Aishwarya Tea Company Pvt. Ltd., Ahmedabad V. The Dy. CIT, Circle-1(1)(1), Ahmedabad

ITA 3310/AHD/2015

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 5404 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 30-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B P SHRIVASTAVA
• Assessee Lawyers: G C PIPARA
• Section: 143(3); 15

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: SHR I RAJPAL YADAV , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER AISHWARYA TEA COMPANY PVT. LTD. 320, MADHUPURA COMMERCIAL CENTRE, MADHUPURA CHOWK, AHMEDABAD - 380004 PAN: AADCA9129J (APPELLANT) VS THE D CIT, CIRCLE - 1 (1)(1) , AHMEDABAD - 380015 (RESPONDENT) REVENUE BY : S H RI B.P. SHRIVASTAVA , SR. D . R. ASSESSEE BY: SHRI G.C. PIPARA DATE OF HEARING : 11 - 09 - 2 018 DATE OF PRONOUNCEMENT : 28 - 09 - 2 018 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBER : - THIS ASSESSEE S APPEAL FOR A. Y. 2012 - 13 , ARI SES FROM ORDER OF THE CIT(A) - 1, AHMEDABAD DATED 22 - 09 - 2 015 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2 . THE ASSESSEE HAS RAISED SOLITARY GROU ND OF APPEAL PERTAINING TO DISALLOWANCE OF ENTIRE INTEREST EXPENSES CLAIMED BY THE ASSESSE E. I T A NO . 3310 / A HD /20 15 A SS ESSMENT YEAR 2012 - 13 I.T.A NO. 3310 /AHD/20 15 A.Y. 2012 - 13 PAGE NO AISHWARYA TEA COMPANY PVT. LTD. VS. D CIT 2 3 . THE FACT IN BRIEF PERTAINING TO THE ISSUE IN GROUND OF APPEAL IS THAT ASSESSEE HAS FILED RETURN OF INCOME ON 27 TH SEP, 2012 DECLARING INCOME OF RS. 88 , 88 ,600 / - . SUBSEQUENTLY, THE CASE WAS SELECTED UNDER SCRUTINY BY ISSUING OF NOTICE U/S. 143(2) OF THE ACT ON 23 RD SEP, 2013. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS ADVANCED LOAN TO TWO PARTIES NAMELY MAP LE HOTE L AND RESORT PVT. LTD. AND WARREN STEELS PVT. LTD AND SHOWN INTEREST INCOME OF RS. 73,27,286/ - @ INTEREST OF 6%. HOWEVER, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS PAID INTEREST ON UNSECURED LOAN TAKEN FROM TWO PARTIES NAMELY ANDHR TIMBER PRODUCT P VT. LTD. OF RS.11 , 57 , 828/ - @ 18% AND MARK MA RBLE AND MINES L TD OF RS.5 , 04 , 000/ - @ 12%. THE ASSESSING OFFICER WAS OF THE VIEW THAT ASSESSEE WAS CHARGING INTEREST AT LOWER RATE. ON THE OTHER HAND, IT WAS PAYING INTEREST ON THE LOAN AT THE HIGHER RATE. THE REFORE, THE ASSESSEE WAS ASKED TO JUSTIFY THE PAYMENT OF INTEREST AT A HIGHER RATE ON UNSECURED LOAN AND CHARGING OF INTEREST ON LOWER INTEREST RATE ON LOAN AND AD VANCES GIVEN BY IT. THE ASSESS EE EXPLAINED THAT IT HA D DEPLOYED ITS IDLE AND SURPLUS FUND FO R SHORT TERM LOAN BUSINESS EXPEDIENCY. THE ASSESSING OFFICER HAS NOT ACCEPTED THE EXPLANATION OF THE ASSESSEE AND STATED THAT ADVANCING O F LOAN BY T H E ASSESSEE @ 6% IS QUITE LOW CONSIDER ING MARKET RATE AT 12%, THEREFORE, HE HAS DISALLOWED THE ENTIRE INTER EST EXPENSES DEBITED TO THE P & L ACCOUNT TO THE AMOUN T OF RS . 6 61 279/ - . 4. AGGRIEVED AS SESSEE HAS FILED APPEAL BEFORE T H E LD. CIT(A). T HE LD. CIT(A) HAS SUSTAINED THE ADDITION STATING THAT ASSSESSEE HAS NOT PRODUCE D ANY COGENT OR CONCRETE MATERIAL TO PROVE THE BUSINESS EXPEDIENCY TO PAY INTEREST AT HIGHER RATE. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. AT THE TIME OF ASSESSMENT, THE ASSESSING OFFICER NOTICED THAT ASSESSEE HAS PROVIDED UNSECURED LOAN TO TWO PARTIES ON INTEREST @ 6% P.A. AND SHOWN INTEREST INCOME OF RS.73,27,286/ - . HOWEVER , THE ASSESSING OFFICER HAS OBSERVED THAT THE I.T.A NO. 3310 /AHD/20 15 A.Y. 2012 - 13 PAGE NO AISHWARYA TEA COMPANY PVT. LTD. VS. D CIT 3 ASSESSE HAS PAID INTEREST ON UNSECURED LOAN TAKEN FROM TWO PARTIES @ 18% ON RS. 11,57,828/ - AND @ 12% ON THE LOAN AMOUNT OF RS. 5 , 04 , 0 0 0/ - . THEREFORE, THE ASSESSING OFFICER HAS S T ATE D THAT T HE ASSESSEE SHOULD HAVE CHARGED INTEREST ON THE UNSECURED LOAN @ 12% WHICH WOULD HAVE BEEN TO THE AMOUNT OF RS. 14 , 65 , 4 , 572/ - . THEREFORE, HE HAS DISALLOWED THE ENTIRE AMOUNT OF INTE RE ST WHICH THE ASSESS E E HAS DEBITED TO THE P & L A/C. DURING THE COURSE OF A SSESSMENT PROCEEDINGS, THE ASSESSE E HAS SUBMITTED THE FOLLOWING REASONS FOR CHARGING INTEREST @ 6% FROM TWO PARTIES TO WHOM THE UNSEC URED LOANS WERE PROVIDED. (1 ) THE T WO PARTIES TO WHOM THE UNSECURE D LOANS WERE GIVE N AND THE TWO FROM WHOM THE UNSECURED LOANS PROVIDED WERE SEPAR AT E AND INDEPENDENT PAR T IES. (2 ) ONE OF THE UNSECURED LOAN WAS OLD LOAN AND NEW LOAN @ 12% WAS OBTAINED FROM ONE OF THE PARTY DURING THE F.Y. 2011 - 12. ON THE OTHER HAND, INTER EST @ 6% W AS EARNED ON DEPLOYMENT OF SURPLUS FUND WITH THE TWO PARTIES NAMELY (I) MAPLE HOTELS & RESORTS PVT. LTD. (II) WARREN STEELS PVT. LTD. (3) THE ASSESSEE COMPANY WAS SELLING THE TEA OF THE COMPANY WARREN TEA LTD ON C & F BAS IS THEREFORE SHORT TERM FUNDS F R O M SALE PROCEEDS WERE DEPLOYED. (4) THE LOAN PROVIDED TO T HE AFORESAID COMPANIES WAS NOT FROM THE BORROWED FUNDS BUT OUT OF THE SURPLUS FUNDS AS EXPLAINED ABOVE. WE HAVE NOTICED THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER HAS NOT CONTRADICTED AND DISPROVED THE FACTS STATED ABOVE THAT T H E ASSESSE E HAS DEPLOYED ITS SURPLUS FUNDS AND NO BORROWED FUNDS WAS USED FOR PROVIDING LOAN TO THE ABOVE TWO PARTIES. AT THE APPELLATE STAGE, THE LD. CIT(A) HAS ALSO SUSTAINED THE DISALLOW ANCE WITHOUT DISPROVING THE FACTS AND CIRCUMSTANC ES STATED BY THE ASSESSEE SUPRA IN THIS ORDER. INTER ALIA, THE LD. CIT(A) HAS ALSO NOT TAKEN INTO CONSIDERATION THE DETAILED FINDINGS OF THE LD. CIT(A) FOR ASSESSMENT YEAR 2011 - 12 AND ASSESSMENT YEAR 2009 - 1 0 ON THE IDENTICAL ISSUE DECIDED IN FAVOUR OF THE ASSESSEE WITH DETAILED REASONING WHEREIN IT WAS HELD THAT T HE WHATEVER THE IDLE SURPLUS FUN D S AVAILABLE WITH THE ASSESSEE WE R E DEPLOYED TO E A RN SHORT TERM DEPOSIT AND THERE WAS NO NEXUS BETWEEN LOAN ACCEPTE D AND LOAN ADVANCED. IN THE LIGHT OF THE ABOVE FACTS AND CIRCUMSTANCES, I.T.A NO. 3310 /AHD/20 15 A.Y. 2012 - 13 PAGE NO AISHWARYA TEA COMPANY PVT. LTD. VS. D CIT 4 WE OBSERVED THAT THE ASSESSEE HAS EARNED INTEREST INCOME OF RS . 73,27,286/ - AND PAID INTEREST ON UNSECURED LOAN TO THE AMOUNT OF RS . 16,61 , 279/ - . THE ASSESSEE HAS DEMONSTRATED THAT I T HAS USED ITS SURPLUS IDLE FUNDS TO PROVIDE SHORT TERM LOAN TO THE TWO PARTIES FOR BUSINESS EXPEDIENCY WHICH RESULTED IN MORE BENEFIT TO THE COMPANY AS IT HAS EARNED INTEREST INCOME OF RS. 73 , 27 , 286/ - FROM THE IDLE FUNDS, WE CONSIDER THAT THE LOWER AUTHOR ITIES HAVE FAILED TO DISPROVE THE ABOVE FACTS AND FINDINGS, THEREFORE, WE ARE NOT INC LINED WITH T H E DECISION OF THE LD. CIT(A). ACCORDINGLY , THE APPEAL O F THE ASSESS EE IS ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 28 - 09 - 201 8 SD/ - SD/ - ( RAJPAL YADAV ) ( AMARJIT SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 28 /09 /2018 / COPY OF ORDER FO RWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,