M/s Ram Dass Kapoor Transport, Ludhiana V. ACIT, Ludhiana

ITA 218/CHANDI/2011

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 0138 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 year(s) 1 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-04-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 21-03-2016
• Assessment Year: 2007-2008
• Appeal Filed On: 04-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: GAGAN DEEP SINGH
• Assessee Lawyers: S K MITTAL
• Keywords: Proportionate interest

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI H.L.KARWA, HON'BLE VICE PRESIDENT & MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 218/CHD/2011 ASSESSMENT YEAR: 2007-08 M/S RAM DASS KAPOOR TRANSPORT VS. THE ACIT, CIRCLE V, LUDHIANA LUDHIANA PAN NO. AAEFR4453N (APPELLANT) (RESPONDENT) APPELLANT BY : SH. S.K. MITTAL RESPONDENT BY : SH. GAGANDEEP SINGH DATE OF HEARING : 23.03.2016 DATE OF PRONOUNCEMENT : 06.04.2016. ORDER PER H.L.KARWA, VP THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF CIT(A)- II, LUDHIANA DATED 29.12.2010 RELATING TO ASSESSMEN T YEAR 2007-08. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE IN THIS APPEAL READS AS UNDER:- THAT THE LD. CIT(A) HAS ERRED IN LAW AND ON THE FAC TS OF THE CASE IN SUSTAINING DISALLOWANCE OF RS. 1010167 /- U/S 36(1)(III) OUT OF INTEREST PAID AND THE DISALLO WANCE IS IN ANY CASE TOO EXCESSIVE. 2 3. BRIEFLY STATED THE FACTS OF THE CASE ARE THAT TH E ASSESSING OFFICER NOTED THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESS EE HAD GIVEN LOANS AND ADVANCES TO VARIOUS PERSONS. THE DETAILS OF LOANS A ND ADVANCES ARE AS UNDER:- 1) DISK INDIA PVT LTD. RS. 5,00,000/- 2) SONAL FABRICATORS PVT LTD RS. 11,20,000/- DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A SSESSING OFFICER REQUIRED THE ASSESSEE TO FURNISH DETAILS OF ABOVE DEBIT BALA NCES AND TO EXPLAIN AS TO WHY PROPORTIONATE INTEREST THEREON SHOULD NOT BE DI SALLOWED U/S 36(1)(III) OF THE INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT'). IN RESPONSE TO THE ABOVE QUERY, THE ASSESSEE FURNISHED COPIES OF THE ACCOUNT OF THE ABOVE PARTIES AND EXPLAINED THAT THE AMOUNTS REPRESENTED BUSINESS TRA NSACTIONS. THE ASSESSING OFFICER REJECTED THE EXPLANATION OF THE ASSESSEE ST ATING THAT ABOVE AMOUNTS REPRESENTED ADVANCES TO SISTER CONCERN / OTHERS FOR NON BUSINESS PURPOSES AND THEREFORE, DISALLOWED INTEREST THEREON AND RESTRICT ED THE DISALLOWANCE TO THE EXTENT OF TOTAL INTEREST PAID BY THE ASSESSEE RELYI NG ON THE DECISION OF HON'BLE E PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS . ABHISHEK INDUSTRIES LTD (2006) 286 ITR 1(P&H).ON APPEAL, THE CIT(A) C ONFIRMED THE ADDITION AND, HENCE, THE ASSESSEE IS IN APPEAL BEFORE THE TR IBUNAL. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS. SHRI GAGAND EEP SINGH, LD. COUNSEL FOR THE ASSESSEE POINTED OUT THAT THE AMOUN T IN QUESTION WAS PAID BY CHEQUES TO THE AFORESAID CONCERNS NAMELY M/S SONAL FABRICATORS PVT LTD AND M/S DISK INDIA PVT LTD FOR THE FABRICATION / MANUFA CTURING OF FOUR LPG BULLET TRUCKS / LPG ROAD TANKERS FOR TRANSPORTATION OF EXP LOSIVE LPG UNDER PROPER FABRICATING LICNECE FROM THE MINISTRY OF COMMERCE AND INDUSTRY, DEPARTMENT 3 OF EXPLOSIVES, GOVERNMENT OF INDIA. IT IS CLAIMED T HAT M/S SONAL FABRICATION PVT LTD IS ENGAGED IN THE BUSINESS OF MANUFACTURING / FABRICATIONS OF LPG TANKS WHICH ARE FITTED ON THE VEHICLE CHASSIS TO TR ANSPORT PETROLEUM PRODUCTS / GAS. THE ASSESSEE HAS PAID AN AMOUNT OF RS. 11,50,0 00/- TO THE SAID CONMEN AND RS. 5 LAKHS TO M/S DISK INDIA PVT. LTD ON BEHAL F OF THE SONAL FABRICATION PVT LTD FOR THE FABRICATION OF LPG IN FINANCIAL YEA R 2005-06, IT IS EVIDENT FROM THE RECORDS THAT THE AMOUNTS IN QUESTION WER E PAID TO THE ABOVE CONCERNS IN THE FINANCIAL YEAR 2005-06 RELATING TO ASSESSMENT YEAR 2006-07. THUS, THESE ADVANCES ARE OLD ADVANCES AND NO FRESH PAYMENTS HAVE BEEN MADE TO THESE CONCERNS IN THE FINANCIAL YEAR 2006-07. TH E TANKERS WERE GOT FABRICATED FROM THE ABOVE CONCERNS IN THE FINANCIAL YEARS 2004-05 AND 2005- 06. THE VEHICLE NUMBERS AND TANK NUMBERS FITTED ARE AS UNDER;- VEHICLE NO. TANK NO. PB 10 BM 8757 SFL/LPG/050 PB 10 BM 8760 SFL/LPG/051 PB 10 BL 4495 SFL/LPG/028 PB 10 BL 4496 SFL/LPG/029 IT IS A MATTER OF RECORD THAT THE TANK BODIES WERE RECEIVED DULY FITTED ON THE CHASSIS IN THOSE YEARS AND HAVE ALSO BEEN PUT T O USE AND TRANSPORTATION CHARGES HAVE ALSO BEEN EARNED ON THEM IN THE RELEVA NT YEAR AND EARLIER YEARS. AS REGARDS THE RECEIPT OF RELEVANT BILLS FR OM THE PARTIES, IT IS STATED THAT THE DUE TO SOME MINOR DISPUTES WITH THE ABOVE CONCERNS THE ASSESSEE DID NOT RECEIVE THE RELEVANT BILLS FROM THE PARTIES IN THE RELEVANT PERIOD. AS A CONSEQUENCE, THE AMOUNTS ARE STANDING IN THE N AME OF ABOVE TWO PARTIES AND WHICH IN EFFECT REPRESENTED COST OF TAN KS. THERE IS NO DISPUTE 4 THAT THE ABOVE TWO AMOUNTS REPRESENTED COST OF LPG TANKS WHICH WERE PURCHASED AND USED FOR BUSINESS PURPOSES AND DO NOT REPRESENT ANY INTEREST FREE LOANS OR ADVANCES FOR NON BUSINESS PURPOSES. THE ASSESSEE HAS ALSO A SUBMITTED COPY OF THE CONFIRMATION LETTER ON BEHALF OF M/S SONAL FABRICATORS PVT LTD., WHEREIN THE SAID CONCERN HAS CERTIFIED THAT THE ASSESSEE ON THEIR BEHALF HAD PAID RS. 5 LAKHS VIDE CHEQUE NO. 533245 DATED 3.12.2005 TO M/S DISK INDIA PVT LIMITED TOWAR DS PAYMENTS AGAINST NEW LPG TANKS. THE COPY OF THE SAID CERTIFICATE IS AVAILABLE AT PAGE 31 OF THE ASSESSEES PAPER BOOK. M/S SONAL FABRICATORS P VT LTD HAVE ALSO FILED ANOTHER CONFIRMATION LETTER CERTIFYING THAT THE SA ID CONCERN HAD RECEIVED RS. 11,50,000/- FROM ASSESSEE AS AN ADVANCE AGAINS T MANUFACTURING OF FOUR LPG TANKS ON LABOUR BASIS. THE DETAILS OF THE SAME ARE AS UNDER:- DATE CHALLAN NO. AMT (RS.) 6.6.2005 736286 6 LAKHS 11.08.2005 824453 4 LAKHS 28.1.2006 101701(AGAINST DD) 1.5 LAKHS TOTAL 11,50,000 /- 5. THERE IS NO MATERIAL ON RECORD TO CONTROVERT TH E DOCUMENTARY EVIDENCE FURNISHED ON BEHALF OF THE ASSESSEE. CONSI DERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, IT IS CLEAR THAT THE DISPUTED AMOUNTS HAD BEEN GIVEN AS TRADE ADVANCE TO THE ABOVE CONCER NS THEREFORE, NO QUESTION OF CHARGING OF INTEREST ARISES, AND AT THE SAME TIME NO DISALLOWANCE OF INTEREST U/S 36(1)(III) OF THE ACT IS REQUIRED TO BE MADE. ACCORDINGLY, WE ALLOW THIS GROUND OF APPEAL RAISED BY THE ASSESSEE AND DELETE THE DISALLOWANCE OF INTEREST ON THESE TWO AM OUNTS I.E. RS. 5 LAKHS AND RS. 11,20,000/- ADVANCED TO M/S DISK INDIA PVT LTD AND M/S SONAL FABRICATIONS PVT. LTD. 5 6. AS PER THE ASSESSING OFFICER THE ASSESSEE HAD ALSO GIVEN LOANS AND ADVANCES TO THE TUNE OF RS. 28,16,000/- TO M/S PUNJAB MACHINERY WORKS P. LTD, RS. 68,33,492/- TO M/S VICKY CARRIE RS AND RS. 11,35,051/- TO M/S RAJIV KAPOOR TRANSPORT. IT IS STATED THAT M /S PUNJAB MACHINERY WORKS P. LTD A SISTER CONCERN OF THE ASSESSEE, WAS ENGAGED IN THE BUSINESS OF MANUFACTURING OF CIRCULAR KNITTING MACHINES. THE MONEY WAS GIVEN TO THE SISTER CONCERN AS APPLICATION MONEY FOR FRESH I SSUE OF NEW SHARES OF THAT CONCERN. THE AMOUNT GIVEN WAS CALLED BACK IN T HE SUCCEEDING YEARS FOR THE REASON OF NON-ISSUANCE OF THE NEW SHARES. A S REGARDS M/S VICKY CARRIERS AND M/S RAJIV KAPOOR TRANSPORT, IT WAS CLA IMED THAT THESE CONCERNS ARE ENGAGED IN THE BUSINESS OF PLYING OF T RUCKS AS THE SUB- CONTRACTORS OF THE ASSESSEE. THE OUTSTANDING BALANC E IS AN AGGREGATED ADVANCE GIVEN TO THEM FOR PLYING OF TRUCKS UNDER TH E SUB- CONTRACTORSHIP OF THE ASSESSEE AS TRANSPORTER. THE ASSESSING OFFIC ER DISALLOWED THE INTEREST UNDER THE PROVISIONS OF SECTION 36 (1)(III ) OF THE ACT. 7. ON APPEAL, THE CIT(A) HELD AS UNDER:- NEXT COMING TO THE DEBIT BALANCE IN THE ACCOUNT OF PUNJAB MACHINERY WORKS P.LTD, (RS. 29,00,000/-), IT IS SEE N FROM THE STATEMENT OF ACCOUNT THAT THE OPENING BALANCE OF RS . 9,30,000/- COMING FORWARD FROM EARLIER YEARS. HOWE VER, FOR THE AMOUNTS ADVANCED IN THE CURRENT YEAR, I DO NOT FIND FORCE IN THE ARGUMENTS OF THE LD. COUNSEL THAT THESE WERE FOR BUSINESS PURPOSES AND THE PAYMENTS MADE IN THE CURR ENT YEAR UNDER CONSIDERATION ARE HELD TO BE FOR NON-BUSINESS PURPOSES ON WHICH PROPORTIONATE DISALLOWANCE OUT OF INTEREST IS UPHELD. THE DISALLOWANCE OF INTEREST SH OULD BE WORKED OUT FOR THE PERIOD SUCH AMOUNT HAS BEEN OUTS TANDING. 6 SIMILARLY, AS REGARDS THE DEBT BALANCE IN THE ACCOU NTS OF VICKY CARRIERS (RS. 68,33,492/-) AND RAJIV KAPOOR T RANSPORT (RS.11,35,051/-) ARE CONCERNED, I DO NOT FIND ANY F ORCE IN THE ARGUMENTS OF THE LD. COUNSEL THAT THESE WERE FO R BUSINESS PURPOSES AND THE SUBMISSION THAT THERE ARE TWO DIFF ERENT ACCOUNTS RELATING TO THE SAME PERSONS AND BOTH THE ACCOUNTS SHOULD BE SEEN TOGETHER TO WORK OUT THE DEBIT / CRE DIT BALANCE IS ALSO DEVOID OF ANY MERIT. CONSIDERING TH E FACTS, I AM OF THE OPINION THAT THE ASSESSING OFFICER HAS RI GHTLY DISALLOWED THE INTEREST ON THESE AMOUNTS. THUS, THE DISALLOWANCE OF INTEREST ON THESE AMOUNTS IS UPHELD . HOWEVER, THE DISALLOWANCE OF INTEREST SHOULD BE WOR KED OUT FOR THE PERIOD SUCH AMOUNTS HAVE BEEN OUTSTANDING. 8. WE HAVE HEARD THE LD. REPRESENTATIVES OF BOTH T HE PARTIES. SHRI GANGANDEEP SINGH, LD. COUNSEL FOR THE ASSESSEE VEHE MENTLY ARGUED THAT THE AMOUNT IN QUESTION WAS ADVANCED BY THE ASSESSEE FIRM TO M/S PUNJAB MACHINERY WORKS P. LTD BEING A SISTER CONCERN AS AP PLICATION MONEY FOR FRESH ISSUE OF NEW SHARES OF THE SAID CONCERN. HE F URTHER POINTED OUT THAT EVEN OTHERWISE THE ADVANCES FOR PURCHASE OF SHARES WERE GIVEN OUT OF INTEREST FREE ADVANCES AND DEPOSITS LYING WITH THE ASSESSEE TO THE EXTENT OF RS. 99,40,376/-. THE DETAILS ARE AVAILABLE AT PAG E 58 OF THE PAPER BOOK. HE THEREFORE, SUBMITTED THAT NO DISALLOWANCE WAS CA LLED FOR. HE FURTHER POINTED OUT THAT THE OUTSTANDING AMOUNT IN THE NAME OF M/S VICKY CARRIERS WAS OUTSTANDING BALANCE ON ACCOUNT OF PLYING OF TRU CKS UNDER THE SUB- CONTRACTORSHIP OF M/S HINDUSTAN PETROLEUM CORPORATI ON LTD, A GOVERNMENT OF INDIA UNDERTAKING. COPIES OF THE ACCOUNTS WERE FILED BEFORE THE ASSESSING OFFICER. SHRI GAGANDEEP SINGH, LD. COUNS EL FOR THE ASSESSEE FURTHER POINTED OUT THAT BOTH THE CONCERNS I.E. ASS ESSEE AND M/S VICKEY CARRIERS ARE ENGAGED IN THE TRANSPORTATION JOB FOR HINDUSTAN PETROLEUM 7 LTD., UNDER A COMMON TENDER AND WERE USING EACH OTH ERS TRUCKS AT DIFFERENT JUNCTURES SO THAT THE AMOUNT BECAME DUE W HICH WAS ADJUSTED FROM TIME TO TIME. SHRI GAGANDEEP SINGH, LD. COUNSE L FOR THE ASSESSEE SUBMITTED THAT AMOUNT DUE WAS ON ACCOUNT OF TRADE D EALINGS, THE DISALLOWANCE OF INTEREST IS UNCALLED FOR. SHRI GA GANDEEP SINGH, LD. COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT OUTSTA NDING AMOUNT IN THE NAME OF M/S RAJIV KAPOOR TRANSPORT WAS ON ACCOUNT O F OUTSTANDING BALANCE OF PLYING OF TRUCKS UNDER SUB CONTRACTORSHI P OF M/S HINDUSTAN PETROLEUM PVT LIMITED, A GOVERNMENT OF INDIA UNDERT AKING. SHRI GAGANDEEP SINGH, LD. COUNSEL FOR THE ASSESSEE SUBMI TTED THAT COPIES OF ACCOUNTS WERE FILED BEFORE THE ASSESSING OFFICER. IN OUR OPINION, THE LOWER AUTHORITIES HAVE NOT PROPERLY CONSIDERED THE REPLY OF THE ASSESSEE AND ALSO THE DOCUMENTARY EVIDENCE SUBMITTED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM. IT APPEARS THAT THE ASSESSING OFFICER HA S COMPLETELY IGNORED THE RELEVANT DOCUMENTS FURNISHED BY THE ASSESSEE. EVEN , THE FIRST APPELLATE AUTHORITY HAS PASSED A CRYPTIC ORDER WITHOUT CONS IDERING THE SUBMISSIONS MADE BY THE ASSESSEE IN SUPPORT OF ITS CLAIM. CON SIDERING THE ENTIRE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE, WE SET ASIDE THE FINDINGS OF THE CIT(A) TO THE ABOVE EXTENT AND REMAND THE MATTER TO THE ASSESSING OFFICER WITH THE DIRECTION TO DECIDE THE LIMITED ISSUE CONC ERNING THE LOANS AND ADVANCES MADE TO M/S PUNJAB MACHINERY WORKS P. LTD, M/S VICKY CARRIERS AND M/S RAJIV KAPOOR TRANSPORT AFRESH, IN ACCORDANC E WITH LAW, AFTER AFFORDING DUE AND REASONABLE OPPORTUNITY OF BEING H EARD TO THE ASSESSEE. 9. NO OTHER POINT WAS RAISED OR ARGUED BEFORE US. 8 10. IN THE RESULT, THE APPEAL IS ALLOWED PARTLY AND PARTLY FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 06/04/2016. SD/- SD/- (ANNAPURNA GUPTA) (H.L.KARWA) ACCOUNTANT MEMBER VICE PRESIDENT DATED 06 TH APRIL, 2016 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR