M/s. Naidunia News & Network P.Ltd.,, Indore v. The ACIT, Indore

CO 62/IND/2009 | 2004-2005
Pronouncement Date: 06-08-2010 | Result: Allowed

Appeal Details

RSA Number 6222723 RSA 2009
Assessee PAN AAACN6748F
Bench Indore
Appeal Number CO 62/IND/2009
Duration Of Justice 10 month(s) 7 day(s)
Appellant M/s. Naidunia News & Network P.Ltd.,, Indore
Respondent The ACIT, Indore
Appeal Type Cross Objection
Pronouncement Date 06-08-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 06-08-2010
Assessment Year 2004-2005
Appeal Filed On 29-09-2009
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH : INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI B.R.KAUSHIK ACCOUNTANT MEMBER PAN NO. : AAACN6748F I.T.A.NO. 442/IND/2009 A.Y. : 2004-05 ACIT M/S.NAIDUNIA NEWS & NETWORK PVT.LTD. 3(1) VS 60/1 BABU LABHCHAND CHHAJLANI MARG INDORE. INDORE. APPELLANT RESPONDENT C.O.NO.62/IND/2009 (ARISING OUT OF I.T.A.NO. 442/IND/2009) A.Y. : 2004-05 M/S.NAIDUNIA NEWS & NETWORK PVT.LTD. ACIT 60/1 BABU LABHCHAND CHHAJLANI MARG VS 3(1) INDORE. INDORE. CROSS OBJECTOR RESPONDENT DEPARTMENT BY : SMT. APARNA KARAN SR. DR RESPONDENT BY : SHRI M. C.MEHTA C. A. O R D E R PER B. R. KAUSHIK A.M. - 2 - 2 THIS APPEAL FILED BY THE REVENUE AND THE CROSS OBJE CTION FILED BY THE ASSESSEE ARISE OUT OF ORDER OF THE LD. CIT(A)- I BHOPAL DATED 11.06.2009 FOR THE ASSESSMENT YEAR 2004-05. I.T.A.NO. 442/IND/2009 REVENUES APPEAL : 2. THE FIRST GROUND OF APPEAL IS REPRODUCED BELOW :- THE LD.CIT(A) INDORE HAS ERRED IN FACTS AND CIRCU MSTANCES OF THE CASE IN DIRECTING TO ALLOW THE INTEREST ON B ORROWED FUNDS WHOLLY AND EXCLUSIVELY FOR BUSINESS PURPOSE W ITHOUT APPRECIATING THE FACT THAT A PART OF LOANS/ADVANCES TO THE EXTENT OF RS. 37 41 585/- WERE DIVERTED FOR NON-BUS INESS PURPOSE. 3. THE SECOND GROUND OF APPEAL IS GENERAL IN NATURE. 4. THE FACTS IN BRIEF ARE THAT THE ASSESSEE FILED RE TURN OF INCOME FOR ASSESSMENT YEAR 2004-05 AT A TOTAL INCOME OF RS . 86 92 910/- ON 31.10.2004. WHILE FINALIZING ASSESSMENT AS PER ORDE R U/S 143(3) DATED 11 TH DECEMBER 2006 THE AO MADE THE ADDITION OF RS. 32 66 888/- ON ACCOUNT OF DISALLOWANCE OF INTEREST ON UNSECURED LO AN AS PER PROVISIONS OF SECTION 14A AND 36(1)(III) OF THE INCOME-TAX ACT 19 61 AND FINALIZED THE ASSESSMENT AT RS. 1 23 09 800/-. THE AO OBSERVED TH AT THE ASSESSEE HAD MADE TOTAL INTEREST PAYMENT OF RS. 1 24 81 695/- ON UNSECURED LOAN OUT OF WHICH INTEREST OF RS. 49 50 033/- HAS BEEN PAID TO THE DIRECTORS. THE - 3 - 3 REMAINING INTEREST OF RS. 75 31 662/- ACCORDING TO THE AO HAD BEEN PAID TO OTHER RELATED PERSONS. THE AO ALSO OBSERVED THAT AS PER BALANCE SHEET OF THE ASSESSEE AS ON 31 ST MARCH 2004 THE INVESTMENT IN SHARES MUTUAL FUNDS AND NSC WAS SHOWN AT RS. 3 56 703/-. HE ALSO OBSERVED THAT THE CASH AND BANK BALANCES IN THE BALANCE SHEET WERE RS . L 00 35 329/- AND LOANS AND ADVANCES WERE RS. 1 13 87 227/-. THUS AC CORDING TO THE AO ASSETS TOTALING TO RS. 21 7 79 259/- DID NOT GIVE R ISE TO ANY TAXABLE INCOME AND THEREFORE PROPORTIONATE INTEREST @ 15% WAS LI ABLE TO BE DISALLOWED. HE ACCORDINGLY DISALLOWED INTEREST OF RS. 53 505/ - ON INVESTMENT OF RS. 3 56 703/- IN SHARES MUTUAL FUNDS AND NSC AND ADDE D THE AMOUNT OF RS. 53 703/- AS PER PROVISIONS OF SECTION 14A OF THE IN COME-TAX ACT 1961. THE ADDITION OF RS. 32 13 383/- WAS ALSO MADE U/S 3 6(1)(III) BEING 15 % OF RS. 2 14 20 556/- I.E. THE TOTAL OF CASH AND BAN K BALANCES LOANS AND ADVANCES. THE LD.CIT(A) CONSIDERED THE SUBMISSIONS OF THE ASSESSEE WHICH ARE REPRODUCED IN PARA 3 AT PAGES 2 TO 7 OF H IS IMPUGNED ORDER. THE LD.CIT(A) AS PER DISCUSSION IN PARA 4 AT PAGES 9 & 10 OF HIS IMPUGNED ORDER HELD THAT THE DISALLOWANCE U/S 14-A AND 36(1) (III) WERE NOT CALLED FOR AND THE ENTIRE ADDITION OF RS. 32 66 888/- WAS LIABLE TO BE DELETED. 5. DURING THE COURSE OF HEARING OF THE APPEAL THE LD. SENIOR D.R. RELIED ON THE ASSESSMENT ORDER AND REITERATED THAT THE EXPENDITURE ON INTEREST FOR INVESTMENT IN ASSETS GIVING RISE TO EX EMPT INCOME U/S 10 WAS - 4 - 4 RIGHTLY DISALLOWED U/S 14A OF THE INCOME-TAX ACT 19 61 AND THE INTEREST ON OTHER ASSETS WAS RIGHTLY DISALLOWED BECAUSE THE FUNDS OF THE BUSINESS WERE AVAILABLE TO THAT EXTENT AND THERE WAS NO BUSI NESS NECESSITY FOR TAKING UNSECURED LOANS TO THAT EXTENT @ 15% OF INTE REST. THE LD. COUNSEL REITERATED THE SUBMISSIONS TAKEN BEFORE THE LOWER A UTHORITIES. HE INVITED OUR ATTENTION TO THE WRITTEN SUBMISSIONS REPRODUCED AT PAGE 4 OF THE IMPUGNED ORDER OF THE LD.CIT(A) AND SUBMITTED THAT THE LOANS AND ADVANCES OF RS. 1 13 87 227/- WERE DURING THE COURS E OF BUSINESS AND OTHER ADVANCES OF RS. 42 73 102/- WERE EITHER ON AC COUNT OF OUTSTANDING BALANCE OF ERSTWHILE PARTNERS OR RELATED TO BUSINES S ASSOCIATES LIKE DAINIK NAI DUNIA BHOPAL AND NAI DUNIA COMMUNICATION PRIVA TE LIMITED. HE ALSO POINTED OUT THAT AN AMOUNT OF RS. 33 72 000/- WAS ON ACCOUNT OF INCOME TAX REFUNDABLE AND THUS THE ACTION OF THE AO IN DISALLOWING THE INTEREST TO THE EXTENT OF LOANS AND ADVANCES ON RS. 1 13 87 227/- WAS NOT IN ACCORDANCE WITH LAW. HE ALSO SUBMITTED THAT THE CASH AND BANK BALANCES OF RS.1 00 35 329/- CONSTITUTED CASH IN HA ND AND CHEQUES RECEIVED BUT NOT PRESENTED TO THE BANK. SIMILARLY BALANCE IN CURRENT ACCOUNT AND DEPOSITS IN SCHEDULED BANK WAS ALSO IN THE NORMAL COURSE OF BUSINESS AND THE TOTAL SUCH CASH AND BANK BALANCES DURING THE RELEVANT ACCOUNTING PERIOD WAS RS. 35 00 329/- AS AGAINST RS . 85 89 624/- FOR THE EARLIER YEAR AS COULD BE SEEN FROM THE DETAILS GIVE N AT PAGE 12 OF THE - 5 - 5 PAPER BOOK. HE ALSO SUBMITTED THAT THE ASSESSEE HAD TAKEN SECURED LOANS FROM THE BANK AMOUNTING TO RS. 95 15 843/- FOR THE PURPOSE OF BUSINESS AS AGAINST RS.1 26 98 176/- FOR EARLIER YEARS AS PE R DETAILS GIVEN AT PAGE 9 OF THE PAPER BOOK. THE UNSECURED LOANS OF RS. 7 83 76 391/- AS PER SCHEDULE IV OF THE BALANCE SHEET WERE SHOWN AT THE END OF THE CURRENT YEAR AS AGAINST THE OUTSTANDING UNSECURED LOAN FROM THE DIRECTORS AND SHAREHOLDERS OF RS. 7 49 10 025/- AS ON 31.3.2003. ACCORDING TO THE LD. COUNSEL THE INCREASE IN THE LIABILITY OF UNSECURED LOANS OF DIRECTORS AND SHAREHOLDERS WAS MAINLY ON ACCOUNT OF INTEREST CRED ITED TO THEIR ACCOUNTS AND NO NEW LOANS WERE TAKEN DURING THE YEAR. HE ALS O SUBMITTED THAT THE WORKING CAPITAL LOAN AND TERM LOANS FROM THE BANKS WERE LESS THAN THE SIMILAR LOANS TAKEN IN EARLIER YEARS AND IT COULD N OT THEREFORE BE SAID THAT THE BUSINESS FUNDS HAD BEEN UTILIZED FOR NON-BUSINE SS PURPOSES. HE FURTHER SUBMITTED THAT THE UNSECURED LOANS WERE SHO WN IN EARLIER YEARS ALSO BUT NO DISALLOWANCE WAS MADE OUT OF CLAIM OF INTEREST IN EARLIER YEARS EVEN WHILE FINALIZING THE ASSESSMENT FOR THOS E YEARS U/S 143(3) OF THE INCOME-TAX ACT 1961 AND FOR THIS ASSESSMENT YE AR THE AO HAS ON THE SAME FACTS ERRONEOUSLY MADE THE DISALLOWANCE ONLY O N THE PRESUMPTION THAT THE ASSETS AMOUNTING TO RS. 2 17 79 259/- DID NOT GIVE RISE TO ANY TAXABLE INCOME AND THAT THE INTEREST PAID ON THE LO ANS TAKEN FROM DIRECTORS AND SHAREHOLDERS TO THAT EXTENT WAS NOT FOR THE EXPENDITURE - 6 - 6 INCURRED FOR THE PURPOSE OF BUSINESS OF THE ASSESSE E. IT WAS ALSO SUBMITTED THAT INVESTMENT IN SHARES MUTUAL FUNDS AND NSCS WA S DULY JUSTIFIED ON ACCOUNT OF BUSINESS EXPEDIENCY AND THE DISALLOWANCE OF RS. 53 505/- U/S 14A OF THE INCOME-TAX ACT 1961 WAS NOT CORRECT. TH E LD. COUNSEL ALSO SUBMITTED THAT FOR THE REASONS DISCUSSED ABOVE THE DISALLOWANCE OF INTEREST OF RS. 32 13 383/- WAS ALSO NOT JUSTIFIED. 6. WE HAVE CAREFULLY CONSIDERED THE ISSUE IN VIEW OF THE ORDERS OF THE AUTHORITIES BELOW MATERIALS PLACED ON RECORD A ND RIVAL SUBMISSIONS. IN OUR CONSIDERED OPINION THE ASSESSEE HAS GIVEN T HE BREAK UP OF CASH AND BANK BALANCE AND LOANS AND ADVANCES WHICH HAS BEEN DULY TAKEN NOTE OF BY THE LD. CIT(A) IN HIS IMPUGNED ORDER AND ALL THE RELEVANT DETAILS WERE ALSO AVAILABLE IN THE BALANCE SHEET FILED WITH THE RETURN OF INCOME. IT IS VERY CLEAR THAT UNSECURED LOANS FROM DIRECTORS AND SHAREHOLDERS HAVE BEEN TAKEN IN EARLIER YEARS AND UTILIZED FOR THE PU RPOSE OF BUSINESS. SIMILARLY SECURED LOANS HAVE BEEN TAKEN FOR THE PU RPOSE OF BUSINESS AS TERM LOANS OR WORKING CAPITAL LOANS. THE CASH & CH EQUES IN HAND AND BANK BALANCES AS PER DETAILS GIVEN IN SCHEDULE 9 OF THE BALANCE SHEETS AS PER P-12 OF THE PAPER BOOK ARE THE ASSETS OF THE BU SINESS AND FUNDS TO THAT EXTENT CANNOT BE CONSIDERED AS FUNDS DIVERTED FOR N ON BUSINESS PURPOSES. SIMILARLY CURRENT ASSETS IN THE FORM OF LOANS AND ADVANCES TOTALING TO RS. 1 13 87 227/- AS PER DETAILS GIVEN IN SCH. 10 OF TH E BALANCE SHEET AS PER - 7 - 7 PAGE 12 OF THE PAPER BOOK HAVE ARISEN IN THE NORMAL COURSE OF BUSINESS OF THE ASSESSEE AND IT CANNOT BE SAID THAT THE INTERES T BEARING FUNDS TO THAT EXTENT HAVE BEEN DIVERTED FOR THE PURPOSES OTHER TH AN THE BUSINESS OF THE ASSESSEE. IT IS ALSO SEEN THAT THE FACTS OF THE CAS E FOR THIS ASSESSMENT YEAR ARE NOT DIFFERENT FROM THE FACTS IN EARLIER YEARS A ND THEREFORE THE PRESUMPTION OF THE AO THAT THE INTEREST BEARING FUN DS HAVE BEEN DIVERTED FOR THE PURPOSES OTHER THAN THE BUSINESS CANNOT BE CONSIDERED CORRECT. THE INVESTMENT IN SHARES AND NSC SHOWN IN THE BALANCE S HEET AS ASSETS AT SCHEDULE VI ARE THE SAME AS IN EARLIER YEAR AND NO NEW INVESTMENTS HAVE BEEN MADE. THE INTEREST ON NSC IS NOT EXEMPT FROM T AX AND THEREFORE DISALLOWANCE UNDER RULE 14-A CANNOT BE MADE ON ACCO UNT OF INVESTMENT IN NSC OF RS. 16 800/-. THE EQUITY SHARES OF PRESS TRUST OF INDIA AND WEBDUNIA.COM (I) LIMITED SHOWN AT RS. 2500/- AND R S. 1 85 100/- RESPECTIVELY ARE FOR THE PURPOSE OF BUSINESS BECAU SE THESE SHARES ARE OF THE CONCERNS DEALING WITH THE ASSESSEE AND INVESTME NTS ARE FOR BUSINESS CONSIDERATIONS. THE 20 056 UNITS OF HDFC MUTUAL FUN DS HAVE BEEN PURCHASED DURING THE YEAR AT RS. 1 52 300/-. AT WOR ST IT CAN BE SAID THAT THE INTEREST OF RS. 23 000/- ON ACCOUNT OF THIS INV ESTMENT IS RELATED TO THE NON TAXABLE INCOME BECAUSE THE EARNINGS FROM MUTU AL FUNDS ARE EXEMPT U/S 10 OF THE INCOME-TAX ACT 1961. HOWEVER FOR DIS ALLOWANCE IS NOT CALLED FOR LOOKING TO THE FACT THAT THIS MUCH INTER EST FREE FUNDS WOULD - 8 - 8 ALWAYS BE AVAILABLE WITH THE ASSESSEE. THUS THE DI SALLOWANCE MADE BY THE ASSESSING OFFICER IN OUR CONSIDERED OPINION H AS BEEN RIGHTLY DELETED BY THE LD. CIT(A). HIS DECISION IS THEREFORE CONF IRMED. 7. THE APPEAL OF THE REVENUE IS DISMISSED. C.O.NO.62/IND/2009: 8. THE GROUND TAKEN IN THE CROSS OBJECTION OF THE ASS ESSEE IS REPRODUCED BELOW :- THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE THE LD.CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF RS. 1 50 000/- IN RESPECT OF GENERAL REPAIRS AND MAINTENANCE OF RS . 25 000/- GENERAL CHARGES RS. 50 000/- CONVEYANCE EXPENSES RS. 50 000/- AND GARDEN AND LAWN EXPENSES OF RS. 25 000 /- WHEN NO SUCH AD HOC DISALLOWANCE ARE CALLED FOR SINCE TH IS BEING A CASE OF A COMPANY AND ALL THE EXPENSES ARE FULLY AN D PROPERLY VOUCHED. 9. THE LD. COUNSEL SUBMITTED THAT THE DISALLOWANCE MAD E ON AD HOC BASIS AND SIMILAR DISALLOWANCE WAS NEVER MADE IN EA RLIER YEARS. IT IS SEEN THAT DISALLOWANCE OF RS. 25 000/- OUT OF TOTAL CLAI M OF GENERAL REPAIRS AT RS. 3 96 339/- WAS MADE BY THE ASSESSING OFFICER FO R THE REASON THAT THE PAYMENTS HAD BEEN MADE IN CASH ON THE BASIS OF SELF -MADE VOUCHERS AND DETAILS OF EXPENSES IN SOME OF THE VOUCHERS WERE MI SSING. AD HOC - 9 - 9 DISALLOWANCE OF RS. 10 000/- WAS MADE OUT OF TOTAL EXPENDITURE OF RS. 27 27 678/- ON ACCOUNT OF TELECOMMUNICATION POSTAG E AND TELEGRAM EXPENSES. THE ADDITION OF RS. 1 LAKH OUT OF TOTAL C LAIM OF TRAVELING EXPENSES OF RS. 14 16 472/- WAS MADE ON ACCOUNT OF PERSONAL COMPONENT AND AS FRINGE BENEFIT DISALLOWANCE OF RS. 50 000/- OUT OF GENERAL CHARGES RS. 50 000/- OUT CONVEYANCE EXPENSES AND RS. 25 000 /- OUT OF GARDEN & LAWN EXPENSES WAS ALSO MADE OUT OF TOTAL CLAIM OF R S. 4 81 045/- AND RS. 11 53 908/- AND RS. 2 49 241/- ON AD HOC BASIS. THE LD.CIT(A) SUSTAINED THE DISALLOWANCES OUT OF GENERAL REPAIRS GENERAL C HARGES CONVEYANCE EXPENSES AND GARDEN AND LAWN EXPENSES FOR THE REAS ON THAT THE EXPENDITURE WERE NOT VERIFIABLE AND PAYMENTS WERE M ADE IN CASH. THE ADDITION ON ACCOUNT OF DISALLOWANCE OF TRAVELING EX PENSES AND TELECOMMUNICATION ETC. WERE DELETED. 10. WE HAVE CAREFULLY CONSIDERED THE ISSUE IN VIEW OF THE ORDERS OF THE AUTHORITIES BELOW MATERIALS PLACED ON RECORD A ND RIVAL SUBMISSIONS. IT IS SEEN THAT THE LD.CIT(A) HAS HIMSELF DELETED THE AD HOC DISALLOWANCE OF EXPENDITURE ON TRAVELING AND TELECOMMUNICATION ETC. FOR THE REASON THAT THE AO FAILED TO PROVE THAT THE EXPENSES WERE PERSO NAL IN NATURE. ON THE SAME LOGIC WE ARE ALSO OF THE CONSIDERED OPINION T HAT THE DISALLOWANCES SUSTAINED BY THE LD. CIT(A) DESERVE TO BE DELETED BECAUSE DISALLOWANCES - 10 - 10 WITHOUT ANY COGENT REASONS WERE MADE BY THE ASSESSI NG OFFICER. THE CROSS OBJECTION OF THE ASSESSEE IS ACCORDINGLY AL LOWED. 11. AS A RESULT THE APPEAL OF THE DEPARTMENT IS TREATE D AS DISMISSED AND CROSS OBJECTION IS ALLOWED. THIS ORDER HAS BEEN PRONOUNCED IN THE OPEN COURT ON 6 TH AUGUST 2010. SD/- SD/- (JOGINDER SINGH) (B. R. KAUSHIK) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED : 6 TH AUGUST 2010. CPU* 568