ACIT, C-1(1), Chandigarh V. M/s International Fresh Farm Products Pvt. Limited, Chandigarh

ITA 813/CHANDI/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2540 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 31-05-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Earning of tax free income; Tax effect
• Section: 14A; 80IB

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH A, CHANDIGARH , !' #! $ % , &' BEFORE: SH.SANJAY GARG, JM & SMT.ANNAPURNA GUPTA, A M ./ ITA NO.813/CHD/2018 / ASSESSMENT YEAR : 2011-12 THE A.C.I.T., CIRCLE-1(1), CHANDIGARH. M/S INTERNATIUONAL FRESH FARM PRODUCTS PVT. LTD., H.NO.3, SECTOR 5, CHANDIGARH. ./PAN NO: AAACI5038D /APPELLANT /RESPONDENT /ASSESSEE BY : SMT.CHANDERKANTA, SR.DR ! / REVENUE BY : SHRI PARIKSHIT AGGARWAL, CA '# $ /DATE OF HEARING : 18.10.2018 %&'(# /DATE OF PRONOUNCEMENT : 31.10.2018 &( /ORDER PER ANNAPURNA GUPTA, A.M . : THE PRESENT APPEAL HAS BEEN FILED BY THE REVENUE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-I, CHANDIGARH (IN SHORT CIT(APPEALS) DATE D 26.3.2018 PASSED U/S 250 (6) OF THE INCOME TAX AT, 1961 (HEREINAFTER REFERRED TO AS ACT). 2. THE REVENUE HAS RAISED THE FOLLOWING EFFECTIVE G ROUNDS OF APPEAL BEFORE US: 2.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HASERRED IN DELETING THE ADDITION OF RS.27,6 6,031/- MADE BY ASSESSING OFFICER, ON ACCOUNT OF DISALLOW ANCE OF DEDUCTION U/S 80IB, WHEN THE ASSESSEE DID NOT FULFIL L THE CONDITIONS LAID OUT U/S 80IB(11) OF THE INCOME TAX ACT, 1961 AND THE ASSESSEE WAS MERELY PROVIDING A WAREHOUSE SERVICE TO M/S PEPSICO HOLDING AND EARNING RENTAL INCOME AND WAS N OT DOING ANY COLD CHAIN BUSINESS. ITA NO.813/CHD/2018 A.Y.2011-12 2 3.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.27, 66,031/- MADE BY ASSESSING OFFICER, ON ACCOUNT OF DISALLOWANC E OF DEDUCTION U/S 80IB, AS THE ASSESSEE COMPANY HAD ENTER ED INTO AGREEMENT WITH PEPSICO INDIA HOLDING PVT. LTD. FOR THE FIRST TIME IN MAY, 2005. WHEREAS, AS PER PROVISIONS OF SECTION 80 IB(11), THE ASSESSEE SHOULD HAVE STARTED THE OPERATING OF COLD CHAIN FACILITY ON OR AFTER THE 1 ST DAY OF APRIL, 1999 BUT BEFORE THE 1 ST DAY APRIL, 2004. THUS THIS CONDITION LAID OUT IN SECTION 80IB(11) W AS NOT FULFILLED AS THE AGREEMENT ITSELF WAS ENTERED INTO I N MAY, 2005. 4.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.27, 66,031/- MADE BY ASSESSING OFFICER, ON ACCOUNT OF DISALLOWAN CE OF DEDUCTION U/S 80IB BY RELYING ON THE DECISION OF HO N'BLE ITAT IN THE ASSESSEE'S OWN CASE FOR A.Y. 2010-11 85 2012-13, W HEN EACH ASSESSMENT YEAR IS DIFFERENT AND FURTHER, THE DEPAR TMENT HAS FILED APPEALS BEFORE THE HON'BLE PUNJAB & HARYANA HI GH COURT AGAINST THESE DECISIONS OF HON'BLE ITAT, WHICH ARE PEND ING BEFORE THE HON'BLE P & H HIGH COURT. 5.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1 ,33,734/- ON ACCOUNT OF DISALLOWANCE U/S 36(L)(III) WHEN THE ADV ANCES GIVEN BY THE ASSESSEE WERE NOT FOR ANY BUSINESS PURPOSE. 6.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS. 1,33,734/- ON ACCOUNT OF DISALLOWANCE U/S 36( L)(III) AS IN VIEW OF THE DECISION OF HON'BLE APEX COURT IN THE C ASE OF M/S AVON CYCLES LTD., LUDHIANA, DECISION OF THE HON'BLE P&H IN THE CASE OF CIT VS KUDU INDUSTRIES IN ITA NO. 388 O F 2014, 8& DECISION OF THE HON'BLE ITAT IN THE CASE OF M/S BCL IND USTRIES AND INFRASTRUCTURES LTD. VS DCIT ITA NO. 1002/CHD/2 013, IT IS A SETTLED POSITION OF LAW THAT ONCE IT IS BORNE OUT FROM RECORD THAT ASSESSEE HAD BORROWED CERTAIN FUNDS ON WHICH L IABILITY TO PAY INTEREST IS BEING INCURRED AND ON OTHER HAN D, CERTAIN AMOUNTS HAD BEEN ADVANCED TO SISTER CONCERNS OR OTHER WITHOUT CARRYING ANY INTEREST AND WITHOUT ANY BUSIN ESS PURPOSES, INTEREST TO EXTENT THAT ADVANCE HAD BEEN MADE WITHOUT CARRYING ANY INTEREST IS TO BE DISALLOWED UNDE R SECTION 36(L)(III). 7.ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE , THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.1,31,362/- ON ACCOUNT OF DISALLOWANCE U/S 14A R.W.S. RULE 8D ON ACCOUNT OF INVESTMENT MADE IN ASSOCIATE COMPANY M/S INTERNA TIONAL MEGA FOOD PARK AMOUNTING TO RS.1,38,22,086/-, THE I NCOME EARNED (IF ANY) FROM WHICH IS EXEMPT FROM TAX, WITH OUT TAKING COGNIZANCE OF CIRCULAR NO.5 OF 2014 OF CBDT ON THIS ISSUE, WHEREIN IT HAS BEEN CLARIFIED THAT THE PROVISIONS OF SECTION 14A ARE APPLICABLE EVEN WHEN NO EXEMPT INCOME HAS BEEN EARNED. 3. GROUND NOS.2, 3 AND 4 RELATE TO THE ISSUE OF DED UCTION CLAIMED BY THE ASSESSEE U/S 80IB(11) OF THE ACT, ON PROFITS ITA NO.813/CHD/2018 A.Y.2011-12 3 DERIVED FROM THE BUSINESS OF SETTING UP AND OPERATI NG COLD CHAIN FACILITY, WHICH WAS DENIED BY THE ASSESSING O FFICER HOLDING THAT THE ASSESSEE WAS NOT DOING ANY SUCH BU SINESS BUT WAS ONLY PROVIDING SERVICES AND EARNING INCOME FROM CONTRACT AND RENT AND ALSO FOR THE REASON THAT THE ASSESSEE HAD NOT CLAIMED THIS DEDUCTION IN EARLIER YEARS WHE N IT HAD ALLEGEDLY COMMENCED ITS BUSINESS. THE ASSESSING OFF ICER, THEREFORE, HELD THAT THE ASSESSEE WAS NOT FULFILLIN G THE CONDITION FOR CLAIMING DEDUCTION U/S 80IB(11) OF TH E ACT AND THUS DENIED THE SAME TO THE ASSESSEE AMOUNTING TO RS.96,57,590/-. THE LD.CIT(APPEALS) ALLOWED THE CLA IM OF THE ASSESSEE ON FINDING THAT IDENTICAL ADDITION MADE IN THE CASE OF THE ASSESSEE INPRECEDING YEARS I.E. A.Y 2010-11 AND SUCCEEDING YEAR I.E. A.Y 2012-13 WAS DELETED BY THE I.T.A.T. VIDE ITS ORDER PASSED IN ITA NO.311/CHD/2015 AND IN ITA NO.703/CHD/2015. 4. BEFORE US, THE LD. DR RELIED UPON THE ORDER OF T HE ASSESSING OFFICER WHILE THE LD. COUNSEL FOR ASSESSE E POINTED OUT THAT THE REVENUE HAD FURTHER GONE IN APPEAL AGA INST THE ORDER OF THE I.T.A.T. IN THE AFORESAID TWO YEARS ,W HICH HAD BEEN DISMISSED BY THE HIGH COURT ON ACCOUNT OF THE TAX EFFECT BEING BELOW THE LIMIT FIXED BY CBDT FOR FILI NG APPEALS TO THE HIGH COURT. COPY OF THE ORDER WAS PLACED BEF ORE US. 5. WE HAVE HEARD THE RIVAL CONTENTIONS. WE SEE NO R EASON TO INTERFERE IN THE ORDER OF THE CIT(APPEALS). ADMI TTEDLY, THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE IN VIEW OF THE ORDER OF THE I.T.A.T. IN THE PRECEDING AND SUCCEEDI NG YEARS ITA NO.813/CHD/2018 A.Y.2011-12 4 ON IDENTICAL ISSUE AND THE APPEAL OF THE REVENUE A GAINST WHICH TO THE HIGH COURT HAS ALSO BEEN DISMISSED, TH OUGH ON ACCOUNT OF LOW TAX EFFECT ,BUT THE FACT REMAINS THA T AS ON DATE THE ORDER OF THE I.T.A.T. STANDS AND WITH NO DISTINGUISHING FACTS HAVING BEEN BROUGHT TO OUR NO TICE BY THE LD. DR, THERE IS NO REASON NOT TO APPLY THE SAM E IN THE IMPUGNED YEAR. THE GROUND NOS.,2, 3 AND 4 OF APPEAL RAISED BY THE REVENUE ARE, THEREFORE, DISMISSED. 6. GROUND NOS.5 AND 6 RAISED BY THE REVENUE RELATE TO THE ISSUE OF DISALLOWANCE OF INTEREST EXPENDITURE MADE U/S 36(1)(III) OF THE ACT AND THE FACTS RELATING TO THE SAME ARE THAT THE ASSESSING OFFICER DISALLOWED THE PROPORTIO NATE INTEREST EXPENSES ON ACCOUNT OF INTEREST FREE LOANS AND ADVANCES MADE BY THE ASSESSEE TO M/S TEMPTATION FOO DS AMOUNTING TO RS.1 CRORE AND TO M/S ZENITH FOOD & NU TRIENTS PVT. LTD. TO RS.44,87,976/-. THE LD.CIT(APPEALS) DE LETED THE DISALLOWANCE SO MADE GIVING A CATEGORICAL FINDING O F FACT THAT THE ASSESSEE HAD SUFFICIENT OWN FUNDS TO MAKE THE I MPUGNED INTEREST FREE ADVANCE AND THAT THE ASSESSING OFFICE R HAD NOT BEEN ABLE TO ESTABLISH A NEXUS OF FUNDS BORROWED AN D EXTENDED AS THE AFORESAID LOANS. RELYING UPON THE C ASE LAWS QUOTED BY THE ASSESSEE IN THE CASE OF BRIGHT ENTERP RISES PVT. LTD. VS CIT, 381 ITR 107 (P&H), GURDAS GARG VS. CI T IN ITA NO.413 OF 2014 (P&H) AND AARTI STEELS LTD. VS. ACIT IN ITA NO.717/2011 (CHD.TRIB), THE CIT(APPEALS) HELD THAT IN VIEW OF THE AVAILABILITY OF SUFFICIENT OWN FUNDS THE PRESUMPTION ITA NO.813/CHD/2018 A.Y.2011-12 5 WAS THAT THE MONEY EXTENDED AS LOAN HAD BEEN ADVANC ED FROM OWN FUNDS AND NOT BORROWED FUNDS. HE, THEREFO RE, DELETED THE DISALLOWANCE MADE U/S 36(1)(III) OF THE ACT TO RS.1,33,734/-. 7. BEFORE US, THE LD. DR RELIED UPON THE ORDER OF T HE ASSESSING OFFICER STATING THAT IN VIEW OF THE DECIS ION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. ABHISHEK INDUSTRIES, 286 ITR 1, THE DISALLOWANCE HA D BEEN RIGHTLY MADE BY THE ASSESSING OFFICER. 8. THE LD. COUNSEL FOR ASSESSEE, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE CIT(APPEALS). 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE GON E THROUGH THE ORDER OF THE CIT(APPEALS). WE FIND NO R EASON TO INTERFERE IN THE ORDER OF THE CIT(APPEALS). THE LD. DR HAS NOT CONTROVERTED THE FACTUAL FINDINGS OF THE CIT(AP PEALS) THAT THERE WAS SUFFICIENT OWN FUNDS AVAILABLE WITH THE A SSESSEE FOR THE PURPOSE OF MAKING IMPUGNED ADVANCES.THE LD. DR HAS ALSO NOT BROUGHT TO OUR NOTICE ANY SUBSEQUENT DECIS ION OF THE JURISDICTIONAL HIGH COURT OR THE HONBLE APEX C OURT UNSETTLING THE PROPOSITION LAID DOWN BY THE JURIS DICTIONAL HIGH COURT IN THE CASES CITED BY THE LD.COUNSEL FOR THE ASSESSEE,THAT IN VIEW OF THE AVAILABILITY OF SUFFIC IENT FUNDS THE PRESUMPTION IS THAT THE SAME WERE USED FOR THE PURPOSE OF MAKING INTEREST FREE ADVANCES. THE DECISION IN T HE CASE OF ABHISHEK INDUSTRIES(SUPRA) WAS RENDERED PRIOR TO TH E AFORESAID DECISIONS AND STOOD OVERRULED BY THEM. IN VIEW OF THE SAME, THE CONCLUSION ARRIVED BY THE CIT(APPEALS ) IN THE ITA NO.813/CHD/2018 A.Y.2011-12 6 FACTS AND CIRCUMSTANCES OF THE PRESENT CASE IS RIGH T AND WE THEREFORE UPHOLD THE SAME THAT NO USER OF BORROWED FUNDS CAN BE ATTRIBUTED IN THE PRESENT CASE FOR THE PURPO SE OF MAKING THE INTEREST FREE ADVANCES. THE DELETION OF INTEREST EXPENSES BY THE LD.CIT(APPEALS) IS, THEREFORE, UPHE LD AND GROUND OF APPEAL NOS.5 AND 6 RAISED BY THE REVENUE ARE DISMISSED. 10. GROUND NO.7 RELATES TO DISALLOWANCE OF EXPENSES MADE U/S 14A OF THE ACT READ WITH RULE 8D OF THE INCOME TAX RULES, 1962 RELATING TO EXPENSES INCURRED FOR EARNI NG EXEMPT INCOME. THE ASSESSING OFFICER HAD MADE DISALLOWANC E OF THE SAME AMOUNTING TO RS.1,31,362/- ON FINDING THAT THE ASSESSEE HAD MADE INVESTMENTS OF RS.1,38,22,086/- I N ITS ASSOCIATE COMPANY M/S INTERNATIONAL MEGA FOOD PARK, THE INCOME THEREOF IN THE NATURE OF DIVIDEND WOULD NOT BE INCLUDIBLE IN THE TOTAL INCOME OF THE ASSESSEE. TH E LD.CIT(APPEALS) DELETED THE DISALLOWANCE SO MADE ON FINDING THAT NO EXEMPT INCOME HAD BEEN EARNED FROM THE AFOR ESAID INVESTMENT DURING THE YEAR AND FOLLOWING THE DECIS ION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T VS. M/S LAKHANI MARKETING INC. (2014) 272 CTR 265 (P&H) WHE REIN IT WAS HELD THAT WHERE NO EXEMPT INCOME IS EARNED NO DISALLOWANCE U/S 14A IS WARRANTED. 11. BEFORE US, THE LD. DR WAS UNABLE TO BRING OUR NOTICE ANY DECISION OF THE HON'BLE JURISDICTIONAL HIGH COU RT CONTRARY TO THAT IN THE CASE OF M/S LAKHANI MARKETI NG INC. (SUPRA) NOR ANY DECISION OF THE HON'BLE APEX COURT IN THIS REGARD. IN VIEW OF THE SAME, WE SEE NO REASON TO I NTERFERE IN ITA NO.813/CHD/2018 A.Y.2011-12 7 THE ORDER OF THE LD.CIT(APPEALS) IN DELETING THE DI SALLOWANCE OF EXPENSES AMOUNTING TO RS.1,31,362/- MADE U/S 14A OF THE ACT. GROUND OF APPEAL NO.7 RAISED BY THE REVENUE I S ALSO DISMISSED. 12. IN EFFECT, THE APPEAL FILED BY THE REVENUE IS D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- ' #! $ % (SANJAY GARG ) (ANNAPURNA GUPTA) / JUDICIAL MEMBER &' / ACCOUNTANT MEMBER )' /DATED: 31 ST OCTOBER, 2018 * ! * &) *+,+ / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. - $ / CIT 4. - $ ( )/ THE CIT(A) 5. +./ 0 , #0 , 123/4 / DR, ITAT, CHANDIGARH 6. /35' / GUARD FILE &) $ / BY ORDER, 6 ! / ASSISTANT REGISTRAR