ASSET MOTORS PVT LTD, MUMBAI V. DY CIT 15(1)(1), MUMBAI

ITA 770/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 0516 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-12-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 12-02-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAJEEV HARIT
• Assessee Lawyers: PRASAD PARANJAPE
• Keywords: Capital asset; Proportionate interest; TDS
• Section: 142(1); 250; 143(2); 48; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI BEFORE SHRI PRAMOD KUMAR, VICE PRESIDENT & SHRI PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 770/MUM/2019 ( ASSESSMENT YEARS: 2014-15 ) ASSET MOTORS PVT LTD., BUNGALOW NO. 3, PLOT NO. 14, UNION PARK, NEAR MAITRI PARK CHEMBUR, MUMBAI. / VS. DY. CIT 15(1)(1) 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI. ./ ./ PAN/GIR NO. : AAHCA7847F ( / APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI PRASAD PARANJAPE, AR / RESPONDENT BY : SHRI RAJEEV HARIT, CIT-DR / DATE OF HEARING 17/12/2020 !'# / DATE OF PRONOUNCEMENT 23/12/2020 / O R D E R PER PAVAN KUMAR GADALE - JM: THE ASSESSEE HAS FILED AN APPEAL AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) -24, MUMBAI, PASSED U/S.143(3) AND 250 OF THE INCOME TAX ACT, 1961. THE ASSESSEE HAS RAISED THE FOLLOWI NG GROUNDS OF APPEAL: 1. THE LD. AO ERRED IN INCORRECTLY APPRECIATING TH E FACT THAT LOANS TAKEN TO MEET DAY TO DAY CIRCULATING NEEDS OF THE BUSINESS WERE NEITHER USED FOR GIVING CAPITAL ADVAN CE FOR ITA NO . 770 /MUM/2019 ASSET MOTORS PVT LTD., MUMBAI. - 2 - PURCHASE OF CAPITAL ASSET NOR FOR ACQUIRING ANY CAP ITAL ASSET AND THE FUNDS WERE USED FOR FUNDING THE DAY TO DAY CIRCULATING NEEDS OF THE BUSINESS OF THE APPELLANT. THE LD. AO ERRED IN DRAWING AN INCORRECT INFERENCE THAT PART O F THE FUNDS WERE USED FOR GIVING CAPITAL ADVANCE AND FURTHER ER RED IN DISALLOWING INTEREST ON BORROWING OF RS. 2,72,220/- IN PROPORTION OF SO CALLED CAPITAL ADVANCE TO TOTAL BO RROWINGS. THE LD. AO FAILED TO APPRECIATE THE FACTS AND WORKE D OUT ADHOC DISALLOWANCE WRONG BASIS. 2. THE A.O FURTHER ERRED IN NOT APPRECIATING THE F ACT THAT THE AMOUNT OF RS. 50,64,880/- TREATED AS CAPITAL AD VANCE IN THE ASSESSMENT ORDER ACTUALLY REPRESENTED AMOUNTS RECOVERABLE ON ACCOUNT OF VAT, SERVICE TAX, INCOME TAX REFUND, TDS AND DIVINE CONSULTANTS AND NO PORTION OF THE SA ID AMOUNT WAS ADVANCED TOWARDS ACQUIRING OF CAPITAL ASSET. 3. THE AO ERRED IN TAKING THE FIGURE OF RS. 58, 48 ,970/- AS CAPITAL ADVANCE WHILE COMPUTING THE DISALLOWANCE IG NORING THE FACT THAT IN PARA 4 OF THE ASSESSMENT ORDER THE CAP ITAL ADVANCE WAS SHOWN AT RS. 50,64,880/- 4. IT IS PRAYED THAT THE ADHOC DISALLOWANCE OF INT EREST INCURRED BY THE APPELLANT ON BORROWING TAKEN AND US ED TO FUND ITS BUSINESS REQUIREMENTS BE DELETED. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY IS ENGAGED IN THE BUSINESS AS THE AUTHORIZE D DEALERS AND SERVICE OF HYUNDAI MOTOR CARS. THE RETURN OF INCOME WAS FILED ON 28.11.2014 FOR THE A. Y 2014-15 DISCLOSING A TOTAL INCOME OF RS.(-) 2,30,36,884/-. SUBSEQUENTLY, THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143(2) AND 142(1) OF TH E ACT ALONG WITH QUESTIONNAIRE WERE ISSUED. IN COMPLIANCE, THE LD. AR FOR THE ASSESSEE APPEARED ITA NO . 770 /MUM/2019 ASSET MOTORS PVT LTD., MUMBAI. - 3 - FROM TIME TO TIME AND SUBMITTED THE DETAILS AND THE CASE WAS DISCUSSED. ON PERUSAL OF FINANCIAL STATEMENTS, THE A.O FOUND THAT THE ASSESSEE HAS MAD E CAPITAL ADVANCES OF RS. 50, 64,880/- AS ON 31.03.2014. WHEREAS, THE ASSESSEE HAS OBTAINED HUGE BORROWED FUNDS AND INTEREST ON LOAN FUNDS ARE DEBITED TO PROFIT AND LOSS ACCOUNT. THE A.O HAS OBSERVED THAT, THE ASSESSEE HAS ADVANCED INTEREST FREE FUNDS TO ITS SISTER CONCERNS AND AT THE SAME T IME PAYING INTEREST ON BORROWED FUNDS. THEREFORE, THE A .O IS OF THE OPINION THAT THE PROPORTIONATE INTEREST AMOUNT CONSIDERING THE ADVANCES AND THE INTEREST O N THE BORROWED FUNDS HAS TO BE DISALLOWED AND ACCORDINGLY MADE DISALLOWANCE U/S 36(1)(III) OF THE ACT OF RS. 2,72,220/- AND ASSESSED THE TOTAL INCOME OF RS.(-) 2,27,64,664/- AND PASSED THE ORDER U/S 143(3 ) OF THE ACT ON 28.11.2016. AGGRIEVED BY THE ORDER, THE ASSESSEE HAS FILED AN APPEAL WITH THE CIT(A), WHERE AS THE CIT(A) CONCORD WITH THE ACTION OF THE A.O AND DISMISSED THE APPEAL. AGGRIEVED BY THE CIT(A) ORD ER, THE ASSESSEE HAS FILED AN APPEAL WITH THE TRIBUNAL. 3. AT THE TIME OF HEARING THE LD. AR SUBMITTED THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ITA NO . 770 /MUM/2019 ASSET MOTORS PVT LTD., MUMBAI. - 4 - DISALLOWANCE MADE BY THE A.O IRRESPECTIVE OF THE FA CT THAT THE ASSESSEE HAS SURPLUS FUNDS AND THE ADVANCES REFERRED IN THE BALANCE SHEET PERTAINS TO VAT AND SERVICE TAX, TDS ETC. FURTHER THE LD.AR SUBSTANTIATED HIS ARGUMENTS WITH EVIDENCES IN THE PAPER BOOK AND PRAYED FOR ALLOWING THE APPEAL. CONTRA, THE LD. DR SUPPORTED THE ORDERS OF THE CIT(A). 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE SOLE MATRIX OF THE DISPUTED ISSUE IS WITH RESPECT TO DISALLOWANCE OF PROPORTIONATE INTEREST BY THE A.O CONSIDERING THE CAPITAL ADVANCES PROVIDED BY THE ASSESSEE. THE CONTENTIONS OF THE LD.AR ARE THAT, THE ADVANCES DOE S NOT PERTAINS TO SISTER CONCERNS BUT THE BALANCE WIT H GOVERNMENT AUTHORITIES. THE LD. AR REFERRED TO THE PAGE 12 OF THE PAPER BOOK AND EXPLAINED THE ASSESSEES LONG TERM CAPITAL BORROWINGS. FURTHER, THE LD.AR DEMONSTRATED THAT THE CAPITAL ADVANCES CONSIDERED BY THE A.O. ARE NOT ADVANCES MADE TO SISTER CONCERNS AND REFERRED TO NOTE 15 OF THE FINANCIAL STATEMENTS AT PAGE 22 OF THE PAPER BOOK. WE FIND, OUT OF TOTAL AMOUNT OF RS.50,64,880/- ITA NO . 770 /MUM/2019 ASSET MOTORS PVT LTD., MUMBAI. - 5 - DISCLOSED UNDER SHORT TERM LOANS AND ADVANCES IN THE NOTE TO FINANCIAL ACCOUNTS, THE AMOUNT OF RS 47,11,874/- PERTAINS TO VAT, SERVICE TAX, TDS AND INCOME TAX REFUND RECEIVABLES. WHEREAS THE A.O IS OF THE OPINION THAT THESE ARE THE ADVANCES PROVIDED TO SISTER CONCERNS. WE CONSIDERING THE SUBMISSIONS OF THE LD. AR ARE OF THE VIEW THAT, THE ADVANCES DISCLOSED IN THE FINANCIAL STATEMENTS ARE WITH THE STATUTORY AUTHORITIES AND THE ACTION OF THE A.O TO DISALLOW PROPORTIONATE INTEREST CONSIDERING SUCH ADVANCES IS NOT ACCEPTABLE. ACCORDINGLY, WE SET ASI DE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OF FICER TO DELETE THE ADDITION AND ALLOW THE GROUNDS OF APP EAL IN FAVOUR OF THE ASSESSEE. 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 23.12.2020 SD/- SD/- (PRAMOD KUMAR) (PAVAN KUMAR GADALE ) VICE PRESIDENT JUDICIAL MEMBER MUMBAI, DATED 23/12/2020 ITA NO . 770 /MUM/2019 ASSET MOTORS PVT LTD., MUMBAI. - 6 - KRK, PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. & '( ) / THE CIT(A) 4. ) ( ) / CONCERNED CIT 5. ,-. //'( , '(# , & / DR, ITAT, MUMBAI 6. .34 5 / GUARD FILE. / BY ORDER, , / //TRUE COPY// 1. / ( ASST. REGISTRAR) !' #, / ITAT, MUMBAI ITA NO . 770 /MUM/2019 ASSET MOTORS PVT LTD., MUMBAI. - 7 - DATE INITIAL 1. DRAFT DICTATED ON 18.12.2020 PS 2. DRAFT PLACED BEFORE AUTHOR 21.12.2020 PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER PS 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. PS 5. APPROVED DRAFT COMES TO THE SR.PS/PS PS 6. KEPT FOR PRONOUNCEMENT ON 7. FILE SENT TO THE BENCH CLERK 8. DATE ON WHICH FILE GOES TO THE AR 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK. 10. DATE OF DISPATCH OF ORDER. 11. DICTATION PAD IS ENCLOSED 2. OTHER MEMBER ON WHICH THE