The ACIT(OSD), Circle-8, Ahmedabad V. Shivganga Builders Pvt. Ltd., Ahmedabad

ITA 2232/AHD/2010

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 67553 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 1 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-08-2013
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 08-08-2013
• Assessment Year: 1999-2000
• Appeal Filed On: 02-07-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P JANGID
• Assessee Lawyers: VIJAY RANJAN
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER AND SHRI T.R. MEENA, ACCOUNTANT MEMBER ITA NO. 2232/AHD/2010 A.Y: 1999-2000 ACIT (OSD), CIRCLE-8, AHMEDABAD VS SHIVGANGA BUILDERS PVT. LTD., 4 SEARS TOWERS, NR. GULBAI TEKRA, AMBAWADI, AHMEDABAD. PAN: AABCS 6714K (ASSESSEE) (REVENUE) REVENUE BY : SHRI J.P. JANGID SR. D.R. ASSESSEE(S) BY : SHRI VIJAY RANJAN, A.R. / // / DATE OF HEARING : 08/08/2013 / DATE OF PRONOUNCEMENT: 14/08/2013 / O R D E R PER SHRI MUKUL KR. SHRAWAT, JUDICIAL MEMBER : THIS IS AN APPEAL FILED BY THE REVENUE ARISING FRO M THE ORDER OF LEARNED CIT(A)-I, AHMEDABAD, DATED 21.4.20 10. THE SUBSTANTIVE GROUND OF THE REVENUE IS HEREBY REPRODU CED BELOW: THE LD. COMMISSIONER OF INCOME-TAX(A)-1, AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS .1302475/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST EXP ENSES. 2. FACTS IN BRIEF AS EMERGED FROM THE CORRESPONDING ASSESSMENT ORDER PASSED UNDER SECTION 143(3) R.W.S. 250 OF THE IT ACT, DATED 22.12.2006 WERE THAT THE ASSESSEE COMPAN Y IS IN THE BUSINESS OF CONSTRUCTION. THIS CASE WAS REOPENED IN VIEW OF THE REMARK OF THE CIT(A) DURING THE COURSE OF APPELLATE PROCEEDINGS ITA NO.2232/AHD/2010 ACIT (OSD0 AHMEDABAD VS. SHIVGANGA BUILDERS A.Y. 1999-2000 - 2 - FOR A.Y. 2000-2001. IN THIS CONNECTION, THERE ARE S OME REFERENCE OF THE ORDERS OF LEARNED CIT(A). HOWEVER, THE MAIN ISSUE IS THAT A DISALLOWANCE OF INTEREST EXPENDITURE WAS MADE ON TH E GROUND THAT THE ASSESSEE HAD ADVANCED INTEREST FREE LOANS. IN T HIS CONNECTION, THE AO HAS MADE THE ADDITION AS FOLLOWS: ON GOING THROUGH CASH FLOW STATEMENT IT IS NOTICED THAT DURING THE CURRENT YEAR THE ASSESSEE HAS FURTHER ADVANCED RS.3 ,46,00,009/- ON INTEREST FREEE ADVANCES. BUT HE WAS HAVING ONLY 1.8 1 CRORES INTEREST FREE DEPOSITS FROM THE MEMBERS. THEREFORE, REMAININ G FUNDS RS.1.19 CRORES WHICH WERE ADVANCED INTEREST FREE BY IT ARE NO DOUBTS WERE ADVANCED OUT OF INTEREST BEARING FUNDS ONLY. THEREF ORE, INTEREST EXPENSES INCURRED ON THIS INTEREST BEARING FUND OF RS.1.19 CRORE CAN NOT BE ALLOWED AS EXPENSES ANY CIRCUMSTANCES. HENCE , INTEREST EXPENSES INCURRED ON DEPOSITS / LOANS OTHER THAN TE RM LOANS RS.13,02,047 ARE AGAIN DISALLOWED OUT OF INTEREST E XPENSES CONSIDERED NOT REQUIRED FOR THE PURPOSE OF BUSINESS AS THE SAME HAS BEEN INCURRED FOR ADVANCING INTEREST FREE LOANS TO SISTER CONCERN ETC. AS STATED IN THE ASSESSMENT ORDER DATED 31/03/2005. 2.1 WHEN THE MATTER WAS CARRIED BEFORE LEARNED CIT( A), THE ASSESSEE HAS FURNISHED FUND FLOW STATEMENT AND ON D UE APPRECIATION RELIEF WAS GRANTED AS FOLLOWS:- I HAVE CONSIDERED THE REASSESSMENT ORDER UNDER REF ERENCE AND THE FACTS NARRATED BY THE APPELLANT. A PERUSAL OF THE A SSESSMENT ORDER ITSELF SHOW THAT IN SO FAR AS TERM LOAN FROM THE BA NK IS CONCERNED, THE ASSESSING OFFICER HIMSELF HAS ACCEPTED THAT IT WAS USED FOR THE PURPOSE OF BUSINESS. INSOFAR AS THE INTEREST FREE A DVANCES ARE CONCERNED, IT IS SHOWN BY THE APPELLANT THAT AS PER THE CASH FLOW CHART, THE APPELLANT WAS HAVING ENOUGH INTEREST FRE E FUNDS RECEIVED INCLUDING THE PROFIT FOR THE YEAR OF THE AGGREGATE AMOUNT OF RS.1,40,75,629/- TO COVER THE BALANCE INTEREST FREE ADVANCES OF RS.1.19 CRORES WORKED OUT BY THE ASSESSING OFFICER. APART FROM THAT THE APPELLANT WAS HAVING INTEREST F REE FUNDS AVAILABLE INCLUDING MEMBERS DEPOSITS OF RS.5.54 CRORES AS AG AINST WHICH PAYMENT OF LOAN AND ADVANCES WAS ONLY OF RS.5.32 CR ORES AND THUS THERE WAS NO JUSTIFICATION FOR HOLDING THAT ANY INT EREST BEARING FUNDS WERE UTILIZED FOR INTEREST FREE LOANS GIVEN TO OTHE RS. THE ASSESSING OFFICER WAS, THEREFORE, NOT JUSTIFIED IN PRESUMING THAT THE MEMBERS COLLECTION WAS THE ONLY FUND AVAILABLE FOR REPAYMEN T OF LOANS AND THAT WAS USED FOR THAT PURPOSE ONLY. CONSIDERING THE ENT IRE FUNDS AND THE FUND FLOW STATEMENT REPRODUCED HEREINABOVE, I AM OF THE VIEW THAT THE ITA NO.2232/AHD/2010 ACIT (OSD0 AHMEDABAD VS. SHIVGANGA BUILDERS A.Y. 1999-2000 - 3 - ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING DISAL LOWANCE OF INTEREST. THE ADDITION OF RS.13,02,475/- IS ACCORDINGLY DELET ED. 3. NOW BEFORE US AN ORDER OF THE TRIBUNAL ITAT D BENCH AHMEDABAD, BEARING ITA NO.1189/AHD/2004 FOR A.Y. 20 00-01, DATED 16.5.2008 (SHIVGANGA BUILDERS PVT. LTD. VS. A CIT) HAS BEEN FILED WHEREIN THE MATTER WAS RESTORED BACK TO THE FILE OF THE AO TO RE-DECIDE BECAUSE IN THAT ORDER THE INTEREST EXPENDITURE WAS DISALLOWED MERELY ON THE GROUND THAT THE ASSESSEE W AS NOT REQUIRED TO BORROW THE MONEY BECAUSE THE ADVANCES R ECEIVED BY THE BUSINESS OF THE ASSESSEE. SINCE, THE MATTER WAS RESTORED BACK TO THE FILE OF THE AO, THEREFORE, A CONSEQUENTIAL ORDE R WAS PASSED BY THE AO FOR A.Y. 2000-01 UNDER SECTION 143(3) R.W.S 254 OF THE IT ACT, DATED 6.11.2009 AND THEREAFTER, THE SUBMISSION OF THE ASSESSEE WAS DULY CONSIDERED AND FOLLOWING S.A. BUI LDER, 288 ITR PAGE 1 AND THE POSITION OF BORROWED FUNDS AND T HE INTEREST FREE FUNDS AVAILABLE TO THE ASSESSEE TOTAL RELIEF W AS GRANTED. LEARNED AR, MR. VIJAY RANJAN HAS, THEREFORE, PLEADE D THAT THE ENTIRE PROCEEDINGS FOR THE YEAR UNDER CONSIDERATION , I.E, A.Y. 1999-2000 WERE STARTED BECAUSE THERE WERE CERTAIN C OMMENTS OF LEARNED CIT(A) TO DECIDE THE APPEAL FOR A.Y. 2000-0 1 BUT THAT OBSERVATION NOW STOOD NULLIFIED AND THE AO HIMSELF HAS HELD THAT NO ADDITION ON THIS GROUND WAS REQUIRED, THEREFORE, ON THE SAME LINES THE VIEW TAKEN BY LEARNED CIT(A) ABOUT THE DE LETION OF THE INTEREST EXPENDITURE DESERVES TO BE CONFIRMED. 4. HAVING HEARD THE SUBMISSIONS OF BOTH THE SIDES A S ALSO PERUSED THE MATERIAL PLACED BEFORE US, WE ARE OF TH E VIEW THAT IN ITA NO.2232/AHD/2010 ACIT (OSD0 AHMEDABAD VS. SHIVGANGA BUILDERS A.Y. 1999-2000 - 4 - THE LIGHT OF THE CONSIDERABLE INTEREST FREE FUNDS A VAILABLE TO THE ASSESSEE AS ALSO THE PAST HISTORY OF THE CASE, THER E WAS NO REASON ON THE PART OF THE AO TO DISALLOW THE INTEREST EXPE NDITURE. LEARNED CIT(A) HAS RIGHTLY DELETED THE ADDITION. RESULTANTL Y, THIS GROUND OF THE REVENUE IS HEREBY DISMISSED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. SD/- SD/- (T.R. MEENA ) (MUKUL KR. S HRAWAT ) ACCOUNTANT MEMBER JUDICIAL MEMB ER AHMEDABAD; DATED 14/08/2013 PRABHAT KR. KESARWANI, SR. P.S. TRUE COPY / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT. 3. #$#% ' '& / CONCERNED CIT 4. ' '&() / THE CIT(A)-III, AHMEDABAD 5. )*' %, ' ' % , ,-$ / DR, ITAT, AHMEDABAD 6. *./ 0 / GUARD FILE. / BY ORDER, 1 11 1/ // /,' #2 ,' #2 ,' #2 ,' #2 ( DY./ASSTT.REGISTRAR) ' ' % ' ' % ' ' % ' ' % , , , , ,-$ ,-$ ,-$ ,-$ / ITAT, AHMEDABAD