The ITO, Ward-5(1), Ahmedabad V. Naval Technoplast Ind.Ltd., Ahmedabad

ITA 2456/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89423 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 7 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-05-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2008-2009
• Appeal Filed On: 29-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: WRITTEN SUBMSSION
• Keywords: Question of law; Notional interest
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD (BEFORE SHRI SHAILENDRA KR. YADAV, J.M. & SHRI ANIL CHATURVEDI, A.M.) I.T. A. NO.2456 /AHD/2011 (ASSESSMEN T YEAR: 2008-09) I.T.O., WARD-5(1), AHMEDABAD V/S M/S. NAVAL TECHNOPLAST INDUSTRIES LTD. 36-38, WHILE HOUSE, PANCHVATI, ELLISBRIDGE, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAACN4950B APPELLANT BY : SMT. SONIA KUMAR, SR. D.R. RESPONDENT BY : WRITTEN SUBMSSION ( )/ ORDER DATE OF HEARING : 28-04-201 5 DATE OF PRONOUNCEMENT : 07 -05-2015 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORD ER OF CIT(A)-XI, AHMEDABAD DATED 21.07.2011 FOR A.Y. 2008-09. 2. IN THIS CASE, NONE APPEARED ON BEHALF OF ASSESSEE B UT HOWEVER WRITTEN SUBMISSIONS DATED 24.04.2015 WERE FILED BY THE ASSE SSEE. WE THEREFORE PROCEED TO DECIDE THE APPEAL, EX PARTE QUA THE ASSE SSEE ON THE BASIS OF MATERIAL ON RECORD AND WRITTEN SUBMISSIONS. ITA NO 2456/ AHD/2011 . A.Y. 2008-09 2 3. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 4. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE B USINESS OF MANUFACTURING AND TRADING OF BOBBINS, TUBES, CONES ETC. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2008-09 ON 06.12.2008 DECLARING TOTAL INCO ME AT RS. 62,10,920/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER T HE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORDER DATED 24.12.2010 AN D THE TOTAL INCOME WAS DETERMINED AT RS. 73,59,070/-. AGGRIEVED BY THE OR DER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO VIDE ORDER DATED 21.07.2011 GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING EFFECTIVE GROUND;- 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELE TING THE ADDITION OF RS. 11,48,154/- ON ACCOUNT OF DISALLOWANCE OF INTEREST EXPENSES. 5. DURING THE COURSE OF ASSESSMENT PROCEEDINGS AND ON PERUSING THE PROFIT AND LOSS ACCOUNT, A.O NOTICED THAT ASSESSEE HAS CLAIMED INTEREST EXPENSES OF RS. 1,16,94,435/- WHICH INCLUDED INTEREST PAID TO B ANKS AND OTHER UNSECURED LOANS. HE ALSO NOTICED THAT ASSESSEE HAD OUTSTANDIN G BALANCE OF CAPITAL INVESTMENTS OF RS. 95,67,950/- AND VARIOUS OTHER AD VANCES ALSO. THE ASSESSEE WAS THEREFORE ASKED TO JUSTIFY THE CLAIM O F INTEREST ON THE CAPITAL INVESTMENT AND WAS ALSO ASKED TO EXPLAIN AS TO WHY PROPORTIONATE DISALLOWANCE OF INTEREST ON THE CAPITAL INVESTMENT MADE BE NOT DISALLOWED TO WHICH ASSESSEE INTERALIA SUBMITTED THAT THE ADVANCE FOR CAPITAL GOODS WERE MADE IN F.Y. 95-96 AND WERE FOR THE BUSINESS PURPOS ES AND THAT NO NEW ADVANCES WERE GIVEN DURING THE YEAR. THE SUBMISSION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE A.O. HE WAS ALSO OF THE VIEW THAT SIMILAR ISSUE ITA NO 2456/ AHD/2011 . A.Y. 2008-09 3 AROSE IN ASSESSEES OWN CASE FOR A.Y. 05-06 AND THE SIMILAR EXPLANATION GIVEN BY THE ASSESSEE WAS NOT FOUND ACCEPTABLE AND THEREFORE THE DISALLOWANCE OF INTEREST WAS MADE. HE, FOLLOWING TH E DECISION IN THE CASE OF RATANLAL OMPRAKASH VS. CIT REPORTED IN 132 ITR 640, WAS OF THE VIEW THAT THE INTEREST ON THE CAPITAL INVESTMENT WAS DISALLOW ABLE AS IT WAS NOT MADE FOR THE PURPOSE OF BUSINESS. HE THEREAFTER ON THE BASI S OF INTEREST RATE OF 12% WORKED OUT THE DISALLOWANCE OF INTEREST OF RS. 11,4 8,154/- (ON THE CAPITAL ADVANCE) AND ADDED TO THE INCOME. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) WHO BY FOLLOWI NG THE DECISION OF AHD TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2002-03 AN D A.Y. 05-06 DELETED THE ADDITION BY HOLDING AS UNDER:- 2.2. I HAVE CONSIDERED THE SUBMISSIONS MADE BY THE A. R. OF THE APPELLANT AND THE OBSERVATIONS OF THE ASSESSING OFFICER IN THE ASSESS MENT ORDER. IT IS SEEN THAT THE SIMILAR ISSUE AROSE IN THE APPELLANT'S OWN CASE FOR A.Y. 20 02-03 AND A.Y. 2005-06. THE SAME HAS ALREADY BEEN DECIDED BY THE HON'BLE ITAT, AAHMEDABA D IN FAVOUR OF THE APPELLANT VIDE ITS ORDER, REFERRED TO ABOVE, WHEREIN AT PARA-8 OF THE ORDER, IT IS OBSERVED BY THE ITAT AS UNDER:- ' 8. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. THE ID. COUNSEL FOR THE ASSE SSEE REFERRED TO PB-17 TO SHOW THAT THE ASSESSEE HAS FUNDS OF RS. 7,38,14,637/- BY WAY OF S HARE CAPITAL AND RESERVES AND SURPLUS ON WHICH NO INTEREST IS INCURRED. HE HAS ALSO REFER RED TO PBO-22 TO REFER TO SCHEDULE-J TO SHOW THAT LOANS AND ADVANCES AND DEPOSITS AS ON 31- 03-2001 WAS IN A SUM OF RS. 4,64,64,815/- WHICH HAVE REDUCED IN THE ASSESSMENT YEAR UNDER APPEAL I.E. ENDING 31ST MARCH 2002 IN A SUM OF RS. 4,44,41,459/-. HE HAS AL SO SUBMITTED THAT THE ADVANCES TO THE CONCERNS IN WHICH DIRECTORS WERE INTERESTED HAVE AL SO REDUCED FROM EARLIER YEARS OF RS. 1,79,65,707/- TO RS. 1,66,21,000/- UNDER APPEAL. IT WOULD, THEREFORE, SHOW THAT NO NEW ADVANCES HAVE BEEN GIVEN IN THE ASSESSMENT YEAR UND ER APPEAL AS WAS EXPLAINED BEFORE THE AUTHORITIES BELOW. IT IS ALSO EXPLAINED THAT NO ADDITION HAS BEEN MADE IN THE PRECEDING ASSESSMENT YEAR ON THIS ISSUE, THEREFORE, THERE IS NO QUESTION OF MAKING THE ADDITION ON THE SAME GIVEN SET OF FACTS AND CIRCUMS TANCES. THE ID. CIT(A), THEREFORE, RIGHTLY NOTED THAT NO NOTIONAL INTEREST CAN BE ADDE D AND FURTHER NO ADDITION CAN BE MADE ON THIS ISSUE. WE, THEREFORE, DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF THE REVENUE. SAME IS ACCORDINGLY DISMISSED.' 2.1. SINCE THE ISSUE FOR THE ASSESSMENT YEAR UNDER CONSI DERATION IS SIMILAR TO THAT OF THE ABOVE ASSESSMENT YEAR, I AM OF THE VIEW THAT THE A. O. IS NOT JUSTIFIED IN MAKING ADDITION ON THIS ACCOUNT. THE A.O. IS DIRECTED TO DELETE THE ADDITION MADE BY HIM OF RS.11,48,154/- THUS, THIS GROUND OF APPEAL IS ALLOWED. ITA NO 2456/ AHD/2011 . A.Y. 2008-09 4 6. AGGRIEVED BY THE AFORESAID ORDER OF LD. CIT(A), REV ENUE IS NOW IN APPEAL BEFORE US. 7. BEFORE US. LD. D.R. RELIED ON THE ORDER OF A.O. ON THE OTHER HAND ASSESSEE HAS FILED WRITTEN SUBMISSIONS WHEREIN IT IS SUBMITT ED THAT ON IDENTICAL ISSUE IN ASSESSEES OWN CASE A.Y. 2002-03 AND A.Y. 2005-0 6 THE ISSUE WAS DECIDED IN FAVOUR OF THE ASSESSEE BY HONBLE TRIBUN AL. IT IS FURTHER STATED THAT AGAINST THE ORDER OF TRIBUNAL, REVENUE HAD PRE FERRED APPEAL BEFORE HONBLE GUJARAT HIGH COURT AND THE APPEAL WAS DISMI SSED. THE COPY OF THE HIGH COURT ORDER WAS ALSO PLACED ON RECORD. 8. WE HAVE HEARD THE LD. D.R. AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE DELETING THE ADDITION HAS FOLLOWED THE DECISION OF HONBLE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 02-03 AND A.Y. 05-06. WE FURTHER FIND THAT AGAINST THE ORDER OF TRIBUNAL, REVENUE HA D PREFERRED APPEAL BEFORE HONBLE HIGH COURT. HONBLE HIGH COURT IN TAX APPEA L NO. 1416 OF 2011 ORDER DATED 24.09.2012 DISMISSED THE APPEAL OF THE ASSESSEE BY HOLDING AS UNDER:- WITH RESPECT TO QUESTION NO.2, WE NOTICE THAT THE A SSESSING OFFICER MADE ADDITION OF RS.16,62,000 OF THE INTEREST ON ADVANCES MADE BY THE ASSESSEE - COMPANY TO CERTAIN CONCERNS IN WHICH THE DIRECTORS OF THE COMP ANIES WERE INTERESTED. THE CIT (APPEALS), HOWEVER, NOTED THAT THE ASSESSEE HAD FUNDS MORE THAN. RS.7,38,14,637 BY WAY OF SHARE CAPITAL RESERVES AND SURPLUS ON WHICH NO INTEREST WAS INCURRED. THE COMMISSIONER, THEREFORE, WAS OF T HE OPINION ON THAT THE ASSESSEE HAD SUFFICIENT FUNDS TO MAKE INTEREST-FREE ADVANCES AND THAT BORROWED FUNDS ON INTEREST WERE NOT DIRECTED FOR MAKING INTE REST FREE ADVANCES. SUCH CONCLUSIONS OF THE COMMISSIONER (APPEALS) WERE CONFIRMED BY THE TRIBUNAL IN THE IMPUGNED JUDGMENT. HERE ALSO WE NOTICE THAT THE OBSERVATIONS OF THE COMMISSIONER (APPEALS), AS CONFIRMED BY THE TRIBUNA L, ARE BASED ON APPRECIATION OF EVIDENCE AND MATERIAL ON RECORD. WH EN TWO AUTHORITIES FOUND ON FACTS THAT NO INTEREST BEARING FUNDS WERE DIRECTED FOR MAKING INTEREST-FREE ADVANCES, IN OUR VIEW, NO QUESTION OF LAW WOULD ARI SE. ITA NO 2456/ AHD/2011 . A.Y. 2008-09 5 9. IN VIEW OF THE AFORESAID FACTS AND IN THE ABSENCE OF CONTRARY BINDING DECISION, WE FIND NO REASON TO INTERFERE WITH THE O RDER OF LD. CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 10. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISS ED. ORDER PRONOUNCED IN OPEN COURT ON 07- 05 - 2015. SD/- SD/- (SHAILENDRA KR. YADAV) ( ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AH MEDABAD