TO MANJEET SINGH AND RS.1,46,000/- TO VISHNU TRADERS (P) LTD. WERE G IVEN BY THE ASSESSEE FOR THE PURPOSE OF BUSINESS. THE CIT(A) FOUND THAT THE ASS ESSEE WAS ABLE TO PROVE THAT THE AMOUNT TO UPSIDC WAS GIVEN FOR PURCHASE OF LEASEHOL D PROPERTY AT EXPORT PROMOTION ZONE, AGRA AND ADVANCE GIVEN TO MANJEET S INGH WAS FOR THE PURPOSE OF PURCHASING FACTORY LAND AND ADVANCE GIVEN TO VISHNU TRADERS (P) LTD. WAS FOR PROCURING FOOTWEAR SOLES. THE CIT(A) HELD THAT WHE N THE ADVANCES WERE GIVEN FOR THE PROPOS OF BUSINESS, THE DISALLOWANCE CANNOT BE MADE UNDER SECTION 36(1)(III) OF THE ACT. HOWEVER, THE CIT(A) FOUND THAT THE AMOUNT OF RS.15,00,000/- TO M.N. STOCK & SHARES SERVICES PVT. LTD. AND RS.11,00,000/ - TO KARAM IMPEX PVT. LTD. WAS NOT GIVEN FOR THE PURPOSE OF BUSINESS. THESE A MOUNTS WERE GIVEN TO THESE 3 ITA NO.196/AGRA/2013 A.Y. 2008-09 PARTIES FOR THE PURPOSE OF BUYING SHARES AND NOT FO R THE PURPOSE OF BUSINESS. THE CIT(A) SUSTAINED THE ADDITION ON THESE AMOUNTS OF W HICH CALCULATION COMES TO RS.3,12,000/-. 5. THE LD. AUTHORISED REPRESENTATIVE REITERATED THE SUBMISSIONS MADE BEFORE THE CIT(A) INCLUDING THE JUDGEMENTS AND ORDERS CITE D BEFORE THE CIT(A) IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWER LIMITED, 313 ITR 340 (BOM.), CIT VS. PREM HEAVY ENGINEERING WORKS PVT. LTD., 285 ITR 554 (ALL.), ITAT, AGRA BENCH ORDER IN THE CASE OF LALA RAM FINANCE & INVESTMENT VS. DCIT IN ITA NO.260 & 261/AGR/2011, ORDER DATED 08.06.2012 AND ORDER OF I TAT, AGRA BENCH IN THE CASE OF M/S. PEE CEE SOAP & CHEMICALS (P) LTD VS. ADDL. CIT IN ITA NO.236/AGR/2011, ORDER DATED 20.04.2012. 6. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHE R HAND, RELIED UPON THE ORDER OF CIT(A). THE LD. DEPARTMENTAL REPRESENTATI VE ALSO RELIED UPON THE JUDGEMENT OF HONBLE ALLAHABAD HIGH COURT IN THE CA SE OF CIT VS. H.R. SUGAR FACTORY (P) LTD., 187 ITR 363 (ALL.) AND MADHAV PRA SAD JATIA VS. CIT, 118 ITR 200 (SC). 7. WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PAR TIES AND RECORDS PERUSED. WE FIND THAT THE ORDERS CITED BY THE LD. DEPARTMENT AL REPRESENTATIVE ARE 4 ITA NO.196/AGRA/2013 A.Y. 2008-09 DISTINGUISHABLE ON FACTS AS IN THE CASE OF CIT VS. H.R. SUGAR FACTORY (P) LTD., 187 ITR 363 (ALL.) WHEREIN BORROWED FUNDS WERE GIVEN TO ITS DIRECTORS BY CHARGING INTEREST @ 2.25% WHEREAS THE INTEREST ON LOAN WAS P AYING AT 8% PER ANNUM. SIMILARLY, IN THE CASE OF MADHAV PRASAD JATIA VS. C IT, 118 ITR 200 (SC), THE BORROWED FUNDS WERE DIVERTED IN THE FORM OF DONATIO N FOR SETTING UP AN ENGINEERING COLLEGE FOR THE MEMORY OF ASSESSEES HU SBAND. THIS JUDGEMENT IS ALSO DISTINGUISHABLE ON FACTS. IN THE CASE UNDER C ONSIDERATION, THE CONTENTION OF THE ASSESSEE IS THAT THE ASSESSEE WAS HAVING SUFFICIENT FUND IN THE FORM OF OWN CAPITAL RS.70,90,699/- WHEREAS THE INTEREST-FREE FUND IS ON LY RS.26,00,000/-. THE ASSESSEE WAS HAVING SUFFICIENT OWN CAPITAL, THEREFORE, ACCOR DING TO THE FORMULA FOLLOWED BY THE I.T.A.T. IN VARIOUS ORDERS INCLUDING THE ORDER OF ITAT, AGRA BENCH IN THE CASE OF M/S. PEE CEE SOAP & CHEMICALS (P) LTD VS. ADDL. CIT IN ITA NO.236/AGR/2011, ORDER DATED 20.04.2012 AND THE JUD GEMENT OF APEX COURT IN THE CASE OF MUNJAL SALES CORPORATION VS. CIT(A), 298 IT R 298, JUDGEMENT OF HONBLE ALLAHABAD HIGH COURT IN THE CASE OF CIT VS. PREM HE AVY ENGINEERING WORKS PVT. LTD., 285 ITR 554 (ALL.), THE ADDITION IS NOT WARRA NTED. IN THE CASES RELIED UPON BY THE LD. DEPARTMENTAL REPRESENTATIVE I.E. CIT VS. H. R. SUGAR FACTORY (P) LTD., 187 ITR 363 (ALL.) AND MADHAV PRASAD JATIA VS. CIT, 118 ITR 200 (SC) WHEREIN THE FACTS ARE THAT THERE WERE DIRECT NEXUS OF BORROWED FUNDS AND THE FUNDS WERE GIVEN FOR OTHER PURPOSES THAN BUSINESS, WHEREAS, IN THE C ASE UNDER CONSIDERATION, THE INTEREST-FREE ADVANCE GIVEN IS A REPLACEMENT OF OWN CAPITAL AND ACCORDING TO THE 5 ITA NO.196/AGRA/2013 A.Y. 2008-09 FORMULA WHICH HAS BEEN APPROVED BY THE APEX COURT I N THE CASE MUNJAL SALES CORPORATION VS. CIT(A) (SUPRA), THE ADDITION IS NOT WARRANTED. EVEN OTHERWISE ALSO, IF WE CONSIDER THE JUDGMENT OF HONBLE ALLAHA BAD HIGH COURT IN THE CASE OF CIT VS. H.R. SUGAR FACTORY (P) LTD., JUDGMENT OF AP EX COURT IN THE CASE OF MADHAV PRASAD JATIA VS. CIT (SUPRA), THE JUDGEMENT OF CIT VS. PREM HEAVY ENGINEERING WORKS PVT. LTD. (SUPRA) AND THE CASE OF MUNJAL SALES CORPORATION VS. CIT(A) (SUPRA), THESE JUDGEMENTS ARE HAVING DIFFERE NT VIEWS. SO FAR AS PROPOSITION OF LAW RELATING TO THE ISSUE AS TO WHIC H VIEW, IN CASE THERE ARE TWO POSSIBLE VIEWS, SHOULD BE FOLLOWED, THE DECISION IN FOLLOWING CASES HAVE DEALT WITH THIS PROPOSITION OF LAW AND HAVE HELD THAT IN CASE A PROVISION OF LAW IS LIABLE TO INTERPRETATION, THEN, THE INTERPRETATION IN FAVOUR OF ASSESSEE SHOULD BE ADOPTED. (1) MYSORE MINERALS LTD. VS. CIT 239 ITR 775 (SC) (2) ORISSA STATE WAREHOUSING CORPORATION VS. CIT 23 7 ITR 589 (SC) (3) CIT VS. PODAR CEMENT PVT. LTD. AND OTHERS, 226 ITR 625 (SC) (4) CIT VS. GWALIOR RAYON SILK MFG. CO. LTD, 196 IT R 149 (SC) (5) CIT VS. SAHAZADA NAND, 60 ITR 392 (SC) (6) CIT VS. KULU VALLEY TRANSPORT CO LTD , 77 ITR 5 18, 530 (SC) (7) CIT VS. VEGETABLE PRODUCTS LTD, 88 ITR 192 (SC) (8) CIT VS. NAGA HILLS TEA CO. LTD., 89 ITR 236, 24 0 (SC) (9) CONTR. ED VS. KANAKASABAI, 89 ITR 251 (SC) (10) CIT VS. MADHO JATIA, 105 ITR 179, 184 (SC) 8. IN ADDITION TO THE ABOVE, IT IS ALSO TO BE NOTED HERE THAT THE ABOVE FORMULA THAT IN CASE WHERE THE ASSESSEE IS HAVING SUFFICIEN T OWN CAPITAL, THE INTEREST ON THE 6 ITA NO.196/AGRA/2013 A.Y. 2008-09 INTEREST-FREE FUND DIVERTED CANNOT BE DISALLOWED AS HAS BEEN FOLLOWED IN VARIOUS ORDERS INCLUDING THE ORDER OF ITAT, AGRA BENCH IN T HE CASE OF M/S. PEE CEE SOAP & CHEMICALS (P) LTD VS. ADDL. CIT IN ITA NO.236/AGR /2011, ORDER DATED 20.04.2012, AND TO MAINTAIN CONSISTENCY, WE FOLLOW THE ABOVE ORDER OF I.T.A.T.. WE ACCORDINGLY FOLLOW THE RATIO LAID DOWN BY THE AP EX COURT IN THE CASE OF CIT VS. PREM HEAVY ENGINEERING WORKS PVT. LTD. (SUPRA) AND THE CASE OF MUNJAL SALES CORPORATION VS. CIT(A) (SUPRA) WHICH IS IN FAVOUR O F THE ASSESSEE. IN THE LIGHT OF THE ABOVE DISCUSSIONS, WE FIND THAT THE ADDITION OF RS.3,12,000/- SUSTAINED BY THE CIT(A) IS NOT WARRANTED. WE, THEREFORE, SET ASIDE THE ORDER OF CIT(A) AND DELETE THE ADDITION OF RS.3,12,000/- SUSTAINED BY THE CIT( A). 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . (ORDER PRONOUNCED IN THE OPEN COURT) SD/- SD/- (BHAVNESH SAINI) (A.L. GEHLOT) JUDICIAL MEMBER ACCOUNTANT MEMBER PBN/* COPY OF THE ORDER FORWARDED TO: APPELLANT/RESPONDENT/CIT (APPEALS) CONCERNED/CIT CO NCERNED/ D.R., ITAT, AGRA BENCH, AGRA/ GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME-TAX APPELLATE TRIBUNAL, AGRA TRUE COPY