The DCIT(OSD)Circle-8, Ahmedabad V. M/s. Torque Automotive Pvt. Ltd., Ahmedabad

ITA 2168/AHD/2013

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9131 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 15-02-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 22-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SITARAM
• Assessee Lawyers: D K PARIKH
• Keywords: Depreciation; Deemed dividend; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER THE DCIT(OSD), CIRCLE - 8, AHMEDABAD (APPELLANT) VS M/S. TORQUE AUTOMOTIVE PVT. LTD., 2 ND FLOOR, MRUDAL TOWER, B/H. TIMES OF INDIA, ASHRAM ROAD, AHMEDABAD - 380009 PAN: AACCT6528R (RESPONDENT) REVENUE BY : S H RI SITA R AM , SR. D . R. ASSESSEE BY: S H RI D.K. PARIKH , A.R. DATE OF HEARING : 15 - 02 - 2 017 DATE OF PRONOUNCEMENT : 22 - 02 - 2 017 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS REVENUE S APPEAL FOR A.Y. 2010 - 2011 , AR I SES FRO M ORDER OF THE CIT(A) - X I V , AHMEDABAD DATED 07 - 06 - 2013 IN APPEAL NO. CIT(A) XIV/DCIT(OSD). CIR. 8/ 181 / 20 12 - 13 , IN PROCEEDINGS UNDER SECT ION 143(3 ) OF THE INCOME TAX ACT, 1961; IN SHORT THE A CT . I T A NO . 2168 / A HD/20 13 A SS ESSMENT YEAR 2010 - 2011 I.T.A NO. 2168 /AHD/20 13 A.Y. 2010 - 2011 PAGE NO D CIT (OSD) VS. M/S.TORQUE AUTOMOTIVE PVT. LTD. 2 2. THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: - 1). THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) - XIV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.5,91,138/ - MADE ON ACCOUNT OF INTERST EXPENSES U/S.36(1)(III) OF THE ACT WITHOUT ASSESSEE ESTABLISHING THE NEXUS BETWEEN INTEREST FREE ADVANCES & AVAILABILITY OF INTEREST FREE FUNDS. 2). THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) - XIV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.1,3 3,857/ - MADE ON ACCOUNT OF FOREIGN TRAVEL EXPENSES NOT PROVED TO HAVE BEEN INCURRED FOR THE PURPOSE OF BUSINESS OF ASSESSEE. 3). THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) - XIV, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.27, 64,117/ - MADE ON ACCOUNT OF DEEMED DIVIDEND U/S.2(22)(E) OF THE ACT. 4). ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) - XIV, AHMEDABAD OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. 5). IT IS THEREFORE, PRAYED THAT THE ORDER OF THE LD. COMMISSIONER OF INCOME - TAX (APPEALS) - XIV, AHMEDABAD MAY BE SET - A - SIDE AND THAT OF THE ORDER OF THE ASSESSING OFFICER BE RESTORED. 3. IN THIS CASE, RETURN OF INCOME DECLARING INCOME OF RS. 2,00,40,907/ - WAS FILED ON 29 TH SEPTEMBER, 2010. THE CASE WAS SELECTED FOR SCRUTINY. NOTICE U/S. 143(2) OF THE ACT WAS ISSUED ON 24 TH AUGUST, 2011. DURING THE COURSE OF APPELLATE PRO CEEDINGS, THE ASSESSING OFFICER OBSERVED THAT ASSESSEE HAS DIVERTED INTEREST BEARING FUND FOR NON - BUSINESS PURPOSES. ON THE PER USAL OF BALANCE - SHEET THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAD MADE INTEREST FREE LOANS AND ADVANCES TO SH. PARESH OF RS.30 LACS, SH. P. SHAH OF RS.25.09 LACS AND SH. GHANSHYAM OF RS 10 LACS FOR WHICH I.T.A NO. 2168 /AHD/20 13 A.Y. 2010 - 2011 PAGE NO D CIT (OSD) VS. M/S.TORQUE AUTOMOTIVE PVT. LTD. 3 NO BUSINESS PURPOSE WAS EXPLAINED BY THE ASSESSEE. THE ASSESSEE EXPLAINED THAT IT HAS SUFFICIENT INTEREST FREE FUNDS AND THE SAID LOANS/ ADVANCES HAVE BEEN MADE THROUGH SUCH INTEREST FREE FUNDS. THE ASSESSING OFFICER STATED THAT SINCE ASSESSEE HA D PAID IN TERESTS AT VARIOUS RATE OF INTEREST, A REASONABLE RATE OF 1 2 % WAS TAKE N TO CALCULATE THE DISALLOWANCE U/S. 36 (1 )(II I ) OF THE ACT IN RESPECT OF FOLLOWING AMOUNTS OF LOAN S AND ADVANCES MADE BY THE ASSESSEE : - NAME AMOUNT PERIOD (MONTHS) RATE OF INTEREST DISALLOWANC E PARESH 3000000 7 0.12 210000 P SHAH 2509485 12 0.12 301138 GJ PATEL 1000000 8 0.12 80000 TOTAL 591138 A GAINST THE DECISION OF ASSESSING OFFICER ON MAKING ABOVE ADDITION, THE ASSESSEE PREFERRED APPEAL BE FORE THE LEARNED CIT APPEAL. THE LEARNED CIT APPEAL HAS DELETED THE ADDITION MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER: - I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND THE SUBMISSIONS GIVEN BY THE APPELLANT. IT IS AN UNDISPUTED FACTS THAT APP ELLANT HAS GIVEN INTEREST FREE LOANS TO THE FOLLOWING PARTIES FOR WHICH ASSESSING OFFICER HAS MADE DISALLOWANCE OF INTEREST FOR RS. 5,91,138/ - ON THE GROUND THAT APPELLANT HAS DIVERTED INTEREST BEARING FUNDS TO INTEREST FREE FUNDS. NAME AMOUNT PERIOD (MO NTH S) RATE OF INTEREST DISALLOWANCE I.T.A NO. 2168 /AHD/20 13 A.Y. 2010 - 2011 PAGE NO D CIT (OSD) VS. M/S.TORQUE AUTOMOTIVE PVT. LTD. 4 PARESH 3000000 7 0.12 210000 P SHAH 2509485 12 0.12 301138 G J PATEL 1000000 8 0.12 80000 TOTAL 591138 THE AO HAS TRIED TO BE JUDICIOUS SO FAR AS PERIOD AND RATE OF INTEREST FOR ABOVE CALCULATION IS CONCERNED. HOWEVER, DATE WISE FUND FLOW ANALYSIS WAS NOT OBTAINED, THEREFORE, NOT CONSIDERED WHILE FRAMING ASSESSMENT ORDER. THE COURTS HAVE GIVEN VARIOUS VERDICTS GIVING BENEFIT OF DOUBT TO THE APPELLANTS FOR LACK OF THIS PARTICULAR EXERCIS E ON THE PART OF AOS. THE APPELLANT HAS GIVEN INTEREST FREE FUNDS TO FOUR DIFFERENT PERSONS AND FUNDS RECEIVED BY THEM FROM APPELLANT ARE USED IN THE COURSE OF SETTING UP THEIR PROJECTS. IT IS EMANATING FROM THE DETAILS SUBMITTED BY APPELLANT THAT LOANS A RE GIVEN OUT OF COMMERCIAL EXPEDIENCY TO THE ABOVE PARTIES. THE HON'BLE SUPREME COURT IN CASE OF S.A. BUILDERS LIMITED V/S CIT288ITR 1 HAS HELD AS UNDER: 'SECTION 36(1)(III) OF THE INCOME - TAX ACT, 1961 - INTEREST ON BORROWED CAPITAL - ASSESSMENT YEARS 199 0 - 91 AND 1991 - 92 - WHETHER BORROWED FUND ADVANCED TO A THIRD PARTY SHOULD BE FOR COMMERCIAL EXPEDIENCY, IF IT IS SOUGHT TO BE ALLOWED UNDER SECTION 36(1) (III) - HELD, YES - ASSESSEE BORROWED FUND FROM BANK AND ADVANCED PART OF IT TO ITS SISTER CONCERN (A S UBSIDIARY) AS INTEREST - FREE LOAN - ASSESSING OFFICER DISALLOWED INTEREST UNDER SECTION 36(1) (III) ON BORROWINGS TO EXTENT THOSE WERE ADVANCED TO SUBSIDIARY - TRIBUNAL AS WELL AS HIGH COURT UPHELD ORDER OF ASSESSING OFFICER - WHETHER SINCE NEITHER HIGH COU RT NOR TRIBUNAL AND OTHER AUTHORITIES HAD EXAMINED WHETHER AMOUNT ADVANCED TO SISTER CONCERN WAS BY WAY OF COMMERCIAL EXPEDIENCY, MATTER WAS TO BE REMANDED TO TRIBUNAL FOR A FRESH DECISION IN ACCORDANCE WITH LAW - HELD, YES' THE HON'BLE SUPREME CO URT FURTHER AT PARA 34 HAS HELD AS UNDER : '34. WE AGREE WITH THE VIEW TAKEN BY THE DELHI HIGH COURT IN CIT V. DALMIA CEMENT (BHARAT) LTD. [2002] 254ITR 3772 THAT I.T.A NO. 2168 /AHD/20 13 A.Y. 2010 - 2011 PAGE NO D CIT (OSD) VS. M/S.TORQUE AUTOMOTIVE PVT. LTD. 5 ONCE IT IS ESTABLISHED THAT THERE WAS NEXUS BETWEEN THE EXPENDITURE AND THE PURPOSE OF THE BUSINESS (WHICH NEED NOT NECESSARILY BE THE BUSINESS OF THE ASSESSEE ITSELF], THE REVENUE CANNOT JUSTIFIABLY CLAIM TO PUT ITSELF IN THE ARM - CHAIR OF THE BUSINESSMAN OR IN THE ; POSITION OF THE BOARD OF DIRECTORS AND ASSUME THE ROLE TO DECIDE HOW MUCH IS RE ASONABLE EXPENDITURE HAVING REGARD TO THE CIRCUMSTANCES OF THE CASE. NO BUSINESSMAN CAN BE COMPELLED TO MAXIMIZE ITS PROFIT. THE INCOME TAX AUTHORITIES MUST PUT THEMSELVES IN THE SHOES OF THE ASSESSEE AND SEE HOW A PRUDENT BUSINESSMAN WOULD ACT. THE AUTHOR ITIES MUST NOT LOOK AT THE MATTER FROM THEIR OWN VIEW POINT BUT THAT OF A PRUDENT BUSINESSMAN. AS A/READY STATED ABOVE, WE HAVE TO SEE THE TRANSFER OF THE BORROWED FUNDS TO A SISTER CONCERN FROM THE POINT OF VIEW OF COMMERCIAL EXPEDIENCY AND NOT FROM THE P OINT OF VIEW WHETHER THE AMOUNT WAS ADVANCED FOR EARNING PROFITS' FURTHER, ON CAREFUL CONSIDERATION OF ANNUAL ACCOUNTS OF APPELLANT COMPANY, IT IS OBSERVED THAT APPELLANT HAS INTEREST FREE FUNDS IN FORM OF SHARE CAPITAL AND RESERVES & SURPLUS FOR RS 9,60, 44,946/ - IN COMPARISON OF ADVANCES GIVEN TO THE ABOVE PERSONS OF RS 65,09,485/ - . EVEN CURRENT YEAR PROFIT AVAILABLE FOR APPROPRIATION AS SHOWN IN AUDITED ANNUAL ACCOUNTS IS RS 1,55,11,497/ - WHICH IS MORE THAN INTEREST FREE ADVANCES GRANTED BY APPELLANT. TH E FACTS PROVE THAT APPELLANT HAS SUFFICIENT INTEREST FREE FUNDS AVAILABLE WITH IT TO GRANT INTEREST FREE ADVANCES HENCE DISALLOWANCE OF INTEREST IS NOT JUSTIFIED. THE HON'BLE BOMBAY HIGH COURT IN CASE OF CIT V/S. RELIANCE UTILITY & POWER LIMITED 313 ITR 34 0 HAS HELD AS UNDER: 'SECTION 36(1)(III) OF THE INCOME - TAX ACT, 196] - INTEREST ON BORROWED CAPITAL - ASSESSEE - COMPANY WAS ENGAGED IN BUSINESS OF GENERATION OF POWER - IT HAD MADE INVESTMENTS IN ITS SISTER CONCERN FROM JANUARY, 2000 TO MARCH, 2000 - ASSES SING OFFICER WAS OF VIEW THAT SUM OF RS. 213 CRORES WAS INVESTED OUT OF BORROWED FUNDS - ACCORDINGLY, ASSESSING OFFICER DISALLOWED A PART OF INTEREST CLAIMED - ON APPEAL, ASSESSEE - COMPANY CONTENDED THAT IT HAD INTEREST - FREE FUNDS WORTH RS. 398 CRORES COMPRIS ING OF SHARE CAPITAL, RESERVES AND SURPLUS AND DEPRECIATION RESERVES AND, THUS, ENTIRE INVESTMENT HAD BEEN MADE IN SISTER CONCERN OUT OF INTEREST - FREE FUNDS - COMMISSIONER (APPEALS) ACCEPTED : ASSESSEE'S CONTENTION AND DIRECTED ASSESSING OFFICER TO ALLOW E NTIRE I.T.A NO. 2168 /AHD/20 13 A.Y. 2010 - 2011 PAGE NO D CIT (OSD) VS. M/S.TORQUE AUTOMOTIVE PVT. LTD. 6 AMOUNT OF INTEREST UNDER SECTION 36(1) (III) - TRIBUNAL UPHELD ORDER OF COMMISSIONER (APPEALS) - ON INSTANT APPEAL, IT WAS SEEN THAT COMMISSIONER (APPEALS) AS ALSO TRIBUNAL HAD RECORDED A CLEAR FINDING THAT ASSESSEE HAD INTEREST - FREE FUNDS OF ITS OWN WHICH HAD BEEN GENERATED IN COURSE OF YEAR COMMENCING FROM 1 - 4 - 1999 - FURTHER, IN TERMS OF BALANCE - SHEET THERE WAS AN AVAILABILITY OF RS. 398.79 CRORES INCLUDING RS. 180 CRORES OF SHARE CAPITAL - WHETHER IF THERE ARE FUNDS AVAILABLE, BOTH, INTEREST - FREE AN D OVERDRAFT AND/OR LOANS TAKEN, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF INTEREST - FREE FUNDS GENERATED OR AVAILABLE WITH COMPANY, PROVIDED SAID FUNDS ARE SUFFICIENT TO MEET INVESTMENTS - HELD, YES - WHETHER SINCE, IN INSTANT CASE, SA ID PRESUMPTION WAS CLEARLY ESTABLISHED IN VIEW OF FINDINGS RECORDED BY COMMISSIONER (APPEALS) AND TRIBUNAL, IMPUGNED ORDER PASSED BY SAID AUTHORITIES WAS TO BE AFFIRMED - HELD, YES' RECENTLY HON'BLE GUJARAT HIGH COURT IN CASE OF RAGHUVIRSYNTETICS LIMITED I N TAX APPEAL NO 829 OF 2007 VIDE ITS ORDER DATED 05 TN DECEMBER 2011 HAS HELD AS UNDER: 'AS CAN BE NOTED FROM THE ORDER OF THE TRIBUNAL, THE ASSESSING OFFICER DISALLOWED THE INTEREST SOLELY ON THE GROUND THAT THE ASSESSEE HAD GIVEN INTEREST FREE LOANS TO TH E ASSOCIATE CONCERNS, VIZ., R.R.FAMILY TRUST AND SAGAR : TEXTILE MILLS AND THIS DISALLOWANCE, IN APPEDL THE C/T (APPEALS) DELETED BY HOLDING THAT THE AMOUNF ADVANCED TO BOTH R.R.FAMILY TRUST AND SAGAR TEXTILES MILS WERE NOT GIVEN DURING THE YEAR UNDER CONS IDERATION, BUT THE SAME WAS GIVEN IN THE EARLIER YEARS. C/T (APPEALS) HAD A/SO TAKEN NOTE OF THE FACT THAT THERE WAS SUFFICIENT FUNDS AVAILABLE WITH THE ASSESSEE - RESPONDENT ON WHICH THERE WAS NO INTEREST LIABILITY THAT HAD BEEN INCURRED. IN SUCH CIRCUMSTAN CES, RELYING ON THE CASE OF TORRENT FINANCIERS LTD. (SUPRA), IT FOUND THAT THE DISALLOWANCE WAS NOT , JUSTIFIABLE. THE TRIBUNAL ON NOTING THESE DETAILS, IN TERMS HELD THAT THERE WAS NOTHING CONTRARY THAT COULD BE BROUGHT ON RECORD BY THE DEPARTMENT. THE AS SESSEE'S EQUITY SHARE CAPITAL RS.3.85 CORES AND RESERVE AND SURPLUS OF RS.5.52 CRORES ALSO WERE NOTED BY THE TRIBUNAL. IT FOUND THAT THE INTEREST FREE FUND AVAILABLE WITH THE ASSESSEE WAS FAR GREATER THAN THE LOAN ADVANCED TO THE SISTER CONCERNS AND AS A C OROLLARY TO THAT, IT CONCLUDED THAT THE BORROWED MONEY WAS NOT UTILIZED FOR THE PURPOSE OF ADVANCE TO THE SISTER CONCERNS, AS HAD BEEN NOTED I.T.A NO. 2168 /AHD/20 13 A.Y. 2010 - 2011 PAGE NO D CIT (OSD) VS. M/S.TORQUE AUTOMOTIVE PVT. LTD. 7 BY THE ASSESSING OFFICER. WHAT HAD WEIGHED WITH THE TRIBUNAL IS THE FACT THAT THE ENTIRE INTEREST FREE FUNDS INCLUD ED OWNER'S OWN CAPITAL AND ACCUMULATED PROFITS AND OTHER INTEREST FREE CREDITS AND LOANS AND IF THE TOTAL INTEREST FREE ADVANCES INCLUDING THE DEBIT BALANCE OF THE PARTNERS DID NOT EXCEED THE TOTAL INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE, INTEREST WAS NOT DISALLOWABLE MERELY ON ACCOUNT OF THE UTILIZATION OF THE FUNDS FOR NON - BUSINESS PURPOSES. THUS, AS CAN BE SEEN THE TRIBUNAL ACTUALLY RELIED ON THE FINDINGS GIVEN IN CASE OF TORRENT FINANCIERS LTD. (SUPRA) AND FURTHERMORE THERE WAS NOTHING CONTRARY THAT COULD BE BROUGHT ON RECORD BY THE DEPARTMENT FOR IT TO HOLD OTHERWISE. FACTUALLY, IT FOUND HUGE FUNDS WERE AVAILABLE WITHOUT ANY INTEREST LIABILITY WITH THE ASSESSEE AND THAT THERE WAS NO EVIDENCE TO HOLD THAT THE BORROWED MONEY WAS UTILIZED FOR THE PURPOSE OF ADVANCE TO THE SISTER CONCERN. ALL THESE ASPECTS CUMULATIVELY LED THE TRIBUNAL TO HOLD THAT THE DISALLOWANCE MADE ONLY ON THE GROUND THAT ADVANCES WERE GIVEN OUT OF THE BORROWED FUNDS, HOLDING THE ASSESSEE INELIGIBLE FOR ALLOWANCE OF INTEREST BY THE ASSESSING OFFICER OF THE SUM OF RS. 18.66 LACS WAS NOT SUSTAINABLE. THE TRIBUNAL HAS CORRECTLY APPROACHED THE ISSUE WHICH HAS BEEN PROPOSED IN THE PRESENT TAX APPEAL. WHEN THERE WAS NO EVIDENCE BROUGHT ON RECORD BY THE DEPARTMENT FOR THE TRIBUNAL TO H OLD OTHERWISE THAN WHAT HAS BEEN CONCLUDED BY WAY OF ANY MATERIAL, WE HOLD THAT THE ISSUE IS APPROPRIATELY CONCLUDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE'. THE HON'BLE SUPREME COURT IN CASE OF MUNJAL SALES CORPORATION 298 ITR 298 HAS ALSO OBS ERVED THAT WHEN ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS TO GRANT ADVANCES TO OTHER PARTIES, NO DISALLOWANCE OF INTEREST IS JUSTIFIED. THE HON'BLE AHMEDABAD I.T.A.T. IN CASE OF PARESH LAL CHAND SHAH IN ITA NO 3408/AHM/2010 VIDE ITS ORDER DATED 29 TH APRI L 2013 HAS DECIDED THE SIMILAR ISSUE IN FAVOUR OF ASSESSEE AFTER CONSIDERING THE DECISION OF RAGHUVIR SYNTHETICS LIMITED REFERRED SUPRA. THE HON'BLE I.T.A.T. WHILE DECIDING THE ISSUE IN FAVOUR OF ASSESSEE HAS CONSIDERED THE DECISION OF KERALA HIGH COURT IN CASE OF V.I. BABY & ORS. (254 ITR 248) AND DECISION OF HON'BLE PUNJAB & HARYANA HIGH COURT IN CASE OF ABHISHEK INDUSTRIES 286 ITR 1, RELIED UPON BY ASSESSING OFFICER FOR MAKING ADDITIONS IN INSTANT CASE. RESPECTFULLY FOLLOWING THE DECISIONS OF HON'BLE GUJ ARAT I.T.A NO. 2168 /AHD/20 13 A.Y. 2010 - 2011 PAGE NO D CIT (OSD) VS. M/S.TORQUE AUTOMOTIVE PVT. LTD. 8 HIGH COURT IN CASE OF RAGHUVIR SYNTHETICS LIMITED AND JURISDICTIONAL I.T.A.T. REFERRED SUPRA, DISALLOWANCE MADE BY ASSESSING OFFICER FOR RS 5,9,138/ - IS DELETED. THE GROUND OF APPEAL IS ACCORDINGLY ALLOWED. 4. DURING THE COURSE OF APPELLATE PROCEEDI NGS BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSING OFFICER. ON THE OTHER HAND, LEARNED COUNSEL SUBMITTED A PAPER BOOK CONTAINING COPIES OF JUDICIAL PRONOUNCEMENTS AND H E ALSO SUPPORTED THE ORDER OF THE LD. CIT(A). 5. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. REGARDING DISALLOWANCE OF INTEREST 36(1)(III) OF RS. 5,91,138/ - . W E NOTICED THAT THE ASSESSEE HAS INTEREST FREE FUNDS IN FORM OF SHARE CAPITAL AND RESERVES & SURPLUS FOR RS 9,60,44,946/ - IN COMPARISON OF ADVANCES GIVEN TO THE ABOVE PERSONS OF RS 65,09,485/ - . I N THE CURRENT YEAR PROFIT AVAILABLE FOR APPROPRIATION AS SHOWN IN AUDITED ANNUAL ACCOUNTS WAS RS 1,55,11,497/ - WHICH WAS MORE THAN INTEREST FR EE ADVANCES GRANTED BY ASSESSEE . T HE SE FACTS PROVE THAT A SSESSEE HAS SUFFICIENT INTEREST FREE FUNDS AVAILABLE WITH IT TO GRANT INTEREST FREE ADVANCES . C ON SID ERING ABOVE FACTS AND THE DECISION OF THE APEX COURT IN THE CASE OF MUNJAL SALES CORPORATION, WE JUSTIF Y THE DECISION OF LD. CIT(A) THAT NO DISAL LOW ANCE OF INTEREST IS REQUIRED IN THE CASE OF THE ASSESSEE. D ISALLOWANCE ON FOREIGN TRAVELLING EXPENDITURE I.T.A NO. 2168 /AHD/20 13 A.Y. 2010 - 2011 PAGE NO D CIT (OSD) VS. M/S.TORQUE AUTOMOTIVE PVT. LTD. 9 6 . DURING THE COURSE OF A SSESSMENT PROCEEDINGS , THE ASSESSING OFFICER NOTICED THAT ASSESSEE INCURRED FOREIGN TRAVELLI NG EXPENSES TO THE TUNE OF RS. 2 , 2 3 , 059/ - TOWARDS FOREIGN TRAV ELLING OF DIRECTOR AND OTHERS F R O M THE COMPANY. ASSESSEE EXPLA I N ED THAT THESE EXPENDITURES WERE INCURRED FOR BUSINESS PURPOSES . HO W EVER, THE ASSESSING OFFICER HAD NOT ACCEPTED THE EXPLANATIO N AS FAR AS EXPENSES OF RS. 1 , 33 ,857/ - INCURRED FOR M/S KURE N AMIN AND MR. I K SHIT AMIN WAS CONCERNED STATING THAT ASSESSEE ONLY SUBMITTED GENERAL EXPLANATION AND F AILED TO FURNISH THE COPY OF TOUR REPORT SUBMITTED BY THE M TO THE COMPANY. AGGRIEVED AGAIN ST THE ADDITION MADE BY THE ASSESSING OFFICER THE ASSESSE PREFERRED APPEAL BEFORE THE LD.CIT(A) WHO DELETED THE ADDITION BY OBSERVING AS UNDER: - ' I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND THE SUBMISSIONS GIVEN BY THE APPELLANT. THE APPELLANT HAS SU BMITTED THAT THE FOREIGN TRAVELLING EXPENSES WERE INCURRED FOR PARTICIPATION IN AUTOMOBILE SEMINAR AT DUBAI. A COPY OF THE INVOICE FOR PARTICIPATION IN THE SAID SEMINAR WAS ALSO FURNISHED. THE SEMINAR WAS ATTENDED BY THE FOUR DIRECTORS ALONG WITH MANAGER A ND SALES HEAD OF THE COMPANY. THE FULL DETAILS OF THE EXPENSES KEPT ON RECORD. IT IS THE BUSINESSMAN WHO DECIDES THE COMMERCIAL OR BUSINESS PRUDENCE OR EXPEDIENCY AND THE REVENUE IS NOT PERMITTED TO DECIDE THE SAME WHILE SITTING IN THE ARMCHAIR OF THE BUSI NESSMAN AS PER SETTLED LAW. THE REVENUE IS NOT PERMITTED TO STEP INTO THE SHOES OF THE BUSINESSMAN AND DECIDE AS TO HOW AND BUSINESSMAN HAS BEEN REITERATED BY DIFFERENT COURTS. THE FULL DETAILS SUCH AS TRAVELLING BILLS / TICKET EXPENSES / RESOLUTION OF BOA RD HAVE BEEN BROUGHT ON RECORD. AFTER CONSIDERING ALL THESE FACTS AND CIRCUMSTANCES, I AM OF THE VIEW THAT A. O. WAS NOT JUSTIFIED IN DISALLOWING THE EXPENSES WITHOUT ANY SPECIFIC FINDING. THE DISALLOWANCE MADE BY A. O. IS ONLY ON THE BASIS OF PRESUMPTION. THE APPELLANT HAS GIVEN SUFFICIENT PROOF IN SUPPORT OF THE EXPENSES CLAIMED BY IT AND THE JUSTIFICATION HOW IT WAS CATALYST FOR BUSINESS PROGRESS. THE DISALLOWANCE MADE BY THE A. O. IS, THEREFORE, DIRECTED TO BE DELETED. THE GROUND OF APPEAL IS ACCORDINGL Y ALLOWED. I.T.A NO. 2168 /AHD/20 13 A.Y. 2010 - 2011 PAGE NO D CIT (OSD) VS. M/S.TORQUE AUTOMOTIVE PVT. LTD. 10 7. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSING OFFICER. ON THE OTHER HAND, LEARNED COUNSEL SUBMITTED A PAPER BOOK CONTAINING JUDICIAL PRONOUNCEMENTS AND RELATE D ACCOUNTS DETAIL. HE ALSO SUPPORTED THE ORDER OF THE LD. CIT(A). 8. AFTER HEARING BOTH THE SIDES AND PERUSAL OF RECORDS W E FIND THAT THE SAID FOREIGN SEMINAR WAS ATTENDED BY FOUR DIRECTORS ALONG WITH THE MANAGING DIRECTOR AND SALES HEAD OF THE COMPANY . THE ASSESSEE HAS PROVIDED FULL D ETAILS SUCH AS TRAVELLING BILLS/TICKET EXPENSES / RESOLUTION OF BOARD PERTAINING TO THE FOREIGN EXPENSES INCURRED. AFTER CONSIDERING THE DETAIL FINDINGS OF THE LD. CIT(A),WE FIND THAT THE A. O. HAD MADE THE DISALLOWANCE ON PRESUMPTION BASIS WITHOUT PROVING CONTRARY THAT CLAIM OF THE ASSESSEE WAS NOT GENUINE. THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS OF THE LD. CIT(A). ADDITION U/S. 2(22)(E) 9 . DURING THE COURSE OF ASSESSMENT PROCEEDINGS , THE ASS ESSING OFFICER NOTICED FROM THE BALANCE SHEET THAT THERE W AS CREDIT BALANCE OF RS. 15 LACS AND 40 LACS RESPECTIVELY ON 27/08/2010 AND 03 - 02 - 2010 IN THE LEDGER ACCOUNT (UNSECURED LOAN ACCOUNT) OF TEC TON E MOTORS PVT. LTD IN THE BOOKS OF ASSESSEE COMPANY . HE OBSERVED THAT IT MEANT THAT LOAN S HAVE BEEN RECEIVED ON THESE DAYS BY THE ASSESSEE COMPANY FROM TECTON E MOTORS PVT. LTD. AND SHAREHOLD ING PATTERN OF THE DIRECTOR SHRI KUREN AMIN IN THE ASSESSEE COMPANY AND I.T.A NO. 2168 /AHD/20 13 A.Y. 2010 - 2011 PAGE NO D CIT (OSD) VS. M/S.TORQUE AUTOMOTIVE PVT. LTD. 11 IN TECTON E MOTOR PVT. LTD WAS ABOVE 20%. THEREF ORE, HE APPLIED PROVISION OF SECTION 2(22)(E) OF THE ACT AND MADE ADDITION OF RS. 27 , 64 , 117/ - ON ACCOUNT OF DEEMED DIVIDEND. AGGRIEVED AGAINST THE ABOVE ADDITION MADE BY THE ASSESSING OFFICER, THE ASSESSEE FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT( A) HAD DELETED THIS ADDITION BY OBSERVING AS UNDER: - I HAVE CAREFULLY PERUSED THE ASSESSMENT ORDER AND THE SUBMISSIONS GIVEN BY THE APPELLANT. TECTONE MOTORS PRIVATE LIMITED HAD ADVANCED LOANS TO THE APPELLANT COMPANY IN THE NORMAL COURSE OF BUSINE SS. I HAVE SEEN ANNEXURE ' C' FILED WHICH IS INDICATING DATE WISE TRANSACTIONS IN THREE PAGES. THE APPELLANT'S OTHER ARGUMENT IS THAT THE APPELLANT COMPANY IS NOT THE SHAREHOLDER IN TECTONE MOTOR PVT. LTD. THEREFORE, THE FACTS INDICATE THAT THE CIRCUMSTANC ES ARE NOT AVAILABLE WHEREIN IT COULD BE TREATED AS THE SHAREHOLDER / MEMBERS RECEIVING DIVIDEND. THE APPELLANT HAS RELIED ON DIFFERENT CASE LAWS SUCH AS; (I) CIT VS. DAISY PACKERS PVT. LTD. [APPEAL NO. 212 OF : 2010] (II) ACIT VS. BHAUMIK COLOU R (P) LTD. (2009) 118 ITD 1 (MUMBAI) (SB) (III) CIT VS. UNIVERSAL MEDICARE PVT. LTD. [190TAXMAN 144 (BOM)] THE RATIO LAID DOWN IN ACIT VS. BHAUMIK COLOUR (P) LTD. (2009) 118 ITD 1 (MUMBAI) (SB) HAS BEEN APPROVED BY JURISDICTIONAL HIGH COURT WHILE DECIDING CIT VS. DAISY PACKERS PVT. LTD. [APPEAL NO. 212 OF 2010]. THE ISSUE HAS BECOME SETTLED WITH THE DECISIONS BEING TAKEN BOTH BY JURISDICTIONAL ITAT AND HON'BLE GUJARAT HIGH COURT. I HAVE GONE THROUGH THE RATIO LAID DOWN IN THESE THREE CASE LAWS. IN VIEW OF T HE FACTS OF THE CASE AND RATIO LAID DOWN IN VARIOUS CASE LAWS, IT IS DECIDED THAT THE FACTS OF THE CASE DOES NOT JUSTIFY INVOKING OF PROVISIONS OF SECTION 2(22) (E) OF THE I. T. ACT, 1961. THE DISALLOWANCE MADE BY THE AO IS, THEREFORE, DELETED AND THE; GRO UNDS OF APPEAL ARE ALLOWED. 10. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER OF THE ASSESSING OFFICER. ON THE OTHER HAND, LEARNED COUNSEL S UBMITTED A PAPER BOOK I.T.A NO. 2168 /AHD/20 13 A.Y. 2010 - 2011 PAGE NO D CIT (OSD) VS. M/S.TORQUE AUTOMOTIVE PVT. LTD. 12 CONTAINING JUDICIAL PRONOU NCEMENTS AN D COPY OF BALANCE SHEET OF TECTONE MOTORS PVT. LTD. HE ALSO SUPPORTED THE ORDER OF THE LD. CIT(A). 11. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. WE NOTICED THAT ASSESSEE WAS NOT A SHARE HOLDER IN LENDER COMPANY AND TECTONE MOTORS PRIVATE LIMITED HAD ADVANCED LOANS TO THE A SSESSEE COMPANY IN THE NORMAL COURSE OF BUSINESS. 11.1 AFTER CONSIDERING THE ABOVE FACTS THAT ASSESSEE WAS NOT A SHARE HOLDER IN THE LENDER COMPANY AND THE FINDINGS OF LD. CIT(A) IN DETAIL TH AT THIS ISSUE HAS BECOME SETTLED WITH THE DECISION TAKEN BY JURISDICTIONAL ITAT A ND HON BL E HIGH COURT, WE FIND THAT ASSESSING OFFICER WAS NOT JUSTIF IED IN INVOKING THE PROVISIONS OF SECTION 2(22) (E) OF THE ACT , THEREFORE, WE UPHOLD THE DECISION OF LD.C IT(A). 1 2 . IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 22 - 02 - 201 7 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHME DABAD : DATED 22 /02 /2017 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT I.T.A NO. 2168 /AHD/20 13 A.Y. 2010 - 2011 PAGE NO D CIT (OSD) VS. M/S.TORQUE AUTOMOTIVE PVT. LTD. 13 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,