DCIT, Meerut V. M/s. Baghpat Co-operative Sugar Mills Ltd., Uttar Pradesh

ITA 6855/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 4404 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 8 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-09-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 15-06-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 30-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Proportionate interest

Judgement Text

IN THE INCOME - TAX APPELLATE TRIBUNAL, DELHI BENCH B , NEW DELHI BEFORE : SHRI I.C. SUDHIR, JUDICIAL MEMBER AND SHRI L.P. SAHU, ACCOUNTANT MEMBER ITA NO. 6855/DEL./2015 ASSESSMENT YEAR: 2011 - 12 D.C.I.T., CIRCLE 1, MEERUT. (APPELLANT) VS. BAGHPAT CO - OPERATIVE SUGAR MILLS LTD., BHAGPAT. PAN AAAAT0568P (RESPONDENT) APPELLANT BY SHRI ANSHU PRAKASH, SR. DR RESPONDENT BY SHRI RAJ KUMAR, CA ORDER PER L.P. SAHU, A.M.: THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LD. CIT(A), MEERUT DATED 13.10.2015 FOR THE ASSESSMENT YEAR 2011 - 12 ON THE FOLLOWING GROUNDS : 1. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) HAS ERRED IN LAW AND FACT IN DELETING THE ADDITION OF RS. 85,50,0007 - MADE BY THE A.O. UNDER THE HEAD 'INCOME FROM OTHER SOURCES' ON ACCOUNT OF BEING ACCRUED INTEREST INCOME NOT DECLARED BY THE ASSESSEE. 2. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND FACT IN DELETING THE ADDITION OF RS. 10,62,6477 - MADE BY THE A.O. AS THE ASSESSEE HAD NOT SHOWN THE SAME AS INCOME INSPITE OF THE FACT THAT IT WAS A TAXABLE INCOME ON ACCOUNT OF BEING RECEIVABLE CLAIM OF MODVAT AND CANVAT. DATE OF HEARING 31.08.2017 DATE OF PRONOUNCEMENT 20 .09.2017 ITA NO. 6855/DEL./2015 2 3. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND FACT IN DELETING THE ADDITION OF RS. 7,47,49,7407 - MADE BY THE A.O. ON ACCOUNT OF DISALLOWANCE OF INTEREST U7S 43B(D) OF THE IT ACT, 1961, IGNORING THE FACT THAT THE INTEREST WAS NOT PAID BY THE ASSESSEE TILL THE DATE OF FILING OF RETURN. 4. WHETHER IN THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEAL S) MAY BE SET ASIDE AND THAT OF THE A.O. BE RESTORED. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED RETURN OF INCOME ON 09.09.2011, DECLARING LOSS OF RS.20,28,64,160/ - . IN THE ASSESSMENT PROCEEDINGS, THE AO OBSERVED THAT THE ASSESSEE IS PAY ING INTEREST ON LOAN AND AT THE SAME TIME, THE ASSESSEE ADVANCED FUNDS TO PARTIES WHICH WAS NOT DIRECTLY RELATED TO BUSINESS PURPOSE. ON BEING ASKED WHY PROPORTIONATE INTEREST MAY NOT BE DISALLOWED, THE ASSESSEE SUBMITTED AS UNDER : 'THAT ALL THE LOANS AND ADVANCES APPEARING IN ASSESSEE BOOKS OF ACCOUNTS WERE MADE FOR BUSINESS PURPOSES ONLY. MAJORITY OF LOANS & ADVANCES ARE IN THE NATURE OF STAFF ADVANCES, ADVANCES TO SUPPLIERS, CONTRACTORS, ADVANCE EXCISES DUTY FOR SUGAR & MOLASSES, SECURITY GIVEN, ETC. LO ANS & ADVANCES ALSO INCLUDES OTHER ADVANCES OF RS. 10,38,73,397/ - DETAILS OF THE SAME IS FILED HEREWITH. IT WOULD BE SEEN FROM SUCH DETAILS THAT A SUM OF RS. 9,68,55,123/ - IS OUTSTANDING IN THE NAME OF U.P. CO - OPERATIVE SUGAR FACTORIES LTD. AND IN PREVIOU S YEAR THE BALANCE OUTSTANDING WAS RS. 8,83,05,123/ - MEANS, THERE IS INCREASE OF RS. 85,50,000/ - WHICH IS ON ACCOUNT OF INTEREST CHARGED BY THE ASSESSEE IN HIS ACCOUNT. COPY OF ACCOUNT OF THE SAME IS FILED HEREWITH. THE OBSERVATION OF YOUR HONOUR THAT THE AMOUNT GIVEN TO U.P. CO - OPERATIVE, IS INTEREST FREE IS NOT TRUE. ' THE AO, HOWEVER, ADDED RS.85,50,000/ - IN THE INCOME OF THE ASSESSEE. ITA NO. 6855/DEL./2015 3 3. IT WAS OBSERVED THAT IN SCHEDULE H OF THE BALANCE SHEET, THE ASSESSEE HAS SHOWN MODVAT AND CANVAT CLAIM AS RECEIVABLE, BUT IT WAS ADDED TO THE INCOME OF THE ASSESSEE BY RS.10,62,647/ - . THE AO FURTHER OBSERVED, IN SCHEDULE - C OF THE BALANCE SHEET, THE ASSESSEE HAS SHOWN FOLLOWING INTEREST ACCRUED AND DUE BUT NOT PAID : SHAKKAR VISHESH NIDHI RS.1,18,29,590/ - STA TE GOVT. LOAN RS.5,29,65,444/ - UP CO - OPERATIVE SUGAR FACTORIES RS.49,54,623/ - FEDERATION LTD. TOTAL RS.7,47,49,740/ - THE AO OBSERVED THAT THE ABOVE INTEREST IS DUE TO THE PUBLIC FINANCIAL INSTITUTION AND STATE FINANCIAL CORPORATION, BUT HAVE NOT B EEN PAID UPTO THE DUE DATE OF FILING THE RETURN OF INCOME WHEREAS AS PER SECTION 43B(D), IT SHOULD HAVE BEEN PAID UPTO THE DATE OF FILING OF RETURN IF THE ASSESSEE WANTED TO TAKE BENEFIT U/S. 34B(D). IN VIEW OF THIS, THE AO DISALLOWED THE INTEREST TO THE E XTENT OF RS.7,47,49,740/ - . IN APPEAL, THE LD. CIT(A), AFTER EXAMINING ALL THE FINANCIAL DOCUMENTS AND SUBMISSIONS OF THE ASSESSEE, ALLOWED THE APPEAL OF THE ASSESSEE. AGGRIEVED BY THE IMPUGNED ORDER, THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. THE LD . DR RELIED ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT THE AO HAS RIGHTLY ADDED THE ACCRUED INTEREST INCOME OF RS.85,50,000/ - IN THE INCOME OF THE ASSESSEE. IN RESPECT OF RS.10,62,647/ - , THE AO HAS RIGHTLY ITA NO. 6855/DEL./2015 4 ADDED THIS AMOUNTS AS MODVAT & CANVA T RECEIVABLE AMOUNT. IT WAS FURTHER SUBMITTED THAT THE DISALLOWANCE U/S. 43B(D) HAS RIGHTLY BEEN MADE BY THE AO, AS THE ASSESSEE DID NOT PAY INTEREST UPTO THE DATE OF FILING OF RETURN OF INCOME TO THE PUBLIC FINANCIAL INSTITUTION AND STATE FINANCIAL CORPN. AS PER SECTION 43B(D). 5. ON THE OTHER HAND, THE LD. AR RELIED ON THE ORDER OF THE CIT(A). HE SUBMITTED A SMALL PAPER BOOK CONTAINING 54 PAGES. 6. AFTER HEARING BOTH THE PARTIES AND PERUSING THE MATERIAL AVAILABLE ON RECORD AND THE PAPER BOOK SUBMITTED BY THE ASSESSEE, WE FIND THAT IN REGARD TO ADDITION OF INTEREST OF RS.85,50,000/ - ACCRUED ON LOAN TO U.P. COOPERATIVE SUGAR FACTORIES FED E RATION LTD., THE ASSESSEE HAS RIGHTLY ACCOUNTED FOR IT IN THE LEDGER ACCOUNT AND OFFERED IT AS AN INCOME. THE DETAILS ARE AT PAGER BOOK PAGES 53 & 54. THE TOTAL INTEREST EXPENSES TAKEN FROM U.P. GOVERNMENT IS RS.6,65,15,444/ - AND DEPOSITED WITH U.P. COOPERATIVE SUGAR FACTORIES FEDERATION LTD. AND THE INTEREST ACCRUED IS RS.85,50,000/ - . THEREFORE, THE NET INTEREST EXPENSES AFTER NETTING OFF IS APPEARING AT PAGE NO. 40 UNDER SCHEDULE - T, UNDER INTEREST EXPENSES, U.P. GOVERNMENT AT RS.5,79,65,444/ - . THEREFORE, THE ASSESSEE HAS CORRECTLY ACCOUNTED FOR IT INTO HIS BOOKS OF ACCOUNT AND THE LD. CIT(A) HAS RIGHTLY DELETED TO THE A DDITION OF RS.85,50,000/ - . ITA NO. 6855/DEL./2015 5 7. THE ASSESSING OFFICER HAS ADDED RS.10,62,647/ - INTO THE INCOME OF THE ASSESSEE WHEREAS IT IS IN THE NATURE OF MODVAT & CANVAT RECEIVABLE, WHICH IS APPEARING IN SCHEDULE H UNDER THE HEAD ADVANCE EXCISE DEPOSIT AVAILABLE AT PAP ER BOOK PAGE 31. IT IS A DEBIT BALANCE OF MODVAT & CANVAT CLAIMS RECEIVABLE, WHICH HAS BEEN WRONGLY ADDED BY THE AO TO THE INCOME OF THE ASSESSEE. IT IS IN THE NATURE OF CURRENT ASSETS AND APPEARING IN THE BALANCE SHEET. THE MODVAT AND CANVAT RECEIVABLE WH ICH IS PAID IN ADVANCE BY THE APPELLANT ON VARIOUS ITEMS BY DEBITING THE RECEIVABLE ACCOUNT AND IS SHOWN AS AN ASSET ITEM AND THE SAME IS ADJUSTED AGAINST THE EXCISE DUTY TO BE PAID SUBSEQUENTLY. THE LD. CIT(A) HAS RIGHTLY DELETED THE ADDITION MADE BY THE ASSESSING OFFICER ON ACCOUNT OF MODVAT & CANVAT RECEIVABLE. THEREFORE, THIS GROUND OF APPEAL IS DISMISSED. 8. IN RESPECT OF GROUND NO. 3, THE AO HAS APPLIED SECTION 43B(D) OF THE IT ACT ON INTEREST PAID/PAYABLE WHICH HAS NOT BEEN PAID UPTO THE DATE OF FILI NG THE RETURN. THIS ISSUE IS SQUARELY COVERED BY THE ORDER DATED 30.03.2016 OF CO - ORDINATE BENCH IN ITA NO. 1535/DEL./2014 FOR THE ASSESSMENT YEAR 2009 - 10, WHEREIN IT HAS BEEN HELD AS UNDER : 11. THE AO BY INVOKING THE PROVISIONS CONTAINED U/S 43B(D) OF T HE ACT MADE AN ADDITION OF RS.8,50,94,998/ - ON ACCOUNT OF INTEREST ACCRUED AND DUE BUT NOT PAID BY REJECTING THE CONTENTION OF THE ASSESSEE THAT THE LENDER CONCERNS ARE INSTITUTIONS CONTROLLED BY THE GOVERNMENT AND NOT FINANCIAL INSTITUTIONS. HOWEVER, CIT (A) IN THE IMPUGNED ORDER, BY RELYING UPON THE FINDING RETURNED BY THE CIT (A), NOIDA VIDE ORDER DATED 26.08.2013 IN ITA NO. 6855/DEL./2015 6 ASSESSEE S OWN CASE QUA THE ASSESSMENT YEAR 2008 - 09, HELD THAT THE INSTITUTION OF UTTAR PRADESH GOVERNMENT ARE NOT COVERED IN THE DEFINITI ON OF PUBLIC FINANCIAL INSTITUTION AND THEREBY DELETED THE ADDITION MADE BY THE AO. 12. UNDISPUTEDLY, THE ASSESSEE IN SCHEDULE C OF THE BALANCE SHEET HAS SHOWN THE INTEREST ACCRUED AND DUE BUT NOT PAID AS UNDER: - SHAKKAR VISHESH NIDHI RS.1,18,29,590/ - STATE GOVT. LOAN RS.5,65,34,280/ - UP COOPERATIVE SUGAR FACTORIES FEDERATION LTD. RS.1,67,31,128/ - TOTAL RS.8,50,94,998/ - 13. NOW, THE SOLE QUESTION FOR DETERMINATION IN THIS CASE IS, AS TO WHETHER THE AFORESAID LENDERS FALL IN THE DEFINITION OF PUBLIC FINANCIAL INSTITUTION EMPOWERING THE AO TO INVOKE THE PROVISIONS CONTAINED U/S 43(D)? IDENTICAL ISSUE HAS COME UP BEFORE THE COORDINATE BENCH OF ITAT, DELHI BENCH H , NEW DELHI IN ACIT VS. BAGHPAT COOPERATIVE SUGAR MILLS LTD., ITA NO.6157/DEL/20 12, IN ASSESSEE S OWN CASE QUA THE ASSESSMENT YEAR 2007 - 08. 14. THE COORDINATE BENCH PROCEEDED TO DECIDE THE ISSUE IN CONTROVERSY AS UNDER: - 6. THE SECOND ISSUE IS DISALLOWANCE OF INTEREST PAID TO FEDERATION. THE AO DISALLOWED THE AMOUNT ON THE GROUND T HAT THE PAYMENT OF INTEREST IS OUTSIDE THE PURVIEW OF BUSINESS OF THE ASSESSEE. LD. CIT(A) GAVE A FINDING THAT THE ASSESSEE HAS TAKEN LOAN FROM GOVT. OF INDIA AND UP GOVERNMENT, FOR THE PURPOSE OF BUSINESS AND THAT THIS IS EVIDENT FROM THE SANCTIONED LETTE RS AND HENCE THE INTEREST IN QUESTION IS ALLOWABLE U/S 36(1). WE HAVE SEEN REASON TO INTERFERE IN THIS FINDING OF THE FIRST APPELLATE AUTHORITY. THE REVENUE HAS RAISED A LEGAL ARGUMENT THAT, THE INTEREST IN QUESTION CANNOT BE ALLOWED, AS IT IS HIT BY THE P ROVISIONS OF SECTION 43 B(D) OF THE ACT. 7. SECTION 438(D) OF THE ACT READS AS FOLLOWS : - D) 'ANY SUM PAYABLE BY THE ASSESSEE AS INTEREST ON ANY LOAN OR BORROWING FROM ANY PUBLIC FINANCIAL INSTITUTION (OR A STATE FINANCIAL CORPORATION OR A STATE INDUSTRIAL INVESTMENT ITA NO. 6855/DEL./2015 7 'CORPORATION), IN ACCORDANCE WITH THE TERM AND CONDITIONS OF THE AGREEMENT GOVERN ING SUCH LOAN OR BORROWING. AS THE INTEREST IN QUESTION IS PAYABLE TO GOVT. OF INDIA AND THE STATEMENT OF UP GOVERNMENT, SECTION 43(B)(D) DOES NOT APPLY. HENCE WE DISMISS THIS GROUND. 15. NO GROUND HAS COME UP BEFORE US TO DEPART FROM THE FINDINGS RETU RNED BY THE COORDINATE BENCH IN THE AFORESAID CASE AND MOREOVER SHAKKAR VISHESH NIDHI, STATE GOVT. LOAN AND UP COOPERATIVE SUGAR FACTORIES FEDERATION LTD. DO NOT FALL UNDER THE DEFINITION OF FINANCIAL INSTITUTION SO AS TO ATTRACT THE PROVISIONS CONTAINED U /S 43B(D) BY ANY STRETCH OF IMAGINATION. SO FINDING NO ILLEGALITY OR INFIRMITY IN THE FINDINGS RETURNED BY THE LD. CIT (A), GROUND NO.3 IS DETERMINED AGAINST THE REVENUE. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF COORDINATE BENCH, THIS GROUND OF APPEA L OF THE REVENUE IS DISMISSED. 9. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20.09.2017 . SD/ - SD/ - ( I.C. SUDHIR ) (L.P. SAHU) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 20.09.2017 *AKS* COPY OF ORDER FORWARDED TO: (1) THE APPELLANT (2) THE RESPONDENT (3) COMMISSIONER (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES, NEW DELHI