Nik-San Engineering Co. Ltd., Vadodara V. The Income Tax Officer, Ward-2(1)(1), Baroda

ITA 2421/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5089 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 23-09-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD - BENCH B BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ./ ITA NO.2421/AHD/2016 / ASSTT. YEAR: 2012-2013 NIK-SAN ENGINEERING CO.LTD. 19, R.C. PATEL IND. ESTATE AKOTA, VADODARA 390020 PAN : AABCN 8963 D VS. ITO, WARD-2(1)(1) BARODA. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI MUKUND BAKSHI, AR REVENUE BY : SHRI KEYUR PATEL, SR.DR ! / DATE OF HEARING : 25/07/2018 '#$ ! / DATE OF PRONOUNCEMENT: 01 /08/2018 %& / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST O RDER OF THE LD.CIT(A)-2, BARODA DATED 24.6.2016 PASSED FOR THE ASSESSMENT YEAR 2012-13. 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS PLEADED THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.24,48,592/-. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-CO MPANY AT THE RELEVANT TIME WAS ENGAGED IN MANUFACTURING AND DIST RIBUTION OF TRANSFORMERS. IT HAS FILED RETURN OF INCOME ELECTRO NICALLY ON 29.9.2012 ITA NO.2421/AHD/2016 2 DECLARING NEGATIVE INCOME AT RS.(-)59,33,460/-. TH E CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND N OTICE UNDER SECTION 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE. ON SCRUTINY OF THE ACCOUNTS IT REVEALED TO THE AO THE ASSESSEE HAS GRA NTED LOAN TO FOUR CONCERNS VIZ. CHAUDHARY GLOBAL LTD., MEERAJ STEELS PVT. LTD., START EXIM PVT. LTD., AND SUNITA SINGHANIA. IT HAS NOT CHARGE D INTEREST FROM THESE ENTITIES/PERSON. THE AO CALCULATED NOTIONAL INTERE ST INCOME ON THE LOANS GIVEN TO THEM AND CALCULATED THE INTEREST OUG HT TO HAVE BEEN CHARGED BY THE ASSESSEE FROM THESE PERSONS AT RS.24 ,48,592/-. HE HAS OBSERVED THAT SINCE THE ASSESSEE HAS BORROWED HUGE FUNDS, THEREFORE, HE DID NOT ALLOW INTEREST EXPENDITURE ON THE ABOVE LOANS. IN OTHER WORDS, AO WAS OF THE VIEW THAT INTEREST BEARING FUN DS WERE DIVERTED BY THE ASSESSEE FOR NON-BUSINESS PURPOSE, AND THEREFOR E, INTEREST EXPENDITURE ON SUCH LOANS WAS DISALLOWED. APPEAL T O THE CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 4. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. A PERUSAL OF THE ASS ESSMENT ORDER WOULD INDICATE THAT THE ASSESSEE HAS DEMONSTRATED BEFORE THE LD.AO THAT IT HAS GIVEN A SUM OF RS.3,42,50,000/- TO THESE FOUR E NTITIES/PERSON. HOWEVER, IT HAS A HUGE SURPLUS OF MORE THAN RS.16 C RORES IN THE SHAPE OF CAPITAL, RESERVES AND SURPLUS ON WHICH NO INTERE ST EXPENDITURE WAS CLAIMED. THUS, THE CASE OF THE ASSESSEE WAS THAT O UT OF THESE INTEREST FREE FUNDS, IT COULD BE PRESUMED THAT INTEREST FREE ADVANCES WERE GIVEN. WE ALSO NOTICED THAT THOUGH THE ASSESSEE HAS CASH C REDIT AND UNSECURED LOANS TO THE TUNE OF RS.23.18 CRORES, BUT WE FIND THAT NON- INTEREST BEARING FUNDS WAS TO THE EXTENT OF RS.16.3 0 CRORES AS ON 31.3.2011 AND RS.16.49 AS ON 31.3.2012. THE INTERE ST FREE FUND HAS AN INCREASING TREND. THESE INTEREST FREE FUNDS COULD EASILY TAKE CARE OF INTEREST FREE ADVANCES AMOUNTING TO RS.3.42 CORES. IN ORDER TO FORTIFY OURSELVES, WE MAKE REFERENCE TO THE DECISION OF HON BLE BOMBAY HIGH ITA NO.2421/AHD/2016 3 COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES AND POWER LTD., 313 ITR 340 (BOM) AND CIT VS. REGHUVIR SYNTHETICS LTD., 354 ITR 222 (GUJ). THEREFORE, WE ALLOW THIS GROUND OF APPEAL AND DELET E ADDITION OF RS.24,48,592/-. 5. IN GROUND NO.2, THE ASSESSEE HAS CHALLENGED CONF IRMATION OF ADDITION OF RS.74,177/-, BUT THE LD.COUNSEL FOR THE ASSESSEE DID NOT PRESS THIS GROUND OF APPEAL, HENCE, IT IS REJECTED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PAR TLY ALLOWED. ORDER PRONOUNCED IN THE COURT ON 1 ST AUGUST, 2018 AT AHMEDABAD. SD/- SD/- (AMARJIT SINGH) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER