M/s R. N. Gupta & Co. Ltd., Ludhiana V. Pr. CIT-1, Ludhiana

ITA 666/CHANDI/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5323 (ITAT-CHANDIGARH)
• Duration Of Justice: 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2013-2014
• Appeal Filed On: 09-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 37(1); 263; 63

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, B, CHANDIGARH , ! '# $ % & '# , () BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ./ ITA NO. 666/CHD/2018 / ASSESSMENT YEAR : 2013-14 SH. R.N. GUPTA & COMPANY LTD., C-55 & 56, FOCAL POINT, LUDHIANA THE PCIT-1, LUDHIANA ./PAN NO: AABCR9636F / APPELLANT /RESPONDENT ! /ASSESSEE BY : SHRI SUBHASH AGARWAL, ADVOCATE ' ! / REVENUE BY : SHRI RAM MOHAN, CIT DR # $ % /DATE OF HEARING : 17.01.2019 &'() % / DATE OF PRONOUNCEMENT : 29.01. 2019 (* / ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGAINST THE ORDER DATED 29.3.2018 OF THE PRINCIPAL COMMISSIONER OF INCOME TAX, LUDHIANA [HEREINAFTER REFERRED TO AS PCIT] PASSED U/S 263 OF THE INCOME- TAX ACT, 1961 (IN SHORT 'THE ACT') AND THEREBY SETT ING ASIDE THE ASSESSMENT ORDER AND DIRECTING THE ASSESSING OFFICER TO MAKE A FRESH ASSESSMENT BY ENHANCING THE INCOME OF THE ASSESSEE. 2. THE LD. PCIT HAS HELD THE ORDER OF THE ASSESSING OFFICER AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENU E ON TWO ISSUES, FIRSTLY THAT THE DISALLOWANCE OF INTEREST EXPENDITURE U/S 3 6(1)(III) OF THE ACT WAS ATTRACTED ON THE INVESTMENT MADE IN FIXED ASSETS, C APITAL WORK IN PROGRESS ITA NO. 666/CHD/2018- SH. R.N. GUPTA & COMPANY, LUDHIANA 2 AND CAPITAL ADVANCES AND SECONDLY THAT THE DISALLOW ANCE OF LOSS CLAIMED ON FOREIGN EXCHANGE FLUCTUATION WAS ALSO ATTRACTED. SI NCE THE ASSESSING OFFICER HAD NOT MADE THE AFORESAID DISALLOWANCE, TH E LD. PCIT RELYING UPON THE ASSESSMENT ORDER FOR THE SUBSEQUENT ASSESSMENT YEAR 2014-15 HELD THAT THE ORDER OF THE ASSESSING OFFICER FOR ASSESSMENT Y EAR UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2013-14 WAS ERRONEOUS AND PREJ UDICIAL TO THE INTEREST OF REVENUE. 3. BEFORE US, LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, HAS SUBMITTED THAT FOR THE ASSESSMENT YEAR 2014-15, THE DISALLOWA NCE MADE BY THE ASSESSING OFFICER ON THE AFORESAID TWO ISSUES STOOD DELETED BY THE LD. CIT(A) VIDE HIS ORDER DATED 8.1.2018. THE REVENUE P REFERRED APPEAL AGAINST THE SAID ORDER OF THE CIT(A) WHICH HAS BEEN DISMISSED BY THE TRIBUNAL VIDE ORDER DATED 13.12.2018 PASSED IN ITA NO. 403/CHD/2018. THE LD. COUNSEL HAS PRODUCED A COPY OF THE SAID ORD ER IN THE OWN CASE OF THE ASSESSEE, DATED 13.12.2018 OF THE TRIBUNAL, O N THE FILE. A PERUSAL OF THE SAID ORDER DATED 13.12.2018 REVEALS THAT BOTH THE AFORESAID ISSUES HAVE BEEN ADJUDICATED BY THE TRIBUNAL IN ITS ORDER. THE RELEVANT PART OF THE FINDINGS OF THE TRIBUNAL IS REPRODUCED BELOW:- 3. GROUND NO.1 : VIDE GROUND NO.1, THE REVENUE HAS AGITATED THE ACTION OF THE CIT(A) IN DELETING THE A DDITION MADE BY THE ASSESSING OFFICER U/S 36(1)(III) OF TH E INCOME-TAX ACT, 1961 (IN SHORT 'THE ACT') OUT OF THE INTEREST EXPENDITURE IN RESPECT OF INVESTMENTS MADE IN FIXED ASSETS, CAP ITAL WORK IN PROGRESS AND CAPITAL ADVANCES. 4. WE HAVE HEARD THE RIVAL CONTENTIONS. THE CIT(A) IN THIS CASE AFTER CONSIDERING THE FACTS AND CIRCUMSTA NCES OF THE CASE HAS GIVEN A CATEGORICAL FINDING THAT ASSESSEE WAS POSSESSED OF SUFFICIENT OWN INTEREST FREE FUNDS TO COVER THE CAPITAL WORK IN PROGRESS AND CAPITAL ADVANCES. HE, THEREFORE, RELYING UPON THE DECISION OF THE JURISDI CTIONAL HIGH COURT IN THE CASE OF BRIGHT ENTERPRISES PVT LTD VS. ITA NO. 666/CHD/2018- SH. R.N. GUPTA & COMPANY, LUDHIANA 3 CIT, JALANDHAR 381 ITR 107 AND ALSO CONSIDERING THE FACT THAT THE ASSESSEE HAD NOT BORROWED ANY SPECIFIC LOA NS FOR THE AFORESAID CAPITAL ADVANCES AND CAPITAL WORK IN PRO GRESS, DELETED THE ADDITIONS SO MADE BY THE ASSESSING OFFI CER. 5. THE ISSUE IS NOW SQUARELY COVERED BY THE VARIOUS DECISIONS OF THE HIGH COURTS INCLUDING THAT OF THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CAS E OF BRIGHT ENTERPRISES PVT. LTD VS. CIT, JALANDHAR (SUPRA) , CIT VS. KAPSONS ASSOCIATES (2016) 381 ITR 204 (P&H) AND TH E LATEST DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL (INCIDENTALLY CONSISTED OF BOTH OF US) IN THE CASE OF ACIT VS. JANAK GLOBAL RESOURCES PVT LTD ITA NO. 470/CHD/201 8 ORDER DATED 16.10.2018, WHEREIN, THE ISSUE HAS BEEN DECID ED IN FAVOUR OF THE ASSESSEE BY ALSO CONSIDERING THE DECI SION OF THE HON'BLE APEX COURT IN THE CASE OF HERO CYCLES VS. CIT 379 ITR 347 (SC) AND ALSO FINDINGS ARRIVED IN THE CASE OF AVON CYCLES LTD. VS. CIT IN ITA NO.277 OF 2013. THE HON 'BLE COURTS HAVE HELD THAT IF THE ASSESSEE IS POSSESSE D OF SUFFICIENT OWN INTEREST FREE FUNDS TO MEET THE INVE STMENTS / INTEREST FREE ADVANCES, THEN, UNDER THE CIRCUMSTAN CES, PRESUMPTION WILL BE THAT INTEREST FREE ADVANCES / I NVESTMENTS HAVE BEEN MADE BY THE ASSESSEE OUT OF OWN FUNDS / I NTEREST FREE FUNDS. IN VIEW OF THIS, THERE IS NO MERIT IN THIS GROUND O F THE REVENUE AND THE SAME IS ACCORDINGLY DISMISSED. 6. GROUND NO.2 : IN GROUND NO.2, THE REVENUE HAS AGITATED THE ACTION OF THE CIT(A) IN ALLOWING THE RELIEF ON ACCOUNT OF DISALLOWANCE MADE BY THE ASSESSING OFFIC ER ON LOSS ON FOREIGN CURRENCY FLUCTUATION. 7. THE RELEVANT DISCUSSION HAS BEEN MADE BY THE CIT (A) IN PARA 5 OF THE IMPUGNED ORDER. THE LD. CIT(A) HAS GIVEN A CATEGORICAL FINDING THAT THE LOAN IN FOREIGN CURREN CY WAS TAKEN BY THE ASSESSEE AT A LOWER RATE OF 7.5% AS AG AINST THE NORMAL RATE OF 12% PER ANNUM. THE SOLE PURPOSE WA S TO GET THE BENEFIT OF THE LOWER RATE OF INTEREST THEREBY IMPROVING THE INCOME BY WAY OF SAVING THE INTEREST COST. THE LD. CIT(A) WHILE RELYING UPON THE DECISION OF THE HON' BLE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF COOPER CORPO RATION PRIVATE LIMITED ITA NO.866/PN/2004, AY2008-09 ORD ER DATED 29.4.2016, ON IDENTICAL FACTS, HAS DELETED T HE ADDITIONS HOLDING THAT THE CONVERSION IN FOREIGN CURRENCY LOA N WHICH LED TO THE IMPUGNED LOSSES, WERE DICTATED BY REVEN UE CONSIDERATIONS TOWARDS SAVING INTEREST COST AND FUR THER HELD THAT THE SAID LOSS WAS ON REVENUE ACCOUNT AND WAS AN ALLOWABLE EXPENDITURE UNDER THE PROVISIONS OF SECT ION 37(1) OF THE ACT. ITA NO. 666/CHD/2018- SH. R.N. GUPTA & COMPANY, LUDHIANA 4 8. THE LD. DR COULD NOT POINT OUT ANY DISTINGUISHI NG FACTS OR CASE LAWS IN THIS RESPECT. IN VIEW OF THI S, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A). THERE IS NO MERIT IN THE APPEAL OF THE REVENUE AND THE SAME IS ACCORDINGLY DISMISSED. 4. SINCE THE AFORESAID ORDER OF THE LD. PCIT PASSED U/S 263 OF THE ACT IS MAINLY BASED ON THE AFORESAID TWO ISSUES AND SI NCE THE AFORESAID ISSUES IN THE SUBSEQUENT ASSESSMENT YEAR HAVE ALREADY BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL, HENCE, UNDER THE CIRC UMSTANCES, IT CANNOT BE SAID THAT THE ORDER PASSED BY THE AS/SESSING OFFIC ER IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE SO FAR AS TH E ABOVE TWO ISSUES WERE CONCERNED. IN VIEW OF THIS, THE ORDER PASSED BY THE PCIT U/S 2 63 IS HEREBY QUASHED. THE APPEAL OF THE ASSESSEE IS HEREBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 29.01.2019 SD/- SD- ( $ % & '# / ANNAPURNA GUPTA) () / ACCOUNTANT MEMBER ( / SANJAY GARG) / JUDICIAL MEMBER DATED : 29.01. 2019 .. '+ ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # / / CIT 4. # / ( )/ THE CIT(A) 5. -01 2 , % 2 , 34516 / DR, ITAT, CHANDIGARH 6. 15 7$ / GUARD FILE '+ # / BY ORDER, 8 ' / ASSISTANT REGISTRAR