Sardar Dairy Ltd., Mehsana V. The Asstt. Commissioner of Income Tax, Mehsana Circle, Mehsana

ITA 3082/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 1167 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2013-2014
• Appeal Filed On: 24-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: IRA KAPO OR
• Keywords: Notional interest

Judgement Text

, - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH SMC BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ./ ITA NO. 3082/AHD/2016 / ASSESSMENT YEAR: 2013-14 SARDAR DIARY LTD. NR. GUJKO MASOL B/H. RTO, HIGHWAY MEHSANA 384 002. PAN : AADCS 0881 M VS ACIT, MEHSANA, CIRCLE MEHSANA. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : MS.IRA KAPOOR, AR REVENUE BY : SHRI KAMLESH MAKWANA, SR.DR / DATE OF HEARING : 10/09/2018 /DATE OF PRONOUNCEMENT : 11/09/2018 O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER : ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINST ORDER OF THE LD.CIT(A), GANDHINAGAR, AHMEDABAD DATED 12.9.2016 FOR THE ASSESSMENT YEAR 2 013-14. 2. THOUGH THE ASSESSEE HAS TAKEN TWO GROUNDS OF APP EAL, IT CONTAINED SUB-GROUNDS, WHICH ARE ARGUMENTATIVE IN NATURE. IN BRIEF, GRIEVANCE OF THE ASSESSEE IS THAT THE LD.CIT(A) HAS ERRED IN CONFIRM ING THE DISALLOWANCE OF RS.3,99,973/- OUT OF INTEREST EXPENDITURE. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT THE ISSUE IN DISPUTE I S SQUARELY COVERED BY THE ITA NO.3082/AHD/2016 - 2 - ORDER OF THE ITAT PASSED IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2012-13. SHE PLACED ON RECORD COPY OF TRIBUNALS O RDER. 3. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, W E HAVE GONE THROUGH THE RECORD CAREFULLY. IT EMERGES OUT FROM THE RECOR D THAT THE ASSESSEE HAS GIVEN ADVANCE OF RS.33.33 LAKHS WITHOUT CHARGING AN Y INTEREST. THE LD.AO CALCULATED NOTIONAL INTEREST ON SUCH INTEREST FREE ADVANCE AND DISALLOWED THE INTEREST EXPENDITURE TO THE EXTENT OF RS.3,99,9 73/-. AN IDENTICAL DISALLOWANCE WAS MADE IN THE ASSESSMENT YEAR 2012-1 3. HOWEVER, ON APPEAL TO THE TRIBUNAL, THE DISALLOWANCE STANDS DEL ETED BECAUSE THE ASSESSEE WAS HAVING MORE INTEREST FREE FUNDS THAN T HE INTEREST FREE ADVANCES GIVEN BY IT. THE FINDING RECORDED BY THE TRIBUNAL IN THE ASSESSMENT YEAR 2012-13 IN ITA NO.2996/AHD/2015 ORD ER DATED 23.7.2018 ON THIS ISSUE READS AS UNDER: 4. I FIND THAT THE LEGAL POSITION IS FAIRLY WELL S ETTLED BY NOW THAT AS LONG AS THE ASSESSEE HAS SUFFICIENT INTEREST FRE E FUNDS, THE PRESUMPTION IS THAT THE INTEREST FREE ADVANCES ARE EXTENDED OUT OF SUCH FUNDS. IN OTHER WORDS, TO THE EXTENT THE ASSES SEE HAS INTEREST FREE FUNDS AND THE INTEREST FREE ADVANCES DO NOT EX CEED SUCH INTEREST FREE FUNDS, NO DISALLOWANCE FOR DIVERSION OF BORROW ED FUNDS CAN BE MADE. AS AGAINST THE INTEREST FREE ADVANCES OF RS.3 5,02,305/-, THE ASSESSEE HAS PAID UP SHARE CAPITAL OF RS.345 LACS. CLEARLY, THEREFORE, THE PRESUMPTION REGARDING NON-BUSINESS USE OF BORRO WED FUNDS WAS UNJUSTIFIED ON THE FACTS OF THIS CASE. I, THEREFORE , HOLD THAT THE IMPUGNED DISALLOWANCE OF RS. 4,20,277/- IS UNSUSTAI NABLE IN LAW AND DIRECT THE ASSESSING OFFICER TO DELETE THE SAME. 4. BEFORE US, THE LD.COUNSEL FOR THE ASSESSEE HAS P LACED ON RECORD COPY OF THE BALANCE SHEET. ON PERUSAL OF THE BALANCE SH EET WOULD INDICATE THAT THE ASSESSEE WAS HAVING PAID UP SHARE CAPITAL OF RS .3.45 CRORES WHEREAS IT HAS ADVANCED A SUM OF RS.33.33 LAKHS ONLY. THE INT EREST FREE CAPITAL WAS MORE THAN TEN TIMES AVAILABLE TO THE ASSESSEE, OUT OF WHICH IT CAN BE ITA NO.3082/AHD/2016 - 3 - ASSUMED THAT SUCH ADVANCES WERE MADE BY THE ASSESSE E. RESPECTFULLY FOLLOWING ORDER OF THE CO-ORDINATE BENCH, WE ALLOW THIS GROUND OF APPEAL AND DELETE THE DISALLOWANCE. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. PRONOUNCED IN THE OPEN COURT ON 11 TH SEPTEMBER, 2018. SD/- (WASEEM AHMED) ACCOUNTANT MEMBER SD/- (RAJPAL YADAV) JUDICIAL MEMBER