Navabharat Ventures Ltd.,(Formerly Navabharat Ferro Alloys Ltd.,), Hyderabad V. ACIT, Hyderabad

ITA 626/HYD/2007

• Counselvise Citation: [2010] 119 COUNSELVISE.COM (IT) 5826 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 9 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-03-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 23-02-2010
• Assessment Year: 2003-2004
• Appeal Filed On: 16-05-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K PHANI RAJU
• Assessee Lawyers: C N PRASAD
• Keywords: Proportionate interest

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL HYDERABAD BENCH 'A' BEFORE SHRI N.R.S.GANESAN AND SHRI AKBER BASHA I.T.A.NO.626/HYD/2007 ASSESSMENT YEAR 2003-04 NAVABHARAT VENTURES LIMITED, HYDERABAD. (FORMERLY KNOWN AS NAVABHARAT FERRO ALLOYES LTD.) .. APPELLANT (PAN AAACB7327C) VERSUS ASST. CIT, CIRCLE 16(1), HYDERABAD. ..RESPONDENT APPELLANT BY : SHRI C.N.PRASAD RESPONDENT BY : SHRI K.PHANI RAJU O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT (APPEALS) V, HYDERABAD, DATED 9-3-2007, FOR THE ASS T. YEAR 2003-04. 2. THE FIRST ISSUE THAT ARISES FOR CONSIDERATION IS DISALLOWANCE OF GROUP GRATUITY TO THE EXTENT OF RS.40,13,970 AND SUPERANN UATION FUND TO THE EXTENT OF RS.27,78,722. SHRI C.N.PRASAD, LEARNED COUNSEL F OR THE ASSESSEE, SUBMITTED THAT THE LOWER AUTHORITIES DISALLOWED THE CLAIM OF THE ASSESSEE TOWARDS GROUP GRATUITY AND SUPERANNUATION FUND ON THE GROUND THAT THE SAME WERE NOT APPROVED BY THE COMMISSIONER OF INCOME-TAX. THE LEA RNED COUNSEL, BY PRODUCING THE ORDER OF THE COMMISSIONER DATED 12-12 -2008, SUBMITTED THAT THE COMMISSIONER HAS APPROVED THE FUNDS WITH EFFECT FRO M 1-6-1988. THEREFORE, THE LEARNED COUNSEL SUBMITTED THAT THE MATTER MAY B E REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER FOR RE-CONSIDERING THE ISS UE IN THE LIGHT OF THE APPROVAL GRANTED BY THE COMMISSIONER OF INCOME-TAX. 2 3. WE HAVE HEARD SHRI H.PHANI RAJU, LEARNED DEPARTM ENTAL REPRESENTATIVE, ALSO. THE LEARNED DEPARTMENTAL REPRESENTATIVE HAS N O OBJECTION FOR SENDING THE MATTER BACK TO THE FILE OF THE AO FOR RE-CONSIDERAT ION IN THE LIGHT OF THE APPROVAL GRANTED BY THE COMMISSIONER ON 12-12-2008. 4. WE HAVE CONSIDERED SUBMISSIONS OF THE LEARNED CO UNSEL FOR THE ASSESSEE AND THE LEARNED DEPARTMENTAL REPRESENTATIVE AND ALS O PERUSED THE MATERIAL AVAILABLE ON RECORD. AS RIGHTLY SUBMITTED BY THE LE ARNED COUNSEL FOR THE ASSESSEE, THE LOWER AUTHORITIES DISALLOWED THE CLAI M OF THE ASSESSEE ON THE GROUND THAT THE FUNDS WERE NOT APPROVED BY THE COMM ISSIONER. NOW THE LEARNED COUNSEL FOR THE ASSESSEE HAS PRODUCED A COP Y OF THE APPROVAL GRANTED BY THE COMMISSIONER ON 12-12-2008 WITH EFFECT FROM 1-6-1988. IN THIS VIEW OF THE MATTER, IN OUR OPINION, THE MATTER NEEDS TO BE RE-EXAMINED BY THE AO. ACCORDINGLY, WE SET ASIDE THE ORDERS OF THE LOWER A UTHORITIES AND REMIT THE MATTER BACK TO THE FILE OF THE AO. THE AO SHALL RE- CONSIDER THE ISSUE IN THE LIGHT OF THE APPROVAL GRANTED BY THE COMMISSIONER ON 12-1 2-2008 AND THEREAFTER DECIDE THE ISSUE IN ACCORDANCE WITH LAW AFTER GIVIN G A REASONABLE OPPORTUNITY TO THE ASSESSEE. 5. THE NEXT ISSUE THAT ARISES FOR CONSIDERATION IS DISALLOWANCE OF RS.4,63,950 TOWARDS PROPORTIONATE INTEREST ON THE FUNDS DIVERTE D TO THE SISTER CONCERN. SHRI C.N.PASAD, LEARNED COUNSEL FOR THE ASSESSEE, SUBMIT TED THAT THE AO DISALLOWED THE INTEREST ON THE GROUND THAT BORROWED FUNDS WERE DIVERTED. ACCORDING TO THE LEARNED COUNSEL, BORROWED FUNDS WERE NOT DIVERTED. THE ASSESSEE LENT ITS OWN FUNDS TO THE SISTER CONCERN IN THE PREVIOUS FINANCI AL YEAR. THE FUNDS LET IN THE PREVIOUS FINANCIAL YEAR CONTINUED FOR THE FINANCIAL YEAR UNDER CONSIDERATION ALSO. 3 ACCORDING TO THE LEARNED COUNSEL, SINCE BORROWED FU NDS WERE NOT DIVERTED, THE QUESTION OF DISALLOWANCE OF INTEREST ON THE PROPORT IONATE AMOUNT DOES NOT ARISE. MERELY BECAUSE THE ASSESSEE BORROWED FUNDS FOR THE ASST. YEAR UNDER CONSIDERATION, IT DOES NOT MEN THAT THE SAME FUNDS WERE DIVERTED. ON A QUERY FROM THE BENCH WHETHER THE MATTER CAN BE REMITTED B ACK TO THE FILE OF THE AO FOR VERIFICATION WHETHER THE BORROWED FUNDS WERE DI VERTED TO THE SISTER CONCERN OR NOT, THE LEARNED COUNSEL FAIRLY SUBMITTED THAT T HE LOWER AUTHORITIES HAVE NOT RECORDED ANY FINDING WITH REGARD TO LENDING OF ASSE SSEE'S OWN FUNDS, THE MATTER MAY BE REMITTED BACK TO THE FILE OF THE AO FOR VERI FICATION. THE LEARNED DEPARTMENTAL REPRESENTATIVE ALSO HAS NO OBJECTION F OR REMANDING THIS ISSUE TO THE FILE OF THE AO FOR RE-EXAMINATION. 6. WE HAVE CONSIDERED THE SUBMISSIONS OF THE LEARNE D COUNSEL FOR THE ASSESSEE AND THE LEARNED DEPARTMENTAL REPRESENTATIV E. THE SPECIFIC CONTENTION OF THE ASSESSEE IS THAT THE BORROWED FUNDS WERE NOT DIVERTED TO THE SISTER CONCERN. HOWEVER, FUNDS WERE BORROWED FOR THE ASST. YEAR UNDER CONSIDERATION. HOWEVER, THE MONEY WAS LENT IN THE EARLIER FINANCIA L YEAR TO THE SISTER CONCERN FROM THE ASSESSEE'S OWN FUNDS. THEREFORE, THE ASSES SEE CONTENDS THAT THE QUESTION OF DISALLOWANCE OF INTEREST DOES NOT ARISE . HOWEVER, THIS MATTER WAS NOT EXAMINED BY THE LOWER AUTHORITIES. THEREFORE, I N OUR OPINION, THE MATTER NEEDS TO BE RE-CONSIDERED BY THE AO. ACCORDINGLY, W E SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND REMIT THE MATTER BACK TO THE FILE OF THE AO. THE AO SHALL EXAMINE THE ISSUE AFRESH AND FIND OUT THE FIN ANCIAL YEAR IN WHICH THE FUNDS WERE LENT TO THE SISTER CONCERN AND WHETHER THE FUN DS WERE LENT FROM BORROWED 4 FUNDS OR FROM ASSESSEE'S OWN FUNDS. THEREAFTER, THE AO MAY DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 3.3.2010 SD/- SD/- (AKBER BASHA) (N.R.S.GANESAN) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, 3RD MARCH, 2010. RRRAO. COPY OF THE ORDER FORWARDED TO:- 1. NAVABHARAT VENTURES LTD., 6-3-1109/1, RAJ BHAVAN RO AD, SOMAJIGUDA, HYDERABAD 500 482. 2. ACIT, CIRCLE 16(1), HYDERABAD. 3. CIT IV, HYDERABAD. 4. CIT (A) V, HYDERABAD. 5. DR, ITAT, HYDERABAD.