The DCITAnand Circle, Anand V. Patel Tractors Co.Ltd., Anand

ITA 39/AHD/2010

• Counselvise Citation: 3920514 RSA 2010
• Duration Of Justice: 2 year(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 05-01-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 05-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Proportionate interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH AHMEDABAD (BEFORE SHRI BHAVNESH SAINI, JM AND SHRI A. MOHAN A LANKAMONY, AM) ITA NO. 39/AHD/2010 A. Y.: 2004-05 THE D. C. I. T., ANAND CIRCLE, 3 RD FLOOR, S. P. PATEL COMPLEX, NR. OLD C. K. HALL, MAYFAIR ROAD, ANAND 388 001 VS PATEL TRACTORS CO. LTD., ANAND CHIKHODARA ROAD, TALUKA & DISTRICT ANAND PA NO. AACFP 2895 G (APPELLANT) (RESPONDENT) APPELLANT BY SHRI VINOD TANWANI, SR. DR. RESPONDENT BY NONE DATE OF HEARING: 05-01-2012 DATE OF PRONOUNCEMENT: 06-01-2012 O R D E R PER BHAVNESH SAINI: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LEARNED CIT(A)-IV , BARODA DATED 08-10-20009, FOR ASSESSMENT YEAR 2004-05, ON THE FO LLOWING GROUND: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LEARNED, THE LEARNED CIT(A) HAS ERRED IN D ELETING THE DISALLOWANCE OF PROPORTIONATE INTEREST EXPENSES OF RS.9,59,273/- OVERLOOKING THE FACT THAT THE ASSESSE E HAS DIVERTED INTEREST BEARING FUNDS FOR THE NON BUSINES S PURPOSES. 2. THE AO MADE THE DISALLOWANCE BY FOLLOWING THE OR DER OF ASSESSMENT YEAR 2002-03 WHICH WAS CONFIRMED BY THE LEARNED ITA NO.39/AHD/2010 DCIT, ANAND CIRCLE VS PATEL TRACTORS CO. LTD. 2 CIT(A) BY DISALLOWING PROPORTIONATE INTEREST @15% P ER ANNUM ON INTEREST FREE ADVANCES OF RS.63,95,155/-. THE ASSES SEE SUBMITTED BEFORE THE AO THAT NONE OF THE ADVANCES IS MADE IN THE ASSESSMENT YEAR AND IT HAD SUFFICIENT INTEREST FREE FUNDS AVAI LABLE I.E. UNSECURED LOANS OF FAMILY AND FRIENDS AMOUNTING TO RS.1,84,82 ,097/- AND SHARE CAPITAL OF RS.19,22,000/-. THE AO DID NOT ACCEPT TH E CONTENTION OF THE ASSESSEE BY NOTING THAT RESERVES AND SURPLUS HAD TU RNED NEGATIVE. REGARDING CLAIM OF INTEREST FREE UNSECURED LOANS OF RS.1,84,82,097/-, THE AO NOTED THAT THIS INCLUDED NEW INTEREST BEARIN G LOANS OF RS.53,86,750/-. IT WAS SUBMITTED BEFORE THE LEARNED CIT(A) THAT IN EARLIER YEAR THE LEARNED CIT(A) PASSED EX-PARTE ORD ER BECAUSE THE COMPANY IS CLOSED. THE AO OVERLOOKED THE FACT THAT THE ASSESSEE HAD SUFFICIENT NON-INTEREST BEARING FUNDS; THEREFOR E, IN VIEW OF THE DECISION OF ITAT AHMEDABAD BENCH IN THE CASE OF TOR RENT FINANCIERS, THE DISALLOWANCE WAS NOT JUSTIFIED. THE LEARNED CIT(A) CONSIDERING THE EXPLANATION OF THE ASSESSEE DIRECTE D THE AO TO MAKE FACTUAL VERIFICATION AND PASSED THE ORDER ACCORDING LY. HIS FINDINGS IN PARA 2.2 ARE REPRODUCED AS UNDER: 2.2 I HAVE CONSIDERED THE MATTER. ASSESSING OFFICE R HAS NOTED THAT APPELLANT HAD INTEREST FREE UNSECURED LOAN FUN DS OF RS.1,84,82,097/- LESS RS.53,86,750/-, I.E. RS.1,30, 95,347/-. IN VIEW OF DECISION OF AHMEDABAD ITAT IN THE CASE OF T ORRENT FINANCIERS, SINCE THE INTEREST FREE FUNDS AVAILABLE (RS.1,30,95,347/-) EXCEEDED INTEREST FREE LOAN ADVA NCED BY THE APPELLANT OF RS.63,95,155/-, NO DISALLOWANCE OF INT EREST U/S. 36(1) (III) IS CALLED FOR. THE DISALLOWANCE OF RS.9 ,59,273/- IS DIRECTED TO BE DELETED SUBJECT TO FACTUAL VERIFICAT ION BY THE ASSESSING OFFICER THAT APPELLANT HAD INTEREST FREE FUNDS OF RS.1,30,95,347/- DURING THE YEAR. ITA NO.39/AHD/2010 DCIT, ANAND CIRCLE VS PATEL TRACTORS CO. LTD. 3 3. THE LEARNED DR RELIED UPON THE ORDER OF THE AO. NONE APPEARED ON BEHALF OF THE ASSESSEE. 4. ON CONSIDERATION OF THE SUBMISSION OF THE LEARNE D DR, WE ARE OF THE VIEW NO INTERFERENCE IS CALLED FOR IN THE MA TTER. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS RELIANCE UT ILITIES AND POWER LTD., 313 ITR 340 HELD AS UNDER: HELD, DISMISSING THE APPEAL, THAT IF THERE WERE FU NDS AVAILABLE BOTH INTEREST-FREE AND OVERDRAFT AND/OR L OANS TAKEN, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF INTEREST-FREE FUNDS GENERATED OR AVAILABLE WITH THE COMPANY, IF THE INTEREST-FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS. IN THIS CASE THIS PRESUMPTION WAS ESTABLISHED CONSIDERING THE FINDING OF FACT BOTH BY THE COMMISSIONER (APPEALS) AND THE TRIBUNAL. THE INTEREST WAS DEDUCTIBLE. 5. CONSIDERING THE FACTS OF THE CASE IN THE LIGHT O F THE FINDINGS OF THE LEARNED CIT(A), WE DO NOT FIND ANY JUSTIFICATIO N TO INTERFERE WITH THE FINDINGS OF THE LEARNED CIT(A). ADMITTEDLY, TH E ASSESSEE HAS INTEREST FREE FUNDS AVAILABLE WHICH ARE MORE THAN T HE AMOUNT ADVANCED, THEREFORE, THE LEARNED CIT(A) RIGHTLY DIR ECTED THE AO TO MAKE FACTUAL VERIFICATION ON THE ISSUE. ACCORDINGLY , THIS GROUND OF APPEAL THE REVENUE HAS NO MERIT AND IS DISMISSED. ITA NO.39/AHD/2010 DCIT, ANAND CIRCLE VS PATEL TRACTORS CO. LTD. 4 6. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. ORDER PRONOUNCED IN THE OPEN COURT SD/- SD/- (A. MOHAN ALANKAMONY) ACCOUNTANT MEMBER (BHAVNESH SAINI) JUDICIAL MEMBER LAKSHMIKANT LAKSHMIKANT LAKSHMIKANT LAKSHMIKANT DEKA DEKA DEKA DEKA/ // / COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT CONCERNED 4. THE CIT(A) CONCERNED 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE BY ORDER D Y. REGISTRAR, ITAT, AHMEDABAD