M/s. Naaraayani Minerals, West Singhbhum V. ACIT, Jamshepur

ITA 64/RAN/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0037 (ITAT-RANCHI)
• Duration Of Justice: 3 year(s) 3 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 31-05-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SANJAY PAUL
• Assessee Lawyers: S K PODDAR
• Keywords: Depreciation; Proportionate interest
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL RANCHI BENCH, RANCHI BEFORE SHRI N.V.VASUDEVAN, JUDICIAL MEMBER AND SHRI M.BALAGANESH, ACCOUNTANT MEMBER ITA NO. 64 / RAN / 2013 ASSESSMENT YEAR :2009-10 M/S NAARAAYANI MINERALS, BARAJAMDA, WEST SINGHBHUM, JHARKHAND [ PAN NO.AAFFN 1865 R ] V/S . ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-2, JAMSHEDPUR /APPELLANT .. / RESPONDENT /BY APPELLANT SHRI S.K. PODDAR ADVOCATE & SHRI DEVESH PODDAR, ADVOCATE /BY RESPONDENT SHRI SANJAY PAUL, DR /DATE OF HEARING 07-09-2016 /DATE OF PRONOUNCEMENT 09-09-2016 / O R D E R PER N.V.VASUDEVAN, JUDICIAL MEMBER:- THIS IS AN APPEAL BY THE ASSESSEE AGAINST THE ORDE R DATED 30.03.20013 OF COMMISSIONER OF INCOME TAX (APPEALS) JAMSHEDPUR RELATING TO ASSESSMENT YEAR (AY) 2009-10. 2. GROUND NOS. 1 TO 3 RAISED BY ASSESSEE CAN BE CON VENIENTLY BE DECIDED TOGETHER. THESE GROUNDS READ AS FOLLOWS:- 1. FOR THAT LD. CIT(APPEALS) WAS NOT JUSTIFIED IN CONFIRMING AN ADDITION OF RS.5,00,214/- ON THE GROUND THAT CRUSHING CHARGE S WERE NOT DISCLOSED IN THE BOOKS OF ACCOUNT TO THIS EXTENT. T HE FINDING OF LD. ASSESSING OFFICER AS CONFIRMED BY LD. CIT(APPEALS) IS FACTUALLY INCORRECT. APPELLANT HAS PROVED BEYOND DOUBT THAT T HE CRUSHING CHARGES WERE DULY DISCLOSED IN SALES ACCOUNT. IT IS ABSOLUT ELY INCORRECT TO ITA NO.64/RAN/2013 A.Y. 2009-10 M/S NARAAYANI MINERALS VS. ACIT, CIR-2 JSR PAGE 2 SUGGEST THAT NO CRUSHING CHARGES WERE DISCLOSED. TH E ADDITION MADE IS ILLEGAL AND INCORRECT. 2. FOR THAT LD. CIT(APPEALS) WAS NOT JUSTIFIED IN C ONFIRMING AN ADDITION OF RS.4,59,600/- MADE ON THE GROUND THAT MOBILE SCR EENING PLANT CRUSHING CHARGES TO THIS EXTENT WERE NOT SHOWN. COM PLETE DETAILS WERE FILED AND LD. ASSESSING OFFICER IN HIS REMAND REPOR T ACCEPTED THAT THE FINDING OF LD. ASSESSING OFFICER WAS NOT CORRECT AN D CRUSHING CHARGES WERE REFLECTED. HOWEVER, HE WAS OF THE OPINION THAT SECTION 40(A)(IA) WAS ATTRACTED SINCE TDS WAS NOT MADE. 3. FOR THAT LD. CIT(APPEALS) WAS NOT JUSTIFIED IN C ONFIRMING THE ADDITION SINCE THE ENTIRE PAYMENTS WERE REFLECTED IN BOOKS O F ACCOUNTS WHICH WAS EXPLAINED AND NO ADDITION WAS CALLED FOR. THE S ALES INCLUDED CRUSHING CHARGES, AS SUCH, PROVISION OF SECTION 40( A)(IA) WAS NOT ATTRACTED. IN ANY CASE, ADDITION CANNOT BE MADE COM PLETELY ON A NEW GROUND IN THE APPELLATE PROCEEDINGS. 3. THE ASSESSEE IS A PARTNERSHIP FIRM. IT IS ENGAG ED IN THE BUSINESS OF TRADING IN MINERAL ORES AND CARRYING OUT PROCESS OF CRUSHING OF IRON ORE. DURING THE PREVIOUS YEAR RELEVANT TO AY 09-10, THE ASSESSEE HAD SHOWN INCOME UNDER THE HEAD MOBILE SCREEN PLANT CRUSHING CHARGES RS.4,59,73,078/- AND UNDER THE HEAD CRUSHING CHARGE S RS.25,26,147/-, THE AGGREGATE OF WHICH WAS RS.4,84,99,225/-. BUT AS PER 26AS (INFORMATION ON TAX DEDUCTED AT SOURCE AND THE PAYMENTS FOR WHICH TAX W AS DEDUCTED AT SOURCE ON PAYMENTS MADE TO THE VARIOUS PERSONS) FOR FINANC IAL YEAR 2008-09 TOTAL RECEIPTS ON WHICH TAX WAS DEDUCTED AT SOURCE (TDS) WAS RS.5,39,79,221/-. THE AO CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WH Y THE CRUSHING CHARGES WERE SHOWN LESS BY THE ASSESSEE COMPARED TO THE CHA RGES AS REFLECTED AS RECEIVED BY THE ASSESSEE IN 26AS. THE ASSESSEE FIL ED RECONCILIATION AS TO WHY THERE WAS A DIFFERENCE AS ABOVE. WE ARE CONCER NED IN GROUNDS NO.1 TO 3 ONLY WITH TWO DISCREPANCIES VIZ., (I) DISCREPANCY IN THE ACCOUNT OF M/S.AML STEEL LTD., WHO HAD SHOWN PAYMENT TO THE ASSESSEE H IGHER BY RS.5,00,214/- AND (II) DISCREPANCY IN THE RECEIPTS ON ACCOUNT OF MOBILE SCREENING PLANT CRUSHING CHARGES OF RS.4,59,600/-. AS PER THE BOOK S OF ACCOUNTS OF THE ASSESSEE THE RECEIPTS ON ACCOUNT OF MOBILE SCREENIN G PLANT CRUSHING CHARGES WERE SHOWN AT RS.4,59,73,078/- WHEREAS AS PER AS 26 A THE RECEIPTS WERE ITA NO.64/RAN/2013 A.Y. 2009-10 M/S NARAAYANI MINERALS VS. ACIT, CIR-2 JSR PAGE 3 RS.4,64,32,678/- WHICH RESULTED IN DISCLOSURE OF RE CEIPTS BY THE ASSESSEE OF INCOME AT A LESSER SUM BY RS.4,65,970/-. 4. WITH REGARD TO THE SUM OF RS.5,00,214/-, THE AS SESSEE SUBMITTED THAT THE DIFFERENCE WAS BECAUSE THE ASSESSEE CREDITED THE SA ID SUM UNDER SALES ACCOUNT (TRADING OF IRON ORE) WHEREAS M/S AML STEEL & POWER LTD., HAD SHOWN THE AFORESAID PAYMENT UNDER THE HEAD CRUSHING CHARGES IN THEIR TDS RETURNS WHICH IN TURN WAS REFLECTED IN AS26. THE AS SESSEE ALSO ENCLOSED ACCOUNT OF M/S AML STEEL & POWER LTD., WHICH SHOWS THAT ON 31.07.2008 A DEBIT ENTRY FOR RS.14,41,956/- WAS PASSED WHICH MEN TIONS SALES INCLUDE INCOME FROM CRUSHING CHARGES OF RS.5,00,214/-. TH E ASSESSEE THUS SUBMITTED THAT A SUM OF RS.5,00,214/- RECEIVED FROM M/S AML STEEL & POWER LTD., WAS CREDITED IN SALES A/C. AND THEREFORE IT C ANNOT BE SAID THAT WAS ANY DISCREPANCY. 5. WITH REGARD TO THE SUM OF RS.4,65,970/-, WHICH WAS DISCREPANCY IN THE MOBILE SCREENING PLANT CRUSHING CHARGES, THE ASSESS EE SUBMIITTED THAT AS PER TRADING A/C FOR MOBILE SCREENING PLANT CRUSHING CH ARGES THE RECEIPT WAS SHOWN AS UNDER MOBILE SCREENING PLANT CRUSHING CHAR GE RS.4,59,73,078/-. ACTUAL MOBILE SCREENING PLANT CRUSHING CHARGES RECE IPT WAS RS.4,64,32,678/- IN WHICH A DEBIT OF RS.4,59,600/- WAS ON ACCOUNT OF SUB-CONTRACTING CHARGES DEBITED IN THE LEDGER LEAVING THEREBY RECEIPT OF RS .4,59,73,078/- AS PER AUDITED PROFIT & LOSS A/C. IN OTHER WORDS, THE GROS S RECEIPT UNDER THIS HEAD OF MOBILE SCREENING PLANT CRUSHING CHARGES WAS RS.4,64 ,32,678/- WHICH WAS REDUCED BY DEBITED ENTRY ON ACCOUNT OF SUB-CONTRACT ING CHARGES RS.4,59,600/- LEAVING THEREBY NET RECEIPT UNDER THE HEAD MOBILE S CREENING PLANT CRUSHING CHARGES OF RS.4,59,73,078/-. AS SUCH, IT IS NOT COR RECT TO SAY THAT THE CRUSHING CHARGES SHOWN WERE LESS BY THIS AMOUNT AND THERE WA S AN UNDISCLOSED INCOME THEREOF. DETAIL ACCOUNT OF HIRE CHARGES WITH SERVICE TAX WAS ALSO ENCLOSED. ITA NO.64/RAN/2013 A.Y. 2009-10 M/S NARAAYANI MINERALS VS. ACIT, CIR-2 JSR PAGE 4 6. THE LD. CIT(A) CALLED FOR REMAND REPORT FROM TH E AO IN THE REMAND REPORT AO SUBMITTED THAT ASSESSEE HAS NOT SUBMITTED IN DOC UMENTARY EVIDENCE WITH REGARD TO DIFFERENCE IN THE ACCOUNT OF M/S AML STEE L & POWER LTD. WITH REGARD TO SUM OF RS.4,65,970/-, THE AO ACCEPTED THE STAND OF THE ASSESSEE BUT NEVERTHELESS SUBMITTED THAT SINCE NO TDS WAS DE DUCTED ON THE PAYMENT OF SUB-CONTRACTING CHARGES FOR MOBILE SCREENING PLA NT CRUSHING CHARGES, THE SUM OF RS.4,65,970/- DESERVES TO BE DISALLOWED U/S 40(A)(IA) OF THE ACT. AFTER GETTING THE COUNTER COMMENTS OF THE ASSESSEE ON THE REMAND REPORT OF THE AO. THE LD. CIT(A) HELD AS FOLLOWS:- 4.3. I HAVE CONSIDERED THE ARGUMENTS OF THE APPELL ANT AND THE FACTS OF THE CASE. I HAVE ALSO CONSIDERED THE REMAND REPORT OF THE AO AND THE COUNTER COMMENTS OF THE APPELLANT. IN THIS CASE DUR ING THE ASSESSMENT PROCEEDINGS, THE AO FOUND THAT THE FIGURE OF TOTAL RECEIPTS AS PER FORM 26AS IS RS.5,39,79,221/-, WHEREAS, THE TOTAL RECEIP TS SHOWN IN THE BOOKS OF ACCOUNTS IS RS.4,84,99,225/- (COMPRISING R S.4,59,73,078/- SHOWN UNDER THE HEAD MOBILE SCREEN PLANT CRUSHING CHARGES AND RS.25,26,147/- UNDER THE HEAD CRUSHING CHARGES. D URING THE ASSESSMENT PROCEEDINGS, THE AO WAS SATISFIED WITH T HE EXPLANATION OF THE ASSESSEE REGARDING THE DISCREPANCIES AMOUNTING TO RS.45,13,812/- (RS.54,79,996/- - RS.9,66,184/-). AT THE APPELLATE STAGE, THE AR SUBMITS THAT OUT OF THE DISCREPANCIES AMOUNTING TO RS.9,66, 184/-, RS.5,00,214/- WAS IN RESPECT OF TRANSACTION WITH AML STEEL & POWE R LTD. THE AR EXPLAINED THAT THE AMOUNT OF RS.5,00,214/- RECEIVED AS CRUSHING CHARGES FROM M/S AML STEEL & POWER LTD. WAS WRONGLY INCLU DED AS SALES IN THE BOOKS OF ACCOUNTS OF THE APPELLANT. HO WEVER, THE AR DID NOT FURNISH ANY EXPLANATION REGARDING THE OBSERVATION O F THE AO IN THE ASSESSMENT ORDER THAT WHEN M/S AML STEEL & POWER LT D., HAD CONSIDERED THE PAYMENTS OF RS.5,00,124/- UNDER THE HEAD CRUSHING CHARGES AND DEDUCTED TDS THEREUPON THEN HOW IT COULD BE B OOKED AS SALES BY THE APPELLANT. MOREOVER, IN THE LEDGER PRO DUCED IT IS SEEN THAT SUCH AN ANOMALY IS REPORTED ONLY IN THE CASE OF M/S AML STEEL & POWER LTD. THE RECONCILIATION OF SALES AMOUNTING TO RS.14 ,41,956/- VIS--VIS A VAT PAYMENT WITH M/S AML STEEL & POWER LTD., SUBMIT TED BY THE APPELLANT DOES NOT SUPPORT THE CASE OF THE APPELLAN T AS THEY ARE UNRELATED ISSUES. AS REGARDS THE BALANCE AMOUNT OF RS.4,59,600/-, THE APPELLANT SUBMITS THAT THE SUB-CONTRACTING CHARGES OF RS.4,59,600/- WAS DEBITED IN THE MOBILE SCREEN PLANT AND AS SUCH MOBILE SCREENING PLANT CHARGES CREDITED IN THE P & L A/C WAS REDUCED BY RS.4,59, 600/-. IT IS STATED THAT RS.2,97,500/- AND RS.1,62,100/- W AS DEBITED ON 31.03.2009 TOWARDS HIRE CHARGES PAID TO M/S NARAYAN I SONS PVT. LTD., FOR THE MONTHS OF JAN. FEB. AND MARCH, 2009 RESPECT IVELY. AGAIN IN THIS CASE, THE ANOMALY IS NOTED ONLY IN THE CASE OF M/S NARAYANI SONS PVT. ITA NO.64/RAN/2013 A.Y. 2009-10 M/S NARAAYANI MINERALS VS. ACIT, CIR-2 JSR PAGE 5 LTD., AND NO ACTUAL PAYMENT HAS BEEN MADE AND THE D EBIT NOTE WAS PASSED ON THE LAST DAY OF THE FINANCIAL YEAR I.E. 3 1.03.2009. MOREOVER, NO EXPLANATION WAS OFFERED AT THE ASSESSMENT STAGE REGARDING THE AMOUNT OF RS.4,59,600/- WHICH SHOWS THAT THE ACCOUN TS HAVE BEEN ADJUSTED TO RECONCILE THE TOTAL RECEIPTS WITH M/S N ARAYANI SONS PVT. LTD., AS PER BOOKS AND AS PER 26AS. MOREOVER, AS OBSERVED BY THE AO IN THE REMAND REPORT WHICH HAS NOT BEEN CONTRADICTED BY TH E APPELLANT IN THE COUNTER COMMENTS THAT THE EXPENDITURE OF RS.4,59,60 0/- CLAIMED TO HAVE BEEN PAID TO M/S NARAYANI SONS PVT. LTD., WOUL D BE HIT BY THE PROVISIONS OF SECTION 40(A)(IA) OF THE IT ACT, 1961 AS NO TDS HAS BEEN DEDUCTED BY THE APPELLANT ON THE SAID PAYMENT. IT H AS BEEN HELD BY THE HONBLE ALLAHABAD HIGH COURT IN THE CASE OF SENEHLATA VS. CIT 61 ITR 139 THAT THE APPELLATE AUTHORITY CAN CHANGE THE HEA D OF DISALLOWANCE IF THE FACTS OF THE CASE SO WARRANTS. THEREFORE, THE P AYMENT OF RS.4,59,600/- WOULD NOT BE ALLOWABLE AS PER THE PRO VISIONS OF S.40(A)(IA) OF THE ACT. 4.4 IN VIEW OF THE ABOVE FACTS IT IS HELD THAT THE ADDITION OF RS.9,66,184/- ON ACCOUNT OF DIFFERENCE IN GROSS RECEIPTS AS PER BOOKS OF ACCOUNTS AND 26AS IS JUSTIFIED AND THE SAME IS CONFIRMED. FURTHE R, THE ADDITION OF RS.4,59,600/- IS ALSO DISALLOWABLE U/S. 40(A)(IA) O F THE ACT. GROUND NOS. 1 & 2 OF THE APPEAL ARE DISMISSED. 7. AGGRIEVED BY THE ORDER OF LD. CIT(A) THE ASSESS EE HAS RAISED GROUNDS NO. 1 TO 3 BEFORE THE TRIBUNAL. WE HAVE HEARD RIVAL SU BMISSIONS. AS FAR AS DISALLOWANCE OF SUM OF RS.5,00,214/- WHICH IS DIFFE RENCE IN THE ACCOUNT OF M/S AML STEEL & POWER LTD., IS CONCERNED, THE LIMITED P RAYER OF THE LD. COUNSEL FOR THE ASSESSEE WAS TO REMAND THE ISSUE TO THE FIL E OF AO SO THAT THE ASSESSEE CAN BE SATISFY THE AO WITH DOCUMENTARY EVI DENCE THAT A SUM OF RS.5,00,214 SHOWN BY M/S.AML STEEL & POWER LTD., WA S ALSO SHOWN BY THE ASSESSEE IN SALES ACCOUNT OF TRADING IN MINERAL ORE . THE REQUEST IS ACCEPTED AND THE ISSUE REMAND BACK TO THE AO FOR FRESH CONSI DERATION AFTER AFFORDING OPPORTUNITY OF ASSESSEE OF BEING HEARD. 8. AS FAR AS ADDITION A SUM OF RS.4,65,970/- IS CO NCERNED, IT IS CLEAR FROM THE REMAND REPORT OF THE AO THAT THE PROVISION OF SEC. 40(A)(IA) OF THE ACT WAS ATTRACTED FOR NON-DEDUCTION OF TDS U/S 194C OF THE ACT ON PAYMENT MADE TO SUB-CONTRACTORS. THEREFORE, THE DISALLOWANCE ON THI S GROUND IS JUSTIFIED. THE ITA NO.64/RAN/2013 A.Y. 2009-10 M/S NARAAYANI MINERALS VS. ACIT, CIR-2 JSR PAGE 6 LD. CIT(A) HAS INHERENT POWER TO MAKE THE IMPUGNED DISALLOWANCE U/S. 40(A)(IA) OF THE ACT EVEN THOUGH THAT WAS NOT THE B ASIS ON WHICH THE AO MADE THE IMPUGNED DISALLOWANCE. WE THEREFORE CONFIRM THE ORDER OF LD. CIT(A) IN SO FAR AS THIS ADDITION IS CONCERNED. GROUND NO.1 IS A CCORDINGLY ALLOWED WHILE GROUND NO. 2 & 3 ARE DISMISSED. 9. GROUND 4 RAISED BY ASSESSEE READS AS FOLLOWS:- 4. FOR THAT LD. ASSESSING OFFICER WAS NOT JUSTIFIED IN MAKING ADDITION OF THE HIRE CHARGES TO FINANCER FOR PROVIDING FINANCES AGAINST THE VEHICLES. AS PER STATEMENTS OF THOSE FINANCERS, THE AMOUNT WA S DEBITED IN THE BOOKS OF ACCOUNTS. IN CASE IT IS FELT THAT ENTIRE A MOUNT DOES NOT RELATE TO THE YEAR UNDER CONSIDERATION, THE ALLOWANCE SHOULD HAVE BEEN MADE FOR THE AMOUNT RELATED TO THE YEAR UNDER CONSIDERATION AND REST SHOULD BE ALLOWED AGAINST THE YEAR TO WHICH IT RELATES. THERE IS NO DISPUTE REGARDING THE EXPENSES INCURRED. THE ADDITION MADE, THEREFORE, IS UNJUSTIFIED, ILLEGAL AND INCORRECT. 10. THE ASSESSEE HAD CLAIMED DEDUCTION OF RS.25,55 ,789/- UNDER THE HEAD INTEREST ON LOANS IN HIS P&L ACCOUNTS. ON PERUSAL OF THE LEDGER ACCOUNT THE AO NOTICED THAT INTEREST AGAINST MAGMA SHARACHI FIN ANCE LTD., WAS CLAIMED AT RS.13,80,000/- AND AGAINST INDUSIND FINANCE AT R S.1,49,500/- AND AGAINST TML FINANCE CHARGES AT RS.7,32,222/-. AS PER INFORM ATION COLLECTED FROM INDUSIND BANK BY THE AO, INTEREST CHARGED ON 31.03. 2009 FOR THE FY 2008-09 WAS RS.26,723/- ONLY. ACCORDING TO THE AO THE ASSES SEE FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING AND THEREFORE ONLY INTEREST RE LATABLE TO PREVIOUS YEAR RELEVANT TO AY 2009-10 CAN BE ALLOWED AS DEDUCTION. THE AO THEREFORE DISALLOWED EXCESS CLAIM OF INTEREST EXPENSES OF RS. 1,22,777/- (RS.1,49,500/- - RS.26,723/-). AGAIN AS PER INFORMATION COLLECTED F ROM M/S MAGMA SHARACHI FINANCE LTD., THE AMOUNT OF INTEREST CHARGED FOR FY 2008-09 WAS RS.6,99,914/- ONLY. THE ASSESSEE HAD CLAIMED DEDUCT ION OF INTEREST OF RS.13,80,000/-. THE AO DISALLOWED THE EXCESS CLAIM OF INTEREST BY THE ASSESSEE OF RS.6,80,086/-. [RS.13,80,000 RS.6,99, 914/-]. AS PER INFORMATION RECEIVED FROM TML FINANCE INTEREST CHAR GED FOR FY 2008-09 WAS RS.2,02,639/- ONLY. THE AO DISALLOWED THE EXCESS CL AIM OF INTEREST BY THE ITA NO.64/RAN/2013 A.Y. 2009-10 M/S NARAAYANI MINERALS VS. ACIT, CIR-2 JSR PAGE 7 ASSESSEE TO THE EXTENT OF RS.5,29,583/- (RS.7,32,22 2 RS.2,02,639/-). THE AO THUS MADE A TOTAL DISALLOWANCE OF INTEREST EXPEN SES OF RS.13,32,446/- (RS.1,22,777/- + RS.6,80,086/- + RS.5,29,583/-). 11. BEFORE CIT(A), THE ASSESSEE FILED COPY OF ACCO UNT IN THE BOOKS OF THE ASSESSEE OF THE AFORESAID PARTIES AND SUBMITTED THA T THOSE PARTIES HAD CHARGED INTEREST IN ONE GO HOWEVER IN THEIR ACCOUNT S THEY HAVE CREDITED PROPORTIONATE INTEREST RELATING TO THE ASSESSMENT Y EAR 09-10. THE ASSESSEE SUBMITTED THAT AS PER MERCANTILE SYSTEM OF ACCOUNTI NG ONCE THE FINANCE CHARGES WERE LEVIED IN PARTICULAR YEAR, THE SAME HA S TO BE PROVIDED FOR. THE ASSESSEE SUBMITTED THAT BIFURCATION OF INTEREST WAS NOT AVAILABLE WITH THE ASSESSEE. THE ASSESSEE ALSO SUBMITTED THAT THERE W AS NO DISPUTE REGARDING THE PAYMENT OF THE INTEREST WHICH HAS BEEN DEBITED BY THE ASSESSEE IN HIS ACCOUNTS. THE ONLY DIFFERENCE RELATES TO THE PERIOD FOR WHICH THIS INTEREST AMOUNT WAS CREDITED BY THESE PARTIES IN THEIR BOOKS OF ACCOUNTS AS INCOME. IT WAS SUBMITTED THAT IF INTEREST IS TO BE ALLOWED IN ASSESSEES HANDS AS PER CREDIT MADE BY THE PERSONS TO WHOM INTEREST WAS PAI D, THEN THE SAME NEEDS TO BE SPREAD OVER IN OTHER YEARS TO GIVE EFFECT OF THE PAYMENT ALREADY MADE BY THE ASSESSEE. 12. AFTER CONSIDERING THE REMAND REPORT OF THE AO AND THE SUBMISSIONS OF THE ASSESSEE, THE CIT(A) CONFIRMED THE ADDITION MADE BY THE AO, OBSERVING AS FOLLOWS: 6.3 I HAVE CONSIDERED THE ARGUMENTS OF THE ASSESSEE AND THE FACTS OF THE CASE. I HAVE ALSO CONSIDERED THE REMAND REPORT OF THE AO AND THE COUNTER COMMENTS OF THE ASSESSEE. IN THIS CASE THE ASSESSEE HAS TAKEN LOANS FOR PURCHASING CERTAIN MACHINERIES FROM FINAN CE COMPANIES. THE CLAIM OF THE ASSESSEE IS THAT THE FINANCE COMPANIES WHILE MAKING THE FINANCES AVAILABLE HAD CALCULATED THE ENTIRE INTERE ST PLUS THE PRINCIPAL AMOUNT AND HAD WORKED OUT THE REPAYMENT SCHEDULE BY THE ASSESSEE ACCORDING TO THE ASSESSEE, IN VIEW OF THESE FACTS, THE ASSESSEE HAD DEBITED THE ENTIRE INTEREST PAYABLE DURING THIS ASS ESSMENT YEAR IN WHICH THE FINANCE WAS ARRANGED AND MADE AVAILABLE TO THE ASSESSEE. HOWEVER, THE AO HELD THAT THE ASSESSEE WAS ENTITLED FOR ALLOWANCE OF INTEREST ONLY TO THE EXTENT THE INTEREST WAS CHARGE D BY THE FIANCE ITA NO.64/RAN/2013 A.Y. 2009-10 M/S NARAAYANI MINERALS VS. ACIT, CIR-2 JSR PAGE 8 COMPANIES. THE POSITION OF INTEREST AS PER THE FINA NCE SCHEME AND THE INTEREST CHARGED BY THE ASSESSEE AND THE INTEREST C HARGED THE FIANC COMPANIES IS AS UNDER:- S.NO. NAME OF THE FINANCE COMPANIES AMOUNT OF INTEREST PAYABLE AS PER THE FINANCE COMPANIES AMOUNT OF INTEREST DEBITED BY THE ASSESSEE AMOUNT OF INTEREST CHARGED BY THE FINANCE COMPANIES DIFFERENCE ADDED BY THE AO 1 MAGMA SHRACHI FINANCE LTD. RS.13,80,000 RS.13,80,000 RS.6,99,914/- RS.6,80,086/- * 2 INDUSLND FINANCE RS.1,49,000 RS.1,49,000 RS.26,723 RS.1,22,777 3 TML FINANCE RS.7,32,222 RS.7,32,222 RS.2,02,639 RS. 5,29,583 TOTAL RS.13,32,446 THIS AMOUNT WAS SEPARATELY ADDED ALSO BY THE AO AS DISCUSSED IN GROUND NO.3 6.4 THE CONTENTION OF THE ASSESSEE THAT ENTIRE INTE REST CALCULATED BY THE FINANCE COMPANIES SHOULD BE ALLOWED AS DEDUCTION DU RING THE SAME YEAR IS NOT ACCEPTABLE. AS PER ESTABLISHED PRACTICE THE FINANCE COMPANIES ACCOUNT FOR THE INTEREST PAYABLE WHILE WO RKING OUT THE REPAYMENT SCHEME. HOWEVER, IN THE REPAYMENT SCHEDUL E AS IN THE CASE O THE ASSESSEE REPAYMENTS ARE TO BE ADJUSTED AGAINS T THE PRINCIPAL AMOUNT AND THE INTEREST AMOUNT. THEREFORE, ONLY SUC H AMOUNT WHICH IS APPLIED TOWARDS REALIZATION OF INTEREST BY THE FINA NCE COMPANIES WILL BE AN ALLOWABLE EXPENDITURE IN THE HANDS OF THE ASSESS EE. THEREFORE, THE AO HAS RIGHTLY RESTRICTED THE ALLOWANCE THE INTERES T EXPENDITURE AS PER THE STATEMENT OF THE FINANCE COMPANIES AND THE DISA LLOWED THE EXCESS CLAIM OF RS.13,32,446/-. THEREFORE, THE DISALLOWANC E MADE BY THE AO IS JUSTIFIED AND THE SAME IS CONFIRMED. GROUND NO. 4 A ND 5 OF THE APPEAL ARE DISMISSED. 13. BEFORE US LD. COUNSEL FOR THE ASSESSEE REITERA TED SUBMISSION AS PER MADE BEFORE REVENUE AUTHORITIES. ALTERNATIVELY IT WAS SUBMITTED THAT THE INTEREST EXPENSE SHOULD BE ALLOWED IN THE CORRESPON DING ASSESSMENT YEAR IN WHICH THEY ACCRUED AS LIABILITY UNDER THE MERCANTIL E SYSTEM OF ACCOUNTING. LD. DR RELIED ON THE ORDER OF LD. CIT(A). 14. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE AR E OF THE VIEW THAT SINCE THE ASSESSEE FOLLOWS MERCANTILE SYSTEM OF ACCOUNTING, T HE INTEREST EXPENDITURE DISALLOWED WHICH DOES NOT PERTAINS TO THE PREVIOUS YEAR RELEVANT TO ASSESSMENT YEAR 2009-10 CANNOT BE ALLOWED AS DEDUCT ION. HOWEVER, THE ITA NO.64/RAN/2013 A.Y. 2009-10 M/S NARAAYANI MINERALS VS. ACIT, CIR-2 JSR PAGE 9 ALTERNATIVE PRAYER OF ASSESSEE IS ACCEPTED AND AO I S DIRECTED TO ALLOW THE DEDUCTION IN THE RELEVANT ASSESSMENT YEAR TO WHICH THE LIABILITY OF THE ASSESSEE TOWARDS INTEREST PERTAINS. THUS GROUND 4 I S PARTLY ALLOWED. 15. GROUND 5 RAISED BY ASSESSEE READS AS FOLLOWS:- 5. FOR THAT THE DISALLOWANCE OF DEPRECIATION ON TH E COMMERCIAL LOADER PURCHASED AND PUT TO USE ON 31 ST MARCH, 2009 WAS UNJUSTIFIED AND INCORRECT. APPELLANT CLAIMED 50% OF THE DEPRECIATIO N SINCE THE VEHICLE WAS IN USE FOR LESS THAN SIX MONTHS. ENOUGH EVIDENC ES WERE PRODUCED THAT THE VEHICLE WAS DELIVERED AND PUT TO USE. MERE LY BECAUSE ON THE BILL IT IS MENTIONED THAT THE VEHICLE WAS DISPATCHED FRO M PUNE TO JHARKHAND IT CANNOT BE PRESUMED THAT VEHICLE WAS NOT DELIVERE D. THE VEHICLE WAS DELIVERED BY THE AGENT HOLDING THE VEHICLE LOCALLY OF COURSE IT HAS MOVED FROM PUNE TO JHARKHAND. THE DISALLOWANCE OF DEPRECI ATION AS SUCH IS ILLEGAL AND INCORRECT. 16. THE DISPUTE IN GR.NO.5 IS WITH REGARD TO ALLOW ING DEPRECIATION ON VEHICLE WHICH ACCORDING TO THE REVENUE THE ASSESSEE HAD NOT USED FOR THE PURPOSE OF BUSINESS AND THEREFORE DEPRECIATION CANNOT BE ALLOW ED U/S.32 OF THE ACT. ACCORDING TO THE ASSESSEE THE VEHICLE WAS PUT TO US E DURING THE PREVIOUS YEAR AND THEREFORE CLAIM FOR DEPRECIATION SHOULD BE ALLO WED. THE DISALLOWANCES OF DEPRECIATION WAS A SUM OF RS.4,21,545/-. THE MACHIN ERY ON WHICH DEPRECIATION WAS CLAIMED AND DISALLOWED BY THE AO W AS A COMMERCIAL LOADER PURCHASED FROM M/S.JCB INDIA LTD., PUNE, OF THE PURCHASE VALUE OF RS.28 LAKH. ACCORDING TO THE ASSESSEE, THE MACHINER Y WAS DELIVERED ON 31.03.2009 AFTER DISPATCH FROM PUNE, MAHARASHTRA. T HE COPY OF INVOICE DATED 31.3.2009 ISSUED BY JCB INDIA LTD., PUNE, SHOWED TH AT THE MACHINERY WAS TO BE DISPATCHED FROM PUNE TO JHARKHAND. ACCORDING TO THE AO, IF THE INVOICE IS DATED 31.3.2009 AND THE MACHINERY WAS TO BE DELIVER ED FROM PUNE TO JHARKHAND, BY APPLYING COMMON SENSE, THE MACHINERY CAN REACH THE ASSESSEES FACTORY NOT EARLIER THAN 01.04.2009. HE WAS OF THE VIEW THAT THEREAFTER TIME WAS REQUIRED FOR INSTALLATION, TRIA L AND MAKING THE MACHINERY FIT FOR USE ETC. SO, THE AO CONCLUDED THAT THE MACHINER Y COULD NOT HAVE BEEN PUT ITA NO.64/RAN/2013 A.Y. 2009-10 M/S NARAAYANI MINERALS VS. ACIT, CIR-2 JSR PAGE 10 TO USE WITHIN FY 2008-09 AND ACCORDINGLY THERE CANN OT BE ANY CAUSE OF CLAIMING DEPRECIATION PARTICULARLY ON THE MACHINERY . 17. BEFORE CIT(A), THE ASSESSEE EXPLAINED THAT THE LOADER WAS PURCHASED FROM LOCAL DEALER AND DELIVERY WAS RECEIVED AT BARA JAMDA ITSELF. IT WAS DELIVERED BY THE AGENT OF M/S JCB INDIA LTD, WHO DE LIVERS ON BEHALF OF M/S JCB INDIA LTD., PUNE. THE COPY OF THE BILL AND TAX INVOICE WAS ENCLOSED. IT WAS REITERATED THAT THE LOADER WAS RECEIVED AT BARAJAMD A FROM THEIR DEPOT ON 28.3.2009, HOWEVER THE INVOICE WAS RAISED ON 31.03. 2009 WHEN THE PAYMENT OF ENTIRE AMOUNT WAS REMITTED TO PUNE. M/S JCB INDI A LTD, HAD TO SHOW THAT THE DELIVERY WAS AFFECTED FROM PUNE AND IT CAME TO BARAJAMDA, JHARKHAND. HOWEVER, IN THE BUSINESS OF AUTOMOBILE IT REMAINS A FACT THAT FROM THE PLANT THE PAY LOADERS OF THE HEAVY MACHINES OR THE AUTOMO BILES ARE TRANSFERRED TO THE DEPOT MAINTAINED BY THE MANUFACTURERS IN DIFFER ENT STATES AND DELIVERY IS MADE FROM SUCH STATIONS WHERE THE PAY LOADER WAS LY ING UNDER THE OWNERSHIP OF M/S JCB INDIA LTD. IT IS A FACT THAT THE MACHINE WAS EVEN BILLED ON 31.03.2009 AND IT WAS RECEIVED ON 28.03.2009 AND WA S PUT IN USE FORM 28.03.2009 AS CONFIRMED BY THE AUDITORS WHILE PREPA RING THE CHART SHOWING THE DEPRECIATION ON DIFFERENT VEHICLES MADE. THE ASSES SEE THEREFORE SUBMITTED THAT THE AO WAS NOT JUSTIFIED IN MAKING A DISALLOWA NCE / DEPRECIATION CLAIMED. IT WAS FURTHER CLARIFIED THAT AS PER AUDIT REPORT T HE JCB MACHINE WAS PURCHASED ON 28.03.2009 AND WAS PUT TO USE ON 28.03 .2009 AS MENTIONED IN ANNEXURE-I RELATING TO NOTES ITEM-4. 18. THE AO GAVE A REMAND REPORT BEFORE THE CIT(A), IN WHICH HE SUBMITTED AS FOLLOWS: 6. REGARDING THE ADDITION OF RS.4,21,545/- UNDER T HE HEAD DEPRECIATION. THE AO MADE THIS ADDITION AS THE CO MMERCIAL LOADER WAS SHOWN BY THE ASSESSEE PURCHASED AND DELIVERED O N 31.03.2009 FROM JCB INDIA LTD., PUNE. THE AO STATED THAT IT WA S NOT POSSIBLE TO USE ANY COMMERCIAL LOADER BEFORE 01.04.2009 IF IT WAS P URCHASED FROM PUNE AND ADDED THE AMOUNT OF RS.4,21,545/- AS CLAIMED BY THE ASSESSEE UNDER THE HEAD DEPRECIATION. THE ASSESSEE IN HI S SUBMISSION BEFORE ITA NO.64/RAN/2013 A.Y. 2009-10 M/S NARAAYANI MINERALS VS. ACIT, CIR-2 JSR PAGE 11 THE APPELLATE PROCEEDINGS STATED THAT THE LOADER WA S DELIVERED FROM BARAJAMDA ON 28.03.2009 FROM THE DEPOT OF JCB INDIA LTD., BUT NO DOCUMENTARY EVIDENCE IN THIS REGARD HAS BEEN FURNIS HED BY THE ASSESSEE WHICH COULD PROVE THE DELIVERY FROM BARAJA MDA ON THE SPECIFIED DATE. HENCE, THE ADDITION MAY BE RESTORED . 19. THE CIT(A) CONFIRMED THE ORDER OF THE AO, OBSE RVING AS FOLLOWS: 7.3 I HAVE CONSIDERED THE ARGUMENTS OF THE APPELLA NT AND THE FACTS OF THE CASE. I HAVE ALSO CONSIDERED THE REMAND REPORT OF THE AO AND THE COUNTER COMMENTS OF THE APPELLANT. THE AO DISALLOWE D THE DEPRECIATION ON COMMERCIAL LOADER AMOUNTING TO RS.4,21,545/- ON THE GROUND THAT THE DELIVERY DATE OF THE JCB WAS 31.03.2009 AND THE JCB WAS DISPATCHED FROM PUNE MAHARASHTRA AND THE SAME COULD NOT HAVE R EACHED THE SITE OF THE ASSESSEE AT BARAJAMDA, ORISSA ON 31.03.2009 I.E. ON THE LAST DAY OF THE FINANCIAL YEAR 2008-09. THE CONTENTION OF TH E APPELLANT IN THE APPELLATE PROCEEDINGS, THAT THE LOADER WAS DELIVERE D TO THE APPELLANT FROM BARAJAMDA ON 28.03.2009 FROM THE DEPOT OF JCB INDIA LTD., WAS VERIFIED DURING THE REMAND PROCEEDINGS. HOWEVER, TH E AO IN HIS REMAND REPORT SUBMITTED THAT NO DOCUMENTARY EVIDENCE IN TH IS REGARD WAS FURNISHED BY THE ASSESSEE WHICH COULD PROVE THE DEL IVERY FROM BARAJAMDA ON 28.03.2009 AS CLAIMED BY THE APPELLANT . THE AR IN THE COUNTER COMMENTS ALSO ONLY CLAIMED THAT THE DOCUMEN TARY EVIDENCE WAS PRODUCED TO THAT EFFECT BUT NO SUCH DOCUMENTARY EVIDENCE WAS SUBMITTED DURING THE APPELLATE PROCEEDINGS. HOWEVER , FROM THE COPY OF THE BILL FROM JCB INDIA LTD., DATED 31.03.2009, IT IS CATEGORICALLY STATED THAT THE JCB LOADER WAS TO BE DISPATCHED FROM PUNE TO JHARKHAND AS UNDER: DISPATCHED FROM : PUNE DESPATCH TO : JHARKHAND. 7.4 IN VIEW OF THE ABOVE FACTS, THE CONTENTION OF T HE APPELLANT IS NOT ACCEPTABLE AND THE DISALLOWANCE OF DEPRECIATION AMO UNTING TO RS.4,21,545/- MADE BY THE AO IS JUSTIFIED AND THE S AME IS CONFIRMED. GROUND NO. 6 OF THE APPEAL IS DISMISSED. 20. AGGRIEVED BY THE ORDER OF LD.CIT(A) THE ASSES SEE HAS PREFERRED GROUND NO.5 BEFORE THE TRIBUNAL. 21. WE HAVE HEARD RIVAL SUBMISSION. THE LD. COUN SEL FOR THE ASSESSEE MADE SUBMISSION AS WERE MADE BEFORE THE REVENUE AUT HORITY. THE LEARNED DR RELIED ON THE ORDER OF THE CIT(A). ITA NO.64/RAN/2013 A.Y. 2009-10 M/S NARAAYANI MINERALS VS. ACIT, CIR-2 JSR PAGE 12 22. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE AR E OF THE VIEW THAT IT WOULD BE JUST AND PROPER TO SET ASIDE THE ORDER OF LD. CIT(A ) ON REMIT TO AO FOR FRESH CONSIDERATION THE QUESTION AS TO WHETHER THE ASSET WAS PUT TO USE ON OR BEFORE 31.03.2009. IN THIS REGARD, WE ARE OF THE VIEW THA T THE EVIDENCE IN THE FORM CONFIRMATION FROM JCB INDIA PUNE AS TO WHEN THE VEH ICLE IN QUESTION WAS DELIVERED TO THE ASSESSEE WOULD BE VERY MATERIAL AN D ASSESSEE IS THEREFORE GIVEN LIBERTY TO PRODUCE THE BEST EVIDENCE TO SUBST ANTIATE ITS CASE. 23. IN THE RESULT, APPEAL OF ASSESSEE PARTLY ALLOWED ORDER PRONOUNCED IN THE OPEN COURT 09/ 09/2016 SD/- SD/- ( ) ('# ) (M.BALAGANESH) (N.V.VASUDEVAN) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) RANCHI, *DKP $- 09 / 09 /201 6 RANCHI / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-M/S NAARAAYANI MINERALS, BARAJAMDA, WEST SINGHBHUM, JARKHAND 2. /RESPONDENT-ACIT, CIRCLE-2, JAMSHEDPU 3. / 2 / CONCERNED CIT RANCHI 4. 2- / CIT (A) RANCHI 5. 5 ##/, /, / DR, ITAT, RANCHI 6. ; / GUARD FILE. BY ORDER/ , /TRUE COPY/ SR.P S, ITAT, RANCHI