Stores Supply (India) Agency Pvt. Ltd., Kolkata V. ITO, WD-3(2), KOLKATA, Kolkata

ITA 992/KOL/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3361 (ITAT-KOLKATA)
• Duration Of Justice: 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2004-2005
• Appeal Filed On: 09-07-2015
• Court: TRIBUNAL
• Department Lawyers: MD GHAYAS UDDIN
• Assessee Lawyers: PARVIN LUHARUKA ACA
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH: KOLKATA [BEFORE SHRI MAHAVIR SINGH, JM] I.T.A NO.992/KOL/2015 ASSESSMENT YEAR: 2004-05 STORES SUPPLY (INDIA) AGENCY PVT. LTD. VS. INCOME -TAX OFFICER, WD-3(2), KOLKATA (PAN: AADCS7423F) ( APPELLANT ) ( RESPONDENT ) DATE OF HEARING: 29.12.2015 DATE OF PRONOUNCEMENT: 20.01.2016 FOR THE APPELLANT: SHRI PARVIN LUHARUKA, ACA FOR THE RESPONDENT: MD. GHAYAS UDDIN, JCIT, SR. DR ORDER THIS APPEAL BY ASSESSEE IS ARISING OUT OF ORDER OF CIT(A)-1, KOLKATA VIDE APPEAL NO. 173/CIT(A)-1/W-3(2)/2007-08 DATED 28.04.2015. ASSE SSMENT WAS FRAMED BY ITO, WD. 3(2), KOLKATA U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (HE REINAFTER REFERRED TO AS THE ACT) FOR ASSESSMENT YEAR 2004-05 VIDE HIS ORDER DATED 24.11. 2006. 2. THE ONLY ISSUE IN THIS APPEAL OF ASSESSEE IS AG AINST THE ORDER OF CIT(A) CONFIRMING THE ACTION OF AO IN DISALLOWING INTEREST PAID ON BORROW ED MONEY FOR THE BUSINESS PURPOSE AMOUNTING TO RS.3,49,606/-. 3. I HAVE HEARD RIVAL SUBMISSIONS AND GONE THROUGH FACTS AND CIRCUMSTANCES OF THE CASE. BRIEFLY STATED FACTS ARE THAT THE ASSESSEE HAS PAID AN AMOUNT OF RS.91,48,820/- TO M/S. SHYAM SUNDAR CHOWDHURY, ONE OF THE DIRECTORS OF THE ASSES SEE COMPANY. THE AO NOTED THAT THE FUND BORROWED BY THE ASSESSEE WORTH RS.81,37,458/- INCLU DING EARLIER YEARS BALANCE OF RS.9,11,698/- WAS ON INTEREST @ 15% AND INTEREST WAS DEBITED IN T HE P&L ACCOUNT AT RS.8,77,358/-. ACCORDING TO AO, THIS BORROWED MONEY WAS ACTUALLY D IVERTED TO M/S. STORE SUPPLY INDIA AGENCY AS INTEREST FREE ADVANCE WHEREAS THE ASSESSE E HAS CLAIMED INTEREST U/S. 36(1)(III) OF THE ACT. ACCORDING TO AO, THE INTEREST WAS NOT UTILIZE D FOR BUSINESS PURPOSES. HENCE, HE DISALLOWED THIS INTEREST. AGGRIEVED, ASSESSEE PREFERRED APPEA L BEFORE CIT(A), WHO ALSO CONFIRMED THE ACTION OF AO. AGGRIEVED, NOW ASSESSEE IS IN SECOND APPEAL BEFORE TRIBUNAL. 4. I FIND THAT THE ASSESSEE COMPANY HAS DIRECT BUSI NESS DEALING WITH THE SUNDRY DEBTOR AND A CLOSE LOOK OF THE LEDGER ACCOUNT OF ASSESSEE (WHICH IS GIVEN IN THE ORDER OF THE CIT(A) AT PAGE 6 PARA 4.1) REVEALS THAT BEFORE ME STORE SUPPLY INDIA AGENCY IS HAVING DIRECT DEALING AS UNDER: 2 ITA NO.992/KOL/2015 STORES SUPPLY (INDIA) AGENCY PVT. LTD., AY 2004-05 2 GOODS PURCHASED BY ASSESSEE COMPANY FROM THE CONCERN GOODS SOLD BY THE ASSESSEE TO THIS CONCERN PAYMENTS RECEIVED BY ASSESSEE AGAINST GOODS SOLD PAYMENTS MADE TO THE CONCERN BY THE ASSESSEE COMPANY RS.232941/- RS.10762693/- RS.9465800/- RS.8084868/- IT WAS EXPLAINED BY THE ASSESSEE THAT IT HAS SOLD G OODS WORTH RS.1,07,62,693/- AGAINST WHICH PAYMENT TO THE TUNE OF RS.94,65,800/- WAS RECEIVED AND BALANCE OF RS.12,96,893/- WAS RECEIVABLE. HE EXPLAINED THAT IF THIS AMOUNT IS AD JUSTED BY THE COST OF PURCHASE OF RS.2,32,941/- IT STANDS AT RS.10,63,952/- ONLY. THE ASSESSEE EXP LAINED THAT THIS AMOUNT OF RS.80,84,868/- INCLUDING EARLIER YEARS BALANCE WAS PAID AND ADJUS TED AGAINST THE SALES AND ASSESSEE COMPANY HAS NO LIABILITY PAYABLE WHEREAS IT WAS TO RECEIVE BALANCE OF RS.10,63,952/- AGAINST GOODS SOLD TO THEM. ACCORDINGLY, IT WAS CLAIMED THAT THE OUTS TANDING AMOUNT FROM THIS PARTY WAS COMMERCIAL IN NATURE AND THE SAME CANNOT BE TREATED AS ADVANCE ON WHICH INTEREST IS TO BE PAID. IT WAS ALSO EXPLAINED THAT THE DETAILS OF UNSECURED LOAN AND ITS UTILIZATION WAS SUBMITTED BEFORE THE LOWER AUTHORITIES AND FROM THE SAID DETAILS IT CAN BE FOUND THAT NO PART OF LOAN WAS DIVERTED OR UTILIZED FOR PAYMENT MADE TO STORE SUPPLY INDIA AGE NCY AND THERE WAS NO NEXUS BETWEEN THE LOAN TAKEN AND PAYMENT MADE TO THE SAID PARTY. THE INTEREST PAID ON SUCH LOAN CANNOT BE DISALLOWED. IT WAS ALSO EXPLAINED THAT SHAREHOLDER S FUND AS ON 31.03.2004 WAS AT RS.60,52,383/- AND THERE HAS BEEN NO NEXUS BETWEEN THE LOAN TAKEN AND THE ADVANCE MADE. I FIND FROM THE ABOVE FACTS THAT THE ASSESSEES TRANS ACTION IS PURELY IN THE NATURE OF COMMERCIAL TRANSACTION IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE. AS IS CLEAR FROM THE ABOVE FACTS THAT THE PAYMENTS RECEIVED BY ASSESSEE AGAINST GOODS SOL D AND PAYMENT MADE TO THE CONCERN BY THE ASSESSEE COMPANY ARE CLEARLY DEPICTABLE AND THERE I S NO NEXUS WITH THE LOAN TAKEN BY ASSESSEE WITH THESE PAYMENTS. ONCE THIS IS THE POSITION, TH E DISALLOWANCE OF INTEREST CANNOT BE MADE. I DELETE THE DISALLOWANCE AND REVERSE THE ORDERS OF T HE LOWER AUTHORITIES. APPEAL OF ASSESSEE IS ALLOWED. 5. IN THE RESULT, THE APPEAL OF ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 20.01.2016. (MAHAVIR SINGH) JUDICIAL MEMBER DATED : 20 TH JANUARY, 2016 JD. SR. P.S 3 ITA NO.992/KOL/2015 STORES SUPPLY (INDIA) AGENCY PVT. LTD., AY 2004-05 3 COPY OF THE ORDER FORWARDED TO: 1. APPELLANT STORES SUPPLY (INDIA) AGENCY PVT. LTD., 5B, CLIVE GHAT STREET, 2 ND FLOOR, KOLKATA-700 001 2. RESPONDENT ITO, WD-3(2), KOLKATA. 3. CIT(A) , KOLKATA 4. CIT , KOLKATA 5. DR, KOLKATA BENCHES, KOLKATA / TRUE COPY, BY ORDER, ASSTT. REGISTRAR .