M/S J.K.Stores, V. Addl. CIT,

ITA 496/CHANDI/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 8433 (ITAT-CHANDIGARH)
• Duration Of Justice: 1 year(s) 9 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 08-12-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 08-05-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO.496/CHD/2014 ASSESSMENT YEAR:2008-09 M/S J.K. STORES, VS. THE ADDL. CIT SCO 25, SECTOR 17-E RANGE II CHANDIGARH CHANDIGARH PAN NO. AAEFJ7835N (APPELLANT) (RESPONDENT) APPELLANT BY : SH. NEERAJ JAIN RESPONDENT BY : MS.CHANDER KANTA DATE OF HEARING : 08/12/2015 DATE OF PRONOUNCEMENT : 26/02/2016 ORDER PER ANNAPURNA MEHROTRA A.M. THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER OF LD. CIT(A), CHANDIGARH, DATED 21.03.2014. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUND OF APPEAL:- 1. (A) THAT THE LD. CIT(A) IS NOT JUSTIFIED IN CONFIRM ING THE DISALLOWANCE AMOUNTING TO RS. 5,53,733/- ON ACCOUNT OF INTEREST. (B) THAT WITHOUT PREJUDICE TO ABOVE, THE APPELLANT DISPUTES THE QUANTUM OF DISALLOWANCE 3. BRIEF FACTS RELATING TO THE CASE ARE THAT DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER FOUND THAT CAPITAL WORK IN PROGR ESS HAD BEEN SHOWN BY THE ASSESSEE AT RS. 1,05,31,692/- WHICH HAS NOT BEEN PU T TO USE DURING THE YEAR UNDER ASSESSMENT. ON THE OTHER HAND, ACCORDING TO T HE A.O. THE ASSESSEE HAD PAID INTEREST ON OVERDRAFT FACILITY TO THE TUNE OF RS. 5,80,889/-. ACCORDING TO THE A.O., SUCH INTEREST COULD NOT BE ALLOWED AS DEDUCTI ON IN VIEW OF THE PROVISO TO SECTION 36(1)(III) AND IN VIEW OF THE DECISION OF P UNJAB & HARYANA HIGH COURT IN THE CASE OF ABHISHEK INDUSTRIES VS. CIT 286 ITR 1. 2 4. ON FIRST APPEAL, LD. CIT(A) ALLOWED THE RELIEF O F RS. 26,156/- BEING INTEREST ON CAR LOAN BUT CONFIRMED THE BALANCE AMOUNT OF INT EREST I.E. RS. 5,53,733/- BY HOLDING THAT THOUGH APPELLANT HAS SUBMITTED THAT NO PART OF BORROWING HAD BEEN UTILIZED FOR THE PURPOSE CAPITAL WORK IN PROGR ESS BUT NO EVIDENCE HAS BEEN FURNISHED. THAT IS HOW THE ASSESSEE HAS FILED THE P RESENT APPEAL RAISING THE ABOVE MENTIONED GROUND OF APPEAL. 5. LD. COUNSEL OF THE ASSESSEE SUBMITTED BEFORE US AT THE TIME OF HEARING THAT ASSESSEE HAD NOT BORROWED ANY CAPITAL ON INTER EST FOR INVESTMENT IN THE CAPITAL WORK IN PROGRESS AND THE INTEREST PAID ON O VERDRAFT FROM PUNJAB & SINDH BANK WAS IN CONNECTION WITH LOAN WHICH WAS USED FOR THE PURPOSE OF BUSINESS. IT WAS FURTHER SUBMITTED THAT A SEPARATE BANK ACCOUNT IN ICICI BANK WAS MAINTAINED FOR INVESTMENT IN CAPITAL WORK IN PROGRE SS AND IN THE SAID BANK ACCOUNT NO FUNDS HAS BEEN TRANSFERRED FROM OVERDRAF T FACILITY OBTAINED FROM PUNJAB AND SINDH BANK. IT WAS FURTHER SUBMITTED THA T THE SAID BANK ACCOUNT WAS CREDITED WITH THE INCOME OF THE ASSESSEE ONLY AND N O INTEREST BEARING BORROWED FUNDS STOOD DEPOSITED IN THE SAID BANK ACCOUNT VIZ. ICICI BANK ACCOUNT. IT WAS FURTHER SUBMITTED THAT ACCRUAL OF PROFITS DURING TH E YEAR WAS ALSO TO THE TUNE OF RS. 1,07,01,282/- AS AGAINST THE INVESTMENT IN CAPI TAL WORK IN PROGRESS AMOUNTING TO RS. 1,05,31,692/-. IT WAS FURTHER SUBMITTED THAT THE FACTS OF THE CASE OF THE ABHISHEK INDUSTRIES LTD. (SUPRA) WERE DIFFERENT THA N THE FACTS OF THE APPELLANTS CASE. RELIANCE WAS PLACED ON THE CHANDIGARH BENCH D ECISION IN THE ASSESSEES OWN CASE FOR A.Y. 2009-10 IN ITA 1026/CHD/2012. IT WAS THUS PLEADED THAT THE DISALLOWANCE MADE AND CONFIRMED IN FIRST APPEAL MAY BE DELETED. 6. ON THE OTHER HAND LD. DR RELIED ON THE ORDERS PA SSED BY THE A.O. AND CIT(A) AND PRAYED THAT THE DISALLOWANCE MAY PLEASE BE SUSTAINED. 3 7. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE ORDERS OF THE AUTHORITIES BELOW. IT IS SEEN THAT INTEREST CAN BE DISALLOWED U/S 36(1)(III) ONLY WHEN INTEREST BEARING BORROWED FUND HAS BEEN USED F OR NON-BUSINESS PURPOSE. IN THE INSTANT CASE, INTEREST HAS BEEN PAID ON OVER DRAFT ACCOUNT FROM PUNJAB AND SINDH BANK, WHEREAS INVESTMENT IN CAPITAL WORK IN PROGRESS HAS BEEN MADE FROM ICICI BANK ACCOUNT IN WHICH THERE WERE NO INTE REST BEARING BORROWED FUNDS AS WAS SHOWN TO US WITH THE HELP OF BANK ACCOUNT PL ACED IN THE PAPER BOOK. THEREFORE, THERE COULD BE NO CASE FOR DISALLOWANCE OF INTEREST CLAIMED BY THE ASSESSEE IN RESPECT OF OVERDRAFT ACCOUNT WITH PUNJA B & SINDH BANK. IT HAS NOT BEEN SHOWN BY EITHER OF THE AUTHORITIES BELOW THAT OVERDRAFT ACCOUNT WITH PUNJAB & SINDH BANK WAS USED FOR THE PURPOSE OF MAK ING INVESTMENT IN CAPITAL WORK IN PROGRESS. EXCEPT MAKING A BALD ASSERTION, A UTHORITIES BELOW HAVE NOT ESTABLISHED THIS AS A FACT. THE FACTS OF THE DECISI ON REFERRED BEFORE US ARE DISTINGUISHABLE. MOREOVER, TRIBUNAL IN ASSESSEES O WN CASE REFERRED SUPRA HAS TAKEN THE VIEW IN FAVOR OF THE ASSESSEE BY RELYING UPON THE JURISDICTIONAL HIGH COURT DECISION IN THE CASE OF BRIGHT ENTERPRISES P LTD. IN ITA 224 OF 2013 DATED 24.7.2015. THEREFORE TAKING INTO ACCOUNT THE ENTIRE FACTS AND THE DECISION OF COORDINATE BENCH DECISION AND DECISION OF JURISDICT IONAL HIGH COURT IN THE CASE OF BRIGHT ENTERPRISES P LTD, SUPRA, WE DELETE THE D ISALLOWANCE OF INTEREST COVERED BY THIS GROUND OF APPEAL. 8. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 26/02/2016 AG COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT, TH E CIT(A), THE DR