ACIT, Jaipur V. ARPIT MARBLES PVT. LTD., Jaipur

ITA 320/JPR/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 4845 (ITAT-JAIPUR)
• Duration Of Justice: 8 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-12-2016
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 06-04-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MRS NEEJA JEPH
• Keywords: Depreciation; Rectification of order; Opportunity of being heard; Commercial expediency
• Section: 43B; 154

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH DQY HKKJR] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YA DAV, AM VK;DJ VIHY LA- @ ITA NO. 320/JP/2016 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2011-12 A.C.I.T., CIRCLE-5, JAIPUR. CUKE VS. M/S ARPIT MARBLES PVT. LTD., C-146-147, ROAD NO. 9, VKI AREA, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AACCA 0145 P VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RE SPONDENT IZR;K{KSI.K @ C.O. NO. 06/JP/2016 (ARISING OUT OF VK;DJ VIHY LA-@ ITA NO. 320/JP/2016) M/S ARPIT MARBLES PVT. LTD., C-146-147, ROAD NO. 9, VKI AREA, JAIPUR. CUKE VS. A.C.I.T., CIRCLE-5, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA- @ PAN/GIR NO.: AACCA 0145 P IZR;K{KSID @ OBJECTOR IZR;FKHZ @ RESPONDENT VK;DJ VIHY LA- @ ITA NO. 705/JP/2016 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2011-12 M/S ARPIT MARBLES PVT. LTD., C-146-147, ROAD NO. 9, VKI AREA, JAIPUR. CUKE VS. A.C.I.T., CIRCLE-5, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AACCA 0145 P VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT ITA 320 & 705/JP/2016 & CO 06/JP/2016_ ACIT VS. M/S ARPIT MARBLES 2 JKTLO DH VKSJ LS @ REVENUE BY : MRS. NEEJA JEPH (JCIT) FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI MANISH AGARWAL (CA) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 30/11/2016 MN?KKS'K.KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 16/12/2016 VKNS'K@ ORDER PER: KUL BHARAT, J.M. ITA NO. 320/JP/2016 FILED BY THE REVENUE AND C.O. NO. 06/JP/2016 FILED BY THE ASSESSEE ARISE AGAINST THE ORDER DATED 29/01/2016 PASSED BY THE LD. CIT(A)-2, JAIPUR FOR TH E A.Y. 2011-12. IT IS ALSO PERTINENT TO MENTION HERE THAT ITA NO. 705/JP/ 2016 FILED BY THE ASSESSEE IS AGAINST THE RECTIFICATION ORDER DATED 2 5/05/2016 PASSED BY THE LD. CIT(A)-2, JAIPUR FOR THE A.Y. 2011-12, WHEREI N THE GROUNDS OF APPEAL TAKEN BY THE REVENUE AS WELL AS THE ASSESSEE ARE AS UNDER:- GROUNDS OF REVENUES APPEAL IN ITA NO. 320/JP/2016. (I) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A), HAS ERRED IN DELETING TH E TRADING ADDITION OF RS.341546/- AS MADE BY A.O. ON ACCOUNT OF VALUATION OF CLOSING STOCK. (II) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCE S OF THE CASE AND IN LAW, THE CIT(A), HAS ERRED IN DELETI NG THE DISALLOWANCE OF INTEREST OF RS. 35,93,757/- AS MADE BY A.O. ON ACCOUNT OF INTEREST FREE ADVANCE TO SISTER CONCERN. (III) A) WHETHER ON THE FACTS AND IN THE CIRCUMSTA NCES OF THE CASE AND IN LAW, THE HON'BLE ITAT IS JUSTIFIED ITA 320 & 705/JP/2016 & CO 06/JP/2016_ ACIT VS. M/S ARPIT MARBLES 3 IN DELETING ADDITION OF RS. 80374/- MADE BY A.O. FO R DEPOSITING THE EMPLOYEES CONTRIBUTION TO PF & ESI BEYOND THE PRESCRIBED TIME LIMIT PROVIDED IN THE RESPECTIVE ACTS. B) WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE ITAT IS JUSTIFIED IN HOLDING THAT EMPLOYEES CONTRIBUTION TO PF & ESI ARE GOVERNED BY THE PROVISIONS OF SECTION 43B AND NOT BY SECTION 36(1)(VA) R.W.S. 2(24)(X) OF I.T. ACT. GROUNDS OF ASSESSEES C.O. NO. 06/JP/2016. (I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE @ 10% OUT OF FOLLOWING EXPENSES CLAIMED IN PROFIT AND LOSS ACCOUNT, WHICH WAS MADE BY LD. A.O. ALLEGING THE SAME AS INCURRED FOR NON BUSINESS PURPOSES: S. NO. PARTICULARS AMOUNT % OF DISALLOWANCE DISALLOWANCE 1. TELEPHONE EXP 49369.00 10% 4,937.00 2. VEHICLE REPAIRS & MAINTENANCE EXP. 3,56, 729.00 10% 35,673.00 3. STAFF WELFARE EXP. 51,345.00 10% 5,134.00 4. TRAVELLING EXP. 11,605.00 10% 1,160.00 46,904.00 DISALLOWANCE SO MADE, WERE WITHOUT PROVING A SINGLE INSTANCE OF NON BUSINESS PURPOSES, THUS SAME DESERVES TO BE HOLD BAD ON LAW AS WELL AS ON FACTS MORE PARTICULARLY WHEN THE APPELLANT IS A PRIVATE LIMITED COMPANY HAVING SEPARATE LEGAL ENTITY. ITA 320 & 705/JP/2016 & CO 06/JP/2016_ ACIT VS. M/S ARPIT MARBLES 4 GROUNDS OF ASSESSEES APPEAL IN ITA NO. 705/JP/201 6. 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW, LD. CIT(A) ERRED IN PASSING RECTIFICATIO N ORDER ON THE BASIS OF AN AFTERTHOUGHT, WHICH COULD NOT BE TREATED AS MISTAKE APPARENT FROM RECORD AND HENCE NOT A RECTIFIABLE MISTAKE COVERED BY SECTION 154 OF THE INCOME TAX ACT. THUS, THE ORDER PASSED U/S 154/250 MAY PLEASE BE HELD AS BAD IN LAW. 2. WITHOUT PREJUDICE TO ABOVE AND IN THE ALTERNATI VE, ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) ERRED IN PASSING ORDER U/S 154/250 OF THE ACT, CONFIRMING THE DISALLOWANCE OF INTEREST ON ADVANCES MADE TO ANDHI MARBLES PVT. LTD. (AMPL) DURING THE YEAR IGNORING THE FACT THAT THE SAME WAS UNDER BUSINESS AND COMMERCIAL EXPEDIENCY AND IN THE NATURE OF TRADE ADVANCE. APPELLANT PRAYS THE DISALLOWANCE SO MADE MAY PLEASE BE HELD AS BAD IN LAW. 2.1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, LD. CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST ON ADVANCES MADE TO AMPL DURING THE YEAR WITHOUT CONSIDERING THE FACT THAT ASSESSEE COMPANY HAD SUFFICIENT INTEREST FREE FUNDS IN THE SHAPE OF SHARE CAPITAL AND RESERVES & SURPLU S TO THE EXTENT OF RS.2,95,98,400/- AND INTEREST FREE UNSECURED LOANS OF RS.4,26,30,961/- FROM DIRECTORS & THEIR RELATIVES (AGGREGATING TO RS.7,22,29,361/-), WHICH WERE UTILIZED FOR THE PURPOSE OF MAKING ADVANCE TO AMPL, THUS NO DISALLOWANCE IS CALLED FOR. APPELLANT PRAYS THE DISALLOWANCE MADE MAY BE HELD AS BAD IN LAW. ITA 320 & 705/JP/2016 & CO 06/JP/2016_ ACIT VS. M/S ARPIT MARBLES 5 2. BOTH THE APPEALS AND C.O. ARE BEING HEARD TOGETH ER AND FOR THE SAKE OF CONVENIENCE AND BREVITY, A COMMON ORDER IS BEING PASSED. 3. AT THE TIME OF HEARING, THE LD AR OF THE ASSESSE E HAS SUBMITTED THAT THE ISSUES INVOLVED IN THESE APPEALS AND C.O. ARE COVERED BY THE DECISION OF THE HONBLE ITAT, JAIPUR BENCHES IN ASSE SSEES OWN CASE FOR THE A.Y. 2010-11 PASSED IN ITA NO. 203 & 704/JP/201 6 AND C.O. 05/JP/2016 ORDER DATED 31/10/2016. THEREFORE, HE PR AYED THAT ISSUES MAY BE DECIDED IN THE LIGHT OF THE HONBLE ITATS OR DER PASSED IN THE ASSESSEES OWN CASE FOR A.Y. 2010-11. 4. AT THE OUTSET, THE LEARNED D.R. HAS VEHEMENTLY S UPPORTED THE ASSESSMENT ORDER, BUT CONCEDED THE FACT THAT THE IS SUES INVOLVED IN THE APPEALS ARE COVERED BY THE ORDER OF THE HONBLE ITA T PASSED IN ASSESSEES OWN CASE FOR A.Y. 2010-11. 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON THE RECORD AS WELL THE ORD ER PASSED BY THE COORDINATE BENCH IN THE CASE OF ASSESSEE ITSELF. WE FIND THAT THE ISSUE RELATED TO TRADING ADDITION I.E. GROUND NO. 1 OF T HE REVENUES APPEAL AND THE ISSUE RELATED TO THE DISALLOWANCE OF INTEREST I. E. GROUND NO. 2 OF THE REVENUES APPEAL HAVE BEEN DECIDED BY THE COORDINAT E BENCH IN ITA 320 & 705/JP/2016 & CO 06/JP/2016_ ACIT VS. M/S ARPIT MARBLES 6 ASSESSEES OWN CASE IN ITA NO. 203 & 704/JP/2016. THE FINDING OF THE COORDINATE BENCH IS REPRODUCED HEREUNDER:- 4.3. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. WE FIND THAT THE LD. CIT (A) HAS DECIDED THIS ISSUE BY FOLLOWING THE ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL I N THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07 BY OBSERVING IN PARA 2.3 OF HIS ORDER AS UNDER :- 2.3. I HAVE PERUSED THE FACTS OF THE CASE, THE ASS ESSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. THE FAC T OF THIS ISSUE IS SIMILAR TO THE FACT OF THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2006-07, WHEREIN THE HONBL E ITAT (APPEAL NO. ITA NO. 96/JP/2010) DECIDED THIS I SSUE IN FAVOUR OF THE ASSESSEE. MY PREDECESSOR FOR A.Y. 2007- 08 IN THE ASSESSEE OWN CASE ALSO ORDERED IN THE FAV OUR OF THE ASSESSEE. SINCE, THE FACTS ARE IDENTICAL AND I SSUE IS COVERED THEREFORE, FOLLOWING THE ABOVE DECISIONS, T HE DISALLOWANCE ON ACCOUNT OF VALUATION OF CLOSING STO CK MADE BY THE ASSESSING OFFICER IS DIRECTED TO BE DEL ETED. THIS GROUND IS ALLOWED. RESPECTFULLY FOLLOWING THE DECISION OF COORDINATE B ENCH IN THE ASSESSEE OWN CASE IN ITA NO. 96/JP/2010, WE UPHOLD THE ORDER OF LD. CIT (A). THIS GROUND OF THE REVENUE IS DISMI SSED. 5.3. WE HAVE HEARD RIVAL CONTENTIONS, PERUSED THE M ATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHOR ITIES BELOW. WE FIND THAT THE LD. CIT (A) HAS DECIDED THIS ISSUE BY FOLLOWING THE ORDER OF THE COORDINATE BENCH OF THE TRIBUNAL I N THE ASSESSEES OWN CASE IN ITA NO. 96/JP/2010 FOR THE A SSESSMENT YEAR 2006-07. WE ALSO FIND THAT THE COORDINATE BEN CH OF THE TRIBUNAL VIDE ITS ORDER DATED 11.02.2016 IN ASSESSE ES APPEAL IN ITA 320 & 705/JP/2016 & CO 06/JP/2016_ ACIT VS. M/S ARPIT MARBLES 7 ITA NO. 648/JP/2014 HAS DECIDED THE IDENTICAL ISSUE BY OBSERVING IN PARA 1.4 OF ITS ORDER AS UNDER :- 1.4 WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE AO NOTED THAT THE ASSESSE E HAS GIVEN ADDITIONAL INTEREST FREE ADVANCES OF RS. 1,44,67,00 0/- DURING THE YEAR TO M/S AMPL. FURTHER NO PURCHASES HAVE BEEN M ADE EITHER AGAINST OPENING DEBIT BALANCE OF RS. 1,58,04 ,153/- OR AGAINST THE ADDITIONAL ADVANCES GIVEN TO M/S AMPL D URING IN THE YEAR. THE AO FURTHER OBSERVED THAT THE ASSESSEE COMPANY HAS TAKEN LOANS FROM FINANCIAL INSTITUTIONS SUCH AS SIDBI, RFC, ICICI BANK, BANK OF RAJASTHAN LTD, ETC. AND THE NEX US BETWEEN THE LOAN TAKEN AND ADVANCES GIVEN TO SISTER CONCERN IS ALSO ESTABLISHED AS LOANS RAISED FROM THESE INSTITUTIONS IN TURN TRANSFERRED TO M/S AMPL. 1.5 IT IS NOTED THAT DURING THE YEAR UNDER CONSIDER ATION, THE ASSESSEE COMPANY HAS DEBITED A SUM OF RS. 1,22,42,6 55/- TOWARDS INTEREST EXPENSE IN HIS PROFIT AND LOSS ACC OUNT. OUT OF THIS, THE AO DISALLOWED A SUM OF RS. 37,28,395/- BE ING INTEREST AT THE RATE OF 15% PAID TO THE FINANCIAL INSTITUTIO NS. THE LD. CIT(A) CONFIRMED THE FINDINGS OF THE AO THAT THE NE XUS HAS BEEN ESTABLISHED BETWEEN THE LOANS TAKEN FROM FINANCIAL INSTITUTIONS AND ADVANCES GIVEN TO M/S AMPL. HOWEVER, THERE IS NO DISCUSSION AS TO HOW SUCH A NEXUS HAS BEEN ESTABLIS HED WHICH WE COULD GATHER FROM THE ORDER OF AO AND LD CIT(A). FURTHER THE LD. CIT(A) HELD THAT NO PURCHASES HAVE BEEN MADE FR OM M/S AMPL DURING THE YEAR AND INSPITE OF OPENING DEBIT BALANCE OF RS. 1,58,04,153/-, FURTHER ADVANCES HAVE BEEN MADE TO IT LEAVING A CLOSING DEBIT BALANCE OF RS. 4,40,07,213/ - WHICH DOES NOT INDICATE THAT ADVANCE GIVEN DURING THE YEAR WAS BASED ON ANY COMMERCIAL EXPEDIENCY. LD CIT(A) ACCORDINGLY U PHELD THE DISALLOWANCE OF INTEREST ON ADVANCES GIVEN TO M/S A MPL DURING THE YEAR UNDER CONSIDERATION. AT THE SAME TIME, IN RESPECT OF INTEREST PAYMENT ON THE OPENING DEBIT BALANCE OF AD VANCES, FOLLOWING ORDER OF THE CO-ORDINATE BENCH FOR A.Y, 2 006-07 AND 2007-08, NECESSARY RELIEF WAS GIVEN TO THE ASSESSEE . 1.6 IT IS NOTED FROM THE PERUSAL OF THE AUDIT REPOR T WHERE THE AUDITORS HAVE OBSERVED THAT THE COMPANY HAS INCURRE D CASH LOSSES DURING THE FINANCIAL YEAR COVERED BY OUR AUD IT AND HAVE INCURRED CASH LOSSES DURING THE IMMEDIATELY PRECEDI NG FINANCIAL YEAR, WHICH HAS RESULTED IN ACCUMULATED LOSSES TO T HE TUNE OF RS. ITA 320 & 705/JP/2016 & CO 06/JP/2016_ ACIT VS. M/S ARPIT MARBLES 8 2,42,55,443/- AS ON 31.03.2009 WHICH EFFECTIVELY W IPES OUT THE SHARE CAPITAL OF 2,41,06,500/- LEAVING ASIDE AN AMO UNT OF RS. 54,91,900/- IN THE RESERVE AND SURPLUS ACCOUNT. F URTHER, FROM THE PERUSAL OF THE NOTES TO THE FINANCIAL STATEMENT OF THE ASSESSEE, IT IS NOTED THAT THERE ARE TRANSACTIONS W HICH HAVE BEEN CARRIED OUT DURING THE YEAR IN TERMS OF PURCHA SE OF MARBLE BLOCKS AMOUNTING TO RS. 60,51,457/- AND SALE OF MAR BLE SLABS AND TILES AMOUNTING TO RS. 55,15,779/-TO M/S AMPL. 1.7 FIRSTLY, REGARDING NEXUS WHICH THE AO AND THE L D. CIT(A) HAS HELD TO HAVE BEEN ESTABLISHED BETWEEN THE AMOUNT B ORROWED FROM THE FINANCIAL INSTITUTIONS AND ADVANCES GIVEN TO M/S AMPL, IT IS UNCLEAR AS TO HOW SUCH AN NEXUS HAS BEEN ESTA BLISHED BY MERELY STATING THAT THE CHEQUES HAVE BEEN ISSUED T O M/S AMPL FROM THE CASH CREDIT ACCOUNT OF THE ASSESSEE MAINTA INED WITH BANK OF RAJASTHAN LTD. IT IS UNCLEAR WHETHER AT T HE TIME OF ISSUING CHEQUES AND MAKING PAYMENT TO M/S AMPL, THE RE WAS A DEBIT OR A CREDIT BALANCE IN THE CASH CREDIT ACCOUN T. IT IS LIKELY THAT THERE ARE SALES REALIZATION AND OTHER DEPOSITS RECEIVED BY THE ASSESSEE PRIOR TO MAKING SUCH ADVANCES TO M/S A MPL AND OUT OF WHICH SUCH ADVANCES HAVE BEEN PAID. HERE, W HAT NEEDS TO BE EXAMINED IS AT THE POINT OF TIME WHEN THE FUN DS WERE ACTUALLY ADVANCED TO M/S AMPL, WHAT WAS THE POSITIO N OF FUNDS ACTUALLY AVAILABLE WITH THE ASSESSEE IN TERMS OF TH E BORROWED FUNDS TO ESTABLISH THE NECESSARY NEXUS. IN ABSENCE OF SUCH A FINDING, IT CANNOT BE SAID THAT THE NEXUS HAS BEEN ESTABLISHED BETWEEN THE BORROWINGS FROM THE FINANCIAL INSTITUTI ONS AND ADVANCES TO AMPL. 1.8 SECONDLY, WHERE A NEXUS HAS NOT BEEN ESTABLISHE D BETWEEN THE BORROWINGS AND THE INTEREST FREE ADVANCES, THE COUR TS HAVE HELD THAT WHERE THE ASSESSEE HAS SUFFICIENT INTEREST FRE E FUNDS AVAILABLE IN THE FORM OF SHARE CAPITAL RESERVES AND SURPLUS, NO DISALLOWANCE OF INTEREST CAN BE MADE WHERE THE ASSE SSEE ESTABLISHES THE COMMERCIAL EXPEDIENCY BEHIND GIVING SUCH ADVANCES. THE ASSESSEE HAVE TAKEN THIS ALTERNATE CO NTENTION AND LETS EXAMINE THE SAME IN THE CONTEXT OF FACTS BEFORE US. IN THE INSTANT CASE, WE HAVE NOTED ABOVE THAT IN VIEW OF THE CONSISTENT CASH LOSS POSITION OF THE ASSESSEE, THE ACCUMULATED LOSSES HAVE ALMOST WIPES OFF ENTIRE SHARE CAPITAL LEAVING SIDE A SUM OF RS. 54,91,900/- WHICH IS A MINUSCULE NUMBER AS AGAINST THE ADDITIONAL ADVANCES OF RS. 12,44,67,000/- MADE BY THE ASSESSEE TO M/S AMPL. THEREFORE, IT CANNOT BE SAID THAT THE ADVANCES HAVE BEEN MADE OUT OF SHARE CAPITAL AND FR EE RESERVES ITA 320 & 705/JP/2016 & CO 06/JP/2016_ ACIT VS. M/S ARPIT MARBLES 9 AND SURPLUS AND THE CONTENTION OF THE LD AR TO THIS EXTENT CANNOT BE ACCEPTED. THE LD AR HAS FURTHER SUBMITTE D THAT THE ASSESSEE COMPANY HAS INTEREST FREE FUNDS IN THE FOR M OF UNSECURED LOAN OF RS. 2.58 CRORES TAKEN FROM DIRECT OR AND RELATIVES ON WHICH NO INTEREST WAS GIVEN BY THE APP ELLANT AND OUT OF SUCH INTEREST FREE FUNDS, THE ADVANCES WERE GIVEN TO M/S AMPL. HERE AGAIN, WHAT NEEDS TO BE EXAMINED (WHICH IS NOT APPARENT FROM THE RECORDS) IS THAT AT THE POINT OF TIME WHEN THE FUNDS WERE ACTUALLY ADVANCED, WHAT WAS THE POSITION OF INTEREST FREE FUNDS ACTUALLY AVAILABLE WITH THE ASSESSEE IN THE FORM OF CASH AND BANK DEPOSITS AND HOW THE SAME HAS BEEN DI SPERSED TO M/S AMPL TO ESTABLISH THE NECESSARY NEXUS AS CLA IMED BY THE LD AR. 1.9 LASTLY, REGARDING THE TEST OF COMMERCIAL EXPEDI ENCY, THE ASSESSEE HAS SUBMITTED THAT IT IS ENGAGED IN THE MA NUFACTURING AND PRODUCING OF MARBLE SLABS WHICH HAVE BEEN MADE FROM THE MARBLE BLOCKS. THE MINING OF THE BLOCKS FROM THE M INES OWNED BY THE ASSESSEE COMPANY WAS VERY LOW DUE TO CLOSER OF MINES AND MAJORITY OF RAW MATERIAL WAS PURCHASED FROM THE MINES OWNED BY SISTER CONCERN M/S AMPL AND PAYMENT WAS MA DE IN ADVANCE WHICH IS IN THE NATURE OF BUSINESS ADVANCES AND THUS NO DISALLOWANCE OF INTEREST PAID ON BORROWED FUNDS SHO ULD BE MADE. IT IS SUBMITTED THAT IT IS UNDER SUCH BUSINE SS EXPEDIENCY, THE ADVANCE PAYMENTS WERE MADE TOWARDS PURCHASE OF RAW MATERIAL AND THE SAME CANNOT BE TAGGED AS INTEREST FREE FUNDS GIVEN FOR NON-COMMERCIAL PURPOSES. IT WAS FURTHER S UBMITTED THAT UNDER SIMILAR FACTS PATTERN, THE CO-ORDINATE B ENCH OF ITAT IN ASSESSEES OWN CASE FOR AYS 2006-07 AND 2007-08 HAS DELETED THE DISALLOWANCE OF INTEREST IN THE HANDS OF THE AS SESSEE. WE HAVE GONE THROUGH THE ORDER OF CO-ORDINATE BENCH FO R AY 2006- 07 AND NOTED THE FOLLOWING FINDINGS OF THE CO-ORDIN ATE BENCH: WE HAVE CONSIDERED THE ARGUMENTS OF BOTH THE PART IES AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. THE CONTENTION OF THE ASSESSEE THAT IT HAD BUSINESS RELATIONSHIP W ITH THE SISTER CONCERN IS A FACT PROVED FROM THE RECORDS AS THE AO IN THE ASSESSMENT ORDER HAVE ADMITTED THAT DURING THE YEAR UNDER APPEAL THE ASSESSEE HAD RECEIVED GOODS OF RS. 28,77 ,791/- FROM ITS SISTER CONCERN M/S ANDHI MARBLE PVT. LTD. THE CONTENTION OF THE ASSESSEE THAT THERE IS NO DIVERSION OF THE FUND S AND THE CIRCUMSTANCES EXPLAINING THE BUSINESS EXPEDIENCY HA VING ARISEN DUE TO CLOSER OF ITS MARBLE MINING AREA ALSO INSPI RES CONFIDENCE AND PROVE THE NECESSITY OF ACQUIRING RAW MATERIAL OF THE NATURE ITA 320 & 705/JP/2016 & CO 06/JP/2016_ ACIT VS. M/S ARPIT MARBLES 10 OF MARBLE BLOCKS REQUIRED TO KEEP ITS MARBLE CUTTIN G ESTABLISHMENT RUNNING. 1.10 IN THIS REGARD, THE LD. CIT(A) HAS NOTED THAT DURING THE YEAR UNDER CONSIDERATION, THERE ARE NO PURCHASES MADE B Y THE ASSESSEE FROM M/S AMPL HENCE THE ALLEGED DECISION OF CO- ORDINATE BENCH ARE DISTINGUISHABLE ON FACTS. AS WE HAVE NOTED ABOVE, THERE ARE TRANSACTIONS WHICH HAVE BEEN CARRI ED OUT DURING THE YEAR IN TERMS OF PURCHASE OF MARBLE BLOC KS AMOUNTING TO RS. 60,51,457/- AND SALE OF MARBLE SLA BS AND TILES AMOUNTING TO RS. 55,15,779/-TO M/S AMPL. HOWEVER, AT THE SAME TIME, THERE IS AN OPENING BALANCE OF RS. 1,58, 04,153/- AGAINST WHICH NO PURCHASES HAVE BEEN REFLECTED DURI NG THE YEAR EXCEPT FOR RS 60,51,457/-. FURTHER THERE IS AN ADD ITIONAL ADVANCE OF RS. 1,44,67,000/- WHICH HAS BEEN MADE DU RING THE YEAR. NOTHING HAS BEEN BROUGHT ON RECORD IN TERMS OF BASIS OF ADVANCING SUCH HUGE AMOUNT TO SISTER CONCERN YEAR O N YEAR BASIS IN ABSENCE OF ANY CORRESPONDING PURCHASES EIT HER IN THE YEAR UNDER CONSIDERATION OR IN SUBSEQUENT YEARS. I T IS TRUE THAT THE COURTS CANNOT SIT IN JUDGEMENT TO DECIDE THE QU ANTUM OF ADVANCES AND THE TERMS AND CONDITIONS OF SUCH ADVAN CES. AT THE SAME TIME, THE ASSESSEE HAS TO DEMONSTRATE THRO UGH ITS CONDUCT AND APPROPRIATE DOCUMENTATION IN ORDER TO S ATISFY THE TEST OF COMMERCIAL EXPEDIENCY WHICH APPARENTLY HAS NOT BEEN DONE IN THE INSTANT CASE. IN THIS REGARD, WE REFER TO THE DECISION OF HONBLE SUPREME COURT IN CASE OF S.A. BUILDERS 2 88 ITR 1 WHERE THE COURT HAVE LAID DOWN THE FOLLOWING PROPOS ITION OF LAW IN RESPECT OF COMMERCIAL EXPEDIENCY (HEAD NOTES): THE HIGH COURT AND OTHER AUTHORITIES SHOULD HAVE EXAMINED THE PURPOSE FOR WHICH THE ASSESSEE ADVANCED THE MON EY TO ITS SISTER CONCERN, AND WHAT THE SISTER CONCERN DID WIT H THE MONEY, IN ORDER TO DECIDE WHETHER IT WAS FOR COMMERCIAL EX PEDIENCY, BUT THAT HAD NOT BEEN DONE. [PARA 30] IT IS NOT IN EVERY CASE THAT INTEREST ON BORROWED LOAN HAS TO BE ALLOWED IF THE ASSESSEE ADVANCES IT TO A SISTER CON CERN. IT ALL DEPENDS ON THE FACTS AND CIRCUMSTANCES OF THE RESPE CTIVE CASE. FOR INSTANCE, IF THE DIRECTORS OF THE SISTER CONCER N UTILIZE THE AMOUNT ADVANCED TO IT BY THE ASSESSEE FOR THEIR PER SONAL BENEFIT, OBVIOUSLY IT CANNOT BE SAID THAT SUCH MONE Y WAS ADVANCED AS A MEASURE OF COMMERCIAL EXPEDIENCY. HOW EVER, MONEY CAN BE SAID TO BE ADVANCED TO A SISTER CONCER N FOR COMMERCIAL EXPEDIENCY IN MANY OTHER CIRCUMSTANCES. WHERE ITA 320 & 705/JP/2016 & CO 06/JP/2016_ ACIT VS. M/S ARPIT MARBLES 11 HOLDING COMPANY, HAS A DEEP INTEREST IN ITS SUBSIDI ARY, AND THE HOLDING COMPANY ADVANCES BORROWED MONEY TO A SUBSID IARY AND THE SAME IS USED BY THE SUBSIDIARY FOR SOME BUSINES S PURPOSES, THE HOLDING COMPANY WOULD ORDINARILY BE ENTITLED TO DEDUCTION OF INTEREST ON ITS BORROWED LOANS. [PARA 35] 1.11 CONSIDERING THE ENTIRETY OF FACTS AND CIRCUMST ANCES OF THE CASE AND IN LIGHT OF HONBLE SUPREME COURT IN CASE OF S. A. BUILDERS 158 TAXMANN 74 , IN OUR VIEW, THE CONTENTION OF BOT H SIDES NEEDS TO BE ADEQUATELY DEMONSTRATED THROUGH APPROPR IATE DOCUMENTATION AND IN ABSENCE THEREOF, THE MATTER RE QUIRE FURTHER EXAMINATION AND WE ACCORDINGLY SET-ASIDE TH IS ISSUE TO THE FILE OF THE AO TO EXAMINE THE SAME AFRESH AFTER GIVING REASONABLE OPPORTUNITY TO THE ASSESSEE. THE ISSUE INVOLVED IN THIS APPEAL IS IDENTICAL TO G ROUND RAISED IN ITA NO. 648/JP/2014 FOR THE IMMEDIATELY PRECEDING Y EAR 2009-10 WHEREIN THE COORDINATE BENCH WHILE DEALING WITH THE ISSUE, PLACING RELIANCE ON THE JUDGMENT OF HONBLE SUPREME COURT RENDERED IN THE CASE OF S.A. BUILDERS, 158 TAXMANN 74 (SC), SET ASIDE THE ORDER OF LD. CIT (A) AND RESTORED THE MAT TER TO THE FILE OF A.O. FOR DECIDING THE MATTER AFRESH. IN THE PRE SENT CASE, CONSIDERING THE ENTIRETY OF FACTS AND CIRCUMSTANCES OF THE CASE AND IN THE LIGHT OF JUDGMENT OF HONBLE SUPREME COU RT (SUPRA), IT WILL BE APPROPRIATE TO EXAMINE THE MATTER IN DETAIL THEREBY AFFORDING OPPORTUNITY TO BOTH THE PARTIES TO PROVE THEIR CONTENTIONS. THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF COORDINATE BENCH IN THE ASSESSEES OWN CASE IN ITA NO. 648/JP/2014, WE SET ASIDE THE ORDER OF LD. CIT (A) AND RESTORE THE MATTER TO THE FILE OF A.O. TO BE DECIDED AFRESH AFTER GIVING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. THIS GROUND OF THE REVENUE IS ALLOWED FOR STATISTICAL PU RPOSES. THE FACTS ARE IDENTICAL AS THERE IS NO CHANGE INTO T HE FACTS AND CIRCUMSTANCES AS POINTED OUT BY THE REVENUE, THEREF ORE BY RESPECTFULLY ITA 320 & 705/JP/2016 & CO 06/JP/2016_ ACIT VS. M/S ARPIT MARBLES 12 FOLLOWING THE DECISION OF THE COORDINATE BENCH IN AS SESSEES OWN CASE IN ITA NO. 203 & 704/JP/2016, GROUND NO. 1 OF THE REVE NUES APPEAL IS DISMISSED WHEREAS GROUND NO. 2 OF THE REVENUES APPE AL IS ALLOWED FOR STATISTICAL PURPOSES ONLY. 6. GROUND NO. 3 OF THE REVENUES APPEAL IS AGAINST DELETION OF DISALLOWANCE OF CONTRIBUTION TOWARDS PF & ESI MADE BY THE A.O.. THE LD. CIT(A) HAS DELETED THE ADDITION BY HOLDING A S UNDER:- 6.3 I HAVE PERUSED THE FACTS OF THE CASE, THE ASSE SSMENT ORDER AND THE SUBMISSIONS OF THE APPELLANT. ADMITTE DLY, EMPLOYEES CONTRIBUTION TO ESI AND PF HAS BEEN PAID BY THE APPELLANT, IN ALL INSTANCES, BEFORE THE DUE DAT E OF FILING THE RETURN OF INCOME UNDER SECTION 139(1). TH IS FACT IS THEREFORE, NOT IN DISPUTE. IN VIEW OF THE JUDGME NTS OF THE RAJASTHAN HIGH COURT IN THE CASE OF JAIPUR VIDH YUT NIGAM LTD. 265 CTR 62 (RAJ.), IT VS SBBJ (2014) 99 DTR 131 (RAJ), AND OTHER CASE LAWS ON THIS ISSUE, THE CL AIM OF THE APPELLANT IS ALLOWABLE. ACCORDINGLY, THE ADDITIO N MADE BY THE ASSESSING OFFICER, IS DELETED. THIS GROUND IS ALLOWED. 6.1 NOW THE REVENUE IS IN APPEAL BEFORE US. THE LD DR HAS SUPPORTED THE ORDER OF THE ASSESSING OFFICER. AT THE OUTSET, IT IS STATED BY THE LD. AUTHORIZED REPRESENTATIVE OF THE ASSESSEE THAT THE ISSUE IS NO MORE RES ITA 320 & 705/JP/2016 & CO 06/JP/2016_ ACIT VS. M/S ARPIT MARBLES 13 INTEGRA, HAS BEEN SETTLED BY THE DECISION OF THE HO N'BLE SUPREME COURT IN THE CASE OF CIT VS BINAY CEMENT 213 CTR 268 AND TH E DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. SBBJ (2014) 99 DTR 131 (RAJ). 7. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON THE RECORD AND ALSO GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. AS THE ISSUE HAS BEEN DECIDED BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS. SBB J (SUPRA), THEREFORE, WE DO NOT SEE ANY REASON TO INTERFERE INTO THE ORDER OF THE LD. CIT(A), ACCORDINGLY, WE AFFIRM THE ORDER OF THE LD. CIT(A) ON THIS GROUND. THIS GROUND OF REVENUES APPEAL IS DISMISSED. 8. NOW COMING TO THE C.O. OF THE ASSESSEE I.E. C.O. NO. 06/JP/2016 IN ITA NO. 320/JP/2016. IT IS STATED BY THE LD. COU NSEL OF THE ASSESSEE THAT THE ISSUE UNDER CONSIDERATION IN THIS C.O. IS ALSO COVERED BY THE DECISION OF THE HONBLE ITAT, JAIPUR BENCH DECISION IN THE CASE OF ASSESSEE ITSELF IN ITA NO. 648/JP/2014 FOR THE A.Y. 2009-10. 8.1 AT THE OUTSET, THE LD. DR HAS SUPPORTED THE ORD ER OF THE ASSESSING OFFICER. ITA 320 & 705/JP/2016 & CO 06/JP/2016_ ACIT VS. M/S ARPIT MARBLES 14 9. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON THE RECORD AND ALSO GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE COORDINATE BENCH OF THE TRIBUNAL HAS DECIDED THIS ISSUE IN ASSESSEES OWN CASE FOR T HE A.Y. 2009-10 BY OBSERVING AS UNDER:- 2.2. WE HAVE HEARD THE RIVAL CONTENTIONS AND PURS UED THE MATERIAL ON RECORD. THE AO HAS DISALLOWED 10% OF TELEPHONE, VEHICLE REPAIR & MAINTENANCE AND DEPRECIATION ON CAR HOLDING THAT THESE FACILITIES A RE SUCH THAT THEY CAN BE USED FOR OTHER THAN BUSINESS PURPOSES. FURTHER, 10% OF STAFF WELFARE AND TRAVELLI NG EXPENSES HAVE BEEN DISALLOWED HOLDING THAT THE EXPENSES ARE NOT FULLY VERIFIABLE. IN OUR VIEW, THES E DISALLOWANCES CANNOT BE SUSTAINED IN EYE OF LAW ON GROUND OF ADHOC NATURE AND SECONDLY, THE CONCEPT OF PERSONAL USE IS ALIEN TO A CORPORATE ENTITY. IN A CORPORATE STRUCTURE, THE FACILITIES ARE PROVIDED TO EMPLOYEES AS PER TERMS OF HIS / HER EMPLOYMENT AND SUCH FACILITIES SUFFER THE NECESSARY PERQUISITE TAX ATION IN HANDS OF THE EMPLOYEES. THERE IS NOTHING ON RECOR D WHICH PROVES THAT THE FACILITIES HAVE BEEN USED FOR PERSONAL PURPOSES AND SECONDLY, THEY HAVE ESCAPED THE PERQUISITE TAXATION. REGARDING DISALLOWANCE OF BONUS, NO BASIS HAS BEEN GIVEN BY AO TO DISALLOW THE SAME. HENCE, THESE DISALLOWANCES ARE HEREBY DELETED. HENCE, THESE GROUNDS ARE ALLOWED. ITA 320 & 705/JP/2016 & CO 06/JP/2016_ ACIT VS. M/S ARPIT MARBLES 15 THEREFORE, BY RESPECTFULLY FOLLOWING THE ORDER OF COO RDINATE BENCH IN THE ASSESSEES OWN CASE REFERRED ABOVE, THE GROUND RAIS ED IN THE C.O. OF THE ASSESSEE IS ALLOWED. 10. NOW WE TAKE ASSESSEES APPEAL BEING ITA NO. 705/J P/2016. GROUND NO. 2 AND 2.1 OF THE APPEAL IS RELATED TO C ONFIRMATION OF THE DISALLOWANCE OF INTEREST. IT IS STATED BY THE L D. AR OF THE ASSESSEE THAT THE HONBLE ITAT, JAIPUR BENCH IN ASSESSEES OWN CASE FOR THE A.Y. 2009-10 HAS SET ASIDE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR FRESH DECISION. THEREFORE, HE PRAYED THAT THIS ISSUE FOR THE YEAR UNDER CONSIDERATION MAY ALSO BE RESTORED TO THE FILE OF T HE ASSESSING OFFICER. 10.1 THE LD. DR HAS NO OBJECTION IF THE ISSUE UNDER CONSIDERATION MAY BE RESTORED TO THE FILE OF THE ASSESSING OFFICER. 11. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES, PERUSED THE MATERIAL AVAILABLE ON THE RECORD AND ALSO GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND MERIT IN THE SUBMISS IONS OF THE LD. AR OF THE ASSESSEE THAT IN EARLIER YEAR ALSO, THE ISSUE I S RESTORED TO THE FILE OF THE ASSESSING OFFICER. THEREFORE, BY FOLLOWING THE DE CISION OF THE COORDINATE BENCH, THE ISSUE UNDER CONSIDERATION IS RESTORED TO THE FILE OF THE ASSESSING OFFICER AND WE DECIDED IN TERMS OF PAR AGRAPH NO. 5.3 OF ITA 320 & 705/JP/2016 & CO 06/JP/2016_ ACIT VS. M/S ARPIT MARBLES 16 THE DECISION OF THE COORDINATE BENCH RENDERED IN AS SESSEES OWN CASE IN ITA NO. 203 & 704/JP/2016 FOR A.Y. 2010-11. ACCORDI NGLY, THE GROUND OF APPEAL IS ALLOWED FOR STATISTICAL PURPOSES ONLY. 12. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES, CROSS OBJECTION OF THE ASSESSEE IS ALLOWED AND APPEAL OF THE ASSESSEE IS ALSO ALLOWED FOR STATISTICAL PURPOSES ON LY. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH DECEMBER, 2016. SD/- SD/- FOE FLAG ;KNO DQY HKKJR (VIKRAM SINGH YADAV) (KUL BHARAT) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 16 TH DECEMBER, 2016 * RANJAN VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- THE A.C.I.T., CIRCLE-5, JAIPUR.. 2. IZR;FKHZ@ THE RESPONDENT- M/S ARPIT MARBLES PVT. LTD., JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR 6. XKMZ QKBZY@ GUARD FILE (ITA NO. 320 & 705/JP/2016 & CO 06/JP/2016) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR