Shree Geeta Trading Co., Patan V. The Income Tax Officer, Ward-1, Patan

ITA 517/AHD/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 6176 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 25-07-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 18-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROOP CHAND
• Assessee Lawyers: AJIT P SANDESARA

Judgement Text

SMC-ITA NO. 517/AHD/2014 SHREE GEETA TRADING CO.VS. ITO ASSESSMENT YEAR: 2010-11 PAGE 1 OF 3 IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD [ BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER ] ITA NO. 517/AHD/2014 ASSESSMENT YEAR : 2010-11 SHREE GEETA TRADING CO. ............ APPELLANT NEAR OLD MARKET YARD, ZINIRET, AT & POST : PATAN, DIST.: PATAN (N.G.) [PAN AAGFS 1182 H] VS. INCOME-TAX OFFICER WARD-1, PATAN .......................RESPONDENT APPEARANCES BY: AJIT P. SANDESARA FOR THE APPELLANT ROOPCHAND FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : 01.02.2018 DATE OF PRONOUNCING THE ORDER : 02.02.2018 O R D E R 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HA S CHALLENGED CORRECTNESS OF THE ORDER DATED 28 TH NOVEMBER 2013 PASSED BY THE CIT(A), GANDHINAGAR, AHMEDABAD, UPHOLDING THE DISALLOWANCE OF RS.5,32,28 0/- MADE BY THE ASSESSING OFFICER UNDER SECTION 36(1)(III) OF THE INCOME-TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2010-11. 2. TO ADJUDICATE ON THIS APPEAL, ONLY A FEW MATERIA L FACTS ARE REQUIRED TO BE TAKEN NOTE OF. DURING THE COURSE OF ASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER NOTED THAT WHILE THE ASSESSEE HAS BORROWED MONIES F ROM RELATIVES @ 18%, THE ASSESSEE HAS EXTENDED LOANS/ADVANCES TO CERTAIN PER SONS AT LESSER RATES (12% OR 15%). FOR THIS REASON, THE ASSESSING OFFICER DISAL LOWED THE EXCESS INTEREST PAID (I.E. DIFFERENCE BETWEEN 18% AND 12% /15%) ON THE BORROWI NGS. THE DISALLOWANCE WAS FOR AN AMOUNT OF RS.7,12,421/-. 3. AGGRIEVED, THE ASSESSEE CARRIED THE MATTER IN AP PEAL BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. LEARNED CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APP EAL BEFORE ME. 4. I HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. SMC-ITA NO. 517/AHD/2014 SHREE GEETA TRADING CO.VS. ITO ASSESSMENT YEAR: 2010-11 PAGE 2 OF 3 5. I HAVE NOTED THE MAIN CONTENTION OF THE ASSESSEE IS THAT THE DEPOSITS WHICH WERE PLACED BY THE ASSESSEE @ 12% INTEREST WERE ONL Y IN RESPECT OF TEMPORARY SURPLUS FUNDS AND THUS CONSTITUTING OPTIMUM UTILIZA TION OF IDLE MONEY FOR SHORT PERIODS. MY ATTENTION WAS ALSO INVITED TO THE ORDER OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF PATEL JAYANTILAL BHAVANBHAI & CO. VS. ITO IN ITA NO.689/AHD/2012 DATED 06.12.2013, WHEREIN, ON MATER IALLY IDENTICAL FACTS, THE TRIBUNAL HAS HELD THAT SUCH TEMPORARY BORROWING OF FUNDS AT A LOWER RATE WOULD NOT CONSTITUTE DIVERSION OF INTEREST BEARING FUNDS AT L OWER RATES. WHILE DOING SO, THE CO- ORDINATE BENCH HAS OBSERVED AS FOLLOWS:- 6. I HAVE CONSIDERED RIVAL SUBMISSIONS AND PERUSE D THE ORDERS OF THE AO AND THE CIT(A), AND COPIES OF VARIOUS ACCOUNT OF PARTIE S, AND ACCOUNT STATEMENT OF THE ASSESSEE, AS FILED IN THE COMPILATION BEFORE ME . I FIND THAT THE AO HIMSELF HAS ADMITTED THAT THE ASSESSEE IS DEALING WITH THE PURCHASE AND SALE OF AGRICULTURE PRODUCE, WHICH IS APPARENTLY SEASONAL B USINESS. I FIND THAT THE ASSESSEE HAS PRUDENTLY USED ITS MONEY NOT IMMEDIATE LY REQUIRED IN THE BUSINESS OF PURCHASE AND SALE OF AGRICULTURAL PRODU CE AND BY DEPOSITING THE SAME WITH DIFFERENT PARTIES, AND HAS EARNED 6% PER ANNUM INTEREST THEREON. IT IS NOT A CASE OF DIVERSION OF FUNDS BY THE ASSESSEE . I FIND THAT THERE ARE NUMBER OF ENTRIES OF DEPOSITS AND WITHDRAWALS IN TH E ACCOUNT OF THREE PARTIES, COPIES OF WHICH HAS BEEN FILED IN THE COMPILATION B EFORE THE TRIBUNAL. THE OPENING AND CLOSING BALANCE IN THE ACCOUNT OF THESE PARTIES HAS A HUGE DIFFERENCE. I FIND THAT CIT(A) HAS NOT GIVEN ANY VA LID REASON FOR CONFIRMING THE ADDITION MADE BY THE AO. THE ASSESSEE HAS TRIED TO MAKE BEST USE OF THE IDLE MONEY FOR SHORT PERIOD, WHENEVER POSSIBLE, AND IT I S NOT A CASE OF DIVERSION OF BORROWED MONEY TO THE THIRD PARTY. IN THESE FACTS O F THE CASE, I FIND THAT NO CASE OF DISALLOWANCE OF INTEREST COULD BE MADE OUT BY THE REVENUE, AND THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE, AND THE GROUND OF THE APPEAL OF THE ASSESSEE IS ALLOWED. 6. THE VIEWS SO EXPRESSED BY THE CO-ORDINATE BENCH APPLY TO THE PRESENT FACTS AND CIRCUMSTANCES AS WELL. THERE IS NO DISPUTE THA T THE SHORT TERM DEPOSITS @ 12% WERE TEMPORARY IN NATURE AND COULD THUS BE INDEED V IEWED AS OPTIMUM UTILIZATION OF SURPLUS FUNDS. THAT EXACTLY WAS THE SITUATION BEFOR E THE CO-ORDINATE BENCH. RESPECTFULLY FOLLOWING THE VIEWS OF THE CO-ORDINATE BENCH, I UPHOLD THE PLEA OF THE ASSESSEE AND, ACCORDINGLY, DIRECT THE ASSESSING OFF ICER TO DELETE THE IMPUGNED DISALLOWANCE OF RS.5,32,280/-. 7. IN THE RESULT, APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT TODAY ON THE 2 ND FEBRUARY, 2018. SD/- PRAMOD KUMAR (ACCOUNTANT M EMBER) AHMEDABAD, THE 2 ND DAY OF FEBRUARY, 2018 **BT SMC-ITA NO. 517/AHD/2014 SHREE GEETA TRADING CO.VS. ITO ASSESSMENT YEAR: 2010-11 PAGE 3 OF 3 COPIES TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD 1. DATE OF DICTATION: .....TWO PAGES DICTATION PAD ATTACHED-.........02.02.2018 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE T HE DICTATING MEMBER: .. 02.02.2018....... 3. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR . P.S./P.S.: .... 02.02.2018.. . 4. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE TH E DICTATING MEMBER FOR PRONOUNCEMENT: 02.02.2018... 5. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK : ... 02.02.2018.... 6. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK : . 7. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER: