The ACIT, Bhopal V. M/s Bhaskar Foods Private Ltd., Bhopal

ITA 389/IND/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2735 (ITAT-INDORE)
• Duration Of Justice: 11 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 21-07-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 27-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: S S DESH
• Keywords: Business expenditure; Notional interest

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI B.R. KAUSHIK, ACCOUNTANT MEMBER ITA NO.389IND/2009 A.Y. - 2006-07 ASSTT. COMMISSIONER OF INCOME TAX 1(2), BHOPAL APPELLANT VS. M/S. BHASKAR FOODS PVT. LTD., T.T. NAGAR, BHOPAL PAN AABCN 1212 L RESPONDENT APPELLANT BY : SHRI MANOJ KUMAR, SR. DR RESPONDENT BY : SHRI S.S. DESHPANDE, CA O R D E R PER JOGINDER SINGH THE REVENUE HAS CHALLENGED THE ORDER OF THE LEARNED CIT(A) DATED 14.5.2009 ON THE GROUND THAT ON THE FACTS AND IN TH E CIRCUMSTANCES OF THE CASE, THE LEARNED COMMISSIONER OF INCOME-TAX (A PPEALS) ERRED IN DELETING THE ADDITION OF RS.34,09,025/- MADE ON ACC OUNT OF INTEREST FREE LOAN. 2 2. DURING HEARING, WE HAVE HEARD SHRI MANOJ KUMAR, LD. SR. DR AND SHRI S.S. DESHPANDE, LD. COUNSEL FOR THE ASSESS EE. THE CONTENTION RAISED ON BEHALF OF THE REVENUE IS THAT THE ASSESSE E GAVE ADVANCES TO GROUP CONCERNS WHICH ARE NOT BUSINESS ADVANCES BUT ARE INTEREST FREE LOANS. THEREFORE, THE ASSESSING OFFICER WAS JUSTIFI ED IN CALCULATING THE INTEREST @12%. ON THE OTHER HAND, THE LD. COUNSEL F OR THE ASSESSEE STRONGLY DEFENDED THE IMPUGNED ORDER BY SUBMITTING THAT THE ASSESSEE SOLD GOODS AMOUNTING TO RS.5,59,69,622/- TO BHASKAR EXXOILS LTD. AND THE AMOUNT OF RS.1,51,95,366/- IS STILL OUTSTANDING . THE CRUX OF THE ARGUMENTS IS THAT THESE ARE PURE BUSINESS TRANSACTI ONS. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. BRIEF FACTS ARE THAT THE ASSESSEE DECLARED NIL INCOME IN ITS RETURN FILED ON 17.11.2006. THE ASSESSEE IS ENGAGED IN MAN UFACTURING PROCEEDINGS AND SALE OF DOC, SOLVENT OIL AND REFINE D OIL. THE ASSESSEE GAVE ADVANCES TO GROUP CONCERNS NAMELY, RS.4,24,50, 256/- TO BHASKAR EXXOILS, RS.2,50,952/- TO BHASKAR RELIEF FUND, RS.5 4,12,079/- TO SHRI SUDHIR AGRAWAL AND RS.75,50,145/- TO SHRI GIRISH AG RAWAL. THE PAID UP CAPITAL AND FREE RESERVES OF THE ASSESSEE COMPANY A RE MORE THAN RS.14.50 CRORES ON WHICH NO INTEREST COST IS INCURR ED BY THE ASSESSEE COMPANY. THE ASSESSEE WAS AGGRIEVED ON THE NOTIONAL ADDITION OF RS.36,90,440/-, BEING THE INTEREST WORKED @12% OF T HE AMOUNT, WHICH 3 WAS ADVANCED TO GROUP CONCERNS/INDIVIDUALS. THERE I S NO DISPUTE TO THE FACT THAT TAXES ARE PAID ON THE REAL INCOME AND NOT ON NOTIONAL INCOME. ADMITTEDLY, THE ASSESSEE IS HAVING THE PAID UP CAPI TAL AND FREE RESERVES OF MORE THAN RS.14.50 CRORES ON WHICH NO INTEREST C OST IS INCURRED OR CLAIMED BY THE ASSESSEE. THE EXPENSES CAN BE DISALL OWED ONLY WHEN THE SAME IS NOT EXCLUSIVELY FOR BUSINESS EXPENSES. IT IS NOT THE CASE THAT ASSESSEE COMPANY HAS UTILISED THE BORROWED FUNDS FO R NON-BUSINESS PURPOSES, THEREFORE, THERE IS NO JUSTIFICATION FOR ADDING THE NOTIONAL INTEREST. THE LD. CIT(A) HAS ALREADY PLACED RELIANC E UPON THE DECISION IN PREM HEAVY ENGG. WORKS P. LTD. (285 ITR 554) (ALL) . THERE IS A FURTHER MENTION OF UNCONTROVERTED FACT IN THE IMPUGNED ORDE R THAT THE NECESSARY DETAILS WERE FILED BY THE ASSESSEE. IN VIEW OF THIS FACT, WE FIND NO INFIRMITY IN THE ORDER OF THE LD. CIT(A), THEREFORE , IT IS UPHELD. FINALLY, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 22 ND JULY, 2010. (B.R. KAUSHIK) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 22 ND JULY, 2010 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, G UARD FILE !VYAS!