Sahajanand Technologies (P) Ltd., Surat V. The ACIT.,Range-4, Surat

ITA 2066/AHD/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 6008 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-06-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 26-05-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 29-05-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRI ASHOK BAL
• Keywords: Commercial expediency

Judgement Text

ITA 2066/AHD/08 A.Y. 2005-06. 1 1 IN THE INCOME TAX APPELLATE TRIBUNAL, D-BENCH, AHME DABAD . BEFORE SHRI T.K. SHARMA, AND SHRI D.C.AGRAWAL. SURAT CAMP . ITA NO. 2066/AHD/2008 (ASSESSMENT YEAR : 2005-2006) SAHJANAND TECHNOLOGIES (P)LTD., SAHJANAND HOUSE, PARSI STREET, SAIYEDPURA, SURAT-395 003. ASSISTANT COMMISSIONER OF INCOME TAX,RANGE-4, AAYAKAR BHAVAN,MAJURA GATE, SURAT. (APPELLANT) VERSUS (RESPONDENT) FOR THE APPELLANT: SHRI RAJESH C.SHAH FOR THE RESPONDENT SHRI SHRI ASHOK BAL, C.I.T.(D.R. ) PAN NO.AADCS 4343 N ORDER SHRI D. C.AGRAWAL : THIS APPEAL IS FILED BY THE ASSESSEE RAISING FOLLO WING GROUND :- THE LD. CI.T.(A)-I HAS ERRED IN CONFIRMING THE DIS ALLOWANCE OF INTEREST OF RS. 1,16,73,186/- ON THE GROUND THAT THE ASSESSEE H AS GIVEN INTEREST FREE LOANS TO SISTER CONCERN AND DIRECTORS. 2. THE ONLY ISSUE INVOLVE IN THIS APPEAL IS DISALLO WANCE OF INTEREST MADE BY THE A.O. AND CONFIRMED BY THE LD. C.I.T.(A). THE DI SALLOWANCE OF INTEREST OF RS.1.16 CRORES IS ON THE GROUND THAT INTEREST FREE ADVANCES WERE GIVEN TO SISTER CONCERN AND DIRECTORS OUT OF INTEREST BEARING BORRO WINGS. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A.O. FOUND THAT ASSESSEE HAS GIVEN INTEREST FREE ADVANCES TO SISTER CONCERN AND ASSOCIATES AS UNDER :- ITA 2066/AHD/08 A.Y. 2005-06. 2 2 SR.NO. NAME OF THE PARTY. LOAN WITHOUT INTEREST. 1. SAHJANAND BIOTECH P. LTD. 9,48,19 1/- 2. DHIRAJLAL V. KOTADIA 3,53,63,360/- 3. SAHJANAND VASCULAR TECH P. LTD. 16, 77,050/- 4. SHIV LASER TECH P. LTD. 23,44,357/- 5. JITENDRA V. KOTADIA 6,79,00,000/- TOTAL OF LOAN OUTSTANDING 10,82,32,958/- 3. THE A.O. DID NOT ACCEPT THE EXPLANATION OF THE A SSESSEE THAT SUCH ADVANCES WERE GIVEN OUT OF THE COMMON ACCOUNT WHICH CONTAINE D INTEREST FREE CAPITAL AND RESERVE ALSO, WHOSE OPENING BALANCES WERE 5 CRORES AND 32.18 CRORES RESPECTIVELY. SUCH INTEREST FREE ADVANCES WERE GIVEN OUT OF SUCH INTEREST FREE CAPITAL AVAILABLE WITH THE ASSESSEE. THE A.O. WAS OF THE VIEW THAT IF SUCH INTEREST FREE ADVANCES WOULD NOT HAVE BEEN GIVEN TO SISTER CONCERN THEN TH IS MONEY WOULD HAVE BEEN AVAILABLE TO THE ASSESSEE FOR ITS BUSINESS PURPOSES AND IT MIGHT NOT HAVE BEEN NECESSARY TO BORROW INTEREST BEARING FUNDS FROM THE BANK OR FROM OTHER PERSONS. HE, ACCORDINGLY DISALLOWED THE INTEREST OF RS.1.16 CRORES CALCULATED ON SUCH INTEREST FREE ADVANCES. 4. THE LD. C.I.T.(A) CONFIRMED THE ADDITION STATING THAT NEITHER BEFORE THE A.O. NOR DURING ASSESSMENT PROCEEDINGS ASSESSEE WAS ABLE TO ESTABLISH ANY COMMERCIAL EXPEDIENCY WHEREBY ASSESSEE WAS REQUIRED TO GIVE INTEREST FREE ADVANCES TO THESE FIVE PARTIES. THE LD. C.I.T. (A) REFERRED TO THE DECISION IN S.A. BUILDERS REPORTED IN 288 ITR-1 ALSO. 5. BEFORE US THE LD. A.R. FOR THE ASSESSEE SUBMITTE D THAT SIMILAR ADDITION WAS MADE IN THE ASSESSMENT YEARS 2003-04 AND 2004-05 AL SO, WHICH WAS DELETED BY THE TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO.82/AH D/2007 PRONOUNCED ON 8-1- ITA 2066/AHD/08 A.Y. 2005-06. 3 3 2010 AND IN I.T.A. NO.3189/AHD/2007 PRONOUNCED ON 9 -4-2010. IN THAT CASE, TRIBUNAL HAD HELD IN PARA-7 AS UNDER :- SINCE IT IS UNDISPUTED FACT THAT THE ASSESSEE HAD SUFFICIENT INTEREST-FREE CAPITAL AND RESERVES OF MORE THAN RS.12 CRORES AND IN ADDITION TO THIS, THERE WERE CURRENT YEARS PROFITS, THEN PRESUMPTION ARISE S IN VIEW OF THE ABOVE JUDGMENT THAT INTEREST-FREE ADVANCES WERE NOT GIVEN OUT OF SUCH INTEREST- FREE FUNDS. THE ONUS SHIFTS NOW TO THE REVENUE TO S HOW THAT AT THE POINT OF TIME WHEN SUCH INTEREST-FREE ADVANCES WERE GIVEN, A SSESSEE DID NOT HAVE SUFFICIENT CASH OF ITSELF AND LENDING WAS ACTUALLY DONE OUT OF INTEREST BEARING BORROWINGS. SINCE THERE IS NO MATERIAL ON R ECORD TO SUPPORT THIS VIEW, AND REVENUE HAS NOT DISCHARGED THE ONUS LYING ON IT, WE UPHOLD THE ORDER OF THE CIT (A). THIS GROUND OF REVENUE IS THE REFORE, REJECTED. 6. SINCE THE FACTS AND CIRCUMSTANCES OF THE CASE AR E THE SAME, ASSESSEE HAD SUFFICIENT INTEREST FREE CAPITAL AND RESERVE THEN O NUS IS NOW SHIFTED TO THE REVENUE TO SHOW THAT INTEREST FREE ADVANCES WERE GIVEN OUT OF INTEREST BEARING BORROWINGS. SINCE THE REVENUE HAS NOT DISCHARGED THIS ONUS WE F OLLOW OUR ORDER FOR THE ASSESSMENT YEAR 2003-04 AND 2004-05 AND DELETE THE ADDITION SO MADE. 7. AS A RESULT, THE APPEAL FILED BY THE ASSESSEE I S ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 11 -06 -20 10. SD/- SD/- (T. K. SHARMA) (D.C. AGRA WAL) JUDICIAL MEMBER. ACCOUNTANT MEMBER AHMEDABAD DATE :- 11 - 06-2010. COPY OF THE ORDER FORWARDED TO : THE ASSESSEE THE ASSESSING OFFICER THE CIT CONCERNED. THE CIT(A) CONCERNED. THE DR, AHMEDABAD GUARD FILE (IN DUPLICATE) BY ORDER, DEPUTY.REGISTRAR,ITAT. AHMEDABAD.