Amba Metals, New Delhi V. ITO, Ward- 50(1), New Delhi

ITA 6884/DEL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 7000 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2013-2014
• Appeal Filed On: 16-11-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S L ANURAGI
• Keywords: Notional interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: SMC NEW DELHI BEFORE SMT DIVA SINGH, JUDICIAL MEMBER ITA NO.6884/DEL/2017 ( ASSESSMENT YEAR: 2013-14) AMBA METALS, 21/6, WEST PATEL NAGAR, NEW DELHI. VS I.T. O WARD-50(1), NEW DELHI ASSESSEE BY SHRI VED JAIN, ADVOCATE REVENUE BY SH. S.L. ANURAGI, SR. DR ORDER THE PRESENT APPEAL HAS BEEN FILED BY THE AS SESSEE ASSAILING THE CORRECTNESS OF THE ORDER DATED 29.9.2017 OF CIT(A) 17, NEW DELH I PERTAINING TO 2013-14 ASSESSMENT YEAR ON THE FOLLOWING GROUNDS :- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A)] IS BAD, BOTH IN THE EYES OF LAW AND ON FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW, IN CONFIRMING T HE ACTION OF THE ASSESSING OFFICER IN MAKING DISALLOWANCE OF INT EREST ON THE SECTION 36(1 )(III) OF THE ACT IN RELATION OF A DVANCES EXTENDED TO SHRI. SIDHBALILSPAT LTD. 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LEARNED CIT(A) HAS ERRED BOTH ON FACTS AND IN LAW, IN CONFIRMING T HE DISALLOWANCE REJECTING THE CONTENTION OF THE ASSESS EE THAT THE ADVANCES HAVING BEEN EXTENDED FOR THE SUPPLY OF MAT ERIAL THE SAME BEING GIVEN OUT OF BUSINESS EXPEDIENCY NO DISA LLOWANCE UNDER SECTION 36(1 )(III) CAN BE MADE. 4. WITHOUT PREJUDICE TO THE ABOVE AND IN THE ALTERN ATIVE THE ADVANCES HAVING BEEN GIVEN OUT OF OWNED FUNDS NO DISALLOWANCE UNDER SECTION 36(1 )(III) CAN BE MADE. 5. THE APPELLANT CRAVES LEAVE TO-ADD, AMEND OR ALT ER ANY OF THE GROUNDS OF APPEAL. DATE OF HEARING 02.07.2018 DATE OF PRONOUNCEMENT 31.07.2018 ITA NO.6884/DEL/2017 2 2. THE LD. AR INVITING ATTENTION TO THE ASSESSM ENT ORDER SUBMITTED THAT THE ASSESSEE DERIVES INCOME FROM BUSINESS OF MANUFACTU RING OF M.S. BILLETS M.S INGOTS, TMT BAR, ANGLE AND CHANNEL AT FACTORY SITUA TED AT PLOT NO. 6-A, INDUSTRIAL AREA, PHASE-II, KALA AMB DISTT. SIRMOUR (HP). IT WA S HIS SUBMISSION THAT ASSESSEE HAD ADVANCED AN AMOUNT OF RS. 47,85,000/- TO M/S. SHRI SIDHBALI ISPAT LTD. THE SAID CONCERN IT WAS SUBMITTED WAS A SUPPLIER OF SPO NGE IRON TO THE ASSESSEE WHICH WAS USED AS A RAW MATERIAL BY THE ASSESSEE . THE ADVANCE WAS STATED TO BE FOR PURCHASE OF RAW MATERIAL. THESE ADVANCES, IT WA S STATED, HAVE BEEN GIVEN IN THE NORMAL COURSE OF BUSINESS AND THEREFORE NO INTE REST WAS CHARGED BY ASSESSEE FIRM IN RESPECT OF THE AMOUNT OF ADVANCES GIVEN. RE FERRING TO THE RECORD IT WAS SUBMITTED THAT THE AO REQUIRED THE ASSESSEE TO SHOW CAUSE WHY NOTIONAL INTEREST @ 12 P.A SHOULD NOT BE ADDED TO THE INCOME OF THE A SSESSEE. IT WAS SUBMITTED THAT THE ASSESSEE ON FACTS HAD EXPLAINED THAT THE A SSESSEE HAD SUBSTANTIAL INTEREST FREE FUNDS AVAILABLE AND THE LOAN WAS ADVA NCED IN THE NORMAL COURSE OF BUSINESS. IT WAS ALSO SUBMITTED THAT THE ASSESSEE HAD ALSO EXPLAINED THAT THE ASSESSEE HAD ENOUGH FUNDS AVAILABLE AS PER RECORD. THE SAID EXPLANATION WAS NOT ACCEPTED BY THE AO WITHOUT ASSIGNING ANY REASON OR UPSETTING THE FACTS. APART FROM THE SAID SUBMISSION, VARIOUS DECISIONS APPLICA BLE TO THESE SET OF FACTS AND CIRCUMSTANCES, WERE ALSO RELIED UPON BEFORE THE A.O . AND THE CIT(A) WITHOUT SUCCESS. 2.1 THE LD. AR ASSAILING THE ORDER INVITED ATTENTIO N TO THE COPY OF BALANCE SHEET AVAILABLE AT PAPER BOOK PAGE 21. REFERRING TO SCHE DULE B AND SCHEDULE C, LD. AR INVITED SPECIFIC ATTENTION TO THE SECURED LOANS AND UNSECURED LOANS AVAILABLE WITH THE ASSESSEE, INVITING FURTHER ATTENTION TO PAGE 25 OF THE PAPER BOOK, IT WAS ELABORATED THAT THE SECURED LOANS TAKEN FROM THE BA NKS WERE SOLELY FOR THE PURPOSE OF TERM LOAN AND WORKING CAPITAL. THE ADVAN CE FOR PURCHASE OF RAW MATERIAL HAS NOT BEEN MADE FROM THESE REVERTING BAC K TO PAGE 21 OF THE PAPER BOOK, IT WAS SUBMITTED THAT THE SECURED LOANS HAVE BEEN UTILIZED FOR INVENTORIES. THUS IT WAS SUBMITTED THAT THE AVAILAB LE UNSECURED LOANS REFERRED TO AT PAGE 25 IN SCHEDULE C, IT WAS SUBMITTED, WOULD S HOW THAT IT WAS MUCH MORE THAN THE LOANS ADVANCED APART FROM THAT THERE WAS F UNDS AVAILABLE IN THE PARTNERS CAPITAL AS PER THE BALANCE SHEET ALSO. THE SE SUBMISSIONS ON FACTS, IT WAS SUBMITTED, REMAINED UNREBUTTED. ACCORDINGLY, IN TH ESE PECULIAR FACTS AND CIRCUMSTANCES, IT WAS HIS SUBMISSION THAT THE DISAL LOWANCE MADE WAS CONTRARY TO ITA NO.6884/DEL/2017 3 FACTS AND PROPOSITIONS AS LAID DOWN IN THE VARIOUS DECISIONS OF THE COURTS AND TRIBUNALS WHICH WERE RELIED UPON : (I) HERO CYCLES (P) LTD. V CIT (2015) 379 ITR 347 (SC); (II) DCIT V. INCITE HOMECARE PRODUCTS (P) LTD. 2017 (8) TMI 185; (III) PR. CIT V. HOLY FAITH INTERNATIONAL PVT. LTD. 2017(8) T MI 185; (IV) CIT V. RELIANCE UTILITIES & POWER LTD. (2009) 313 ITR 340; (V) CIT VS. HDFC BANK LTD. (2014) 366 ITR 505; (VI) CIT V. AMOD STAMPING (P.) LTD. (2014 ) 223 TAXMAN 256; (VII) CIT V. CONSUMER MARKING (INDIA) (P.) LTD. ITA NO. 646 OF 2 015; (VIII) M/S. R.N. GUPTA AND CO. LTD. V. ADDL. CIT ITA NO. 848/CHD/2015; (IX ) HOTZ INDUSTRIES LTD. VS. DCIT 2018 (5) TMI 1630; AND (X) SURRENDER KUMAR BHU RARIA V. ITO 2018 (5) TMI 1083. 3. LD. SR DR RELIED UPON THE IMPUGNED ORDER. 4. I HAVE HEARD THE SUBMISSIONS AND PERUSED THE MAT ERIAL ON RECORD. IT IS SEEN THAT THE ISSUE WAS CONSIDERED BY THE AO IN THE FOLLOWING MANNER :- FURTHER IT IS SUBMITTED THAT THE ASSESSEE IS HAVI NG INTEREST FREE FUNDS I.E. UNSECURED LOANS AMOUNTING TO RS. 2,45,78,000/ - AND CAPITAL BALANCE OF PARTNERS RS. 11,10,92 ,695/- AMOUNTING TO (AS ON 1.4.2012) REFER CAPITAL ACCOUNT AND UNSECURED LOANS AS PER BA LANCE SHEET ALREADY FILED IN VIEW OF THE ABOVE FACTS IT IS SUBMITTED THAT THE ASSESSEE HAS NOT CHARGED INTEREST ON ADVANCES GIVEN IN THE N ORMAL COURSE OF BUSINESS AND AS ADEQUATE INTEREST FREE F UNDS WERE AVAILABLE WITH THE FIRM WHICH HAVE BEEN USED TO MAK E THE ADVANCES BY THE ASSESSEE. 5. I FIND THAT IT IS NOT IN DISPUTE THAT THE ADVANC E WAS GIVEN TO M/S. SHRI SIDHBALI ISPAT LTD. WHO WAS A SUPPLIER OF SPONGE IR ON TO THE ASSESSEE. THE ADVANCE ADMITTEDLY WAS IN THE NORMAL COURSE OF BUSI NESS. EVEN OTHERWISE, IT IS SEEN THAT THE ASSESSEE HAD MORE THAN ADEQUATE UNSEC URED FUNDS AVAILABLE AT ITS DISPOSAL. IT IS ALSO SEEN THAT THE TERM SECURED LO ANS OBTAINED FOR WORKING CAPITAL HAVE BEEN UTILIZED IN THE INVENTORIES. IN THE FACE OF THESE FACTS WHICH THE ASSESSEE HAS CONSISTENTLY CANVASSED BEFORE THE AO A ND CIT (A) WHICH HAVE NOT BEEN REBUTTED, I FIND THAT THE ADDITION MADE IN THE PECULIAR FACTS AND ITA NO.6884/DEL/2017 4 CIRCUMSTANCES AND THE JUDICIAL PRECEDENT AVAILABLE CANNOT BE SUSTAINED. THE ADDITION IS DIRECTED TO BE DELETED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. ORDER PRONOUNCED IN OPEN COURT ON THIS 31 ST DAY OF JULY, 2018. SD/- (DIVA SINGH) JUDICIAL MEMBER DATED THE 31 ST DAY OF JULY, 2018 VEENA/TS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT TRUE COPY ASSISTANT REGISTRAR ITAT NEW DELHI