Control Plus Oil & Gas Solutions Pvt ltd., Ahmedabad V. The ITO, Ward-1(1)(3), Ahmedabad

ITA 428/AHD/2018

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 1812 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-02-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 21-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L P JAIN
• Assessee Lawyers: G C PIPARA
• Keywords: Capital asset; Condonation of delay; Revenue expenditure
• Section: 143(3); 73

Judgement Text

, SMC IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD ( CONVENED THROUGH VIRTUAL COURT ) BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SMT. MADHUMITA ROY, JUDICIAL MEMBER ./ I.T.A. NO. 428/AHD/2018 ( ASSESSMENT YEAR : 2014-15) CONTROL PLUS OIL & GAS SOLUTIONS PVT. LTD. 22, DHARA CENTRE, NEAR VIJAY CHAR RASTA, NAVRANGPURA, AHMEDABAD - 380009 / VS. THE INCOME TAX OFFICER WARD -1(1)(3), PRATYAKSH KAR BHAWAN, BEHIND PANJARAPOLE, AMBAWADI, AHMEDABAD 380 015 ./ ./ PAN/GIR NO. : AACCC7127K ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI G. C. PIPARA, A.R. / RESPONDENT BY : SHRI L. P. JAIN, SR.D.R. DATE OF HEARING 12/01/2021 !'# / DATE OF PRONOUNCEMENT 19/02/2021 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS)-1, AHMEDABAD, (CIT(A) IN SHORT), DATED 29.09.2017 ARISING IN THE ASSESSMENT ORDER DATED 21.12.2016 PA SSED BY THE ITA NO.428/AHD/18 [CONTROL PLUS OIL & GAS SOLUTIONS PVT. LTD. VS. ITO] A.Y. 2014-15 - 2 - ASSESSING OFFICER (AO) UNDER S. 143(3) OF THE INCOM E TAX ACT, 1961 (THE ACT) CONCERNING AY 2014-15. 2. AS PER THE GROUNDS OF APPEAL FILED BY THE ASSESS EE, THE ASSESSEE IS AGGRIEVED BY THE DISALLOWANCE OF RS.25,49,201/- TOWARDS INTEREST EXPENSES INCURRED ON TERM LOANS AVAILED BY THE ASSE SSEE. 3. WHEN THE MATTER WAS CALLED FOR HEARING, THE LEAR NED COUNSEL FOR THE ASSESSEE SUBMITTED AT THE OUTSET THAT THERE IS A DELAY OF 73 DAYS IN FILING THE APPEAL FOR AY 2014-15 BEFORE THE ITAT AG AINST THE ORDER OF THE CIT(A). IN THIS CONNECTION, THE LEARNED COUNSE L REFERRED TO THE AFFIDAVIT FILED BY THE ASSESSEE DATED 16 TH SEPTEMBER, 2019 ALONGWITH A PETITION OF EVEN DATE AND URGED FOR CONDONATION OF DELAY AND DISPOSAL OF THE APPEAL ON MERITS. REFERRING TO THE CONTENTS OF THE AFFIDAVIT, THE LEARNED COUNSEL POINTED OUT THAT THE ASSESSEE COMPA NY INADVERTENTLY LEFT THE FIRST APPELLATE ORDER TO BE APPEALED AGAIN ST IN THE DRAWER OF ONE OF DIRECTOR WHICH GOT MIXED WITH OTHER PAPERS. THE FIRST APPELLATE ORDER WAS THUS UNATTENDED DUE TO A BRIEF LAPSE ON T HE PART OF THE DIRECTOR, WHICH WAS PRAYED TO BE CONDONED. IT WAS FURTHER POINTED OUT THAT THE DELAY OCCURRED IS NOT INTENTIONAL OR DELIB ERATE AND THE AFORESAID DELAY OF 73 DAYS OCCURRED HAS NOT CAUSED ANY SERIOUS PREJUDICE TO THE REVENUE. NO MALAFIDE CAN BE IMPUT ED FOR SUCH DELAY. THE LEARNED COUNSEL REFERRED TO THE DECISION RENDER ED BY THE HONBLE SUPREME COURT IN THE CASE OF COLLECTOR OF LAND ACQUISITION VS. MST. KATIJI & ORS. 167 ITR 471 (SC) TO CONTEND THAT THE SUBSTANTIAL JUSTICE DESERVES TO BE PREFERRED OVER THE TECHNICAL GLITCH COMMITTED BY THE ASSESSEE IN BELATED FILING FOR PLAUSIBLE REASONS. 4. ON MERITS, LEARNED COUNSEL FOR THE ASSESSEE POIN TED OUT THAT INTEREST EXPENDITURE ON TERM LOAN IN THE IMPUGNED A Y 2014-15 WAS DISALLOWED FOR THE REASON THAT THE TERM LOAN TAKEN FROM LENDER SREI EQUIPMENTS PVT. LTD. IS IN THE NATURE OF CAPITAL EX PENDITURE. TO REBUT ITA NO.428/AHD/18 [CONTROL PLUS OIL & GAS SOLUTIONS PVT. LTD. VS. ITO] A.Y. 2014-15 - 3 - THE ALLEGATION OF THE REVENUE, THE LEARNED COUNSEL REFERRED TO A LETTER DATED 23.12.2016 FILED WITH THE AO ON 5 TH JANUARY, 2017 TO CLARIFY THAT THE REPRESENTATIVE OF THE ASSESSEE HAS WRONGFULLY A GREED FOR THE PROPOSED DISALLOWANCE BEFORE THE AO ON MISCONSTRUCT ION OF UNDERLYING FACTS. ON FACTS, THE LEARNED COUNSEL RE FERRED TO THE NOTES TO THE AUDITED FINANCIAL STATEMENT OF THE ASSESSEE COMPANY FOR THE YEAR ENDED 31 ST MARCH, 2015 WHICH EXPLAINS THAT LOANS FROM NON-BAN KING FINANCIAL COMPANY INCLUDING LOAN FROM SREI EQUIPMEN TS PVT. LTD. WAS SECURED AGAINST THE ASSET BELONGING TO HOLDING COMP ANY CORRTECH INTERNATIONAL PVT. LTD. THE LOAN WAS WRONGLY UNDER STOOD TO HAVE BEEN TAKEN FOR ACQUISITION OF CAPITAL ASSET WHICH ADMITT EDLY HAVE NOT BEEN ACQUIRED. THE LOAN WAS ONLY SECURED AGAINST THE CA PITAL ASSET. IT WAS SUBMITTED THAT THIS FACT WAS DULY BROUGHT TO NOTICE OF THE FIRST APPELLATE AUTHORITY AS WELL. AS NOTED IN PARA 2.2( 3) OF THE FIRST APPELLATE ORDER, IT WAS ALLEGED THAT AFTER RECORDIN G THE RELEVANT FACTS AS REPRESENTED ON BEHALF OF THE ASSESSEE, THE CIT(A) B Y A VERY CRYPTIC ORDER, DISMISSED THE CASE OF THE ASSESSEE ON THE GR OUND THAT ASSESSEE HAS FAILED TO ESTABLISH WITH EVIDENCE THAT INTEREST CLAIMED HAS BEEN UTILIZED FOR THE PURPOSE FOR WHICH IT HAS TAKEN THE LOAN. IT WAS REITERATED THAT THE LENDER WAS ONLY A NON-BANKING F INANCE COMPANY FROM WHOM A LOAN FACILITY WAS AVAILED AGAINST THE S ECURITY OF ASSET I.E. BENDING MACHINE. THE LOAN FACILITY SO AVAILED HAS BEEN UTILIZED FOR THE PURPOSE OF BUSINESS AS CONTEMPLATED UNDER S.36 (1)(III) OF THE ACT. IT WAS SUBMITTED THAT THE AO HAS NOT ALLEGED THAT A NY EXPENDITURE HAS BEEN INCURRED FOR NON-BUSINESS PURPOSES. LEARNED C OUNSEL FINALLY SUBMITTED THAT THE DISALLOWANCE OF INTEREST ON LOAN FACILITY SO AVAILED IS TOTALLY UNJUSTIFIED IN THE OSTENSIBLE FACTS OF T HE CASE. 5. THE LEARNED DR FOR THE REVENUE, ON THE OTHER HAN D, SUBMITTED THAT THE ASSESSEE DOES NOT DESERVE CONDONATION OF D ELAY ON SUCH A VAGUE GROUND QUOTED IN THE AFFIDAVIT. THE LEARNED D R FURTHER SUBMITTED ON MERITS THAT THE ASSESSEE HAS NOT DISCH ARGED ITS ONUS TO ITA NO.428/AHD/18 [CONTROL PLUS OIL & GAS SOLUTIONS PVT. LTD. VS. ITO] A.Y. 2014-15 - 4 - ESTABLISH WITH EVIDENCE THAT INTEREST CLAIMED HAS B EEN UTILIZED FOR THE PURPOSE FOR WHICH LOANS WERE TAKEN. 6. ON APPRAISAL OF THE ARGUMENTS FROM BOTH SIDES, W E FIND THAT SUFFICIENT CAUSE, WHEN SEEN LIBERALLY, EXISTS IN TH E INSTANT CASE DESERVING CONDONATION OF SHORT DELAY. ALTHOUGH, TH ERE APPEARS TO BE SOME NEGLIGENCE ON THE PART OF THE ASSESSEE IN NOT PREFERRING APPEAL IN TIME AFTER THE ORDER OF THE CIT(A) WAS DELIVERED, B UT NEGLIGENCE DOES NOT APPEAR TO BE OF SUCH A DEGREE THAT THE APPEAL C AN BE DISMISSED BEING BARRED BY LIMITATION WHEN SEEN IN CONJUNCTION WITH THE MERITS INVOLVED IN THE CASE OF THE ASSESSEE. THE SHORT DE LAY OCCURRED IN PREFERRING APPEAL HAS ALSO NOT SHOWN TO HAVE CAUSED ANY SERIOUS PREJUDICE TO THE REVENUE. IT IS THE ADMITTED POSIT ION THAT ASSESSEE HAS NOT ACQUIRED ANY CAPITAL ASSET DURING THE YEAR AND CONSEQUENTLY, INTEREST ON LOAN FACILITY OBTAINED FROM THE NON-BAN KING FINANCE COMPANY HAS ARISEN TO THE ASSESSEE AFTER THE ASSET WAS PUT TO USE, EVEN IF, THE LOAN WAS BORROWED FOR ACQUISITION OF ASSET. THE CASE ON MERIT IS PRIMA FACIE TENABLE IN THE LIGHT OF PLETHORA OF JUDICIAL PRECE DENTS. THE PRIMA FACIE CASE ON MERITS ALSO GIVES AN IMPRESSION THAT THE DELAY WAS NOT MALAFIDE PER SE. HENCE, DELAY OF 73 DAYS IN FILING APPEAL BEFORE THE TRIBUNAL STANDS CONDONED AND THE APPEAL OF THE ASSESSEE DESERVES TO BE PROCEEDED ON MERITS. 7. AS RECORDED IN THE FIRST APPELLATE ORDER IN CONJ UNCTION WITH THE AUDITED BALANCE SHEET, IT IS EVIDENT THAT THE LOAN FACILITY HAS BEEN TAKEN AGAINST THE SECURITY OF THE CAPITAL ASSET. T HE DIVERSION OF LOAN FUNDS FOR NON-BUSINESS PURPOSES HAS NOT BEEN ALLEGE D BY THE REVENUE AUTHORITIES. BESIDES, THE FINDINGS OF THE CIT(A) I S QUITE VAGUE INDEED. SECTION 36(1)(III) OF THE ACT GOVERNS ALLOWABILITY OF INTEREST PAID IN RESPECT OF CAPITAL BORROWED FOR THE PURPOSES OF BUS INESS OR PROFESSION. AS HELD IN DY. CIT V. CORE HEALTH CARE LTD. [2008] 167 TAXMAN 206 (SC) , THERE IS NO DISTINCTION IN SECTION 36(1)(III) OF THE ACT CAPITAL ITA NO.428/AHD/18 [CONTROL PLUS OIL & GAS SOLUTIONS PVT. LTD. VS. ITO] A.Y. 2014-15 - 5 - BORROWED FOR REVENUE PURPOSE AND CAPITAL BORROWED F OR A CAPITAL PURPOSE. THE ASSESSEE IS ENTITLED TO CLAIM INTERES T PAID ON BORROWED CAPITAL AFTER THE ASSET IS PUT TO USE FOR BUSINESS PURPOSES. THE LOAN HAVING BEEN UTILIZED FOR ACQUISITION OF CAPITAL ASS ET IN THE EARLIER YEARS IS THUS NOT AN OBSTACLE FOR TREATING INTEREST EXPEN DITURE AS REVENUE EXPENDITURE UNDER S.36(1)(III) OF THE ACT R.W.S. EX PLANATION 8 TO S.43A OF THE ACT. THE CIT(A) HAS WRONGLY APPLIED THE TES TS LAID DOWN FOR APPLICABILITY ON SECTION 36(1)(III) OF THE ACT IN I TS NON-DESCRIPT ORDER. WE THUS FIND MERIT IN THE PLEA OF THE ASSESSEE FOR ALLOWABILITY OF INTEREST CLAIM IN QUESTION. 8. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED . SD/- SD/- (MADHUMITA ROY) (PRADIP KUMAR K EDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 19/02/2021 S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 19/02/20 21