M/s Stylam Industries Ltd., Chandigarh V. Addl. CIT, Chandigarh

ITA 249/CHANDI/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 86182 (ITAT-CHANDIGARH)
• Duration Of Justice: 10 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 02-02-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 10-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES A CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R. SOOD, ACCOUNTANT MEMBER ITA NO. 249/CHD/2014 ASSESSMENT YEAR: 2010-11 M/S STYLAM INDUSTRIES LTD., VS THE ADDL CIT, RAN GE I, CHANDIGARH CHANDIGARH PAN NO.AAACG5969R (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VINEET KRISHAN RESPONDENT BY : SHRI S.K. MITTAL DATE OF HEARING : 02.02.2015 DATE OF PRONOUNCEMENT : 06.02.2015 ORDER PER T.R.SOOD, A.M. THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINS T THE ORDER DATED 29.01.2014 OF CIT(A) CHANDIGARH. 2. IN THIS APPEAL ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THAT THE ORDER PASSED U/S 250(6) OF THE INCOME-T AX ACT, 1961 BY THE LD. CIT(A) CHANDIGARH IN APPEAL NO. 587/12/- 13 DATED 29.01.2014 IS CONTRARY TO LAW AND FACTS OF TH E CASE. 2. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) GRAVELLY ERRED IN UPHOLDING THE ADDITION OF RS. 11,94,494/- MADE BY LD. ASSESSING OFFICER BY INVOKI NG THE PROVISIONS OF SECTION 14A OF THE INCOME-TAX ACT, 19 61. 3. THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) GRAVELLY ERRED IN UPHOLDING THE ADDITION OF RS. 10,06,430/- MADE BY THE LD. ASSESSING OFFICER BY IN VOKING THE PROVISIONS OF SECTION 36(I)(III) ON THE ADVANCE S GIVEN TO 2 M/S GOLDEN NET SOFT PVT LTD., TEJI BRAR AND M/S ZEA L EXIM AND DIRECTOR OF THE COMPANY. 3. GROUND NO.1 OF GENERAL NATURE AND DOES NOT REQUI RE SEPARATE ADJUDICATION. 4. GROUND NO.2 : AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTICE D THAT ASSESSEE HAS MADE HUGE INVESTMENTS IN VARIOUS MUTUAL FUNDS DURING THE YEAR, THEREFORE, PROVISIONS OF SECTION 14A READ WITH RULE 8-D WERE INVOKED AND DISALLOWANCE WAS MADE AMOUNTING TO RS. 11,94,494/-. 5. ON APPEAL, THE DISALLOWANCE HAS BEEN CONFIRMED B Y LD. CIT(A). 6. BEFORE US LD. COUNSEL FOR THE ASSESSEE FAIRLY AD MITTED THAT THIS BEING ASSESSMENT YEAR 2010-11, SECTION 14A IS APPLICABLE. HOWEVER, THE QUANTUM OF DISALLOWANCE HAS BEEN WRONGLY CALCULATED. IN THIS REGARD HE REFERRED TO A RECTIFICATION APPLICATION MOVED BEFORE THE ASSESSIN G OFFICER COPY OF WHICH IS AVAILABLE AT PAGE 1 OF THE PAPER BOOK. 7. ON THE OTHER HAND LD. DR RELIED ON THE ORDER OF ASSESSING OFFICER AND CIT(A). 8. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT THE ASSESSEE DOES NOT DISPUTE THE APPLICATION OF SECTION 14A READ WITH RU LE 8-D, THEREFORE, WE HOLD THAT DISALLOWANCE IS MAINTAINABLE U/S 14A READ WITH RULE 8-D. HOWEVER, AS FAR AS THE AMOUNT OF DISALLOWANCE IS CONCERNED, THE ASS ESSING OFFICER IS DIRECTED TO DISPOSE OF THE RECTIFICATION APPLICATION DATED 2.12 .2013 WHICH WILL SETTLE THE DISPUTE. THEREFORE, THIS GROUND IS ALLOWED FOR STAT ISTICAL PURPOSES. 3 9. GROUND NO.3 : AFTER HEARING BOTH THE PARTIES WE FIND THAT DURING ASSESSMENT PROCEEDINGS IT WAS NOTICED BY THE ASSESS ING OFFICER THAT ASSESSEE HAS RAISED VARIOUS UNSECURED LOANS OUT OF WHICH SO ME ADVANCES WERE GIVEN TO THE SISTER CONCERN. FURTHER, AN ADVANCE OF RS. 1,8 0,000/- WAS ALSO GIVEN TO THE DIRECTOR OF THE COMPANY. THE ASSESSING OFFICER INVO KED THE PRINCIPLE LAID DOWN BY HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF ABHISHEK INDUSTRIES LTD 286 ITR 1 AND DISALLOWED THE INTEREST AMOUNTIN G TO RS. 10,06,430/-. 10. ON APPEAL, IT WAS POINTED OUT THAT IN CASE OF M /S GOLDEN NET SOFT PVT LTD, CERTAIN LOANS WERE ALSO TAKEN AND, THEREFORE, EVEN IF A DISALLOWANCE WAS TO BE MADE, THAT THE SAME SHOULD BE MADE ON BY CALCULATIN G INTEREST DAY TO DAY BASIS. THE LD. CIT(A) AGREED WITH THIS PROPOSITION AND DIR ECTED THE ASSESSING OFFICER TO CALCULATE THE INTEREST ON DAY TO DAY BASIS. SAME PRINCIPLE WAS APPLIED IN THE CASE OF TEJI BRAR FINANCIAL SERVICES LTD. AS FAR A S ADVANCES TO THE DIRECTOR IS CONCERNED, THE LD. CIT(A) CONFIRMED THE DISALLOWANC E. 11. BEFORE US, LD. COUNSEL FOR THE ASSESSEE SUBMIT TED THAT SINCE THE LOANS WERE ALSO TAKEN FROM M/S GOLDEN NET SOFT PVT LTD AN D M/S TEJI BRAR FINANCIAL SERVICES LTD, THEREFORE, DISALLOWANCE SHOULD BE RES TRICTED ON THE BASIS OF CALCULATING OF INTEREST FORM DAY TO DAY. IN RESPEC T OF ADVANCES TO THE DIRECTOR, IT WAS SUBMITTED THAT DIRECTOR WAS RECEIVING SALARY OF RS. 2.5 LAKH PER MONTH AND THEREFORE, THIS AMOUNT SHOULD BE TREATED AS ADVANCE TO STAFF. 12. ON THE OTHER HAND LD. DR STRONGLY SUPPORTED THE ORDER OF CIT(A). 13. AFTER CONSIDERING THE RIVAL SUBMISSIONS WE FIND THAT SINCE LOANS HAVE ALSO BEEN TAKEN FORM M/S GOLDEN NET SOFT PVT LTD AND M/S TEJI BRAR FINANCIAL SERVICES LTD, THEREFORE, OBVIOUSLY THE NET DISALLOW ANCE HAS TO BE MADE AFTER MAKING CALCULATION FROM DAY TO DAY FOR LOANS GIVEN AND LOANS RECEIVED. THE LD. 4 CIT(A) HAS GIVEN SIMILAR DIRECTION, THEREFORE, WE A GAIN DIRECT THE ASSESSING OFFICER TO MAKE DISALLOWANCE AFTER MAKING DAY TO DA Y CALCULATION. 14. IN RESPECT OF THE ADVANCE TO THE DIRECTOR, SINC E HE WAS ALSO RECEIVING SALARY @ 2,50,000/- PER MONTH, HE HAS TO BE TREATED JUST LIKE ANY OTHER STAFF MEMBER AND ADVANCE TO STAFF CANNOT BE CALLED DIVERS ION OF FUNDS, THEREFORE, NO PROPORTIONATE DISALLOWANCE SHOULD BE MADE IN THIS R ESPECT. 12. IN THE RESULT, APPEAL IS ALLOWED FOR STATISTICA L PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 06.02.2015 SD/- SD/- (BHAVNESH SAINI) (T.R. SOOD) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 6 TH FEBRUARY,2015 RKK COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR