Gian Chand Jasbir Singh, Karnal V. ITO, Karnal

ITA 2177/DEL/2009

• Counselvise Citation: [2010] 135 COUNSELVISE.COM (IT) 7240 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 3 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 25-08-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 22-05-2009
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Commercial expediency

Judgement Text

ITA NO. 2177/DEL/09 A.Y. 2006-07 1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH C NEW DELHI BEFORE SHRI C.L. SETHI, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER I.T.A. NO. 2177/DEL/2009 A.Y. : 2006-07 GIAN CHAND JASBIR SINGH, RAILWAY ROAD, NEAR JAIN BAGICHI, KARNAL 132 001 HARYANA (PAN: AACFG0119E) VS. I.T.O., WARD-1, AAYKAR BHAVAN, SECTOR-12, KARNAL 132001 KARNAL (APPELLANT ) (RESPONDENT ) ASSEESSEE BY : SH. GIRISH ANEJA, CA DEPARTMENT BY : SH. P.K. GUPTA, D.R. PER SHAMIM YAHYA: AM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DATED 2.3.2009 PERTAINING TO ASSESSMENT YEAR 2006-07. 2. THE ISSUE RAISED IS THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN PARTLY CONFIRMING THE DISALLOWANCE OF INTEREST U /S 36(1)(III). 3. IN THIS CASE THE ASSESSING OFFICER NOTED THAT I N THE BALANCESHEET OF THE ASSESSEE THERE ARE LOANS AND ADVANCES OF ` 23,55,534/- AND ALSO UNSECURED LOAN OF ` 15,19,951/- AND SECURED LOAN OF ` 15,61,681/-. THE ASSESSEE HAD DEBITED ` 3,47,113/- AS INTEREST ON UNSECURED AND SECURED LO ANS WHEREAS NO INTEREST HAVE BEEN CHARGED ON THE LOANS AND ADVANCES GIVEN TO M/ S GIAN ASSOCIATES ITA NO. 2177/DEL/09 A.Y. 2006-07 2 ` 22,05,534/- AND M/S A.P. ENTERPRISES ` 1,50,000/-. THESE WERE SISTER CONCERNS OF THE ASSESSEE. THE ASSESSEE RESPONDED THAT ON THIS ISSUE IN THE CASE OF SA BUILDERS LTD. VS. C.I.T. 288 ITR 1 WAS APPLICABLE. ASSESSING OFFICER DID NOT AGREED WITH THIS CONTENTION. HE DID NOT FIND ANY COMMERC IAL EXPEDIENCY IN ADVANCING SUMS TO THE SISTER CONCERNS. THEREFORE, HE MADE DISALLOWANCE OF ` 2,82,664/- BEING INTEREST PAID ON THESE LOANS. 4. BEFORE THE LD. COMMISSIONER OF INCOME TAX (APPEA LS) ASSESSEE CLAIMED THE ADVANCES GIVEN WERE BUSINESS ADVANCES. IT WAS SU BMITTED THAT MORE FUNDS HAVE BEEN RECEIVED FROM M/S A.P. ENTERPRISES DURING THE YEAR THAN THE OUTFLOW AND THEREFORE, NO INTEREST WAS DISALLOWABLE. IN THE CASE OF M/S GIAN ASSOCIATES, ASSESSEE CLAIMED THAT ASSESSEE IS ONE OF THE DEALER S OF ACC AND THERE ARE ABOUT 40-50 DEALERS IN KARNAL AND SURROUNDING DISTRICTS. ASSESSEE CLAIMED THAT M/S GIAN ASSOCIATES IS C&FA FOR ACC LTD. AND THEREFORE , GIVING INTEREST FREE ADVANCE TO M/S GIAN ASSOCIATES IS IN BUSINESS INTEREST. A SSESSEE FURTHER SUBMITTED THAT CALCULATION OF INTEREST HAVE BEEN MADE BY THE ASS ESSING OFFICER ON THE NET LOAN OUTSTANDING AT THE END OF THE YEAR @12%, WHEREAS, T HE DIFFERENT BALANCES WERE OUTSTANDING DURING THE YEAR AND THEREFORE, THE QUA NTUM OF DISALLOWANCE IS ALSO DISPUTED. LD. COMMISSIONER OF INCOME TAX (APPEALS) DID NOT FIND THE ASSESSEES CONTENTION ACCEPTABLE. HE RELIED UPON THE DECISI ON OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF C.I.T. VS. ABHISHEKH INDU STRIES LTD. 286 ITR 1 AND ALSO UPON DECISION IN THE CASE OF C.I.T. VS. AVERY CYCLE INDUSTRIES LTD. 298 ITR 239. HE HELD AS UNDER:- I HAVE CONSIDERED THE FACTS OF THE CASE AND THE S UBMISSIONS OF THE ASSESSEE. IF THERE WAS MORE AMOUNT RETURNED THEN WHAT IS ADVANCE DURING THE YEAR AND STILL REMAINS THE BALANCE OUTSTANDING IN THE CASE OF A.P. ITA NO. 2177/DEL/09 A.Y. 2006-07 3 ENTERPRISES, THEN IT IS CLEAR THAT OPENING OUTSTAN DING WAS MUCH HIGHER BUT IT DOES NOT SHOW ANYWHERE THAT IT WAS THE BUSINESS NECESSITY TO ADVANCE LOANS TO A.P. ENTERPRISES. ASSESSEE HAS NOT FILED DETAIL OF ANY BUSINESS TRANSACTION WITH A.P. ENTERPRISES, THEREFORE, IT IS CLEAR THAT THE SAID ADVANCE WAS NOT FOR BUSINESS PURPOSES. SIMILARLY IN THE CAS E OF M/S GIAN ASSOCIATES, ASSESSEE HAS SIMPLY CLAIMED THAT M/S GIAN ASSOCIAT ES IS C&FA OF ACC LTD. AND THE ASSESSEE IS THE STOCKIEST BUT IT HAS NOT E XPLAINED AS TO HOW GIVING INTEREST FREE ADVANCE BY ASSESSEE TO GIAN ASSOCIATE S IS IN BUSINESS INTERST. NO EVIDENCE OF ANY BUSINESS TRANSACTION OR OF ANY B ENEFIT FROM GIAN ASSOCIATES HAS BEEN FILED, THEREFORE, IT IS CLEAR THAT IT IS ALSO NOT A BUSINESS ADVANCE. THEREFORE, IT IS CLEAR THAT THE HUGE BALA NCES WHICH ARE OUTSTANDING ARE NOT FOR BUSINESS PURPOSE BUT UNDIS PUTEDLY INTEREST FREE. 5. AS REGARDS THE ASSESSEE CLAIMED THAT INTEREST HA D BEEN CALCULATED ON THE BASIS OF ACTUAL BALANCES OUTSTANDING. LD. COMMISSI ONER OF INCOME TAX (APPEALS) DIRECTED THE ASSESSING OFFICER TO CALCULATE THE DI SALLOWABLE INTEREST ON THE BASIS OF ACTUAL DAY TO DAY BALANCE OUTSTANDING IN THE C ASES OF INTEREST FREE ADVANCE BY APPLYING THE RATE OF INTEREST @12%. 6. AGAINST THIS ORDER THE ASSESSEE IS IN APPEAL BEF ORE US. 7. WE HAVE HEARD BOTH THE COUNSEL AND PERUSED THE R ECORDS. IT IS CLEAR IN THIS CASE THAT ASSESSEES FIRM HAS GIVEN INTEREST FREE A DVANCES TO OTHER FIRMS WHICH ARE SISTER CONCERNS. NO REASON AS TO HOW IT WAS C OMMERCIALLY EXPEDIENT FOR THE ASSESSEE FIRM TO GIVE INTEREST FREE ADVANCES TO THE ASSESSEES SISTER CONCERN HAS BEEN DEMONSTRATED. IT IS ALSO NOT THE CASE THAT I NTEREST FREE FUND IS AVAILABLE TO THE ASSESSEE TO ADVANCE INTEREST FREE LOANS TO SIST ER CONCERNS. IN THE CASE OF A.P. ENTERPRISES ADMITTEDLY, THE OPENING BALANCE WERE L ARGE AMOUNT AND AS A RESULT DESPITE RECEIPT OF THE PAYMENT DURING THE YEAR, THE AMOUNT REMAINED IN DEBIT. BUT THE FACT REMAINS THAT THE AMOUNTS WERE GIVEN TO BOTH THE SISTER CONCERNS OUT ITA NO. 2177/DEL/09 A.Y. 2006-07 4 OF INTEREST BEARING FUNDS. ASSESSEE HAS NOT BEE N ABLE TO DEMONSTRATE AS TO WHAT WAS THE BENEFIT OR COMMERCIAL EXPEDIENCY WHICH PROMPTED THE ASSESSEE FIRM TO GIVE INTEREST FREE ADVANCES TO SISTER CONCE RNS. BOTH THE SISTER CONCERNS HAVE AN INDEPENDENT IDENTITY. PROFIT EARNED BY THESE SISTER CONCERNS CANNOT BE SAID TO HAVE RESULTED IN ANY KIND OF GAIN TO THE AS SESSEE. IN THAT VIEW OF THE MATTER, THE HONBLE APEX COURT DECISION IN THE CASE OF SA BUILDERS IS NOT APPLICABLE ON THE FACTS OF THE CASE. HENCE, IN T HE FACTS AND CIRCUMSTANCES OF THE CASE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AND ACCORDINGLY, WE UPHOLD THE SAME. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/8/2010. SD/- SD/- [C.L. SETHI] [SHAMIM YAHYA] JUDICIAL MEMBER ACCOUNTANT MEMBER DATE 31/8/2010 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, DEPUTY REGISTRAR, ITAT, DELHI BENCHES