ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-2, JALANDHAR V. MESERS K.C. EDUCATIONAL SOCIAL WELFARE SOCIETY, HIMACHAL PRADESH

ITA 530/ASR/2018

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 4199 (ITAT-AMRITSAR)
• Duration Of Justice: 3 year(s) 5 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2015-2016
• Appeal Filed On: 31-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR BEFORE DR. M. L. MEENA, ACCOUNTANT MEMBER AND SH. ANIKESH BANERJEE, JUDICIAL MEMBER I.T.A. No. 529/Asr/2018 Assessment Year: 2015-16 M/s K.C. Educational Social Welfare Society, Vill. Pandoga, Una (H.P.) [PAN: AAJFK 4479Q] Vs. The Dy. Commissioner of Income Tax, Central Circle-II, Jalandhar (Appellant) (Respondent) I.T.A. No. 530/Asr/2018 Assessment Year: 2015-16 The Asstt. Commissioner of Income Tax, Central Circle-2, Jalandhar Vs. M/s K.C. Educational Social Welfare Society, VPO Pandoga, Uprala, Teh. & Distt. Una (H.P.) [PAN: AAJFK 4479Q] (Appellant) (Respondent) Appellant by : Sh. Rajinder Kumar Chopra, CA Respondent by: Sh. S. M. Surendranath, Sr. DR Date of Hearing: 22.03.2022 Date of Pronouncement: 21.04.2022 ITA Nos. 529&530/Asr/2018 K.C. Educational Social Welfare Society v. DCIT 2 ORDER Per Anikesh Banerjee, JM: The instant appeals are filed by the assessee and the revenue against the order passed by the Ld. Commissioner of Income Tax (Appeals)-5, Ludhiana [in brevity the CIT(A)], bearing Appeal No. 30/IT/CIT(A)-5/LDH/2017-18 dated 29.08.2018 u/s 250(6) of the Income Tax Act, 1961 [in brevity the Act], for Assessment Year 2015-16. 2. Brief fact is that the addition was made by the ld. Assessing Officer [in brevity the AO] amount of Rs. 2,05,81,728/- u/s 36(1)(iii) of the Act for disallowance of interest expenditure related to interest free non business advance to the different parties. 3. The assessee filed an appeal before the ld. CIT(A) and Appellate Authority after considering the submission of the assessee the addition was reduced Rs.8,39,490/- violation of section 36(i)(iii) related to interest free non business advance to the parties. As per the counsel of the assessee, the whole advance was utilized from surplus funds for the commercial expediencies. 4. After receiving the order of the Commissioner of the ld. CIT(A), the assessee filed an appeal before us. 5. As per the counsel of the assessee, the assessee has a loan amount of Rs.63,61,86,021/- which was utilized for addition of fixed assets, amount of Rs.63,93,93,679/-. So, the interest free advance is from business surplus funds. Accordingly, for commercial expediency no interest was charged to the parties. So, the violation of section 36(1)(iii) of the Act is arbitrary bad in law. ITA Nos. 529&530/Asr/2018 K.C. Educational Social Welfare Society v. DCIT 3 6. Further the counsel of the assessee submitted the assessee’s own case bearing ITA No. 348/Asr/2018 assessment year 2014-15 order dated 25.08.2019 in which the matter is covered in favour of the assessee. 7. The ld. DR vehemently argued and relied on the assessment order and appeal order. As per the ld. DR, the amount was paid in different dates from bank loan account of assessee to the parties for interest free advance. As per the ld. DR, the assessee utilized the amount from its loan/CC limit account directly from transferring the fund to different entities. The utilization of the interest free fund is from the loan account of the assessee accordingly the addition is sustained. 8. We have heard both the parties & considered the available records. The same issue is covered by our coordinate Bench, supra. Apparently the assessee’s utilization of the loan fund to its fixed asset vide page 23 of the paper book of the assessee. So, the assessee made its payment from his surplus funds. On the other hand, the Revenue also pointed out that the amount utilized from assessee’s loan account directly. So, the matter is further to be considered by the ld. AO by verifying the nature of payment and mode of payment related to interest free advance. Therefore, we are setting aside the matter to the ld. AO for further verification only related above said matter. Accordingly, the appeal of the assessee is allowed for statistical purposes. 9. For adjudication of cross appeal of the revenue, the Ld CIT(A) in his order, page-9 elaborated the facts related the advance to parties. The findings of the Ld. CIT(A) is as follows: “ T h e f a c t s o f t h e c a s e , t h e b a s i s o f d i s a l l o w a n c e / ad d i t i o n m a d e b y t h e A . O . a n d a r g u m e n t s o f t h e A R d u r i n g t h e c o u r s e o f ap p e l l a t e p r o c e e d i n g s h a v e b e e n c o n s i d e r e d . T h e A R r e p e a t e d t h e a r g u m e n t t h a t o n l y t h e i n t e r e s t f r e e f u n d s w e r e u s e d f o r m a k i n g t h e s e a d v an c e s a n d n o b o r r o w e d ITA Nos. 529&530/Asr/2018 K.C. Educational Social Welfare Society v. DCIT 4 f u n d s w a s u t i l i z e d . I t w a s a l s o s u b m i t t e d t h a t i n th e p a s t s i m i l a r d i s a l l o w a n c e s w e r e m a d e , h o w e v e r r e l i e f w a s g r a n t e d i n r e s p e c t o f l o a n s o u t s t a n d i n g i n t h e n a m e s o f M / s . S u t l e j S e r v i c e S t at i o n ( P ) L t d . , M / s . Wa l i a T r a d e r s L t d . , M / s . I n d i g o F i n c a p P v t . L t d . T he A R h a s f i l e d t h e c o p i e s o f a c c o u n t s o f t h e s i s t e r c o n c e r n s / p e r s o n s in r e s p e c t o f w h i c h d i s a l l o w a n c e s h a v e b e e n m a d e b y t h e A O . A p e r u s a l of t h e l e d g e r a c c o u n t s f i l e d b y t h e A R s h o w s t h a t t h e a c c o u n t s o f M / s . I n d i g o F i n c a p P v t . L t d . , M / s . S u t l e j S e r v i c e S t a t i o n (P ) L t d . a n d M / s . Wa l i a T r a d e r s L t d . a r e r u n n i n g a c c o u n t s h a v i n g b o t h c r e d i t a n d d e b i t en t r i e s a s i n t h e p r e c e d i n g y e a r s a l s o . T h i s g i v e s s u p p o r t t o t h e c o nt e n t i o n o f t h e A R t h a t t h e s e a r e t h e b u s i n e s s t r a n s a c t i o n s a n d t h e b a l a n c es w e r e o n a c c o u n t o f b u s i n e s s p u r p o s e s / e x p e d i e n c y . H e n c e , t h e d i s a l l o w a nc e m a d e b y t h e A O i n r e s p e c t o f t h e s e t h r e e p a r t i e s i s n o t f o u n d s u s t a i na b l e a n d t h u s d e l e t e d . H o w e v e r , a s r e g a r d a d v a n c e g i v e n t o S m t . K a m a l G a n dh i , S h . K a p i l C h a d h a , M / s . K h u s h a l C h a n d E d u c a t i o n a l S o c i e t y , M / s. D e e E n n K n i t w e a r a n d S h . G o p a l K r i s h a n B h a g a t , n o b u s i n e s s p u r p o s e / ex p e d i e n c y h a s b e e n e s t a b l i s h e d . T h e a m o u n t s t o t h e m h a v e b e e n g i v e n f ro m i n t e r e s t b e a r i n g f u n d s l e a d i n g t o e x t r a i n t e r e s t b u r d e n w i t h o u t a n y g a i n s i n r e t u r n . T h e a r g u m e n t o f t h e a s s e s s e e r e g a r d i n g a d v a n c e o u t o f in t e r e s t f r e e f u n d s h a s b e e n r e b u t t e d b y t h e A O i n t h e a s s e s s m e n t o r d e r b y s h o w i n g t h a t t h e a m o u n t s h a v e b e e n t r a n s f e r r e d d i r e c t l y f r o m L o a n / C C a c c o u n t s a n d t h e a s s e s s e e has n o t r e c e i v e d a n y i n t e r e s t f r e e f u n d s f o r m a k i n g t h es e a d v a n c e s . A p e r u s a l o f t h e ledger a c c o u n t s s h o w s t ha t i n t h e c a s e o f Smt. K a m a l G a n d h i , a p a r t f r o m o p e n i n g b a l a n c e o f R s . 1 9 ,3 5 , 5 0 0 / - f u r t h e r l o a n o f R s . 3 , 5 0 , 0 0 0 / - w a s g i v e n l e a d i n g t o a c l o s in g b a l a n c e o f R s . 2 2 , 8 5 , 0 0 0 / - S i m i l a r l y , i n t h e c a s e o f S h . K a p i l C h ad h a , a l o a n o f R s . 1 0 , 0 0 , 0 0 0 / - w a s g i v e n o n 0 7 . 0 6 . 2 0 1 4 i n o n e g o . I n th e c a s e o f S h . K h u s h a l C h a n d E d u c a t i o n a l S o c i e t y , t h e t o t a l l o a n o f R s . 2 0, 3 2 , 0 0 0 / - w a s g i v e n o u t o f w h i c h R s . 7 5 , 0 0 0 / - w a s r e c e i v e d b a c k l e a v i n g a b a l a n c e o f R s . 1 9 , 5 7 , 0 0 0 / - a s o n 3 1 . 0 3 . 2 0 1 5 . S i m i l a r l y , i n t h e c a se o f M / s . D e e E n n K n i t w e a r a t o t a l l o a n o f R s . 1 1 , 0 0 , 0 0 0 / - w a s g i v e n a n d t h e r e i s n o f u r t h e r t r a n s a c t i o n s a n d t h e s a m e a m o u n t w a s o u t s t a n d i n g a s o n 3 1 . 0 3 . 2 0 1 5 a l s o . S a m e i s t h e p o s i t i o n w i t h r e s p e c t t o S h . G o p a l K r i sh a n B h a g a t w h e r e a l o a n o f R s . 2 , 0 0 , 0 0 0 / - w a s o u t s t a n d i n g t h r o u g h - o u t t h e y e a r . T h e r e f o r e , t h e d i s a l l o w a n c e m a d e i n r e s p e c t o f a d v a n c e t o S m t . K a m a l G a n d h i , S h . K a p i l C h a d h a , M / s . K h u s h a l C h a n d E d u c a t i o n a l S o c i e ty , M / s . D e e E n n K n i t w e a r a n d S h . G o p a l K r i s h a n B h a g a t , i s f o u n d s u st a i n a b l e a n d h e n c e c o n f i r m e d . ITA Nos. 529&530/Asr/2018 K.C. Educational Social Welfare Society v. DCIT 5 A c c o r d i n g l y , t h i s g r o u n d o f a p p e a l i s p a r t l y a l l o w ed . ” The parties like M/s Indigo Fincap Pvt Ltd, M/s Sutlej Service Station (P) Ltd & M/s Walia Traders Ltd, had regular transaction with assessee. Accordingly, this can be considered as business expediency related these three parties. Here, we are inclining on observation of the Ld CIT(A). 10. In the result, the appeal of the assessee is allowed for statistical purposes and the appeal of the Revenue is dismissed. Order pronounced in the open court on 21.04.2022 Sd/- Sd/- (Dr. M. L. Meena) (Anikesh Banerjee) Accountant Member Judicial Member Date: 21.04.2022 *GP/Sr. PS* Copy of the order forwarded to: (1) The Appellant: (2) The Respondent: (3) The CIT(A), (4) The CIT concerned (5) The Sr. DR, I.T.A.T (6) The Guard File True Copy By Order