Aishwarya Tea Company Pvt. Ltd., Ahmedabad V. The Dy. CIT, Circle-1(1)(2), Ahmedabad

ITA 264/AHD/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2799 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 01-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B P SRIVASTAVA
• Assessee Lawyers: G C PIPARA
• Section: 143(3); 142(1); 143(1)

Judgement Text

, B - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SMT. MADHUMITA ROY, JUDICIAL MEMBER . IT NO.264/AHD/2017 / ASSTT. YEARS: 2013-14 AISHWARYATEACOMPAN Y PVT. LTD . 320,MADHUPURA COMMERCIAL CENTRE, MADHUPURACHOWK, AHMEDABAD PAN:AAD CA9 129 J VS. DC IT , CIRCLE-1(1)(2) AHMEDABAD 380 015 / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI G.C. PIPARA, A.R REVENUE BY : SHRI B.P. SRIVASTAVA, SR. D.R ! / DATE OF HEARING : 31/12/2018 '#$ ! / DATE OF PRONOUNCEMENT: 28/02/2019 / O R D E R PER MADHUMITA ROY- JM : THE INSTANT APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER DATED 29/07/2016 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS)-1 ARISING OUT OF THE ORDER DATED 22/2/2016 PASSED BY THE DCIT CIRCLE- 1(1)(2) AHMEDABAD UNDER SECTION 143(3) OF THE INCOM E TAX ACT 1961(THE ACT) FOR ASSESSMENT YEAR 2013-14. 2. THE ASSESSEE HAS FILED AN APPLICATION FOR CONDON ATION OF DELAY OF 117 DAYS IN PREFERRING THE APPEAL BEFORE US ALONG W ITH AN AFFIDAVIT AFFIRMED BY THE ASSESSEE. THE EXPLANATION RENDERED BY THE ASSESSEE AT ITA NO. 264/AHD/2017 A.YR. 2013-14 2 PARAGRAPH 2 & 4 SEEMS TO BE GENUINE AND THEREFORE T HE DELAY IS CONDONED. 3. THE ASSESSEE CARRIES ON THE BUSINESS OF TRADING IN TEA LEAVES ON WHOLESALE BASIS AND ALSO CONSIGNMENT AGENT OF TEA. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS SHOWN TOTAL TU RN-OVER OF RS. 29,01,30,733/- ON WHICH NET PROFIT OF RS. 1,44,44,6 70/- HAS BEEN DECLARED. THE INTEREST INCOME OF RS. 3,720/- WAS A LSO SHOWN BY THE ASSESSEE. THE RETURN OF INCOME WAS FILED ON 25/09/ 2013 THROUGH ELECTRIC MEDIA DECLARING INCOME OF RS. 1,48,06,870/- WHICH W AS DULY PROCESSED UNDER SECTION 143(1) OF THE ACT. UPON SCRUTINY NOTI CE UNDER SECTION 142(1) OF THE ACT DATED 08/09/2014 WAS SERVED UPON THE ASSESSEE FOLLOWED BY A FURTHER NOTICE DATED 22/02/2015 CALLI NG FOR PRELIMINARY DETAILS SUCH AS AUDITED BALANCE SHEET, P&L ACCOUNT, AUDIT REPORT IN FORM NO. 3CD ETC., AS WELL AS DETAILS OF CREDITORS, UNSE CURED LOAN, LOANS AND ADVANCES AND COPY OF LEDGER ACCOUNT OF EXPENDITURE WERE ALSO CALLED FOR ON 08/06/2015. 4. IT APPEARS FROM THE BALANCE SHEET THAT THE ASSES SEE HAS ADVANCED RS. 19,30,684/- AND RS. 2,00,00,000/- AND RS. 24,20 ,00,000/- TO WARRANT STEELS PVT. LTD., SECTRA PLAZA PVT. LTD. AND MAPLE HOTELS & RESORTS PVT. LTD. RESPECTIVELY CHARGING INTEREST AT 6%. IT WAS FURTHER REVEALED THAT THE ASSESSEE COMPANY HAS PAID INTEREST OF UNSECURED LOANS @ 12% INTEREST AND THEREFORE WAS DIRECTED TO EXPLAIN AND JUSTIFY THE PAYMENT OF INTEREST AT A HIGHER RATE OF UNSECURED LOANS AND CH ARGING OF INTEREST AT A LOWER RATE OF LOANS AND ADVANCES. IN REPLY THEREOF THE ASSESSEE CATEGORY MENTIONED THAT THE LOANS AND ADVANCES GIVEN TO THE SAID THREE PARTIES ARE NOT FROM THE BORROWED FUNDS BUT FROM THE SHORT-TERM SURPLUS FUNDS AT THE DISPOSAL OF THE ASSESSEE COMPANY. IN RESPECT OF TH E FACT THE BANK BOOK OF THE RELEVANT PERIOD/MONTH ALONG WITH THE COPY OF THE LEDGER ACCOUNT ITA NO. 264/AHD/2017 A.YR. 2013-14 3 OF THE PARTY NAMELY WARRANT COMPANY LTD. DULY CONFI RMED BY IT FOR THE FINANCIAL YEAR 2012-13 WAS FURNISHED BY THE ASSESSE E. HOWEVER, THE AO DID NOT ACCEPT THE EXPLANATION RENDERED BY THE ASSE SSEE. THE LD. AO WAS OF THE OPINION THAT THE ASSESSEE SINCE WAS NOT IN THE BUSINESS OF ADVANCING MONEY ON INTEREST THE ADVANCE OF MONEY AS MADE BY THE ASSESSEE AT MUCH LOWER RATE THAN IT OBTAINED, THERE FORE, DEFINITELY NOT FOR THE PURPOSES OF ASSESSEES BUSINESS. HE THEN DISAL LOWED THE INTEREST EXPENDITURE OF RS. 8,36,677/- UNDER SECTION 36(1)(I II) OF THE ACT TREATING THE SAME AS NOT INCURRED FOR THE PURPOSE OF BUSINES S. IN APPEAL SUCH ADDITION WAS CONFIRMED BY THE FIRST APPELLATE AUTHO RITY WITH A FINDING THAT THE ASSESSEE HAD NOT BEEN ABLE TO PRODUCE ANY COGENT AND/OR CONCRETE MATERIAL ON RECORD TO PROVE THE BUSINESS E XIGENCY TO PAY INTEREST AT HIGHER RATE. HENCE, THE INSTANT APPEAL BEFORE US. 5. AT THE TIME OF HEARING OF THE INSTANT APPLICATIO N THE LD. COUNSEL APPEARING FOR THE ASSESSEE DULY SUBMITTED BEFORE US THAT THE ISSUE IS SQUARELY COVERED BY THE ORDER PASSED BY THE LD. TRI BUNAL IN ASSESSEES OWN CASE FOR A.Y. 2012-13. A COPY OF THE SAID ORDE R PASSED IN ITA NO. 3310/AHD/2015 HAS ALSO BEEN SUPPLIED BY THE LD. COU NSEL BEFORE US. FURTHER THAT THIS PARTICULAR ISSUE WAS ALSO SETTLED IN FAVOUR OF THE ASSESSEE COMPANY BY THE FIRST APPELLATE AUTHORITY F OR A.Y. 2011-12. HE THEREFORE, PRAYED FOR DELETION OF SUCH DISALLOWANCE OF INTEREST OF RS. 8,36,677/-. ON THE CONTRARY, THE LD. DR RELIED UPO N THE ORDER PASSED BY THE AUTHORITIES BELOW. 6. HEARD THE RESPECTIVE PARTIES, PERUSED THE RELEVA NT MATERIALS AVAILABLE ON RECORD. IT APPEARS THAT THIS PARTICUL AR ISSUE OF DISALLOWANCE OF INTEREST EXPENSES HAS ALSO BEEN TAKEN INTO CONSI DERATION BY THE COORDINATE BENCH IN THE APPEAL PREFERRED BY THE ASS ESSEE ITA NO. 3310/AHD/2015 FOR A.Y. 2012-13 AND ULTIMATELY THE A SSESSEES APPEAL WAS ALLOWED BY DELETING SUCH ADDITION MADE BY THE A UTHORITIES BELOW. THE RELEVANT PORTION OF SUCH JUDGMENT IS REPRODUCED HERE IN BELOW:- ITA NO. 264/AHD/2017 A.YR. 2013-14 4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED TH E MATERIAL ON RECORD. AT THE TIME OF ASSESSMENT, THE ASSESSING OFFICER NOTIC ED THAT ASSESSEE HAS PROVIDED UNSECURED LOAN TO TWO PARTIES ON INTEREST @ 6% P.A. AND SHOWN INTEREST INCOME OF RS. 73,27,286/-. HOWEVER, THE A SSESSING OFFICER HAS OBSERVED THAT THE ASSESSEE HAS PAID INTEREST ON UNS ECURED LOAN TAKEN FROM TWO PARTIES @ 18% ON RS. 11,57,828/- AND @ 12% ON T HE LOAN AMOUNT OF RS. 5,04,000/-. THEREFORE, THE ASSESSING OFFICER HAS S TATED THAT THE ASSESSEE SHOULD HAVE CHARGED INTEREST ON THE UNSECURED LOAN @ 12% WHICH WOULD HAVE BEEN TO THE AMOUNT OF RS. 1,46,54,572/-. THER EFORE, HE HAS DISALLOWED THE ENTIRE AMOUNT INTEREST WHICH THE ASSESSEE HAS D EBITED TO THE P & L A.C. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE AS SESSEE HAS SUBMITTED THE FOLLOWING REASONS FOR CHARGING INTEREST @ 6% FROM T WO PARTIES TO WHOM THE UNSECURED LOANS WERE PROVIDED. (1) THE TWO PARTIES TO WHOM THE UNSECURED LOANS WER E GIVEN AND THE TWO FROM WHOM THE UNSECURED LOANS PROVIDED WERE SEPARAT E AND INDEPENDENT PARTIES. (2) ONE OF THE UNSECURED LOANS WAS OLD LOAN AND NEW LOAN @ 12% WAS OBTAINED FROM ONE OF THE PARTY DURING THE F.Y. 2011 -2. ON THE OTHER HAND, INTEREST @ 6% WAS EARNED ON DEPLOYMENT OF SURPLUS F UND WITH THE TWO PARTIES NAMELY (I) MAPLE HOTELS & RESORTS PVT. LTD. (II) WA RREN STEELS PVT. LTD. (3) THE ASSESSEE COMPANY WAS SELLING THE TEA OF THE COMPANY WARREN TEA LTD. ON C&F BASIS THEREFORE SHORT TERM FUNDS FROM S ALE PROCEEDS WERE DEPLOYED. (4) THE LOAN PROVIDED TO THE AFORESAID COMPANIES WA S NOT FROM THE BORROWED FUNDS BUT OUT OF THE SURPLUS FUNDS AS EXPLAINED ABO VE. WE HAVE NOTICED THAT DURING THE COURSE OF ASSESSMEN T PROCEEDINGS THE ASSESSING OFFICER HAS NOT CONTRADICTED AND DISPROVE D THE FACTS STATED ABOVE THAT THE ASSESSEE HAS DEPLOYED ITS SURPLUS FUNDS AN D NO BORROWED FUNDS WAS USED FOR PROVIDING LOAN TO THE ABOVE TWO PARTIES. AT THE APPELLATE STAGE, THE LD. CIT(A) HAS ALSO SUSTAINED THE DISALLOWANCE WITH OUT DISPROVING THE FACTS AND CIRCUMSTANCES STATED BY THE ASSESSEE SUPRA IN T HIS ORDER. INTER ALIA, THE LD. CIT(A) HAS ALSO NOT TAKEN INTO CONSIDERATION TH E DETAILED FINDINGS OF THE LD. CIT(A) FOR ASSESSMENT YEAR 2011-12 AND ASSESSME NT YEAR 2009-10 ON THE IDENTICAL ISSUE DECIDED IN FAVOUR OF THE ASSESSEE W ITH DETAILED REASONING WHEREIN IT WAS HELD THAT THE WHATEVER THE IDLE SURP LUS FUNDS AVAILABLE WITH THE ASSESSEE WERE DEPLOYED TO EARN SHORT TERM DEPOS IT AND THERE WAS NO NEXUS BETWEEN LOAN ACCEPTED AND LOAN ADVANCED. IN THE LIGHT OF THE ABOVE FACTS AND CIRCUMSTANCES WE OBSERVED THAT THE ASSESS EE HAS EARNED INTEREST INCOME OF RS. 73,27,286/- AND PAID INTEREST ON UNSE CURED LOAN TO THE AMOUNT OF RS. 16,61,279/-. THE ASSESSEE HAS DEMONSTRATED THAT IT HAS USED ITS SURPLUS IDLE FUNDS TO PROVIDE SHORT TERM LOAN TO TH E TWO PARTIES FOR BUSINESS EXPEDIENCY WHICH RESULTED IN MORE BENEFIT TO THE CO MPANY AS IT HAS EARNED INTEREST INCOME OF RS. 73,27,286/- FROM THE IDLE FU NDS, WE CONSIDER THAT THE LOWER AUTHORITIES HAVE FAILED TO DISPROVE THE ABOVE FACTS AND FINDINGS, THEREFORE, WE ARE NOT INCLINED WITH THE DECISION OF THE LD. CIT(A). ACCORDINGLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. 7. WE FIND EVEN THE PARTIES TO WHOM LOANS AND ADVAN CES WERE GIVEN BY THE ASSESSEE ARE SAME INCLUDING THE RATE OF INTEREST CH ARGED THEREIN. IT SEEMS THAT THE ISSUE ITA NO. 264/AHD/2017 A.YR. 2013-14 5 IS SQUARELY COVERED BY THE SAID JUDGMENT. RESPECTF ULLY FOLLOWING THE SAME WE ALLOW THE APPEAL PREFERRED BY THE ASSESSEE BY DELETING TH E ADDITION MADE BY THE AUTHORITIES BELOW. 8. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. [ORDER PRONOUNCED IN THE COURT ON 28TH FEBRUARY, 2019.] SD/- SD/- ( WASEEM AHMED ) ( MADHUMITA ROY ) ACCOUNTANT MEMBER JUDICIALMEMBER AHMEDABAD; DATED 28/02/2019 TANMAY TRUE COPY '()*)$ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. + / THE RESPONDENT. 3. ,, - / CONCERNED CIT 4. - ( ) / THE CIT(A) 5. )./'' , / DR, ITAT, 6. /012 / GUARD FILE. / BY ORDER, / , (DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD