GOLDEN CHEMICALS P.LTD, MUMBAI V. JCIT (OSD) RG 8(1), MUMBAI

ITA 237/MUM/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 87882 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-01-2015
• Appeal Filed By: Assessee
• Bench Allotted: G
• Next Hearing Date: 12-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 07-01-2013
• Court: TRIBUNAL
• Department Lawyers: R N DSOUZA
• Assessee Lawyers: DILIP J THAKKARRAJESH P SHAH
• Keywords: Opportunity of being heard; Source of fund

Judgement Text

IN THE INCO ME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI BEFORE SHRI VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER ./I.T.A. NO. 237/M/2013 ( / ASSESSMENT YEAR : 2009 - 2010 ) M/S. GOLDEN CHEMICALS PVT LTD., 502, JAI KRISHNA COMPLEX, NEW LINK ROAD, FUN REPUBLIC THEATRE LANE, ANDHERI (W), MUMABI - 53. / VS. JCIT (OSD), RANGE 8(1), MUMBAI. ./ PAN : AACG 1738 J ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SHRI DILIP J THAKKAR, RAJESH P SHAH / RESPONDENT BY : SHRI R.N. DSOUZA, DR / DATE OF HEARING : 12.1.2015 / DATE OF PRONOUNCEMENT : 23 .01.2015 / O R D E R PER D. KARUNAKARA RAO, AM: THIS APPEAL FILED BY THE ASSESSEE ON 7.1.2013 IS AGAINST THE ORDER OF THE CIT (A) - 16, MUMBAI DATED 16.11.2012 FOR THE ASSESSMENT YEAR 2009 - 2010. IN THIS APPEAL, ASSESSEE RAISED THE FOLLOWING GROUND WHICH READS AS UNDER: ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD CIT (A) ERRED IN CONFIRMING THE ACTION OF ASSESSING OFFICER OF DISALLOWING INTEREST OF RS. 21,94,486/ - U/S 36(1)(III) OF CAPITAL WORK IN PROGRESS OF RS. 2,03,75,915/ - CLAIMED BY THE ASSESSEE. 2. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE MENTIONED THAT THE ASSESSEE CLAIMED THE INTEREST EXPENDITURE OF RS. 55.90 LAKHS AND QUANTIFIED THE CAPITAL WORK - IN - PROGRESS OF RS. 2,03,75,915/ - . DURING THE ASSESSMENT PROCEEDINGS ASSESSING OFFICER NOTICED THAT T HE ASSESSEE FAILED TO FILE THE DETAILS ABOUT THE AVAILABLE FUNDS AND THE FUNDS UTILIZED FOR THE SAID CAPITAL WORK - IN - PROGRESS AND THEREFORE HE CAME TO THE CONCLUSION THAT THE SAID INTEREST DEBIT IS NOT ALLOWABLE SINCE THE CONDITIONS SPECIFIED U/S 36(1)(III) ARE NOT MET. FURTHER, ASSESSING OFFICER OBSERVED THAT THE ASSESSEE PAID INTEREST OF RS. 49.50 LAKHS ON ITS INTER - CORPORATE DEPOSITS AND THE SAME WORKS OUT TO 10.77%. THEREFORE, ASSESSING OFFICER DISALLOWED TH E 10.77% OF 2 INTEREST CLAIMED IN THE P & L ACCOUNT AS RELATABLE TO THE AFOREMENTIONED CAPITAL WORK - IN - PROGRESS OF RS. 2,03,75,915/ - WHICH WORKS OUT TO RS. 21, 94,486/ - AND THE SAME IS DISALLOWED U/S 36(1)(III) OF THE ACT. ON APPEAL, CIT (A) PARTLY ALLOWED T HE APPEAL OF THE ASSESSEE. AGGRIEVED WITH THE DECISION OF THE CIT (A), ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL BY RAISING THE ABOVE MENTIONED GROUND. 3. DURING THE PROCEEDINGS BEFORE US, LD COUNSEL FOR THE ASSESSEE PUT FORWARDED THE CORE ARGUMENT MENTIO NING THAT THE RELATABLE BORROWED FUNDS ON WHICH THE INTEREST OF RS. RS. 55.90 LAKHS WAS PAID BY THE ASSESSEE. HE HAS NOTHING TO DO WITH THE AMOUNT CAPITAL WORK - IN - PROGRESS OF RS. 2,03,75,915/ - . HE SUBMITTED THAT THE WORK - IN - PROGRESS WAS FINALIZED BY THE INITIAL ACCRUAL / CURRENT YEARS INCOME. THE STATED BORROWED FUNDS WERE UTILIZED FOR BUSINESS PURPOSES IN THE PAST. TO SUBSTANTIATE THE ABOVE CLAIM OF THE ASSESSEE, LD COUNSEL FOR THE ASSESSEE BROUGHT OUR ATTENTION TO THE PAGE 14 OF THE ANNUAL ACCOUNT. REFERRING TO SCHEDULE C, LD COUNSEL MENTIONED THAT THERE IS A REDUCTION IN THE UNSECURED LOANS FROM RS. 7,99,92,579/ - TO 7,59,16,616/ - . REFERRING TO SCHEDULE D QUA THE CAPITAL WORK - IN - PROGRESS, LD COUNSEL DEMONSTRATED THE WORK - IN - PROGRESS DETAILS AND THE SAME SHOWS THE OPENING WORK - IN - PROGRESS IS ONLY RS. 23,49,679/ - AND THE CLOSING WORK - IN - PROGRESS BY THE END OF THE YEAR UNDER CONSIDERATION IS RS. 2,03,75,915/ - . THE ABOVE FIGURES FROM SCHEDULES C AND D DEMONSTRATE THAT NO FRESH LOANS WERE TAKEN B Y THE ASSESSEE RATHER THEY ARE REIMBURSEMENT AND CAPITAL WORK - IN - PROGRESS IS AT A NOMINAL OPENING BALANCE. PRIMA FACIE ASSESSEES CLAIM STANDS MERIT. FURTHER, LD COUNSEL DEMONSTRATED THAT THE UNSECURED LOANS ON WHICH THE INTEREST EXPENDITURE OF RS. 55.90 LAKHS WAS INCURRED IS UNCONNECTED TO THE IMPUGNED CAPITAL WORK - IN - PROGRESS. IN THESE FACTUAL MATRIX, ASSESSING OFFICERS DECISION TO DISALLOW 10.77% OF THE WORK - IN - PROGRESS IS NOT PROPER. THERE IS A MERIT IN THE ASSESSEES CONTENTION. 4. ON THE OTHER HA ND, LD DR FAIRLY SUBMITTED THAT THIS IS A MATTER OF FACT THERE IS NO FINDING OF THE ASSESSING OFFICER THAT THE UNSECURED LOANS WERE NOT UTILIZED FOR THE ABOVE REFERRED CAPITAL WORK - IN - PROGRESS. SUBJECT TO THE FINDING OF THE FACT IN THE REMAND PROCEEDINGS, ASSESSEES CLAIM MAY BE ACCEPTED. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL PLACED BEFORE US. IN OUR OPINION, THE 3 MATTER SHOULD BE REMANDED FOR THE LIMITED PURPOSE OF FINDING IF I NITIAL ACCRUALS ARE THE SOURCES OF INCOME FOR EXPENDITURE ON THE IMPUGNED CAPITAL WORK - IN - PROGRESS. IN THE REMANDING PROCEEDINGS, ASSESSEE IS DIRECTED TO DEMONSTRATE BEFORE THE ASSESSING OFFICER THAT THE IMPUGNED LOANS RELATABLE TO THE INTEREST CLAIM OF R S. 55.90 LAKHS ARE NOT APPLIED FOR BUILDING UP OF CAPITAL WORK - IN - PROGRESS IN THE YEAR UNDER CONSIDERATION. ACCORDINGLY, WE ALLOW THE APPEAL OF THE ASSESSEE CONDITIONALLY. ASSESSING OFFICER MAY DECIDE THE ISSUE AFTER GRANTING A REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN A TIME BOUND MANNER. ACCORDINGLY, GROUND RAISED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUN CED IN THE OPEN COURT ON 2 3 R D JANUARY, 2015. S D / - S D / - (VIJAY PAL RAO) (D. KARUNAKARA RAO) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; 2 3 .1.2015 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI