Unident Brushes Pvt. Ltd., Baroda V. The ACIT., Circle-4, Baroda

ITA 390/AHD/2007

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 0394 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-11-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 27-11-2009
• Assessment Year: 2003-2004
• Appeal Filed On: 24-01-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M C
• Keywords: Opportunity of being heard; Set aside
• Section: 80IB

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL : C BENCH : AHMEDABAD (BEFORE HONBLE SHRI T.K. SHARMA, J.M. & HONBLE SH RI N.S. SAINI, A.M.) I.T.A. NO. 390/AHD./2007 ASSESSMENT YEAR : 2003-2004 UNIDENT BRUSHES LTD., BARODA -VS.- ASSISTANT COMMISSIONER OF INCOME TAX, (P.A. NO. AAACU 2382 A) CIRCLE-4, BARO DA. (APPELLANT) (RESPONDENT) APPELLANT BY : SMT. URVASHI SHODH AN RESPONDENT BY : SHRI M.C. PANDIT, SR. D.R. O R D E R PER SHRI T.K. SHARMA, JUDICIAL MEMBER :- THIS APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER DATED 31.10.2006 OF LEARNED COMMISSIONER OF I NCOME TAX (APPEALS) -III, BARODA FOR THE ASSESSMENT YEAR 2003-04. 2. THE GROUND NO. 1 IS AGAINST CONFIRMING THE DISAL LOWANCE OF INTEREST EXPENSES OF RS.4,06,000/- ON THE GROUND THAT THE SAME PERTAINED TO FUNDS BORROWED, WHICH WERE UTILIZED BY THE ASSESSEE-COMPANY TO PROVIDE INTEREST-FREE ADVAN CES TO ITS ASSOCIATE CONCERNS. 3. BRIEF FACTS ARE THAT THE ASSESSEE HAS GIVEN ADVA NCES TO IT ASSOCIATE CONCERNS AS UNDER :- (A) ROSE PACKERS (P) LTD. RS. 9,00,000/- (B) S & G MOULDERS (P) LTD. RS.20,00,000/- RS.29,00,000/- NO INTEREST WAS CHARGED BY THE ASSESSEE ON THESE AD VANCES. AT THE SAME TIME, THE A.O. NOTICED THAT THE ASSESSEE-COMPANY HAD PAID INTEREST AND BAN K CHARGES AMOUNTING TO RS.77,41,408/-. ON BEING ASKED TO SHOW CAUSE WHY CORRESPONDING INTERES T SHOULD NOT BE DISALLOWED IN RESPECT OF TWO ADVANCES TO THE ASSOCIATE CONCERNS, THE ASSESSEE-CO MPANY REPLIED THAT ADVANCES HAD BEEN MADE OUT OF SUFFICIENT NON-INTEREST BEARING FUNDS AVAILA BLE WITH THE COMPANY. THE A.O. NOT BEING 2 SATISFIED WITH THE EXPLANATION, HELD THAT INTEREST @ 14%, I.E. THE RATE CHARGED BY THE BANK ON THE AMOUNT OF ADVANCES OF RS.29,00,000/- WAS ATTRIBUTAB LE TO NON-BUSINESS PURPOSE AND, THEREFORE, HE DISALLOWED RS.4,06,000/-. 4. ON APPEAL, IN THE IMPUGNED ORDER, THE LEARNED CO MMISSIONER OF INCOME TAX(APPEALS) CONFIRMED THE AFORESAID DISALLOWANCE ON THE GROUND THAT IDENTICAL ISSUE CAME UP FOR CONSIDERATION BEFORE HIS PREDECESSORS IN RESPECT OF APPEALS FOR THE ASSESSMENT YEARS 2001-02 AND 2002-03. VIDE ORDERS DATED 10.02.2005 AND 04.10.200 5 RESPECTIVELY, THE ISSUE WAS DECIDED AGAINST THE ORDER AND DISALLOWANCE WAS CONFIRMED. A GGRIEVED BY THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 5. AT THE TIME OF HEARING, ON BEHALF OF ASSESSEE SM T. URVASHI SHODHAN APPEARED AND CONTENDED THAT AGAINST THE ORDER OF LEARNED COMMISS IONER OF INCOME TAX(APPEALS) FOR EARLIER TWO YEARS, I.E. ORDER DATED 10.02.2005 AND 04.10.20 05 (SUPRA), FURTHER APPEALS WERE FILED. THE ITAT, D BENCH, AHMEDABAD IN BOTH THE YEARS, SET ASIDE THE ISSUE TO THE FILE OF A.O. TO DECIDE THE SAME AFRESH KEEPING IN VIEW THE DECISION OF THE HON'BLE APEX COURT IN THE CASE OF S.A. BUILDERS LTD. VS.- CIT AND ANOTHER REPORTED IN (20 07) 288 ITR 1 (SC). FURTHER SHE SUBMITTED THAT FOR THIS YEAR INSTEAD OF REMANDING THE MATTER TO THE FILE OF A.O., THE DISALLOWANCE OF INTEREST BE DELETED FOLLOWING THE DECISION OF THE HON'BLE BO MBAY HIGH COURT IN THE CASE OF CIT VS.- RELIANCE UTILITIES AND POWER LTD. REPORTED IN (2009 ) 313 ITR PAGE 340, WHEREIN IT WAS HELD IF THERE WERE FUNDS AVAILABLE BOTH INTEREST-FREE AND O VERDRAFT AND/OR LOANS TAKEN, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENT WOULD BE OUT OF INTERES T-FREE FUNDS GENERATED OR AVAILABLE WITH THE COMPANY, IF THE INTEREST FREE-FUNDS WERE SUFFICIENT TO MEET THE INVESTMENT. 6. ON THE OTHER HAND, SHRI M.C. PANDIT, LD. DEPARTM ENTAL REPRESENTATIVE CONTENDED THAT SINCE IN THE EARLIER TWO YEARS MATTERS WERE RESTORE D, FOR THIS YEAR ALSO, THE MATTER BE RESTORED TO THE FILE OF A.O., WHO WILL EXAMINE THE APPLICATION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS.- RELIANCE UTILITIES AND POWER LTD.(SUPR A). 7. WE HAVE GIVEN OUR CAREFUL CONSIDERATION TO THE R IVAL SUBMISSIONS MADE BEFORE US AND HAVE PERUSED THE ORDERS OF AUTHORITIES BELOW. WHEN THE TRIBUNAL DECIDED THE APPEAL OF THE 3 ASSESSEE IN EARLIER TWO YEARS, THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS.- RELIANCE UTILITIES AND POWER LTD. (313 ITR PA GE 340) WAS NOT AVAILABLE. IN THE EARLIER TWO YEARS, THE MATTER BE RESTORED TO THE FILE OF A.O. B ECAUSE REASONS GIVEN FOR MAKING THE ADDITION ARE SAME. KEEPING IN VIEW THE DECISION OF THE TRIBUNAL IN EARLIER TWO YEARS, IN OUR OPINION, IT WILL MEET THE ENDS OF JUSTICE FOR THIS YEAR, THEREFORE, THE MATTER IS RESTORED TO THE FILE OF A.O. WHO WILL EXAMINE THE FACTS OF ASSESSEES CASE KEEPING IN VIE W THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS.- RELIANCE UTILITIES A ND POWER LTD. (SUPRA). IN CASE, THE FACTS ARE IDENTICAL WITH THAT IN THE CASE OF CIT VS.- RELIAN CE UTILITIES AND POWER LTD. (SUPRA), THE A.O. WILL ALLOW APPROPRIATE RELIEF TO THE ASSESSEE IN AC CORDANCE WITH LAW AFTER GIVING OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8. THE ONLY OTHER GROUND OF APPEAL IS AGAINST CONFI RMING THE ACTION OF A.O. EXCLUDING MISCELLANEOUS INCOME OF RS.5,563/- AND INSURANCE CL AIM OF RS.4,725/- FROM THE INDUSTRIAL PROFIT COMPUTED FOR THE PURPOSE OF CLAIMING DEDUCTION UNDE R SECTION 80IB OF THE INCOME TAX ACT, 1961. 9. AT THE TIME OF HEARING, THE LD. COUNSEL OF THE A SSESSEE CONTENDED THAT IN RESPECT OF MISCELLANEOUS INCOME, THE ASSESSEE IS NOT ENTITLED TO DEDUCTION UNDER SECTION 80IB. THEREFORE, THIS PORTION OF THE GROUND IS NOT PRESSED. HOWEVER, WITH REGARD TO INSURANCE CLAIM OF RS.4,725/-, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE A.O. BE DIRECTED TO ALLOW THE NET OFF IN RESPECT OF THE EXPENSES INCURRED, WHICH WERE DEBITED TO THE PROFIT & LOSS A/C. FOR THIS PURPOSE, SHE PLEADED THAT THE MATTER BE RESTORED TO THE FILE OF A.O. 10. ON THE OTHER HAND, THE LD. DEPARTMENTAL REPRESE NTATIVE COULD NOT CONTROVERT THE AFORESAID SUBMISSION OF THE LD. COUNSEL OF THE ASSESSEE. 11. HAVING HEARD BOTH THE SIDES, WE HAVE CAREFULLY GONE THROUGH THE ORDERS OF AUTHORITIES BELOW. IN RESPECT OF THE MISCELLANEOUS INCOME, THE ASSESSEE IS NOT ENTITLED TO DEDUCTION UNDER SECTION 80IB. HOWEVER, IN RESPECT OF INSURANCE CLA IM OF RS.4,725/- THE MATTER IS RESTORED TO THE FILE OF A.O. WITH THE DIRECTION THAT THE ASSESSEE S HOULD FURNISH THE DETAILS OF EXPENSES WHICH CAN 4 BE SET OFF AND ONLY BALANCE AMOUNT BE EXCLUDED FROM INDUSTRIAL PROFIT COMPUTED FOR THE PURPOSE OF CLAIMING DEDUCTION UNDER SECTION 80IB. THIS GROU ND OF APPEAL IS PARTLY ALLOWED. 12. IN THE RESULT, FOR STATISTICAL PURPOSES, THE AP PEAL OF THE ASSESSEE IS PARTLY ALLOWED TO THE EXTENT INDICATED HEREINABOVE. THE ORDER PRONOUNCED IN THE COURT ON 30.11.2009 SD/- SD/- (N.S. SAINI) (T.K. SHARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 30 / 11 / 2009 COPY OF THE ORDER IS FORWARDED TO : 1) THE ASSESSEE (2) THE DEPARTMENT 3) CIT(A) CONCERNED; (4) CIT CONCERNED, (5) D.R., ITAT, AHMEDABAD. TRUE COPY BY ORDER DEPUTY REGISTRAR, ITAT, AHMEDABAD LAHA/SR.P.S.