Tractel Tirfor India Pvt. Ltd., New Delhi V. ITO, New Delhi

ITA 5775/DEL/2013

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 7210 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-01-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 28-01-2016
• Assessment Year: 2002-2003
• Appeal Filed On: 28-10-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Opportunity of being heard
• Section: 43B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : H : NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NOS.5775 &6724/DEL/2013 ASSESSMENT YEARS : 2002-03 & 2003-04 TRACTEL TIRFOR INDIA PVT. LTD., 302, HARSH BHAWAN, 64-65, NEHRU PLACE, NEW DELHI. PAN: AAACT4320R VS. ITO, WARD-16(4), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI AJAY KUMAR SINGHAL, CA DEPARTMENT BY : SHRI RAJIV RANKA, SR. DR DATE OF HEARING : 28.01.2016 DATE OF PRONOUNCEMENT : 28.01.2016 ORDER PER R.S. SYAL, AM: THESE TWO APPEALS BY THE ASSESSEE RELATE TO THE ASS ESSMENT YEARS 2002-03 & 2003-04. SINCE BOTH THE APPEALS ARE BAS ED ON ALMOST SIMILAR FACTS AND COMMON GROUNDS OF APPEAL, WE ARE, THEREFO RE, PROCEEDING TO DISPOSE THEM OFF BY THIS CONSOLIDATED ORDER FOR TH E SAKE OF CONVENIENCE. ITA NOS.5775 &6724/DEL/2013 2 A.Y. 2002-03 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF RS.14,94,377/- TOWARDS INTEREST PAI D TO CANARA BANK IN RESPECT OF NASIK UNIT. 3. SUCCINCTLY, THE ASSESSEE AT THE MATERIAL TIME WA S ENGAGED IN THE MANUFACTURING OF MATERIAL HANDLING EQUIPMENTS. IN THE AUDIT REPORT FILED ALONG WITH RETURN OF INCOME, IT WAS MENTIONED THAT THE COMPANY HAD BECOME SICK AND WAS REGISTERED WITH THE BIFR DURING THE YEAR ENDING 31.3.1996 AND THAT ON THE BASIS OF THE DECISION OF THE BIFR, THE NASIK UNIT OF THE COMPANY WAS TAKEN OVER BY M/S HINDUSTAN PARSON LTD. (HPL). THE ASSESSEE CLAIMED DEDUCTION, INTER ALIA , OF INTEREST TO THE TUNE OF RS.14,94,377/- WITH THE NARRATION WORKING CAPIT AL LOAN (NASIK). THE AO OPINED THAT SINCE NASIK UNIT HAD BEEN TRANSFERRE D TO HPL WAY BACK IN 1996, THERE WAS NO JUSTIFICATION FOR CLAIMING AN Y INTEREST IN RESPECT OF SUCH UNIT AGAINST THE CHARGEABLE INCOME. ON BEING CALLED UPON TO ADDUCE REASONS FOR JUSTIFYING SUCH DEDUCTION, THE A SSESSEE STATED THAT IN THE MEETING HELD ON 27.1.1997 BEFORE THE BIFR TO RE VIEW THE PROGRESS ITA NOS.5775 &6724/DEL/2013 3 MADE IN THE IMPLEMENTATION OF THE SCHEME TRANSFERRI NG NASIK UNIT, HPL TOOK OVER THE WORKING CAPITAL LIABILITY OF NASIK UN IT ONLY TO THE EXTENT OF RS.12.54 LAC, BEING THE AMOUNT EQUAL TO THE VALUE O F CURRENT ASSETS, THEREBY LEAVING THE BALANCE AMOUNT OF BANK LOAN OF OVER RS.1 CRORE IN THE HANDS OF THE ASSESSEE ALONE WHICH DEVOLVED ON I TS FARIDABAD UNIT. THE AO DID NOT ALLOW DEDUCTION OF INTEREST AMOUNTIN G TO RS.14,94,377/- ON SUCH LOAN LIABILITY OF NASIK UNIT, AS IN HIS OPI NION, FULL LIABILITY DEVOLVED UPON HPL AND IT WAS A VOLUNTARY ACT ON THE PART OF THE ASSESSEE TO TAKE UPON ITSELF THE REMAINING LOAN LIABILITY O F THE TRANSFERRED UNIT, ON WHICH NO DEDUCTION OF INTEREST WAS ALLOWABLE. HE F URTHER INVOKED THE PROVISIONS OF SECTION 43B FOR MAKING THE DISALLOWAN CE AS, IN HIS OPINION, SUCH INTEREST WAS NOT EVEN PAID. THE LD. CIT(A) AF FIRMED THE VIEW TAKEN BY THE AO. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE ON THE FAC T THAT NASIK UNIT OF THE ASSESSEE WAS TRANSFERRED TO HPL, PURSUANT TO BIFR O RDER. IT IS FURTHER NOTICED THAT THE ORIGINAL ORDER OF BIFR WAS AMENDED BY WAY OF A ITA NOS.5775 &6724/DEL/2013 4 CORRIGENDUM ON 20 TH SEPTEMBER, 1996, AS PER WHICH THE TRANSFER OF NASIK UNIT TO HPL WAS SUBJECT TO THE CONDITION OF T RANSFERRING BANK LIABILITY ONLY TO THE EXTENT OF CURRENT ASSETS. JO INT VALUATION OF CURRENT ASSETS WAS CARRIED ON AND SUCH CURRENT ASSETS WERE VALUED AT RS.12.54 LAC. RESULTANTLY, THE WORKING CAPITAL LIABILITY TO THIS EXTENT ALONE WAS TAKEN OVER BY HPL, WHILE THE REMAINING AMOUNT REMAI NED WITH THE ASSESSEE WITH THE CONSENT OF BOTH THE PARTIES. THI S ARRANGEMENT IS FURTHER EVIDENCED FROM SUMMARY RECORD PROCEEDINGS O F THE HEARING HELD ON 27.1.1997 BEFORE BIFR, A COPY OF WHICH IS AVAILA BLE ON PAGES 35-41 OF THE PAPER BOOK. FROM THE ABOVE NARRATION OF FAC TS, IT IS EVIDENT THAT HPL TOOK OVER BANK LIABILITY ONLY TO THE EXTENT OF RS.12.54 LAC, BEING THE VALUE OF CURRENT ASSETS AND THE REMAINING BANK LIAB ILITY IN RESPECT OF NASIK UNIT REMAINED WITH THE ASSESSEE ALONE. IT IS IN RESPECT OF THIS REMAINING LIABILITY WITH THE OPENING BALANCE AS ON 1.4.2001 AT RS.87,93,963/- THAT THE ASSESSEE CLAIMED DEDUCTION OF INTEREST TO THE TUNE OF RS.14.94 LAC, WHICH HAS BEEN DENIED BY THE REVE NUE AUTHORITIES. IN OUR CONSIDERED OPINION, THERE CAN BE NO REASON TO D ISALLOW DEDUCTION OF SUCH INTEREST BECAUSE OF THE FACT THAT THE NASIK UN IT WAS THAT OF THE ITA NOS.5775 &6724/DEL/2013 5 ASSESSEE ALONE AND HPL TOOK OVER THE BANK LIABILITY ONLY EQUAL TO THE VALUE OF CURRENT ASSETS AT RS.12.54 LAC, THEREBY LEAVING THE REMAINING BANK LIABILITY WITH THE ASSESSEE ON WHICH INTEREST FOR THE YEAR CAME AT RS.14.94 LAC. SINCE THIS LIABILITY WAS INCURRED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS OF NASIK UNIT, INTEREST ON SUCH LOAN HAS TO BE ALLOWED AS DEDUCTION. OUR VIEW IS FORTIFIED BY THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF VEECUMSEES VS. CIT (1996) 220 ITR 185 (SC) , IN WHICH THAT ASSESSEE WAS DOING BUSINESS OF JEWE LLERY AND ALSO RUNNING A CINEMA THEATRE. INTEREST ON CAP ITAL BORROWED FOR CONSTRUCTION OF CINEMA THEATRE, EVEN AFTER SALE OF CINEMA THEATRE, WAS HELD TO BE DEDUCTIBLE IN THE HANDS OF THE ASSESSEE BECAUSE THE LOAN WAS OBTAINED FOR THE PURPOSE OF BUSINESS. IN OUR CONSI DERED OPINION, THIS JUDGMENT SQUARELY GOVERNS THE FACTS OF THE INSTANT CASE. SETTING ASIDE THE IMPUGNED ORDER ON THIS SCORE, WE ALLOW DEDUCTION OF INTEREST TO THE TUNE OF RS.14.94 LAC. 5. AS REGARDS THE AOS POINT OF VIEW FOR MAKING DIS ALLOWANCE U/S 43B, BEING NON-PAYMENT OF INTEREST TO THE BANK, WE AGAIN FIND NO FORCE ITA NOS.5775 &6724/DEL/2013 6 IN THE SAME. A COPY OF THE BANK STATEMENT IS AVAILA BLE AT PAGE 42 ONWARDS OF THE PAPER BOOK, WHICH DEMONSTRATES THAT AFTER CHARGING OF INTEREST, THERE ARE DEPOSITS IN THE SAME BANK ACCOU NT TO THE TUNE OF RS.15 LAC AND ODD. SUCH DEPOSITS HAVE BEEN MADE DURING TH E CURRENT YEAR. THESE FACTS INDICATE THAT THERE IS NO VIOLATION OF SECTION 43B BECAUSE THE AMOUNT DEPOSITED IN THE BANK ACCOUNT IS MORE THAN T HE AMOUNT OF DEDUCTION OF INTEREST. WE, THEREFORE, ALLOW THIS G ROUND OF APPEAL. 6. IN THE RESULT, THE APPEAL IS ALLOWED. A.Y. 2003-04 7. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE DISALLOWANCE OF INTEREST OF RS.25,16,266/- PAID TO CANARA BANK IN R ESPECT OF NASIK UNIT. BOTH THE SIDES ARE IN AGREEMENT, AS HAS ALSO BEEN RECORDED BY THE AO, THAT THE FACTS AND CIRCUMSTANCES OF THE DEDUCTION O F INTEREST BY THE ASSESSEE AND ITS DISALLOWANCE BY THE AO ARE MUTATIS MUTANDIS SIMILAR TO THOSE OF THE ASSESSMENT YEAR 2002-03. IN VIEW OF O UR DECISION IN THE FOREGOING PARAS, WE HOLD THAT THE ASSESSEE IS OTHER WISE ENTITLED TO DEDUCTION OF INTEREST. ITA NOS.5775 &6724/DEL/2013 7 8. AS REGARDS THE APPLICABILITY OF SECTION 43B, THO UGH THERE IS NO SPECIFIC REFERENCE TO THIS PROVISIONS, BUT THE AO MADE REFERENCE TO THE SAME REASONS FOR DISALLOWANCE AS WERE GIVEN BY HIM IN HIS ORDER FOR THE A.Y. 2002-03. GOING BY THAT AND APPLYING THE DOCTR INE OF INCORPORATION, IT HAS TO BE ASSUMED THAT THE AO HAS ALSO INVOKED S ECTION 43B FOR DISALLOWANCE OF INTEREST IN THE CURRENT YEAR AS WEL L. THE LD. AR DID NOT READILY HAD A COPY OF BANK STATEMENT TO DEMONSTRATE THAT INTEREST TO THE TUNE OF RS.25,16,266/- WAS PAID BY MEANS OF DEPOSIT S IN THE BANK ACCOUNT. UNDER SUCH CIRCUMSTANCES, WE SET ASIDE TH E IMPUGNED ORDER AND REMIT THE MATTER TO THE AO FOR EXAMINING CANARA BANK STATEMENT OF THE ASSESSEE TO CHECK IF THE DEPOSITS IN THE BANK A CCOUNT ARE MORE THAN THE CLAIM FOR DEDUCTION OF INTEREST TO THE TUNE OF RS.25.16 LAC. IF IT IS SO, THEN, THE DEDUCTION SHOULD BE ALLOWED AND IN THE OT HERWISE SCENARIO DEDUCTION SHOULD BE RESTRICTED EQUAL TO THE AMOUNT OF SUCH DEPOSITS. NEEDLESS TO SAY, THE ASSESSEE WILL AFFORDED A REASO NABLE OPPORTUNITY OF BEING HEARD IN SUCH FRESH PROCEEDINGS. ITA NOS.5775 &6724/DEL/2013 8 9. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATIST ICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 28.01.201 6. SD/- SD/- [SUDHANSHU SRIVASTAVA] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 28 TH JANUARY, 2016. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.