Appeal details
Counselvise Citation
[2018] 125 COUNSELVISE.COM (IT) 8109 (ITAT-AHMEDABAD)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
4 year(s) 3 month(s) 24 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
20-06-2018
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
C
Next Hearing Date
29-06-2017
Assessment Year
2009-2010
Appeal Filed On
26-02-2014
Judgement Text
, LH LHLH LH IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD OLHE VGEN] YS[KK LNL; OLHE VGEN] YS[KK LNL; OLHE VGEN] YS[KK LNL; OLHE VGEN] YS[KK LNL; , BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI WASEEM AHMED, ACCOUNTANT MEMBER ./ I.T.A. NO.584/AHD/2014 ( / ASSESSMENT YEAR : 2009-10) THE DCIT, CIRCLE 4, AHMEDABAD. / VS. GSL NOVA PETROCHEMICALS LTD., SURVEY NO.396-403, MARIYA VILLAGE, SARKHEJ BAVLA HIGH WAY, AHMEDABAD 380 110 ./ ./ PAN/GIR NO. : AAACN 5419 K ( / APPELLANT ) .. ( !' / RESPONDENT ) # / APPELLANT BY : SHRI SAURABH SINGH, SR. D.R. !' $ # / RESPONDENT BY : SHRI T. P. HEMANI, A.R. % &' $ () / DATE OF HEARING 31/05/2018 *+,- $ () / DATE OF PRONOUNCEMENT 20/06/2018 . / O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE REVENUE AGAINST THE APPELLATE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-IV, AHMEDABAD [CIT(A) IN SHORT] VIDE APPEAL NO.CIT(A)- IV/AHD/300A/13-14 DATED 03/12/2013 ARISING IN THE A SSESSMENT ORDER PASSED UNDER S.143(3) OF THE INCOME TAX ACT, 1961 ( HERE-IN-AFTER ITA NO.584/AHD/2014 DCIT VS. GSL NOVA PETROCHEMICALS PVT. LTD. ASST.YEAR 2009-10 - 2 - REFERRED TO AS 'THE ACT') DATED 25/11/2011 RELEVAN T TO ASSESSMENT YEAR (AY) 2009-10. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE ARE AS UNDER:- 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.44,44,962/- MADE ON ACCOUNT OF DISAL LOWANCE U/S. 36(1)(III) OF THE ACT, WITHOUT PROPERLY APPRECIATIN G THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD. 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.17,760/- MADE ON ACCOUNT OF DISALLOW ANCE U/S.14A OF THE ACT, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD. 3. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE ADDITION OF RS.23,508/- MADE ON ACCOUNT OF CAPITALI ZATION ON INTEREST, WITHOUT PROPERLY APPRECIATING THE FACTS O F THE CASE AND THE MATERIAL BROUGHT ON RECORD. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE AO. 5. IT IS, THEREFORE, PRAYED THAT THE ORDER OF THE L D. CIT(A) MAY BE SET ASIDE AND THAT OF THE AO MAY BE RESTORED TO THE ABO VE EXTENT. 3. THE FIRST ISSUE RAISED BY THE REVENUE IN GROUND NO.1 IS THAT LEARNED CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE A O FOR RS.44,44,962/- ON ACCOUNT OF INTEREST ON THE DIVERSION OF THE FUND . 4. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE IS A LIMITED COMPANY AND ENGAGED IN THE MANUFACTURING AND TRADING BUSINESS O F POY, FDY, DT, DTEX, POLYESTER CHIPS AND TRADING IN CLOTH, ETC. TH E ASSESSEE IN THE YEAR ITA NO.584/AHD/2014 DCIT VS. GSL NOVA PETROCHEMICALS PVT. LTD. ASST.YEAR 2009-10 - 3 - UNDER CONSIDERATION HAS SHOWN ADVANCES TO ITS SISTE R CONCERN AS DETAILED UNDER: SR. NO. NAME OF THE SISTER CONCERN AMOUNT 1. GUPTA DYING & PRINTING MILLS LTD. 2,46,38,544/- 2. GUPTA SYNTHETICS LTD. 1,24,02,806/- THE ASSESSEE HAS NOT CHARGED ANY INTEREST ON THE AM OUNT ADVANCED TO ITS SISTER CONCERNS WHEREAS IT WAS INCURRING INTEREST C OST ON THE MONEY BORROWED BY IT. THEREFORE, THE AO WAS OF THE VIEW T HAT THE ASSESSEE HAS DIVERTED INTEREST-BEARING FUND TO ITS SISTER CONCER NS WITHOUT CHARGING ANY INTEREST THEREON. ACCORDINGLY, THE AO SHOW-CAUSED T HE ASSESSEE TO EXPLAIN FOR MAKING THE DISALLOWANCE OF PROPORTIONAT E INTEREST ON THE AMOUNT ADVANCED TO ITS SISTER CONCERN. HOWEVER, THE ASSESSEE FAILED TO MAKE ANY REPLY IN C OMPLIANCE TO THE QUERY RAISED BY THE AO. THEREFORE, THE AO WORKED OU T THE AMOUNT OF INTEREST FOR RS.44,44,962/- (12% ON RS. 2,46,38,544 + 1,24,02,806) AND MADE THE DISALLOWANCE U/S 36(1)(III) OF THE ACT. TH E AMOUNT DISALLOWED WAS ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LEARN ED CIT(A). THE ASSESSEE BEFORE THE LEARNED CIT(A) SUBMITTED THAT I T HAS ADVANCED MONEY TO ITS SISTER CONCERN IN CONNECTION WITH ITS BUSINE SS TRANSACTIONS. AS SUCH THE ASSESSEE DURING THE YEAR HAS SHOWN SALES OF GOO DS TO ITS SISTER CONCERN WORTH OF RS. 1339.64 LACS & RS. 2083.79 LACS RESPEC TIVELY. THIS FACT WAS ITA NO.584/AHD/2014 DCIT VS. GSL NOVA PETROCHEMICALS PVT. LTD. ASST.YEAR 2009-10 - 4 - DULY DISCLOSED IN THE TAX AUDIT REPORT IN THE COLUM N OF RELATED PARTY TRANSACTIONS. THUS, THE DEBIT BALANCE AS OBSERVED B Y THE AO IS REPRESENTING THE BUSINESS TRANSACTIONS OF THE ASSES SEE WITH ITS SISTER CONCERN. 6. THE ASSESSEE IN CASE OF THE ADVANCE MADE TO GUJA RAT DYING AND PRINTING MILLS LTD HAS RECOVERED THE AMOUNT OF INTE REST FOR RS.11.81 LACS ON ACCOUNT OF LATE PAYMENT MADE BY IT AGAINST THE S UPPLY OF GOODS. THIS FACT WAS ALSO REPORTED IN TAX AUDIT REPORT IN THE C OLUMN OF RELATED PARTY TRANSACTIONS. 7. THE ASSESSEE HAS SHOWN ITS CAPITAL OF RS.13.50 C RORES AND INTEREST- FREE UNSECURED LOANS OF RS.13.53 CRORES IN ITS BALA NCE SHEET. THE SAID FUND AVAILABLE WITH THE ASSESSEE EXCEEDS THE AMOUNT OF ADVANCES MADE TO THE SISTER CONCERN. THEREFORE, THE ADVANCES WERE MA DE TO THE SISTER CONCERN OUT OF ITS OWN AND INTEREST-FREE FUNDS. HEN CE, IT CAN BE CONCLUDED THAT NO ADVANCES HAVE BEEN GIVEN OUT OF THE INTERES T-BEARING FUNDS. THE ASSESSEE IN SUPPORT OF HIS CLAIM RELIED ON THE JUDG MENT OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES & P OWER LTD. REPORTED IN 178 TAXMAN 135. THE ASSESSEE ALSO SUBMITTED THAT THE LOANS OBTAINED BY IT HAVE BEEN UTILIZED FOR THE ACQUIRING FIXED ASSETS AND TO MEET THE WORKING CAPITAL REQUIREMENTS OF THE BUSINESS. THE AO HAS NOT PROVED ANY NEXUSES ITA NO.584/AHD/2014 DCIT VS. GSL NOVA PETROCHEMICALS PVT. LTD. ASST.YEAR 2009-10 - 5 - BETWEEN THE BORROWED FUNDS AND THE MONEY ADVANCED T O SISTER CONCERN JUSTIFYING THAT ADVANCES HAVE BEEN GIVEN OUT OF THE BORROWED FUNDS. WITHOUT PREJUDICE TO THE ABOVE, THE ASSESSEE ALSO S UBMITTED THAT IT HAS BORROWED TERM LOAN @ 9.75% AND WORKING CAPITAL LOAN @ 10.75% PER ANNUM WHEREAS THE AO HAS CHARGED INTEREST @ 12% ON THE MONEY ADVANCED TO THE SISTER CONCERN WITHOUT APPLYING ANY BASIS. IT WAS ALSO SUBMITTED THAT THE ASSESSEE WAS SHOW-CA USED FOR NOT CHARGING THE INTEREST ON THE ADVANCE GIVEN TO THE SISTER CON CERN AS PER ORDER SHEET ENTRY DATED 28-11-2011, BUT THE ASSESSMENT ORDER WA S PASSED U/S 143(3) OF THE ACT VIDE ORDER DATED 25-11-2011. THEREFORE, IT IS CLEAR THAT THE AO HAS NOT APPLIED HIS MIND AND CHARGED THE INTEREST O N THE ADVANCES GIVEN TO THE SISTER CONCERN ON A NOTIONAL BASIS. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER: 5.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS M ADE BY THE APPELLANT AND HAVE GONE THROUGH THE ASSESSMENT ORDE R AS WELL. 5.2.1 THE ACTION OF THE AO IS NOT JUSTIFIED IN VIEW OF THE FOLLOWING REASONS: (I) THERE ARE ENOUGH EVIDENCES SUBMITTED BY THE AP PELLANT TO PROVE THAT ACTUALLY THESE WERE THE DEBIT BALANCE IN THE R UNNING BUSINESS ACCOUNT. THE APPELLANT IS HAVING REGULAR BUSINESS T RANSACTIONS WITH BOTH THESE RELATED CONCERNS. (II) THE APPELLANT HAS ALSO CHARGED INTEREST OF RS .11.81 LAKHS FROM ONE OF THE RELATED PARTY ON LATE PAYMENT AGAINST SA LE OF GOODS WHICH ITA NO.584/AHD/2014 DCIT VS. GSL NOVA PETROCHEMICALS PVT. LTD. ASST.YEAR 2009-10 - 6 - PROVED THAT THE TRANSACTIONS WERE CARRIED OUT BY TH E APPELLANT PURELY ON COMMERCIAL BASIS. (III) THE APPELLANT WAS HAVING SUFFICIENT P AID-UP CAPITAL AND INTEREST FREE UNSECURED LOANS AT ITS DISPOSAL TO COVER THE DEBIT BALANCE OF THE TWO SISTER CONCERNS. (IV) THE CONTENTION OF THE APPELLANT THAT THE DATE OF ORDER I.E. 25-11- 2011 IS BEFORE THE DATE OF SHOW-CAUSE ENTRY DTD.28- 11-2011 IS ALSO CORRECT WHICH PROVES THAT APPELLANT WAS NOT GIVEN A NY OPPORTUNITY TO SUBMIT ITS EXPLANATION ON THIS ISSUE. (V) SIMILAR DISALLOWANCES IN EARLIER AY 2008-09 AN D SUBSEQUENT AY 2010-11 HAVE BEEN DELETED BY LD. CIT (APPEAL) AFTER CONSIDERING THE ABOVE FACTORS WHICH WERE ALSO PRESENT IN ABOVE STAT ED TWO YEARS. 5.2.2 IN VIEW OF ABOVE, THE ADDITION MADE BY THE A O OF RS.44,44,962/- ON ACCOUNT OF DISALLOWANCE U/S 36(1)(III) OF THE AC T CANNOT BE SUSTAINED AND THE SAME IS DELETED. THIS GROUND IS ALLOWED. BEING AGGRIEVED BY ORDER OF LEARNED CIT(A) REVENUE IS IN SECOND APPEAL BEFORE US. THE LD. DR BEFORE US VEHEMENTLY SUPPORTED THE ORDER OF THE AO WHEREAS, THE LEARNED AR BEFORE US FILED A PAPER BOO K COMPRISING PAGES FROM 1 TO 31 AND REITERATED THE SUBMISSION MADE BEF ORE THE LEARNED CIT(A). 8. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE ISSUE IN THE INSTANCES CAS E RELATES TO THE DISALLOWANCE MADE BY THE AO FOR THE AMOUNT OF INTER EST CHARGED ON THE MONEY ADVANCED BY THE ASSESSEE TO ITS SISTER CONCER N. THE ASSESSEE HAS ITA NO.584/AHD/2014 DCIT VS. GSL NOVA PETROCHEMICALS PVT. LTD. ASST.YEAR 2009-10 - 7 - SHOWN ADVANCES TO SISTER CONCERN AGGREGATING TO RS. 3,70,41,350/- ONLY. THE ASSESSEE CLAIMED THAT SUCH MONEY ADVANCED TO IT S SISTER CONCERN REPRESENTS THE BUSINESS TRANSACTIONS. SIMILARLY, IT WAS ALSO CLAIMED BY THE ASSESSEE THAT ITS OWNED FUND EXCEEDS THE AMOUNT OF ADVANCED MADE TO SISTER CONCERN. IT IS AN UNDISPUTED FACT THAT THE OWNED FUND OF THE ASSESSEE EXCEEDS THE AMOUNT OF MONEY ADVANCED TO ITS SISTER CONCERN AS E VIDENT FROM THE COPY OF THE BALANCE SHEET, WHICH IS PLACED ON PAGE NO.7 OF THE PAPER BOOK. THE RELEVANT EXTRACT OF THE BALANCE SHEET IS REPROD UCED AS UNDER: GSL NOVA PETROCHEMICALS LIMITED (FORMALLY KNOWN AS NOVA PETROCHEMICALS LTD.) BALANCE SHEET AS AT 31 ST MARCH, 2009 PARTICULARS SCHE NO. RS. AS AT 31- 03-2009 AS AT 31- 03-2008 RS. SOURCES OF FUNDS 1. SHAREHOLDERS FUNDS: (A) SHARE CAPITAL (B) RESERVES AND SURPLUS 1 2 135000000 NIL 135000000 NIL 135000000 135000000 FROM THE ABOVE, THERE REMAINS NO DOUBT THAT THE OWN ED FUNDS OF THE ASSESSEE EXCEED THE AMOUNT OF MONEY ADVANCED TO ITS SISTER CONCERN. THEREFORE, THE PRESUMPTION CAN BE DRAWN THAT THE MO NEY HAS BEEN ADVANCED OUT OF ITS OWNED FUND. IN HOLDING SO WE FI ND SUPPORT AND GUIDANCE FROM THE JUDGMENT OF HONBLE BOMBAY HIGH C OURT IN THE CASE ITA NO.584/AHD/2014 DCIT VS. GSL NOVA PETROCHEMICALS PVT. LTD. ASST.YEAR 2009-10 - 8 - OF CIT VS. RELIANCE UTILITIES & POWER LTD. 178 TAXM AN 135. THE RELEVANT EXTRACT OF THE ORDER REPRODUCED BELOW: IF THERE ARE FUNDS AVAILABLE BOTH, INTEREST-FREE A ND OVERDRAFT AND/OR LOANS ARE TAKEN, THEN A PRESUMPTION WOULD ARISE THA T INVESTMENTS WOULD BE OUT OF THE INTEREST-FREE FUND GENERATED OR AVAIL ABLE WITH THE COMPANY, IF THE INTEREST-FREE FUNDS ARE SUFFICIENT TO MEET THE INVESTMENTS. IN THE INSTANT CASE SAID PRESUMPTION WAS ESTABLISHE D CONSIDERING THE FINDINGS OF FACT, BOTH BY THE COMMISSIONER (APPEALS ) AND THE TRIBUNAL. AS THE OWNED FUND OF THE ASSESSEE EXCEEDS THE AMOUN T OF ADVANCES GIVEN TO ITS SISTER CONCERN, WE HOLD THAT THE ADVANCES HA VE BEEN MADE OUT OF THE OWNED FUNDS OF THE ASSESSEE, AND THEREFORE THERE IS NO QUESTION OF MAKING ANY DISALLOWANCE ON ACCOUNT OF DIVERSION OF FUND U/ S 36(1)(III) OF THE ACT. HENCE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LEARNED CIT(A). 9. THE SECOND ISSUE RAISED BY THE REVENUE IN THE GR OUND NO. 2 IS THAT LEARNED CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO FOR RS.17,760/- UNDER THE PROVISION OF SECTION 14A OF T HE ACT. THE ASSESSEE IN ITS BALANCE SHEET HAS SHOWN INVESTM ENT IN SHARES BUT FAILED TO JUSTIFY THE SOURCE OF MONEY UTILIZED IN S UCH INVESTMENTS. THE AO ACCORDINGLY ASSUMED THAT THE BORROWED FUNDS HAD BEEN UTILIZED IN INVESTING IN SHARES. THEREFORE, THE DISALLOWANCE IS REQUIRED TO BE MADE UNDER THE PROVISIONS OF SECTION 14A R.W.R. 8D OF IN COME TAX RULES. ACCORDINGLY, THE AO MADE THE DISALLOWANCES FOR RS.1 7,760/- ONLY AND ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ITA NO.584/AHD/2014 DCIT VS. GSL NOVA PETROCHEMICALS PVT. LTD. ASST.YEAR 2009-10 - 9 - 10. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LEAR NED CIT(A). THE ASSESSEE BEFORE THE LEARNED CIT(A) SUBMITTED THAT I T HAS NOT EARNED ANY DIVIDEND/ TAX-FREE INCOME FROM SUCH INVESTMENTS. TH EREFORE, THERE IS NO QUESTION OF MAKING THE DISALLOWANCE U/S 14A R.W.R. 8D. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER: 6.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS MA DE BY THE APPELLANT AND HAVE GONE THROUGH THE ASSESSMENT ORDE R AS WELL. 6.2.1 IN VIEW OF THE FACT THAT APPELLANT HAS NOT EA RNED ANY EXEMPTED INCOME IN THE FORM OF DIVIDEND IN THIS YEAR, THE DI SALLOWANCE MADE BY THE AO U/S 14A DOES NOT SEEM TO BE JUSTIFIED. IN VI EW OF THIS, THE ADDITION MADE BY THE AO OF RS.17,760/- IS DELETED. THIS GROUND IS ALLOWED. BEING AGGRIEVED BY ORDER OF THE LEARNED CIT(A) REVE NUE IS IN THE SECOND APPEAL BEFORE US. BOTH LEARNED AR AND DR VEHEMENTLY SUPPORTED THE ORDER OF THE ORDER OF AUTHORITIES BELOW AS FAVORABL E TO THEM. 11. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS AN UNDISPUTED FACT THAT THE ASSESSEE HAS NOT EARNED ANY DIVIDEND INCOME / EXEMPT INCOME FROM THE SHARES HELD AS AN INVESTMENT. THEREFORE, IN OUR CONSIDERED VIEW, NO D ISALLOWANCE U/S 14A R.W.R. 8D CAN BE MADE. IN THIS REGARD, WE FIND SUPP ORT AND GUIDANCE FROM THE JUDGMENT OF HONBLE GUJARAT HIGH COURT IN THE C ASE OF CIT VS. ITA NO.584/AHD/2014 DCIT VS. GSL NOVA PETROCHEMICALS PVT. LTD. ASST.YEAR 2009-10 - 10 - CORRTECH ENERGY P. LTD. REPORTED IN 372 ITR 97. THE RELEVANT EXTRACT OF THE JUDGMENT IS REPRODUCED AS UNDER: SECTION 14A(1) PROVIDES THAT FOR THE PURPOSE OF CO MPUTING TOTAL INCOME UNDER CHAPTER IV, NO DEDUCTION SHALL BE ALLO WED IN RESPECT OF EXPENDITURE INCURRED BY THE ASSESSEE IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. IN THE INSTANT CASE, THE TRIBUNAL HAS RECORDED THE FINDING OF FACT THAT THE ASSESSEE DID NOT MAKE ANY CLAIM FOR EXEMPTION OF ANY INCOME FROM PAYMENT OF TAX. IT WAS ON THIS BASIS THAT THE TRIBUNAL HELD THAT DISALLOWANCE UNDER SECTION 14A COULD NOT BE MADE. IN THE PROCESS TRIBUNAL RELIED O N THE DECISION OF DIVISION BENCH OF PUNJAB AND HARYANA HIGH COURT IN CASE OF CIT V. WINSOME TEXTILE INDUSTRIES LTD. [2009] 31 9 ITR 204 IN WHICH ALSO THE COURT HAD OBSERVED THAT WHERE THE ASSESSEE DID NOT MAKE ANY CLAIM FOR EXEMPTION, SECTION 14A COULD HAVE NO APPL ICATION. THERE IS NO AMBIGUITY THAT THERE WAS NO DIVIDEND IN COME / EXEMPT INCOME EARNED BY THE ASSESSEE DURING THE YEAR. THER EFORE, THE RATIO LAID DOWN BY THE HONBLE GUJARAT HIGH COURT IN THE CASE OF CORRTECH ENERGY PVT. LTD (SUPRA) IS SQUARELY APPLICABLE TO THE FACTS OF THE CASE ON HAND. THEREFORE, WE DO NOT FIND ANY REASON TO INTERFERE I N THE FINDINGS OF THE LEARNED CIT(A), AND HENCE GROUND OF APPEAL FILED BY THE REVENUE IS DISMISSED. 12. THE NEXT ISSUE RAISED BY THE REVENUE IN THE GRO UND NO. 3 IS THAT THE LEARNED CIT(A) ERRED IN DELETING THE ADDITION MADE BY THE AO FOR RS. 23,508/- ON ACCOUNT OF CAPITALIZATION OF INTEREST E XPENSES. THE ASSESSEE DURING THE YEAR HAS SHOWN CAPITAL WORK -IN-PROGRESS FOR RS. 1,95,900/- ONLY. THE AO WAS OF THE VIEW THAT THE BO RROWED FUNDS HAD ITA NO.584/AHD/2014 DCIT VS. GSL NOVA PETROCHEMICALS PVT. LTD. ASST.YEAR 2009-10 - 11 - BEEN UTILIZED IN THE CAPITAL WORK-IN-PROGRESS AS SH OWN IN THE BALANCE SHEET BUT THE ASSESSEE HAS FAILED TO DO SO. THEREFO RE, THE CORRESPONDING INTEREST EXPENSES CLAIMED BY THE ASSESSEE SHOULD BE DISALLOWED AND ALLOCATED TO THE CAPITAL WORK-IN-PROGRESS. ACCORDIN GLY, THE AO WORKED OUT THE INTEREST EXPENSES ABOUT THE CAPITAL WORK-IN -PROGRESS @12% OF RS.1,95,900/- AND ACCORDINGLY, WORKED OUT THE ELEME NT OF INTEREST EXPENSE OF RS. 23,508/-, WHICH NEEDS TO BE CAPITALI ZED. ACCORDINGLY, THE AO DISALLOWED THE SAME AND ADDED TO THE TOTAL INCOM E OF THE ASSESSEE. 13. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL TO LEAR NED CIT(A). THE ASSESSEE BEFORE THE LEARNED CIT(A) SUBMITTED THAT I TS OWN FUND INCLUDING THE INTEREST-FREE UNSECURED LOAN OF RS.13.50 CRORES AND 13.53 CRORES RESPECTIVELY EXCEEDS THE AMOUNT OF CAPITAL WORK-IN- PROGRESS. THEREFORE, THE ENTIRE AMOUNT OF INVESTMENT WAS MADE BY THE ASS ESSEE ON ITS OWN FUNDS. THE LEARNED CIT(A) AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE DELETED THE ADDITION MADE BY THE AO BY OBSERVING AS UNDER: 7.2.1 IT IS SEEN THAT AO HAS NOT CORRELATED THE U TILIZATION OF INTEREST BEARING BORROWED FUNDS FOR PURCHASE OF ITE MS FALLING IN WORK- IN-PROGRESS. WITHOUT CORRELATING THE FLOW OF FUNDS, THIS FINDING OF THE AO CANNOT BE SAID TO BE BASED ON VERIFICATION OF FACTS . FURTHER, THE APPELLANT HAS MORE THAN SUFFICIENT PAID-UP CAPITAL AND INTEREST FREE UNSECURED LOANS TO COVER SUCH INVESTMENT IN WORK-IN -PROGRESS. IN VIEW OF THIS, IT IS HELD THAT THE AO WAS NOT JUSTIFIED I N MAKING ADDITION OF RS.23,508/- TO THE INCOME OF THE APPELLANT AND THE SAME IS HEREBY DELETED. THIS GROUND IS ALLOWED. ITA NO.584/AHD/2014 DCIT VS. GSL NOVA PETROCHEMICALS PVT. LTD. ASST.YEAR 2009-10 - 12 - BEING AGGRIEVED BY ORDER OF THE LEARNED CIT(A) REVE NUE IS IN SECOND APPEAL BEFORE US. BOTH LEARNED AR AND DR VEHEMENTLY SUPPORT THE ORDER OF AUTHORITIES BELOW AS FAVORABLE TO THEM. 14. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THERE IS NO DISPUTE THAT THE O WNED FUND OF THE ASSESSEE EXCEEDS THE AMOUNT OF CAPITAL WORK IN PROG RESS. THEREFORE, THE PRESUMPTION CAN BE DRAWN THAT THE MONEY HAS BEEN IN VESTED OUT OF ITS OWNED FUND. IN HOLDING SO, WE FIND SUPPORT AND GUID ANCE FROM THE JUDGMENT OF HONBLE BOMBAY HIGH COURT IN THE CASE O F CIT VS. RELIANCE UTILITIES & POWER LTD. 178 TAXMAN 135. THE RELEVANT EXTRACT OF THE ORDER REPRODUCED BELOW: IF THERE ARE FUNDS AVAILABLE BOTH, INTEREST-FREE A ND OVERDRAFT AND/OR LOANS ARE TAKEN, THEN A PRESUMPTION WOULD ARISE THA T INVESTMENTS WOULD BE OUT OF THE INTEREST-FREE FUND GENERATED OR AVAIL ABLE WITH THE COMPANY, IF THE INTEREST-FREE FUNDS ARE SUFFICIENT TO MEET THE INVESTMENTS. IN THE INSTANT CASE SAID PRESUMPTION WAS ESTABLISHE D CONSIDERING THE FINDINGS OF FACT, BOTH BY THE COMMISSIONER (APPEALS ) AND THE TRIBUNAL. AS THE OWNED FUND OF THE ASSESSEE EXCEEDS THE AMOUN T OF CAPITAL WORK IN PROGRESS, WE HOLD THAT IT HAS BEEN MADE OUT OF THE OWNED FUNDS OF THE ASSESSEE AND THEREFORE THERE IS NO QUESTION OF MAKI NG ANY DISALLOWANCE ON ACCOUNT OF MONEY INVESTED IN THE CAPITAL WORK IN PROGRESS. HENCE, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LEARNED CIT(A). ITA NO.584/AHD/2014 DCIT VS. GSL NOVA PETROCHEMICALS PVT. LTD. ASST.YEAR 2009-10 - 13 - 15. GROUND NO.4 AND 5 ARE GENERAL AND DO NOT REQUIR E ANY SEPARATE ADJUDICATION. 16. IN THE RESULT, APPEAL FILED BY THE REVENUE IS D ISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 20/06/2018 SD/- SD/- JKTIKY ;KNO JKTIKY ;KNO JKTIKY ;KNO JKTIKY ;KNO OLHE VGEN OLHE VGEN OLHE VGEN OLHE VGEN U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; U;KF;D LNL; YKS[KK LN YKS[KK LN YKS[KK LN YKS[KK LN L; L; L; L; (RAJPAL YADAV) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 20/06/2018 PRITI YADAV, SR.PS !'# $#! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. !' / THE RESPONDENT. 3. /01( % 2( / CONCERNED CIT 4. % 2( ( ) / THE CIT(A)-IV, AHMEDABAD. 5. 567 !(&01 , ) 01- , 8 / / DR, ITAT, AHMEDABAD 6. 79 :' / GUARD FILE. % & / BY ORDER, ' 5( !( //TRUE COPY// '/& () ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD
