M/s. K.T.M India, New Delhi V. DCIT, Panipat

ITA 57/DEL/2012

• Counselvise Citation: [2018] 122 COUNSELVISE.COM (IT) 2738 (ITAT-DELHI)
• Duration Of Justice: 6 year(s) 9 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-10-2018
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 06-06-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 05-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: NAINA SOIN KAPIL
• Keywords: Principle of natural justice; Proportionate interest
• Section: 80IB

Judgement Text

1 ITA NO. 57/DEL/2012 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: D NEW DELHI BEFORE SHRI N. K. SAINI, ACCOUNTANT MEM BER AND MS SUCHITRA KAMBLE, JUDI CIAL MEMBER ITA NO. 57/DEL/2012 ( A.Y 2008-09) K. T. M. INDIA C/O. M/S. RRA TAX INDIA, D-28, SOUTH EXTENSION, PART-1 NEW DELHI AAEFK6502B (APPELLANT) VS DCIT PANIPAT CIRCLE, PANIPAT (RESPONDENT) APPELLANT BY SH. RAKESH GUPTA, SH. SOMIL AGARWAL, ADVS. RESPONDENT BY SH. NAINA SOIN KAPIL, SR. DR ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER DATED 31/10/2011 PASSED BY CIT (A)-KARNAL, FOR ASSESSMENT YEAR 2008- 09. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANCE S OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN DISALLOWING THE DEDUCTION OF RS.7,05,311/- U/S 8 0IB IN RESPECT OF PURPORTED EXPORT INCENTIVES EVEN THOUGH ASSESSEE WA S SUPPORTING MANUFACTURER. 2. THAT IN ANY CASE AND IN ANY VIEW OF THE MATTER, ACTION OF LD. CIT(A) IN CONFIRMING THE ACTION OF LD. AO IN PASSING THE I MPUGNED ORDER AND DATE OF HEARING 26.09.2018 DATE OF PRONOUNCEMENT 15.10.2018 2 ITA NO. 57/DEL/2012 DISALLOWING THE CLAIM U/S 801B IN RESPECT OF PURPOR TED EXPORT INCENTIVES IS BAD IN LAW AND AGAINST THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE. LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN MAKING DISALLOWANCE OF RS.65,250/- ON ACCOUNT OF PRO-RATE INTEREST ON LOAN U/S 36(I)(III) OF THE INCOME TAX ACT., 1961 . 4. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. C1T(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN MAKING ADDITION OF RS.20,89,100/- ON ACCOUNT OF SHORT TERM CAPITAL GAIN ARISING ON SALE OF LAND. 5. THAT HAVING REGARD TO THE FACTS AND CIRCUMSTANC ES OF THE CASE, LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN CONFIRMING THE ACTION OF LD. AO IN FRAMING THE IMPUGNED ASSESSMENT IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE AND BY RECORDING INCORRECT FACTS AND FINDIN GS AND WITHOUT PROVIDING ADEQUATE OPPORTUNITY OF HEARING. 3. THE ASSESSEE IS A PARTNERSHIP CONCERN AND DERIVE S INCOME AS A SUPPORTING MANUFACTURER, FROM MANUFACTURING AND EXP ORT OF HANDLOOM PRODUCTS. THE ASSESSEE FIRM RECEIVED CAPITAL TOWAR DS DEPB/DUTY DRAW BACK AMOUNTING TO RS.60,47,967/- IN RESPECT OF EXPORT RE ALIZATION. THE ASSESSEE CLAIMED DEDUCTION U/S 80IB FOR RS.7,05,311/- AT 25% ON THE PROFIT OF RS. 28,21,245/-. THE ASSESSING OFFICER HELD THAT DEPB/ DUTY DRAW BACK CLAIMS AMOUNTING TO RS. 7,05,311/- IN RESPECT OF EXPORT RE ALIZATION WERE NOT PROFITS DERIVED FROM INDUSTRIAL UNDERTAKING AND REDUCED THE CLAIM OF DEDUCTION U/S 80IB FROM RS. 7,05,311/- TO RS. NIL. THE ASSESSING OFFICER FURTHER MADE ADDITION OF RS. 65,250/- ON ACCOUNT OF PRO RATA INT EREST ON LOAN U/S 36(I) (III) OF THE ACT. THE ASSESSING OFFICER ALSO MADE ADDITION AMOUNTING TO RS.20, 89,100/- ON ACCOUNT OF SHORT TERM CAPITAL GAIN ARIS ES ON SALE OF LAND. 3 ITA NO. 57/DEL/2012 4. BEING AGGRIEVED BY THE ASSESSMENT ORDER, THE ASS ESSEE FILED APPEAL BEFORE THE CIT (A). THE CIT (A) DISMISSED THE APPEAL OF T HE ASSESSEE. 5. THE LD. AR SUBMITTED THAT AS RELATES TO GROUND N O. 1 & 2, THE SAME IS DECIDED AGAINST THE ASSESSEE IN ASSESSEES OWN CAS E FOR ASSESSMENT YEAR 2007-08 BEING ITA NOS. 5619, 2529/DEL/2011, ITA NO. 1981/DEL/2012, ITA NO. 3165/DEL/2011 VIDE ORDER DATED 14 TH SEPTEMBER, 2018. AS REGARDS, GROUND NO. 3, THE LD. AR SUBMITTED THAT THE ASSESSE E, DURING THE ASSESSMENT SUBMITTED THE DETAILS REGARDING ADVANCES FOR FURNIT URE AND FIXTURE, ADVANCE PETRIFIED AND LOANS AND ADVANCES TO SISTER CONCERNS . THUS, THE LD. AR SUBMITTED THAT ALL THESE AMOUNTS WERE INTEREST FREE ADVANCES AND, THEREFORE, THE ASSESSING OFFICER WAS INCORRECT IN MAKING DISAL LOWANCE OF RS. 65,250/- ON ACCOUNT OF PRO RATA INTEREST ON LOAN U/S 36(I) (III ) OF THE ACT. AS REGARDS GROUND NO. 4, THE LD. AR SUBMITTED THAT THE ASSESSEE SOLD ITS BUSINESS AS SLUMP SALE TO SPJ TEXTILES PVT. LTD ON 2/7/2007 FOR THE CONSID ERATION OF RS. 3,89,84,198.86/-. THE BALANCE SHEET OF THE ASSESSE E AS ON 2/7/2007 CONTAINING LAND MEASURING 2 ACRE, 2 KARNAL, 15 MARL AS AS ASSET WHICH WAS DULY REFLECTED IN SCHEDULE OF FIXED ASSETS OF THE BALANC E SHEET. THE ASSESSING OFFICER AS WELL AS THE CIT (A) HAS NOT VERIFIED THESE DETAI LS. THEREFORE, THE LD. AR REQUESTED THAT THE ISSUE MAY BE RESTORED BACK TO TH E FILE OF THE ASSESSING OFFICER FOR VERIFICATION AND PROPER ADJUDICATION. THE LD. AR SUBMITTED THAT GROUND NO. 5 AND 6 ARE GENERAL IN NATURE, HENCE, NO T PRESSED. 6. THE LD. DR RELIED UPON THE ASSESSMENT ORDER AND THE ORDER OF THE CIT (A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. AS REGARDS, GROUND NO. 1 & 2, THE TRIBUNA L DECIDED THE ISSUE AGAINST THE ASSESSEE. THE TRIBUNAL FOR ASSESSMENT YEAR 200 7-08 HELD AS UNDER:- 4 ITA NO. 57/DEL/2012 4. AFTER HEARING BOTH THE PARTIES, WE FIND THAT IT IS NOT IN DISPUTE THAT THE ASSESSEE HAS GIVEN INTEREST FREE ADVANCE TO ITS SIS TER CONCERN. THE ASSESSEE'S CASE HAS BEEN THAT IT HAS GIVEN THE ADVA NCE FROM THE INTEREST FREE FUNDS AVAILABLE OUT OF CAPITAL OF THE PARTNERS AND THE ENTIRE LOAN WAS USED FOR THE PURPOSE OF BUSINESS. THE AO FOLLOWING THE JUDGMENT OF HON'BLE P & H HIGH COURT IN THE CASE OF CIT VS. ABH ISHEK (SUPRA) HELD THAT ON SUCH AN INTEREST FREE ADVANCE PROPORTIONATE INTEREST HAS TO BE DISALLOWED. NOW THE SAID JUDGMENT OF HON'BLE P & H HIGH COURT IN CIT VS. ABHISHEK (SUPRA) HAS BEEN OVERRULED BY THE HON' BLE SUPREME COURT IN THE CASE OF CIT VS. MUNJAL SALES CORPORATION, WH EREIN THE HON'BLE SUPREME COURT HELD THAT IF ASSESSEE HAS HUGE INTERE ST FREE FUNDS INCLUDING THE PROFIT EARNED BY THE ASSESSEE DURING THE YEAR WHICH IS SUFFICIENT TO COVER THE ADVANCEMENT OF LOAN, THEN N O INTEREST SHOULD BE DISALLOWED. THE ASSESSEE HAS DEMONSTRATED THAT THE HUGE AMOUNT OF MONEY WAS LYING IN THE CAPITALOF THE PARTNERS AND T HE PROFIT EARNED DURING THE RELEVANT ASSESSMENT YEAR ITSELF WAS APPR OXIMATELY RS.1.19 CRORES. THEREFORE, SUCH AN AVAILABILITY OF FUNDS IN TEREST FREE IS SUFFICIENT TO COVER UP A SMALL INTEREST FREE LOAN OF RS. 16 LACS GIVEN TO SISTER CONCERN. ACCORDINGLY, THE DISALLOWANCE OF RS. 1,14,777/- IS DELETED. IN THE RESULT APPEAL OF THE ASSESSEE IS ALLOWED. SINCE, THE ISSUE IS IDENTICAL IN PRESENT ASSESSMENT YEAR AS WELL, THE SAME IS COVERED IN ASSESSEES OWN CASE AGAINST THE ASSES SEE. THEREFORE, GROUND NO. 1 & 2 ARE DISMISSED. 8. AS REGARDS GROUND NO.3, THE ASSESSING OFFICER AS WELL AS THE CIT(A) HAS NOT LOOKED INTO THE ASPECT OF THE ADDITIONS FOR T HE BUSINESS PURPOSE RELATING TO FURNITURE AND FIXTURES AND COMMERCIAL EXPEDIENCIES. THE ASSESSING OFFICER ALSO IGNORED THE LOANS AND ADVANCES GIVEN TO THE SISTER CONCERN. THEREFORE, THIS NEEDS TO BE VERIFIED AND THEREFORE, WE REMAND BACK THIS ISSUE TO THE FILE OF THE ASSESSING OFFICER TO ADJUDICATE UPON IT AS PER THE EVIDENCE PRODUCED BEFORE THE 5 ITA NO. 57/DEL/2012 ASSESSING OFFICER BY THE ASSESSEE. NEEDLESS TO SA Y, THE ASSESSEE BE GIVEN OPPORTUNITY OF HEARING BY FOLLOWING PRINCIPALS OF N ATURAL JUSTICE. HENCE, GROUND NO. 3 IS PARTLY ALLOWED FOR STATISTICAL PURP OSE. 9. AS REGARDS GROUND NO.4, BOTH THE ASSESSING OFFIC ER AS WELL AS THE CIT(A) HAS NOT TAKEN THE COGNIZANCE OF THE EVIDENCE PRODUC ED BEFORE THE ASSESSING OFFICER MORE PARTICULARLY THAT OF BALANCE SHEET AN D ITS PROFIT. THEREFORE, THIS ISSUE ALSO NEEDS TO BE REMANDED BACK TO THE FILE OF THE ASSESSING OFFICER. NEEDLESS TO SAY, THE ASSESSEE BE GIVEN OPPORTUNITY OF HEARING BY FOLLOWING PRINCIPALS OF NATURAL JUSTICE. GROUND NO. 4 IS PAR TLY ALLOWED FOR STATISTICAL PURPOSE. 10. AS REGARDS GROUND NO. 5 & 6, THE SAME ARE GENER AL IN NATURE AND NOT PRESSED BY THE LD. AR, HENCE DISMISSED. 11. IN RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH OCTOBER, 2018. SD/- SD/- (N. K. SAINI) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: /10/2018 R.N* COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT 6 ITA NO. 57/DEL/2012 ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 26.09.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 26.09.2018 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS . 10 .2018 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT . 10 .2018 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK . 10 .2018 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER