M/s Power Drugs Ltd., Chandigarh V. Addl. CIT, Chandigarh

ITA 313/CHANDI/2011

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 5441 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2006-2007
• Appeal Filed On: 23-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Notional interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL: B BENCH: CHANDIGARH BEFORE SHRI D K SRIVASTAVA, AM AND MS. SUSHMA CHOWL A, JM ITA NO. 313/CHANDI/2011 ASSESSMENT YEAR: 2 006-07 M/S POWER DRUGS LTD., V ADDL C.I.T. RANGE-III, C HANDIGARH H NO. 2342 SECTOR 23-C CHANDIGARH PAN: AABCP 7960 J (APPELLANT-ASSESSEE) (RESPONDENT) APPELLANT BY: SHRI ANIL KUMAR RESPONDENT B Y: SHRI JAISHREE SHARMA ORDER D K SRIVASTAVA: THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER PASSED BY THE LD. CIT(A) ON 1.11.2010, ON THE FOLLOWING GR OUNDS: 1 THE LD. CIT(A) HAS ERRED IN SUSTAINING THE ADDIT ION OF RS. 6,00,000/- AS NOTIONAL INTEREST ON ADVANCE OF RS. 25 LACS EACH TO SHRI ASHOK ANAND AND MRS. RANI ANAND, BEING IN VIOLATION OF SEC 36(III) OF INCOME- TAX ACT. THE ADDITION BE DELETED. 2 THE LD. CIT(A) HAS ERRED IN SUSTAINING THE ADDIT ION OF RS. 29,602/- BEING THE DIFFERENCE IN BOOKS OF ACCOUNT OF ASSESSEE VIZ-A-VI Z M/S NFL LTD. THE ADDITION BE DELETED. 3 THE LD. CIT(A) HAS ERRED IN SUSTAINING THE ADDIT ION OF RS. 8,60,000/- ON ACCOUNT OF LOW PROFITABILITY. THE ADDITION BE DELE TED. 2. APROPOS GROUND NO. 1, THE AUTHORIZED REPRESENTAT IVE FOR THE ASSESSEE FAIRLY CONCEDED THAT IDENTICAL ISSUE HAS ALREADY BEEN CONS IDERED AND DECIDED BY THIS TRIBUNAL IN THE CASE OF THE ASSESSEE FOR A.Y 2005-06. HE HAS I NVITED OUR ATTENTION TO PARAS NO. 13 TO 16 OF THE ORDER PASSED BY THIS TRIBUNAL ON 22.11.10 IN THE CASE OF THE ASSESSEE FOR A.Y 2005-06. PARAGRAPH 16 OF THE AFORESAID ORDER READS AS UNDER:- 16 ON HEARING THE RIVAL CONTENTIONS OF THE PARTIES , WE FIND THAT IT IS AN ADMITTED POSITION THAT THE AMOUNT WAS ADVANCED FOR ACQUISITI ON OF NEW ASSET WHICH WAS CLAIMED TO BE FOR THE FURTHERANCE OF THE BUSINESS A CTIVITY OF THE ASSESSEE BEFORE US. ADMITTEDLY THE AMOUNT WAS NOT ADVANCED AS A LOAN AN D WE FIND NO MERIT IN THE ORDERS OF AUTHORITIES BELOW IN APPLYING THE RATIO L AID BY THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF ABHISHEK INDUSTRIES (SUPR A). HOWEVER ADMITTEDLY THE ASSESSEE HAD BORROWED THE LOANS WHICH WERE UTILIZED FOR MAKING THE SAID ADVANCES. WE ARE IN CONFORMITY WITH THE ORDERS OF AUTHORITIES BELOW THAT THE PROVISO UNDER SEC 36(1)(III) OF THE ACT IS SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE. THE AMOUNT OF INTEREST ATTRIBUTABLE TO THE CAPITAL BORR OWED FOR ACQUISITION OF NEW ASSET FOR EXPANSION OF THE EXISTING BUSINESS CAN NOT BE A LLOWED AS DEDUCTION FOR THE PERIOD BEGINNING FROM THE DATE ON WHICH THE CAPITAL WAS BO RROWED TILL THE DATE OF THE ASSET BEING PUT TO USE. ACCORDINGLY WE SUSTAIN THE DISAL LOWANCE OF RS. 6 LACS AND DISMISS THE GROUND NO. 4 RAISED BY THE ASSESSEE. POWER DRUGS LTD V. ADDL CIT, CHANDIGARH 313/CHANDI/2011 2 RESPECTFULLY FOLLOWING THE AFORESAID ORDER GROUND N O. 1 TAKEN BY THE ASSESSEE IS DISMISSED. 3. APROPOS GROUND NO. 2, THE AUTHORIZED REPRESENTAT IVE FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAD RUNNING AN ACCOUNT WITH NATIONAL F ERTILISER LTD. HE FAIRLY STATED THAT THERE WERE DIFFERENCES IN THE BALANCES APPEARING IN BOOKS VIZ-A-VIZ THOSE BOOKS OF NATIONAL FERTILISERS LTD. THE ASSESSEE WANTS TO CONCEAL TH E AFORESAID DIFFERENCES. IN THIS VIEW OF THE MATTER, THE ISSUE IS RESTORED TO THE FILE OF AO. T HE ASSESSEE IS DIRECTED TO RECONCILE THE DIFFERENCE IN BALANCE BEFORE THE AO. THE AO SHALL CONSIDERED THE CASE OF THE ASSESSEE AFRESH AND PASS A SUITABLE ORDER IN THIS REGARD IN CONFORMITY WITH LAW. GROUND NO. 2 IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 4. APROPOS GROUND NO. 3 THE IMPUGNED ADDITION WAS M ADE BY THE AO AFTER THE ASSESSEE HAD AGREED THE SAME TO THE ADDITION. ON APPEAL, TH E LD. CIT(A) CONFIRMED THE ACTION OF THE AO. AT THE TIME OF HEARING BEFORE US, THE AUTHORIZ ED REPRESENTATIVE FOR THE ASSESSEE WAS SPECIFICALLY ASKED AS TO WHETHER THE IMPUGNED ADDIT ION WAS AGREED BEFORE THE AO. HE SUBMITTED THAT IT WAS AGREED BY THE LD. COUNSEL FOR THE ASSESSEE THAT THE ASSESSEE WAS NOT APPEARANCE BEFORE THE AO. ADDITIONS AGREED TO BY TH E LD. COUNSEL FOR THE ASSESSEE ARE AS GOOD AS ADDITION AGREED TO BY THE ASSESSEE. BESIDE S THE ASSESSEE HAS PLACED NO MATERIAL TO REBUT THE FINDING RECORDED BY THE AO IN THE ASSESSM ENT ORDER IN THIS BEHALF. IN THIS VIEW OF THE MATTER, GROUND NO. 3 IS DISMISSED. 5. APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON APRIL, 2011 (SUSHMA CHOWLA) (D K SRIVASTAVA) JUDICIAL MEMBER ACCOUNTANT MEM BER CHANDIGARH: THE APRIL, 2011 SURESH COPY TO: 1. THE APPELLANT, POWER DRUGS LTD. CHANDIGARH 2. THE RESPONDENT, ADDL C.I.T. RANGE III, CHANDIGA RH 3. THE CIT(A), CHANDIGARH 4. THE LD. CIT, CHANDIGARH 5. THE D.R, INCOME-TAX DEPARTMENT, CHANDIGARH TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, CHANDIGARH