M/s Kashmir Apiaries Private Limited, Doraha V. DCIT, Khanna

ITA 899/CHANDI/2016

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8337 (ITAT-CHANDIGARH)
• Duration Of Justice: 5 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2010-2011
• Appeal Filed On: 11-08-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: D K MITTAL
• Keywords: Business expenditure
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DIVISION BENCH, CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO.899/CHD/2016 (ASSESSMENT YEAR : 2010-11) KASHMIIR APIARIES PRIVATE LIMITED, VS. THE D.C.I.T., VILLAGE MALHIPUR, G.T. ROAD, CIRCLE KHANNA DORAHA. PAN: AABCK9673M (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AJAY JAIN RESPONDENT BY : SHRI D.K. MITTAL, DR DATE OF HEARING : 19.01.2017 DATE OF PRONOUNCEMENT : 07.02.2017 O R D E R PER ANNAPURNA GUPTA, A.M . : THE APPEAL FILED IS DIRECTED AGAINST THE ORDER O F LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-2, LUDHIANA DATED 30.5.2016 RELATING TO ASSESSMENT YEA R 2010-11. 2. GROUND NO.1 & 4 RAISED BY THE ASSESSEE ARE GENERAL IN NATURE AND NEED NO ADJUDICATION. 3. GROUND NO.2 RAISED BY THE ASSESSEE READS AS UNDER : 2. THE LD CIT (A) HAS WRONGLY UPHELD THE ADDITION OF RS.2,00,000/- U/S 37 OF THE ACT ON ACCOUNT OF NON- RECOVERABLE AMOUNT OF SECURITY GIVEN FOR BOOKING 2 PREMIUM SPACE FOR DISPLAY OF ITS VARIOUS PRODUCTS. 4. BRIEF FACTS RELATING TO THE ISSUE ARE THAT DURI NG THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD DEBITED AN AMOU NT OF RS.2 LACS TO THE PROFIT & LOSS ACCOUNT AS LISTING F EE. ON CONFRONTING THE SAME TO THE ASSESSEE, THE ASSESSEE CONTENDED THAT THE LISTING FEE WAS PAID TO ONE VISH AL RETAILS PVT. LTD. AS REFUNDABLE SECURITY ON 16.6.20 08 TO SECURE SPACE IN THE VARIOUS MALLS FOR RETAIL SALE O F THEIR PRODUCTS. THE ASSESSEE FURTHER CONTENDED THAT DUE TO FINANCIAL PROBLEM OF THE COMPANY, IT WAS REQUESTED FOR REFUND OF THE DEPOSIT BUT DESPITE LOT OF EFFORTS, N O MONEY WAS REFUNDED. THE ASSESSEE CONTENDED THAT DUE TO NON- RECOVERY OF THE SECURITY AMOUNT, THE SAID AMOUNT HA S BEEN WRITTEN OFF AS BUSINESS EXPENSES UNDER SECTION 37 O F THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). THE ASS ESSING OFFICER WAS NOT SATISFIED WITH THE CONTENTION OF TH E ASSESSEE AND, THEREFORE, DISALLOWED THE AFORESTATED AMOUNT ADDING THE SAME TO THE INCOME OF THE ASSESSE E. 5. THE LD. CIT (APPEALS) UPHELD THE DISALLOWANCE SINCE THE ASSESSEE HAD NOT FILED ANY EVIDENCE TO PR OVE ITS CONTENTION THAT IT HAD MADE SEVERAL EFFORTS TO RECO VER THE REFUNDABLE SECURITY BUT WAS UNABLE TO RECOVER THE S AME. THE LD. CIT (APPEALS) ALSO HELD THAT SINCE THE PAYM ENT PERTAINED TO THE PRECEDING, THE CLAIM COULD NOT BE ALLOWED IN THE IMPUGNED YEAR. FOR THE AFORESTATED REASONS, THE DISALLOWANCE MADE WAS UPHELD BY THE LD. CIT (APPEAL S). 3 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE REITERATED THE CONTENTIONS MADE BEFORE THE LOWER AUTHORITIES AND STATED THAT THE SECURITY GIVEN TO V ISHAL RETAILS PVT. LTD. HAD BECOME IRRECOVERABLE AND HAD, THEREFORE, BEEN WRITTEN OFF IN THE PROFIT & LOSS AC COUNT FOR THE YEAR. THE LD. COUNSEL FOR THE ASSESSEE STATED THAT IT WAS THE BUSINESS LOSS TO THE ASSESSEE AND WAS ALLOW ABLE UNDER SECTION 37 OF THE ACT. 7. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE LD. CIT (APPEALS) AND STATED THAT IN T HE ABSENCE OF ANY EVIDENCE TO PROVE THAT THE AMOUNT HA D BECOME IRRECOVERABLE, THE SAME COULD NOT BE ALLOWED TO THE ASSESSEE. 8. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTIES. IT IS NOT IN DISPUTE THAT THE AMOUNT OF R S.2 LACS PERTAINED TO SECURITY PAID TO VISHAL RETAILS PVT. L TD. ON ACCOUNT OF SECURING SPACE IN VARIOUS MALLS FOR RETA IL SALE OF THE PRODUCTS OF THE ASSESSEE. THE CONTENTION OF THE ASSESSEE IS THAT THIS SECURITY AMOUNT HAS BEEN WRIT TEN OFF IN THE YEAR SINCE THE ASSESSEE TRIED TO RECOVER THE SAME DUE TO FINANCIAL PROBLEMS BEING FACED BY IT BUT WAS UNABLE TO DO SO. THUS, AS PER THE ASSESSEE, DUE TO NON- RECOVERABILITY OF THE SAID SECURITY DEPOSIT, A BUSI NESS LOSS HAD ACCRUED TO THE ASSESSEE WHICH IT HAD CLAIMED AS SUCH BY WRITING OFF THE SECURITY DEPOSIT IN THE PROFIT & LOSS ACCOUNT. WE FIND THAT OTHER THAN CLAIMING THE SAME TO BE A BUSINESS LOSS NO EVIDENCE OF ANY SORT HAS BEEN PR ODUCED 4 BY THE LD. COUNSEL FOR THE ASSESSEE BEFORE US OR EV EN BEFORE THE LOWER AUTHORITIES TO PROVE ITS ABOVE CON TENTION. IN THE ABSENCE OF ANY SUCH EVIDENCE, THE WRITE OFF OF SECURITY DEPOSIT IN THE PROFIT & LOSS ACCOUNT CANNO T BE TREATED AS A BUSINESS LOSS AND WE ARE IN COMPLETE AGREEMENT WITH THE LD. CIT (APPEALS) IN THIS REGARD .BUT IN THE INTEREST OF JUSTICE WE CONSIDER IT FAIR TO GRAN T THE ASSESSEE ANOTHER OPPURTUNITY OF PROVING ITS CLAIM O F INCURRING BUSINESS LOSS BY ADDUCING EVIDENCES IN TH IS REGARD. FOR THIS LIMITED PURPOSE WE RESTORE THE ISS UE BACK TO THE AO WITH THE DIRECTION THAT THE ASSESSEE BE G IVEN ADEQUATE OPPORTUNITY IN THIS REGARD. THIS GROUND OF APPEAL RAISED BY THE ASSESSEE IS, THEREFORE ALLOWED FOR ST ATISTICAL PURPOSES. 9. GROUND NO.3 RAISED BY THE ASSESSEE READS AS UNDER : 3. THAT THE LD CIT (A) HAS WRONGLY UPHELD ADDITION OF RS.1,88,553/- UNDER SECTION 36(1)(III) OF THE INCOM E TAX ACT ON ACCOUNT OF INTEREST RATE DIFFERENCE ON ADVANCE WITHOUT APPRECIATING THE FACT THAT THE ADVAN CE WAS GIVEN TO SUPPLIER IN THE ORDINARY COURSE OF BUSINESS. 10. THE BRIEF FACTS RELATING TO THE CASE ARE THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD GIVEN AN ADVANCE OF RS.60 LACS FOR 308 DAYS W.E.F. 1.4.2009 TO 2.2.2010 AND RS.20 LACS FOR 78 DAYS W.E.F. 19.1.201 0 TO 31.3.2010 TO SAHAJ HONEY BEE FARMS AND CHARGED INTE REST 5 @ 9% PER ANNUM FROM THEM. THE ASSESSING OFFICER FU RTHER NOTED THAT THE ASSESSEE HAD PAID INTEREST @ 14% TO THE BANK. ACCORDINGLY, THE ASSESSING OFFICER COMPUTED THE INTEREST CHARGEABLE TO SAHAJ HONEY BEE FARMS AT RS.7,64,053/- AS AGAINST RS.5,75,500/- CHARGED BY T HE ASSESSEE. HE, THEREFORE, MADE A DISALLOWANCE OF RS.1,88,553/- UNDER SECTION 36(1)(III) OF THE ACT O N ACCOUNT OF INTEREST. THE CIT (APPEALS) UPHELD THE DISALLOWANCE MADE FOLLOWING THE DECISION OF THE HON 'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF ABHISHE K INDUSTRIES LIMITED (SUPRA). 11. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE CONTENDED THAT IT HAD ENOUGH OWN INTEREST FREE FUND S TO MAKE THE AFOROESTATED ADVANCES AND, THEREFORE, THE DISALLOWANCE MADE WAS UNWARRANTED. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE PROFITS EARN ED BY THE ASSESSEE DURING THE YEAR AMOUNTING TO RS.2,20,50,090/- AND TO THE ADVANCES MADE TO SAHAJ HONEY BEE FARMS AMOUNTING TO RS.60 LACS AND 20 LACS AS REFLECTED IN ITS PROFIT AND LOSS ACCOUNT AND BALANC E SHEET OF THE ASSESSEE FOR THE YEAR PLACED IN THE PAPER BO OK. THE LD. COUNSEL FOR THE ASSESSEE STATED THAT CLEARLY IT S OWN FUNDS WERE MORE THAN SUFFICIENT TO MAKE THE AFOREST ATED ADVANCES AND IN VIEW OF THE DECISION OF THE HON'BLE PUNJAB & HARYANA HIGH COURT IN THE CASE OF BRIGHT ENTERPRI SES (P) LTD. VS . CIT , JALANDHAR IN ITA NO . 224 OF 2013 DATED 6 24.07.2015, NO DISALLOWANCE UNDER SECTION 36(1)(III ) OF THE ACT WAS WARRANTED. 12. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF THE LD. CIT (APPEALS). 13. WE HAVE HEARD THE CONTENTIONS OF BOTH THE PARTIES. WE FIND MERIT IN THE CONTENTION OF LD. CO UNSEL FOR THE ASSESSEE. UNDENIABLY, THE OWN INTEREST FREE FU NDS OF THE ASSESSEE IN THE FORM OF PROFITS EARNED DURING T HE YEAR BEING RS.2.02 CRORES WERE MORE THAN SUFFICIENT TO M AKE IMPUGNED ADVANCES OF RS.80 LACS AND, THEREFORE, TH E PRESUMPTION IS THAT THE ADVANCE HAS BEEN MADE OUT O F THE OWN INTEREST FREE FUNDS AND THUS THERE WAS NO OCCAS ION TO MAKE ANY DISALLOWANCE ON ACCOUNT OF INTEREST UNDER SECTION 36(1)(III) OF THE ACT AS HELD BY THE HON'BL E JURISDICTIONAL HIGH COURT IN THE CASE OF BRIGHT ENTERPRISES (P) LTD. (SUPRA). IN VIEW OF THE SAME, DISALLOWANCE MADE UNDER SECTION 36(1)(III) OF THE A CT IS DELETED. 14. IN THE RESULT APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- (BHAVNESH SAINI) (ANNAPURNA GUPTA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 7 TH FEBRUARY, 2017 *RATI* COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE DR ASSISTANT REGISTRAR, ITAT, CHANDIGARH 7