Jewel Consumer Care Pvt. Limited, Vadodara V. The Asstt. Commissioner of Income Tax, Circle-1(1)(2), Baroda

ITA 2070/AHD/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 0020 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 04-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

, A IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD (THROUGH VIRTUAL COURT) BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SMT. MADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NO. 2070/AHD/2018 ( ASSESSMENT YEAR : 2014-15) JEWEL CONSUMER CARE PVT. LIMITED SUBHAAG, B-15/16, RAMIN PARK, OLD PADRA ROAD, VADODARA 390 020 / VS. ACIT CIRCLE -1(1)(2), BARODA ./ ./ PAN/GIR NO. : AAACB8634Q ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI BHAVIN MARFATIA, A.R. / RESPONDENT BY : SHRI DILEEP KUMAR, SR. D.R. DATE OF HEARING 22/06/2020 !'# / DATE OF PRONOUNCEMENT 24/06/2020 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS)-1, VADODARA (CIT(A) IN SHORT), DATED 20 .07.2018 ARISING IN THE ASSESSMENT ORDER DATED 29.12.2016 PASSED BY THE ASSESSING OFFICER (AO) UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING AY 2014-15. ITA NO. 2070/AHD/18 [JEWEL CONSUMER CARE PVT. LTD. VS. ACIT] A.Y. 2014-15 - 2 - 2. THE SUBSTANTIVE GROUND OF APPEAL RAISED BY ASSES SEE READ HEREUNDER: 1. DISALLOWANCE U/S 36(1)(III) THE LD. CIT(A)-I, BARODA HAS ERRED IN LAW AND FACTS IN CONFIRMING THE DISALLOWANCE OF INTEREST EXPENSES OF RS. 3,72,000/- U/S 36(1)(III). THE LD. CIT(A)-I HAS FOLLOWED THE ORDER OF HIS PREDECES SOR FOR AY 2011-12 AND CONFIRMED THE ADDITION. THE LD. CIT(A) HAS FAIL ED TO APPRECIATE THAT THE APPELLANT HAD SUFFICIENT INTEREST FREE FUN DS TO COVER THE INTEREST FREE ADVANCES TO THE APPELLANT'S SISTER CO NCERN IN RELATION TO THE ABOVE DISALLOWANCE. THE LD. CIT(A)-I HAS ALSO F AILED TO APPRECIATE THAT THE SAID INTEREST FREE ADVANCES WERE PROVIDED BY THE APPELLANT TO ITS SISTER CONCERN FOR BUSINESS PURPOSE AND WITH A CLEAR COMMERCIAL PURPOSE AND THUS THE CONCLUSION THAT THE SAID FUNDS WERE APPLIED FOR A NON-BUSINESS PURPOSE WAS ERRONEOUS. THE LD. CIT(A)- 1 HAS ALSO FAILED TO APPRECIATE THAT THE ISSUE ON IDENTICAL FACTS STA NDS COVERED BY THE HON. ITAT IN FAVOUR OF THE APPELLANT FOR AY 2007-08 AND AY 2008-09 VIDE ITA NO. 2618/AHD/2010 & 757/AHD/2012 RESPECTIV ELY. 3. WE HAVE HEARD THE RIVAL SUBMISSIONS ON THE ISSU E. THE DISALLOWANCE OF INTEREST EXPENSES OF RS.3,72,000/- UNDER S.36(1)(III) OF THE ACT IS IN CONTROVERSY. 4. IT IS THE CASE OF THE ASSESSE THAT INTEREST EXPE NDITURE HAS BEEN INCURRED ON CERTAIN INTEREST FREE ADVANCES TO SISTE R CONCERN M/S. AMIGO DISPENSING SOLUTIONS PVT. LTD. THE AO HAS AL LEGED THAT THE SAID ADVANCES HAVE BEEN MADE FOR NON-BUSINESS PURPO SES AND CONSEQUENTLY, INTEREST INCURRED THEREON CANNOT BE C LAIMED AS DEDUCTION IN VIEW OF THE PROVISION OF SECTION 36(1) (III) OF THE ACT. THE CIT(A), IN FIRST APPEAL, HAS CONFIRMED THE AFOR ESAID ACTION OF DISALLOWANCE BY AO PLACING RELIANCE ON THE ORDER OF THE CIT(A) ON SIMILAR FACTS CONCERNING AY 2011-12. IT IS SUBMITT ED ON BEHALF OF THE ASSESSEE THAT THE DISALLOWANCE MADE BY THE REVE NUE AUTHORITIES ON SIMILAR FACTS HAS BEEN REVERSED BY THE ITAT IN ITA NOS. 3436 & 3437/AHD/2014 ORDER DATED 09.07.2018 CONCERNING AYS. 2010-11 & 2011-12 FOR THE SAME ASSESSEE. SIMILAR REVERSAL OF DISALLOWANCE WAS STATED TO HAVE BEEN DONE BY THE CO-ORDINATE BEN CH IN ITA NO. 1008/AHD/2017 ORDER DATED 03.05.2019 CONCERNING AY 2013-14. ON FACTS, IT WAS POINTED OUT ON BEHALF OF THE ASSESSEE THAT INTEREST FREE ITA NO. 2070/AHD/18 [JEWEL CONSUMER CARE PVT. LTD. VS. ACIT] A.Y. 2014-15 - 3 - FUNDS IN THE FORM OF CAPITAL/RESERVES ETC. IS SUBST ANTIALLY IN EXCESS OF THE INTEREST FREE ADVANCES GIVEN BY THE ASSESSEE . THE INTEREST FREE CAPITAL AND RESERVES ARE STATED TO BE IN THE VICINI TY OF RS.26 CRORES AS AGAINST THE INTEREST FREE ADVANCE OF RS.31 LAKHS IN QUESTION. IT WAS THUS CLAIMED THAT IN THE INSTANT CASE, INTEREST FREE FUNDS AVAILABLE AT THE DISPOSAL OF ASSESSEE ARE SUFFICIEN T TO MEET THE INTEREST FREE ADVANCES AND THUS A PRESUMPTION WOULD ARISE THAT INTEREST FREE ADVANCES WERE LENT FROM INTEREST FREE FUNDS AND NOT BORROWED FUNDS. 5. IN VIEW OF THE DECISION OF THE HONBLE BOMBAY HI GH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWER LTD., [2009] 313 ITR 340 (BOM.) AND SIMILAR APPROACH ADOPTED BY THE CO-ORDINATE BEN CH IN EARLIER YEARS, WE FIND SUFFICIENT REASONS TO ADMIT THE CLAIM OF THE ASSESSEE FOR REVERSAL OF DISALLOWANCE FAVOURABLY. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . SD/- SD/- (MADHUMITA ROY) (PRADIP KUMAR K EDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 24/06/2020 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 ON 24/06/2020