Amanpreet Singh, Ludhiana V. ACIT, Ludhiana

ITA 912/CHANDI/2016

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2347 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 year(s) 2 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 16-08-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDRA KANTA
• Assessee Lawyers: B N MONGA SHRI ROHIT KAURA
• Keywords: Capital asset

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BE NCH A, CHANDIGARH !, ' # , . %.. . & , '( # BEFORE: SMT. DIVA SINGH, JM & DR. B.R.R. KUMAR , A M ./ ITA NO. 912/CHD/2016 / ASSESSMENT YEAR : 2012-13 SH. AMANPREET SINGH PROP. M/S VIRINDRA ENGINEERING WORKS, DABA ROAD LUDHIANA ASST. CIT CIRCLE V, LUDHIANA ./ PAN NO: AOSPS3963E / APPELLANT / RESPONDENT ! ' / ASSESSEE BY : SHRI. B.N. MONGA, SHRI. ROHIT KAURA # ! ' / REVENUE BY : SMT. CHANDRAKANTA $ % ! &/ DATE OF HEARING : 30/08/2018 '()* ! &/ DATE OF PRONOUNCEMENT : 29/10/2018 ')/ ORDER PER DR. B.R.R. KUMAR, A.M: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE A GAINST THE ORDER OF THE LD. CIT(A), LUDHIANA DT. 26/05/2016. 2. IN THE PRESENT APPEAL ASSESSEE HAS RAISED THE FO LLOWING GROUNDS: 1. THAT THE ORDER PASSED BY THE LD. CIT(A) IS BAD IN L AW AS WELL AS ON FACTS. 2. THAT THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN UPHOLDING THE ADDITION OF RS. 3,70,212/- MADE UNDER SECTION 36(1) (III) OF THE INCOME TAX ACT, 1961 BY THE ASSESSING OFFICER. 3. THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FA CTS OF THE CASE. 3. BRIEFS FACTS IN THIS CASE ARE THAT THE ASSESSEE FILED HIS RETURN OF INCOME ON 13.07.2012 BY DECLARING INCOME OF RS. 50,01,837/-. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF MANUFACTURING SEWING MACHINES PARTS DURING THE PERIOD UNDER CONSIDERATION. DURING THE COURSE OF ASSESSMENT PROC EEDINGS, THE AO OBSERVED FROM THE BALANCE SHEET THAT THE ASSESSEE HAS PURCHA SED TWO PLOTS OF LAND ONE IS SITUATED AT INDUSTRIAL AREA, KOHARA OF RS. 26,90,00 0/- AND SECOND IS AT AAYALI, 2 KALAN, LUDHIANA OF RS. 33,10,500/- DURING THE YEAR. THE ASSESSEE WAS ISSUED A SHOW-CAUSE AS TO WHY INTEREST SHOULD NOT BE CAPITAL IZED ON THIS LAND TILL THE DATE OF PUT TO USE GIVEN THAT INTEREST BEARING LOAN FUND S OF RS. 50,00,357/- ARE OUTSTANDING AGAINST CAPITAL OF RS. 48,19,393/-. THE AO WAS NOT SATISFIED WITH THE ASSESSEES SUBMISSION. THE AO WAS OF VIEW THAT THE ASSESSEE HAD PAID INTEREST ON LOANS THROUGHOUT THE YEAR AND THE ASSESSEE HAD ALSO ACQUIRED NEW ASSETS AND THERE HAD BEEN MAJOR ADDITION IN CAPITAL ASSETS. TH E INTEREST FOR THE PERIOD TILL THE TIME OF PUT TO USE OF THE ASSETS HAS TO BE CAPITALI ZED AS PER SECTION 36(1)(III). ACCORDINGLY, THE AO MADE AN ADDITION OF RS. 3,70,21 2/- U/S 36(1)(III) OF THE INCOME TAX ACT, 1961. 4. THE LD. CIT(A) CONFIRMED THE ORDER OF THE ASSESS ING OFFICER AT THAT TIME RELYING ON THE JUDGMENT OF CIT VS. ABHISHEK INDUSTR IES LTD. 5. BEFORE US, THE LD. AR SUBMITTED THE BALANCE SHEE T OF THE ASSESSEE WHEREIN THE CAPITAL ACCOUNT IS TO THE TUNE OF RS. 31,93,282 /- AND UNSECURED LOANS FROM FRIENDS AND RELATIVES OF RS. 51,57,274/- AS AT 2011 TO PROVE THAT THE ASSESSEE BROUGHT SUFFICIENT OWN FUNDS FOR THE INVESTMENTS. A S PER THE P&L ACCOUNT THE ASSESSEE HAS DISCLOSED A NET PROFIT OF RS. 47,16,89 9/-. 6. LD. DR RELIED ON THE ORDERS OF THE AUTHORITIES B ELOW. 7. THE ISSUE STANDS ADJUDICATED BY VARIOUS PRECEDEN TS BY THIS TRIBUNAL BASED ON THE VARIOUS PRONOUNCEMENTS OF THE JURISDICTIONAL HIGH COURTS. WHEN THE ASSESSEE HAS GOT OWN FUNDS AVAILABLE AT THEIR DISPO SAL NO DISALLOWANCE IS CALLED FOR AS ENUNCIATED IN VARIOUS JUDGMENTS. IN THE CASE OF BRIGHT ENTERPRISES PVT. LTD. VS. CIT(PUNJAB & HARYANA HIGH COURT IN ITA NO. 224/ 2013 DT. 24/07/2015 IT WAS HELD THAT IF THERE ARE INTEREST FREE FUNDS AVAILABL E THEN IT WILL BE PRESUMED THAT THESE HAVE BEEN MADE OUT OF INTEREST FREE FUNDS. SI MILAR VIEW WAS HELD IN THE 3 CASE OF CIT VS. KAPSONS ASSOCIATES INVESTMENT PVT. LTD. [2015] 381 ITR 204 (P&H) WHEREIN, THE HONBLE COURT HAS HELD THAT INTEREST ON INVESTMENT IN OTHER PROPERTIES NOT FOR BUSINESS PURPOSE CANNOT BE DISAL LOWED IF THE ASSESSEE IS HAVING SUFFICIENT INTEREST FREE FUNDS AT ITS DISPOS AL. SIMILAR MATTER HAS BEEN HEARD BY THE HONBLE DELHI HIGH COURT IN THE CASE OF D.D. INDUSTRIES LTD. IN ITA 512-DEL- 2015 VIDE ORDER DT. 13/03/2015 WHEREIN IT WAS HELD THAT NO DISALLOWANCE IS CALLED FOR WHEN THE ASSESSEE HAS GOT SURPLUS FUNDS FOR ACQ UIRING ASSETS IN QUESTION. HENCE, RESPECTFULLY FOLLOWING THE RATIO LAID DOWN B Y THE VARIOUS JUDICIAL PRONOUNCEMENTS, THE DISALLOWANCE MADE ON ACCOUNT OF INTEREST IS HEREBY DELETED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- ! . %.. . & , (DIVA SINGH) (DR. B.R.R. KUMAR) ' #/ JUDICIAL MEMBER '( #/ ACCOUNTANT MEMBER AG DATE: 29/10/2018 (+ ! ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. $ / / CIT 4. $ / ()/ THE CIT(A) 5. -23 4, & 4, 67839/ DR, ITAT, CHANDIGARH 6. 38 :%/ GUARD FILE