Malankara Plantations Ltd, Kottayam V. The ACIT, Kottayam

ITA 378/COCH/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81386 (ITAT-COCHIN)
• Duration Of Justice: 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 19-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K KJ JOHN
• Assessee Lawyers: ABRAHAM JACOB

Judgement Text

1 ITA NO. 378/COCH/2014 IN THE INCOME TAX APPELLATE TRIBUNAL COCHIN BENCH, COCHIN BEFORE SHRI N.R.S. GANESAN (JM) AND SHRI CHANDRA PO OJARI (AM) I.T.A NO.378/COCH/2014 (ASSESSMENT YEAR 2010-11) MALANKARA PLANTATIONS LTD VS ACIT, CIR.1 MALANKARA BUILDINGS KOTTAYAM KODIMATHA PAN : AABCT2019A (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ABRAHAM JACOB RESPONDENT BY : SHRI K.KJ. JOHN DATE OF HEARING : 16-10-2014 DATE OF PRONOUNCEMENT : 21-11-2014 O R D E R PER N.R.S. GANESAN (JM) THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-V, KOCHI DATED 31-05-2014 AND PERTAINS TO AS SESSMENT YEAR 2010- 11. 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISAL LOWANCE OF INTEREST AND BANK CHARGES TO THE EXTENT OF RS. 14,23,820 ON THE ADVANCES MADE TO SUBSIDIARY COMPANY. 2 ITA NO. 378/COCH/2014 3. SHRI ABRAHAM JACOB, THE LD.REPRESENTATIVE FOR TH E ASSESSEE SUBMITTED THAT THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS FOR THE PURPOSE OF MAKING ADVANCE TO SISTER CONCERN. ACCOR DING TO THE LD.REPRESENTATIVE, THE INTEREST FREE FUNDS WERE ADV ANCED TO SISTER CONCERN, M/S MALANKARA WOOD LTD ONLY FOR BUSINESS PURPOSE. MALANKARA WOOD LTD USED THE FUNDS ONLY FOR THE PURPOSE OF BUSINESS. T HEREFORE, EVEN IF THE BORROWED LOANS WERE DIVERTED THERE CANNOT BE ANY DI SALLOWANCE. THE LD.REPRESENTATIVE FURTHER SUBMITTED THAT NO DISALLO WANCE IS CALLED FOR SINCE THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS. R EFERRING TO THE BALANCE- SHEET AS ON 31-03-2010 THE COPY OF WHICH IS AVAILAB LE AT PAGES 24 AND 25 OF THE PRINTED ANNUAL REPORT, THE LD.REPRESENTATIVE SUBMITTED THAT THE PAID UP CAPITAL IS RS.8.40 CRORES. THE RESERVES AND SUR PLUS IS RS.11,47,18,576. WHAT WAS ADVANCED TO SISTER CONCERN IS ONLY RS.6,01 ,22,389. THEREFORE, THERE CANNOT BE ANY DISALLOWANCE. MOREOVER, IN THE ABSENCE OF ANY ALLEGATION THAT THE FUNDS WERE NOT USED FOR BUSINES S PURPOSE, ACCORDING TO THE LD.REPRESENTATIVE, THERE CANNOT BE ANY DISALLOW ANCE IN VIEW OF THE JUDGMENT OF THE APEX COURT IN THE CASE OF SA BUILDE RS LTD 288 ITR 1 (SC). 3. ON THE CONTRARY, SRI KK JOHN, THE LD.DR SUBMITTE D THAT ADMITTEDLY THE ASSESSEE HAS ADVANCED RS.6,01,22,389 TO MALANKA RA WOOD LTD WHICH IS A SUBSIDIARY OF THE ASSESSEE. REFERRING TO THE JUDGMENT OF THE KERALA HIGH COURT IN VI BABY & CO 254 ITR 248 (KER) THE LD .DR SUBMITTED THAT IF 3 ITA NO. 378/COCH/2014 THE ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS, TH EN THERE MAY NOT BE ANY NECESSITY FOR BORROWING FUNDS. THE FACT THAT THE A SSESSEE BORROWED THE FUNDS ITSELF SHOWS THAT THE ASSESSEE NEEDED FUNDS F OR ITS BUSINESS. THEREFORE, THE CIT(A) HAS RIGHTLY CONFIRMED THE DIS ALLOWANCE MADE BY THE ASSESSING OFFICER BY PLACING RELIANCE ON THE JUDGME NT OF THE JURISDICTIONAL HIGH COURT IN VI BABY & CO (SUPRA). 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. ADMITTED LY, THE ASSESSEE HAS ADVANCED INTEREST FREE FUNDS TO MLALANKARA WOOD LTD WHICH IS A SUBSIDIARY COMPANY OF THE ASSESSEE. THE CLAIM OF THE ASSESSEE IS THAT THE INTEREST FREE FUNDS WERE AVAILABLE AND THE ADVANCE WAS MADE FOR BUSINESS PURPOSE. THE APEX COURT IN THE CASE OF MUNJAL SALE S CORPORATION VS CIT 298 ITR 298 (SC) FOUND THAT WHEN THE ADVANCE WAS MA DE FROM THE INTEREST FREE FUNDS, THEN THERE CANNOT BE ANY DISAL LOWANCE. THEREFORE, THE JUDGMENT OF THE KERALA HIGH COURT IN THE CASE OF VI BABY & CO (SUPRA) MAY NOT BE APPLICABLE TO THIS CASE. MOREOVER, ADMI TTEDLY, THE ADVANCE WAS MADE TO SISTER CONCERN OF THE ASSESSEE. IT IS NOT THE CASE OF THE REVENUE THAT THE ADVANCE MADE TO THE SISTER CONCERN WAS NOT MADE FOR BUSINESS PURPOSE. IN THE ABSENCE OF ANY SUCH ALLEG ATION, THIS TRIBUNAL IS OF THE CONSIDERED OPINION THAT THERE CANNOT BE ANY DISALLOWANCE IN RESPECT OF INTEREST AND BANK CHARGES ON THE ADVANCE MADE TO SISTER CONCERN, IN 4 ITA NO. 378/COCH/2014 VIEW OF THE JUDGMENT OF THE APEX COURT IN SA BUILDE RS (SUPRA). IN THIS VIEW OF THE MATTER, THE ORDER OF THE LOWER AUTHORIT Y IS SET ASIDE AND THE ASSESSING OFFICER IS DIRECTED TO DELETE THE ADDITIO N. 5. IN THE RESULT, APPEAL OF THE ASSESSEE STANDS ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 21 ST NOVEMBER, 2014. SD/- SD/- (CHANDRA POOJARI) (N.R.S. GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER COCHIN, DT : 21 ST NOVEMBER, 2014 PK/- COPY TO: 1. MLANKARA PLANTATIONS LTD, MALANKARA BUILDINGS, K ODIMATHA 2. ACIT, CIR.1, KOTTAYAM 3. THE COMMISSIONER OF INCOME-TAX, KOTTAYAM 4. THE COMMISSIONER OF INCOME-TAX(A)-V, KOCHI 5. THE DR (TRUE COPY) BY ORDER ASSTT. REGISTRAR, INCOME-TAX APPELLATE TRIBUNAL, COCHIN BENCH