DCIT, Mandi Gobindgarh V. M/s Industrial Cables (India) Ltd., Rajpura

ITA 911/CHANDI/2014

• Counselvise Citation: [2015] 120 COUNSELVISE.COM (IT) 8726 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-01-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 12-01-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 28-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DR AMA RVEER SINGH
• Keywords: Proportionate interest; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI T.R.SOOD, ACCOUNTANT MEMBER ITA NO. 911/CHD/2014 ASSESSMENT YEAR: 2009-10 THE DCIT, VS THE INDUSTRIAL CABLES (INDIA )LTD., CIRCLE, INDUSTRIAL AREA, MANDI GOBINDGARH. RAJPURA. PAN: AAACI3498P (APPELLANT) (RESPONDENT) APPELLANT BY : DR. AMARVEER SING H RESPONDENT BY : NONE DATE OF HEARING : 12.01.2015 DATE OF PRONOUNCEMENT : 21.01.2015 O R D E R PER BHAVNESH SAINI,JM THIS APPEAL BY REVENUE IS DIRECTED AGAINST THE ORDE R OF LD. CIT(APPEALS) PATIALA DATED 28.08.2014 FOR ASSESSMEN T YEAR 2009-10 ON THE FOLLOWING GROUNDS : 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE, LD. CIT(A) HAS ERRED IN DELETING THE ADDITION OF RS.62,99,847/- MADE ON ACCOUNT OF DISALLOWANCE OF INTEREST U/S 36(L)(III) OF INCOME TAX ACT, 1961, ON THE INTEREST FREE ADVANCE MADE TO ITS SISTER CONCERN WI THOUT ANY COMMERCIAL EXPEDIENCY. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND I N LAW, THE LD. CIT(A) HAS ERRED IN FOLLOWING THE HON' BLE JURSIDICTIONAL ITAT'S DECISION IN THE ASSESSEE'S OW N CASE FOR THE A.Y. 2005-06 PARTICULARLY WHEN THE DEPARTMENT IS IN APPEAL BEFORE THE HON'BLE HIGH COU RT AGAINST THE SAID DECISION. 2 2. BRIEFLY THE FACTS ON THE ABOVE GROUNDS ARE THAT ASSESSEE HAS ADVANCED INTEREST FREE LOANS TO ITS SUBSIDIARY COMPANIES. THE ASSESSING OFFICER HELD THAT THE ASSESSEE HAD DI VERTED INTEREST BEARING LOANS FOR NON-BUSINESS PURPOSES AN D CHARGED NO INTEREST ON THE LOANS. WHEN CONFRONTED, ASSESSEE S UBMITTED THAT THE AMOUNT OF RS. 3.47 CR WAS PAID TO M/S HARYANA T ELECOM LTD. IN ASSESSMENT YEAR 2005-06 AND RS. 3 LACS WAS PAID IN ASSESSMENT YEAR 2007-08 BY THE ASSESSEE COMPANY IN PURSUANCE OF THE ORDER OF BIFR AS PROMOTERS CONTRIBUTION OF R EHABILITATION SCHEME OF HARYANA TELECOM LTD. IN VIEW OF THESE FA CTS, THE AMOUNT HAS BEEN PAID UNDER LEGAL OBLIGATION I.E. IN VIEW OF BIFR ORDER. MOREOVER, HARYANA TELECOM LTD. IS A SUBSIDI ARY COMPANY OF THE ASSESSEE AND IN ADDITION TO THE ORDER OF BIF R, THE ABOVE PAYMENT IS ALSO MADE FOR COMMERCIAL EXPEDIENCY AND AS SUCH THE ISSUE IS COVERED BY JUDGEMENT OF THE HON'BLE SU PREME COURT IN THE CASE OF S.A. BUILDERS VS CIT 288 ITR 1. COP Y OF THE REHABILITATION SCHEME OF HARYANA TELECOM LTD. DULY APPROVED BY BIFR WAS ALSO FILED. FURTHER, THE ITAT CHANDIGARH BENCH IN ASSESSMENT YEAR 2007-08 AND ASSESSMENT YEAR 2005-06 HAS ALREADY DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE COMPANY. THE ORDER OF THE TRIBUNAL WAS FILED BEFORE ASSESSIN G OFFICER. IT WAS ALSO SUBMITTED THAT LOANS TO GOODSTAR CREDIT & PORTFOLIO AND ICL TOWERS LTD. ARE VERY OLD. THE CAPITAL ON THE D ATE OF ADVANCING LOAN WAS VERY MUCH MORE THAN THE AMOUNT O F THE LOANS AND AS SUCH, NO PROPORTIONATE INTEREST IS DIS ALLOWABLE ON THESE LOANS. 3. IT WAS SUBMITTED THAT LD. CIT(APPEALS) HAS CONFI RMED THE ADDITION ON ACCOUNT OF INTEREST ON THESE TWO LOANS. THE 3 ASSESSING OFFICER, HOWEVER, NOTED THAT AS PER DIREC TION OF BIFR, THE PROMOTERS WERE SUPPOSED TO BRING RS. 3.50 CR WI THIN A PERIOD NOT EXCEEDING SIX MONTHS AND THE ASSESSEE PA ID RS. 3.47 CR TO THE SUBSIDIARY COMPANY IN ASSESSMENT YEAR 200 5-06 AND A SUM OF RS. 3 LACS DURING ASSESSMENT YEAR 2007-08. THE ASSESSING OFFICER, THEREFORE, HELD THAT CONTENTION THAT RS. 3.50 CR PAID PERTAINS OF THE ORDER OF BIFR AS ALSO THE C OMMERCIAL EXPEDIENCY OF THE TRANSACTION IS NOT ESTABLISHED. THE ASSESSING OFFICER, ACCORDINGLY DISALLOWED RS. 71,81,000/-. 4. THE ASSESSEE REITERATED THE SUBMISSIONS BEFORE L D. CIT(APPEALS). IT WAS SUBMITTED THAT IN ASSESSMENT Y EAR 2005-06, THE MATTER REACHED BEFORE ITAT CHANDIGARH BENCH, WH O VIDE ORDER DATED 28.11.2008 IN ITA NO. 237/CHD/2008 DELE TED THE ADDITION WITH REGARD TO LOANS TO HARYANA TELECOM LT D. THE ASSESSING OFFICER, IN HIS COMMENTS ALSO STATED THAT ITAT CHANDIGARH BENCH DELETED THE ADDITION BUT THE VIEW NOT ACCEPTED BY THE DEPARTMENT AND APPEAL IS PENDING IN HON'BLE HIGH COURT. THE LD. CIT(APPEALS), FOLLOWING THE ORD ER OF THE TRIBUNAL, DELETED THE ADDITION IN THE CASE OF LOANS GIVEN TO SUBSIDIARY COMPANY M/S HARYANA TELECOM LTD. AND AS REGARDS OTHERS, HE HAS CONFIRMED THE ADDITION. IT IS STATE D THAT THE ISSUE IS COVERED BY ORDER OF ITAT CHANDIGARH BENCH IN THE CASE OF THE SAME ASSESSEE FOR ASSESSMENT YEAR 2005-06 IN ITA NO . 237/CHD/2008 (SUPRA). COPY OF THE ORDER IS PLACED ON RECORD. 5. THE GROUNDS OF APPEAL RAISED BY THE REVENUE SHOW THAT THE PRESENT APPEAL IS PREFERRED BY THE REVENUE MERELY B ECAUSE THE DEPARTMENTAL APPEAL IS PENDING BEFORE HON'BLE HIGH COURT IN ASSESSMENT YEAR 2005-06. THE ISSUE IS, THEREFORE, COVERED IN 4 FAVOUR OF THE ASSESSEE. MERELY BECAUSE APPEAL IS P ENDING IN HIGH COURT, IS NO GROUND TO SUSTAIN THE ADDITION AG AINST THE ASSESSEE. THE LD. CIT(APPEALS), THEREFORE, CORRECT LY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSMENT YEAR 2005-06 RI GHTLY DELETED THE ADDITION. THE DEPARTMENTAL APPEAL HAS NO MERIT AND IS ACCORDINGLY, DISMISSED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST JANUARY,2015. SD/- SD/- (T.R.SOOD) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 21 ST JANUARY,2015. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT, DR ASSISTANT REGISTRAR, ITAT CHANDIGARH