M/s. Shree Lamikant Industries, Indore V. The I.T.O., Indore

ITA 235/IND/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2858 (ITAT-INDORE)
• Duration Of Justice: 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-05-2010
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2005-2006
• Appeal Filed On: 22-04-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: A B DOSHI
• Keywords: Proportionate interest; Commercial expediency

Judgement Text

PAGE 1 OF 5 - I.T.A.NOS. 234 TO 236/IND/2010 SHREE LAXMIKANT INDUSTRIES, INDORE. IN THE INCOME TAX APPELLATE TRIBUNAL INDORE (S.M.C.) BENCH : INDORE BEFORE SHRI V.K. GUPTA, ACCOUNTANT MEMBER PAN NO. : AAGFS0068Q I.T.A.NO. 234 TO 236/IND/2010. A.YS. : 2004-05,2005-06 & 2006-07 M/S. SHREE LAXMIKANT INDUSTRIES, INCOME-TAX OFFICER, 79/A, NEW INDUSTRIAL ESTATE (FORT), INDORE. VS 1(1), INDORE. APPELLANT RESPONDENT APPELLANT BY : SHRI A. B. DOSHI, C. A. RESPONDENT BY : SMT. APARNA KARAN, SR. DR DATE OF HEARING : 14.05.2010 O R D E R THESE APPEALS BELONG TO THE SAME ASSESSEE AND INVOL VE COMMON ISSUES, HENCE, THEY ARE BEING HEARD TOGETHER FOR TH E SAKE OF CONVENIENCE. 2. I HAVE HEARD BOTH THE PARTIES AND HAVE ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. 3. THE GROUNDS OF APPEAL IN I.T.A.NO. 234/IND/2010 ARE REPRODUCED FOR THE SAKE OF READY REFERENCE, AS IN O THER APPEALS, THE SAME ISSUES ARE INVOLVED EXCEPT FOR THE DIFFERENCE IN QU ANTUM. PAGE 2 OF 5 - I.T.A.NOS. 234 TO 236/IND/2010 SHREE LAXMIKANT INDUSTRIES, INDORE. 1. THAT IN THE FACT AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A)-I, INDORE, ERRED IN UPHOLDING RS. 56,375/- O UT OF HAMMALI EXPENSES. 2. THAT IN THE FACT AND CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A)-I, INDORE, ERRED IN UPHOLDING RS. 2,35,080/- OUT OF INTEREST. 4. AS REGARD HAMMALI EXPENSES, IT IS NOTED THAT THESE EXPENSES HAVE BEEN DISALLOWED BY THE REVENUE AUTHORITIES FOR THE REASON THAT THE ASSESSEE FAILED TO SUBSTANTIATE ITS CLAIM BY ADDUCI NG THE REQUIRED EVIDENCES SUCH AS EVIDENCE OF PAYMENT MADE TO LABOU RS, WHO CARRIED OUT SUCH JOB. IT IS ALSO NOTED THAT SUBSTANTIAL INCREAS E IN SUCH EXPENSES DUE TO INCREASE IN THE RATES OF HAMMALI HAS ALSO NOT BEEN ESTABLISHED. EVEN DURING THE COURSE OF HEARING BEFORE ME, THE LEARNED COUNSEL COULD NOT MEET WITH THESE FINDINGS OF THE REVENUE AUTHORITIES AND PREFERRED ONLY TO RELY ON THE SUBMISSIONS MADE BEFORE THEM. IN THIS V IEW OF THE MATTER, WHEN THE ASSESSEE HAS FAILED TO DISCHARGE ITS ONUS OF CLAIMING EXPENDITURE, IN MY OPINION, THE ORDER OF THE LD. CI T(A) IS CORRECT IN LAW. ACCORDINGLY, THIS GROUND OF THE ASSESSEE IS DISMIS SED. 5. IN GROUND NO.2, THE ISSUE IS REGARDING DISALLOWANCE OF PROPORTIONATE INTEREST OUT OF INTEREST EXPENSES CLA IMED BY THE ASSESSEE. THE AO FOUND THAT THE ASSESSEE HAD GIVEN LOANS TO V ARIOUS PARTIES PAGE 3 OF 5 - I.T.A.NOS. 234 TO 236/IND/2010 SHREE LAXMIKANT INDUSTRIES, INDORE. AGGREGATING TO RS. 16,21,244/-. THE AO REQUIRED THE ASSESSEE TO SUBSTANTIATE ITS CLAIM FOR ALLOWANCE OF INTEREST ON BORROWED FUNDS, WHICH WERE UTILIZED IN GIVING OF ALL THESE ADVANCES. THE ASSESSEE MADE GENERAL SUBMISSIONS SUCH AS THE ADVANCES WERE GIVEN FOR BUS INESS PURPOSES I.E. AGAINST SOME CONTRACTUAL WORK TO BE RENDERED BY OTH ER PARTIES FOR THE ASSESSEE OR ADVANCES AGAINST EXPENSES/PURCHASES. HE , HOWEVER, MADE THE IMPUGNED DISALLOWANCE AS THESE SUBMISSIONS WERE NOT SUPPORTED BY THE DOCUMENTARY EVIDENCE. THE LD. CIT(A) ALSO EXAMINED EACH AND EVERY CASE AND FOUND THAT THE ASSESSEE FAILED TO PROVE TH E ASPECT OF COMMERCIAL EXPEDIENCY TO JUSTIFY ITS CLAIM OF ALLOWANCE OF INT EREST EXPENDITURE. DURING THE COURSE OF HEARING BEFORE ME, ON A QUERY FROM THE BENCH, THE LEARNED COUNSEL FAIRLY ADMITTED THAT AS FAR AS THE ASPECT OF UTILIZATION OF BORROWED FUNDS FOR MAKING THESE ADVANCES WERE CONCE RNED, THAT WAS NOT DISPUTED. THE LEARNED COUNSEL WAS THEN ASKED TO PR OVE THE ASPECT OF COMMERCIAL EXPEDIENCY/ CONSIDERATION INVOLVED IN MA KING OF SUCH ADVANCES FOR WHICH HE GAVE REPLIES THAT ONE ADVANCE AGAINST BROKERAGE WAS GIVEN TO SHRI JAGDISH P. CHOWDHARY DALAL FOR GR AINS TO BE SOLD THROUGH HIM. THE LEARNED COUNSEL WAS ASKED TO EXPLA IN THAT WHAT HAPPENED TO THESE ADVANCES IN SUBSEQUENT YEARS I.E. WHETHER THESE PARTIES ACTUALLY RENDERED SERVICES OR SUPPLIED THE MATERIAL , THE LEARNED COUNSEL SUBMITTED THAT NOTHING OF THAT SORT HAPPENED. PAGE 4 OF 5 - I.T.A.NOS. 234 TO 236/IND/2010 SHREE LAXMIKANT INDUSTRIES, INDORE. 6. THE LD. SR. DR , ON THE OTHER HAND, SUBMITTED THAT EACH AND EVERY TRANSACTION HAD BEEN EXAMINED BY THE LD. CIT( A) IN DETAIL AND THE ASSESSEE FAILED TO PROVE THE ASPECT OF BUSINESS PUR POSE INVOLVED IN THESE TRANSACTIONS AND, THEREFORE, THE ORDER OF LD. CIT(A ) WAS LIABLE TO BE CONFIRMED. 7. I HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD AND THE ORDERS OF THE AUTHORITIE S BELOW. 8. IT IS NOTED THAT THE IMPUGNED ADVANCES HAVE BEEN MA DE OUT OF INTEREST BEARING BORROWED FUNDS. HOWEVER, THE ASSES SEE HAS FAILED TO PROVE THE COMMERCIAL CONSIDERATION/BUSINESS PURPOSE INVOLVED IN MAKING OF SUCH ADVANCES. HENCE, IN MY VIEW, AS PER THE PRO VISIONS OF SECTION 36(1)(III) INTEREST ON BORROWED FUNDS CANNOT BE ALL OWED IN TOTO AS ALL THE BORROWED FUNDS HAVE NOT BEEN UTILIZED FOR BUSINESS PURPOSES. THUS, I CONFIRM THE FINDINGS OF THE LD. CIT(A) IN THIS REGA RD IN ALL THE YEARS. THUS, GROUND NO.2 OF THE ASSESSEES APPEAL STANDS DISMISS ED. 9. TO SUM UP, ALL THE APPEALS FILED BY THE ASSESSEE ST AND DISMISSED. PAGE 5 OF 5 - I.T.A.NOS. 234 TO 236/IND/2010 SHREE LAXMIKANT INDUSTRIES, INDORE. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 17 TH MAY, 2010. SD/- (V. K. GUPTA) ACCOUNTANT MEMBER DATED : 17 TH MAY, 2010. CPU* 145