The Asstt. Commissioner of Income-tax, Jammu V. Sh. Raju Chowdhary, S/o Sh. Sudershan Kumar, Jammu

ITA 735/ASR/2014

• Counselvise Citation: 73520914 RSA 2014
• Duration Of Justice: 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2009-2010
• Appeal Filed On: 09-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: TARSEM LAL
• Assessee Lawyers: MUNISH ARORA
• Keywords: Capital receipt
• Section: 80IB

Judgement Text

IN THE INCOME TAX APPELLATE TRI BUNAL AMRITSAR BENCH; AMRITSAR. BEFORE SH. PRAMOD KUMAR, ACCOUNTANT MEMBER AND SH. A.D.JAIN, JUDICIAL MEMBER I.T.A. NO. 735(ASR)/2014 ASSESSMENT YEAR: 2009-10 PAN :ABSPK3429J THE ASSISTANT COMMISSIONER OF INCOME-TAX, CIRCLE-2, VS. SH. RAJU CHOWDHARY, S/O SH. SUDERSHAN KUMAR, 56 A/D, TAWI CHEMICAL INDUSTRIES, K.C. MARKET, JAMMU. (APPELLANT) (RESPONDENT) APPELLANT BY: SH. TARSEM LAL, DR. RESPONDENT BY: SH. MUNISH ARORA, AR DATE OF HEARING: 01.06.2015 DATE OF PRONOUNCEMENT: 24.06.2015 ORDER PER A.D.JAIN (JM): THIS IS DEPARTMENTS APPEAL FOR THE ASSESSMENT YEAR 2009-10 AGAINST THE ORDER OF THE CIT(A), JAMMU, DATED 26.09 .2014, DELETING THE ADDITION/DISALLOWANCE OF RS.14,17,370/- MADE BY THE AO U/S 80IB OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) ON EXCISE DUTY REFUND, TREATING IT TO BE A REVENUE RECEIPT NOT DIRECTLY ATTRIBUTABLE T O THE INDUSTRIAL ACTIVITIES OF THE ASSESSEE FIRM. GROUND NOS. 1 TO 3 RELATE TO TH IS ISSUE. 2. THE ASSESSING OFFICER MADE THE DISALLOWANCE IN O RDER TO FOLLOW THE CONSISTENCY OF THE STAND AS TAKEN BY THE DEPARTMENT IN OTHER CASES. THE ASSESSING OFFICER OBSERVED THAT THE DECISION IN THE CASE OF M/S SHREE BALAJI 2. ITA NO.735/ASR/2014 ASST. YEAR.2009-10 ALLOYS AND ORS. VS. CIT , 333 ITR 335 (J&K), WHICH HAS GONE IN FAVOUR OF THE ASSESSEE, HAD NOT BEEN ACCEPTED BY THE DEPARTME NT AND THE DEPARTMENTS SPECIAL LEAVE PETITION WAS HITHERTO PENDING BEFORE THE HONBLE SUPREME COURT. 3. THE LEARNED CIT(A) DELETING THE DISALLOWANCE , FOLLOWING THE JUDGMENT OF THE HONBLE J & K HIGH COURT, IN THE CASE OF M/S. BALAJI ALLOYS AND OTHERS VS. CIT (SUPRA), WHERE IT HAS BEEN HELD THAT EXCIS E DUTY REFUND IN PURSUANCE TO THE INCENTIVE ALLOWANCE BY THE GOVERNMENT PERTAI NING TO INDUSTRIAL POLICY INTRODUCED IN THE STATE OF J&K ARE CAPITAL RECEIPT. 4. CHALLENGING THE IMPUGNED ORDER, THE LEARNED DR H AS CONTENDED THAT THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION C ORRECTLY MADE BY THE ASSESSING OFFICER BY DISALLOWING THE DELETING UNDER SECTION 80IB OF THE ACT, ON EXCISE DUTY REFUND, TREATING IT TO BE A REVENUE RECEIPT NOT DIRECTLY ATTRIBUTABLE TO THE INDUSTRIAL ACTIVITIES OF THE AS SESSEE; THAT WHILE DOING SO, THE LEARNED CIT(A) HAS ERRED IN FOLLOWING THE JUDGMENT OF HONBLE J&K HIGH COURT, IN THE CASE OF M/S. BALAJI ALLOYS AND OTHER S VS. CIT (SUPRA), WHICH DECISION HAS NOT BEEN ACCEPTED BY THE DEPARTMENT AN D THE APPEAL FILED AGAINST THIS DECISION BEFORE THE HONBLE SUPREME COURT, IS STILL PENDING; AND THAT THE LEARNED CIT(A) HAS ERRED IN NOT APPRECIATING THE JU DGMENTS OF THE HONBLE SUPREME COURT IN SAHNEY STEEL AND PRESS WORKS LTD. VS. CIT ,228 ITR 253(SC) AND CIT VS. PONNY SUGARS AND CHEMICALS LTD . , 306 ITR 392(SC); 3. ITA NO.735/ASR/2014 ASST. YEAR.2009-10 WHEREIN, THE HONBLE SUPREME COURT HAS HELD SUCH RE CEIPTS TO BE REVENUE RECEIPTS. 5. HAVING HEARD BOTH THE PARTIES IN THE LIGHT OF TH E MATERIAL PLACED ON RECORD, WE ARE OF THE VIEW THAT THE ISSUE AT HAND I S SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY DECISION OF THE HONBLE JURISDIC TIONAL HIGH COURT OF JAMMU AND KASHMIR, IN THE CASE OF SHREE BALAJI ALLOYS ( SUPRA). SHREE BALAJI ALLOYS (SUPRA) HOLDS, INTER ALIA, THAT EXCISE DUTY REFUND IS A CAPITAL RECEIPT. THIS JUDGMENT, IT IS SEEN, HAS BEEN PASSED AFTER DU LY TAKING INTO CONSIDERATION THE CASE OF SAHNEY STEEL AND PRESS WORKS LTD. (SU PRA) AND PONNY SUGAR AND CHEMICALS LTD. (SUPRA). THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE FOLLOWING THE CASE OF MEPCO INDUSTRIES LTD. VS. CI T, 319 ITR 208 (SC), WHEREIN, BOTH SAHNEY STEEL AND PRESS WORKS LTD. ( SUPRA) AND PONNY SUGAR AND CHEMICALS LTD. (SUPRA) WERE CONSIDERED. 6. AS SUCH, THE DEPARTMENT IS WRONG IN CONTENDING T HAT THE LEARNED CIT(A) HAS ERRED IN DECIDING THE ISSUE IN FAVOUR OF THE AS SESSEE BY FOLLOWING THE DECISION IN THE CASE HONBLE J & K HIGH COURT, IN T HE CASE OF M/S. BALAJI ALLOYS AND OTHERS VS. CIT (SUPRA), AND THAT THE LE ARNED CIT(A) HAS ERRED IN NOT APPRECIATING THE CASE OF SAHNEY STEEL AND PRES S WORKS LTD.,(SUPRA) AND PONNY SUGARS AND CHEMICALS LTD.(SUPRA). 7. WE HAVE ALSO TAKEN THE ABOVE VIEW, IN SIMILAR FA CTS AND CIRCUMSTANCES, IN INCOME TAX OFFICER, WARD-3, PATHANKOT VS. M/S . T.K. PAPER MILLS, CHACK 4. ITA NO.735/ASR/2014 ASST. YEAR.2009-10 SAKTA, KATHUA, H.O.:- PATHANKOT, IN ITA NO. 106(A SR)/2014, FOR A.Y. 2010- 11, VIDE ORDER DATED 05.08.2014. 8. FOR THE ABOVE DISCUSSION, GROUND NOS. 1 TO 3 TAK EN BY THE DEPARTMENT ARE FOUND TO BE SHORN OF MERIT, AND ARE, HENCE, REJ ECTED. 9. THEREFORE, FINDING NO ERROR WHATSOEVER THEREIN, THE LEARNED CIT(A)S ORDER UNDER APPEALO THIS ISSUE IS UPHELD. 10. APROPOS GROUND NO.4, THE DEPARTMENT CONTENDS THAT THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION MADE ON A CCOUNT OF DISALLOWANCE OF INTEREST ON INTEREST FREE ADVANCES PAID TO THE SIST ER CONCERNS AS DURING THE COURSE OF ASSESSMENT PROCEEDINGS, DESPITE ADEQUATE OPPORTUNITIES, THE ASSESSEE FAILED TO FURNISH ANY PLAUSIBLE EXPLAINATION IN SUP PORT OF THE AMOUNT DISALLOWED. 11. IN THIS REGARD, THE AO WAS OF THE OPINION THAT THE ASSESSEE WAS PAYING INTEREST ON SECURED LOANS AS WELL AS UNSECURED LOAN S, WITHOUT CHARGING INTEREST FROM SISTER CONCERNS. THE ASSESSEE EXPLAINED BEFORE THE LEARNED CIT THAT IT HAD ADVANCED INTEREST FREE LOAN TO M/S INDRA THEATRE JA MMU, A SISTER CONCERN; THAT THIS INTEREST FREE LOAN OF RS.87,95,415/- WAS PAID OUT OF THE ASSESSEES CAPITAL OF RS.4,69,49,410/- IN THE BOOKS OF M/S. TAWI CHEM ICAL INDUSTRIES, UNIT-I. THE LEARNED CIT(A) TOOKS THESE FACTS INTO CONSIDERA TION AND ACCEPTED THE ASSESSES CONTENTION THAT THE LOAN HAD BEEN ADVANCE D FROM THE ASSESSEES OWN CAPITAL RESOURCES AND NOT FROM BORROWED FUNDS, AS A LLEGED BY THE AO. IT WAS, 5. ITA NO.735/ASR/2014 ASST. YEAR.2009-10 THEREFORE, THAT THE LEARNED CIT(A) DELETED THE ADDI TION OF RS.3,31,477/-, MADE BY THE AO, HOLDING THAT THERE CANNOT BE DISALLOWANC E OF INTERESET ON THE ALLEGED INTEREST FREE ADVANCES PAID BY THE ASSESSEE TO ITS SISTER CONCERNS. 12. THE LEARNED CIT(A), WHILE DELETING THE ADDITION , HAS OBSERVED AS FOLLOWS: I HAVE CONSIDERED THE FINDING OF THE AO ON INTERE ST DISALLOWANCE OF RS.3,31,447/-. THE AO HAS MENTIONED THAT THE APPELL ANT HAS ADVANCED AN INTEREST FREE LOAN TO M/S INDRA THEATRE JAMMU WH ICH IS A SISTER CONCERN OF THE APPELLANT. THE AO HAS FURTHER STATED THAT THE APPELLANT IS PAYING INTEREST ON SECURED LOANS AS WELL AS UNSECUR ED LOANS BUT NOT CHARGING INTEREST FROM THE SISTER CONCERN. THE APPE LLANT, ON THE OTHER HAND, STATED THAT THE INTEREST FREE LOAN AMOUNTING TO RS.87,95,415/- TO M/S INDRA THEATRE WAS GIVEN FROM THE CAPITAL OF THE APPELLANT STANDS AT RS.4,69,49,410/ IN THE BOOKS OF M/S. CHEMICAL INDUS TRIES, UNIT-I. THE AMOUNT ADVANCED HAS BEEN FROM HIS OWN CAPITAL RESOU RCES AND NOT FROM THE BORROWED FUND. I HAVE CONSIDERED RIVAL ARGUMEN TS AND FIND THAT THE AO HAS NOT SHOWN ANY NEXUS BETWEEN THE BORROWED FUN D(INTEREST BEARING) AND THE ADVANCES MADE (INTEREST FREE) ALLE GEDLY TO THE SISTER CONCERN. WHEN ADEQUATE CAPITAL IS AVAILABLE WITH TH E APPELLANT, IN ABSENCE OF ANY NEXUS SHOWN BETWEEN THE BORROWED FUN D AND THE FUNDS ADVANCED; THE ADDITION CANNOT BE JUSTIFIED. THUS, T HE ADDITION OF RS.3,31,477/- MADE ON ACCOUNT OF DISALLOWANCE OF IN TEREST IS DELETED. 13. OBVIOUSLY, IN ORDER TO PROOF ADVANCING OF INTE REST FREE LOANS, THE AO MUST ESTABLISH IN A NEXUS BETWEEN BORROWED FUNDS AN D THE LOANS/ADVANCESED. IN THE PRESENT CASE, THIS WAS NOT DONE. ON THE OTHE R HAND, UNDSIPUTEDLY, THE CAPITAL OF THE ASSESSEE IN THE BOOKS OF M/S. TAWI C HEMICAL INDUSTIRES, UNIT-I, STOOD AS RS.4,69,49,410/-. LOAN PAID TO M/S. INDRA THEATRE WAS OF 6. ITA NO.735/ASR/2014 ASST. YEAR.2009-10 RS.87,95,415/-. THUS, SUFFICIENT CAPITAL WAS AVAIL ABLE WITH THE ASSESSEE AND SO, IN THE ABSENCE OF EVIDENCE TO THE CONTRARY, IT CAN NOT BE SAID THAT THE ASSESSEE HAD ADVANCED LOANS FROM OUT OF BORROWED FU NDS. AS SUCH, FINDING NO ERROR IN THE ORDER OF THE LEARNED CIT(A), IN THIS R EGARD, THE SAME IS HEREBY CONFIRMED. GROUND NO.4 IS REJECTED. 14. IN THE RESULT, THE APPEAL FIELD BY THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 2 4.06.2015. SD/- SD/- (PRAMOD KUMAR) ( A.D. JAIN) ACCOUNTANT MEMBER JUDIC IAL MEMBER DATED: 24.06.2015 /PK/ COPY OF THE ORDER FORWARDED TO: 1. THE ASSESSEE: SH. RAJU CHOWDHARY, S/O SH.SUDERSHAN KUMAR, 56 A/D , TAWI CHEMICAL INDUSTRIES, K.C.MARKET, JAMMU. 2. THE ASSISTANT COMMISSIONER OF INCOME-TAX, C IRCLE-2 3. THE CIT(A), 4. THE CIT, 5. THE SR DR, I.T.A.T., TRUE COPY BY ORDER (ASSISTANT REGISTRAR) INCOME TAX APPELLATE TRIBUNAL, AMRITSAR BENCH: AMRITSA