CIL Nova Petrochemicals Ltd., Ahmedabad V. The Deputy Commissioner of Income Tax, Circle-1(1)(2), Ahmedabad

ITA 983/AHD/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3383 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 10 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2013-2014
• Appeal Filed On: 24-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L P JAIN
• Keywords: Notional interest
• Section: 143(3)

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER ./ I.T.A. NO. 983/AHD/2017 ( ASSESSMENT YEAR : 2013-14) CIL NOVA PETROCHEMICALS LTD. 391/396 MORAIYA VILLAGE, SARKHEJ-BAVLA HIGHWAY, SANAND, AHMEDABAD - 382210 / VS. DY. COMMISSIONER OF INCOME TAX CIRCLE-1(1)(2), AHMEDABAD ./ ./ PAN/GIR NO. : AADCN0932G ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI BANDISH SOPARKAR, A.R. / RESPONDENT BY : SHRI L. P. JAIN, SR.D.R. DATE OF HEARING 21/02/2019 !'# / DATE OF PRONOUNCEMENT 26/02/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF I NCOME TAX (APPEALS)-1, AHMEDABAD (CIT(A) IN SHORT), DATED 2 8.02.2017 ARISING IN THE ASSESSMENT ORDER DATED 24.02.2016 PASSED BY THE ASSESSING OFFICER (AO) UNDER S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING AY 2013-14. ITA NO. 983/AHD/17 [CIL NOVA PETROCHEMICALS LTD. VS. DCIT] A.Y. 2013-14 - 2 - 2. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA D AS UNDER: 1. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE IT IS MOST RESPECTFULLY SUBMITTED THAT THE LD. COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN LAW AND ON FACTS BY CONF IRMING A DISALLOWANCE OF INTEREST TO THE EXTENT OF 9.75% U/S 36(1)(III) OF THE IT ACT IN RESPECT OF CAPITAL WORK IN PROGRESS. 3. BRIEFLY STATED, THE ASSESSEE IS ENGAGED IN MANUF ACTURING AND TRADING OF POY, FDY & TEXTURIZED YARN AND TRADING I N CLOTH. THE RETURN FILED BY THE ASSESSEE FOR AY 2013-14 WAS SUB JECTED TO SCRUTINY ASSESSMENT. THE ASSESSMENT WAS COMPLETED UNDER S.1 43(3) OF THE ACT BY MAKING DISALLOWANCE OF INTEREST ON ACCOUNT OF UT ILIZATION OF BORROWED FUNDS TOWARDS CAPITAL WORK-IN-PROGRESS R S.17,34,463/- AND TOWARDS NON-INTEREST BEARING ADVANCES RS.8,34,801 /-. TO DELINEATE, THE ASSESSEE HAS SHOWN CAPITAL WORK-IN-PROGRESS AT AN AMOUNT OF RS.4,83,38,831/- IN ITS BALANCE SHEET. THE DISALLO WANCE OF INTEREST WAS MADE THEREON BY COMPUTING INTEREST @9.75% AND A CCORDINGLY THE DISALLOWANCE WAS WORKED OUT AT RS.17,34,463/-. IT WAS ALSO NOTICED BY THE AO THAT ASSESSEE HAD GIVEN ADVANCE OF RS.85,62, 061/- TO SUPER NOVA POLYFEB PVT. LTD. FOR PROCURING SOME MACHINERI ES AND ACCORDINGLY COMPUTED DISALLOWANCE OF RS.8,34,801/- THEREON. 4. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL TOWARDS SUCH INTEREST DISALLOWANCES BEFORE THE FIRST APPELLATE AUTHORITY. THE CIT(A) SUSTAINED THE DISALLOWANCE OF INTEREST ON CAPITAL W ORK-IN-PROGRESS AND GRANTED RELIEF FOR INTEREST DISALLOWANCE TOWARDS IN TEREST FREE ADVANCES. 5. FURTHER AGGRIEVED BY THE PART RELIEF, THE ASSESS EE HAS PREFERRED APPEAL BEFORE THE TRIBUNAL. ITA NO. 983/AHD/17 [CIL NOVA PETROCHEMICALS LTD. VS. DCIT] A.Y. 2013-14 - 3 - 6. THE LEARNED AR FOR THE ASSESSEE AT THE OUTSET SU BMITTED THAT THE ISSUE IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE IN ITS OWN CASE BY THE ORDER OF THE ITAT CONCERNING AY 2012-13 IN ITA NO. 388/AHD/2016 ORDER DATED 13.08.2018. 7. THE LEARNED DR RELIED UPON THE ORDER OF THE CIT( A). 8. WE HAVE HEARD RIVAL SUBMISSIONS. AS POINTED OUT ON BEHALF OF THE ASSESSEE, WE FIND THAT THE DISALLOWANCE OF INTE REST ON CAPITAL WORK- IN-PROGRESS WAS REVERSED BY THE CO-ORDINATE BENCH I N ASSESSEES OWN CASE IN AY 2012-13. THE RELEVANT OPERATIVE PART OF THE ORDER OF THE ITAT IS REPRODUCED HEREUNDER: 5. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. THE ASSESSEE HAS PLAC ED ON RECORD ANNUAL REPORT CONTAINING THE BALANCE SHEET AND OTHE R DETAILS. THE ASSESSEE HAS RESERVES AND SURPLUS OF MORE THAN RS.4 8 CRORES. IT HAS INTERNAL ACCRUAL DURING THE YEAR WHICH CAN TAKE CAR E OF SUCH INVESTMENTS. THE LD.COUNSEL FOR THE ASSESSEE TOOK U S THROUGH NET CASH FLOW FROM OPERATIONS AVAILABLE ON PAGE NO.20 OF THE ANNUAL REPORT WHICH SUGGEST THAT THE ASSESSEE HAS NET CASH FLOW R S.16,55,474/-. THUS, CONSIDERING INTEREST FREE FUNDS AVAILABLE WIT H THE ASSESSEE IN THE SHAPE OF SHARE CAPITAL, RESERVES AND SURPLUS, A S WELL AS NET REVENUE FROM OPERATIONS, WE ARE OF THE VIEW THAT AL LEGED INVESTMENT IN WIP COULD BE ASSUMED AS CARRIED FROM THESE SURPL US FUNDS. NO NOTIONAL INTEREST OUGHT TO BE CALCULATED FOR CAPITA LIZATION. IN ORDER TO FORTIFY OURSELVES, WE WOULD LIKE TO REFER TO THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE U TILITIES & POWER LTD., 313 ITR 340 (BOM). IN VIEW OF THE ABOVE , THIS GROUND OF APPEAL IS ALLOWED. 9. THE FACTS AND THE CIRCUMSTANCES BEING SIMILAR WI THOUT ANY MATERIAL CHANGE, WE DO NOT SEE ANY REASON TO DEPART FROM THE VIEW ITA NO. 983/AHD/17 [CIL NOVA PETROCHEMICALS LTD. VS. DCIT] A.Y. 2013-14 - 4 - ALREADY TAKEN IN THIS REGARD. IN PARITY WITH THE F INDINGS OF THE CO- ORDINATE BENCH, WE FIND THAT MERIT IN THE PLEA OF T HE ASSESSEE. THE AO IS ACCORDINGLY DIRECTED TO DELETE THE ADDITION MADE ON THIS SCORE. 10. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 26/02/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 26/02/2 019