ITO, Ward - 3(2), Kolkata, Kolkata V. M/s. U-Tor Rolling Mills Ltd., Kolkata

ITA 683/KOL/2010

• Counselvise Citation: [2011] 119 COUNSELVISE.COM (IT) 6813 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 2 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 21-06-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 07-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M BHATTACHARYA
• Assessee Lawyers: S M SURANA
• Section: 143(3)

Judgement Text

ITA NO.683/KOL/2010 M/S. U-TOR ROLLING MILLS LTD. A.Y 06-07 1 , B IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH: KO LKATA BEFORE HONBLE SRI MAHAVIR SINGH JM & HONBLE SRI C .D. RAO AM () , . !., , , , '# $ / I.T.A NO. 683/KOL/2010 %& '( / ASSESSMENT YEAR : 2006-07 INCOME-TAX OFFICER VS. M/S. U-TOR RO LLING MILLS LTD. WARD 3(2), KOLKATA PAN: AAACU 5426F (*+ /APPELLANT ) (,-*+/ RESPONDENT ) *+ / FOR THE APPELLANT : . / SHRI M. BHATTACHARYA, SR DR ,-*+ / FOR THE RESPONDENT : . / SHRI S.M SURANA, AR '/ / ORDER , SHRI MAHAVIR SINGH JUDICIAL MEMBER: THIS APPEAL BY REVENUE IS ARISING OUT OF THE ORDER OF CIT(A)-I, KOLKATA IN APPEAL NO. 151/CIT(A)/3(2)/08-09 VIDE DATED 29-01-2010. A SSESSMENT WAS FRAMED BY I.T.O, WARD-3(2), KOLKATA FOR ASSESSMENT YEAR 2006-07 U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HI S ORDER DATED 12-11-2008. 2. THE ONLY ISSUE IN THIS APPEAL OF REVENUE IS AGAI NST THE ORDER OF CIT(A) DELETING DISALLOWANCE MADE BY AO ON ACCOUNT OF INTEREST EXPE NDITURE ON OVERDRAFT FACILITY AVAILED FROM BANK. FOR THIS, REVENUE HAS RAISED FOLLOWING T HREE EFFECTIVE GROUNDS:- 1. THAT THE LD. CIT(A)HAS ERRED IN LAW AS WELL AS ON FACT BY DELETING THE DISALLOWANCE OF INTEREST EXPENDITURE O F RS. 3679,009/- FOR AVAILING THE OVERDRAFT FROM BANK. 2. THAT THE LD. CIT(A) HAD ERRED IN LAW AS WELL AS ON FACT BY HOLING THAT THE INTEREST EXPENDITURE OF RS. 36,79,009/- WA S INCIDENTAL TO THE BUSINESS ACTIVITY OF THE ASSESSEE. 3. THAT THE LD. C.L.T.(A) HAS ERRED IN LAW AS WELL AS ON FACT BY NOT GIVING THE OPPORTUNITY TO THE ASSESSING OFFICER UND ER RULE 46A TO EXAMINE THE NEW FACTS BROUGHT ON RECORD BY THE ASSE SSEE BEFORE HIM. ITA NO.683/KOL/2010 M/S. U-TOR ROLLING MILLS LTD. A.Y 06-07 2 3. WE HAVE HEARD RIVAL CONTENTIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. WE FIND THAT DURING ASSESSMENT PROCEEDINGS, A O REQUIRED THE ASSESSEE AS TO WHY PAYMENT OF INTEREST TO INDUS IND BANK AMOUNTING T O RS.36,79,009/- BE NOT DISALLOWED AS OVER DRAFT SANCTIONED TO THE ASSESSEE FOR REPAYING ADVANCES TAKEN FROM USHA MARTIN LTD. THE AO AFTER TAKING REPLY FROM THE ASSESSEE NOTED T HAT ASSESSEE HAS NOT TAKEN ANY STEP TO REALIZE THE AMOUNT FROM PARTIES TO WHOM ADVANCES WE RE GIVEN FOR SUPPLY OF MATERIAL AND EVEN NO STEP HAS BEEN TAKEN TO REALIZE ADVANCES GIV EN TO SUPPLIER. HENCE, AO NOTED THAT ASSESSEE HAS NOT CHARGED INTEREST ON ADVANCES GIVEN TO SUPPLIERS. IT HAS BORROWED FUNDS TO REPAY THE ADVANCES TAKEN BY IT. ACCORDINGLY, HE DISALLOWED INTEREST. THE CIT(A) ALLOWED CLAIM OF ASSESSEE BY GIVING FOLLOWING FINDI NGS :- THE LOAN FROM BANK CONTINUED FROM EARLIER YEARS IN WHICH NET INTEREST WAS TAXED. THAT THE OVERDRAFT FROM THE BAN K WAS TAKEN FOR THE REPAYMENT OF INTEREST FREE ADVANCES FROM THE BANK T HEREFORE CANNOT BE DISPUTED. THE APPELLANT WAS RECEIVING INTEREST OUT OF THE LOAN GIVEN FROM THE INTEREST FREE ADVANCES RECEIVE FROM M/S. USHA MARTI N. TO THAT EXTENT, THE PAYMENT OF INTEREST IS DIRECTLY LINKED TO THE RECEI PT OF INTEREST BY THE APPELLANT. THEREFORE, IN MY OPINION INTEREST PAID A ND RECEIVED SHOULD HAVE BEEN SET- OFF. ON THE FACTS AND ON THE PREMISE THAT BECAUSE THE ADVANCES GIVEN TO THE SUPPLIERS WERE NOT REALIZED COULD NOT BY ITSELF BE A GROUND TO DISALLOW THE INTEREST PAID ON THE OVERDRAFT FROM BA NK. THE BALANCE SHEET OF THE APPELLANT ALSO DOES NOT SHOW THAT IT HAD ANY SU BSTANTIAL FUNDS OF ITS OWN TO GIVE I FIND TO AGREE IN THE / A/R THAT THE BANK OVERDRAFT WAS TAKEN TO REGARDING THE ADVANCE TAKEN FOR THE PURPOSE OF BUSI NESS OF THE COMPANY AND IS TO BE ALLOWED U/S 36(I)(III)/37 OF THE I.T. ACT , 1961. IN VIEW OF THE ABOVE THE I.T.O. IS DIRECTED TO NET THE INTEREST PAID, AG AINST INTEREST RECEIVED BY THE ASSESSEE. 4. WE FIND THAT THE ASSESSEE HAS RECEIVED ADVANCES FROM USHA MARTIN LTD FOR SUPPLY OF MATERIAL IN EARLIER YEARS, PART OF WHICH WAS GI VEN TO THE SUPPLIERS AND PART OF THE SAME WAS INVESTED FOR EARNING INTEREST ON LOANS ADVANCE D TO THREE PARTIES NAMELY, SIVASATYAM PETROCHEMICALS PVT. LTD, USHA MARTIN VENTURES LTD & UMIL SHARE & STOCK BROKING SERVICES LTD. WE FIND FROM RECORDS THAT INTEREST FR EE ADVANCES RECEIVED FROM USHA MARTIN LTD, ASSESSEE EARNED INTEREST FROM THE AFORESAID TH REE PARTIES AND REPAID THIS LOAN TO USHA ITA NO.683/KOL/2010 M/S. U-TOR ROLLING MILLS LTD. A.Y 06-07 3 MARTIN LTD AFTER GETTING OVER DRAFT FROM THE BANK A ND PAID INTEREST THEREON, WHICH WAS ALLOWED QUA INTEREST INCOME IN EARLIER YEARS. WE F IND FROM RECORDS THAT ASSESSEE HAS DISCLOSED INTEREST INCOME LESS INTEREST PAID AS UND ER:- INCOME SIDE TDS GROSS INTEREST RECEIVED SHIVSATYAM PETROCHEMICALS PVT LTD 16,055 1,792, 354.00 USHA MARTIN VENTURES LTD 29,522 26 2,338.00 UMIL SHARE & STOCK BROKING SERVICES LTD 10,305 1,836,849.00 55,882 3,891,541.00 LESS: INTEREST PAID BASANT HOLDINGS LTD 12,389.00 INDUSIND BANK 3,679,008.72 200,143.27 WE FIND THAT OVER DRAFT WAS SANCTIONED BY THE BANK AGAINST FDR OF USHA MARTIN LTD AND THAT DOESNT AFFECT THE FACT THAT THE MONEY BORROW ED HAVE BEEN UTILIZED FOR THE PURPOSES OF INVESTMENT ON WHICH ASSESSEE HAS EARNED INTERES T AND THEREFORE, INTEREST PAID THEREON HAS TO BE ALLOWED AS DEDUCTION FROM INTEREST RECEIP TS. WE ARE OF THE VIEW THAT THE INTEREST PAID BY THE ASSESSEE IS FOR THE PURPOSES OF EARNING OF INTEREST INCOME, HENCE, ALLOWABLE AS DEDUCTION. WE FIND NO INFIRMITY IN THE ORDER OF CIT (A) AND IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE CONFIRM THE SAME. 5. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. '/ #0' 1 0% 2 3 !# -06-2011 ORDER PRONOUNCED IN THE OPEN COURT ON 24 -06-2011 SD/- SD/- [ . !., , , , '# ] [ , ] C.D. RAO, ACCOUNTANT MEMBER MAHAVIR SINGH, JUDICIAL MEMBER (!#) DATED :24-06-2011 *PP 45 %67 8 /SR.P.S. ITA NO.683/KOL/2010 M/S. U-TOR ROLLING MILLS LTD. A.Y 06-07 4 '/ 9 ,: ;':'<- COPY OF THE ORDER FORWARDED TO: 1 . *+ /APPELLANT- I.T. O WARD 3(2) 8/2 ESPLANADE EAST, DWARI HOUSE, KOL-69. 2 ,-*+ / RESPONDENT : M/S. U-TOR ROLLING MILLS LTD, RAJA T ERRACE, 2 ND FL, 24 R.N. MUKHERJEE ROAD, KOL-1 3 . /% / THE CIT, 4 . /% ( )/ THE CIT(A), KOLKATA 5 . C2 ,% / DR, KOLKATA BENCHES, KOLKATA -: ,/ TRUE COPY , '/%0/ BY ORDER , 7 /ASSTT. REGISTRAR