M/s Vibhava Industries, Hubli V. JCIT, Hubli

ITA 492/BANG/2016

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9362 (ITAT-BANGALORE)
• Duration Of Justice: 5 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Assessment Year: 2011-2012
• Appeal Filed On: 18-03-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: TSHERING ONGDA
• Assessee Lawyers: S RAMASUBRAMANIAN
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL BANGALORE BENCH SMC, BANGALORE BEFORE SHRI A.K.GARODIA, ACCOUNANT MEMBER ITA NO.492(BANG) 2016 (ASSESSMENT YEAR : 2011-12) M/S VIBHAVA INDUSTRIES, CENTRE POINT, OPP : SANJEVANI PRESS NCM, HUBLI PAN NO.AADFV3065F APPELLANT VS THE JOINT COMMISSIONER OF INCOME TAX, RANGE-3, BANGALORE RESPONDENT ASSESSEE BY : SHRI S. RAMASUBRAMANIAN, CA REVENUE BY : SHRI TSHERING ONGDA, JCIT DATE OF HEARING : 10-08-2016 DATE OF PRONOUNCEMENT : 16-09-2016 O R D E R PER A. K. GARODIA, A. M.: THIS IS AN ASSESSEES APPEAL DIRECTED AGAINST THE ORDER OF THE LD. CIT(A), HUBLI DATED 30-11-2015 FOR THE ASSESSMENT Y EAR : 2011-12. 2.THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: 1. THAT THE ORDER OF THE LD.CIT(A) IN SO FAR IT IS PREJUDICIAL TO THE INTEREST F THE APPELLANT, IS BA D AND ERRONEOUS IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THAT THE ORDER U/S 143(3) PASSED BY THE JCIT, RANGE-3, HUBLI IS WITHOUT JURISDICTION AS THE JURISDICTION WAS ALREADY ASSUMED BY ITO, WARD-3(2), HUBLI. ITA NOS.492(BANG)2016 2 3. THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN HOLDING THAT THE ADVANCES GIVEN TO SOFTWARE ENGINEE RS ARE NOT FOR BUSINESS PURPOSE. 4. THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DISALLOWING THE INTEREST ON THE ADVANCES GIVEN TO SOFTWARE ENGINEERS EVEN THOUGH THE APPELLANT HAS RECEIVED INTEREST ON SUCH FUNDS. 5. THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DISALLOWING THE INTEREST ON THE ADVANCE GIVEN TO MR . YASHKARAN SINGH ON THE GROUND THAT IT IS REPAID IN THE SUBSEQUENT YEARS EVEN THOUGH THE ADVANCE WAS PAID FOR BUSINESS PURPOSES. 6. THAT THE LD. CIT(A) ERRED IN LAW AND ON FACTS IN DISALLOWING THE INTEREST ON THE ADVANCE GIVEN TO MR . D.A.RATAN (SUPPLIER OF RAW MATERIAL) ON THE GROUND THAT SUCH AN ADVANCE IS VERY HIGH EVEN THOUGH THE ADVANC E WAS PAID FOR BUSINESS PURPOSES. 7. THAT THE LD. CIT(A) OUGHT TO HAVE HELD THAT THE ADVANC3ES GIVEN TO AICE INDIA (P)LTD., AND B.R.PATI L IS FOR THE PURPOSE OF THE BUSINESS. 8. THAT THE LD. CIT(A) DENIED THE EXPLANATION OF TH E APPELLANT THAT THE INTEREST FREE FUNDS AVAILABLE AR E MORE THAN THE ADVANCE MADE TO ALL THE PARTIES. EACH OF THE ABOVE GROUNDS IS WITHOUT PREJUDICE TO O NE ANOTHER AND THE APPELLANT CRAVES LEAVE OF THE HONB LE ITAT, BANGALORE TO ADD, DELETE, AMEND OR OTHERWISE MODIFY ONE OR MORE OF THE ABOVE GROUNDS EITHER BEFO RE OR AT THE TIME OF HEARING OF THIS APPEAL. ON OUGHT NOT HAVE GIVEN ADEQUATE OPPORTUNITY TO TH E APPELLANT TO PRODUCE SRI SAMEER ARORA BEFORE THE AO . THUS, THE ADDITION MADE HAS TO BE DELETED. ITA NOS.492(BANG)2016 3 6. THE LD. CIT(A) ERRED IN CONFIRMING THE INTEREST U/S 234A, 234B AND 234C OF THE ACT. 7. WITHOUT PREJUDICE, THE ADDITIONS ARE EXCESSIVE, ARBITRARY AND UNREASONABLE AND OUGHT TO BE DELETED. 8. FOR THESE AND OTHER GROUNDS THAT MAY BE URGED AT THE TIME OF HEARING OF THE APPEAL, THE APPELLANT PR AYS THAT THE APPEAL MAY BE ALLOWED. 3. IT WAS SUBMITTED BY THE LD. AR OF THE ASSESSEE THAT GROUND NO.1 IS GENERAL AND GROUND NO.2 IS NOT PRESSED. ACCORDI NGLY, GROUND NO.2 IS REJECTED AS NOT PRESSED. 4. REGARDING REMAINING GROUNDS, HE SUBMITTED THAT SOFTWARE ENGINEERS TO WHOM THE MONEY WAS ADVANCED WERE WORKI NG FOR THE ASSESSEE AND THEREFORE, THE ADVANCE ARE FOR BUSINES S EXPEDIENCY AND HENCE, THIS ADDITION MADE BY THE A. O. IS NOT JUSTI FIED IN RESPECT OF SUCH INTEREST FREE ADVANCES. RELIANCE HAS BEEN PLACED BY HIM ON THE JUDGMENT OF THE HONBLE KARNATAKA HIGH COURT RENDERED IN THE CASE OF CIT VS SRIDEV ENTERPRISES AS REPORTED IN 192 ITR 165. 5. THE LD. DR OF THE REVENUE SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW. 6. I HAVE CONSIDERED THE RIVAL SUBMISSIONS. I FIN D THAT IT IS NOTED BY THE AO ON PAGE NO.2 & 3 OF THE ASSESSMENT ORDER THA T ADVANCES WERE GIVEN TO VARIOUS PARTIES WITH WHOM THE ASSESSEE DOE S NOT HAVE REGULAR BUSINESS TRANSACTION. ON PAGE-8 OF THE ORDER OF HEL D. CIT(A), IT IS NOTED ITA NOS.492(BANG)2016 4 BY THE LD.CIT(A) THAT THE AMOUNTS GIVEN TO TWO SOFT WARE ENGINEERS OF RS.5.00 LAKHS ARE STATED TO BE ADVANCES PENDING SET TLEMENT OF THEIR BILLS. THE LD. CIT(A) HELD THAT THIS IS NOT ACCEPTABLE WIT HOUT GIVING ANY VALID REASONS FOR THE SAME. LD. CIT(A) FURTHER STATED THA T THE ASSESSEE HAS NOT PROVED THAT THESE TWO ENGINEERS HAVE EXCLUSIVELY WO RKED FOR THE ASSESSEE IN THE DEVELOPMENT OF SOFTWARE FOR THEM AND THE ASS ESSEE MAY BE ONE OF THE CUSTOMERS OF THESE ENGINEERS AND THESE PERSONS ARE INVOLVED IN DEVELOPMENT OF VARIOUS SOFTWARE TO SELL IN THE OPEN MARKET FOR PROFIT. EVEN IF THIS OBSERVATION OF THE LD.CIT(A) IS TRUE T HEN ALSO, IT CANNOT BE SAID THAT THE ADVANCES IN QUESTION ARE WITHOUT BUSI NESS EXPEDIENCY. IT IS SETTLED POSITION OF LAW NOW THAT IF INTEREST FRE E ADVANCES ARE GIVEN FOR BUSINESS EXPEDIENCY, INTEREST ON BORROWING TO GIVE SUCH ADVANCES CANNOT BE DISALLOWED. THIS WAS SO HELD BY THE HON BLE APEX COURT IN THE CASE OF SA BUILDERS REPORTED IN 288 ITR 1. 7. REGARDING ADVANCES OF RS.25.00 LAKHS TO SHRI YA SHKARAN SINGH, THIS IS THE CASE OF THE ASSESSEE THAT THIS AMOUNT W AS GIVEN TO HIM FOR PURCHASE OF LAND FOR THE FIRM. REGARDING PAYMENT O F RS.32.00 LAKHS TO SHRI D.A.RATAN, IT IS THE STATEMENT OF THE ASSESSEE THAT THIS PERSON IS A SUPPLIER OF RAW MATERIALS. REGARDING ADVANCES TO A ICE INDIA (P)LTD., AND SHRI B.R.PATIL, IT WAS THE CONTENTION OF THE ASSESS EE THAT THE ADVANCES TO THESE PERSONS WERE GIVEN TO GET MORE BUSINESS FROM THEM BECAUSE THEY ARE DEALERS OF THE ASSESSEES GOODS. 8. IN MY CONSIDERED OPINION, ALL THESE ADVANCES AR E ON ACCOUNT OF BUSINESS EXPEDIENCY AND THEREFORE, INTEREST ON BORR OWINGS FOR GIVING ITA NOS.492(BANG)2016 5 THESE ADVANCES CANNOT BE DISALLOWED. ACCORDINGLY, I DELETE THE DISALLOWANCES AND GROUND NO. 3 TO 7 ARE ALLOWED. 9. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PA RTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THE DATE MENT IONED ON THE CAPTION PAGE. (A.K. GARODIA) ACCOUNTANT MEMBER BANGALORE: D A T E D : 16.09.2016 AM* COPY TO : 1 APPELLANT 2 RESPONDENT 3 CIT(A)-II BANGALORE 4 CIT 5 DR, ITAT, BANGALORE. 6 GUARD FILE BY ORDER, AR, ITAT, BANGALORE ITA NOS.492(BANG)2016 6 1. DATE OF DICTATION 2. , , DATE ON WHICH TYPED DRAFT IS PLACED BEFORE THE DICT ATING MEMBER .. 3. !' # . $ %# / $ %# # & DATE ON WHICH THE APPROVED DRAFT COMES TO THE PS/SR .PS. 4. ''() & * + DATE ON WHICH THE ORDER IS PLACED BEFORE THE DICTAT ING MEMBER FOR PRONOUNCEMENT 5. * . %# / # . . %# # + DATE ON WHICH THE ORDER COMES BACK TO THE PS/SR.PS .. 6 * !', + DATE OF UPLOADING THE ORDER ON WEBSITE .. 7. ! !', ' , - ) IF NOT UPLOADED, FURNISH THE REASON FOR DOING SO . 8. .% / 0 + DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 9. * 1'2 / 34 & 5 + DATE ON WHICH ORDER GOES FOR XEROX &ENDORSEMENT 10. 0 6 / + DATE ON WHICH THE FILE GOES TO THE HEAD CLERK 11. * 7 & 0 8 + THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER . 12. !) * 9() & 0 9() /#5 . + THE DATE ON WHICH THE FILE GOES TO DESPATCH SECTION FOR DESPATCH OF THE TRIBUNAL ORDER 13. * 9() + DATE OF DESPATCH OF ORDER .