M/s. Ramdev Masala(Arvindbhai Group), Ahmedabad V. The Income Tax Officer, Ward-7(1), Ahmedabad

ITA 958/AHD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 9101 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 10 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 11-01-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 04-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: S N DIVATIA
• Keywords: Proportionate interest
• Section: 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER, AND SHRI S. S. GODARA, JUDICIAL MEMBER. ITA NO. 958/AHD/2014 (ASSESSMENT YEAR:2009-10) M/S. RAMDEV MASALA (ARVINDBHAI GROUP), 311, NR. SOLA OVEBRIDGE, SARKHEJ- GANDHINAGAR HIGHWAY, SOLA, AHMEDABAD - 380060 APPELLANT VS. THE INCOME TAX OFFICER, WARD 7(1), AHMEDABAD RESPONDENT PAN: AADFR5561N /BY ASSESSEE : SHRI S. N. DIVATIA, A.R. /BY REVENUE : SHRI JAMES KURIAN, SR. D.R. /DATE OF HEARING : 11.01.2017 /DATE OF PRONOUNCEMENT : 27.02.2017 ORDER PER S. S. GODARA, JUDICIAL MEMBER THIS ASSESSEES APPEAL FOR ASSESSMENT YEAR 2009-10 ARISES AGAINST THE CIT(A)-XXI, AHMEDABADS ORDER DATED 22.01.2014, PAS SED IN APPEAL NO. CIT(A)-XXI/231/11-13, UPHOLDING ASSESSING OFFICERS ACTION IN DISALLOWING ITA. NO. 958/AHD/2014 (M/S. RAMDEV MASALA (ARVINDBH AI GROUP) VS. ITO) A.Y. 2009-10 - 2 - ITS PAYMENTS OF PACKAGING MATERIAL OF RS.76156/- AN D PURCHASE OF CLOTH BAGS OF RS.1,09,035/- FOR NON DEDUCTION OF TDS THEREBY I NVOKING SECTION 40(A)(IA) OF THE ACT ALONG WITH DISALLOWANCE OF INTEREST EXPE NSES OF RS.31,875/-; RESPECTIVELY, IN PROCEEDINGS U/S.143(3) OF THE INCO ME TAX ACT, 1961, IN SHORT THE ACT. HEARD BOTH SIDES. CASE FILE PERUSED. 2. WE COME TO FORMER TWO SUBSTANTIVE GROUNDS CHALLE NGING BOTH THE LOWER AUTHORITIES ACTION INVOKING SECTION 40(A)(IA ) OF THE ACT ON PACKAGING MATERIAL AND CLOTH BAGS PAYMENTS OF RS.76,156/- AND RS.1,09,035/-; RESPECTIVELY. THE ASSESSEE HAD MADE THE FORMER PAY MENT ON PURCHASE OF PACKAGING MATERIAL IN THE NATURE OF PLAIN PLASTIC B AGS FROM M/S. WIN PRINTS. ITS CASE BEFORE THE LOWER AUTHORITIES THROUGHOUT HA S BEEN THAT IT HAD NOT ASSIGNED OR GOT PERFORMED ANY CONTRACTUAL WORK ALIK E JOB WORK OR LABOUR PAYMENTS SO AS TO BE COVERED WITHIN THE SCOPE AND A MBIT OF SECTION 194C OF THE ACT PRESCRIBED IN TDS DEDUCTION THEREUPON. THE ASSESSING OFFICER QUOTED ITS FAILURE IN PRODUCING EVIDENCE TO PROVE T HAT THERE WAS NO PRINTING MADE FOR PLASTIC BAGS. THE CIT(A) ON THE OTHER HAN D TAKES NOTE OF THE ASSESSING OFFICERS FINDING THAT THE ASSESSEE HAD B EEN DEDUCTING TDS ON OTHER PAYMENTS MADE TO THE SAME PARTY. THEY NOWHER E SPECIFICALLY REJECT ASSESSEES CONTENTION AS NOT TO HAVE PURCHASED ANY PRINTING MADE ON THE RELEVANT PLASTIC BAGS. WE OBSERVE IN THESE PECULIA R FACTS THAT THE ASSESSING ITA. NO. 958/AHD/2014 (M/S. RAMDEV MASALA (ARVINDBH AI GROUP) VS. ITO) A.Y. 2009-10 - 3 - OFFICER HAS PUT A NEGATIVE BURDEN ON THE ASSESSEE T O PROVE A NEGATIVE FACT WHICH THE CIT(A) HAS UPHELD AFTER CONCLUDING THAT I T HAD INDEED DEDUCTED TDS ON OTHER BILLS WITHOUT COMPARING THE NATURE OF PAYMENTS THEREIN. WE THUS ACCEPT ASSESSEES ARGUMENTS QUA FORMER DISALLO WANCE OF RS.76,156/- ON PACKAGING MATERIAL MADE U/S.40(A)(IA) OF THE ACT. 3. WE NOW PROCEED TO DEAL WITH LATTER LIMB OF THE V ERY DISALLOWANCE ON PURCHASE OF CLOTH BAGS DONE FROM M/S. DESAI BROTHER S TO THE TUNE OF RS.1,09,035/-. HEREIN AS WELL THE ASSESSING OFFICE R QUOTED ASSESSEES FAILURE IN PROVING AS TO HAVE NO PRINTING MADE FOR THE PLAS TIC BAGS IN QUESTION. THE CIT(A)S FINDINGS ARE ALSO ON IDENTICAL LINES THAT THE ASSESSEE HAD DEDUCTED TDS TO PAYMENTS MADE TO THE VERY PARTY ON OTHER BIL LS. WE REITERATE OUR RELEVANT FINDINGS IN PRECEDING PARAGRAPH TO DELETE THIS DISALLOWANCE AS WELL. 4. THIS LEAVES US WITH ASSESSEES LAST SUBSTANTIVE GROUND ASSAILING CORRECTNESS OF INTEREST DISALLOWANCE OF RS.31,875/- AS AFFIRMED BY THE CIT(A) AS FOLLOWS: 7. GROUND OF APPEAL NO.4 IS AGAINST DISALLOWANCE OF INTEREST EXPENSES FOR ADVANCE GIVEN TO PHARMALAB INDIA PVT. LTD. FOR RS.3 1,875/-. THE ASSESSING OFFICER HAS MADE THE DISALLOWANCE, NOTING AS UNDER: 'THE ASSESSEE'S ARGUMENT IS NOT ACCEPTABLE FOR THE FOLLOWING REASONS: - I. THE ASSESSEE HAS NOT PRODUCED ANY SUPPORTING EVI DENCES THAT, HE HAS PAID FOR CONSTRUCTING TO ANY MACHINERY TO PHARM A LAB INDIA P.LTD. ITA. NO. 958/AHD/2014 (M/S. RAMDEV MASALA (ARVINDBH AI GROUP) VS. ITO) A.Y. 2009-10 - 4 - II. THE ASSESSEE ALSO FAILED TO PRODUCE ANY EVIDENC E THAT, UNDER WHICH CIRCUMSTANCES THE MACHINES ALLEGED TO BE PRODUCED B Y PHARMA LAB INDIA. III. THE ASSESSEE DID NOT PAID ANY COMPENSATION OR ANY TOKEN AMOUNT FOR REJECTING A MACHINE WHICH WAS MADE SPECIALLY FO R THE ASSESSEE. HENCE, THE PREPONDERANCE OF THE PROBABILITY SUGGEST S THAT, THE AMOUNT WAS ADVANCED WITHOUT ANY BUSINESS PURPOSE. T HE ASSESSEE AHS TAKEN LOAN FROM SME.T SHITAL P. SHAH AND PAID I NTEREST @ 9%. HENCE, THE PROPORTIONATE INTEREST WORKED OUT AT RS. 31,875/- I DISALLOWED OUT OF THE INTEREST EXPENDITURE CLAIMED U/S. 36(1) (III).' 7.1 DURING THE COURSE OF APPELLATE PROCEEDINGS , THE APPELLANT HAS MADE THE FOLLOWING SUBMISSIONS: 'DISALLOWANCE OUT OF INTEREST EXPENSE FOR ADVANCE G IVEN TO THE PHARMALAB INDIA PVT. LTD. FOR RS.31875/-: IN THIS MATTER WE INFORM YOU THAT WE HAVE MADE THE ADVANCE PAYMENT TO PHARMALAB INDIA PVT. LTD. WHICH IS ENGAGED IN CO NSTRUCTING THE MACHINERY AS PER THE REQUIREMENT OF THE CUSTOMER. WE HAVE ALSO MADE THE ADVANCE PAYMENT FOR CONSTRUCTION OF THE MA CHINERY BUT THE SAME WAS NOT SUITABLE FOR US SO, WE HAVE RECEIVED B ACK THE SAME ADVANCE. THEREFORE ADVANCE GIVEN FOR PURCHASE OF MA CHINERY WHICH WAS SUBSEQUENTLY CANCELLED AND AMOUNT WAS RECEIVED BACK CAN NOT BE COMPARED AS INTEREST FREE ADVANCE. FURTHER IT HA S DIRECT BUSINESS NEXUS SO THE ADVANCE GIVEN AND RECEIVED BACK CANNOT BE TREATED AS INTEREST FREE ADVANCE. THE LEARNED ASSESSING OFFICE R AHS ERRED IN FACTS AND CIRCUMSTANCES OF HE CASE AND ALSO IN LAW BY ADDITION IN THE FORM OF OUT OF INTEREST EXPENSES FOR ADVANCE GIVEN TO PHRAMALAB INDIA PVT. LTD. OF RS. 31875/- BY MAKING NOTIONAL I NTEREST @ 12% ON THE AMOUNT RS. 850000/- GIVEN AS ADVANCE TO PHARMAL AB INDIA PVT. LTD. FOR PURCHASE OF MACHINERY WHICH WAS CANCELLED AND THE AMOUNT WAS RECEIVED BACK TO THE ASSESSEE.' 7.2 I HAVE CONSIDERED THE ASSESSMENT ORDER AND THE SUBMISSIONS MADE BY THE APPELLANT. THE APPELLANT HAS NOT SUBMITTED ANY EVID ENCE IN SUPPORT OF ITS CLAIM THAT MONEY RECEIVED FROM PHARMALAB INDIA PVT. LTD, WAS RETURN OF ADVANCE GIVEN FOR MACHINES. IN VIEW OF THE ABOVE, I AGREE WITH THE ASSESSING OFFICER AND DISALLOWANCE MADE BY HIM IS CONFIRMED. 5. SHRI DIVATIA SUBMITS AT THE OUTSET THAT THE ASSE SSEE COULD NOT SUBMIT ANY EVIDENCE IN SUPPORT OF ITS CLAIM THAT THE MONEY IN QUESTION RECEIVED FROM M/S. PHARMALAB INDIA PVT. LTD. WAS IN THE NATURE OF RETURN OF ADVANCE GIVEN ITA. NO. 958/AHD/2014 (M/S. RAMDEV MASALA (ARVINDBH AI GROUP) VS. ITO) A.Y. 2009-10 - 5 - FOR MACHINES. HE SEEKS ONE MORE INNINGS BY STATING THAT THE ASSESSEE IS VERY MUCH READY AND WILLING TO FILE ALL NECESSARY EVIDEN CE BEFORE THE ASSESSING AUTHORITY. AFTER ARGUING FOR SOMETIME AGAINST THIS CONTENTION, LEARNED DEPARTMENTAL REPRESENTATIVE DOES NOT OPPOSE THE ASS ESSEES PRAYER SEEKING TO REMIT THE ISSUE BACK TO THE ASSESSING OFFICER. WE APPRECIATE THIS FAIR STAND AND DIRECT THE ASSESSING AUTHORITY TO DECIDE THE IN STANT ISSUE AFRESH AFTER AFFORDING ADEQUATE OPPORTUNITY OF HEARING TO THE AS SESSEE. 6. THIS ASSESSEES APPEAL IS PARTLY ALLOWED. [PRONOUNCED IN THE OPEN COURT ON THIS THE 27 TH DAY OF FEBRUARY, 2017.] SD/- SD/- ( PRAMOD KUMAR ) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD: DATED 27/02/2017 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- / REVENUE 2 / ASSESSEE ! / CONCERNED CIT 4 !- / CIT (A) ( )*+ ,--. . /0 / DR, ITAT, AHMEDABAD 1 +23 / GUARD FILE. BY ORDER / . // . /0