M/s. Bajaj Foods Ltd., Ahmedabad V. The Income Tax Officer,Ward-1(2), Ahmedabad

ITA 2276/AHD/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2708 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 6 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 03-08-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Keywords: Commercial expediency
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER M/S. BAJAJ FOODS LTD. A - 401, SAMUNDRA COMPLEX, NR. HOTEL CLASSIC GOLD, ELLISBRIDGE, AHMEDABAD PAN: AAA - CB - 6184 - D (APPELLANT) VS THE IT O , WARD - 1 (2) , AHMEDABAD (RESPONDENT) REVENUE BY : S H RI LALIT P. JAIN , SR. D . R . ASSESSEE BY: SHRI TUSHAR HEMANI, A.R. DATE OF HEARING : 21 - 01 - 2 019 DATE OF PRONOUNCEMENT : 21 - 02 - 2 019 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S APPEAL FOR A.Y. 2010 - 11 , ARI SES FROM ORDER OF THE CIT(A) - 1, AHMEDABAD DATED 15 - 05 - 2 015 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THE BRIEF FACTS ARE THAT RETURN OF INCOME DECLARING INCOME OF RS. 7 , 75 , 730/ - WAS FILED ON 3 RD SEP, 2010. SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF THE ACT ON 24 TH AUGUST, I T A NO . 2276 / A HD/20 15 A SS ESSMENT YEAR 2010 - 11 I.T.A NO. 2276 /AHD/20 15 A.Y. 2010 - 11 PAGE NO M/S. BAJAJ FOODS LTD. VS. IT O 2 2011. F URTHER FACTS OF THE CASE ARE DISCUSSED UNDER THE TWO GROUNDS OF APPEALS FILED BY THE ASSES EE AS UNDER: - DISALLOWANCE OF RS. 16 , 27 , 820/ - U/S. 36(I)(III) OF THE ACT 3 . DURING THE ASSESSMENT, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS MADE LOAN AND ADVANCES TO THE AMOUNT OF RS. 78 , 47 , 5 , 019/ - TO VARIOUS PARTIES . OUT OF THE AFORESAID ADVAN CES AN AMOUNT OF R S. 19 , 85 , 5 , 747/ - WAS GIVEN TO THE FOLLOWING TWO PARTIES : - SHRADDHA INTL. RS. 29,92,179/ - SPECIFIC FOOD INC. RS. 1,68,63,587/ - ---------------------- RS. 1,98,55,747/ - -------- -------------- THE ASSESSEE HAS PROVIDED ADVANCE TO THE AMOUNT OF RS . 4 , 73 , 60 , 562/ - TO THE 15 SUPPLIERS PARTIES. THE AMOUNT OF INTEREST EXPENDITURE WAS CLAIMED TO THE AMOUNT OF RS 16 , 27 , 820/ - . THE ASSESSING OFFICER STATED THAT THE ASSESSEE HA S SHOWN SALE OF RS. 9 , 10 , 49 , 943/ - AND DEBTOR OF RS. 42,37,424/ - . THE ASSESSEE HA D SHOWN SUNDRY CREDITORS FOR GOODS TO T H E AMOUNT OF RS.4 , 23 , 38 , 468/ - AND THERE WAS SUNDRY DEBTOR OF RS. 42,37,424/ - ONLY. FROM THE AB O VE THE ASSESSING OFFICER OBSERVED THA T ASSESSEE HAS ITS OWN FUND I.E. SALES REALIZATION TO THE AMOUNT OF R S. 9 , 10 , 49 , 943/ - AND THE SUNDRY CREDITOR TO THE EXTENT OF RS. 4 , 23 , 38 , 648/ - AND CAME TO THE CONCLUSION THAT BORROWING OF FUND BY THE COMPANY TO THE EXTENT OF RS. 6 , 72 , 16 , 409/ - WAS NOT FO R THE PURPOSE OF BUSINESS. T HE ASSESSING OFFICER WAS OF THE VIEW THAT ASSESSEE HAD DIVERTED T HE INTEREST BEARING BORROWING OF RS. 6 , 72 , 16 , 409/ - TOWARDS INTEREST FREE LOAN AND ADVANCES. CONSEQUENTLY THE ASSESSUING OFFICER HELD THAT INTEREST @ 12% ON RS. 6, 72,16,409/ WORKED OUT AT RS. 80 , 65 , 969/ - WAS DISALLOWABLE. HOWEVER, THE ASSESSING OFFICER HAS RESTRICTED THE I.T.A NO. 2276 /AHD/20 15 A.Y. 2010 - 11 PAGE NO M/S. BAJAJ FOODS LTD. VS. IT O 3 DISALLOWANCE TO THE EXTENT OF CLAIM OF INTEREST EXPENSES OF RS. 16 , 27 , 820/ - AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 4 . DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LD. COUNSEL HAS SUBMITTED AS UNDER: - HOWEVER. CIT(A) CONFIRMED DISALLOWANCE U/S 36(L)(III) QUA FOLLOWING ADVANCES MADE DURING YEAR UNDER CONSIDERATION (PG.34 OF CIT(A)'S ORDER AND PG.4 OF ASST. ORDER): > BAJAJ HERBAL PVT. L TD. (SR. NO.2) - RS.3,63,33,321/ - > SAI KRUPA FABRIC PVT . LTD. (SR. NO. 1 0) - RS. 14,56.000/ - > SAINAIH HNTERPRISES (SR. NO. 13) - RS.22,00,000/ - TOTAL RS.3, 99,89 ,321 / - UNDERLYING ADVANCES ARE 'BUSINESS ADVANCES: AT THE OUTSET, THE ADVANCES IN QUESTION AIR RELATED TO THE BUSINESS OF THE ASSESSEE AND HAVE BEEN MADE OUT OF COMMERCIAL EXPEDIENCY. SUCH FACT WAS CATEGORICALLY POINTED OUT BEFORE AO AND THE SAME HAS NOT BEEN D ENIED BY EITHER OF THE LOWER AUTHORITIES. UNDER SUCH CIRCUMSTANCES, NO DISALLOWANCE CAN BE MADE U/S 36(L)(III) IN RESPECT OF SUCH ADVANCES. RELIANCE IS PLACED ON 'S.A. BUILDERS VS. CIT - 288 ITR 1 (SC)'. MAJOR COMPONENT OF INTEREST EXPENSES REPRESENTS INTE REST ON LOANS TAKEN FOR SPECIFIC BUSINESS PURPOSE: IT IS FURTHER SUBMITTED THAT MAJOR COMPONENT, OF INTEREST EXPENSES REPRESENTS INTEREST ON LOANS TAKEN FOR SPECIFIC PURPOSES AS FOLLOWS AND CIT(A) HAS ACCEPTED THE FACT THAT SUCH FUNDS CANNOT BE DIVERTED TO NON - INTEREST BEARING FUNDS SINCE THE SAME ARE MONITORED BY BANKS (PG.33 OF CIT(A)'S ORDER): > TERM LOAN; > PACKING CREDIT LIMIT FOR EXPORT; > VEHICLE LOAN; ONCE CIT(A) HAS ACCEPTED THE SAID FACT, THEN QUESTION OF CONFIRMING ANY PART OF DISALLOWANCE U/S 36(L)(III) DOES NOT ARISE AT ALL. SUBSTANTIAL INTEREST FREE FUNDS: AS REGARDS FRESH ADVANCES OF RS.3.99,89,321/ - , ASSESSEE HAS INTEREST - FREE FUNDS AGGREGATING TO RS.4,41,33,783/ - AS FOLLOWS (PG.20 OF CIT(A)'S ORDER): > SHARE CAPITAL : RS.2,08,33,880 / - > RESERVES : RS.52,80,783/ - > INTEREST FREE UNSECURED LOANS : RS.1,80,19.120, - TOTAL RS.4,41,33,783/ - THUS, AS AGAINST INTEREST FREE ADVANCES OF RS.3,99,89,321/ - , ASSESSEE HAS INTEREST - FREE FUNDS AGGREGATING TO RS.4,41,33,783/ - (I.E. 1.10 TIMES). THU S, NO DISALLOWANCE IS CALLED FOR U/S 36(L)(III) ON THE FRESH ADVANCES DURING THE YEAR UNDER CONSIDERATION AS WELL. RELIANCE IS PLACED ON: > CIT VS. TORRENT POWER LTD. - 363 ITR 474 (GUJ); > CIT VS. SUZKM ENERGY LTD. - 354 ITR 630 (GUJ); > CIT VS. GUJARA T POWER CORPORATION LTD. - 352 ITR 583 (GUJ); > CIT VS. HITACHI HOME & LIFE SOLUTIONS (I). LTD. - (2014) 41 TAXMANN.COM 540 (GUJ); > CIT VS. RELIANCE UTILITIES & POWER I , MUNJAL SALES CORPORATION VS. CIT - 298 ITR 298 (SC); I N LIGHT OF THE ABOVE, IMPUGNED DISALLOWANCE DESERVES TO BE DELETED. ON THE OTHER HAND LD. DEPARTMENTAL REPRE SENTATIVE HAS PLACED RELIANCE ON THE DECISION OF LD. CIT(A). I.T.A NO. 2276 /AHD/20 15 A.Y. 2010 - 11 PAGE NO M/S. BAJAJ FOODS LTD. VS. IT O 4 5 . WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERNAL ON RECORD CAREFULLY. IN RESP ECT OF OUTSTANDING ADVANCE OF RS. 3 . 63 CRORES TO M/S. BAJAJ HERBAL PVT. L TD T HE SISTER CONCERN OF THE ASSESSEE, THE LD. CIT(A) STATED THAT THE ASSESSEE HAD MENTIONED THAT ADVANCE WAS GIVEN FOR THE PROPERTY NAMED SARTHIK (405) BUT NO DETAILS WERE SUBMITTED TO SUBSTANTIATE THE FAC T. THEREFORE THE LD. CIT(A) HELD THAT CLAIM OF INTEREST U/S. 36(I)(III) OF THE ACT WAS NOT FOR THE PURPOSE OF THE BUSINESS OF THE ASS E SSEE. IN RESPECT OF ADVANCE OF RS. 22 LACS TO M/S SARN A TH ENTERPRISE THE LD. CIT (A) STATED T HAT IT WAS CLAIMED THAT ADVANCE WAS FOR PURPOSE OF PROPERTY BUT NO CONFIRMATION FROM THE SAID PARTY WAS FURNISHED THEREFORE THE CLAIM OF INTEREST U/S. 36(I)(III) OF THE ACT WAS DISALLOWED. IT IS ALSO NOTICED T HAT AS PER PAGE NO. 8 OF THE ASSESSMENT ORDE R, THE ASSESSING OFFICER STATED THAT ASSESSEE WAS HAVING INTEREST FREE FUNDS IN THE FORM OF SHARE CAPITAL AND RESERVES AND SURPLUS TO THE EXTENT OF RS. 2,61,14,663/ - ONLY . HOWEVER AS MENTIONED ABOVE IN THIS ORDER , THE LD. COUNSEL HAS SUBMITTED THAT THE A SSESSE WAS HAVING TOTAL INTEREST FREE FUNDS AGGREGATI NG TO RS. 4,41,33,783/ - AND PL E ADE D THAT NO DISALLOWANCE U/S.36(I)(III) IS CALLED FOR . IN THE LIGHT OF AFORESAID FACTS AND CIRCUMSTANCES, WE OBSERVE THAT T H E ASSESSING OFFICER AND THE LD. CIT (A) HAS NO T GIVEN CATEGORICAL FINDING ON THE FOLLOWING ISSUES. (I) WHETHER ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS TO COVER ADVANCES GIVEN TO ITS ASSOCIATE CONCERNS AND NO INTEREST BEARING FUND WAS ADVANCED TO IT S ASSOCIATE CONCERNS. (II) WHETHER THE MONEY AD VANCED TO THE SISTER CONCERNS AND OTHERS WAS FOR THE PURPOSE OF BUSINESS NEED OF THE ASSESSEE. THE LD. COUNSEL HAS SUBMITTED THAT SUCH FA C T WAS CATEGORICALLY POINTED OUT B EFORE THE ASSESSING OFFICER AND THE SAME HAS NOT BEEN DENIED BY EITHER OF I.T.A NO. 2276 /AHD/20 15 A.Y. 2010 - 11 PAGE NO M/S. BAJAJ FOODS LTD. VS. IT O 5 THE LOWER AUTHORITIES. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US THESE CONTENTIONS OF THE LD. COUNSEL WAS NOT CONTROVERTED BY THE REVENUE THEREFORE, WE ARE OF THE VIEW THAT IT WOULD BE APPROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFI CER TO DECIDE DE - NOVO ON THE POINTS (I) AND (II) AS ABOVE AFTER AFFORDING ADEQUATE OPPORTUNITY TO THE ASSESSEE. ACCORDINGLY THIS GROUND OF THE APPEAL IS RESTOR ED TO THE FILE OF THE ASSESSING OFFICER FOR DECIDING AFRESH AS DIRECTED ABOVE . THEREFORE THIS GRO UND OF APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSE. 7. 4 TH GROUND OF APPEAL OF THE ASSESSEE OF ADDITION OF RS. 2,86,427/ - MADE ON ACCOUNT OF EXCHANGE RATE OF DIFFERENCE : - W E NOTICED THAT T H E ASSE S SEE HAD NOT FILED T HE IMPUGNED GROUND OF A PPEAL BEFOR E THE LD. CIT(A) . WE HAVE ALS O GONE THROUGH THE FORM NO. 35 FILED BEFORE THE LD. CIT(A) AND NOTICED THAT NEITHER SUCH GROUND OF APPEAL REFLECTED IN THE FORM NO. 35 N OR SUCH GROUND OF APPEAL WAS ADJUDICATED BY THE LD.CIT(A). IN THE LIGHT OF THE ABOVE FACT AND CIRCUMSTANCES THIS GROUND OF APPEAL OF THE ASSESSEE STAND S DISM ISSED . 8. THE GROUND OF APPEAL NO. 1 & 2 ARE OF GENERAL NATURE WHI C H DO NOT REQUIRE ANY ADJUDICATION . IN THE RESULT, THE GROUND OF APPEAL NO. 3 IS ALLOWED FOR STATISTICAL PURPOSE AND GROU N D NO. 4 IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 21 - 02 - 201 9 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 21 /02 /2019 I.T.A NO. 2276 /AHD/20 15 A.Y. 2010 - 11 PAGE NO M/S. BAJAJ FOODS LTD. VS. IT O 6 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,