Smt. Abhadevi Agrawal, Burhanpur V. The JCIT, Khandwa

ITA 59/IND/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5691 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 1 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-02-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 20-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S S DESHPANDE
• Keywords: Capital asset; Depreciation

Judgement Text

ABHADEVI AGRAWAL ITA NO. 59/IND/2014 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, HONBLE JUDICIAL MEMBER AND SHRI B.C. MEENA, HONBLE ACCOUNTANT MEMBER ITA NO. 59/IND/2014 A.Y.2009-10 ABHADEVI AGRAWAL BURHANPUR PAN ADAPA 0122A ::: APPELLANT VS JT.COMMR. OF INCOME TAX KHANDWA ::: RESPONDENT APPELLANT BY SHRI S.S. DESHPANDE RESPONDENT BY SHRI R.A. VERMA DATE OF HEARING 10.2. 201 6 DATE OF PRONOUNCEMENT 10 . 2 .201 6 O R D E R PER SHRI B.C. MEENA, AM THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-II, INDORE, DATED 20.9 .2013. ABHADEVI AGRAWAL ITA NO. 59/IND/2014 2 2. GROUND NO. 1 RELATES TO CONFIRMATION OF ADDITION OF RS.5,53,024/- BY THE CIT(A) ON ACCOUNT OF DISALLOWANCE OF INTEREST. 3. BRIEF FACTS OF THE CASE ARE THAT THE AO NOTICED THAT THE BALANCE SHEET OF THE ASSESSEE REFLECTS OIL MILL MACHINE RY AND OIL MILL BUILDING AT RS.34,35,045/- AND RS.20,95,1 90/- TOTALING TO RS.55,30,235/-. HE OBSERVED THAT NO INC OME HAS BEEN DERIVED FROM THE ABOVE ASSETS AND THE OIL MILL HAS NOT BEEN COMMISSIONED DURING THE YEAR. THE AO, THERE FORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY INTEREST ATTRIBUTABLE TO THE SAID ASSETS SHOULD NOT BE DISALLOWED IN RESPONSE TO WHICH IT WAS SUBMITTED BY THE ASSESSEE TH AT NO LOANS HAVE BEEN BORROWED FOR ACQUISITION OF THE ASSETS. IT WAS ALSO ARGUED THAT THE MACHINERY AND BUILDING HAVE BEEN ACQUIRED AND CONSTRUCTED FROM THE FUNDS AVAILABLE I N THE CAPITAL ACCOUNT. HOWEVER, THESE CONTENTIONS OF THE ASSESSEE DID NOT SATISFY THE AO. THE AO OBSERVED THAT THE ABHADEVI AGRAWAL ITA NO. 59/IND/2014 3 ASSESSEES SECURED LOANS AND UNSECURED LOANS HAVE BEEN INCREASED BY MORE THAN 2.89 CRORES AND RS. 2.75 CRORES RESPECTIVELY FROM THE IMMEDIATELY PRECEDING YEAR. HE WAS, THEREFORE, OF THE VIEW THAT OBVIOUSLY INCREASED LOAN F UNDS HAVE FOUND THEIR WAY PARTLY TO THE ABOVE ASSETS. MOREO VER, THE BALANCE SHEET OF AN ASSESSEE IS A COMPOSITE STATEMENT OF ACCOUNTS IN WHICH NO PARTICULAR ASSET CAN BE TREATED ATTRIBUTABLE TO ANY PARTICULAR LIABILITY. THUS, THE ASSESS EES PLEA THAT THE FUNDS INVESTED IN THE ABOVE ASSETS WERE F ROM CAPITAL WAS NOT ACCEPTED BY THE AO. HE, THEREFORE, DISALLOWED RS. 5,53,024/- OUT OF INTEREST EXPENSES B EING 10% OF THE AGGREGATE VALUE OF ASSETS. 4. FELT AGGRIEVED BY THE DISALLOWANCE OF INTEREST BY T HE AO, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) AND REITERATED THE SUBMISSIONS MADE BEFORE THE AO. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE IN THE W AKE OF THE FACTS OF THE CASE, THE LD. CIT(A) DID NOT AGREE TH AT THE ABHADEVI AGRAWAL ITA NO. 59/IND/2014 4 INVESTMENT IN OIL MIL AND BUILDING HAS NOT BEEN MADE O UT OF BORROWED FUNDS BECAUSE THE ASSESSEE HAS FAILED TO BIFURCATE SUCH INVESTMENT AS ATTRIBUTABLE TO THE AVAILABLE CAPITAL. IT IS ALSO NOT POSSIBLE TO DISTINGUISH THE I NVESTMENT OUT OF CAPITAL TO INVESTMENT OUT OF BORROWED FUNDS. THE LEARNED CIT(A), THEREFORE, CONFIRMED THE ACTION OF TH E AO IN MAKING THE DISALLOWANCE OF RS. 5,53,024/-. AGAINST THIS FINDING OF THE LEARNED LD. CIT(A), THE ASSESSEE HAS P REFERRED THE PRESENT APPEAL BEFORE THE TRIBUNAL. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT FROM THE BALANCE SHEET IT WOULD BE SEEN THAT THE ASSESSEE HAS BORROWED THE FUNDS ON THE CC LOAN ON HYPOTHECATION OF GOODS. THUS, THE BORROWED FUNDS WER E NOT UTILIZED FOR CONSTRUCTION OF THE OIL MILL MACHINERY AND BUILDING. IT WOULD BE SEEN THAT THE OLD BALANCE IN TH E OIL MILL MACHINERY IS RS. 33.55 LACS AND THE ADDITION IS ON LY RS. 79,419/-. SIMILARLY IN THE BUILDING THE ADDITION IS ABHADEVI AGRAWAL ITA NO. 59/IND/2014 5 HARDLY OF RS. 6,09,000/-. THE ASSESSEE HAS HER OWN CAPI TAL TO THE TUNE OF RS. 10 CRORES AND THERE IS NO DIRECT NEXUS BETWEEN THE BORROWED FUNDS AND INVESTMENT IN OIL MIL L MACHINERY AND BUILDING. THE LD. COUNSEL FOR THE ASSESS EE FURTHER SUBMITTED THAT THE BUILDING IS UTILIZED AS A G ODOWN FOR THE BUSINESS OF COTTON TRADING AND AS SUCH NO DISALLOWANCE COULD HAVE BEEN MADE ON THIS COUNT. 6. THE LD. DR, ON THE OTHER HAND, REFUTED THE ORDER OF THE LD. CIT(A) AND RELIED UPON THE FINDINGS OF THE LEARNE D AO. 7. AFTER HEARING BOTH THE SIDES, WE FIND THAT NONE O F THE AUTHORITIES BELOW HAS GIVEN A CLEAR FINDING REGARDING TH E ADVANCE ON WHICH THE INTEREST HAS BEEN PAID WHICH WAS UTILIZED FOR PURCHASE OF CAPITAL ASSET. WE, THEREFORE, IN THE INTEREST OF JUSTICE AND FAIR PLAY, SET ASIDE THE ORDER S OF THE AUTHORITIES BELOW AND RESTORE THE ISSUE TO THE FILE O F THE AO FOR DECIDING THE SAME DE NOVO AFTER CONSIDERING THE ABHADEVI AGRAWAL ITA NO. 59/IND/2014 6 ASSESSEES SUBMISSIONS AND GIVING HER AN OPPORTUNITY O F BEING HEARD. 8. BY WAY OF GROUND NO. 2 THE ASSESSEE HAS CHALLENGED THE ORDER OF THE LD. CIT(A) CONFIRMING THE DISALLOWAN CE OF DEPRECIATION OF RS.2,09,409/- MADE BY THE AO ON THE GROUND THAT THE OIL MILL BUILDING WAS UNDER CONSTRUCT ION AND WAS NOT READY TO USE. 9. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE DEBITED A SUM OF RS. 2,09,409/- UNDER THE HEAD DEPRECIATION ON OIL MILL BUILDING. THE AO OBSERVED THAT THE OIL MILL W AS NOT COMMISSIONED DURING THE YEAR UNDER CONSIDERATION AND AS SUCH IT WAS NOT PUT TO USE. THE AO, THEREFORE, DISALL OWED THE DEPRECIATION AGAINST WHICH THE ASSESSEE IS IN APPEAL BEFORE US. 10. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT SINCE THE BUILDING WAS BEING UTILIZED FOR THE PU RPOSE OF ABHADEVI AGRAWAL ITA NO. 59/IND/2014 7 BUSINESS, THEREFORE, THE DISALLOWANCE OF DEPRECIATION IS NOT JUSTIFIED. 11. WE HAVE HEARD BOTH THE SIDES. ON QUERY BY THE BE NCH FROM THE LD. COUNSEL FOR THE ASSESSEE AS TO WHETHER T HE MACHINERY WAS INSTALLED IN THE BUILDING, HE ANSWERED POSITIVELY. WHEN HE WAS ASKED AS TO HOW THE MACHINERY WAS INSTALLED IN THE BUILDING AND IT WAS NOT PUT TO USE , THEN HOW THIS BUILDING WAS UTILIZED FOR ANY BUSINESS, HE COULD NOT ANSWER SATISFACTORILY. WE, THEREFORE, HAVE NO OPTION BUT TO CONFIRM THE ORDER OF THE LEARNED CIT(A ) ON THIS GROUND. GROUND NO. 2 OF THE APPEAL OF THE ASSESSEE IS, THEREFORE, DISMISSED. 12. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS P ARTLY ALLOWED FOR STATISTICAL PURPOSES. SD/- SD/- (D.T. GARASIA) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED - 29.2.2016 ABHADEVI AGRAWAL ITA NO. 59/IND/2014 8