The Asst. Commissioner of Income Tax, Circle-1(1)(1), Vadodara V. Ambalal Sarabhai Enterprises Limited, Vadodara

ITA 2032/AHD/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 9127 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-07-2019
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: misc
• Appeal Filed On: 08-09-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Notional interest; Commercial expediency; Set aside
• Section: 143(3)

Judgement Text

, A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO. 2032/AHD/2017 ( ASSESSMENT YEAR : 1984-85) THE ASST. CIT CIRCLE 1(1)(1), 1 ST FLOOR, AAYKAR BHAVAN, RACE COURSE CIRCLE, VADODARA - 390007 / VS. M/S. AMBALAL SARABHAI ENTERPRISES LTD. DR. VIKRAM SARABHAI MARG, WADI WADI, VADODARA ./ ./ PAN/GIR NO. : AABCA6893K ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI SMITI SAMANT, SR.D.R. / RESPONDENT BY : NONE DATE OF HEARING 08/07/2019 !'# / DATE OF PRONOUNCEMENT 09/07/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF IN COME TAX (APPEALS)-1, VADODARA (CIT(A) IN SHORT), DATED 30 .06.2017 ARISING IN THE ASSESSMENT ORDER DATED 30.11.1988 PA SSED BY THE ITA NO. 2032/AHD/17 [ACIT VS. M/S. AMBALAL SARABHAI ENTERPRISES LTD.] A.Y. 1984-85 - 2 - ASSESSING OFFICER (AO) UNDER S. 143(3) OF THE INCOM E TAX ACT, 1961 (THE ACT) CONCERNING AY 1984-85. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE REA D AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW,- THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF NOTIONAL INTE REST AGGREGATING TO RS. 43,20,661 /-WITHOUT APPRECIATING THE FINDINGS THAT RS. 2,09,76,370 ADVANCED BY ASSESSEE TO WADI FINANCIERS AND INVESTMENT PVT L TD., THAT COMPANY IN TURN HAD ADVANCED RS. 98.58 LAKHS TO SHIP LTD., IGN ORING THE FACT THAT WADI FINANCIERS HAS NOT AMALGAMATED WITH ASE AND HENCE, ADVANCE OF RS. 98.58 LAKHS ON 24.2.82 BY WADI FINANCIERS TO SHIP WITHOUT INTEREST DOES NOT CREATE THE NECESSARY FICTION OF GIVING OF AMOUNT TO SELF AND HENCE IT MUST BE HELD DISALLOWANCE OF INTEREST. 3. NONE APPEARED ON BEHALF OF THE ASSESSEE. ACCORD INGLY, THE MATTER WAS PROCEEDED EX PARTE. 4. THE CIT(A) HAS DEALT WITH THE ISSUE RAISED ON BE HALF OF REVENUE AS UNDER: 3. THE FIRST ISSUE SET ASIDE BY THE ITAT IS REGARD ING DISALLOWANCE OF INTEREST EXPENDITURE AMOUNTING TO RS. 43,20,661/-AT TRIBUTABLE TO INTEREST FREE ADVANCE TO SISTER CONCERNS. THE ITAT'S OBSERVA TIONS ARE AS FOLLOWS: '13. THE GROUND NO. 9 OF THE ASSESSEE'S APPEAL IS R EGARDING DISALLOWANCE OF INTEREST EXPENDITURE AMOUNTING TO R S,43,20,661/- ATTRIBUTABLE TO INTEREST FREE ADVANCES TO SISTER CO NCERNS. THE AO HAS DEALT WITH THIS ISSUE IN PARA 17 OF HIS ORDER. THE AO DISALLOWED THIS AMOUNT ON THE GROUND THAT THE ASSESSEE HAS NOT BEEN ABLE TO EXPLAIN COMMERCIAL EXPEDIENCY OF SUCH ADVANCES OR T O PROVE THE BORROWINGS TO THE EXTENT OF THESE ADVANCES AS FOR T HE PURPOSE OF ASSESSES'S BUSINESS. HE HAS ALSO DISALLOWED SINCE S IMILAR AMOUNTS HAVE BEEN DISALLOWED IN THE PAST. THE MATTER WAS CA RRIED IN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY WHEREIN THE ID . COUNSEL FOR THE ASSESSEE RAISED VARIOUS CONTENTIONS AND HAS GIVEN T HE DETAILS AS UNDER: ADVANCES MADE TO OUTSTANDING BALANCE SWASTIK HOUSEHOLD & INDUSTRIES PRODUCTS 1. SHAHIBAG ENTERPRENEURS (P) LTD. 3,00,000 ITA NO. 2032/AHD/17 [ACIT VS. M/S. AMBALAL SARABHAI ENTERPRISES LTD.] A.Y. 1984-85 - 3 - 2. SARABHAI MANAGEMENT CORP.(P) LTD. 4,65,508 SSRABHAI CHEMICALS SARABHAI MANAGEMENT CORP.(P) LTD. 4,15,358 HEAD OFFICE WADI FINANCIERS & INVEST. (P) LTD. 2,09,76,370 THE OTHER SUBMISSIONS OF THE ASSESSEE HAVE BEEN DIS CUSSED IN DETAIL BY THE CIT(A) VIDE PARA 12 OF HIS ORDER. HE HAS OBS ERVED THAT SINCE THE FACTS CONTINUE TO BE IDENTICAL AND THERE BEING NO CHANGE IN THE CIRCUMSTANCES, NO ADDITIONAL AND NEW ARGUMENTS AND/ OR EVIDENCE BEING FURNISHED, THERE IS NO JUSTIFICATION IN INTER FERING WITH THE DECISION OF THE AO AS REGARDS RS.110-19 LAKHS AMOUN TS ARE CONCERNED. HOWEVER, AS REGARDS THE ISSUE IN CONNECT ION WITH THE WADI FINANCIERS & INVESTMENT (P) LTD. IS CONCERNED, THE AO HAS CLEARLY STATED THAT WFI IS NOT AMALGAMATED WITH AMB ALAL SARABHAI ENTERPRISES AND HENCE, ADVANCES BY WFI TO SHIP (P) LTD. WITHOUT INTEREST DOES NOT CREATE THE NECESSARY FICTION OF G IVING AMOUNT TO SELF. IN VIEW OF THE CLEAR FINDINGS AS ABOVE, AND I N ABSENCE OF ANY SPECIFIC JUSTIFICATION FOR ITS ALLOWANCE, SO HE UPH ELD THE SAME. 13.1 BEFORE US THE ID. DR SUPPORTED THE ORDERS OF T HE AUTHORITIES BELOW WHILE THE ID. COUNSEL FOR THE ASSESSES OPPOSE D THE SAME ARID CONTENDED THAT THE ISSUE IS COVERED IN FAVOUR OF AS SESSES BY THE DECISION OF THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR AY 1979-80. FOR AY 1980-81 A SIMILAR ISSUE HAS BEEN RESTORED BACK T O THE FILE OF CIT(A) AND THE CASE IS STILL PENDING BEFORE THE CIT (A). FOR AYS, 1981-82 AND 1982-83 A SIMILAR ISSUE HAS BEEN DECIDE D IN FAVOUR OF THE ASSESSES BY THE TRIBUNAL VIDE ITS ORDERS. 13.2. AFTER CONSIDERING THE RIVAL SUBMISSIONS AND G OING THROUGH THE MATERIAL ON RECORD, WE FIND THAT A SIMILAR ISSU E HAS BEEN DECIDED IN FAVOUR OF ASSESSEE BY THE TRIBUNAL VIDE ITS ORDERS FOR AYS 1979-80, 81-82 AND 1982-83 WHILE FOR AY 1980-81 THE ISSUE HAS BEEN RESTORED BACK TO THE FILE OF CIT(A) AND TH E SAME IS PENDING THERE. THEREFORE, IN THE INTEREST OF JUSTIC E, WE RESTORE THIS ISSUE TO THE FILE OF CIT(A) FOR DECIDING THE SAME I N LIGHT OF FINAL OUTCOME OF AY 1979-80, 81-82, 82-83 AND IN ACCORD ANCE WITH LAW AFTER PROVIDING REASONABLE OPPORTUNITY OF HEARING T O BOTH THE PARTIES. THIS ISSUE IS DISPOSED OF ACCORDINGLY.' 3.1. IT MAY BE MENTIONED HERE THAT THE AO HAD BEEN REQUESTED VIDE LETTER DATED 10.08.2015 TO FURNISH THE ORDERS OF CI T(A)'S FOR AYS. 1979-80 AND 1980-81. THE SAME HAS NOT BEEN RECEIVED. THE AO HAS STATED VIDE LETTER DATED 28.06.2017 THAT RECORDS FOR THESE YEAR S ARE NOT TRACEABLE. THE CIT(A)'S ORDER FOR THESE YEARS ARE ALSO NOT AVAILAB LE IN THIS OFFICE. BUT, A PERUSAL OF THE ABOVE OBSERVATIONS OF THE ITAT SHOWS THAT THE BENCH HAS CLEARLY DIRECTED TO DECIDE THE ISSUE IN LIGHT OF FI NAL OUTCOME OF THE AYS 1980-81, 1981-82 AND 1982-83. THUS, IN THE FINAL DI RECTION, THE TRIBUNAL HAS NOT DIRECTED TO CONSIDER THE OUTCOME OF SET ASI DE APPELLATE ORDER FOR THE AY 1980-81. THE ORDER PASSED BY THE ITAT 'C' BE NCH IN APPELLANT'S OWN CASE FOR AY 1982-83 IN ITA NO. 3240/AHD/1994 AN D ITA NO. ITA NO. 2032/AHD/17 [ACIT VS. M/S. AMBALAL SARABHAI ENTERPRISES LTD.] A.Y. 1984-85 - 4 - 3L30/AHD/1994 DATED 29.10.2001 COULD BE TRACED BY T HIS OFFICE FROM THE APPELLATE FOLDER FOR THE AY 1982-83 IN APPEAL NO. C AB-I/242/06-07. IN THIS ORDER, THE BENCH HAS DISCUSSED THE ISSUE RELAT ING TO DISALLOWANCE OF INTEREST ATTRIBUTABLE TO THE ADVANCE GIVEN TO THE G ROUP CONCERNS AS DISCUSSED IN PARA 10.3 AS FOLLOWS: '10. GROUND NO. 9 IS AGAINST SUSTAINING THE DISALLO WANCE OF RS, 15,32,294/- ON ACCOUNT OF NOTIONAL INTEREST ATTRIBU TABLE TO INTEREST GIVEN TO THE GROUP CONCERNS. 10.1. THE COUNSEL OF THE ASSESSEE SUBMITTED THAT IS SUE INVOLVED IN THIS GROUND OF APPEAL IS COVERED IN FAVOUR OF THE A SSESSEE BY DECISION OF THIS TRIBUNAL IN ASSESSEE'S OWN CASE FO R THE AY 1979-80. IN THE AY 1980-81, SIMILAR DISALLOWANCE WAS ALSO MA DE AND TRIBUNAL SET-ASIDE THE SAME BACK TO THE CIT(A) FOR ADJUDICATING THE SAME AFRESH SINCE ASSESSING OFFICER HAD HIMSELF FAI LED TO ADJUDICATE THE ISSUE ON REMAND BY THE CIT(A). THE COUNSEL OF T HE ASSESSEE FURTHER ADMITTED THAT THIS ISSUE IS DECIDED IN FAVO UR OF THE ASSESSEE BY THIS TRIBUNAL IN THE AY 1981-82. THE RELEVANT DI SCUSSION IS NARRATED IN PAGE 27 OF THE TRIBUNAL ORDER FOR THE A Y 1981-82. 10.2. ON THE OTHER HAND, THE LEARNED D.R. SUPPORTED THE ORDER OF THE CIT(A). THE LEARNED D.R. HAS ALSO SUBMITTED THA T THIS ISSUE HAS BEEN SET ASIDE BY LEARNED CIT(A) TO ASSESSING OFFIC ER FOR DECIDING THE SAME AFRESH. THEREFORE, ORDER OF CIT(A) BE UPHE LD. 10.3. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULL Y GONE THROUGH THE ORDER OF AUTHORITIES BELOW. RIVAL SUBMISSIONS W ERE ALSO CONSIDERED. THE IMPUGNED DISALLOWANCE HAS BEEN MADE ON FACTS IDENTICAL TO THE AY 1981-82. IN THE AY 1981-82 THIS TRIBUNAL HAS DECIDED THE SIMILAR DISALLOWANCE. WE, THEREFORE, RE SPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEE'S O WN CASE FOR THE AY 1981-82 DELETE THE ADDITION OF RS. 15,32,294/-. THIS GROUND OF APPEAL IS ACCORDINGLY ALLOWED.' 3.1.1. A PERUSAL OF THE ABOVE ORDER OF THE ITAT FOR AY 1982-83 SHOWS THAT THE FACT THAT TRIBUNAL HAS SET ASIDE THE SIMILAR IS SUE FOR AY 1980-81 TO THE FILE OF THE CIT(A) WAS KNOWN TO THEM, STILL BY FOLL OWING THEIR OWN ORDER FOR THE AY 1981-82 IN THE APPELLANT'S OWN CASE, THE BENCH HAS DIRECTED THE DISALLOWANCE TO BE DELETED. HENCE, THE DECISION MAD E IN THE ORDER OF THE ITAT FOR THE AY 1982-83 IS REQUIRED TO BE FOLLOWED IN THE CURRENT YEAR'S PROCEEDINGS ALSO. ACCORDINGLY, FOLLOWING THE DECISI ON OF THE IN APPELLANT'S OWN CASE FOR THE AY 1982-83, THE DISALLOWANCE OF NO TIONAL INTEREST MADE IN THE CURRENT YEAR IS ALSO DIRECTED TO BE DELETED. AS A RESULT, THIS GROUND IS ALLOWED. 5. WE NOTICE THAT THE CIT(A) HAS ADJUDICATED THE IS SUE IN FAVOUR OF THE ASSESSEE HAVING REGARD TO THE DECISIO N OF THE CO- ORDINATE BENCH OF TRIBUNAL FOR THE EARLIER ASSESSME NT YEARS. THE CIT(A) INTER ALIA HAS OBSERVED THAT THE CASE RECORDS ARE NOT TRACEABLE AT THE END OF THE AO. IN THE SIMILARLY P LACED FACTS, THE ITA NO. 2032/AHD/17 [ACIT VS. M/S. AMBALAL SARABHAI ENTERPRISES LTD.] A.Y. 1984-85 - 5 - CIT(A) HAS RIGHTLY DECIDED THE ISSUE IN FAVOUR OF T HE ASSESSEE. THE REVENUE COULD NOT BRING ANYTHING ON RECORD TO P OINT OUT ANY FLAW IN THE REASONINGS ADOPTED BY THE CIT(A). THUS , WE SEE NO REASON TO IMPUGN THE ORDER OF THE CIT(A). WE THUS DECLINE TO INTERFERE. 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. SD/- SD/- (RAJPAL YADAV) (PRADIP K UMAR KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 09/07/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 09/07/20 19