M/s Chebrolu Agro Pvt. Ltd., Visakhapatnam V. The ACIT, Rangel-1, Guntur

ITA 431/VIZ/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 50197 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-05-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 12-04-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 09-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B SASMAL

Judgement Text

ITA NO 431 OF 2009 CHEBROLU AGRO PRIVATE LIMITED, G UNTUR PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO. 431 /VIZAG/20 10 ASSESSMENT YEAR: 2007 - 08 M/S CHEBROLU AGRO P VT. LTD., GUNTUR VS. ACIT RANGE - 1, GUNTUR (APPELLANT) PAN NO: AACCC 4573 F (RESPONDENT) APPELLANT BY: SHRI G.V.N. HARI, CA RESPONDENT BY: SHRI B. SASMAL, DR ORDER PER SHRI B. R. BASKARAN, ACCOUNTANT MEMBER: THE APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER DATED 31.5.2010 PASSED BY LEARNED CIT(A), GUNTUR AND IT R ELATES TO THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE IS AGGRIEVED BY THE ORDER OF THE LE ARNED CIT (A) IN CONFIRMING THE DISALLOWANCE OF INTEREST TO THE EXTE NT OF RS.7,48,625/-. 3. THE FACTS RELATING TO THE SAID ISSUE ARE STATED IN BRIEF. THE ASSESSEE HAD CLAIMED INTEREST EXPENDITURE OF RS.37, 30,219/- ON LOANS OBTAINED FROM BANKS. THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS ADVANCED A SUM OF RS.56.50 LAKHS AS INTEREST FR EE LOANS TO VARIOUS INDIVIDUALS. HENCE, THE ASSESSING OFFICER TOOK THE VIEW THAT ITA NO 431 OF 2009 CHEBROLU AGRO PRIVATE LIMITED, G UNTUR PAGE 2 OF 4 THE ASSESSEE HAS DIVERTED THE INTEREST BEARING FUN DS FOR NON-BUSINESS PURPOSES AND THE SAME IS NOT ALLOWABLE AS EXPENDITU RE UNDER SECTION 36 (1)(III) OF THE ACT. ACCORDINGLY THE ASSESSING OFFICER WORKED OUT THE INTEREST AMOUNT RELATABLE TO RS.56.50 LAKHS CIT ED ABOVE, AT RS.7,48,625/- AND DISALLOWED THE SAME. THE LEARNED CIT (A) ALSO CONFIRMED THE SAID DISALLOWANCE AND IN THAT REGARD, SHE TOOK SUPPORT OF FOLLOWING DECISIONS: A) CIT VS. V.I. BABY & CO. (254 ITR 248) KERALA B) CIT VS. ABHISHEK INDUSTRIES LTD (286 ITR 1) (P& H) AGGRIEVED BY THE SAID DECISION OF THE LEARNED CIT ( A), THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE LEARNED AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ISSUE UNDER CONSIDERATION WAS NOT PROPERLY EXAMINED BY TH E LOWER AUTHORITIES. HE SUBMITTED THAT THE ASSESSEE HAD ADV ANCED THE IMPUGNED LOANS IN THE IMMEDIATELY PRECEDING YEAR. T HOUGH THE ASSESSMENT OF THAT YEAR WAS COMPLETED UNDER SECTION 143(3), NO FINDING OF DIVERSION OF BORROWED FUNDS WAS RECORDED IN THAT YEAR. THUS DURING THE YEAR UNDER CONSIDERATION, THE IMPUG NED LOANS ARE ONLY CARRY FORWARD LOANS AND HENCE THE ASSESSING OF FICER COULD NOT HAVE TAKEN A CONTRARY VIEW. IN SUPPORT OF THIS PROP OSITION, THE LEARNED AUTHORISED REPRESENTATIVE RELIED UPON THE DECISION OF HON'BLE KARNATAKA HIGH COURT IN THE CASE OF CIT VS. SRI DEV ENTERPRISES (1991) (192 ITR 165). THE LEARNED AUTHORISED REPRESENTATIV E ALSO SUBMITTED THAT THE ASSESSEE IS HAVING INTEREST FREE FUNDS TO THE TUNE OF RS.351.93 LAKHS IN THE FORM OF SHARE CAPITAL, RESER VES AND SURPLUS & ITA NO 431 OF 2009 CHEBROLU AGRO PRIVATE LIMITED, G UNTUR PAGE 3 OF 4 UNSECURED LOANS. HE FURTHER SUBMITTED THE LOANS OB TAINED FROM STATE BANK OF INDIA, HAVE BEEN UTILIZED FOR ACQUISITION O F FIXED ASSETS AND CURRENT ASSETS AND THE END USE OF LOAN IS ALSO VERI FIED BY THE BANK PERIODICALLY. ACCORDINGLY HE SUBMITTED THAT THE IM PUGNED DISALLOWANCE OF INTEREST IS NOT CALLED FOR IN THE F ACTS AND CIRCUMSTANCES OF THE CASE. ON THE CONTRARY THE LEAR NED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE VARIOUS CONTENTIO NS PUT FORTH BY THE LEARNED AUTHORISED REPRESENTATIVE REQUIRE TO BE EXAMINED AT THE END OF THE ASSESSING OFFICER. 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND CAREFULL Y PERUSED THE RECORD. THE CLAIM OF THE ASSESSEE IS THAT IT HAS A DVANCED THE IMPUGNED LOAN OF RS.56.50 LAKHS TO VARIOUS INDIVIDU ALS IN THE IMMEDIATELY PRECEDING YEAR AND NOT DURING THE YEAR UNDER CONSIDERATION. THE ASSESSEE ALSO CLAIMS THAT IT IS POSSESSED OF SUFFICIENT AMOUNT OF INTEREST FREE FUNDS. FURTHER IT IS ALSO CLAIMED THAT THE LOANS OBTAINED FROM THE BANK HAVE BEEN UTILIZED FOR THE SPECIFIC PURPOSES AND ITS END USE HAS BEEN MONITORED BY THE SAID BANK. THUS, ACCORDING TO THE ASSESSEE, THERE IS NO DIVERSION OF INTEREST FREE FUNDS. HOWEVER, AS SUBMITTED BY THE LEARNED DEPARTMENTAL R EPRESENTATIVE, THE VARIOUS CLAIMS PUT FORTH BY THE ASSESSEE REQUIR E EXAMINATION ON THE BASIS OF BOOKS OF ACCOUNT AND OTHER RECORDS MAI NTAINED BY THE ASSESSEE. FROM THE ASSESSMENT ORDER, IT DOES NOT AP PEAR THAT THE ASSESSING OFFICER HAS CARRIED OUT SUCH TYPE OF EXAM INATION. ACCORDINGLY WE ARE OF THE VIEW THAT THE IMPUGNED IS SUE NEEDS TO BE EXAMINED AFRESH BY THE ASSESSING OFFICER. ACCORDING LY WE SET ASIDE ITA NO 431 OF 2009 CHEBROLU AGRO PRIVATE LIMITED, G UNTUR PAGE 4 OF 4 THE ORDER OF THE LEARNED CIT (A) ON THIS ISSUE AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WITH A DI RECTION TO EXAMINE THE ISSUE AFRESH IN ACCORDANCE WITH THE LAW AFTER M AKING DUE VERIFICATION OF RELEVANT RECORD. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS TRE ATED AS ALLOWED FOR STATISTICAL PURPOSES. PRONOUNCED IN THE OPEN COURT ON 9 TH MAY, 2011. SD/- SD/- (SUNIL KUMAR YADAV) (B R BASKARAN) JUDICIAL MEMBER ACCOUNTANT M EMBER PVV/SPS VISAKHAPATNAM, DATE: 09-05-2011 COPY TO 1 M/S CHEBROLU AGROS PVT. LTD., GUNTU R 2 THE ACIT RANGE-1, GUNTUR 3 4. THE CIT GUNTUR THE CIT(A), GUNTUR 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM