The Dy. Commissioner of Income Tax, Anand V. M/s Amin Machinery Pvt. Ltd, Anand

ITA 42/AHD/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 85612 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 27-01-2015
• Assessment Year: 2002-2003
• Appeal Filed On: 05-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: S N DIVETIA
• Keywords: Depreciation; Unabsorbed depreciation
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD (BEFOR E SHRI MUKUL KR. SHRAWAT, J.M. & SHRI ANIL CHATURVEDI , A.M.) I. T. A. NO. 42 / AHD/ 20 1 0 (A SSESSMENT YEAR: 2002 - 03) DEPUTY COMMISSIONER OF INCOME - TAX, ANAND CIRCLE, ANAND V/S AMIN MACHINERY PVT. LTD. G.I.D.C., VALLABH UDYOGNAGAR, DIST. ANAND. (A PPELLANT) (RESPONDENT) PAN: AACCA0719K APPELLANT BY : SMT. SONIA KUMAR, SR. D.R. RESPONDENT BY : SHRI S.N. DIVETIA ( )/ ORDER DATE OF HEARING : 27 - 01 - 2015 DATE OF PRONOUNCEMENT : 30 - 01 - 2015 PER SHRI ANIL CHATURVEDI,A.M. 1. THIS APPEAL FILED BY THE REVENUE IS AGAINST THE ORDER OF CIT(A) - I V, BARODA DATED 23.10.2009 FOR A.Y. 2002 - 03. 2. THE FACTS AS CULLED OUT FROM THE MATERIAL ON RECORD ARE AS UNDER. 3. ASSESSEE IS A COMPANY STA TED TO BE ENGAGED IN THE BUSINESS OF MANUFACTURING AND SALE OF W ELDING AUTOMATION EQUIPMENT. ASSESSEE FILED ITS RETURN OF INCOME FOR A.Y. 2002 - 03 ON 31.10.2002 DECLARING TOTAL INCOME AT RS. NIL AFTER SET OFF OF BROUGHT FORWARD BUSINESS LOSSES OF EARLIER Y EARS. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ITA NO 42/AHD/2010 . A.Y. 2002 - 03. 2 ORDER DATED 04.02.2005 AND THE TOTAL INCOME WAS DETERMINED AT RS. 01,82,500/ - AFTER SETTING OFF OF BUSINESS LOSSES AND UNABSORBED DEPRECIATION. AGG RIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A) WHO VIDE ORDER DATED 23.10.2009 GRANTED SUBSTANTIAL RELIEF TO THE ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF CIT(A), REVENUE IS NOW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS; - 1. THE LD. CIT (A) HAS ERRED IN LAW AND ON FACTS IN DIRECTING THE AO TO DELETE ADDITION OF RS. 8,00,000/ - MADE ON ACCOUNT OF EXCISE DUTY ON CLOSING STOCK OF FINISHED GOODS, BY FOLLOWING THE DECISION OF IT AT AHMEDABAD DATED 20.3.2009 IN THE CASE OF NARAN LALA PVT. LTD. AND DECISION DATED 19.6.2009 IN THE CASE OF M/S CHEMICAL & DYESTUFF INDUSTRIES, DESPITE THE EXCISE DUTY HAVING BEEN ACCRUED ON THE MANUFACTURE OF GOODS AS SETTLED IN THE CASE OF MCDOWELL & CO. VS. CTO 154 ITR 148 (SC) AND ALL OVERHEADS INCLUDING EXCISE DUTY BEING INCLUDIBLE IN THE VALUATION OF FINISHED GOODS AS SETTLED IN THE CASE OF CIT VS. BRITISH PAINTS INDIA LTD. 188 ITR 44( SC). 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED CIT(A) HAS ERRED IN ALLOWING T HE INTEREST EXPENSES OF RS. 2,33,833/ - OVERLOOKING THE FACT THAT THE ASSESSEE HAD DIVERTED INTEREST BEARING FUNDS FOR ITS SISTER CONCERN. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSI NG OFFICER. 1 ST GROUND IS WITH RESPECT TO DELETION ON ACCOUNT OF EXCISE DUTY MADE TO CLOSING STOCK OF FINISHED GOODS. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NOTICED THAT ASSESSEE HAS VALUED THE CLOSING STOCK OF FINISHED GOODS AT COST WITHOUT C ONSIDERING THE EXCISE DUTY. HE FURTHER NOTICED THAT THE CLOSING STOCK OF FINISHED GOODS WAS RS. 50,00,000/ - AND THE EXCISE DUTY AT 16% ON IT WORKED OUT TO RS. 8 LACS. HE ACCORDINGLY MADE ADDITION OF RS. 8 LACS TO THE CLOSING STOCK. AGGRIEVED BY THE ORDER O F A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A). LD. CIT(A) DELETED THE ADDITION BY HOLDING AS UNDER: - 2.1. BEFORE ME, APPELLANT RELIED UPON THE DECISION OF ITAT, AHMEDABAD IN THE CASE OF NARAN LALA PVT. LTD. IN ITA NO.686/AHD/2006 AND CHEMICAL & DYESTUF F INDUSTRIES IN ITA NO.L077/AHD/2009, WHEREIN FOLLOWING THE DECISION OF MADHYA PRADESH HIGH COURT IN THE CASE OF D & H SECHERON ELECTRODES PVT. LTD. 173 TAXMAN, 188, ITAT AHMEDABAD HELD THAT WHEN FINISHED GOODS ARE NOT SOLD OR CLEARED AND ELEMENT OF EXCISE DUTY THEREON HAS NOT BEEN INCURRED AND DEBITED IN THE TRADING ACCOUNT OF THE YEAR, THERE WAS NO QUESTION OF MAKING ANY ADDITION TO THE VALUE OF THE CLOSING STOCK. APPELLANT FURTHER SUBMITTED THAT EVEN OTHERWISE IF EXCISE DUTY ON FINISHED GOODS WAS DEBITED TO THE TRADING ACCOUNT, THE SAME WOULD HAVE BEEN ALLOWED U/S.43B OF THE INCOME TAX ACT, SINCE THE SAME WOULD BE PAID BEFORE DUE DATE OF FILING THE RETURN OF INCOME. 2.2. IN VIEW OF DECISIONS OF ITAT AHMEDABAD DATED 20.3.2009 IN THE CASE OF NARAN LALA PVT . LTD. AND DECISION DATED 19.6.209 IN THE CASE OF M/S. CHEMICAL & DYESTUFF INDUSTRIES, THE ADDITION OF RS.8,00,000/ - MADE BY THE ASSESSING OFFICER IS DELETED. ITA NO 42/AHD/2010 . A.Y. 2002 - 03. 3 5. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 6. BEFORE US, LD. D.R. S UPPORTED THE ORDER OF A.O. SHE FURTHER SUBMITTED THAT IN VIEW OF THE DECISION OF HON BLE APEX COURT IN THE CASE OF CIT VS. BRITISH PAIN TS INDIA LTD. 188 ITR 44 (SC). A LL THE OVERHEADS INCLUDING EXCISE DUTY SHOULD BE CONSIDERED WHILE VALUATION OF FINISHED G OODS. SHE THUS SUPPORTED THE ORDER OF A.O. THE LD. A.R. ON THE OTHER HAND SUPPORTED THE ORDER OF LD. CIT(A). HE FURTHER SUBMITTED THAT IN RESPECT OF EXCISABLE GOODS MANUFACTURED AND LYING IN STOCK THE EXCISE DUTY LIABILITY GETS CRYSTALLIZED ON THE DATE OF CLEARANCE OF GOODS AND NOT ON THE DATE OF MANUFACTURE. HE FURTHER SUBMITTED THAT SINCE THE GOODS WERE STILL LYING IN STOCK WITH THE ASSESSEE, THERE WAS NO LIABILITY TOWARDS EXCISE . HE ALSO PLACED RELIANCE ON THE DECISION OF HON BLE APEX COURT IN THE CASE OF CIT VS. SHRIRAM HONDA POWER EQUIPMENT LTD. (2013) 352 ITR 48 (SC) AND THE DECISION IN THE CASE OF ACIT VS. TORRENT CABLES LTD. (2013) 354 ITR 163 (SC). HE THUS SUPPORTED THE ORDER OF LD. CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATER IAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE DELETING THE ADDITION HAD RELIED UPON THE DECISION OF AHMEDABAD TRIBUNAL WHEREIN IT WAS HELD THAT WHEN FINISHED GOODS ARE NOT SOLD OR CLEARED AND ELEMENT OF EXCISE DUTY THEREON HAS NOT BEEN INCURRED AND DEBITED TO THE TRADING ACCOUNT OF THE YEAR, THERE WAS NO QUESTION OF MAKING ANY ADDITION TO THE VALUE OF CLOSING STOCK. BEFORE US, REVENUE HAS NOT BROUGHT ANY CONTRARY BINDING DECIS ION IN ITS SUPPORT. WE FURTHER FIND THAT HON BLE BOMBAY HIGH COURT IN THE CASE OF C IT VS. LOKNETE BALASAHEB DESAI SSK LTD. (2011) 339 ITR 288 (BOM) HAS HELD THAT IN RESPECT OF EXCISABLE GOODS MANUFACTURED AND LYING IN STOCK, THE EXCISE DUTY LIABILITY WOULD GET CRYSTALLIZED ON THE DATE OF CLEARANCE OF GOODS AND NOT ON THE DATE OF MANUFACT URE. CONSIDERING THE AFORESAID FACTS, WE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A). THUS THIS GROUND OF REVENUE IS DISMISSED. 2 ND GROUND IS WITH RESPECT TO DELETION OF INTEREST EXPENSE OF RS. 2,33,833/ - . ITA NO 42/AHD/2010 . A.Y. 2002 - 03. 4 8. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, A.O NOTICED THAT ASSESSEE HAS MADE INTEREST FREE ADVANCES TO ITS SISTER CONCERNS AND AT THE SAME TIME HAD PAID INTEREST TO BANK ON THE LOANS AVAILED BY IT. A.O WAS OF THE VIEW THAT THE ENTIRE INTEREST CANNOT BE ALLOWED WHEN IT HAS DIVERTED INT EREST FREE ADVANCES TO ITS SISTER CONCERNS. HE ACCORDINGLY WORKED OUT THE DISALLOWANCE OF INTEREST AT RS. 2,33,833/ - AND ADDED THE SAME TO THE TOTAL INCOME. AGGRIEVED BY THE ORDER OF A.O., ASSESSEE CARRIED THE MATTER BEFORE CIT(A). LD. CIT(A) DELETED THE A DDITION BY HOLDING AS UNDER: - 4.1. BEFORE ME, APPELLANT SUBMITTED THAT THE ASSESSING OFFICER FAILED TO ESTABLISH ANY NEXUS BETWEEN THE INTEREST BEARING FUNDS BORROWED BY THE APPELLANT AND ADVANCES GIVEN TO THE CONCERNED PERSONS. FURTHER, AS EVIDENT FROM TH E BALANCE SHEETS AS ON 31.3.2000, 31.3.2001 AND 31.3.2002, APPELLANT HAD SUFFICIENT INTEREST FREE FUNDS AS UNDER: - F.Y. INTEREST FREE FUNDS (RS.) 1999 - 2000 .. 65,31,310/ - 2000 - 01 .. 65,18,648/ - 2001 - 02 .. 65,18,648/ - APPELLANT SUBMITTED THAT THE ADVANCES IN QUESTION TO ASSOCIATE CONCERNS WERE NOT GIVEN DURING THE YEAR UNDER APPEAL AND SINCE THERE WAS NO DISALLOWANCE OF ANY INTEREST EXPENSES IN EARLIER YEARS, DISALLOWANCE CANNOT BE MADE FOR THE YEA R UNDER APPEAL. IN THIS REGARD, APPELLANT RELIED UPON DECISION OF KARNATAKA HIGH COURT IN THE CASE OF SRIDEV ENTERPRISES 192 ITR 165. APPELLANT RELIED UPON DECISIONS IN THE CASE OF MUNJAL SALES, 298 ITR 298 AND RELIANCE UTILITY AND POWER LTD. (2009) 313 IT R 340 (BOM) HOLDING THAT IF SUFFICIENT INTEREST FREE FUNDS WERE AVAILABLE, DISALLOWANCE OF INTEREST COULD NOT BE MADE. LASTLY, APPELLANT CONTENDED THAT IN CASE OF AMIN PANEL, THE TRANSACTIONS - WERE BUSINESS TRANSACTIONS AND HENCE ANY ADVANCES ON THAT ACCOUN T COULD NOT BE TREATED AS NOT RELATING TO BUSINESS. 4.2. I HAVE CONSIDERED THE MATTER. AS PER THE LEDGER ACCOUNTS OF THE PARTIES, INTEREST IN RESPECT OF WHICH HAS BEEN CALCULATED BY THE ASSESSING OFFICER, THE CLOSING BALANCE AS ON 31.3.2002 WAS AS UNDER: - AMIN PANELS .. RS. 13,79,968/ - BHARAT MACHINERY & PROFILE CO .. RS. 5,94,706/ - POWER ELECTRONICS .. RS. 4,10,647/ - H. P. AMIN .. RS. 1,19,077/ - AS AGAINST THIS, AS PER THE BALANCE SHEET OF THE APPELLANT AS ON 31.3.2002,.THERE WERE UNSEC URED LOANS OF RS.65,18,648/ - AND SCHEDULE 20 OF THE BALANCE SHEET, I.E. REGARDING INTEREST AND BANK CHARGES SHOWS NO INTEREST AS PAID TO DEPOSITORS. THE ONLY INTEREST PAID AND CLAIMED IN THE PROFIT AND LOSS ACCOUNT COMPRISES BANK INTEREST OF RS.14,53,989/ - AND BANK CHARGES OF RS.1,96,298/ - TOTALING TO RS.16,50,287/ - . THUS, APPELLANT'S CONTENTION THAT IT HAD SUFFICIENT INTEREST FREE FUNDS TO COVER INTEREST FREE ADVANCES, IS CORRECT. FOLLOWING THE DECISION OF ITAT, AHMEDABAD IN THE CASE OF TORRENT FINANCIERS (73 TTJ (AND) 624) AND DECISION OF BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITY AND POWER LTD. (2009) 313 ITR 340, ADDITION OF RS.2,33,832/ - IS DELETED 9. AGGRIEVED BY THE ORDER OF LD. CIT(A), REVENUE IS NOW IN APPEAL BEFORE US. 10. BEFORE US, LD. D.R. SUP PORTED THE ORDER OF A.O. THE LD. A.R. REITERATED THE SUBMISSIONS MADE BEFORE LD. CIT(A) AND SUPPORTED HIS ORDER. ITA NO 42/AHD/2010 . A.Y. 2002 - 03. 5 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. WE FIND THAT LD. CIT(A) WHILE GRANTING RELIEF HAS GIVEN A FINDING THA T ASSESSEE WAS HAVING SUFFICIENT INTEREST FREE FUNDS TO COVER THE INTEREST FREE ADVANCES. LD. CIT(A) FURTHER RELIED ON THE DECISION OF AHMEDABAD TRIBUNAL AND BOMBAY HIGH COURT CITED IN HIS ORDER. BEFORE US REVENUE HAS NOT BROUGHT ANY CONTRARY BINDING DECIS ION ON RECORD IN ITS SUPPORT. WE THEREFORE FIND NO REASON TO INTERFERE WITH THE ORDER OF LD. CIT(A). THUS THIS GROUND OF REVENUE IS DISMISSED. 12. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 30 - 01 - 201 5 . SD/ - SD/ - (MUKUL KR. SHRAWAT ) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHMEDABAD