DCIT, CIR-2(2), KOLKATA, Kolkata V. M/s PRS Metaliks Ltd., Kolkata

ITA 450/KOL/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 1950 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2012-2013
• Appeal Filed On: 15-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DAVID Z CHAWNGTHU CIT LD
• Assessee Lawyers: DILIP LOYALKA FCA LD
• Keywords: Depreciation; Business expenditure
• Section: 43B; 143(3); 142(1); 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL : D BE NCH, KOLKATA BEFORE : SHRI S.S.VISWANETHRA RAVI, JUDICI AL MEMBER AND SHRI DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA NO. 450/KOL/2016 A.Y 2012-13 D.C.I.T, CIR-2(2), KOLKATA VS. M/S. PRS METALIKS L TD PAN AADCP9239J [APPELLANT ] [RESPONDENT ] APPELLANT BY : SHRI DAVID Z.CHAWNGTHU, ADDL.C IT, LD. SR.DR RESPONDENT BY : SHRI DILIP LOYALKA, FCA, LD.A R DATE OF HEARING : 17-10-2017 DATE OF PRONOUNCEMENT : 10-01-2018 ORDER SHRI S.S.VISWANETHRA RAVI, JM: THIS IS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT-(A),- I, KOLKATA DATED 06-01-2016 FOR TH E ASSESSMENT YEAR 2012-13. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A COMPANY AND ENGAGED IN THE BUSINESS OF MANUFACTURING OF PIG IRON AND MARKETING OF C.I PIPES, CASTINGS AND FERRO ALLOYS. THE ASSESSEE FILED ITS RETURN FOR THE A.Y UNDER CONSIDERATION ON 08-0 3-2013 SHOWING INCOME OF RS.61,87,241/-. UNDER SCRUTINY, NOTICES U /S. 143(2) AND 142(1) OF THE ACT WERE ISSUED. IN RESPONSE TO WHIC H, THE AR OF THE ASSESSEE APPEARED AND FILED VARIOUS DETAILS AND DOC UMENTS IN SUPPORT OF THE RETURN FILED BEFORE THE AO. THE AO DETERMINE D THE TOTAL INCOME AT RS.1,81,82,105/- AS AGAINST RETURNED INCOME OF R S.61,87,241/- INTER-ALIA MAKING VARIOUS DISALLOWANCES ON ACCOUNT OF INTEREST (RS.4,46,817/-), DEPRECIATION (RS.89,41,080/-) AND DISALLOWANCE (RS.26,06,967/-) U/S. 43B OF THE ACT VIDE HIS ORDER DT. 09-02-2015 PASSED U/S. 143(3) OF THE ACT. ITA NO.450/KOL/2016 M/S.PRS METALIKS PVT. LTD 2 3. GROUND NO.1 RELATES TO DELETION OF DISALLOWANCES OF RS. 89,41,080/- AND RS.4,46,817/- ON ACCOUNT OF DEPRECI ATION AND INTEREST RESPECTIVELY BY THE CIT-A. 4. ON PERUSAL OF RECORDS, THE AO FOUND THAT DURING THE PREVIOUS YEAR THE ASSESSEE WAS NOT ENGAGED IN MANUFACTURING ACTIVITIES. IN THE TAX AUDIT REPORT, HEREINAFTER IN SHORT TAR, THE A O FOUND THAT THE ASSESSEE CLAIMED DEPRECATION ON PLANT & MACHINERY, FACTORY BUILDING AND ELECTRIC INSTALLATION AS UNDER:- PLANT & MACHINERY RS.8041396.46 FACTORY INSTALLATION RS.444267.96 ELECTRICAL INSTALLATION RS.455415.50 TOTAL RS.8941079.92 SAY RS.8941080/- 5. THE AO SHOW CAUSED THE ASSESSEE WHY NOT THE DISA LLOWANCE ON DEPRECIATION ON UNUSED MACHINERY CAN BE MADE. THE A SSESSEE EXPLAINED THAT THE DEPRECIATION IS ALLOWABLE SINCE THE MACHINERY IS PUT TO USE IN EARLIER YEAR AND, THEREFORE, THE DEPR ECIATION CANNOT BE DISALLOWED. THE AO HELD THAT THE DEPRECIATION IS AL LOWED ONLY IF IT IS USED FOR THE PURPOSE OF BUSINESS OR PROFESSION AS T HE ASSESSEE FAILED TO MEET THE CONDITIONS AS LAID DOWN BY THE ACT. THE REFORE, THE AO DISALLOWED THE CLAIM OF DEPRECIATION OF RS.89,41,08 0/-. 6. AGGRIEVED, THE ASSESSEE CHALLENGED THE ORDER OF THE AO IN MAKING SUCH DISALLOWANCE BEFORE THE CIT-A CONTENDIN G THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURIN G OF PIG IRON. IT SET UP ITS INDUSTRY IN THE F.Y 2006-07. THE PRODUCT ION STARTED IN THE YEAR 2008-09. STEEL MARKET, WHICH WAS IN THE BOOM I N THE YEAR 2008-09 STARTED FALLING DAY BY DAY FROM YEAR 2009-1 0. BUT, DUE TO SUCH UNFAVOURABLE MARKET CONDITIONS, THE ASSESSEE H AD TO STOP ITS PRODUCTION FROM F.Y 2011-12. IT WAS WAITING FOR FAV OURABLE MARKET CONDITION TO RESUME ITS PRODUCTION. MACHINERIES AND PLANT ARE KEPT READY FOR USE. FURTHER SUBMITTED THAT IT WAS SETTLE D PRINCIPLE OF LAW THAT EXPENDITURE INCLUDING DEPRECIATION DURING SUSP ENSION OF ACTIVITY ITA NO.450/KOL/2016 M/S.PRS METALIKS PVT. LTD 3 FOR UNFAVOURABLE MARKET CONDITION THAT IS DURING TH E PERIOD OF LULL ARE ALLOWABLE AS BUSINESS EXPENDITURE. IN SUPPORT OF T HE CONTENTION THE ASSESSEE RELIED ON THE DECISION OF THE HONBLE CALC UTTA HIGH COURT IN THE CASE OF CIT VS. NORPLEX OAK INDIA REPORTED IN 1 98 TAXMAN 470(CAL), WHEREIN IT WAS HELD THAT THE WORD USED APPEARING IN SECTION 32(1) SHOULD BE GIVEN A REASONABLE MEANING. BY INTRODUCING THE SAID PROVISION, THE LEGISLATURE WANTED TO GIVE THE BENEFIT OF DEPRECIATION ON THE PLANT & MACHINERY PURCHASED BY THE ASSESSEE AND USED FOR THE PURPOSE OF THE BUSINESS. THE WORD USE D SHOULD BE INTERPRETED TO MEAN A SITUATION WHERE THE MACHINERI ES WHICH ARE REQUIRED FOR RUNNING AN ASSESSEES BUSINESS HAVE BE EN KEPT FOR THE SAID PURPOSE. THE ASSESSEE PLACED THE RELIANCE ON T HE DECISION OF THE HONBLE HIGH COURT OF CALCUTTA IN THE CASE OF CIT V S. UNION CARBIDE (I) LTD REPORTED IN (2002) 254 ITR 488(CAL), WHEREI N IT HAS BEEN HELD THAT THE WORD USED OCCURRING IN SECTION 32 OF THE ACT SHOULD BE GIVEN BROAD CONSTRUCTION AND IF IT IS NOT ACTUALLY IN USE , THE ASSESSEE SHOULD BE ENTITLED TO THE BENEFIT OF DEPRECIATION IF IT IS OTHERWISE READY FOR USE. BESIDE THIS, THE ASSESSEE ALSO RELIED ON THE F OLLOWING DECISIONS/CASE LAWS:- CIT VS. INDIA TEA & TIMBER CO. 221 ITR 857(GAU) HELD THAT DEPRECIATION SHOULD BE ALLOWED AS A DEDUC TION EVEN THROUGH THE FACTORY DID NOT WORK DURING THE YEAR AS EXPRESSION USED SHOULD HA VE A WIDER MEANING SO AS TO INCLUDE NOT ONLY ACTUAL BUT ALSO PASSIVE USER. CIT VS. REFRIGERATION & ALLIED INDUSTRIES LTD 247 I TR 12(DEL) HELD THAT DEPRECIATION SHOULD BE ALLOWED EVEN THROU GH THE ASSETS COULD NOT BE USED DURING THE YEAR, SINCE THE OBLIGATION TO KEEP THE M ACHINERY IN GOOD WORKING CONDITION SOT THAT IT CAN BE USED AT ANY MOMENT WAS PRESENT. HIRA FINANCIAL SERVICES LTD 298 ITR 245(MAD) HELD THAT WHERE THE ASSESSEE COULD NOT USE THE PLAN T & MACHINERY FOR STRIKE, BUT KEPT THEM READY FOR USE IT SHALL BE CONSIDERED THAT THE PLANT & MACHINERY WERE USED FOR THE PURPOSE OF THE BUSINESS. GENERAL CORPORATION LTD VS. CIT (1935) 003 ITR 03 50(MAD) CIT VS. BHARAT NIDHI LTD (1966) 060 ITR 0520 (P&H) CIT VS. HARISH CHANDER JAGGANNATH PRASAD (1961) 043 ITR 0231(P&H), KARSONDASRANCHHODDASS VS. CIT (1972) 083 ITR 0001 (BOM.) CIT VS. BHARAT INSURANCE CO. LTD (1983) 142 ITR 0 342(DEL) 7. THE CIT-A AFTER CONSIDERING THE ABOVE SUBMISSION S OF THE ASSESSEE HELD THAT THE ASSESSEE IS ENTITLED TO CLAI M DEPRECIATION AND, ITA NO.450/KOL/2016 M/S.PRS METALIKS PVT. LTD 4 THEREFORE, DIRECTED THE AO TO DELETE THE ADDITION O F RS.89,41,08/- ON ACCOUNT OF DEPRECIATION BY STATING AS UNDER:- I HAVE CONSIDERED THE OBSERVATION MADE BY THE AO A ND WRITTEN SUBMISSION MADE BY THE AR OF THE APPELLANT. I FIND THAT THERE IS SUFFICIENT FORCE IN THE SUBMISSION OF THE AR OF THE APPELLANT. THE APPELLANT COMPANY WHICH WAS ENGAGED IN MANUFAC TURE OF PIG IRON AND HAD STOPPED ITS PRODUCTION DURING THE F.Y 2011-12 DUE T O UNFAVOURABLE MARKET CONDITIONS AND HAD CLAIMED THAT THE PLANT & MACHINERY WERE KEP T READY FOR USE. THE AO ISSUED A SHOW CAUSE DURING ASSESSMENT PROCE EDINGS AND PROPOSED TO DISALLOW THE CLAIM OF DEPRECIATION ON PLANT & MACHI NERY, FACTORY BUILDING & ELECTRIC INSTALLATION AS THE MACHINERY WAS NOT PUT TO USE DU RING THE YEAR. THE AO DISALLOWED THE APPELLANT CLAIM OF DEPRECIATION HOLDING THAT TH E ASSESSEE HAD FAILED TO MEET THE CONDITION LAID DOWN FOR USE OF P & M FOR CLAIM OF D EPRECIATION. THE APPELLANT HAS THROUGH ITS WRITTEN SUBMISSION MAINLY CONTENDED THA T THE MACHINERIES WERE KEPT READY FOR USE AND ALSO CONTENDED THAT IT IS SETTLED PRINC IPLE OF LAW THAT EXPENDITURE INCLUDING DEPRECIATION DURING SUSPENSION OF ACTIVITY FOR UNF AVOURABLE MARKET CONDITION THAT IS DURING THE PERIOD OF FULL ARE ALLOWABLE AS BUSINESS EXPENDITURE. THE APPELLANT HAS PLACED RELIANCE ON JUDGMENT ON THE CASE LAWS OF THE JURISDICTION HIGH COURT IN THE CASE OF CIT V. NORPLEX OAK INDIA 198 TAXMAN 470(CAL) & C IT V. UNION CARBIDE (I) LTD. (2002) 254 ITR 488(CAL) & CIT V INDIA TEA & TIMBER CO 221 ITR 857(GAU). IN VIEW OF THE ABOVE DISCUSSION AND THE TOTALITY O F THE FACTS OF THE CASE, IT IS HELD THAT THE APPELLANT IS ENTITLED TO CLAIM OF DEP RECIATION IN RESPECT OF P & M WHICH WAS KEPT READY FOR USE. THE AO IS DIRECTED TO DELETE TH E ADDITION OF RS.89,41,080/- OUT OF DEPRECIATION. 8. AGGRIEVED BY SUCH ORDER OF THE CIT-A, THE REVENU E IS IN APPEAL BEFORE US. THE LD.DR RELIED ON THE ORDER OF THE AO IN MAKING DISALLOWANCE ON DEPRECIATION. ON THE OTHER HAND, TH E LD.AR OF THE ASSESSEE HAS OPPOSED THE ORDER OF THE AO. HE REITER ATED HIS SAME SUBMISSION MADE BEFORE THE CIT-A AND SUPPORTED THE IMPUGNED ORDER OF THE CIT-A IN DIRECTING TO DELETE THE SAME TO TH E AO. 9. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD INCLUDING THE CASE LAWS RELIED ON BY THE ASS ESSEE BEFORE THE CIT-A AS WELL AS BEFORE US. IT IS NOT THE CASE OF T HE REVENUE THAT THE ASSESSEE HAS CEASED TO CARRY ON ITS BUSINESS PERMAN ENTLY. IT IS ONLY A CASE OF TEMPORARY LULL IN THE BUSINESS AGAINST WHIC H THE MACHINERIES WERE NOT PUT TO USE. ON INTRODUCTION OF CONCEPT OF BLOCK ASSETS THE PROVISIONS OF SECTION 32 OF THE ACT BY THE TAX LAWS (AMENDMENT) ACT, 1986, WHICH CAME INTO FORCE W.E.F 1-4-1980 THE CONC EPT OF USAGE OF ASSET(S) FOR THE PURPOSE OF CLAIMING OF DEPRECIATIO N HAS BECOME REDUNDANT. APART FROM THE ABOVE, THE LAW LAID DOWN BY THE SEVERAL DECISIONS CITED BY THE ASSESSEE BEFORE THE CIT-A CL EARLY PERMITS THE ALLOWANCE OF DEPRECIATION, WHEN THE MACHINERIES ARE KEPT FOR READY TO ITA NO.450/KOL/2016 M/S.PRS METALIKS PVT. LTD 5 USE. ON PERUSAL OF THE CASE LAWS RELIED ON BY THE ASSESSEE BEFORE THE CIT-A, IN OUR OPINION THAT THE CIT-A HAS RIGHTLY AP PRECIATED THE FACTS AND HAS RIGHTLY COME TO THE CONCLUSION THAT THE AS SESSEE IS ENTITLED TO CLAIM THE DEPRECATION AND ACCORDINGLY, DIRECTED THE AO TO DELETE THE IMPUGNED ADDITION ON THIS ISSUE. WE FURTHER FIN D THAT THE CIT-A HAS DISCUSSED THE ISSUE THOROUGHLY WITH VARIOUS CAS E LAWS. WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER OF THE CIT -A IN DIRECTING AND DELETING THE SAME TO THE AO. THEREBY, THE GROUND ON THE ISSUE OF DELETION OF DEPRECIATION OF RS.89,41,080/- RAISED B Y THE REVENUE IS DISMISSED. 10. NEXT EFFECTIVE ISSUE IN GROUND NO.1 I.E. DELETI ON OF DISALLOWANCE OF RS.4,46,817/- ON ACCOUNT OF INTEREST BY THE CIT- A. 11. ON PERUSAL OF THE BALANCE SHEET THE AO FOUND TH AT THE ASSESSEE GAVE SHORT TERM LOAN & ADVANCE OF RS.6,67,61,785/-, ON WHICH NO INTEREST WAS CHARGED. ON PERUSAL OF THE PROFIT & LO SS ACCOUNT THE AO NOTICED THAT THE ASSESSEE PAID INTEREST AMOUNTING TO RS.65,81,723/- AND CLAIMED THE SAME AS DEDUCTIBLE EXPENDITURE COMP UTING THE INCOME FROM BUSINESS. THE AO CALLED THE ASSESSEE TO EXPLAIN WHY THE INTEREST BEARING LOAN WAS GIVEN TO OTHERS AS INTERE ST FREE ADVANCE. IN REPLY, THE ASSESSEE SUBMITTED THAT IT HAD TAKEN SEC URED LOAN, UNSECURED LOAN AND INTEREST PAID THEREON AS UNDER:- LOAN AMOUNT INTEREST TERM LOAN FROM INDIAN OVERSEAS BANK RS.1,63,59,998 RS.65,70,241 UNSECURED LOANS FROM OTHERS (INTEREST FREE) RS.4,65,52,948 NIL 12. THE ASSESSEE PAID INTEREST ON TERM LOAN OF RS.6 5,70,241/-. THE ASSESSEE POINTED OUT THAT NO INTEREST WAS PAID ON U NSECURED LOANS AS IT IS INTEREST FREE LOAN. THE ASSESSEE ALSO POINTED OUT THAT IT HAS NET WORTH (SHARE CAPITAL + RESERVE & SURPLUS) OF RS.4, 69,93,522/- AND UNSECURED LOANS FROM OTHERS RS.4,65,52,948/- TOTALI NG TO RS.9,39,87,044/- AND THE LOAN/ADVANCE GIVEN FOR BUS INESS PURPOSE IS ONLY RS.6,67,61,785/-, BREAK UP OF WHICH ARE AS UND ER:- ITA NO.450/KOL/2016 M/S.PRS METALIKS PVT. LTD 6 LOANS/ADVANCE FOR BUSINESS PURPOSE RS. 99,20,152 /- RECEIVABLE FOR COMMISSION B.F FROM LAST YEAR RS .1,35,73,372/- RECEIVABLE FOR COMMISSION CURRENT YEAR RS.4,32, 68,261/- TOTAL: RS.6,67, 61,785/- 13. THE ASSESSEE SUBMITTED THAT RS.99,20,152/- CAN BE SAID TO HAVE ADVANCED OUT OF CAPITAL WORTH & INTEREST FREE LOAN OF RS.9,39,87,044/- AND NO DISALLOWANCE IS ATTRACTED O N ACCOUNT OF INTEREST. HOWEVER, THE AO HELD THAT THE ASSESSEE DE CLARED THAT RS.99,20,152/- WAS GIVEN AS INTEREST FREE LOAN/ADVA NCE AND WAS UNABLE TO PROVE CONCLUSIVELY THAT THE INTEREST FREE LOAN/ADVANCE WAS GIVEN OUT OF NON INTEREST BEARING FUND. ACCORDINGLY , THE AO FOUND THAT THE INTEREST EXPENDITURE AMOUNTING TO RS.4,46,817/- [ IE. RS.39,89,440 X 11.2%] IS DISALLOWABLE AS IT IS NOT UTILIZED FOR THE PURPOSE OF THE BUSINESS. 14. AGGRIEVED, THE ASSESSEE CHALLENGED THE ORDER OF THE AO IN MAKING SUCH DISALLOWANCE BEFORE THE CIT-A. BEFORE H IM THE ASSESSEE CONTENDED THAT THE ENTIRE TERM LOAN WAS USED FOR AC QUISITION OF PLANT & MACHINERY AND NO PART OF THE SAID LOAN HAS BEEN U SED FOR ANY OTHER PURPOSE. THE WORKING CAPITAL LOAN WAS ALSO USED FOR WORKING CAPITAL REQUIREMENT. BESIDE THE ABOVE, THE ASSESSEE HAD INT EREST FREE UNSECURED LOAN AMOUNTING TO RS.4,65,52,948/- AND OW N FUND AMOUNTING TO RS.9,04,93,522/-. THE ASSESSEE HAS NOT GIVEN INTEREST FREE LOAN OF RS.99,20,152/- AS FOUND BY THE AO. THE SUM OF RS. 99,20,152/- APPEARING UNDER THE HEAD SHORT TERM LO AN & ADVANCES REPRESENTS BUSINESS ADVANCES AND RECOVERABLE ON AC COUNT OF DIFFERENT TAXES AND DEPOSITS. THE DETAILS OF RS.99, 20,152/- ARE AS UNDER :- NAME AMOUNT (RS.) PURPOSE DEPUTY COMMISSIONER OF COMMERCIAL TAXES 15,48,479 SALES TAX SECURITY DEPOSIT (JSEB) 21,200 SECURITY DEPOSIT TO JSEB FA & CAO SOUTH EASTERN RAILWAY 80,570 TO RAILWAY ASHE CONTROLS PVT LIMITED 15,366 PURCHASE ADVAN CE ESSEL MINING & INDUSTRIES LIMITED 5,72,122 PURCHASE ADVANCE ITA NO.450/KOL/2016 M/S.PRS METALIKS PVT. LTD 7 MAP MINES & MINERALS LIMITED 5,50,000 PURCHASE ADV ANCE NEW INDIA MINERAL 1,81,491 PURCHASE ADVANCE PADMA LOGISTIC & AND KHANIJ P.LTD 88,801 PURCHASE ADVANCE PRADEEP COKE INDUSTRIES 1,25,889 PURCHASE ADVANCE SAKCHI INDUSTRIES 7,025 PURCHASE ADVANCE SUNRISE TRADING CO. 60,679 PURCHASE ADVANCE YASH AGENCIES 2,00,000 PURCHASE ADVANCE ANJANEYA CONSULTANCY (P) LIMITED 16,13,705 ADVANCE FOR CONSULTANCY ANJANEYAISPAT LIMITED 1,17,750 PURCHASE ADVANCE ANUP SAROGI 8,50,000 ADVANCE FOR LAND PURCHASE CORE MINERALS 27,132 PURCHASE ADVANCE GOVINDA IMPEX LIMITED 22,55,615 PURCHASE ADVANCE MN SINGH 51,000 PURCHASE ADVANCE MONGIA HI TECH (P) LIMITED 10,00,000 PURCHASE ADVAN CE PARTH ISPAT (INDIA) PVT LIMITED 53,328 PURCHAS E ADVANCE RAJESH STEEL TRADING CO. 1,90,000 PURCHASE ADVANC E TLPL LOGISTICS PRIVATE LIMITED 10,000 ADVANCE TO TRANSPORTER VISHAL ENTERPRISES 3,00,000 PURCHASE ADVANCE TOTAL 99,20,152 15. BEFORE THE CIT-A THE ASSESSEE SUBMITTED THAT SI NCE THE ASSESSEE HAS NOT GIVEN ANY INTEREST FREE LOAN AS SU CH QUESTION OF ANY DISALLOWANCE OF INTEREST DOES NOT ARISE AT ALL. WIT HOUT PREJUDICE TO THE ABOVE IT MAY FURTHER BE POINTED OUT THAT THE ASSESS EE HAS USED ENTIRE INTEREST BEARING LOAN FOR BUSINESS PURPOSE ONLY AND EVEN IF RS.99,20,152 IS CONSIDERED AS INTEREST FREE LOAN GR ANTED BY THE ASSESSEE, ITS OWN FUND AMOUNTING TO RS.9,04,93,522/ - AND INTEREST FREE UNSECURED LOAN ACCEPTED AMOUNTING TO RS. 45,38 ,321/- AGGREGATING TO RS.9,50,31,843/- FAR EXCEEDED THE LO AN GRANTED. BEFORE THE CIT-A THE ASSESSEE HAS ALSO SUBMITTED T HAT IT IS A SETTLED LAW THAT WHERE ASSESSEES INTEREST FREE FUND EXCEED S THE INTEREST FREE LOAN GIVEN, NO DISALLOWANCE OF INTEREST CAN BE MADE . FOR THIS PROPOSITION, THE ASSESSEE RELIED ON FOLLOWING CASE LAWS:- CIT VS. KAJAL EXPORT (2014) 362 ITR 328 (GUJ.) CIT VS. VIJAYWADA BOTTLING CO. LTD 356 I TR 625(AP) CIT VS. RAGHUVIR SYNTHETICS LTD 354 ITR 222(GUJ ) CIT VS. RELIANCE UTILITIES & POWER LTD 313 ITR 3 40(BOM) CIT VS. PREM HEAVY ENGNRS WORKS P.LTD 285 ITR 5 54(ALL) D & H SECHERON ELECTRODIES P.LTD 142 ITR 52 8(MP) CIT VS. GOPIKRISHNA MURLIDHAR 47 ITR 469 (AP) REGAL THEATRE VS. CIT 225 ITR 205(DEL) CIT VS. INDIA CARBON LTD 247 ITR 510(GAU) 16. AFTER CONSIDERING THE ABOVE THE CIT-A HELD THAT THE RATIO OF THE CITED CASE LAWS ARE FOUND TO BE SQUARELY APPLICABLE TO THE FACTS OF THE PRESENT CASE. HE ALSO HELD THAT THE FINDING OF THE AO IN DISALLOWING RS.4,46,817/- AS INTEREST FOR NON-BUSINESS PURPOSE IS ERRONEOUS AND ITA NO.450/KOL/2016 M/S.PRS METALIKS PVT. LTD 8 UNJUSTIFIED AND ACCORDINGLY DIRECTED THE AO TO DELE TE THE ADDITION OF RS.4,46,817/- BY OBSERVING AS UNDER:- I HAVE CAREFULLY CONSIDERED THE MATERIAL BEFORE ME , I FOUND THAT THE AO HAS ERRED IN HOLDING THAT THE APPELLANT HAD FAILED TO ESTABLISH THE NEXUS BETWEEN INTEREST PAID AND INTEREST FREE ADVANCES. THE A.R OF THE APPELLANT IN HIS WRITTEN SUBMISSION HAS CATEGORICALLY MENTIONED THAT THE COMPANY HAD TAKEN INTEREST BEARING LOAN FROM INDIAN OVERSEAS BANK OF RS.2,72,69,998/- AND WORKIN G CAPITAL LOAN FROM INDIAN OVERSEAS BANK RS.27,74,806/-. THE ABOVE ENTIRE LOAN WAS USED FOR ACQUISITION OF PLANT AND MACHINERY AND NO PART OF THE SAID LOAN HA S BEEN USED FOR ANY OTHER' PURPOSES. THE WORKING CAPITAL LOAN WAS ALSO USED FO R WORKING CAPITAL REQUIREMENT. THE APPELLANT ABOVE ASSESSEE HAD INTEREST FREE UNSE CURED LOAN AMOUNTING TO RS. 4,65,52,948/- AND ALSO HAD OWN FUNDS AMOUNTING TO R S.9,04,93522/-. THEREFORE, THE FINDING OF THE AO THAT ASSESSEE HAS GIVEN INTEREST FREE LOAN OUT OF INTEREST-FREE FUNDS IS NOT CORRECT. THE SUM OF RS.99,20,152/- APPEARING UNDER THE HEADING SHORT TERM LOAN AND ADVANCE REPRESENTS BUSINESS ADVANCES AND R ECOVERABLE ON ACCOUNT OF DIFFERENT TAX AND ADVANCES. IT IS SETTLED LAW THAT WHERE APPELLANT'S INTEREST FREE FUND EXCEED THE INTEREST FREE LOAN GIVEN NO DISALLOWANCE OF INTEREST CAN BE MADE FOR THIS PROPOSITION. RELIANCE WAS PLACED UPON CITATION IN THE CASE OF CIT VS. KAJ AL EXPORTS (2014) 362 ITR 328 (GUJ) (PAGE 5-6). CIT VS. VIJAYWADA BOTTLING CO. LT D. 356 ITR 625 (AP), CIT VS. RAGHUVIR SYNTHETICS LTD. 354 ITR 222 (GUJ), RELIANC E UTILITIES AND POWER LTD. 313 ITR 340 (BORN), CIT VS. PREM HEAVY ENGINEERING WORKS PV T. LTD 285 ITR 554 (ALL)., D & H SECHERON ELECTRODES PVT. LTD VS. CIT 142 ITR 528(MP ), CIT VS.GOPIKRISHNA MURLIDHAR 47 ITR 469 (AP), REGAL THEATRE VS. CIT 225 ITR 205( DEL), CIT VS. INDIA CARBON LTD 247 ITR 510 (GAU). CONSIDERING THE ABOVE DISCUSSION AND RATIO OF THE CITED CASE LAWS WHICH IS FOUND TO BE SQUARELY APPLICABLE TO THE FACTS OF THE INSTA NT CASE, IT IS HELD THAT THE FINDING OF THE AO IN DISALLOWING RS.4,46,817 AS INTEREST FOR N ON-BUSINESS PURPOSE IS ERRONEOUS AND UNJUSTIFIED. THEREFORE, I DIRECT THE AO TO DELE TE THE ADDITION OF RS.4,46,817/-. THIS GROUND IS ALLOWED. 17. AGGRIEVED BY SUCH ORDER OF THE CIT-A, THE REVEN UE IS IN APPEAL BEFORE US AND CONTENDED THAT THE CIT-A ACCEPTED THE PLEA OF THE ASSESSEE WITHOUT THOROUGH VERIFICATION. THE LD.DR R ELIED ON THE ORDER OF THE AO MAKING DISALLOWANCE ON INTEREST FOR NON-B USINESS PURPOSE. ON THE OTHER HAND, THE LD.AR OF THE ASSESSEE HAS OP POSED THE ORDER OF THE AO. HE REITERATED HIS SAME SUBMISSION MADE B EFORE THE CIT-A AND SUPPORTED THE IMPUGNED ORDER OF THE CIT-A IN DI RECTING AND DELETING THE SAME. HE ALSO SUBMITS THAT THE AO ARBI TRARILY DISALLOWED THE SAID ADDITION WITHOUT VERIFYING THE DETAILS AS GIVEN BY THE ASSESSEE. 18. HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIA L INCLUDING THE CASE LAWS RELIED ON BY THE ASSESSEE BEFORE THE CIT- A AS WELL AS BEFORE US. IT IS CLEAR FROM THE FINDINGS OF THE CI T-A THAT THE TERM LOAN AND WORKING CAPITAL LOAN BOTH WERE AVAILED BY THE ASSESSEE. THE ASSESSEE USED ONLY INTEREST BEARING LOAN FOR THE PU RPOSE OF BUSINESS ITA NO.450/KOL/2016 M/S.PRS METALIKS PVT. LTD 9 I.E TERM LOAN USED FOR ACQUIRING PLANT & MACHINERY AND WORKING CAPITAL LOAN USED FOR WORKING CAPITAL, WHICH HAS BE EN DEMONSTRATED BY THE ASSESSEE. THEREFORE, THE DISALLOWANCE ON INT EREST FOR NON BUSINESS PURPOSE IS TOTALLY ERRONEOUS AND UNJUSTIFI ED. THIS DISALLOWANCE CANNOT BE SUSTAINED. THE EXISTENCE OF OWN FUND OF THE ASSESSEE IS FAR BETTER THAN THE ADVANCES GIVEN BY T HE ASSESSEE. THE DECISIONS AS RELIED ON BY THE CIT-A CLEARLY SUPPORT S THE CASE OF THE ASSESSEE. THEREFORE, THE CIT-A WAS JUSTIFIED IN DIR ECTING THE AO TO DELETE THE ADDITION OF RS. 4,46,817/-. WE FIND THAT THE CIT-A HAS ANALYZED THE CASE LAWS AS RELIED ON BY THE ASSESSEE ON THIS ISSUE. IT IS SETTLED LAW THAT WHERE ASSESSEES INTEREST FREE FUND EXCEED THE INTEREST FREE LOAN GIVEN NO DISALLOWANCE OF INTERES T CAN BE MADE BY THE DECISIONS OF VARIOUS COURTS. THUS, THE CIT-A WA S FULLY JUSTIFIED IN DIRECTING TO DELETE THE SAME TO THE AO. WE DO NOT F IND ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT-A ON THIS ISSUE . WE UPHOLD THE SAME. THEREBY, THE ISSUE IN GROUND NO. 1 DELETION OF INTEREST RS.4,46,817/- RAISED BY THE REVENUE IS DISMISSED. 19. GROUND NOS.2 & 3 RAISED BY THE REVENUE ARE ARGU MENTATIVE IN NATURE, WHICH NEEDS NO ADJUDICATION. HENCE, THE SAM E ARE DISMISSED. 20. GROUND NO. 4 IS GENERAL IN NATURE, WHICH REQUIR ES NO ADJUDICATION. HENCE, THE SAME IS DISMISSED. 21. IN THE RESULT, THE APPEAL OF THE REVENUE ITA NO . 450/KOL/2016 FOR THE A.Y 2012-13 IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 10-01-2018 SD/- SD/- ARJUN LAL SAINI S.S. VISWANETHRA RAVI ACCOUNTANT MEMBER JUDICIAL MEMBER DATED :10-01-2018 ITA NO.450/KOL/2016 M/S.PRS METALIKS PVT. LTD 10 PP(SR.P.S.) COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT/REVENUE :THE DCIT, CIR-2(2), AAYKAR BHAWA N,7 TH FL., P-7, CHOWRINGHEE SQUARE, KOLKATA-69. 2 RESPONDENT/ASSESSEE: M/S.PRS METALIKS LTD 20 EAST I NDIA HOUSE, 1 ST FL., ROOM NO.1A, BRITISH INDIAN ESTATE-69. 3 . THE CIT(A), KOLKATA 4. 5. CIT , KOLKATA DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER SR.P.S, HEAD OF OFFICE ITAT KOLKATA