Appeal details
Counselvise Citation
[2016] 132 COUNSELVISE.COM (IT) 4657 (ITAT-KOLKATA)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 year(s) 10 month(s) 2 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
17-06-2016
Appeal Filed By
Department
Bench Allotted
B
Next Hearing Date
14-06-2016
Assessment Year
2004-2005
Appeal Filed On
14-08-2013
Judgement Text
I.T.A. NO. 2256/KOL./2013 ASSESSMENT YEAR: 2004-2005 PAGE 1 OF 5 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA B BENCH, KOLKATA BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SHRI S.S. VISWANETHRA RAVI, JUDICIAL MEMBER I.T.A. NO. 2256/KOL/ 2013 ASSESSMENT YEAR: 2004-2005 ASSISTANT COMMISSIONER OF INCOME TAX,.............. ...................APPELLANT CIRCLE-54, KOLKATA, 3, GOVERNMENT PLACE (WEST), 2 ND FLOOR, KOLKATA-700 001 -VS.- M/S. LOVELOCK & LEWES,............................. ...........................RESPONDENT PLOT-Y/14, BLOCK-EP, SECTOR-V, SALT LAKE ELECTRONICS COMPLEX, KOLKATA-700 091 [PAN : AABFL 5878 A] APPEARANCES BY: SHRI AMITABHA CHOWDHURY, JCIT, SR. D.R., FOR THE DEPARTMENT SHRI K.M. GUPTA, SHRI B.K. JAIN, MS. NEHA BANSAL, A .RS., FOR THE ASSESSEE DATE OF CONCLUDING THE HEARING : JUNE 14, 2016 DATE OF PRONOUNCING THE ORDER : JUNE 17, 2016 O R D E R PER SHRI P.M. JAGTAP :- THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. COMMISSIONER OF INCOME TAX (APPEALS)-XXXVI, KOLKATA DATED 19.06.2013 AND IN THE SOLITARY GROUND RAISED THEREIN, THE REVE NUE HAS CHALLENGED THE ACTION OF THE LD. CIT(APPEALS) IN DELETING THE DISA LLOWANCE OF RS.76,96,794/- MADE BY THE ASSESSING OFFICER ON ACC OUNT OF INTEREST. 2. THE ASSESSEE IN THE PRESENT CASE IS A PARTNERSHI P FIRM OF CHARTERED ACCOUNTANTS. THE RETURN OF INCOME FOR THE YEAR UNDE R CONSIDERATION WAS FILED BY IT ON 31.10.2004 DECLARING TOTAL INCOME OF RS.13,18,52,040/-. IN THE PROFIT & LOSS ACCOUNT FILED ALONG WITH THE SAID RETURN, A SUM OF RS.1,01,77,450/- WAS DEBITED BY THE ASSESSEE ON ACC OUNT OF INTEREST I.T.A. NO. 2256/KOL./2013 ASSESSMENT YEAR: 2004-2005 PAGE 2 OF 5 EXPENDITURE. DURING THE COURSE OF ASSESSMENT PROCEE DINGS, THE CLAIM OF THE ASSESSEE FOR THE DEDUCTION ON ACCOUNT OF INTERE ST WAS EXAMINED BY THE ASSESSING OFFICER AND ON SUCH EXAMINATION HE FOUND THAT THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION HAD GIVEN SUBST ANTIAL LOANS/ADVANCES TO ITS SISTER CONCERNS FREE OF INTER EST. ACCORDING TO THE ASSESSING OFFICER, IF THE ASSESSEE-FIRM HAD NOT GIV EN SUCH INTEREST-FREE ADVANCES TO ITS SISTER CONCERNS, IT WOULD NOT HAVE ACQUIRED TO PAY ANY INTEREST ON LOAN. HE, THEREFORE, PROPOSED TO MAKE A DISALLOWANCE ON ACCOUNT OF INTEREST AND SOUGHT THE EXPLANATION OF T HE ASSESSEE IN THIS REGARD. IN REPLY, IT WAS SUBMITTED BY THE ASSESSEE THAT DEBIT BALANCES APPEARING IN THE NAME OF THE SISTER CONCERNS ARE IN THE NATURE OF SUNDRY DEBTORS ARISING ON ACCOUNT OF SALE OF SERVICES, ETC . AND THERE BEING NO DIVERSION OF BORROWED FUNDS FOR GIVING ANY INTEREST -FREE ADVANCES FOR NON-BUSINESS PURPOSE, THERE WAS NO QUESTION OF ANY DISALLOWANCE OF INTEREST EXPENDITURE. THE EXPLANATION OF THE ASSESS EE WAS NOT FOUND ACCEPTABLE BY THE ASSESSING OFFICER AS HE NOTICED F ROM THE BALANCE-SHEET OF THE ASSESSEE THAT THERE WAS A SEPARATE DEBIT BAL ANCE OF RS.3.21 CRORES APPEARING AS FEES AND EXPENSES RECEIVABLE. HE HEL D THAT IT WAS THUS A CASE WHERE THE MONEY WAS ALLOWED TO REMAIN BY THE A SSESSEE-FIRM WITH THE SISTER CONCERN WITHOUT CHARGING ANY INTEREST ON THE ONE HAND AND INTEREST BEARING LOANS WERE DRAWN ON THE OTHER HAND WITH AN INTENTION TO REDUCE THE TAXABLE PROFIT. HE, THEREFORE, MADE A DI SALLOWANCE OF RS.76,96,794/- OUT OF INTEREST BEING INTEREST PAID ON PARTNERS CURRENT ACCOUNT AND BANK OVERDRAFT. 3. THE DISALLOWANCE MADE BY THE ASSESSING OFFICER O N ACCOUNT OF INTEREST WAS CHALLENGED BY THE ASSESSEE IN THE APPE AL FILED BEFORE THE LD. CIT(APPEALS) AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE AND THE MATERIAL AVAILABLE ON RECORD, THE LD. CIT(A PPEALS) FOUND THAT A SIMILAR DISALLOWANCE MADE ON ACCOUNT OF INTEREST IN ASSESSEES OWN CASE FOR EARLIER YEARS, I.E. A.YS. 2001-02, 2002-03 AND 2003-04 INVOLVING IDENTICAL FACTS WAS DELETED BY THE TRIBUNAL. HE, TH EREFORE, FOLLOWED THE DECISION RENDERED BY THE TRIBUNAL ON THE SIMILAR IS SUE IN ASSESSEES OWN I.T.A. NO. 2256/KOL./2013 ASSESSMENT YEAR: 2004-2005 PAGE 3 OF 5 CASE FOR A.YS. 2001-02, 2002-03 AND 2003-04 AND DEL ETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER ON ACCOU NT OF INTEREST. AGGRIEVED BY THE ORDER OF THE LD. CIT(APPEALS), THE REVENUE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. AS AGREED BY THE LD. REPRESENTATIVES OF BOTH THE SIDES, THE ISSUE INVOLV ED IN THIS APPEAL OF THE REVENUE FOR A.Y. 2004-05 RELATING TO THE DELETION B Y THE LD. CIT(APPEALS) OF THE DISALLOWANCE MADE BY THE ASSESSING OFFICER O N ACCOUNT OF INTEREST IS SQUARELY COVERED BY THE DECISION OF THE TRIBUNAL RENDERED IN ASSESSEES OWN CASE FOR A.YS. 2001-02, 2002-03 AND 2003-04. TH E COPIES OF THE RELEVANT ORDERS OF THE TRIBUNAL ARE PLACED ON RECOR D BEFORE US AND PERUSAL OF THE SAME SHOWS THAT A SIMILAR DISALLOWAN CE ON ACCOUNT OF INTEREST MADE IN ASSESSEES OWN CASE FOR A.YS. 2001 -02 AND 2002-03 WAS DELETED BY THE TRIBUNAL FOR THE FOLLOWING REASONS G IVEN IN PARAGRAPHS NO. 10 & 11 OF ITS COMMON ORDER DATED 17 TH JANUARY, 2007 PASSED IN ITA NOS. 976 & 977/KOL/2006:- 10. WE HAVE CONSIDERED THE RIVAL SUBMISSION MADE B Y BOTH THE SIDES, PERUSED THE ORDERS OF THE ASSESSING OFFI CER AND THE LD. CIT(A) AND THE PAPER BOOK FILED BY THE LD. COUNSEL ON BEHALF OF THE APPELLANT AND THE VARIOUS CASE DEC ISIONS CITED BY BOTH THE SIDES, INCLUDING THAT OF THE DECI SION OF THE CO-ORDINATE BENCH OF TRIBUNAL IN THE CASE OF ACIT V S. PRICE WATER HOUSE, KO/KATA VIDE ITA NO.1280/KO1/2005 DATE D 22ND SEPTEMBER, 2006 FOR THE ASSESSMENT YEAR 2001-0 2. 10.1. WE FIND THAT THE HON'BLE TRIBUNAL IN THE CASE OF PRICE WATER HOUSE (SUPRA) AT PARA 24 OF THE ORDER HAD HEL D AS UNDER: '24. WE HAVE HEARD BOTH THE PARTIES AND TAKEN INTO CONSIDERATION THE ORDERS OF TAX AUTHORITIES. WE HAVE ALSO CONSIDERED THE PAPER BOOK FILED BY THE LD COUNSEL FOR THE ASSESSEE AND THE CASE LAWS RELIED UPON. IN THIS CASE, FROM THE FACTS AND EVIDENCES PLACED ON RECORD, IT IS EVIDENT THAT OUT OF RS.11.62 CRORES, RS.9.47 CRORES IS OPENING BALANCE AND SUCH BALANCE INCLUDES ADJUSTMENT BY WAY OF SALE OF SERVICES OUT OF POCKET EXPENSES RELATED TO SUCH SALE OF SERVICES, DEBITS ON ACCOUNT OF SHARING COMMON INFRASTRUCTURE, RECOVERIES I.T.A. NO. 2256/KOL./2013 ASSESSMENT YEAR: 2004-2005 PAGE 4 OF 5 MADE FROM THE GROUP ENTITIES OR OTHER ADJUSTMENTS. APART FROM THE FACT THAT NO MATERIAL HAS BEEN BROUGHT ON RECORD BY THE REVENUE THAT THE BORROWED FUNDS WERE ACTUALLY DIVERTED FOR ADVANCING INTEREST-FREE LOANS TO THE SISTER CONCERNS AND, THEREFORE, IN OUR CONSIDERED OPINION, THE ACTION OF ASSESSING OFFICER IN DISALLOWING THE CLAIM OF INTEREST BY THE ASSESSEE ON BORROWING FUNDS WAS NOT JUSTIFIED WE, THEREFORE, DELETE THE SAME AND ACCEPT THE GROUND RAISED BY THE ASSESSEE.' 11. CONSIDERING THE TOTALITY OF THE FACTS OF THE CA SE AND FOLLOWING THE DECISION OF THE HONBLE TRIBUNAL IN ON E OF THE SISTER CONCERNS OF THE APPELLANT AND IN ABSENCE OF ANY CONTRARY MATERIAL BROUGHT ON RECORD BY THE REVENUE AGAINST SUCH DECISION, WE ARE OF THE CONSIDERED OPINION THA T THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE ACTION O F THE ASSESSING OFFICER IN DISALLOWING THE CLAIM OF INTER EST TO THE EXTENT OF RS.35,15,097/- BY THE APPELLANT ON BORROW ED FUNDS. THE ASSESSING OFFICER IS THEREFORE DIRECTED TO DELETE THE ADDITION. 5. THE AFORESAID DECISION OF THE TRIBUNAL RENDERED IN A.YS. 2001-02 AND 2002-03 HAS BEEN SUBSEQUENTLY FOLLOWED BY THE T RIBUNAL TO DELETE A SIMILAR DISALLOWANCE MADE ON ACCOUNT OF INTEREST IN ASSESSEES CASE FOR A.Y. 2003-04 VIDE PARAGRAPH NO. 5.2 OF ITS ORDER DA TED 25 TH JANUARY, 2008 PASSED IN ITA NO. 404/KOL/2007, WHICH READS AS UNDE R:- 5.2. THE LEARNED COUNSEL OF THE ASSESSEE SUBMITTED THAT NO MONEY WAS ADVANCED TO ANY OF THE SISTER CONCERNS. T HE DEBIT BALANCE IN THE ACCOUNTS OF SISTER CONCERNS IS ON AC COUNT OF THE BILLS FOR THE PROFESSIONAL CHARGES RAISED TO THEM W HICH REMAINED OUTSTANDING. WHEN NO AMOUNT IS ACTUALLY PA ID TO THEM, THE QUESTION OF DIVERSION OF INTEREST BEARING FUND TO THOSE SISTER CONCERNS DOES NOT ARISE. HE FURTHER SU BMITTED THAT THE TRIBUNAL IN THE ASSESSEE'S OWN CASE FOR ASSESSM ENT YEARS 2001-02 AND 2002-03 HAS ACCEPTED THE CLAIM OF THE A SSESSEE. THIS STATEMENT BY THE LEARNED COUNSEL AT THE BAR HA S NOT BEEN CONTROVERTED BEFORE US BY THE LD. DEPARTMENTAL REPR ESENTATIVE. IN VIEW OF THE ABOVE, RESPECTFULLY THE DECISION OF THE TRIBUNAL FOR THE SAID ASSESSMENT YEARS, WE DELETE THE ADDITI ON OF RS.63,03,266/. 6. AS THE ISSUE INVOLVED IN THE YEAR UNDER CONSIDER ATION AS WELL AS ALL THE MATERIAL FACTS RELEVANT THERETO ARE SIMILAR TO A.YS. 2001-02, 2002-03 AND 2003-04, WE RESPECTFULLY FOLLOW THE DECISION OF THE COORDINATE BENCH I.T.A. NO. 2256/KOL./2013 ASSESSMENT YEAR: 2004-2005 PAGE 5 OF 5 OF THIS TRIBUNAL RENDERED FOR THE SAID YEARS AND UP HOLD THE IMPUGNED ORDER OF THE LD. CIT(APPEALS) DELETING THE DISALLOW ANCE MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST. 7. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT ON JUNE 17, 2016 . SD/- SD/- (S.S. VISWANETHRA RAVI) (P.M. JAGTAP) JUDICIAL MEMBER ACCOUNTANT MEMBER KOLKATA, THE 17 TH DAY OF JUNE, 2016 COPIES TO : (1) ASSISTANT COMMISSIONER OF INCOME TAX,. CIRCLE-54, KOLKATA, 3, GOVERNMENT PLACE (WEST), 2 ND FLOOR, KOLKATA-700 001 (2) M/S. LOVELOCK & LEWES, PLOT-Y/14, BLOCK-EP, SECTOR-V, SALT LAKE ELECTRONICS COMPLEX, KOLKATA-700 091 (3) COMMISSIONER OF INCOME-TAX (APPEALS)-XXXVI, KOL KATA (4) COMMISSIONER OF INCOME TAX, KOLKATA (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR, INCOME TAX APPELLATE TRIBUNAL, KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.
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