M/s. JMC Automotive Components Pvt. Ltd., Faridabad V. ITO, Faridabad

ITA 2404/DEL/2017

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 6990 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: D
• Assessment Year: 2013-2014
• Appeal Filed On: 20-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Deemed to accrue or arise in india; Capital expenditure; TDS
• Section: 143(3); 115JB; 40(a)(ia); 37(1); 201; 194A

Judgement Text

1 ITA No. 2404/Del./2017 M/s. JMC Automotive Components P. Ltd. IN THE INCOME TAX APPELLATE TRIBUNAL DELHI (DELHI BENCH ‘D’ : NEW DELHI) (Through Video Conferencing) BEFORE SH. N.K.BILLAIYA, ACCOUNTANT MEMBER AND SH. ANUBHAV SHARMA, JUDICIAL MEMBER ITA No.2404/Del/2017 (Assessment Year : 2013-14) M/s. JMC Automotive Components Private Limited Plot No. -2, Dabua Nawada Road, Dabua Extention Industrial Area, Faridabad PAN – AABCJ6600R Vs. ITO Ward-1(3), Faridabad (APPELLANT) (RESPONDENT) Assessee by Shri Rajeev Ahuja, Adv. Revenue by Shri Bhagwati Charan, Sr. DR Date of hearing: 07.03.2022 Date of Pronouncement: 14 .03.2022 2 ITA No. 2404/Del./2017 M/s. JMC Automotive Components P. Ltd. ORDER PER ANUBHAV SHARMA, JM: The appeal has been preferred by the assessee against the order u/s 250(6) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) dated 23.02.2017 in appeal no. 263/15-16 passed by Commissioner of Income Tax (Appeals), Faridabad (hereinafter referred to as the “First Appellate Authority or FAA) in appeal preferred against order dated 26.02.2016 u/s 143(3) of the Act passed by Income Tax Officer, Ward-1(3), Faridabad (hereinafter referred to as the Ld. AO). 2. In brief, the facts of the case are that the appellant is engaged in the business of manufacturing and trading of auto parts components. It had e-filed its return declaring income of Rs. 28,83,670/- on 29.09.2013 and the same was processed u/s 143(1) of the Income Tax Act. The appellant had also declared deemed income of Rs. 33,10,662/- u/s 115JB of the Income Tax Act. Later on the case of the appellant was selected for scrutiny through CASS, and subsequently assessment was completed u/s 143(3) of the Income Tax Act. The return income of Rs. 28,83,670/- was assessed u/s 143(3) of the Act at an income of Rs. 75,59,880/- on 26.02.2016. is engaged in the business of manufacturing and trading of auto parts components. 3. The Ld. AO had made following additions : • Rs.9,61,425/- under the provision of section 40(a)(ia) of the Income Tax Act, 1961. • Rs.1,50,808/- under the provision of section 36(l)(iii) of the Income Tax Act, 1961. 3 ITA No. 2404/Del./2017 M/s. JMC Automotive Components P. Ltd. • Rs.17,34,336/- under the section 37(1) of the Income Tax Act 1961 on account of Pre payment discount. • Rs. 1,42,500/- under the provision of Section 36(1)(iii) of the Income Tax Act, 1961. • Rs. 9,18,292/- under the provision of section 37(1) of the Income Tax Act, 1961, treating these as capital in nature. • Rs. 1,96,800/- under the provision of section 36(1)(iii) of the Income Tax Act, 1961.] • Rs. 3,01,629/- under the provision of Section 36(1)(iii) of the Income Tax Act, 1961. • Rs. 73,620/- for disallowed the loss in chit fund. 4. Now before the Tribunal, the assessee has raised following grounds of appeal :- “1. That on the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax Appeals (hereinafter referred to as ‘CIT (A)’), grossly erred in confirming the addition of Rs 2,47,363/- made u/s 40(a)(ia) of the income tax act, 1961 which is bad in law and not called for (Ground No-1) 2. That on the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax Appeals (hereinafter referred to as ‘CIT (A)’), erred in confirming the addition of Rs 1,50,808/- made u/s 36(1)(iii) of the income tax act,1961 which is bad in law 4 ITA No. 2404/Del./2017 M/s. JMC Automotive Components P. Ltd. and not called for (Ground No-2) 3. That on the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax Appeals (hereinafter referred to as ‘CIT (A)’), erred in confirming the addition of Rs 1,25,821/- made u/s 37(1) of the income tax act, 1961 of difference in the rate of interest which is bad in law and not called for. (Ground No-3) 4.That on the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax Appeals (hereinafter referred to as ‘CIT (A)’), erred in confirming the addition of Rs. 1,42,500/- made u/s 36(1)(iii) of the income tax act 1961 which is bad in law and not called for. (Ground No-4) 5. That on the facts and circumstances of the case and in law, the Ld. Commissioner of Income Tax Appeals (hereinafter referred to as ‘CIT (A)’), erred in confirming the addition of Rs. 2,42,136/- made u/s 37(1) of the income tax act, 1961 which is bad in law and not called for. (Ground No-5) 5. Heard the Ld. Counsel for the assessee and ld. Sr. DR for the revenue. On behalf of the assessee relying order dated 16.11.2016 of ITAT, Delhi Bench SMC 3 in ITA No. 6441/Del/2015 for Assessment Year 2011-12 and Delhi Bench – G, ITA no. 1310/Del/2016 for Assessment Year 2012-13, order dated 13.08.2021 it was contended that ground no. 1, 2 and 4 are squarely covered in assessee’s own 5 ITA No. 2404/Del./2017 M/s. JMC Automotive Components P. Ltd. case and except for difference of amount involved same questions of facts and law are involved. 6. In regard to the Ground no. 3 it is contended that the appellant availed bill discount facilities from Sandhar Automotavies (Dhumspur) which is a unit of M/s. Sandhar Technologies Ltd. And same is also customer of appellant company and from M/s. Sandhar Enterprises is Proprietary firm of MD of Sandhar technologies Ltd. Appellant company claimed interest on discounting charges of bills amounting to Rs. 17,34,336/- which were disallowed by Ld. AO and Ld. FAA has restricted the disallowance to an amount of Rs. 1,25,821/- being difference on account of rate of difference as paid to Sandhar Automotaves (Dhumspur) and M/s. Sandhar Enterprises. It was submitted that expenditure interest is based on commercial expediency and to cover up temporary cash flow mismatch. It was submitted that Bill Discounting expenses cannot be restricted on account of difference in the rate of interest between two entities. 7. In regard to Ground no. 5 it was submitted that the process charges of Rs. 78,652/- were paid to SIDBI for sanction of term loan of Rs. 70,00,000/- but this amount was for working capital and should have been treated as a revenue expenditure. Ld. Counsel placed on record sanction letter dated 01.01.2013 of the SIDBI wherein the loan is shown to be sanctioned to meet the margin money for working capital requirements of the company. 8. Ld. Sr. DR submitted that the Ld. Tax Authorities below have followed the settled legal principles on the basis of which assessment was done and additions made in the case of assessee and he thus, defended the orders of Ld. Tax 6 ITA No. 2404/Del./2017 M/s. JMC Automotive Components P. Ltd. Authorities. Giving thoughtful consideration to the arguments and going through the record the finding are given ground wise. GROUND NO. 1 9. It can be observed as with regard to non-deduction of TDS, as per the provisions of Section 194A of the Act for interest Rs. 2,47,363/- paid to Barclays Investment & Loan (India) Ltd., that except for changed figures, the principles of law have been considered in assesse’s own case in ITA No. 1310/Del/2016 order dated 13.08.2021 for assessment year 2012-13. It is explained by the assessee that the lender company has closed its operation in India, therefore, appellant could not lay hand on the certificate issued u/s 201 of the Act. Though appellant succeeded to get certificates from the two other lenders and placing it before the Ld. First Appellate Authority to get part relief. 9.1 This Bench is of considered view that the appellant needs an opportunity to bring on record the other sources of information or documents to establish if certificate was issued by Barclays Investment and Loan (India) Ltd. Accordingly, the AO is directed to conduct a proper inquiry in that regard including giving opportunity to the assessee. Consequently ground no. 1 is determined in favour of the assessee for statistical purpose. Ground no. 2 10. As with regard to ground no. 2 in assessee’s own case for the assessment year 2012-13, the Co-ordinate Bench of the Tribunal has examined the issues based on the basis of relevant statutory provisions and judicial pronouncements while determining the controversies of disallowance of interest on the advances 7 ITA No. 2404/Del./2017 M/s. JMC Automotive Components P. Ltd. made by the assessee. There is no reason to differ. All the machinery for which the advance was given were part of the replacement machinery and said machineries for which the advance was given was not for extension of existing business. The Bench is thus inclined to decided this ground in favour of the assessee. GROUND NO. 3 11. In regard to this ground no 3, it can be observed that the assessee has paid bill discounting charges 15 and 16% to Sandhar Automotavies (Dhumspur) and 19% to Sandhar Enterprises. While as per the own case of assessee they are connected enterprises of one proprietor. Thus, the Ld. First Appellate Authority has rightly disallowed amount of Rs. 1,25,821/- being not based on principles of prudence and considering them excessively paid. Even otherwise, admittedly, in assessee’s own case for the year 2012-13, the Co-ordinate Bench has also determined the issue against the assessee and meeting the similar fate, in the present appeal, ground no. 3 is determined against the assessee. GROUND NO. 4 12. As with regard to ground no. 4 in assessee’s own case for the assessment year 2012-13, the Co-ordinate Bench of the Tribunal has examined the issues based on the basis of relevant statutory provisions and judicial pronouncements while determining the controversy of disallowance of interest on the advances made by the assessee. There is no reason to differ. The advances were not given in the relevant assessment year but given in the year 2011-2012. The same were given out of interest free funds. The Bench is thus inclined to decided this ground in favour of the assessee. GROUND NO. 5 8 ITA No. 2404/Del./2017 M/s. JMC Automotive Components P. Ltd. 13. In regard to this ground no 5 it can be observed that the sanction letter placed on record by the assessee makes it apparent the loan of the 70,00,000/- , taken from SIDBI was to meet margin money for working capital requirement of the company. The interest on this loan stands allowed by the Ld. AO as revenue expenditure that being so there could be no justification to disallow the process charges made for procuring the loan as capital expenditure. Thus, only to the extent of Rs 78,652/- impugned addition of total Rs 2,42,136/- is liable to be set aside. Accordingly this ground is allowed partly. 14. Resultantly, the appeal filed by the assessee is partly allowed for statistical purposes. Order pronounced and signed in open court on this 14 th day of March, 2022. Sd/- Sd/- (N.K.BILLAIYA) (ANUBHAV SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER Date:- 14 .03.2022 *Binita, SR.P.S* Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT, NEW DELHI