Sardar Dairy Ltd., Mehsana V. The ACIT, Mehsana Circle, Mehsana

ITA 2996/AHD/2015

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7790 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 8 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-07-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 26-10-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: P M MEHTA
• Section: 143(3); 2

Judgement Text

SMC-ITA NO. 2996/AHD/2015 ACIT VS. SARDAR DAIRY LTD ASSESSMENT YEAR: 2012-13 PAGE 1 OF 3 IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD [ BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER ] ITA NO.2996/AHD/2015 ASSESSMENT YEAR: 2012-13 SARDAR DAIRY LIMITED ...............APPELL ANT NR. GUJKO MASOL, B/H. RTO, HIGHWAY, MEHSANA-384 002 [PAN : AADCS 0881 M] VS. ACIT, MEHSANA CIRCLE .......................... ..RESPONDENT MEHSANA APPEARANCES BY: PM MEHTA, FOR THE APPELLANT JAMES KURIAN, FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 24.04.2018 DATE OF PRONOUNCING THE ORDER : 23.07.2018 O R D E R 1. BY WAY OF THIS APPEAL, THE ASSESSEE-APPELLANT HA S CHALLENGED CORRECTNESS OF THE ORDER DATED 6 TH AUGUST, 2015 PASSED BY THE BY THE LEARNED CIT(A), GANDHINAGAR, AHMEDABAD, IN THE MATTER OF ASSESSMENT UNDER SECTIO N 143(3) OF THE INCOME-TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2012-13. 2. GRIEVANCES RAISED BY THE ASSESSEE, AS SUMMED-UP IN THE CONCISE GROUNDS OF APPEAL FILED BEFORE ME, ARE AS FOLLOWS:- 1. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF TH E APPELLANTS CASE, THE LD. CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE DISALLOWA NCE MADE BY ASSESSING OFFICER OF RS.4,20,277/- U/S. 36(1)(III) BEING 12% OF BUSINESS FINANCE MADE TO SUPER FINANCE TRADING CO. OF RS.35,02,305/-, WITHOU T APPRECIATING THE EVIDENCES AND SUBMISSION MADE BY THE APPELLANT. 2. IN LAW AND IN THE FACTS AND CIRCUMSTANCES OF TH E APPELLANTS CASE, THE LD. CIT(A) HAS GROSSLY ERRED IN UPHOLDING THE DISALLOWA NCE OF EXPENSES MADE BY ASSESSING OFFICER AGGREGATING TO RS.3,03,932/- WHIC H INCLUDES RENT OF RS.1,60,000/-, ELECTRICITY OF RS.1,33,287/- AND OTH ER EXPENSES OF RS.10,645/-, WITHOUT APPRECIATING THE EVIDENCES PRODUCED BY THE APPELLANT. SMC-ITA NO. 2996/AHD/2015 ACIT VS. SARDAR DAIRY LTD ASSESSMENT YEAR: 2012-13 PAGE 2 OF 3 2. SO FAR AS THE FIRST GRIEVANCE OF THE ASSESSEE IS CONCERNED, THE RELEVANT MATERIAL FACTS ARE LIKE THIS. DURING THE COURSE OF ASSESSME NT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS EXTENDED AN INTEREST FR EE ADVANCE OF RS.35,02,305/- TO SUPER FINANCE & TRADING CO. AND THAT THE ASSESSEE H AD ALSO BORROWED THE FUNDS, FOR WHICH INTEREST WAS BEING PAID. IT WAS IN THIS BACKD ROP THAT THE ASSESSING OFFICER INFERRED THAT THE INTEREST BEARING FUNDS HAVE BEEN USED FOR NON-BUSINESS PURPOSES, AND, ACCORDINGLY, HE DISALLOWED INTEREST COMPUTED @ 12% ON THIS INTEREST FREE ADVANCE EXTENDED TO SUPER FINANCE & TRADING CO. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A) BUT WITHOUT ANY SU CCESS. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE ME. 3. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 4. I FIND THAT THE LEGAL POSITION IS FAIRLY WELL SE TTLED BY NOW THAT AS LONG AS THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS, THE PR ESUMPTION IS THAT THE INTEREST FREE ADVANCES ARE EXTENDED OUT OF SUCH FUNDS. IN OTHER WORDS, TO THE EXTENT THE ASSESSEE HAS INTEREST FREE FUNDS AND THE INTEREST FREE ADVAN CES DO NOT EXCEED SUCH INTEREST FREE FUNDS, NO DISALLOWANCE FOR DIVERSION OF BORROWED FU NDS CAN BE MADE. AS AGAINST THE INTEREST FREE ADVANCES OF RS.35,02,305/-, THE ASSES SEE HAS PAID UP SHARE CAPITAL OF RS.345 LACS. CLEARLY, THEREFORE, THE PRESUMPTION RE GARDING NON-BUSINESS USE OF BORROWED FUNDS WAS UNJUSTIFIED ON THE FACTS OF THIS CASE. I , THEREFORE, HOLD THAT THE IMPUGNED DISALLOWANCE OF RS. 4,20,277/- IS UNSUSTAINABLE IN LAW AND DIRECT THE ASSESSING OFFICER TO DELETE THE SAME. 5. GROUND NO.1 IS THUS ALLOWED. 6. AS REGARDS GROUND NO.2 OF APPEAL, THE ONLY ISSUE PRESSED BEFORE ME WAS DISALLOWANCE OF RS.1,60,000/- IN RESPECT OF RENT AN D IT WAS POINTED OUT THAT THE DEDUCTION HAS BEEN DECLINED IN THE ABSENCE OF ANY NOTARIZED AGREEMENT ENTERED I NTO BY THE APPELLANT AND LANDLORD . HOWEVER, IT IS ONLY ELEMENTARY THAT ABSENCE OF N OTARIZED RENT AGREEMENT CANNOT A REASON ENOUGH TO DECLINE THE DED UCTION FOR RENT EXPENSES WHICH ARE OTHERWISE ADMISSIBLE. NOTHING REALLY TURNS ON THE NOTARIZATION OF THE RENT AGREEMENT AND THERE IS NO OTHER DEFECT POINTED OUT IN THE RENT AG REEMENT. I AM, THEREFORE, OF THE CONSIDERED VIEW THAT THE DEDUCTION FOR RENT OF RS.1 ,60,000/- SHOULD INDEED HAVE BEEN ALLOWED. 7. AS REGARDS THE OTHER SMALL EXPENSES OF RS.1,33,2 87/- AND RS.10,645/-, I HAVE NOTICED THAT UNDISPUTEDLY THE EVIDENCE TO THE EXTEN T OF RS.87,973/- WERE FURNISHED, BUT THE SAME WERE HELD TO BE REIMBURSABLE ON THE GROUND THAT THE BILL WAS IN THE NAME OF LANDLORD. I FIND THAT THE ASSESSEE WAS OPERATING I TS BUSINESS FROM THE HIRED PREMISES AND THE RENT FOR THE SAME IS HELD TO BE DEDUCTABLE. I DO NOT SEE ANY REASON TO DECLINE THE DEDUCTION IN RESPECT OF ELECTRICITY BILL ONLY ON TH E GROUND THAT THE SAID BILL IS IN THE NAME OF LANDLORD. I, THEREFORE, HOLD THAT DEDUCTION TO T HE EXTENT OF RS.87,973/- OUT OF ELECTRICITY BILL OF RS.1,33,287/- SHOULD INDEED HAVE BEEN ALLOW ED. SMC-ITA NO. 2996/AHD/2015 ACIT VS. SARDAR DAIRY LTD ASSESSMENT YEAR: 2012-13 PAGE 3 OF 3 8. AS REGARDS THE REMAINING AMOUNT, NO SPECIFIC AR GUMENTS WERE ADVANCED BEFORE ME AND I, THEREFORE, TREAT THE SAME AS NOT PRESSED. 9. TO SUM-UP, OUT OF TOTAL DISALLOWANCE OF RS.3,03, 932/- SUSTAINED BY CIT(A), RS.1,60,000/- OUT OF THE RENT EXPENDITURE AND RS.87 ,973/- OUT OF ELECTRICITY EXPENSES SHOULD BE ALLOWED AS DEDUCTION. THE ASSESSING OFFIC ER IS ACCORDINGLY DIRECTED TO DELETE THE DISALLOWANCE TO THIS EXTENT. 10. GROUND NO.2 IS THUS PARTLY ALLOWED AS INDICATED ABOVE. 11. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED. P RONOUNCED IN THE OPEN COURT TODAY ON THE 23 RD DAY OF JULY, 2018. SD/- PRAMOD KUMAR (ACCOUNTANT MEMBER) AHMEDABAD, THE 23 RD DAY OF JULY, 2018 **BT COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD 1. DATE OF DICTATION: ..3 PAGES DICTATION PAD, AS DICTATED BY HONBLE AM, ATTACHED-20.07.2018 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: ..20.07.2018. 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR . P.S./P.S.: ..23.07.2018...... 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: .... 23.07.2018... 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : ... 23.07.2018 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK : . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER: 8. DATE OF DESPATCH OF THE ORDER: ......