M/s. Vikshara Trading & Investment Pvt. Ltd., Ahmedabad V. The Income tax Officer,Ward-8(4), Ahmedabad

ITA 2491/AHD/2011

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 5318 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 06-01-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 05-10-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: J P JHANGID SR D R
• Assessee Lawyers: K H SHAH
• Keywords: Notional interest

Judgement Text

, , , , C, IN THE INCOME TAX APPELLATE TRIBUNAL AT AHMEDABAD, C BENCH . .. . . .. . , !' !' !' !', , , , #$ %&'( #$ %&'( #$ %&'( #$ %&'(, , , , )* + ) ' )* + ) ' )* + ) ' )* + ) ' BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND ANIL CHATURVEDI, ACCOUNTANT MEMBER) ITA NO.2361/AHD/2010 [ASSTT.YEAR : 2007-2008] VIKSHARA TRADING & INV. (P) LTD. C/O. KETAN H. SHAH, ADVOCATE 903, SAPPHIRE COMPLEX NR. CARGO MOTORS C.G. ROAD, AHMEDABAD. PAN : AAACV 5043 P /VS. ACIT, CIR.8 AHMEDABAD. ITA NO.2491/AHD/2011 [ASSTT.YEAR : 2008-2009] VIKSHARA TRADING & INV. (P) LTD. C/O. KETAN H. SHAH, ADVOCATE 903, SAPPHIRE COMPLEX NR. CARGO MOTORS C.G. ROAD, AHMEDABAD. /VS. ITO, WARD-8(4) AHMEDABAD. ITA NO.1830/AHD/2012 [ASSTT.YEAR : 2009-2010] VIKSHARA TRADING & INV. (P) LTD. C/O. KETAN H. SHAH, ADVOCATE 903, SAPPHIRE COMPLEX NR. CARGO MOTORS C.G. ROAD, AHMEDABAD. /VS. ITO, WARD-8(4) AHMEDABAD. ( (( (-. -. -. -. / APPELLANT) ( (( (/0-. /0-. /0-. /0-. / RESPONDENT) 1& 2 3 )/ ASSESSEE BY : SHRI K.H. SHAH + 2 3 )/ REVENUE BY : SHRI J.P. JHANGID, SR. -DR 5 2 &(*/ DATE OF HEARING : 6 TH JANUARY, 2014 678 2 &(*/ DATE OF PRONOUNCEMENT : 7.2.2014 ITA NO.2361/AHD/2010 AND 2 OTHERS -2- )9 / O R D E R PER G.C. GUPTA, VICE-PRESIDENT : THESE THREE APPEALS BY THE ASSESSEE FOR THE ASSESSMENT YEARS 2007-08, 2008-09 AND 2009- 10 ARE DIRECTED AGAINST THE ORDERS OF THE CIT(A). THESE ARE BEING DISPOSED OF WITH THIS CONSOLIDATED ORDER. ITA NO.2361/AHD/2010 (ASSTT.YEAR 2007-2008) 2. THE GROUND NOS.1 AND 2 OF THE ASSESSEE ARE AS UN DER: 1. IN NOT APPRECIATING THE FACTS THAT THE ADDITION MADE IN REFERENCE TO INTEREST PAYMENT OF RS.13,15,697/-. IT IS PRAYED T HAT IN VIEW OF THE FACTS AND CIRCUMSTANCES OF THE CASE, THERE IS NO JUSTIFIC ATION FOR CONFIRMING THE AFORESAID DISALLOWANCE VIZ. NOTIONAL INTEREST PAYME NT WHICH IS BASED ON ASSUMPTION AND PRESUMPTION WITHOUT ANY NEXUS PROVED BY THE DEPARTMENT. IT IS FURTHER PRAYED THAT THE LEARNED LOWER AUTHORITY HA TOTALLY ERRED IN RELYING UPON THE ORDER OF ASSTT.EY AR 2005-06 IN THE CASE OF THE ASSESSEE IN ITA NO.960/AHD/2008 DATED 01.07.08. IT IS PRAYED THAT THE FACTS ARE TOTALLY DISTINGUISHABLE AND EACH IS S EPARATE ASSESSMENT YEAR, AND AS SUCH, THERE IS NO JUSTIFICATION FOR CONFIRMI NG THE ADDITION ON THIS GROUND ALSO. 2. WITHOUT PREJUDICE, IT IS PRAYED THAT THE DISALLO WANCE OF INTEREST WOULD BE TO THE EXTENT OF RS.2,59,786/- I.E. @5.5% ON RS.47,23,387/- (RS.62,90,000 RS.15,66,613) AS PER AOS ORDER PAG E 2 PARA 3 AS WELL AS CIT(A) ORDER PAGE 3 PARA 2.2. THUS, IN ALTERNAT IVE, THE ADDITION SHOULD BE TO THE EXTENT OF RS.2,59,786/- AND NOT TH E WHOLE ACTUAL INTEREST PAYMENT OF RS.13,15,692/- AS DISALLOWED BY THE AO. 3. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT RESERVES AND SURPLUS OF THE ASSESSEE ARE MORE THAN THE AMOUNT OF INTERES T FREE ADVANCE MADE BY THE ASSESSEE COMPANY, AND THEREFORE, THERE SHOULD NOT B E ANY DISALLOWANCE OUT OF THE INTEREST PAYMENT OF THE ASSESSEE. HE RELIED ON THE DECISIONS OF THE HONBLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SRIDEV ENTERPRISES, 192 ITR 165 (KAR) AND ITAT, AHMEDABAD BENCH IN THE CASE OF AGEN CIES (INDIA) CORPN. VS. ITO, IN ITA NO.1408/AHD/2009 ORDER DATED 24.8.2012. HE SUBMITTED THAT THE ISSUE SHOULD HAVE BEEN DECIDED IN ACCORDANCE WITH T HE LATEST DECISION OF THE HONBLE GUJARAT HIGH COURT IN CIT VS. RAGHUVIR SYNT HETICS LTD., TAX APPEAL ITA NO.2361/AHD/2010 AND 2 OTHERS -3- NO.829 OF 2007 DATED 5.12.2011. THE LEARNED DR HAS OPPOSED THE SUBMISSIONS OF THE LEARNED COUNSEL FOR THE ASSESSEE. HE SUBMIT TED THAT IN THE EARLIER ASSESSMENT YEAR 2005-06, THE TRIBUNAL HAS DECIDED T HE ISSUE AGAINST THE ASSESSEE AND THAT THE INTEREST FREE ADVANCES WERE OLD RIGHT FROM THE ASSESSMENT YEAR 2005-2006, AND THEREFORE, THEY COULD NOT BE OUT OF RESERVES AND SURPLUS WITH THE ASSESSEE. HE RELIED ON THE ORDERS OF THE AO AND TH E CIT(A). THE LEARNED COUNSEL FOR THE ASSESSEE, IN HIS REJOINDER, SUBMITT ED THAT IN THE EARLIER ASSESSMENT YEAR 2005-06, RESERVES AND SURPLUS WERE NOT SUFFICIENT AND THIS PLEA WAS TAKEN BY THE ASSESSEE BEFORE THE APPELLATE AUTH ORITY, AND THEREFORE, THE ORDER IN THE ASSESSMENT YEAR 2005-06, IS NOT RELEVANT FOR DECIDING THE ISSUE BEFORE THE TRIBUNAL. 4. WE HAVE CONSIDERED RIVAL SUBMISSIONS AND HAVE PE RUSED THE ORDERS OF THE AO AND THE CIT(A), AND ALSO CHART SHOWING THE AMOUN T OF RESERVES AND SURPLUS AND ALSO INTEREST FREE ADVANCE DURING THE YEAR. WE FIND THAT THERE IS NO FINDING RECORDED BY THE REVENUE AUTHORITIES THAT WHETHER TH E RESERVES AND SURPLUS OF THE ASSESSEE FOR THE RELEVANT YEAR WERE MORE THAN THE I NTEREST FREE ADVANCE OF THE ASSESSEE. THE CIT(A) WAS NOT HAVING THE BENEFIT OF DECISION OF HONBLE GUJARAT HIGH COURT IN THE CASE OF CIT VS. RAGHUVIR SYNTHETI CS LTD. (SUPRA). IN THESE FACTS, WE ARE OF THE VIEW THAT IT SHALL BE IN THE I NTEREST OF JUSTICE TO RESTORE THE ISSUE IN THESE GROUNDS OF THE APPEAL OF THE ASSESSE E TO THE FILE OF THE AO TO DECIDE THE ISSUE OF DISALLOWANCE OF INTEREST AFRESH AFTER RECORDING A CLEAR CUT FINDING WITH REGARD TO THE AMOUNT OF RESERVES AND S URPLUS AVAILABLE WITH THE ASSESSEE AND THE AMOUNT OF INTEREST FREE ADVANCE MA DE BY IT AND TO DECIDE THE SAME AFRESH IN THE LIGHT OF THE DECISION OF THE HON BLE GUJARAT HIGH COURT IN CIT VS. RAGHUVIR SYNTHETICS LTD. (SUPRA) AFTER ALLO WING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. WE FURTHER DIRECT THAT TO THE EXTENT OF RESERVES AND SURPLUS, NO DISALLOWANCE FROM THE INTEREST CLAIMED BY THE ASSESSEE COULD BE MADE ON ACCOUNT OF INTEREST FREE ADVANCE MADE BY TH E ASSESSEE. THE FACT THAT THE INTEREST FREE ADVANCES WERE OLD AND WERE CONTIN UING RIGHT FROM THE ITA NO.2361/AHD/2010 AND 2 OTHERS -4- ASSESSMENT YEAR 2005-06, IS NOT DECISIVE TO THE ISS UE, AND IF THE AMOUNT OF RESERVE AND SURPLUS AVAILABLE WITH THE ASSESSEE IS MORE THAN THE INTEREST FREE ADVANCES, DURING THE RELEVANT PERIOD, NO CASE OF DI SALLOWANCE OUT OF INTEREST COULD BE SUSTAINED, EVEN IF, THE INTEREST FREE ADVA NCES WERE CONTINUING FROM EARLIER YEARS. WE DIRECT ACCORDINGLY. 5. THE GROUND NO.3 OF THE ASSESSEE IS AS UNDER: 3. IN CONFIRMING THE DISALLOWANCE TO THE EXTENT OF RS.41,076/- AS PER CIT(A) ORDER PAGE 4 PARA 3.1. IT IS PRAYED THAT AS PER THE SUBMISSION MADE BEFORE CIT(A), HIS ORDER PAGE 5 PARA 3.2 IN VI EW OF THE VARIOUS JUDICIAL PRONOUNCEMENT IN REFERENCE TO SEC.41(1), T HE DISALLOWANCE MADE IS REQUIRED TO BE DELETED THOUGH AGREED BEFORE THE AO DURING THE COURSE OF ASSESSMENT PROCEEDINGS. THE DECISION OF CIT VS. GP INTERNATIONAL LTD., 325 ITR 25 (P&H) IS RELIED UPON ALONG WITH TH E OTHER DECISIONS AS STATED BEFORE CIT(A). 6. THE LEARNED COUNSEL FOR THE ASSESSEE HAS NOT PRE SSED THIS GROUND, WHICH IS ACCORDINGLY DISMISSED. ITA NO.2491/AHD/2011 (ASSTT.YEAR 2008-2009) 7. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED T HAT THE ONLY EFFECTIVE GROUND OF THE APPEAL OF THE ASSESSEE IS GROUND NO.1 , WHICH IS REPRODUCED BELOW: 1. IN CONFIRMING THE DISALLOWANCE OF RS.9,31,165/- DISALLOWED BY THE AO SINCE THE APPELLANT HAS GIVEN INTEREST FREE LOAN TO VARIOUS PARTIES AMOUNTING TO RS.3,07,66,183/-. IT IS PRAYED THAT A S PR THE WRITTEN SUBMISSION MADE ON VARIOUS ASPECTS, THE LEARNED CIT (A) OUGHT TO HAVE DELETED THE WHOLE ADDITION. 8. BOTH THE PARTIES BEFORE US SUBMITTED THAT FACTS OF THE CASE ARE IDENTICAL FOR THIS YEAR WITH THE FACTS OF THE CASE OF THE ASSESSE E FOR THE EARLIER ASSESSMENT YEAR 2007-2008. WE HAVE CONSIDERED RIVAL SUBMISSIONS. IN VIEW OF OUR DECISION IN RESTORING THE ISSUE TO THE FILE OF THE AO IN EARLIE R ASSESSMENT YEAR 2007-08, FOR THE REASONS RECORDED IN THE FOREGOING PARAS OF THIS ORDER, WHILE DISPOSING OF THE APPEAL OF THE ASSESSEE FOR THE EARLIER ASSESSMENT Y EAR 2007-08, THE ISSUE IN THIS ITA NO.2361/AHD/2010 AND 2 OTHERS -5- GROUND OF THE APPEAL IS RESTORED TO THE FILE OF THE AO FOR DE NOVO DECISION WITH SIMILAR DIRECTION AS CONTAINED IN THE FOREGOING PAR AS OF THIS ORDER. WE DIRECT ACCORDINGLY. ITA NO.1830/AHD/2012 (ASSTT.YEAR 2009-2010) 9. THE ONLY GROUND OF THE APPEAL OF THE ASSESSEE IS AS UNDER: 1. IN CONFIRMING THE DISALLOWANCE MADE BY THE AO A T RS.8,10,476/-. IT IS PRAYED THAT IN VIEW OF THE FACTS AND SUBMISSIONS MADE BEFORE CIT(A) DATED 25.7.2012 ALONG WITH PAPER BOOK PAGES 1 TO 94 , HE OUGHT TO HAVE DELETED THE SAID DISALLOWANCE AND IT IS PRAYED THAT THE APPEAL OF THE ASSESSEE MAY PLEASE BE ALLOWED. 10. BOTH THE PARTIES BEFORE US SUBMITTED THAT FACTS OF THE CASE ARE IDENTICAL FOR THIS YEAR WITH THE FACTS OF THE CASE OF THE ASSESSE E FOR THE EARLIER ASSESSMENT YEAR 2007-2008. WE HAVE CONSIDERED RIVAL SUBMISSIONS. IN VIEW OF OUR DECISION IN RESTORING THE ISSUE TO THE FILE OF THE AO IN EARLIE R ASSESSMENT YEAR 2007-08, FOR THE REASONS RECORDED IN THE FOREGOING PARAS OF THIS ORDER, WHILE DISPOSING OF THE APPEAL OF THE ASSESSEE FOR THE EARLIER ASSESSMENT Y EAR 2007-2008, THE ISSUE IN THIS GROUND OF THE APPEAL IS RESTORED TO THE FILE O F THE AO FOR DE NOVO DECISION WITH SIMILAR DIRECTION AS CONTAINED IN THE FOREGOIN G PARAS OF THIS ORDER. WE DIRECT ACCORDINGLY. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE FOR T HE ASSESSMENT YEAR 2007-2008 IS PARTLY ALLOWED FOR STATISTICAL PURPOSE AND THAT OF THE ASSESSMENT YEARS 2008-09 AND 2009-10 ARE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN OPEN COURT ON THE DATE MENTIONE D HEREINABOVE. SD/- SD/- ( %&'( %&'( %&'( %&'( / ANIL CHATURVEDI) )* + )* + )* + )* + /ACCOUNTANT MEMBER ( .. /G.C. GUPTA ) !' !' !' !' /VICE-PRESIDENT