ITO, Ludhiana V. M/s Ashoka Engineers (P) Ltd., Ludhiana

ITA 540/CHANDI/2015

• Counselvise Citation: 54021514 RSA 2015
• Duration Of Justice: 5 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 02-11-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 19-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH,CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS.ANNAPURNA MEHROTRA, ACCOUNTANT MEMBER ITA NO. 540/CHD/2015 ASSESSMENT YEAR: 2010-11 THE ITO, VS M/S ASHOKA ENGINEERS P.LTD., WARD 1(1), INDUSTRIAL AREA C, LUDHIANA. SUA ROAD, DHANDARI KALAN, LUDHIANA. PAN: AABCA4136H & CO NO. 18/CHD/2015 IN ITA NO. 540/CHD/2015 ASSESSMENT YEAR: 2010-11 M/S ASHOKA ENGINEERS P.LTD., VS THE ITO, INDUSTRIAL AREA C, WARD 1(1, SUA ROAD, LUDHIANA. DHANDARI KALAN, LUDHIANA. PAN: AABCA4136H (APPELLANT) (RESPONDENT) DEPARTMENT BY : SHRI MANJIT SINGH, DR ASSESSEE BY : NONE DATE OF HEARING : 02.11.2015 DATE OF PRONOUNCEMENT : 05.11.2015 O R D E R PER BHAVNESH SAINI,JM THE DEPARTMENTAL APPEAL AS WELL AS CROSS OBJECTION BY ASSESSEE ARE DIRECTED AGAINST THE ORDER OF LD. CIT(APPEALS)-I LUDHIANA DATED 26.02.2015 FOR ASSESS MENT YEAR 2010-11. 2 2. WE HAVE HEARD LD. DR AND PERUSED THE FINDINGS OF AUTHORITIES BELOW. HOWEVER, NONE APPEARED ON BEHAL F OF THE ASSESSEE DESPITE NOTIFYING THE DATE OF HEARING THROUGH REGISTERED POST. 3. IN THE DEPARTMENTAL APPEAL, THE REVENUE CHALLENG ED THE DELETION OF ADDITION OF RS. 15,19,519/- UNDER S ECTION 36(1)(III) OF THE ACT. THE ASSESSEE IN THE CROSS O BJECTION SUPPORTED THE ORDER OF THE LD. CIT(APPEALS) FOR DEL ETING THE ADDITION. 4. BRIEFLY THE FACTS OF THE CASE ARE THAT THE ASSES SMENT ORDER REVEALED THAT ASSESSING OFFICER HAS HIGHLIGHT ED THE ISSUE OF ASSESSEE HAVING CLAIMED AN EXPENDITURE OF RS. 46,06,086/- ON ACCOUNT OF FINANCIAL EXPENSES OUT OF WHICH RS. 27,45,653/- PERTAINS TO BANK INTEREST. THE ASS ESSING OFFICER HAS HIGHLIGHTED THAT THE ASSESSEE'S PURCHAS E OF M.S. ROUNDS WERE ONLY FROM ONE SUPPLIER M/S MUKESH STEELS LTD., LUDHIANA AND ENTIRE SALE THEREOF HAS B EEN TO ONE M/S J.V.R. FORGINGS LTD. SIMILARLY, THE PURCHA SES OF M.S. PIPE IS FROM M/S ADITYA PIPES & STRIPS LTD. AN D SALES TO M/S J.V.R. FORGINGS LTD. THE SAID J.V.R. FORGIN G LTD. IS ASSOCIATE CONCERN IN TERMS OF PROVISIONS OF SECT ION 40(A)(2)(B) OF THE INCOME TAX ACT. THE ASSESSING O FFICER HAS OBSERVED THAT THE RECEIVABLES FROM M/S J.V.R. FORGINGS LTD. HAS REMAINED OUTSTANDING FOR THE FINA NCIAL YEAR 2009-10 AND NO INTEREST FOR THE SAME HAS BEEN CHARGED. THE ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN WHY THE INTEREST DEBITED UNDER PROFIT & LOS S 3 ACCOUNT SHOULD NOT BE DISALLOWED AS THE INTEREST BE ARING FUNDS HAD BEEN USED TO ADVANCE INTEREST FREE FUNDS TO ASSOCIATE CONCERN NAMELY M/S J.V.R. FORGING IN THE GARB OF SALES TRANSACTIONS. 5. THE ASSESSEE SUBMITTED BEFORE ASSESSING OFFICER THAT ASSESSEE COMPANY PURCHASED KNITTED CLOTH WITH RAW W OOL FROM VARIOUS CONCERNS AND SOLD, DETAILS OF WHICH AR E ALREADY SUBMITTED. AS REGARDS M.S. ROUND AND M.S. PIPE DURING ASSESSMENT YEAR 2009-10, THE SAME WERE SOLD TO M/S J.V.R. FORGING LTD., LUDHIANA AND THE SAID AMOU NT WAS AT RS. 1.24 CR. WHICH WAS OUTSTANDING AS ON 31.03.2010. THE ASSESSEE COMPANY HAS SUFFICIENT FU NDS WHICH ARE NOT INTEREST BEARING AND WERE MORE THAN T HE ABOVE AMOUNT. IT IS, THEREFORE, CLEAR THAT THERE A RE SUFFICIENT FUNDS AVAILABLE WITH THE ASSESSEE ON WHI CH, NO INTEREST WAS PAID, THEREFORE, QUESTION OF DIVERSION OF FUNDS WOULD NOT ARISE. FURTHER, THE UNIT IS DOING TRADING BUSINESS AND MONEY LENDING BUSINESS. THE FUNDS OF SECURED LOANS HAVE BEEN USED IN MAKING THE LENDING BUSINESS, THEREFORE, SALES MADE TO M/S J.V.R. FORGI NG LTD. HAS NO CONNECTION. THE SALES MADE TO THIS CONCERN ARE RECORDED IN THE BOOKS OF ACCOUNT WHICH ARE DUE TO COMMERCIAL EXPEDIENCY. THE ASSESSEE IS A PRIVATE L TD. COMPANY AND ASSESSEE RELIED UPON DECISION OF THE HO N'BLE SUPREME COURT IN THE CASE OF S.A.BUILDERS LTD. 288 ITR 1. THE ASSESSING OFFICER WAS, HOWEVER, NOT SATISFIED W ITH THE EXPLANATION OF ASSESSEE AND MADE THE ADDITION. 4 6. THE ASSESSEE REITERATED THE SAME SUBMISSIONS BEF ORE LD. CIT(APPEALS) AND SUBMITTED THAT ASSESSEE HAS SUFFICIENT FUNDS AND ALSO RECEIVED INTEREST FROM VA RIOUS PARTIES AT RS. 27,45,078/- AGAINST WHICH ASSESSEE P AID INTEREST OF RS. 27,45,653/-, THEREFORE, DIFFERENCE IS VERY NOMINAL. IT WAS FURTHER REITERATED THAT ASSESSEE H AS SUFFICIENT FUNDS AVAILABLE ON WHICH NO INTEREST HAS BEEN PAID AND TRANSACTION WITH M/S J.V.R. FORGING LTD. W AS COMMERCIAL TRANSACTION, THEREFORE, ADDITION IS WHOL LY UNJUSTIFIED. 7. THE LD. CIT(APPEALS) ACCEPTED THE CONTENTION OF THE ASSESSEE. THE ASSESSING OFFICER, ON THE BASIS THAT ASSESSEE HAS NOT REALIZED THE OUTSTANDING DEBITS FR OM THE SISTER CONCERN, MADE THE ADDITION. THE ASSESSING O FFICER HAS FAILED TO NOTE THAT IT WAS COMMERCIAL TRANSACTI ON WITH THIS ASSOCIATE CONCERN TO WHOM SALES HAVE BEEN MADE . IT WAS CLEARLY BROUGHT ON RECORD THAT GOODS PURCHASED HAVE BEEN SOLD ON MARKET RATE AND AT PROFIT, ALTHOUGH TO THE SISTER CONCERN. THE LD. CIT(APPEALS) ALSO NOTED THA T ASSESSEE HAS RECEIVED INTEREST IN A SUM OF RS. 27,4 5,078/- ,THEREFORE, THE DIFFERENCE WAS MARGINAL AND AS SUCH , ENTIRE TRANSACTION WAS COMMERCIAL AND ACCORDINGLY, DELETED THE ADDITION. 8. ON CONSIDERATION OF THE SUBMISSIONS OF THE LD. D R, WE DO NOT FIND ANY MERIT IN THIS GROUND OF APPEAL OF T HE REVENUE. THE ASSESSEE HAS CLEARLY MADE OUT A CASE OF COMMERCIAL TRANSACTION WITH THE ASSOCIATE CONCERN T O 5 WHOM SALES ARE MADE. MAY BE THERE WAS A DEBIT BALA NCE AGAINST THE ASSOCIATE CONCERN BY ITSELF WOULD NOT G IVE RIGHT TO THE ASSESSING OFFICER TO DISALLOW THE INTE REST. THE ASSESSEE WAS HAVING SUFFICIENT FUNDS AVAILABLE WITH HIM. THEREFORE, IT IS NOT A CASE OF DIVERSION OF FUNDS T O THE ASSOCIATE CONCERN. FURTHER, INTEREST BEARING FUNDS HAVE NOT BEEN USED TO ADVANCE INTEREST FREE FUNDS TO THE ASSOCIATE CONCERN BECAUSE IN THIS CASE, SALES TRANS ACTIONS HAVE BEEN CONDUCTED WITH THE ASSOCIATE CONCERN. TH E ASSESSEE ALSO EXPLAINED THAT FUNDS WERE TAKEN FOR M ONEY LENDING BUSINESS PURPOSES AND AS SUCH, IT HAS NO CO NCERN WITH THE TRADING ACTIVITIES OF THE ASSESSEE. THESE FACTS CLEARLY SHOWED THAT ASSESSEE GENUINELY ENTERED INTO THE TRANSACTIONS OF SALES WITH THE ASSOCIATE CONCERN, THEREFORE, IT IS NOT A CASE OF DIVERSION OF INTERES T BEARING FUNDS TO THE ASSOCIATE CONCERN. THE LD. CIT(APPEAL S), ON PROPER APPRECIATION OF FACTS AND MATERIAL ON RECORD CORRECTLY DELETED THE ADDITION. 9. THE CROSS OBJECTION IS MERELY FILED IN SUPPORT O F THE ORDER OF LD. CIT(APPEALS). 10. IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY MERIT IN THE DEPARTMENTAL APPEAL. THE SAME IS ACCORDINGLY DISMISSED. THE CROSS OBJECTION OF THE ASSESSEE IS NOT MAINTAINABLE BECAUSE IT IS MERELY F ILED IN SUPPORT OF THE ORDER OF THE LD. CIT(APPEALS) AND ACCORDINGLY IS DISMISSED. 6 11. IN THE RESULT, DEPARTMENTAL APPEAL AND CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (ANNAPURNA MEHROTRA) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 5 TH NOV., 2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT/CHD