KELVION INDIA PVT. LTD. (FORMERLY KNOWN AS GEA ECOFLEX INDIA PVT. LTD.), THANE V. ACIT 15(1)(2), MUMBAI

ITA 4236/MUM/2017

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 3907 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2011-2012
• Appeal Filed On: 08-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH, MUMBAI BEFORE S/ SHRI B.R.BASKARAN (AM) & AMARJIT SINGH (JM) I.T.A. NO. 4236 /MUM /20 1 7 (ASSESSMENT YEAR 20 11 - 12 ) KELVION INDIA PVT. LTD. (EARLIER GEA ECOFLEX INDIA PVT. LTD) 403/404, ODYSSEY IT PARK ROAD N O. 9, WAGALE INDL. ESTATE, THANE (WEST) PIN : 400 604. PAN : AACCG3264H VS. ACIT 15(1)(2) AAYAKAR BHAVAN M.K. ROAD CHURCHGATE MUMBAI - 400 020. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI KIRIT SHETH DEPARTMENT BY SHRI MANOJ KUMAR SINGH DATE O F HEARING 30 .10 . 201 8 DATE OF PRONOUNCEMENT 30 . 10 . 201 8 O R D E R PER B.R. BASKARAN (A M) : - THE APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 27.4.2017 PASSED BY THE LEARNED CIT(A) - 24, MUMBAI AND IT RELATES TO A.Y. 2011 - 12. THE ASSESSEE IS AGGRIEVED BY THE DECISION OF THE LEARNED CIT(A) IN CONFIRMING THE DISALLOWANCE OF INTEREST EXPENDITURE OF ` 16.95 LAKHS U/S. 36(1)(II) OF THE ACT. 2. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND SALE OF PLATE HEAT EXCHANGER. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAD CLAIMED INTEREST EXPENDITURE OF ` 33.23 LAKHS. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS SHOWN CAPITAL WORK - IN - PROGRESS AT RS. 1126.23 LAKHS AND RS. 35,00,00/ - AS AT THE BEGINNING AND AS AT TH E END OF THE YEAR RESPECTIVELY. ACCORDINGLY, HE TOOK THE VIEW THAT INTEREST RELATING TO CAPITAL WORK - IN - PROGRESS SHOULD HAVE BEEN CAPITALIZED BY THE ASSESSEE. ACCORDINGLY, HE WORKED OUT KELVION INDIA PVT. LTD. 2 INTEREST RELATING TO CAPITAL WORK - IN - PROGRESS AT RS. 138.90 LAKHS AND DISALLOWED THE SAME. 3. BEFORE THE LEARNED CIT(A), THE ASSESSEE SUBMITTED THAT IT HAS DEBITED INTEREST EXPENDITURE OF RS. 33.23 LAKHS ONLY TO THE PROFIT AND LOSS ACCOUNT OUT OF WHICH SUM OF RS. 16.28 LAKHS WAS RELATING TO INTEREST PAID UNDER INCOME TAX AC T U/S. 234B & 234C OF THE ACT. IT WAS SUBMITTED THAT THE ABOVE SAID INTEREST OF RS. 16.28 LAKHS HAS ALREADY BEEN DISALLOWED BY THE ASSESSEE VOLUNTARILY WHILE COMPUTING TOTAL INCOME . ACCORDINGLY, IT WAS SUBMITTED THAT NET INTEREST DEBITED TO PROFIT AND LOSS ACCOUNT WAS ONLY RS 16.95 LAKHS AND HENCE THE ASSESSING OFFICER WAS NOT JUSTIFIED IN DISALLOWING INTEREST EXPENDITURE TO THE TUNE OF RS. 138.90 LAKHS. THE ASSESSEE ALSO SUBMITTED THAT IT WAS HAVING TWO DIVISIONS, VIZ., RT DIVISION AND PHE DIVISION. IT WA S SUBMITTED THAT THE BORROWED FUNDS HAVE BEEN USED FOR THE PURPOSE OF BUSINESS UNDER RT DIVISION. THE EXPANSION BY WAY OF CAPITAL WORK - IN - PROGRESS HAS TAKEN PLACE IN PHE DIVISION AND IT WAS FURTHER SUBMITTED THAT THE ENTIRE CAPITAL WORK IN PROGRESS HAS BEE N FUNDED FULLY OUT OF INTERNAL ACCRUAL S, I.E., NO BORROWED FUNDS HAVE BEEN USED . SINCE THE ASSESSEE DID NOT FURNISH FUND FLOW STATEMENT TO SUBSTANTIATE ITS CLAIM, THE LEARNED CIT(A) CONFIRMED THE DISALLOWANCE TO THE EXTENT OF RS.16.95 LAKHS , BEING NET INT EREST EXPENDITURE CLAIMED BY THE ASSESSEE. STILL AGGRIEVED, THE ASSESSEE HAS FILED THIS APPEAL BEFORE US. 4. THE LEARNED AR REITERATED THE CONTENTIONS MADE BEFORE THE LEARNED CIT(A). HE FURTHER SUBMITTED THAT THE ASSESSEE HAS PREPARED SEPARATE T RIAL BALA NCE FOR BOTH PHE DIV ISION AND RT DIVISION AND THE SAME WOULD MAKE IT CLEAR THAT CAPITAL WORK - IN - P ROGRESS HAS BEEN FUNDED FULLY OUT OF INTERNAL ACCRUAL S . HE SUBMITTED THAT THE ASSESSEE DOES NOT HAVE ANY OBJECTION IN RESTORING THIS ISSUE TO THE FILE OF THE A SSESSING OFFICER FOR EXAMINING THE FACTUAL ASPECTS PRESENTED BY HIM. KELVION INDIA PVT. LTD. 3 5. THE LEARNED AR ALSO SUBMITTED THAT OWN FUNDS AVAILABLE WITH THE ASSESSEE IS MORE THAN THE VALUE OF WORK - IN - PROGRESS AND HENCE AS PER THE PRINCIPLES LAID DOWN BY HON'BLE BOMBAY HIGH CO URT IN THE CASE OF RELIANCE UTILITIES POWER LIMITED (313 ITR 340 ) , THE CAPITAL WO RK - IN - PROGRESS SHOULD BE CONSIDERE D AS MET OUT OF OWN FUNDS ONLY . A CCORDINGLY HE SUBMITTED THAT THERE IS NO REQUIREMENT OF MAKING ANY DISALLOWANCE OUT OF INTEREST EXPENDITURE . 6. THE LEARNED DR , ON THE CONTRARY, SUBMITTED THAT THE ASSESSEE HAS NOT FURNISHED FUND - FLOW STATEMENT S TO SUBSTANTIATE ITS CLAIM. 7. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE RECORD. THE LEARNED AR SUBMIT TED THAT IT HAS PREPARED SEPARATE T RIAL BALANCE FOR PHE DIVISION AND RT DIVISION AND THE SAME IS AVAILABLE AT PAGES 15 TO 37 OF THE PAPER BOOK. IT IS THE CONTENTION OF THE ASSESSEE THAT WORK - IN - PROGRESS HAS BEEN FUNDED OUT OF OWN FUNDS AND FURTHER, THE S AID EXPANSION HAS TAKEN PLACE IN PHE DIVIS ION. IT WAS FURTHER SUBMITTED THAT THE B ORROWED FUND S HA VE BEEN USED IN RT DIVISION AND HENCE INTEREST EXPENDITURE IS FULLY ALLOWABLE AS DEDUCTION. THE ASSESSEE ALSO PLACED RELIANCE ON THE DECISION RENDERED BY HON'BLE BOMBAY HIGH COURT IN THE CASE OF RELIA NCE UTILITIES AND POWER LTD (SUPRA) . SINCE CONTENTION S OF THE ASSESSEE REQUIRES FACTUAL VERIFICATION, WE RESTORE THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER FOR EXAMINING VARIOUS CONTENTIONS OF THE ASSESSEE INCLUDING RELIANCE PLACED BY THE ASSESSEE IN THE CASE OF RELIANCE UTILITIES AND POWER LTD. ACCORDINGLY, ORDER PASSED BY THE LEARNED CIT(A) ON THIS ISSUE IS SET ASIDE. 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER HAS BE E N PRONOUNCED IN THE COURT ON 30 . 10 .201 8 . SD/ - SD/ - (AMARJIT SINGH ) ( B.R. BASKARAN) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED : 30 / 10 / 20 1 8 KELVION INDIA PVT. LTD. 4 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. BY ORDER, //TRUE COPY// ( SENIOR PRIVATE SECRETARY ) PS ITAT, MUMBAI