DCIT, Circle-1, Nashik V. M/s. Gavakari Prakashan, Nashik

ITA 239/PUN/2013

• Counselvise Citation: 23924514 RSA 2013
• Duration Of Justice: 1 year(s) 4 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 13-05-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 23-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S P WALIMBE
• Assessee Lawyers: N O N E
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO. 239 / P N/ 20 1 3 ASSESSMENT YEAR : 200 8 - 09 ASST. COMMISSIONER OF INCOME TAX, C IRCLE - 1, NASHIK VS. M/S. GAVAKARI PRAKASHAN, 430, TILAKPATH, NASHIK (APPELLANT) (RESPONDENT) PAN NO. AACFG1912F APPELLANT BY: SHRI S.P. WALIMBE RESPONDENT BY: N O N E DATE OF HEARING : 13 - 0 5 - 2014 DATE OF PRONOUNCEMENT : 26 - 05 - 2014 ORD ER PER R.S . PADVEKAR , JM : - IN THIS APPEAL, THE REVEN U E HAS CHALLENGED THE IMPUGNED O RDER OF THE LD. CIT(A) - I, NASHIK DATED 14 - 11 - 2012 FOR THE A.Y. 200 8 - 09. THE REVENUE HAS TAKEN THE FOLLOWING EFFECTIVE GROUND IN THE APPEAL: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) - I, NASHIK IS JUSTIFIED IN DELETING THE ADDITION OF RS.18,96, 720/ - ON ACCOUNT OF INTEREST DISALLOWED BY THE A.O. IN RESPECT OF INTEREST BEARING FUNDS APPLIED BY THE FIRMS FOR GIVING ADVANCES FOR ACQUISITION O F ASSETS, WHICH ARE STILL SHOWN AS ADVANCE IN BALANCE SHEET AND NOT AS FIXED ASSETS? 2. THE FACTS WHICH ARE REVEALED FROM THE RECORD AS UNDER. THE ASSESSEE IS IN THE BUSINESS OF PUBLISHING NEWS PAPER NAMELY GAVKARI. THE ASSESSEE FILED THE RETURN OF IN COME FOR THE A.Y. 2008 - 09 DECLARING LOSS OF RS.1,35,65,810/ - . THE ASSESSEES CASE WAS SELECTED FOR SCRUTINY AND ASSESSMENT HAS BEEN COMPLETED U/S. 143(3) OF THE INCOME - TAX ACT. SO FAR AS THE ISSUE OF DISALLOWANCE OF THE INTEREST IS CONCERNED, THE 2 ITA NO. 239/PN/2013, GAVAKARI PRA KASHAN, NASHIK ASSESS ING OFFICER HAS OBSERVED THAT ON EXAMINATION OF THE BALANCE SHEET OF THE FIRM, IT IS SEEN THAT THE FOLLOWING ADVANCES ARE SHOWN IN THE SCHEDULE OF FIXED ASSETS: SR. NO. DESCRIPTION AMOUNT OF ADVANCES (RS.) 1 ADVANCE FOR INDUSTRIAL LAND 13,79,800/ - 2 ADVA NCE FOR GODOWN CONSTRUCTION 24,00,000/ - 3 ADVANCE FOR STAFF QUARTERS 39,06,000/ - 4 ADVANCE FOR LAND 70,00,000/ - 5 ADVANCE FOR NAVI MUMBAI LAND 50,00,000/ - 2,41,85,800/ - 2.1. THE ASSESSING OFFICER HAS FURTHER OBSERVED THAT THE ASSETS FOR WHICH THE S AID ADVANCES HAVE BEEN GIVEN ARE NOT YET CONVERTED TO THE OWNERSHIP OF THE ASSESSEE AND ARE NOT ADEQUATELY USED FOR THE BUSINESS OF THE FIRM . FROM THE BALANCE SHEET IT IS SEEN THAT FROM YEARS TOGETHER THESE AMOUNTS ARE SHOWN AS 'ADVANCES' AND NOT AS 'FIXE D ASSETS'. THE BALANCE SHEET OF THE FIRM FURTHER INDICATES THAT HUGE INTEREST BEARING LOAN FUNDS ARE UTILIZED BY THE FIRM I.E., SECURED LOAN RS. 1,54,76,015/ - AND DEPOSITS FROM PUBLIC RS. 32,37,19,265/ - , ON WHICH INTEREST IS PAID BY THE FIRM @ 12% PER ANNUM. THE FACT THAT THE ADVANCES MENTIONED AS ABOVE ARE NOT CONVERTED TO THE ASSESSEE'S OWNERSHIP AND ARE NOT ADEQUATELY USED FOR BUSINESS AND COUPLED WITH THE FACT THAT INTEREST BEARING FUNDS ARE UTILIZED FOR THIS PURPOSE, BRINGS TO FOR C E THE PROVISIONS OF S EC . 36(L)(III) OF THE INCOME - TAX ACT. 3 . THE ASSESSING OFFICER HAS FURTHER OBSERVED THAT AS MENTIONED IN THE DETAILS OF ADVANCES IN ABOVE PARAGRAPH , THE ADVANCES FOR LAND AT KHAMBALE AND DWARKA ARE AT RS. 13,79,880/ - AND RS.70,00,000/ - RESPECTIVELY. T HESE ADVANCES ARE NOT CONVERTED TO 'FIXED ASSETS' BY THE FIRM AND THE SAME ARE NOT AT ALL PUT TO USE. THESE FACTS WERE SUBJECTED 3 ITA NO. 239/PN/2013, GAVAKARI PRA KASHAN, NASHIK TO EXAMINATION DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS FOR A.Y. 2006 - 07 ALSO, DURING THE COURSE OF WHICH DISALLOWANCE O F THE RELATED INTEREST WAS MADE BY THE ASSESSING OFFICER. S UCH FINDINGS WERE CONFIRMED BY THE LD. CIT(A) - I, NASHIK. THE FACTS BEING SAME FOR THE YEAR UNDER CONSIDERATION ALSO. INTEREST CALCULATED @ 12% PER ANNUM ON THE AMOUNTS OF ADVANCES AS ABOVE I.E . RS . 10,05,876/ - IS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE FIRM. 4 . THE ASSESSING OFFICER HAS FURTHER OBSERVED THAT THE ASSESSEE'S BALANCE SHEET ALSO REFLECTS ADVANCES FOR GODOWN CONSTRUCTION, ADVANCES FOR STAFF QUARTERS AND ADVANCES FOR NEW BOMBAY LAND AT RS. 24,00,000/ - , RS. 39,06,000/ - AND RS. 50,00,000/ - RESPECTIVELY, AMOUNTING TO RS. 1,58,06,000/ - . HERE TOO THESE ADVANCES ARE NOT CONVERTED IN TO 'FIXED ASSETS' BY THE ASSESSEE AND THE SAME HA VE NOT BEEN PUT TO USE OF THE BUSINESS OF THE FIRM. THIS IS CLEAR FROM THE FACT THAT THE ASSESSEE HAS STARTED DEVELOPMENT OF THE PLOT AT NAVI MUMBAI LAND AS DISCUSSED IN ABOVE PARAGRAPH BUT THE PRINTING PRESS, OFFICE ETC . MENTIONED IN THE DEVELOPMENT AGREEMENT HAS NOT BEEN PUT TO USE. AS SUCH INTEREST CALCU LATED @ 12% PER ANNUM ON THE AMOUNT OF ADVANCES OF RS. 1,58,06,000/ - I.E . RS. 18,96,720/ - IS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE FIRM. 5 . THE ASSESSING OFFICER HAS OBSERVED THAT IN VIEW OF THE DISCUSSION AS ABOVE, INTEREST AMOUNTING TO RS. 29,02, 596/ - I.E., RS. 10,05,876/ - AND RS. 18,96,720/ - RESPECTIVELY IS DISALLOWED AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. 6. IN SUM AND SUBSTANCE THE ASSESSING OFFICER MADE THE DISALLOWANCE WHILE WORKING OUT INTEREST ON THE AMOUNTS OF ADVANCE S MENTIONED I N PARA NO. 2 AND MADE THE ADDITION OF RS.29,02,596/ - RESULTED INTO THE R EDUCTION IN LOSS. THERE WERE TWO ADDITIONS ONE WAS A S 4 ITA NO. 239/PN/2013, GAVAKARI PRA KASHAN, NASHIK DISCUSSED IN PARA NO. 3 IN RESPECT OF THE ADVANCES FOR LAND AT KHAMBALE AND DWARKA AND THE SAID ADDITION HAS BEEN CONFIRMED BY TH E LD. CIT(A). IN RESPECT OF THE ANOTHER ADDITION DISCUSSED IN PARA NO. 4 I.E. TO THE EXTENT OF RS. 18,96,720/ - THE LD. CIT(A) DELETED THE SAID ADDITION. THE REVENUE GRIEVANCE IS LIMITED TO THE SECOND ADDITION WHICH WAS DELETED BY THE LD. CIT(A). NONE WAS PRESENT FOR THE ASSESSEE. LD. DR FOR THE REVENUE WAS PRESENT AND NARRATED THE FACTS AND SUPPORTED THE ORDER OF THE ASSESSING OFFICER. WE REPRODUCE HERE UNDER THE DISCUSSION MADE BY THE LD. CIT(A) IN RESPECT OF EACH ADVANCE AS ADVANCE FOR THE GODOWN CONS TRUCTION, ADVANCE FOR CIDCO PLOT ETC. 7.2. I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, ASSESSMENT ORDER AND RIVAL CONTENTIONS. AS REGARDS ADVANCE FOR GODOWN CONSTRUCTION, IT IS OBSERVED THAT THE APPELLANT FIRM HAS INCURRED EXPENDITURE ON CONSTRUC TION OF GODOWN AND PLACE FOR PRINTING PRESS ON A PLOT OWNED BY SHRI ARVIND PTNIS, PARTNER OF THE APPELLANT FIRM. THIS PROVES THAT THE CONSTRUCTED SHED IS A BUSINESS ASSET. FURTHER IT IS PROVED FROM THE COPY OF CERTIFICATE ISSUED BY CA & FILED WITH THE AUD IT BUREAU OF CIRCULATIONS THAT THE APPELLANT FIRM HAS USED THIS PLACE FOR PRINTING OF NEWSPAPER AND STORAGE OF NEWSPRINT. ON PERUSAL OF THE PROVISIONS OF SECTION 36(L)(III) INCLUDING THE PROVISO THERETO, IT IS OBSERVED THAT DEDUCTION OF INTEREST IS ALLOWED IF THE ASSET IS PUT TO USE FOR BUSINESS PURPOSE AND OWNERSHIP OF THE ASSET IS NOT THE PRE - CONDITION FOR ALLOWANCE OF THE DEDUCTION OF INTEREST. IT IS ALSO OBSERVED THAT NO DISALLOWANCE IS MADE IN THE SCRUTINY ASSESSMENT FOR A.Y.2009 - 10 IN THE CASE OF THE APPELLANT AFTER CONSIDERING THIS CLAIM OF THE APPELLANT FIRM. IN VIEW OF THE ABOVE FACTS, I AM OF THE CONSIDERED OPINION THAT THE SHED IS A BUSINESS ASSET AND IS USED FOR BUSINESS PURPOSE THEREFORE THE AO IS NOT JUSTIFIED IN MAKING THE DISALLOWANCE OF INT EREST. AS REGARDS ADVANCE FOR STAFF QUARTERS, IT IS OBSERVED THAT THIS PAYMENT IS TOWARDS THE PURCHASE AND RENOVATION OF FLAT WHICH IS USED AS STAFF QUARTERS BY THE APPELLANT FIRM. IT IS EXPLAINED BY THE APPELLANT FIRM THAT THE FLAT IS OWNED BY SHRI ANAN D POTNIS, SON OF THE PARTNER BUT THE SAME IS IN POSSESSION OF THE APPELLANT FIRM AND USED FOR STAFF MEMBERS AS PER THE AGREEMENT BETWEEN THE OWNER OF THE FLAT AND THE APPELLANT FIRM. THIS PROVES THAT THE FLAT IS A BUSINESS ASSET. ON 5 ITA NO. 239/PN/2013, GAVAKARI PRA KASHAN, NASHIK PERUSAL OF THE PROVISI ONS OF SECTION 36(L)(III) INCLUDING THE PROVISO THERETO, IT IS OBSERVED THAT DEDUCTION OF INTEREST IS ALLOWED IF THE ASSET IS PUT TO USE FOR BUSINESS PURPOSE AND OWNERSHIP OF THE ASSET IS NOT THE PRE - CONDITION FOR ALLOWANCE OF THE DEDUCTION OF INTEREST. IN VIEW OF THE ABOVE FACTS, I AM OF THE CONSIDERED OPINION THAT THE SHED IS A BUSINESS ASSET AND IS USED FOR BUSINESS PURPOSE THEREFORE THE AO IS NOT JUSTIFIED IN MAKING THE DISALLOWANCE OF INTEREST. AS REGARDS ADVANCE FOR CIDCO PLOT, IT IS OBSERVED THAT TH E APPELLANT FIRM HAS PAID EASE PREMIUM TO CIDCO TOWARDS ALLOTMENT OF THE SAID PLOT. THE APPELLANT FIRM HAS GIVEN THE SAID PLOT FOR DEVELOPMENT AND IN CONSIDERATION OF THE SAME HAS RECEIVED AND DECLARED INCOME OF RS.1,22,33,596/ - ON THIS COUNT. IT IS ALSO O BSERVED THAT THE THANE EDITION OF THE GAVKARI NEWSPAPER IS PUBLISHED BY USING THE PREMISES .GOT AS PART OF THE DEVELOPMENT AGREEMENT. THIS FACT IS PROVED FROM THE COPY OF THE ELECTRICITY BILL OF THE PREMISES AT NAVI MUMBAI. CONSIDERING THE ABOVE FACTS, IT IS EVIDENT THAT THE ADVANCE APPEARING IN THE BALANCE SHEET IS FOR BUSINESS PURPOSES WHICH HAVE ALSO GENERATED INCOME FOR THE APPELLANT FIRM. IT IS ALSO OBSERVED THAT NO DISALLOWANCE IS MADE IN THE SCRUTINY ASSESSMENT FOR A.Y.2009 - 10 IN THE CASE OF THE APPE LLANT AFTER CONSIDERING THIS CLAIM OF THE APPELLANT FIRM. IN VIEW OF THE ABOVE FACTS, I AM OF THE CONSIDERED OPINION THAT THE SAID ADVANCE IS IN THE COURSE, OF THE BUSINESS AND THEREFORE THE AO IS NOT JUSTIFIED IN MAKING THE DISALLOWANCE OF INTEREST. CON SIDERING THE ABOVE FACTS, THE DISALLOWANCE MADE OF RS.18,96,720/ - ON ACCOUNT OF INTEREST IS DELETED. THE SUMMARIZED GROUND NO. 2 STANDS ALLOWED . 7. WE HAVE ANXIOUSLY CONSIDERED THE REASONS GIVEN BY THE LD. CIT(A) FOR DELETING THE ADDITION OF RS.18, 96,720/ - TOWARDS USING THE INTEREST BEARING FUND FOR NON - BUSINESS PURPOSES. THE ASSESSING OFFICER CALCULATED THE SAID AMOUNT ON THE FOLLOWING ADVANCES: I. ADVANCE FOR GODOWN CONSTRUCTION RS.24 LACS. II. ADVANCE FOR STAFF QUARTERS RS.39.06 LACS . III. AD VANCE FOR CIDCO LAND IN NAVI MUMBAI RS.50 LACS . 8. AS PER THE FACTS ON RECORD, WE FIND THAT THE SAID ADVANCES ARE MADE IN THE COURSE OF BUSINESS OF THE ASSESSEE . T O AVOID THE REPETITION 6 ITA NO. 239/PN/2013, GAVAKARI PRA KASHAN, NASHIK OF FACTS WHICH ARE ALREADY NARRATED BY THE LD. CIT(A) , W E ADOPT THE SAME FOR THE PURPOSE OF OUR REASONS IN THIS ORDER. WE HOLD THAT THE LD. CIT(A) ON THE FACTS OF TH OSE THREE ADVANCES HAS RIGHTLY HELD THAT THE SAID ADVANCES ARE MADE IN THE COURSE OF BUSINESS OF THE ASSESSEE AND THE ASSESSING OFFICER WAS NOT JUSTIFIED IN H OLDING CONTRARY. WE FIND NO REASON TO INTERFERE WITH THE ORDER OF THE LD. CIT(A). ACCORDINGLY, THE SAME IS CONFIRMED. 9. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 26 - 05 - 2014 PRONOUNCED IN THE OPEN COURT ON - 05 - 2014 SD/ - SD/ - ( G.S. PANNU ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER RK /PS PUNE , DATED : 26 TH MAY, 20 1 4 COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) - I, NASHIK 4 THE CIT - I, NASHIK 5 THE DR, ITAT, B BENCH, PUNE . 6 GUARD FILE. //TRUE COPY// BY ORDER PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL PUNE