The Dy. Commissioner of Income Tax, Jalandhar V. M/s Malhotra Book Depot., Jalandhar

ITA 72/ASR/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 7823 (ITAT-AMRITSAR)
• Duration Of Justice: 6 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 10-08-2017
• Assessment Year: 2013-2014
• Appeal Filed On: 02-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SATPAL DUA TAXATION MANAGER
• Keywords: Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. T. S. KAPOOR, ACCOUNTANT MEMBER AND SH. N.K. CHOUDHRY, JUDICIAL MEMBER I.T.A NO. 72/(ASR)/2017 ASSESSMENT YEAR: 2013-14 PAN: AABFM2169D THE DY. CIT, CENTRAL CIRCLE-II, JALANDHAR. VS. M/S MALHOTRA BOOK DEPOT, M.B.D. HOUSE, RAILWAY ROAD, JALANDHAR. (APPELLANT) (RESPONDENT) APPELLANT BY : SH. RAHUL DHAWAN (D. R.) RESPONDENT BY: SH. SATPAL DUA (TAXATION MANAGER) DATE OF HEARING: 10.08.2017 DATE OF PRONOUNCEMENT: 31.08.201 7 ORDER PER T. S. KAPOOR (AM): THIS IS AN APPEAL FILED BY REVENUE AGAINST THE ORDE R OF LD. CIT(A), JALANDHAR DATED 15.12.2016 FOR ASST. YEAR: 2013-14. 2. THE ONLY GRIEVANCE RAISED BY REVENUE BY THIS APP EAL IS THE ACTION OF LD. CIT(A) BY WHICH HE HAS DELETED THE DISALLOWA NCE OF RS.1,29,36,151/-, WHICH THE ASSESSING OFFICER HAD M ADE U/S 36(1)(III) OF THE ACT. 3. AT THE OUTSET, THE LD. DR SUBMITTED THAT LD. CI T(A) HAS WRONGLY DELETED ALLOWED RELIEF TO THE ASSESSEE WITHOUT APPR ECIATING THE FINDING OF HIS PREDECESSOR THAT THE FUNDS WERE RAISED TO MAKE UP FOR THE SHORTFALL ITA NO.72(ASR)/2017 ASSESSMENT YEAR: 2013-14 2 CAUSED BY INTEREST FREE INVESTMENTS IN SISTER CONCE RNS WHICH DID NOT SERVE ANY BUSINESS PURPOSE FOR THE ASSESSEE COMPANY . 4. THE LD. AR ON THE OTHER HAND SUBMITTED THAT THE ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS AVAILABLE TO FUND TH E INTEREST FREE ADVANCES AND IN THIS RESPECT OUR ATTENTION WAS INVITED TO FI NDINGS OF LD. CIT(A) AT PAGE 2. 5. THE LD. AR SUBMITTED THAT SIMILAR ADDITIONS WERE MADE BY ASSESSING OFFICER IN ASSESSMENT YEAR 2010-11 AND 20 12-13 WHICH THE HON'BLE TRIBUNAL HAD DELETED AND IN THIS RESPECT OU R ATTENTION WAS INVITED TO PAPER BOOK PAGE 1 TO 6, WHERE A COPY OF SUCH ORDER WAS PLACED. THE LD. AR FURTHER SUBMITTED THAT THE ORDER OF HON' BLE TRIBUNAL HAS BEEN FURTHER UPHELD BY HON'BLE PUNJAB & HARYANA HIGH COU RT IN ITA NO. 31 AND 82 OF 2017 VIDE DECISION DATED 23.02.2017 AND O UR ATTENTION WAS INVITED TO PAPER BOOK PAGE 7 TO 12 WHERE A COPY OF SUCH ORDER WAS PLACED. 6. WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE THOUGH THE MATERIAL PLACED ON RECORD. WE FIND THAT THE LD. CIT(A) HAS M ADE A FINDING OF FACT THAT ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS TO THE TUNE OF RS.67,56,57,021/- WHEREAS THE ADVANCES MADE WERE TO THE TUNE OF RS.57,05,58,160/-. WE FURTHER FIND THAT THE LD. CIT (A) HAS FOLLOWED THE ORDER OF THE HON'BLE TRIBUNAL WHERE THE HON'BLE TRI BUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY HOLDING THAT THE ASSESSEE HAD MORE INTEREST FREE FUNDS THAN INTEREST FREE ADVANCES. WE FIND THAT IN THE ITA NO.72(ASR)/2017 ASSESSMENT YEAR: 2013-14 3 PRESENT YEAR ALSO THE ASSESSEE HAD FUNDS TO THE TUN E OF RS. 67,56,57,021/- WHICH COMPRISE OF THE FOLLOWING ITEM S: (I) CAPITAL RS. 15,65,37,128/- PAGE 1 OF P.B. (II) SUNDRY CREDITORS RS.51,91,19,893/- PAGE 1 OF P.B. TOTAL RS.67,56,57,021/- WHEREAS THE INTEREST FREE ADVANCES WERE TO THE TUN E OF RS. 57,05,58,160/-. THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF ASSESSEE ITSELF IN ITA NOS. 31 AND 82 OF 2017 VIDE ORDER DATED 23.02.2017, IN SIMILAR FACTS AND CIRCUMSTANCE HAS D ISMISSED THE APPEAL OF THE REVENUE BY HOLDING AS UNDER: 4. WE HAVE HEARD LEARNED COUNSEL FOR THE PARTIES. 5. THE MATTER HAS BEEN CONSIDERED BY THE TRIBUNAL I N DETAIL. A PERUSAL OF THE ORDER PASSED BY THE TRIBUNAL SHOWS THAT THE CAPITAL OF THE ASSESSEE COMPANY WAS RS.31,71,64,888/- FOR THE ASSESSMENT YE AR 2010-11. THE INVESTMENT IN SISTER CONCERNS IN THE SHAPE OF SHARE APPLICATION MONEY WAS TO THE TUNE OF RS.20,32,60,000/-. THE ASSESSEE WAS HAVING CURRENT LIABILITIES AND PROFITS TO THE TUNE OF RS. 17,41,39 ,750/-. THE TOTAL NON INTERESTS BEARING FUNDS AVAILABLE WITH THE ASSESSEE WERE AT RS.49,43,04,638/-. OUT OF THE TOTAL FUNDS ON WHICH NO INTEREST WAS PAID BY THE ASSESSEE AMOUNTING TO RS. 49,43,04,638/-, THE A SSESSEE HAD ADVANCED RS.20,32,60,000/-. THUS, THERE WAS SUFFICI ENT NON-INTEREST BORROWING FUNDS OUT OF WHICH THE ASSESSEE HAD ADVAN CED/INVESTED IN SISTER CONCERNS. IT WAS FURTHER RECORDED THAT IN TH E ASSESSMENT YEAR 2012- 13 ALSO, THE ASSESSEE HAD SUFFICIENT INTEREST FREE FUNDS TO MAKE INVESTMENT IN THE GROUP COMPANIES RELYING UPON THE DECISION OF THE APEX COURT IN HERO CYCLE PRIVATE LIMITED VS. COMMISSIONER OF INCOME TAX (CENTRAL) 63 TAXMANN.COM 308 AND COMMISSIONER OF INCOME TAX-1, LUDHIANA VS. M/S ABHISHEK INDUSTRIES LIMITED, LUDHIANA, (2006) 286 ITR 1(P&H). THE TRIBUNAL ALLOWED THE APPEALS FILED BY THE ASSES SEE. THE RELEVANT FINDINGS RECORDED BY THE TRIBUNAL READ THUS:- 9.WE HAVE HEARD THE RIVAL PARTIES AND HAVE GONE TH E MATERIAL PLACED ON RECORD. WE FIND THAT FOR ASSESSMENT YEAR 2010-11 TH E CAPITAL OF THE ASSESSEE COMPANY WAS RS. 31,71,64,888/- WHICH IS AP PARENT FROM THE COPY OF BALANCE SHEET AS PLACED IN (PB-2). AS AGAIN ST THIS THE INVESTMENTS IN SISTER CONCERN IN THE SHAPE OF SHARE APPLICATION MONEY AS PER PAPER BOOK PAGE 2 AND AS NOTED BY ASSESSING OFFICER IS RS . 20,32,60,000/-. WE FURTHER FIND THAT ASSESSEE WAS HAVING CURRENT LIABI LITIES AND PROFITS TO THE TUNE OF RS. 17,41,39,750/-, THEREFORE, THE TOTAL OF NON INTERES TS BEARING FUNDS AVAILABLE WITH THE ASSESSEE WERE PAID AT RS. 49,43,04,638/-. THESE ITA NO.72(ASR)/2017 ASSESSMENT YEAR: 2013-14 4 FIGURES ARE VERIFIABLE FROM THE COPIES OF BALANCE S HEET AS PLACED IN (PB PAGE 2). OUT OF TOTAL AVAILABLE FUNDS ON WHICH NO I NTEREST WAS PAID BY ASSESSEE AMOUNTING TO RS. 49,43,04,638/-, THE ASSES SEE HAD ADVANCED RS. 20,32,60,000/-, THEREFORE, ONE FACT IS CLEAR TH AT IN ITA NO.L96(ASR)/2015, THERE WAS SUFFICIENT NON INTEREST BORROWING FUNDS OUT OF WHICH THE ASSESSEE HAD ADVANCED/INVESTED IN THE SIS TER CONCERNS. 10. SIMILARLY, WE FIND THAT FOR ASSESSMENT YEAR 201 2-13 THE CAPITAL OF THE FIRM AS PER BALANCE SHEET PLACED AT (PB PAGE 3) WAS RS. 13,21,61,500/- AND THE INTEREST FREE CURRENT LIABILITIES WERE TO T HE TUNE OF RS. 91,20,514/- MAKING THE TOTAL AVAILABILITY OF INTEREST FREE FUND S TO THE TUNE OF RS. 104.58 CRORES. THE ASSESSEE IN THIS YEAR HAD MADE INVESTME NTS IN THE GROUP CONCERNS AS NOTED BY ASSESSING OFFICER TO THE TUNE OF RS. 53.76 CRORES. THEREFORE, WE FIND THAT IN THIS YEAR ALSO THE ASSES SEE HAD SUFFICIENT INTEREST FREE FUNDS TO MAKE INVESTMENT IN THE GROUP COMPANIES. FURTHER WE FIND THAT LEARNED CIT(A) HAS FOLLOWED THE DECISION OF PUNJAB & HARYANA HIGH COURT IN THE CASE OF ABHISHEK INDUSTRIES AND H AS FURTHER RELIED UPON THE DECISION OF M/S BRIGHT ENTERPRISES PRIVATE LIMI TED, DECIDED BY AMRITSAR BENCH, WE FIND THAT THE DECISION OF BRIGHT ENTERPRI SES PRIVATE LIMITED HAS BEEN OVERRULED BY PUNJAB AND HARYANA HIGH COURT. TH E FINDINGS OF HONBLE PUNJAB & HARYANA HIGH COURT ARE REPRODUCED BELOW. HELD, ALLOWING THE APPEAL, THAT WHETHER THE AMOUNT WAS DEBITED TO THE ACCOUNT OF THE SISTER CONCERN IN RESPECT OF THE PAY MENT MADE OR WHETHER THE AMOUNT WAS ACTUALLY PAID TO THE SISTER CONCERN AND USED BY FT FOR THE PURPOSE OF BUSINESS, WAS. IMMATERIAL. EITHER WAY TH E AMOUNT WAS USED FOR THE BUSINESS OF THE SISTER CONCERN. IT WAS NOT EVEN SUGGESTED THAT THE ADVANCE WAS USED BY THE SISTER CONCERN FOR THE PURP OSE OTHER THAN FOR THE PURPOSES OF ITS BUSINESS. IN THE MEMORANDUM OF APPE AL, THE ASSESSEE EXPRESSLY STATED THAT IT HAD ADVANCED THE AMOUNT TO ITS SISTER CONCERN AS A MEASURE OF COMMERCIAL EXPEDIENCY FOR THE PURPOSE OF BUSINESS. THE ASSERTION WAS NEVER DENIED. THE ASSESSEE OWNED ABOU T 89 PER CENT OF THE EQUITY CAPITAL. WHEN A HOLDING COMPANY INVESTED MON EY FOR THE PURPOSE OF THE BUSINESS OF ITS SUBSIDIARY, IT MUST NECESSARILY BE HELD TO BE AN EXPENSE ON ACCOUNT OF COMMERCIAL EXPEDIENCY. A FINANCIAL BE NEFIT OI ANY NATURE DERIVED BY THE SUBSIDIARY ON ACCOUNT OF THE AMOUNTS ADVANCED TO IT BY THE HOLDING COMPANY WOULD NOT MERELY INDIRECTLY BUT DIR ECTLY BENEFIT ITS HOLDING COMPANY. THERE WOULD BE A DIRECT BENEFIT ON ACCOUNT OF ADVANCE MADE BY THE ASSESSEE TO ITS SISTER COMPANY, IF IT I MPROVED THE FINANCIAL HEALTH OF THE SISTER COMPANY AND MADE IT A VIABLE E NTERPRISE. BUT IT WAS NOT NECESSARY THAT THE ADVANCE RESULTS IN A POSITIV E TANGIBLE BENEFIT. THUS, THE ASSESSEE WAS ENTITLED TO THE DEDUCTION UNDER SE CTION 36(L)(III) OF THE INCOME TAX ACT, 6. LEARNED COUNSEL FOR THE APPELLANT HAS NOT BEEN A BLE TO SHOW THAT THE FINDINGS RECORDED BY THE TRIBUNAL ARE ILLEGAL O R PERVERSE WARRANTING INTERFERENCE BY THIS COURT. THUS NO SUBSTANTIAL QUE STION OF LAW ARISES. CONSEQUENTLY, BOTH THE APPEALS STAND DISMISSED. ITA NO.72(ASR)/2017 ASSESSMENT YEAR: 2013-14 5 THE LD. CIT(A) WHILE ALLOWING THE APPEAL OF ASSESS EE HAS FOLLOWED THE ORDER OF HON'BLE TRIBUNAL IN THE CASE OF ASSESS EE ITSELF AND WHICH HAS BEEN UPHELD BY HON'BLE PUNJAB & HARYANA HIGH COURT. 7. THEREFORE IN VIEW OF THE ABOVE FACTS AND CIRCUMS TANCES AND FOLLOWING THE JUDICIAL PRECEDENTS, WE DO NOT FIND A NY INFIRMITY IN THE ORDER OF LD. CIT(A). 8. IN VIEW OF THE ABOVE, THE APPEAL FILED BY THE RE VENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 31.08.2017 SD/- SD/- (N. K. CHOUDHRY) (T. S. KAPOOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 31.08.2017. /GP/SR. PS . COPY OF THE ORDER FORWARDED TO: (1) THE ASSESSEE: (2) THE (3) THE CIT(A), (4) THE CIT, (5) THE SR DR, I.T.A.T., TRUE COPY BY ORDER