M/S EMM KAY INDUSTRIES LIMITED, JALANDHAR V. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-II, JALANDHAR

ITA 674/ASR/2017

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 3327 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 5 month(s) 27 day(s)
• Appeal Type: Income Tax (International Taxation) Appeal
• Pronouncement Date: 20-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 26-06-2018
• Assessment Year: 2008-2009
• Appeal Filed On: 23-10-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SANDEEP CHAUHAN
• Section: 143(3); 153A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I.T.A. NOS. 673 & 674/ASR/2017 ASSESSMENT YEARS: 2007-08 & 2008-09 EMM KAY INDUSTRIES LIMITED, D-29, FOCAL POINT, JALANDHAR [PAN: AAACE 3104E] VS. ASSTT. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE-II, JALANDHAR (APPELLANT) (RESPONDENT) APPELLANT BY : SH. SANDEEP VIJH (C.A .) RESPONDENT BY: SH. SANDEEP CHAUHAN, CIT-DR DATE OF HEARING: 26.06.2018 DATE OF PRONOUNCEMENT: 29.06.2018 ORDER PER SANJAY ARORA, AM: THIS IS A SET OF TWO APPEALS BY THE ASSESSEE ARISIN G OUT OF ITS ASSESSMENTS U/S. 153A R.W.S. 143(3) OF THE INCOME TAX ACT, 1961 ('THE ACT' HEREINAFTER) FOR TWO CONSECUTIVE YEARS, BEING ASSESSMENT YEARS (AYS) 200 7-08 AND 2008-09. THE SAME RAISING A COMMON ISSUE, WERE POSTED FOR HEARING AND , ACCORDINGLY, HEARD TOGETHER, AND ARE BEING DISPOSED PER A COMMON, CONSOLIDATED O RDER FOR THE SAKE OF CONVENIENCE. 2. THE LD. AUTHORIZED REPRESENTATIVE (AR) NOT PRESS ING THE ASSESSEES GROUNDS 1(A) AND 1(B), ENDORSING THE SAME THROUGH HIS WRITT EN SUBMISSIONS (COPY ON RECORD), THE ONLY ISSUE SURVIVING IN THESE APPEALS IS AS TO WHETHER ANY DISALLOWANCE U/S. 36(1)(III), AND IF SO, TO WHAT EXTENT, IS CALL ED FOR IN THE FACT AND CIRCUMSTANCES ITA NOS. 673 & 674/ASR/2017 (AYS 2007-08 & 2008-09) EMM KAY INDUSTR IES LIMITED V. ASSTT. CIT 2 OF THE CASE. THE ASSESSEES CASE IS THAT THE INTERE ST-FREE ADVANCES, ADMITTEDLY FOR NON-BUSINESS PURPOSES, QUA WHICH ONLY THE DISALLOWANCE AS MADE BY THE ASSESSI NG OFFICER (AO) STANDS SUSTAINED IN FIRST APPEAL, ARE SOURCED FROM INTEREST-FREE CAPITAL AVAILABLE WITH IT DURING THE RELEVANT YEARS. NO DIS ALLOWANCE IN RESPECT OF THE ASSESSEES CLAIM FOR INTEREST ON BORROWED CAPITAL U /S. 31(1)(III) IS THEREFORE CALLED FOR. TOWARD THIS, THE LD. AR, SH. SANDEEP VIJH CA, THE ASSESSEES COUNSEL, WOULD TAKE US TO THE BALANCE-SHEETS AS ON 31.03.2007 AND 31.03.2008, SHOWING INTEREST- FREE CAPITAL THEREAT AT RS.665.47 LACS AND 1093.23 LACS RESPECTIVELY (PB PG. 13/AY 2007-08 AND PB PG. 6/AY 2008-09). BESIDES, RELIANCE WAS PLACED BY HIM ON VARIOUS DECISIONS, INCLUDING BY THE HON'BLE APEX CO URT AND HON'BLE JURISDICTIONAL HIGH COURT VIZ. MUNJAL SALES CORPORATION V. CIT [2008] 298 ITR 298 (SC); BRIGHT ENTERPRISES PVT. LTD. V. CIT [2016] 381 ITR 107 (P&H); CIT V. KAPSONS ASSOCIATES [2016] 381 ITR 204 (P&H). 3. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. A PERUSAL OF THE AUDITED BALANCE-SHEETS REVEAL THA T THE ONLY BORROWED CAPITAL ON WHICH INTEREST STANDS SUFFERED BY THE ASSESSEE F OR THE RELEVANT YEARS IS BY WAY OF SECURED LOANS; THE UNSECURED LOANS, RAISED DURING F .Y. 2007-08 (I.E., RELEVANT TO AY 2008-09), STATED TO BE FROM FAMILY MEMBERS, BEING O N INTEREST-FREE BASIS. THE SECURED LOANS, AS EXPLAINED, REPRESENT INSTITUTIONA L FINANCE TOWARD FINANCING THE VARIOUS BUSINESS ASSETS OF THE ASSESSEE-COMPANY VIZ . VEHICLES; PLANT AND MACHINERY; WORKING CAPITAL; ETC. THAT BEING ADMITTE DLY THE CASE, WE FIND NO CASE FOR APPROPRIATING ANY PART OF THE INTEREST COST INC URRED BY THE ASSESSEE OVER THE NON BUSINESS ASSETS, I.E., THE IMPUGNED ADVANCES THAT H AVE NOT BEEN SHOWN TO BE GIVEN DURING THE COURSE, OR FOR THE PURPOSES, OF THE ASSE SSEES BUSINESS. THERE IS UNDER THE CIRCUMSTANCES IN FACT NO NEED TO INVOKE THE PRE SUMPTION IN LAW, AS LAID DOWN AND EXPLAINED BY THE HON'BLE COURTS CITED SUPRA, EX PLAINING THAT WHERE THE ITA NOS. 673 & 674/ASR/2017 (AYS 2007-08 & 2008-09) EMM KAY INDUSTR IES LIMITED V. ASSTT. CIT 3 INVESTMENT IN OR APPLICATION OF FUNDS BY AN ASSESSE E IS SOURCED FROM A COMMON POOL OF FUNDS, A PRESUMPTION, BASED ON THE ASSESSEE S CAPITAL AVAILABLE FOR SUCH APPLICATION, COULD BE DRAWN THAT THE SAME STAND FUN DED FROM THE SAID CAPITAL; THE LOANS RAISED BEING ESSENTIALLY OR PREDOMINANTLY FOR BUSINESS PURPOSES. AS AFORE-NOTED, THE BORROWED CAPITAL ON WHICH INTER EST IN THE PRESENT CASE HAS BEEN INCURRED IS IN THE FORM OF DEDICATED FINAN CE TOWARD FINANCING BUSINESS ASSETS. THERE IS NO QUESTION OF APPLICATION OF SUCH CAPITAL FOR NON-BUSINESS PURPOSES AND, PER CONTRA, THE NON-BUSINESS ASSETS B EING FINANCED FROM A COMMON POOL OF FUNDS. NO DISALLOWANCE IS ACCORDINGLY CALLE D FOR. WE DIRECT ITS DELETION. 4. IN THE RESULT, THE ASSESSEES APPEALS ARE ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON JUNE 29, 2018 SD/- SD/- (N. K. CHOUDHRY) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 29.06.2018 /GP/SR. PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: EMM KAY INDUSTRIES LIMITED, D-29, FOCAL POINT, JALANDHAR (2) THE RESPONDENT: ASSTT. COMMISSIONER OF INCO ME TAX, CENTRAL CIRCLE-II, JALANDHAR (3) THE CIT(APPEALS)-5, LUDHIANA (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T TRUE COPY BY ORDER