DCIT, CHENNAI V. Diamond Engineering (Chennai) P Ltd., CHENNAI

ITA 936/CHNY/2017

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 4791 (ITAT-CHENNAI)
• Duration Of Justice: 9 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 17-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R U AROON PRASAD IRS
• Assessee Lawyers: S SRIDHAR
• Keywords: Proportionate interest

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH : CHENNAI . , !' # $! # % . &' , ) + , [BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBE R AND SHRI DUVVURU RL REDDY , JUDICIAL MEMBER ] ./I.T.A. NO.936/CHNY/2017. / ASSESSMENT YEAR : 2008-2009. DEPUTY COMMISSIONER OF INCOME TAX, CORPORATE CIRCLE 1(1) CHENNAI. VS. M/S. DIAMOND ENGINEERING (CHENNAI) P. LTD, NO.179, RAJIV GANDHI SALAI, SHOLINGANALLUR, CHENNAI 600 119 . [PAN AAACD 3949E] ( -. / APPELLANT) ( /0-. /RESPONDENT) / APPELLANT BY : SHRI. R.U. AROON PRASAD, IRS, JCIT. /RESPONDENT BY SHRI. S. SRIDHAR, ADVOCATE /DATE OF HEARING : 13-02-2018 ! /DATE OF PRONOUNCEMENT : 13-02-2018 1 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER IN THIS APPEAL FILED BY THE REVENUE , WHICH IS DIRECTED AGAINST AN ORDER DATED 09.02.2017 OF THE LD. COMMIS SIONER OF INCOME TAX (APPEALS)-1, CHENNAI, IT IS AGGRIEVED THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) DELETED THE DISALLOWANCE MADE BY THE LD. ITA NO. 936/CHNY /2018 :- 2 -: ASSESSING OFFICER U/S.36(1) (III) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). 2. LD. COUNSEL FOR THE REVENUE SUBMITTED THAT ASSESSEE HAD ADVANCED MONEY TO GROUP CONCERNS WITHOUT CHARGING I NTEREST. AS PER THE LD. DR, THE ASSESSING OFFICER HAD MADE A PRO-R ATA DISALLOWANCE OF INTEREST. CONTENTION OF THE LD. DEPARTMENTAL REPRE SENTATIVE WAS THAT LD. COMMISSIONER OF INCOME TAX (APPEALS) HAD DELETE D THE ADDITION MADE BY THE LD. ASSESSING OFFICER, RELYING ON A DEC ISION OF TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2009-2010 I N ITA NO.820/MDS/2013, DATED 11.11.2015. AS PER THE LD. DR, THE TRIBUNAL HAD REMITTED THE ISSUE BACK TO THE LD. ASSESSING OF FICER, ONLY FOR VERIFYING THE AMOUNT OF EQUITY CAPITAL AND RESERVE DISCLOSED IN THE BALANCE SHEET OF THE ASSESSEE SO AS TO CHECK WHETHE R ANY INTEREST BEARING ADVANCE WAS USED FOR GIVING INTEREST FREE LOANS TO SISTER CONCERNS. 3. PER CONTRA, LD. AUTHORISED REPRESENTATIVE SUBMITTED THAT THE ISSUE WAS VERY SIMILAR TO WHAT WAS CONSIDERED BY T HE TRIBUNAL IN ASSESSEES APPEAL FOR ASSESSMENT YEAR 2009-2010 AND SIMILAR DIRECTIONS COULD BE GIVEN HERE ALSO. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. THERE IS NO DISPUT E THAT DISALLOWANCE ITA NO. 936/CHNY /2018 :- 3 -: OF INTEREST MADE BY THE LD. ASSESSING OFFICER FOR T HE IMPUGNED ASSESSMENT YEAR WERE BASED ON VERY SAME FACT SITUAT ION WHICH PREVAILED FOR ASSESSMENT YEAR 2009-2010. IN THE SA ID YEAR ALSO, ASSESSEE HAD GIVEN INTEREST FREE ADVANCE TO M/S. EM ERALA ENGINEERING UNIT-II AND M/S. RUBY ENGINEERING. ASSESSEE HAD AL SO AVAILED LOAN WORTH D65/- CRORES ON WHICH INTEREST WAS PAID. WH AT WAS HELD BY THE TRIBUNAL AT PARA 4 & 5 OF THE ORDER IS REPRODUCED H EREUNDER:- 4.AT THE TIME OF HEARING, THE LD. A.R. AT THE OUT SET SUBMITTED THAT THE ASSESSEE COMPANY HAD SUFFICIENT RESERVES AND SURPLUS COUPLED WITH EQUITY OVER AND A BOVE 31 CRORES AS ON 01.04.2008 WHILE AS THE AMOUNT ADVANCED TO ITS SISTER CONCERNS WAS ONLY ABOUT 21.6 CRORES APPROXIMATELY. THEREFORE, IT COULD BE CONSTR UED THAT THE ASSESSEE HAD ADVANCED LOAN TO ITS SISTER CONCERNS FROM ITS NON-INTEREST BEARING FUNDS. HENCE IT WAS PLEADED THAT THE ADDITION MADE BY THE LD. ASSES SING OFFICER BY DISALLOWING THE INTEREST AGGREGATING TO 3,27,78,927/- IN VIEW OF THE NON-INTEREST BEARING L OAN TO SISTER CONCERNS IS NOT WARRANTED. LD. D.R VEHEMENTL Y ARGUED IN SUPPORT OF THE ORDERS OF THE REVENUE AND ALSO RELIED ON DECISION OF S.A. BUILDERS VS. CIT(A) REPO RTED IN 288 ITR 1. 5. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY PER USED THE MATERIALS AVAILABLE ON RECORD. ON PERUSING THE BALANCE SHEET SUBMITTED BY THE ASSESSEE IT IS APPAR ENT ITA NO. 936/CHNY /2018 :- 4 -: THAT THE ASSESSEE IS HAVING RESERVES AND SURPLUS OF 11.8 CRORES APPROXIMATELY AND 20/- CRORE EQUITY AS ON 01.04.2008. THIS FUND OF THE ASSESSEE IS NON-INTERE ST BEARING AND AVAILABLE TO THE ASSESSEE FOR DEPLOYING IN THE BUSINESS AS IT DEEMS FIT. THEREFORE, THE NON-INTERE ST BEARING FUND OF THE ASSESSEE COMPANY VIZ. EQUITY AN D RESERVES/SURPLUS OF RS.31.8 CRORES (APPROX.) CAN BE PRESUMED TO HAVE BE ADVANCED AS THE INTEREST FREE ADVANCES TO THE SISTER COMPANY OF 21.6 CRORES(APPROX.) WHICH IS FAR LESS THAN THE NON-INTEREST BEARING FUN D AVAILABLE WITH THE ASSESSEE COMPANY. HENCE, THE ADDITION MADE BY THE LD. ASSESSING OFFICER BY DISAL LOWING THE INTEREST IS NOT WARRANTED. SINCE THESE FACTS WE RE NOT EXAMINED BY THE REVENUE, WE HEREBY REMIT THE MATTER BACK TO THE FILE OF THE LD. ASSESSING OFFICER FOR T HE LIMITED PURPOSES OF VERIFYING THE AMOUNT OF EQUITY CAPITAL & RESERVES/SURPLUS DISCLOSED IN THE BALANCE SHEET AND IF THE LD.A.O FINDS THAT THE NON-INTEREST BEARING FUND OF THE ASSESSEE IS MORE THAN THE INTEREST FREE ADVANCE EXTENDED TO ITS SISTER CONCERN THEN THE LD .A.O SHA LL DELETE THE ADDITION MADE BY HIM OF 3,27,78,927/- TOWARDS DISALLOWANCE OF PROPORTIONATE INTEREST ON I NTEREST- FREE FUND DIVERTED TO SISTER CONCERNS. HOWEVER IF F OUND OTHERWISE HE SHALL PASS APPROPRIATE ORDER AS PER LA W AND MERITS. FACT SITUATION BEING SAME, WE ARE OF THE OPINION TH AT ENDS OF JUSTICE WILL BE MET IF SIMILAR DIRECTION, AS GIVEN BY THE TRIBUNAL FOR ASSESSMENT YEAR 2009-2010, IS GIVEN FOR IMPUGNED AS SESSMENT YEAR ITA NO. 936/CHNY /2018 :- 5 -: ALSO. WE THEREFORE SET ASIDE THE ORDERS OF THE LO WER AUTHORITIES AND REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING O FFICER FOR CONSIDERATION AFRESH, IN ACCORDANCE WITH THE DIRECT IONS GIVEN BY THE TRIBUNAL IN ITS ORDER FOR ASSESSMENT YEAR 2009-2010 IN ITA NO.820/MDS/2013, DATED 11.11.2015. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS ALLOW ED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ON TUESDAY, THE 13 TH DAY OF FEBRUARY, 2018, AT CHENNAI. SD/- SD/- ( # $! # % . &' ) ( DUVVURU RL REDDY ) ) / JUDICIAL MEMBER ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER '# / CHENNAI $% / DATED:13TH FEBRUARY, 2018. KV %& '()( / COPY TO: 1 . / APPELLANT 3. *+, / CIT(A) 5. (-. / / DR 2. / RESPONDENT 4. * / CIT 6. .01 / GF