M/s. Umiya Automobiles, Mehsana V. The Asstt. Commissioner of Income Tax, Mehsana Circle, Mehsana

ITA 2740/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2426 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 24-10-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: APOORVA BHARDWAJA
• Assessee Lawyers: MEHUL S THAKKER
• Keywords: Notional interest

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH A BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ./ ITA NO.2740/AHD/2016 / ASSESSMENT YEAR: 2013-14 M/S.UMIYA AUTOMOBILES STATE HIGHWAY, NAGALPUR MEHSANA 384 002. VS ACIT, MEHSANA CIR. MEHSANA. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI MEHUL S. THAKKER, AR REVENUE BY : MS.APOORVA BHARDWAJA, SR.DR / DATE OF HEARING : 06/08/2018 /DATE OF PRONOUNCEMENT : 31/08/2018 O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER : PRESENT APPEAL IS DIRECTED AT THE INSTANCE OF THE ASSESSEE AGAINST OR DER OF LD.CIT(A), GANDHINAGAR, AHMEDABAD DATED 22.8.2016 FOR THE ASSE SSMENT YEAR 2013- 14. 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS PLEADED THAT THE LD.CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST EXPENSE AMOUNTING TO RS.13,20,000/-. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI RM AT THE RELEVANT TIME WAS AN AUTHORISED DEALER OF TWO WHEELERS OF HERO MO TOCARP. IT HAS FILED ITA NO.2740/AHD/2016 - 2 - ITS RETURN OF INCOME ELECTRONICALLY ON 28.9.2013 DE CLARING TOTAL INCOME AT RS.29,23,680/-. ON SCRUTINY OF THE ACCOUNTS, IT RE VEALED TO THE AO THAT THE ASSESSEE HAS ADVANCED A SUM OF RS.1.10 CRORES T O SHRI CHANDRAKANT TULSIBHAI PATEL ON WHICH NO INTEREST WAS CHARGED BY IT. HE CONFRONTED THE ASSESSEE AS TO WHY A NOTIONAL INTEREST ON THE A BOVE LOAN SHOULD NOT BE CALCULATED AND DISALLOWED OUT OF INTEREST EXPENS ES CLAIMED BY THE ASSESSEE. THE ASSESSEE FILED ITS SUBMISSIONS, WHIC H HAVE BEEN REPRODUCED BY THE AO. THE LD.AO, THEREAFTER ASSIGN ED SEVEN REASONS FOR HOLDING THAT INTEREST INCOME ON SUCH ADVANCES OUGHT TO BE CALCULATED BY THE ASSESSEE. IN OTHER WORDS, HE HELD THAT THE ASS ESSEE HAS MISUSED INTEREST BEARING FUNDS BY MAKING INTEREST FREE ADVA NCES TO SHRI CHANDRAKANT TULSIBHAI PATEL. ACCORDINGLY DISALLOWA NCE OF RS.13.20 LAKHS WAS MADE WHICH HAS BEEN UPHELD BY THE LD.CIT( A). 4. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. APART FROM OTHER SUB MISSIONS; THAT LOANS WERE GIVEN FOR THE PURPOSE OF BUSINESS, IN THE PAST INTEREST WAS CHARGED BY THE ASSESSEE FOR F.Y.2010-11 AND 2011-12, THIS Y EAR IT WAS NOT CHARGED ON ACCOUNT WEAK FINANCIAL POSITION OF SHRI CHANDRAK ANT TULSIBHAI PATEL. IT WAS POINTED OUT THAT A SUM OF RS.2,95,84,048/- W AS AVAILABLE IN THE SHAPE OF INTEREST FREE CAPITAL. OUR ATTENTION WAS DRAWN TO PAGE NO.46 OF THE PAPER BOOK WHEREIN CAPITAL CONTRIBUTION BY SHRI JASWANTBHAI N. PATEL, MANUBHAI N. PATEL AND RAJENDRAKUMAR N. PATEL IS AVAILABLE. IT IS ALSO DEMONSTRATED THAT THE ACCOUNTS OUT OF WHICH SU CH ADVANCES WERE GIVEN, HAD NEVER BEEN A NEGATIVE BALANCE EXCEPT ON THE FIRST ADVANCES OF RS.35LAKHS GIVEN ON 27.4.2010. IT WAS A CASH CREDI T ACCOUNT AND INTEREST LIABILITY IN THIS ACCOUNT WAS OF RS.1.00 LAKH. THU S, IT WAS DEMONSTRATED BEFORE US THAT INTEREST BEARING FUNDS WERE NOT USED BY THE ASSESSEE FOR ITA NO.2740/AHD/2016 - 3 - MAKING SUCH ADVANCES. ON THE OTHER HAND, THE LD.DR RELIED UPON THE ORDER OF THE REVENUE AUTHORITIES. 5. ON DUE CONSIDERATION OF THE ABOVE FACTS, WE ARE OF THE VIEW THAT THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS AVA ILABLE, OUT OF WHICH IT COULD BE ASSUMED THAT THESE ADVANCES WERE GIVEN TO SHRI CHANDRAKANT TULSIBHAI PATEL. HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES P.LTD. REPORTED IN 313 ITR 340 H AS CONSIDERED ALMOST SIMILAR SITUATION AND HELD THAT IF AN ASSESSEE DEMO NSTRATES AVAILABILITY OF SUFFICIENT INTEREST FREE FUNDS WHICH CAN TAKE CARE OF ALLEGED ADVANCEMENT OF INTEREST FREE LOANS, THEN IT IS TO BE ASSUMED TH AT SUCH ADVANCES WERE GIVEN OUT OF INTEREST FREE FUNDS. CONSIDERING THE ABOVE DETAILS, WE ARE OF THE VIEW THAT NO DISALLOWANCE OUT OF INTEREST EXPEN DITURE IS TO BE MADE IN THE CASE OF ASSESSEE. WE ALLOW FIRST GROUND OF APPEAL AND DELETE DISALLOWANCE OF RS.13,20,000/-. 6. IN GROUND NO.2, GRIEVANCE OF THE ASSESSEE IS THA T THE LD.CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.36,212/- ON THE GROUND THAT PAYMENT OF EMPLOYEES CONTRIBUTION TO PF & ESIC WAS MADE AFTER DUE DATE AS PRESCRIBED UNDER THE RELEVANT ACT. 7. THIS CONTROVERSY HAS BEEN SILENCED BY THE HONBL E GUJARAT HIGH COURT IN THE CASE OF CIT VS. GUJARAT STATE ROAD TRA NSPORT CORPN, 265 CTR 64 (GUJ) WHEREIN IT IS HELD THAT IF EMPLOYEES CONTRIBUTION TOWARDS PF AND ESICI ARE NOT DEPOSITED WITHIN TIME LIMIT PR OVIDED IN THE RESPECTIVE ACTS, I.E. PROVIDENT FUND AND ESI ACT, T HEN DEDUCTION WILL NOT BE ADMISSIBLE TO THE ASSESSEE. HENCE, RESPECTFULLY FOLLOWING THE DECISION ITA NO.2740/AHD/2016 - 4 - OF HONBLE HIGH COURT CITED (SUPRA), WE DO NOT FIND ANY MERIT IN THE GROUND OF APPEAL. IT IS REJECTED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. PRONOUNCED IN THE OPEN COURT ON 31 ST AUGUST, 2018. SD/- SD/- (WASEEM AHMED) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER