ASST CIT CIR 3, KALYAN V. ASHOK RADHAKISHEN MEHRA, DOMBIVALI

ITA 2230/MUM/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 1563 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: I
• Assessment Year: 2011-2012
• Appeal Filed On: 16-04-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Question of law
• Section: 43B; 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH I,MUM BAI BEFORE SHRI D.KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH, JUDICIAL MEMBER ITA NO.2230/MUM/2015 FOR (ASSESSMENT YEAR : 2011-12 ) ACIT CIRCLE-3, 2 ND FLOOR, RANI MANSION, MURBAD ROAD, KALYAN(W), KALYAN-421301. VS. SHRI ASHOK RADHAKISHEN MEHRA PROP. OF M/S CRYSTAL INDIA, W-114, MIDC, PHASE-II, MANPADA ROAD, DOMBIVLI (E)-421204 PAN: AAYPM8408Q (APPELLANT) (RESPONDENT) REVENUE BY : MR. SAURABH KUMAR RA I (DR) ASSESSEE BY : MR. VINAY MEHTA ( AR ) DATE OF HEARING : 07.12.2016 DATE OF PRONOUNCEMENT : 07 .12.2016 ORDER UNDER SECTION 254(1) OF INCOME TAX ACT PER PAWAN SINGH, JM: 1. THIS APPEAL BY THE REVENUE FILED U/S 253 OF THE INC OME-TAX ACT (ACT) IS DIRECTED AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME-TAX (APPEALS) [FOR SHORT THE CIT(A)] I, MUMBAI DATED 29.01.2015 FOR ASSESSMENT YEAR (AY) 2011-12. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: 1) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN IGNORING THE LEGAL POSITION ENV ISAGED IN EXPLANATION 3D TO CLAUSE (E) OF SECTION 43B, WHICH STATES THAT DEDUCT ION ON ANY SUM, BEING INTEREST PAYABLE SHALL BE ALLOWED ONLY IF SUCH INTE REST HAS BEEN ACTUALLY PAID AND ANY INTEREST REFERRED IN THE SAID CLAUSE WHICH GETS FURTHER CONVERTED INTO LOAN OR ADVANCE SHALL NOT BE DEEMED TO HAVE ACTUALL Y BEEN PAID. 2) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE DID NOT HAVE POSITIVE BALANCE IN HIS CASH CREDIT ACCOUNT ON A SI NGLE DATE PRIOR TO FILING OF RETURN. 3) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN HOLDING THAT THE CLOSING BALANC E OF RS.280 CRORES AS ON 31.03.2011 IN THE OD ACCOUNT BEING LESS THAN THE OP LIMIT OF RS. 3 CRORES, INDICATES THAT THE SAME IS ON ACCOUNT OF PRINCIPLE LOAN AND NOT ON ACCOUNT OF INTEREST. 2 ITA NO. 2230/M/2015 SHRI ASHOK RADHAKISHEN MEHRA 4) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LD. CIT(A) HAS ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE FAILED TO FURNISH ANY DOCUMENTARY EVIDENCE IN SUPPORT OF HIS CLAIM TH AT INTEREST HAD BEEN PAID. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS EN GAGED IN MANUFACTURING AND PROCESSING BLENDED SOLVENTS UNDER THE NAME OF PROP RIETORSHIP CONCERN M/S. CRYSTAL INDIA, FILED ITS RETURN OF INCOME FOR RELEVANT AY ON 23.09.2011 DECLARING TOTAL INCOME OF RS. 74,94,211/-. THE ASSESSMENT WAS COMPL ETED U/S 143(3) OF THE ACT ON 28.02.2014. THE ASSESSING OFFICER (AO) WHILE FRAMIN G THE ASSESSMENT DISALLOWED THE INTEREST OF RS. 57,88,447/-CLAIMED ON OD/CC ACCOU NT U/S 43B(D)/(E) R.W. EXPLANATION 3D. ON APPEAL BEFORE THE LD. CIT(A), T HE ADDITION MADE BY AO BY WAY OF DISALLOWANCE WAS DELETED. THUS, AGGRIEVED BY THE ORDER OF LD. CIT(A), THE REVENUE HAS FILED THE PRESENT APPEAL BEFORE US. 3. AT THE OUTSET, LD. AR OF THE ASSESSEE ARGUED THAT T HIS CASE IS SQUARELY COVERED BY THE DECISION OF MADRAS HIGH COURT IN CIT VS. PRAKASH FO ODS & FEED MILLS P. LTD. AND T.C.(A). NOS. 775 AND 808 OF 2014 DATED 26.11.2014 AND THE DECISION OF KOLKATA TRIBUNAL IN ACIT VS. SHUBH GAUTAM IN ITA NO. 414/KO L/2010. ON THE OTHER HAND, LD. DR FOR REVENUE RELIED UPON THE ORDER OF AO. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS OF THE PAR TIES AND GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. WE HAVE SEEN THAT DURING THE ASS ESSMENT FROM THE P&L A/C THE AO HAS OBSERVED THAT ASSESSEE HAS DEBITED AN AMOUNT OF RS. 57,88,447/- TOWARDS BANK INTEREST. THE ASSESSEE WAS ASKED TO FURNISH THE PRO OF OF ACTUAL PAYMENT AND ALSO SHOW-CAUSED AS TO WHY THE SAME SHOULD NOT BE DISALL OWED, IF THE SAME WAS NOT ACTUALLY PAID WITHIN THE MEANING OF THE PROVISION O F SECTION 43B(D)/(E) R.W. EXPLANATION 3D THERETO. THE ASSESSEE FILED HIS REPL Y DATED 22.01.2014 AND CONTENDED THAT ALL THE PAYMENTS ARE MADE DURING THE YEAR, HEN CE THE DISALLOWANCE U/S 43B(D)/(E) IS NOT APPLICABLE. THE ASSESSEE ALSO FILED THE LEDG ER COPY OF BANK CHARGES AND BANK INTEREST PAID TO UBI. THE AO NOT ACCEPTED THE EXPLA NATION FURNISHED BY ASSESSEE AND DISALLOWED THE INTEREST. BEFORE THE LD. CIT(A) IT W AS SUBMITTED THAT THE ASSESSEE HAS CC RUNNING ACCOUNT, WHEREIN A LOT OF WITHDRAWAL AS WELL AS NUMBER OF DEPOSITS. THE DEPOSITS JUSTIFY THE PAYMENTS OF INTEREST AS WELL AS PRINCIPAL AMOUNT. ON THE YEAR ENDING ON 31.03.2011 THE TOTAL WITHDRAWAL WERE RS. 42,36,65,395/0 AND THE DEPOSITS WERE SHOWN AT RS. 39,56,40,419/- AND HAVING CLOSIN G BALANCE OF RS. 2,80,24,975/-. 3 ITA NO. 2230/M/2015 SHRI ASHOK RADHAKISHEN MEHRA THE PAYMENTS IN RESPECT OF TERM LOAN WERE ALSO PAID . THE LD. CIT(A) WHILE CONSIDERING THE APPEAL OF THE ASSESSEE CONCLUDED AS UNDER: 7. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE EA E, THE FINDINGS OF THE AO, THE SUBMISSIONS OF THE AR OF THE APPELLANT AND MATERIAL PLACED ON RECORD. AS PER THE BANK STATEMENT, IT IS SEEN THAT DURING THE YEAR UND ER CONSIDERATION, THE BANK HAD PROVIDED THE FOLLOWING AMOUNT OF INTEREST AGAINST C C ACCOUNT WITH UBI: DATE INTEREST DEBITED (RS.) 30.04.2010 31.05.2010 30.06.2010 31.07.2010 31.08.2010 30.09.2010 31.10.2010 30.11.2010 31.12.2010 31.01.2011 28.02.2011 31.03.2011 TOTAL 94,573 84,967 95,701 2,92,934 2,22,761 2,46,311 2,73,797 3,36,301 4,15,025 3,80,428 3,16,063 3,28,139 46,68,742 IMMEDIATELY, AFTER THE ABOVE ENTRIES, UNDER THE HEA D 'INTEREST ACCOUNT', THE APPELLANT HAS DEPOSITED NUMBER OF CHEQUES IN CC ACC OUNT, IN EVERY MONTH. THE AO, HOWEVER, DISALLOWED THE ABOVE INTEREST ON THE G ROUND THAT THE SAID INTEREST WAS NOT PAID BY THE APPELLANT AND THE PAYMENTS WERE MADE ONLY AGAINST PRINCIPLE AMOUNT. THE AO, HOWEVER, OBSERVED THAT THE DEBIT BA LANCE IN THE CC ACCOUNT HAS INCREASED FROM RS. 74.61 LAKHS TO RS. 2.80 CRORES. THE AO, DID NOT CONSIDERED THE FACT THAT THE OD LIMIT OF THE APPELLANT WAS INCREAS ED TO RS. 3 CRORES. THEREFORE, THE DEBIT BALANCE OF RS. 2.80 CRORES, WAS WELL WITH IN THE OD LIMIT PROVIDED BY THE BANK. 7.1. THE PERUSAL OF OD ACCOUNTS REVEALS THAT INTERE ST AMOUNT WERE DEBITED IN THE OD ACCOUNT AND SUFFICIENT AMOUNT WAS DEPOSITED AFTE R DEBIT OF INTEREST, IN EVERY MONTH. THEREFORE, THE OBSERVATION OF THE AO THAT SA ID INTEREST WAS NOT PAID DURING THE YEAR AND CONVERTED INTO LOAN, IS NOT FACTUALLY CORRECT. 7.2. THE CONTENTION OF THE AO THAT THE INTEREST HAS BEEN CONVERTED INTO LOAN, ON THE GROUND THAT THE BALANCE IN OD ACCOUNT WAS ALWAY S REMAINED A DEBIT BALANCE, IS NOT CORRECT AS THE OD LIMIT OF THE CC ACCOUNT WA S INCREASED FROM RS. 1.5 CRORES TO RS. 3 CRORE, WHICH WAS NOT CONSIDERED BY THE AO. SINCE THE CLOSING BALANCE I.E. (-) RS. 2.80 CRORES, AS ON 31.03.2011, IN THE OD ACCOUNT IS LESS THAN THE OD LIMIT OF RS. 3 CRORES, INDICATE THAT THE SAM E IS ON ACCOUNT OF PRINCIPLE LOAN AND NOT ON ACCOUNT OF INTEREST. CONSIDERING THE FAC TS OF THE CASE IN ENTIRETY, ABOVE DISCUSSION AND RESPECTFULLY FOLLOWING THE ABOVE DEC ISIONS QUOTED, THE ADDITION MADE BY THE AO, ON THIS ACCOUNT IS HEREBY, DELETED. THIS GROUND OF APPEAL IS ALLOWED ACCORDINGLY. 5. THE HONBLE MADRAS HIGH COURT IN CIT VS. PRAKASH FO ODS & FEED MILLS P. LTD. (SUPRA) WHILE DECIDING THE SIMILAR GROUND HELD AS U NDER: 4 ITA NO. 2230/M/2015 SHRI ASHOK RADHAKISHEN MEHRA 3. WE HAVE HEARD THE LEARNED STANDING COUNSEL APPE ARING FOR THE REVENUE AND PERUSED THE ORDERS PASSED BY THE TRIBUNAL AND THE A UTHORITIES BELOW. 4. BEFORE ADVERTING TO THE MERITS OF THE CASE, IT W OULD BE APPOSITE TO REFER TO THE RELEVANT PORTION OF SECTION 43B OF THE ACT, WHICH R EADS AS UNDER: SECTION 43B. CERTAIN DEDUCTIONS TO BE ONLY ON ACTUA L PAYMENT: NOTWITHSTANDING ANYTHING CONTAINED IN ANY OTHER PROVISION OF THIS A CT, A DEDUCTION OTHERWISE ALLOWABLE UNDER THIS ACT IN RESPECT OF- (A) *** (B) *** (C) **** (D) ANY SUM PAYABLE BY THE ASSESSEE AS INTEREST ON ANY LOAN OR BORROWING FROM ANY PUBLIC FINANCIAL INSTITUTION OR A STATE FINANCI AL CORPORATION OR A STATE INDUSTRIAL INVESTMENT CORPORATION, IN ACCORDANCE WI TH THE TERMS AND CONDITIONS OF THE AGREEMENT GOVERNING SUCH LOAN OR BORROWING, OR (E) ANY SUM PAYABLE BY THE ASSESSEE AS INTEREST ON ANY LOAN OR ADVANCES FROM A SCHEDULED BANK IN ACCORDANCE WITH THE TERMS AND CON DITIONS OF THE AGREEMENT GOVERNING SUCH LOAN OR ADVANCES, OR (F) *** EXPLANATION 3C.- FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT A DEDUCTION OF ANY SUM, BEING INTEREST PAYABLE UNDER CLAUSE (D) OF THIS SECTION, SHALL BE ALLOWED IF SUCH INTEREST HAS BEEN ACTUALLY PAID AND ANY INTEREST REFERRED TO IN THAT CLAUSE WHICH HAS BEEN CONVERTED INTO A LOAN OR BORROWING SHALL NOT BE DEEMED TO HAVE BEEN ACTUALLY PAID. EXPLANATION 3D.- FOR THE REMOVAL OF DOUBTS, IT IS H EREBY DECLARED THAT A DEDUCTION OF ANY SUM, BEING INTEREST PAYABLE UNDER CLAUSE (E) OF THIS SECTION, SHALL BE ALLOWED IF SUCH INTEREST HAS BEEN ACTUALLY PAID AND ANY INTEREST REFERRED TO IN THAT CLAUSE WHICH HAS BEEN CONVERTED INTO A LOAN OR ADVANCE SHALL NOT BE DEEMED TO HAVE BEEN ACTUALLY PAID. 5. THE DEPARTMENT DECLINED TO GRANT THE BENEFIT OF DEDUCTION ON INTEREST PAID PRIMARILY ON THE PLEA THAT THE AMOUNT HAS NOT BEEN ACTUALLY PAID AND TRANSFER OF AMOUNT FROM ONE ACCOUNT TO ANOTHER ACCOUNT CANNOT B E TREATED AS PAID. HOWEVER, THE TRIBUNAL REPELLED THE SAID PLEA BY INTERPRETING SECTION 43B OF THE ACT AND HELD THAT OVERDRAFT/CASH CREDIT ACCOUNTS ARE NOT SIMILAR TO LOAN ACCOUNTS. THE TRIBUNAL FURTHER OBSERVED THAT THE INTEREST AMOUNT HAS BEEN ACTUALLY PAID BY THE ASSESSEE THROUGH OVERDRAFT/CASH CREDIT ACCOUNT AND, THEREFOR E, SET ASIDE THE DISALLOWANCE MADE UNDER SECTION 43B OF THE ACT. 6. A BARE READING OF EXPLANATIONS 3C AND 3D TO SECT ION 43B OF THE ACT PROVIDES AN ANSWER TO THE PROBLEM BY MAKING IT CLEAR THAT WH ERE INTEREST AMOUNT HAS NOT BEEN CONVERTED INTO LOAN OR BORROWING (OR) LOAN OR ADVANCE, AS THE CASE MAY BE, THERE IS NO QUESTION OF DENYING THE BENEFIT OF DEDU CTION. IN THE CASE ON HAND, THE INTEREST AMOUNT HAS BEEN ACTUALLY PAID BY THE ASSES SEE THROUGH OVERDRAFT/CASH CREDIT ACCOUNT AND THE SAME HAS NOT BEEN CONVERTED INTO LOAN OR BORROWING (OR) LOAN OR ADVANCE, AS THE CASE MAY BE. 7. FOR THE FOREGOING REASONS, THESE APPEALS ARE DIS MISSED BY ANSWERING THE QUESTION OF LAW AGAINST THE REVENUE AND IN FAVOUR O F THE ASSESSEE. 6. THUS, IN VIEW OF THE RATION OF THE DECISION OF MADR AS HIGH COURT (SUPRA), WE FIND THAT THE GROUND OF APPEAL RAISED IN THE PRESENT APPEAL I S COVERED AGAINST THE REVENUE, THUS WE DO NOT FIND ANY ILLEGALITY OR INFIRMITY IN THE ORDER PASSED BY LD. CIT(A). 7. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. 5 ITA NO. 2230/M/2015 SHRI ASHOK RADHAKISHEN MEHRA ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH DECEMBER, 2016. SD/- SD/- (D.KARUNAKARA RAO) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 07/12/2016 S.K.PS COPY OF THE ORDER FORWARDED TO : BY ORDER, (ASSTT.REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY/