SURYA AUTOMOBILES PVT .LTD., ABOHAR V. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE-II, BATHINDA

ITA 93/ASR/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8713 (ITAT-AMRITSAR)
• Duration Of Justice: 1 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 06-03-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 19-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: P N ARORA
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I. T. A. NOS. 92 & 93/(ASR)/2018 ASSESSMENT YEARS: 2013-14 & 2014-15 SURYA AUTOMOBILES PVT. LTD., HANUMANGARH ROAD, ABOHAR-152116 [PAN: AAFCS 2711N] VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE-II, BATHINDA (APPELLANT) (RESPONDENT) APPELLANT BY : SH. P. N. ARORA (ADV.) RESPONDENT BY: SH. CHARAN DASS (D.R.) DATE OF HEARING: 06.03.2019 DATE OF PRONOUNCEMENT: 08.04.2019 ORDER PER SANJAY ARORA, AM: THIS IS A SET OF TWO APPEALS BY THE ASSESSEE DIRECT ED AGAINST THE COMMON ORDER BY THE COMMISSIONER OF INCOME TAX (APPEALS), BATHINDA (CIT(A) FOR SHORT) DATED 13.12.2017, PARTLY ALLOWING THE ASSESS EES APPEALS FOR TWO SUCCESSIVE YEARS, BEING ASSESSMENT YEARS (AYS.) 2013-14 AND 20 14-15, CONTESTING ITS ASSESSMENTS FOR THESE YEARS VIDE ORDERS UNDER SECTI ON 143(3) OF THE INCOME TAX ACT, 1961 ('THE ACT' HEREINAFTER) DATED 27.01.2016 AND 23.09.2016 RESPECTIVELY. 2. THE APPEALS RAISING COMMON ISSUE/S, WERE POSTED FOR HEARING AND, ACCORDINGLY, HEARD TOGETHER. THE SAME ARE ALSO BEIN G DISPOSED OF PER A COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NOS. 92 & 93/ASR/2018 (AYS 2013-14 & 2014-15) SURYA AUTOMOBILES PVT. LTD. V. ASSTT. CIT 2 3. THE ONLY ISSUE ARISING IN THESE APPEALS IS THE S USTAINABILITY IN LAW, IN THE FACTS AND CIRCUMSTANCES OF THE CASE, OF THE DISALLO WANCE U/S. 36(1)(III) FOR THE RELEVANT YEARS, MADE IN THE SUM OF RS.2,14,948 AND RS.3,44,431 FOR AYS. 2013-14 AND 2014-15 RESPECTIVELY. THE SAME BEING QUA THE SAME LOANS/ADVANCES, THE FACTS AS DISCUSSED AND THE ARGUMENTS MADE WOULD APPLY TO BOTH. 4. THE BRIEF FACTS OF THE CASE ARE THAT LOANS/ADVAN CES AT RS.17,91,255 WERE MADE DURING THE PREVIOUS YEAR RELEVANT TO AY 2013-1 4 TO ONE, ADITI SANEJA AND BHARAT SANEJA. THE SAME BEING FOUND AS NOT FOR ANY BUSINESS PURPOSE, THE ASSESSING OFFICER (AO) DISALLOWED THE INTEREST ON B ORROWED CAPITAL U/S. 36(1)(III); THE ASSESSEE HAVING CLAIMED INTEREST EXPENDITURE AT RS.23,76,146 AND RS.51,03,498 FOR THE TWO SUCCESSIVE YEARS RESPECTIVELY. THE SAME BEING CONFIRMED IN FIRST APPEAL/S, THE ASSESSEE HAS PREFERRED SECOND APPEAL/ S. 5. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. THE ASSESSEES PRINCIPAL ARGUMENT IS THAT IT HAS SU FFICIENT INTEREST-FREE FUNDS; THE PROFIT FOR THE FIRST YEAR, I.E., IN WHICH THE A DVANCES WERE MADE, ITSELF BEING AT RS.76.21 LACS, I.E., SUFFICIENT TO COVER THE IMPUGN ED ADVANCES MADE. THE ARGUMENT, ATTRACTIVE AT FIRST BLUSH, IS MISPLACED. THIS IS AS PROFIT DOES NOT BY ITSELF SIGNIFY AVAILABILITY OF LIQUID FUNDS, FOR THEM TO BE TRANSM ITTED TO ANOTHER. IT IS THE CASH FLOW STATEMENT FOR THE YEAR THAT WOULD EXHIBIT WITH SOME ACCURACY THE FINANCING PATTERN, I.E., OF VARIOUS ASSETS. EVEN AS OBSERVED BY THE BE NCH DURING HEARING, THE ASSESSEE HAS DURING THIS YEAR (AY 2013-14) REPAID BORROWINGS TO THE EXTENT OF RS.196.93 LACS, WHICH SHOULD EXPLAIN THE AVENUE OF THE CASH P ROFIT OR, MORE BROADLY SPEAKING, THE CASH INFLOWS FOR THE YEAR. A MERE BROWSE OF THE BALANCE-SHEET AS AT 31.03.2013 (PB PGS.13-35), HOWEVER, SHOWS NO FRESH BORROWINGS, SAVE ONE, FOR T HE YEAR; THE ASSESSEE HAVING, ITA NOS. 92 & 93/ASR/2018 (AYS 2013-14 & 2014-15) SURYA AUTOMOBILES PVT. LTD. V. ASSTT. CIT 3 AS OBSERVED EARLIER, IN FACT SUBSTANTIALLY REDUCED BORROWINGS DURING THE YEAR (REFER NOTE 3, 4 TO THE BALANCE SHEET AS AT 31/03/2013/PB PG. 27). THE ONLY FRESH ADVANCE CONTRACTED DURING THE YEAR IS FROM HERO FIN CORP. LTD., NEW DELHI AGAINST THE LETTER OF CREDIT AND, THUS, APPLIED FOR BUSINES S PURPOSES. HOW, THEN, ONE MAY ASK, COULD THE LOAN/ADVANCE/S MADE DURING THE YEAR POSSIBLY BE ASCRIBED TO BORROWED CAPITAL ? CLEARLY, THEREFORE, THE IMPUGNED ADVANCES HAVE BE EN MADE OUT OF OTHER (INTEREST-FREE) SOURCES, INCLUDING EQUITY CAPITAL (RESERVES AND, SINCE REALIZED PROFITS FOR THE CURRENT YEAR). THERE ARE N O FRESH ADVANCES DURING THE FOLLOWING YEAR (AY 2014-15); THE INTEREST DISALLOWA NCE BEING QUA THE SAME ADVANCES, I.E., AS MADE FOR AY 2013-14. FURTHER, AD DITIONAL LOANS ASSUMED DURING THIS YEAR OVER WHICH THE ASSESSEE HAS EARNED A PR OFIT OF RS.68.57 LACS (REFER BALANCE-SHEET AS AT 31.03.2014/PB PGS. 13-33), ARE FOR BUILDING (HERO FINCORP. LTD.) AND TOWARD WORKING CAPITAL (L&T FINANCE LTD.) , SECURED AGAINST THE RELEVANT ASSETS. THE IMPUGNED LOANS/ADVANCES HAVING BEEN, IN FACT, FOUND BY US TO HAVE BEEN FINANCED BY INTEREST-FREE FUNDS, I.E., DURING F.Y. 2012-13, THERE IS NO BASIS TO PRESUME THE SAME BEING NOT SO, OR FINANCED IN WHOLE OR IN PART BY BORROWED CAPITAL DURING THE FOLLOWING YEAR (I.E., F.Y. 2013-14, RELE VANT TO AY 2014-15). THE DECISION IN HERO CYCLES (P.) LTD. V. CIT [2015] 379 ITR 347 (SC), APPLIED BY THE LD. CIT(A) IN CONFIRMING THE DISALLO WANCE/S, IS THUS NOT APPLICABLE ON FACTS. WE DECIDE ACCORDINGLY. 6. IN THE RESULT, THE ASSESSEES APPEALS ARE ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON APRIL 08, 201 9 SD/- SD/- (N. K. CHOUDHRY) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 08.04.2019 ITA NOS. 92 & 93/ASR/2018 (AYS 2013-14 & 2014-15) SURYA AUTOMOBILES PVT. LTD. V. ASSTT. CIT 4 /GP/SR/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: SURYA AUTOMOBILES PVT. LTD., HANUMANGARH ROAD, ABOHAR-152116 (2) THE RESPONDENT: ASSTT. COMMISSIONER OF INCO ME TAX, CIRCLE-II, BATHINDA (3) THE CIT(APPEALS), BATHINDA (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T. TRUE COPY BY ORDER