ITO, Ward 2(2), Aurangabad V. Smt. Usha Pandurang Kulkarni, Aurangabad

ITA 630/PUN/2013

• Counselvise Citation: 63024514 RSA 2013
• Duration Of Justice: 1 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-11-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 07-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MAZHAR AKRAM
• Assessee Lawyers: N O N E
• Keywords: Business income; Depreciation; Search and seizure; Proportionate interest; Commercial expediency
• Section: 143(3); 6; 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE BEFORE: SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR, JUDICIAL MEMBER ITA NO S . 629 & 630 /PN/20 1 3 ASSESSMENT YEAR S : 200 8 - 09 & 2009 - 10 THE INCOME - TAX OFF ICER, WARD - 2(2), JEEVAN SUMAN 2 ND FLOOR, LIC BUILDING, N - 5, CIDCO, AURANGABAD - 431003 VS. SMT. USHA PANDURANG KULKARNI, GURUKUNJ HOUSING SOCIETY, TILAK NAGAR, AURANGABAD (APPELLANT) (RESPONDENT) PAN NO. ALLPK4791Q REVENUE BY: SHRI MAZHAR AKRAM ASSESSEE BY: N O N E ORDER PER R.S . PADVEKAR , JM : - BOTH THESE APPEALS ARE FILED BY THE REVENUE , CHALLENGING THE RESPECTIVE IMPUGNED ORDERS OF THE LD. CIT(A), AURANGABAD DATED 27 - 12 - 2012 FOR THE A. Y R S. 2008 - 09 AND 2009 - 10. IT IS SEEN THAT NO TICE HAS BEEN SERVED ON THE ASSESSEE AND IN SPITE OF SERVICE OF NOTICE THE ASSESSEE PREFERRED NOT TO REMAIN PRESENT. WE, ACCORDINGLY, DECIDE THESE APPEALS ON MERIT. WE HAVE HERD THE LD. DR FOR THE REVENUE. AS THE FACTS AND ISSUES ARE IDENTICAL HENCE, TH ESE APPEALS ARE DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS WHICH ARE VERBATIM IN BOTH THE APPEALS: 1. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE HON'BLE CIT(A) WAS JUSTIFIED IN DELETING THE ADDITION MADE BY THE A.O . AT RS.47,13,190/ - RS.39,94,657/ - FOR A.Y. 2008 - 09, 2009 - 10 BUSINESS PURPOSE, IGNORING THE FACT THAT IT IS EVIDENT FROM RECORDS THAT THE ASSESSEE FAILED TO PRODUCE EVIDENCE EITHER BEFORE THE A.O . OR BEFORE THE CIT(A) TO SUBSTANTIATE HER OF INCURRENCE OF ABOVE FOR 'BUSINESS PURPOSE' . 2 ITA NO S. 629 & 630/PN/2013, SMT. USHA PANDURANG KULKARNI, AURANGABAD 2. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE CIT(A) WHILE DELETING THE ADDITION AS MENTIONED IN GROUND NO . 1 ABOVE, JUSTIFIED IN IGNORING THE EVIDENCE ON RECORD WHICH GOES TO PROVE THAT THE COMPARISON OF FIGURES SHOWING THE ACTUAL PROFIT DERIVED AND THE CORRESPONDING INTEREST EXPENDITURE SHOWS THAT THE ASSESSEE HAS INCURRED LOSS BY EXECUTING SUB CONTRACT WORK EVERY YEAR AND NO PRUDENT BUSINESSMAN WILL CARRY ON SUCH ACTIVITY YEAR AFTER YEAR . 3. WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE HON'BLE CIT(A) WHILE DELETING ADDITION AS MENTIONED IN GROUND NO . 1 ABOVE JUSTIFIED IN IGNORING THE FACTS THAT AS PER PROVISION OF SECTION 36 (1)(III) PROVI DES FOR DEDUCTION O F INTEREST ON LOANS RAISED FOR BUSINESS PURPOSE AND ONES THE ASSESSEE CLAIMS ANY SUCH DEDUCTION IN THE BOOK OF ACCOUNTS THE PRIME ONUS WILL BE ON THE ASSESSEE TO SATISFY THE ASSESSING OFFICER THAT WHATEVER LOANS WERE RAISED BY THE ASSESSEE, THE SAME WERE U SED FOR THE BUSINESS PURPOSE AS HAS BEEN HELD BY THE PANJAB & HARIYANA HIGH COURT IN ITS DECISION DELIVERED IN THE CASE OF CIT V/S ABHISHEK INDUSTRIES LTD . 2006 (156 TAXMAN 237) THE ASSESSEE HAS FAILED TO DISCHARGE THE ONUS CAST ON HER EITHER BEFORE THE AS SESSING OFFICER OF BEFORE THE APPELLATE AUTHORITY. 4. WHETHER THE LEARNED CIT(A) WAS RIGHT IN DELETING THE ADDITION AS MENTIONED IN GROUND 1 ABOVE, DESPITE THE FACTS THE ASSESSEE HAS FAILED TO PROVE THE NEXUS BETWEEN INTEREST FREE FUNDS AND THOSE ADVANCED IN TEREST FREE TO ITS SISTER CONCERN. 2. THE FACTS WHICH REVEALED FROM THE RECORD ARE AS UNDER. THE ASSESSEE IS AN INDIVIDUAL AND ENGAGED IN THE BUSINESS OF SUB - CONTRACTING AND HIRING MACHINERY UNDER THE NAME AND STYLE OF M/S. SHARDA EARTHMOVERS. A SEARCH AND SEIZURE ACTION U/S. 132 OF THE ACT WAS CONDUCTED ON RUDRANEE GROUP AND ITS ASSOCIATES ON 02 - 02 - 2006. THE ASSESSE HAS FILED RETURN OF INCOME FOR THE A.Y. 2008 - 09 ON 29 - 09 - 2008 DECLARING LOSS OF ( - ) RS.33,52,899/ - . THE ASSESSING OFFICER HAS ASSESSED TH E INCOME OF THE ASSESSEE U/S. 143(3) OF THE ACT AT RS.13,60,291/ - BY 3 ITA NO S. 629 & 630/PN/2013, SMT. USHA PANDURANG KULKARNI, AURANGABAD MAKING ADDITION OF RS.47,13,190/ - ON ACCOUNT OF DISALLOWANCE OF INTEREST ON BANK LOAN U/S. 36(1)(III) OF THE ACT. 3. SO FAR AS A.Y. 2009 - 10 IS CONCERNED THE ASSESSE HAS FILED RETURN OF INCOME ON 31 - 03 - 2010 , DECLARING INCOME OF RS.6,00,000/ - . THE ASSESSING OFFICER HAS ASSESSED THE INCOME OF THE ASSESSEE U/S. 143(3) OF THE ACT AT RS.47,65,000/ - . THE ASSESSING OFFICER HAS DISALLOWED INTEREST ON BANK LOAN OF RS.39,99,657/ - U/S. 36(1)(III) OF THE ACT. SIMILARLY, THE ASSESSING OFFICER HAS DISALLOWED RS.41,564/ - OUT OF CAR EXPENSES AND DEPRECIATION FOR PERSONAL USE TO THE EXTENT OF 25% AND HAS ALSO MADE ADDITION OF RS.1,23,713/ - TOWARDS LOW WITHDRAWALS FOR HOUSEHOLD EXPENSES. 4 . IN THE ASSES SMENT PROCEEDINGS FOR THE A.Y. 200 8 - 09, THE ASSESSING OFFICER NOTICED THAT THE OUTSTANDING BALANCE IN BANKS CASH CREDIT ACCOUNT IS RS.3,04,82,343/ - AND THE ASSESSEE HAS GIVEN INTEREST FREE DEPOSIT OF RS.2,85,00,100/ - TO M/S. RUDRANEE CONSTRUCTION COMPANY (RCC). THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAS CLAIMED INTEREST EXPENDITURE ON THE SAID BORROWED FUNDS, HOWEVER, THE BORROWED FUNDS WERE NOT UTILIZED BY THE ASSESSEE FOR BUSINESS PURPOSES. THE ASSESSING OFFICER, THEREFORE, HELD THAT THE INTEREST ON THE SAID BORROWED FUND IS NOT ALLOWABLE U/S. 36(1)(III) OF THE ACT TO THE EXTENT THE FUNDS HAVE BEEN GIVEN AS DEPOSIT TO M/S. RUDRANEE CONSTRUCTION COMPANY. THE ASSESSING OFFICER HAS RELIED ON THE DECISION IN THE CASE OF CIT VS. M/S. ABHISHEK INDUSTRI ES LTD., LUDHIANA 286 ITR 1 (P & H) IN SUPPORT OF THE DISALLOWANCE. THE ASSESSING OFFICER WORK ED OUT DISALLOWANCE OF INTEREST U/S. 36(1)(III) AT RS. 47,13,190/ - AS UNDER: I. BORROWED LOAN RS.3,04,80,313/ - II. INTEREST ON BORROWED LOAN RS.50,40,672/ - III. INTER EST FREE FUNDS PROVIDED TO SISTER CONCERN RS.2,85,00,100/ - 4 ITA NO S. 629 & 630/PN/2013, SMT. USHA PANDURANG KULKARNI, AURANGABAD IV. PROPORTIONATE INTEREST ON SUCH FUNDS PROVIDED TO SISTER CONCERN RS.47,13,190/ - V. DISALLOWANCE TO BE MADE AND ADDED TO THE INCOME OF THE ASSESSEE RS.47,13,190/ - 5. IN THE ASSESSMENT PROCEEDINGS FOR THE A.Y. 2009 - 10, THE ASSESSING OFFICER NOTICED THAT THE OUTSTANDING BALANCE IN BANKS CASH CREDIT ACCOUNT IS RS.2,02,64,198/ - AND THE ASSESSEE HAS GIVEN INTEREST FREE DEPOSIT OF RS.1,82,42,100/ - TO M/S. RUDRANEE CONSTRUCTION COMPANY (RCC) . THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAS CLAIMED INTEREST EXPENDITURE ON THE SAID BORROWED FUNDS, HOWEVER, THE BORROWED FUNDS WERE NOT UTILIZED BY THE ASSESSEE FOR BUSINESS PURPOSES. THE ASSESSING OFFICER, THEREFORE, HELD THAT THE INTEREST ON T HE SAID BORROWED FUND IS NOT ALLOWABLE U/S. 36(1)(III) OF THE ACT TO THE EXTENT THE FUNDS HAVE BEEN GIVEN AS DEPOSIT TO M/S. RUDRANEE CONSTRUCTION COMPANY. THE ASSESSING OFFICER, THEREFORE, WORKED OUT DISALLOWANCE OF INTEREST U/S. 36(1)(III) AT RS.39,99,6 57/ - . 6. THE ASSESSEE CHALLENGED THE ADDITIONS MADE BY THE ASSESSING OFFICER BY MAKING DISALLOWANCE OF INTEREST U/S. 36(1)(III) OF THE ACT BEFORE THE LD. CIT(A). BEFORE THE LD. CIT(A) THE ASSESSEE CONTENDED THAT SHE HAS USED THE FUNDS BORROWED FROM THE B ANK FOR THE BUSINESS PURPOSE AND HENCE DISALLOWANCE OF INTEREST U/S. 36(1)(III) OF THE ACT IS NOT JUSTIFIED. THE CONTENTIONS RAISED BY THE ASSESSEE ARE SUMMARIZED AS UNDER: (1) THE ASSESSEE HAS CARRIED OUT MOSTLY THE WORK ALLOTTED BY THE PRINCIPAL CONTRACT OR I.E. THE RUDRANEE CONSTRUCTION COMPANY IN A. YRS. 2003 - 04 TO 2009 - 10 WHICH IS MORE THAN 100%. DURING THE 5 ITA NO S. 629 & 630/PN/2013, SMT. USHA PANDURANG KULKARNI, AURANGABAD YEAR, THE ASSESSEE HAS RECEIVED CONTRACTS OF RS.1.19 CRORES FROM RUDRANEE CONSTRUCTION COMPANY. (2) ALL THE CONTRACTORS HAVE TO KEEP SECURITY DEPOSI T WITH THE CONTRACTEE AS PER TERMS OF CONDITIONS OF THE CONTRACT/SUB - CONTRACT WHICH IS A COMMON BUSINESS PRACTICE. (3) THE SECURITY DEPOSIT IS KEPT FOR GIVING ASSURANCE FOR TIMELY COMPLETION OF WORK AS PER NORMS SPECIFICATION GIVEN BY THE PARTY AND AGREED BY THE CONTRACTOR AS PER COMMON BUSINESS PRACTICE. THE ASSESSEE IS A SUB - CONTRACTOR AND RCC BEING MAIN CONTRACTOR HAS TO PAY SECURITY DEPOSIT WITH GOVERNMENT FOR OBTAINING/EXECUTING WORK AND THE ULTIMATE RESPONSIBILITY OF THE WORK IS THAT OF PRINCIPAL CONT RACTOR. (4) ALL THE CONDITIONS FOR ALLOWABILITY OF INTEREST U/S 36(L)(III) ARE FULFILLED AS THE SAID SECTION ALLOWS THE AMOUNT OF INTEREST PAID IN RESPECT OF CAPITAL BORROWED FOR THE PURPOSE OF BUSINESS OR PROFESSION. IN THE CASE UNDER APPEAL, INTEREST HAS BEEN PAID ON CAPITAL BORROWED FROM BANK AND UTILIZED FOR GIVING SECURITY DEPOSIT TO PRINCIPAL CONTRACTOR WHICH IS FOR THE PURPOSE OF BUSINESS. (5) THE EXPENDITURE HAS BEEN INCURRED FOR COMMERCIAL EXPEDIENCY WHICH IS ALLOWABLE EXPENDITURE AS PER BLACK'S LA W DICTIONARY THE WORD 'EXPEDIENT' IS DEFINED AS 'SUITABLE AND APPROPRIATE FOR ACCOMPLISHMENT OF SPECIFIC OBJECT; AND THE WORD 'COMMERCIAL' IS DEFINED AS 'RELATED TO OR CONNECTED WITH TRADE AND TRAFFIC OR COMMERCE IN GENERAL; IS OCCUPIED WITH BUSINESS OR CO MMERCE.' 7. THE ASSESSEE ALSO PLACED HER RELIANCE ON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF S.A. BUILDER S LTD. VS. CIT 288 ITR 1 AS WELL AS DECISIONS IN THE CASES OF CHATE COACHING CLASSES PVT. LTD. 6 ITA NO S. 629 & 630/PN/2013, SMT. USHA PANDURANG KULKARNI, AURANGABAD VS. ACIT ITA NO. 948/PN/2007 AND LAXMI METAL PRESSING WORKS PVT. LTD. VS. ACIT ITA NO. 1411/PN/2007. THE ASSESSEE ALSO CONTENDED BEFORE LD. CIT(A) THAT THE DECISION RELIED ON BY THE ASSESSING OFFICER IN THE CASE OF M/S. ABHISHEK INDUSTRIES LTD., LUDHIANA (SUPRA) IS ON DISTINGUISHABLE ON FACTS AS IN THE SAID CASE THE INTEREST FREE AMOUNT ADVANCED WAS FOR NON - BUSINESS PURPOSE WHEREAS IN THE CASE OF THE ASSESSEE, THE INTEREST FREE ADVANCED WAS GIVEN FOR BUSINESS PURPOSE. THE LD. CIT(A) REFERRED TO THE DECISION IN THE ASSESSEES OWN CASE BY HIS P REDECESSOR FOR THE A. YRS. 2003 - 04, 2004 - 05 AND 2006 - 07 IN WHICH THE IDENTICAL DISALLOWANCE WAS MADE BY THE ASSESSING OFFICER BUT WAS DELETED BY THE LD. CIT(A) IN THOSE YEARS. THE LD. CIT(A) DELETED THE ENTIRE ADDITION MADE BY THE ASSESSING OFFICER IN BOT H THE ASSESSMENT YEARS AND OPERATIVE PART OF THE FINDING OF THE LD. CIT(A) IS AS UNDER: 7.1 THE REASONS STATED BY MY PREDECESSOR FOR ALLOWING THE APPEAL ARE APPLICABLE TO THE APPEALS BEFORE ME WITH EQUAL FORCE. IT IS ALSO WORTH NOTING THAT THE EXISTENCE OF THE APPELLANT CONCERN IS BASED ON THE WORK ALLOTTED BY M/S. RUDRANEE CONSTRUCTION COMPANY. IT IS EVIDENT FROM THE ABOVE DISCUSSION THAT THE APPELLANT HAS EARNED SUBSTANTIAL BUSINESS RECEIPTS AND PROFIT ON THE BASIS OF SUB - CONTRACT WORK ALLOTTED BY M/S. RU DRANEE CONSTRUCTION COMPANY IN EARLIER YEARS FROM A.Y. 2003 - 04 TO 2007 - 08. THE DEPOSIT GIVEN BY THE APPELLANT IS ON ACCOUNT OF BUSINESS EXPEDIENCY AND AS PER NORMAL BUSINESS PRACTICE. IN VIEW OF THE ABOVE FACTS AND DISCUSSION AND RESPECTFULLY FOLLOWING THE RATIO LAID DOWN BY THE DECISIONS OF HON'BLE APEX COURT AND HON'BLE I.T.A.T., PUNE RELIED ON BY THE APPELLANT. I AM OF THE CONSIDERED VIEW THAT THE A.O. IS NOT JUSTIFIED IN DISALLOWING INTEREST OF RS.47,13,190/ - U/S. 36(L)(III) OF THE ACT. THE ADDITION OF RS.47,13.190/ - IS, THEREFORE, DELETED. THE A.O. IS DIRECTED ACCORDINGLY. 7.1 SAME WAY IN THE A.Y. 2009 - 10 ALSO THE LD. CIT(A) ON THE SAME REASON DELETED THE ADDITION. 7 ITA NO S. 629 & 630/PN/2013, SMT. USHA PANDURANG KULKARNI, AURANGABAD 8. WE FIND THAT IN THE ASSESSEES OWN CASE IN THE PRECEDING YEARS I.E. A. YRS. 2003 - 04 , 2004 - 05 AND 2006 - 07 ON THE IDENTICAL SET OF FACTS AND REASONS THE ASSESSING OFFICER HAD MADE THE DISALLOWANCE WHICH WAS DELETED BY LD. CIT(A). NOTHING HAS BEEN PLACED BEFORE US BY THE REVENUE TO SHOW THAT THE DECISION OF LD. CIT(A) HAS BEEN REVERSED BY THE TRIBUNAL. WE, THEREFORE, CONFIRM THE ORDER OF LD. CIT(A) ON THE REASON THAT IN THE PRECEDING YEARS THE LD. CIT(A) HAS DELETED THE ADDITION WHICH WAS MADE BY THE ASSESSING OFFICER ON THE SAME REASONS AND IDENTICAL SET OF FACTS. ACCORDINGLY, GROUNDS TA KEN BY THE REVENUE ARE DISMISSED. 9. IN THE RESULT, BOTH THE REVENUES APPEALS ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON 30 - 0 1 - 201 5 SD/ - SD/ - ( G . S . PAN NU ) ( R.S. PADVEKAR ) ACCOUNTANT MEMBER JUDICIAL MEMBER PUNE, DATED : 30 TH JANUARY, 2015 RK/PS COPY TO 1 ASSESSEE 2 DEPARTMENT 3 THE CIT(A) , AURANGABAD 4 THE CIT, AURANGABAD 5 6 THE DR, ITAT, B BENCH, PUNE. GUARD FILE. //TRUE COPY// BY ORDER ASSISTANT REGISTRAR , INCOM E TAX APPELLATE TRIBUNAL , PUNE