M/s. Shree Laxmi Bidi Trading Co.,, Ahmedabad v. The Jt.CIT.,Range-11,, Ahmedabad

ITA 1209/AHD/2013 | 2009-2010
Pronouncement Date: 28-11-2014 | Result: Allowed

Appeal Details

RSA Number 120920514 RSA 2013
Assessee PAN AAFFS5299C
Bench Ahmedabad
Appeal Number ITA 1209/AHD/2013
Duration Of Justice 1 year(s) 6 month(s) 28 day(s)
Appellant M/s. Shree Laxmi Bidi Trading Co.,, Ahmedabad
Respondent The Jt.CIT.,Range-11,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 28-11-2014
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted B
Tribunal Order Date 28-11-2014
Date Of Final Hearing 26-11-2014
Next Hearing Date 26-11-2014
Assessment Year 2009-2010
Appeal Filed On 30-04-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD BEFORE SHRI ANIL CHATURVEDI ACCOUNTANT MEMBER AND SHRI KUL BHARAT JUDICIAL MEMBER 1. ./ I.T.A. NO.1209/AHD/2013 A.Y. 2009-10 2. ./ I.T.A. NO.1398/AHD/2013 A.Y. 2009-10 1. SHREE LAXMI BIDI TRADING CO. GOMTIPUR ROAD CEMENT CHAWL 745/7 GOMTIPUR AHMEDABAD-380 021 2. JT.CIT RANGE-11 AHMEDABAD / VS. 1. JT.COMMISSIONER OF INCOME TAX RANGE-11 AHMEDABAD 2. SHREE LAXMI BIDI TRADING CO. AHMEDABAD ' ./ ./ PAN/GIR NO. AAFFS 5299 C ( '% / APPELLANTS ) .. ( &''% / RESPONDENTS ) ASSESSEE B Y : SHRI S.N.SOPARKAR A.R. REVENUE B Y : SHRI ROOP CHAND SR.D.R. () / DATE OF HEARING 26/11/2014 *+ -) / DATE OF PRONOUNCEMENT 28/11/2014 / O R D E R PER SHRI KUL BHARAT JUDICIAL MEMBER : THESE CROSS-APPEALS BY THE ASSESSEE AND THE REVENU E ARE DIRECTED AGAINST THE ORDER OF THE LD.COMMISSIONER OF INCOME TAX(APPEALS)-XVI AHMEDABAD (CIT(A) IN SHORT) DATED 15/03/2013 PER TAINING TO ASSESSMENT YEAR (AY) 2009-10. THESE APPEALS WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS CONSOLIDATED O RDER FOR THE SAKE OF CONVENIENCE. ITA NO.1209/AHD/2013 (BY ASSESS EE) AND ITA NO.1398/AHD/2013 (BY REVENUE) SHREE LAXMI BIDI TRADING CO. VS.JT.CIT ASST.YEAR 2009-10 - 2 - 2. FIRST WE TAKE UP THE ASSESSEES APPEAL IN ITA N O.1209/AHD/2013 FOR AY 2009-10. THE ASSESSEE HAS RAISED THE FOLLO WING GROUNDS OF APPEAL:- 1. THE LD.COMMISSIONER OF INCOME TAX (APPEALS)-XVI A HMEDABAD ERRED IN CONFIRMING THE DISALLOWANCE OF RS.5 14 632 /- U/S.14A OF THE INCOME TAX ACT 1961. IN VIEW OF THE FACTS AND CIR CUMSTANCES OF THE CASE THE DISALLOWANCE OF RS.5 14 632/- CONFIRMED B Y THE CIT(A) BE DELETED. 2. THE LD.COMMISSIONER OF INCOME TAX (APPEALS) XVI AH MEDABAD HAS ERRED IN CONFIRMING THE DISALLOWANCE OF RS.32 31 48 6/- OUT OF INTEREST PAYMENT MADE BY THE APPELLANT (PARA 4.4 PA GE 18 OF ASSESSMENT ORDER). IN VIEW OF THE FACTS AND CIRCUM STANCES OF THE CASE THE DISALLOWANCE OF RS.32 31 486/- CONFIRMED BY THE CIT(A) BE DELETED. 2. BRIEFLY STATED FACTS ARE THAT THE CASE OF THE A SSESSEE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND THE ASSESSMENT U/S.143( 3) OF THE INCOME TAX ACT 1961 (HEREINAFTER REFERRED TO AS THE ACT) WAS FRAMED VIDE ORDER DATED 22/12/2011 THEREBY THE ASSESSING OFFICER (AO IN SHORT) MADE DISALLOWANCE BY INVOKING THE PROVISIONS OF SECTION 14A OF THE ACT READ WITH RULE-8D OF THE IT RULES 1962 AMOUNTING TO RS. 5 14 632/- DISALLOWANCE OF INTEREST CLAIMED U/S.36(1)(III) OF THE ACT AMOUNTING TO RS.3 15 09 824/- AND THE OTHER DISALLOWANCES IN RES PECT OF VEHICLE EXPENSES OF RS.33 152/- & TELEPHONE EXPENSES OF RS. 37 588/-. APART FROM THE SAID DISALLOWANCES THE AO ALSO MADE DISAL LOWANCE IN RESPECT OF THE RATE DIFFERENCE AMOUNTING TO RS.34 78 373/-. A GGRIEVED BY THE ASSESSMENT ORDER THE ASSESSEE CARRIED THE MATTER BEFORE THE LD.CIT(A) ITA NO.1209/AHD/2013 (BY ASSESS EE) AND ITA NO.1398/AHD/2013 (BY REVENUE) SHREE LAXMI BIDI TRADING CO. VS.JT.CIT ASST.YEAR 2009-10 - 3 - WHO AFTER CONSIDERING THE SUBMISSIONS AND RECORDS P LACED BEFORE HIM PARTLY ALLOWED THE APPEAL. WHILE DISPOSING OF THE APPEAL LD.CIT(A) CONFIRMED THE ADDITION OF RS.5 14 632/- MADE U/S.1 4A OF THE ACT REDUCED THE DISALLOWANCE OF INTEREST TO THE EXTENT OF RS.32 31 486/- AGAINST THE DISALLOWANCE OF RS.3 15 09 824/-. IN RESPECT OF THE RATE DIFFERENCE THE LD.CIT(A) DELETED THE ADDITION OF R S.34 78 373/-. 3. APROPOS TO GROUND NO.1 OF ASSESSEES APPEAL THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT THIS ISSUE IS COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL (ITAT BENCH A A HMEDABAD) IN ITA NO.777/AHD/2011(BY REVENUE) AND CO NO.93/AHD/20 11 (BY ASSESSEE) FOR AY 2007-08 DATED 19/09/2014 WHEREIN THE TRIBUNAL RESTRICTED THE DISALLOWANCE TO THE NET INTEREST AND NOT ON THE BASIS OF GROSS INTEREST. IN THE PRESENT CASE THE AO MADE THE DI SALLOWANCE ON THE BASIS OF GROSS INTEREST. 3.1. ON THE CONTRARY THE LD.SR.DR SUPPORTED THE OR DERS OF THE AUTHORITIES BELOW. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT A SIMILAR ISSUE WAS DECIDED BY THE COO RDINATE BENCH OF THIS TRIBUNAL IN ITA NO.777/AHD/2011 FOR AY 2007-08 (SUP RA) WHEREIN THE TRIBUNAL HAS HELD THAT WHILE WORKING OUT THE DISAL LOWANCE U/S.14A OF THE ACT THE NET INTEREST SHOULD BE CONSIDERED. WHILE DOING SO THE TRIBUNAL ITA NO.1209/AHD/2013 (BY ASSESS EE) AND ITA NO.1398/AHD/2013 (BY REVENUE) SHREE LAXMI BIDI TRADING CO. VS.JT.CIT ASST.YEAR 2009-10 - 4 - HAS FOLLOWED THE DECISION OF HONBLE BOMBAY TRIBUNA L RENDERED IN THE CASE OF MORGAN STANLEY (IND) SECURITIES VS. ACIT I N ITA NO.5072/MUM/2005 DATED 13/04/2011. IN THE INSTAN T CASE THE REVENUE HAS NOT POINTED OUT ANY CHANGE IN THE FACTS AND CIR CUMSTANCE AND THEREFORE WE DO NOT FIND ANY REASON TO TAKE A DIFF ERENT VIEW THAN TAKEN BY THE COORDINATE BENCH IN ITA NO.777/AHD/2011(SUPR A). THEREFORE THE AO IS DIRECTED TO WORK OUT THE DISALLOWANCE ON THE BASIS OF NET INTEREST AND THIS ISSUE IS RESTORED BACK TO THE FIL E OF AO TO DECIDE IT AFRESH IN THE LIGHT OF THE DIRECTION GIVEN HEREINABOVE. THUS THIS GROUND OF ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOS ES. 5. APROPOS TO GROUND NO.2 OF ASSESSEES APPEAL THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT WHILE DISPOSING OF THIS GROUND THE LD.CIT(A) FOLLOWED THE EARLIER ORDER PASSED FOR AY 2008-09. HE SUBMITTED THAT THE MATTER WAS CARRIED BEFORE THE ITAT B BENCH AHMEDA BAD AND THE TRIBUNAL IN ITA NO.2325/AHD/2012 FOR AY 2008-09 VID E ORDER DATED 31/10/2014 HAS DECIDED THIS ISSUE IN FAVOUR OF ASSE SSEE. HE SUBMITTED THAT THIS ISSUE IN EARLIER YEAR ALSO TRAVELLED UPTO THE HONBLE JURISDICTIONAL HIGH COURT WHEREIN THE HONBLE HIGH COURT HAS IN ASSESSEES OWN CASE - IN TAX APPEAL NOS.851 TO 856 OF 2014 VIDE OR DER DATED 01/09/2014 DECIDED THE ISSUE IN FAVOUR OF ASSESSEE . 6. ON THE CONTRARY LD.SR.DR SUPPORTED THE ORDER OF THE LD.CIT(A). ITA NO.1209/AHD/2013 (BY ASSESS EE) AND ITA NO.1398/AHD/2013 (BY REVENUE) SHREE LAXMI BIDI TRADING CO. VS.JT.CIT ASST.YEAR 2009-10 - 5 - 7. WE HAVE HEARD THE RIVAL SUBMISSIONS PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IN THE INSTANT CASE WE FIND THAT THE LD.CIT(A) HAS DECIDED THIS ISSUE BY FOLLOWING THE EARLIER DECISION PERTAINING TO AYS 20 07-08 & 2008-09 BY OBSERVING AS UNDER:- 4.3 IT HAS BEEN NOTED THAT THERE IS NO MATERIAL C HANGE IN THE FACTS OF THE CASE OF THE PRESENT APPEAL AS COMPARED TO APPELLANTS CAS E FOR AY 2007-08 & 2008- 09. THE FINDING GIVEN IN ABOVE ORDERS ARE REASONABL E ENOUGH AND GIVEN AFTER CONSIDERING THE LEGITIMATE NEED OF THE BORROWED FUN DS AND UTILIZATION THEREOF. IT IS PERTINENT TO BE NOTED HERE THAT THE ASSESSING OFFICER HAD NOT PROPERLY EXAMINED THE CASE. HE HAS DISALLOWED THE INTEREST E XPENSES WHICH WERE FAR IN EXCESS THAN THE INTEREST PAID TO THE RELATIVES AND FAMILY MEMBERS OF THE PARTNERS OF THE FIRM. THE APPELLANT HAS RAISED NEW FUNDS OF RS.4 87 53 200/- AGAINST WHICH AO HAS DISALLOWED INTEREST OF RS.315 09 824/-. THE AO AT BEST OUGHT TO HAVE DISALLOWED INTEREST ON NEW LOANS. HAV ING SAID THAT THERE IS NO DENYING THE FACT THAT THE APPELLANT CANNOT CLAIM IN TEREST U/S 36(1)(III) IN RESPECT OF ANY BORROWED FUNDS UNLESS HE IS ABLE TO ESTABLISH A CLEAR NEXUS BETWEEN SUCH BORROWED FUNDS AND THEIR IMMEDIATE DEP LOYMENT / UTILISATION FOR THE PURPOSE OF BUSINESS. PERUSAL OF THE DETAILS OF BANK ACCOUNTS FILED BY THE APPELLANT HOWEVER INDICATE THAT THERE WERE OCCASION S WHEN THE APPELLANT WAS HAVING ITS OWN FUNDS AND WAS NOT IN NEED OF ANY BOR ROWINGS. CONSEQUENTLY THE APPELLANT CANNOT BE ALLOWED INTEREST ON THOSE BORRO WED FUNDS WHICH WERE OBTAINED AT A TIME WHEN THE APPELLANT WAS HAVING IT S OWN FUNDS. ACCORDINGLY AN EFFORT WAS MADE TO IDENTIFY THE FACTUAL POSITION OF THE RECEIPT OF FUNDS INTEREST PAID UPON IT WHICH WAS NOT UTILISED BY THE APPELLANT FOR ITS BUSINESS WITH REFERENCE TO THE BANK STATEMENTS OF THE APPELL ANT OPERATED DURING THE YEAR. DURING THE YEAR THE APPELLANT HAS OBTAINED U NSECURED LOANS OF RS.4 87 53 200/- FROM DIFFERENT PARTIES ON DIFFERE NT DATES WHICH WAS DEPOSITED IN BANK ACCOUNTS OF THE APPELLANT MAINTAINED WITH U NION BANK OF INDIA AND CORPORATION BANK. PERUSAL OF THE BANK STATEMENT SHO W THAT ON EVERY OCCASION WHEN THE UNSECURED LOAN WAS OBTAINED BY THE APPELLA NT SUFFICIENT FUNDS OF ITS OWN WERE AVAILABLE IN ITS BANK ACCOUNT AT THAT POIN T OF TIME. IT GOES ON TO INDICATE THAT THERE WAS NO ACTUAL BUSINESS NEED TO BORROW FUNDS. THUS THE ARGUMENT OF THE APPELLANT THAT THE BORROWED FUNDS W ERE UTILISED FOR THE PURPOSES OF BUSINESS DOES NOT GETS VINDICATED. A CH ART INDICATING BORROWINGS ITA NO.1209/AHD/2013 (BY ASSESS EE) AND ITA NO.1398/AHD/2013 (BY REVENUE) SHREE LAXMI BIDI TRADING CO. VS.JT.CIT ASST.YEAR 2009-10 - 6 - MADE BY THE APPELLANT FROM PARTIES ON DIFFERENT DAT ES PERIOD OF HOLDING RATE OF INTEREST ASSUMING BANK RATE OF 14% ETC IS REPROD UCED HEREUNDER:- NAME OF DEPOSITOR NAME OF BANK DATE OF DEPOSIT AMOUNT INTEREST DAYS UP TO 3/31/2009 14% INTEREST AMT. UP TO 3/31/2009 SHREE ARBUDA TRANSPORT COMPANY UBI 12.04.2008 7500000 353 1015479 SHREE JAYLAXMI TRANSPORT COMPANY UBI 12.04.2008 2500000 353 338493 PARBHUDAS KISHORDAS HUF UBI 18.04.2008 325000 347 4 3256 JASWANTLAL PARBHUDAS HUF UBI 18.04.2008 650000 347 86512 10975000 PARBHUDAS KISHORDAS HUF UBI 28.05.2008 1300000 307 153079 1300000 PARBHUDAS KISHORDAS HUF UBI 14.06.2008 1300000 290 144603 1300000 SHREE ARBUDA TRANSPORT COMPANY UBI 08.08.2008 3000000 235 270411 PARBHUDAS KISHORDAS HUF UBI 19.08.2008 200000 224 1 7184 JASWANTLAL PARBHUDAS HUF UBI 19.08.2008 500000 224 42959 3700000 JASWANTLAL PARBHUDAS HUF UBI 23.09.2008 1050000 189 76118 1050000 SHREE JAYLAXMI TRANSPORT COMPANY UBI 03.10.2008 3000000 179 205973 RAJNIKANT P PATEL HUF UBI 08.10.2008 283200 174 189 01 PRAHLADBHAI PARBHUDAS HUF UBI 08.10.2008 250000 174 16685 JASWANTLAL PARBHUDAS HUF UBI 08.10.2008 325000 174 21690 M/S. PARBHUDAS KISHORDAS UBI 25.10.2008 3500000 15 7 210767 JASWANTLAL PARBHUDAS HUF UBI 25.10.2008 400000 157 24088 7758200 SHREE ARBUDA TRANSPORT COMPANY CORP BANK 27.11.2008 6000000 124 285370 SHREE JAYLAXMI TRANSPORT COMPANY CORP BANK 27.11.2008 4000000 124 190247 10000000 BHARATKUMAR P PATEL CORP BANK 08.01.2009 70000 82 2202 70000 PRAHLADBHAI PARBHUDAS HUF UBI 15.01.2009 900000 75 25890 900000 JASWANTLAL PARBHUDAS UBI 16.02.2009 950000 43 15668 ITA NO.1209/AHD/2013 (BY ASSESS EE) AND ITA NO.1398/AHD/2013 (BY REVENUE) SHREE LAXMI BIDI TRADING CO. VS.JT.CIT ASST.YEAR 2009-10 - 7 - HUF 950000 PRAHLADBHAI PARBHUDAS HUF UBI 04.03.2009 550000 27 5696 DEVANG JAGDISHBHAI UBI 18.03.2009 200000 13 997 750000 KALINDIBEN RAJNIKANT CORP BANK 26.03.2009 5000000 5 9589 KALINDIBEN RAJNIKANT CORP BANK 26.03.2009 5000000 5 9589 10000000 48753200 3231446 4.4 A PERUSAL OF THE ABOVE SHOWS THAT OUT OF THE T OTAL AMOUNT OF RS.4 87 53 200/- BORROWED BY THE APPELLANT ON DIFFE RENT DATES AND PAID INTEREST THE INADMISSIBLE RATE OF INTEREST WHICH R EQUIRES TO BE ADDED TO APPELLANTS INCOME COMES TO RS.32 31 486/-. THE HYP OTHESIS TAKEN IS INSYNC WITH REASONING TAKEN IN EARLIER APPELLATE ORDERS AS WELL. THE ARGUMENT OF THE APPELLANT OF GIVING HIM A BENEFIT OF NOTIONAL INTER EST OF RS.20 77 358/- HAS BEEN FOUND TO BE BEREFT OF ANY MERIT. ACCORDINGLY THE A DDITION MADE BY THE LD AO IS CONFIRMED TO THE EXTENT OF RS.32 31 486/- ONLY AND THE BALANCE IS DELETED. THE SECOND GROUND OF APPEAL RAISED IS THEREFORE PARTLY ALLOWED. 7.1. THE COORDINATE BENCH OF THIS TRIBUNAL (ITAT BE NCH B AHMEDABAD) IN ITA NO.2325/AHD/2012 FOR AY 2008-09 I N ASSESSEES OWN CASE VIDE ORDER DATED 31/10/2014 HAS DECIDED TH IS ISSUE IN PARAS-17 AND 18 BY OBSERVING AS UNDER:- 17. FURTHER IN RESPECT OF THE RETENTION OF DISAL LOWANCE OF INTEREST OF RS.10 71 797/- WE FIND THAT THE CIT(A) UPHELD THE DISALLOWANCE ON HIS FINDINGS THAT BORROWED FUNDS WE RE NOT REQUIRED FOR IMMEDIATE BUSINESS NEEDS. IN OUR CONS IDERED VIEW THE NEED OF BUSINESS IS TO BE JUDGED FROM THE POINT OF VIEW OF BUSINESSMEN. THE ASSESSEE IS HAVING BUSINESS TURNO VER OF OVER 211 CRORES DURING THE YEAR UNDER CONSIDERATION. TH E AMOUNT WHICH THE ASSESSEE MAY NEED FOR HIS BUSINESS MAY NO T BE AVAILABLE ALWAYS TO THE ASSESSEE. THEREFORE THE ASSESSEE HA S TO AVAIL THE LOAN AMOUNT WHEN IT IS AVAILABLE BY KEEPING IN VIEW THE FUTURE ITA NO.1209/AHD/2013 (BY ASSESS EE) AND ITA NO.1398/AHD/2013 (BY REVENUE) SHREE LAXMI BIDI TRADING CO. VS.JT.CIT ASST.YEAR 2009-10 - 8 - NEEDS WHICH MAY ARISE IN THE COURSE OF BUSINESS. T HEREFORE MERELY AS BECAUSE THE ASSESSEE HAD SUFFICIENT OWN F UNDS ON THE DATE OF THE BORROWINGS IT CANNOT BE CONCLUDED THAT BORROWINGS IT CANNOT BE CONCLUDED THAT BORROWINGS WERE NOT FOR TH E PURPOSE OF BUSINESS. 18. IN THE INSTANT CASE WE FIND THAT IT IS NOT T HE CASE OF THE REVENUE THAT THE BORROWED FUNDS WERE DIVERTED AND A CTUALLY UTILIZED FOR ANY NON-BUSINESS PURPOSES OF THE ASSES SEE. THUS IN OUR CONSIDERED VIEW THE DISALLOWANCE OF INTEREST O F RS.10 71 797/- UPHELD BY THE CIT(A) IS NOT SUSTAINABLE. 7.2. THE HONBLE JURISDICTIONAL HIGH COURT HAS IN ASSESSEES OWN CASE AN IDENTICAL ISSUE DECIDED BY OBSERVING AS UNDER:- 10. EXAMINING THE FACTS OF THE PRESENT CASE IN THE LIGHT OF THE ABOVE DECISION THE COMMISSIONER (APPEALS) IN HIS ORDER H AS OBSERVED THAT THERE IS NO DISPUTE THAT THE ASSESSEE REQUIRES HUGE FUNDS FOR THE PURPOSE OF ITS BUSINESS. FOR MAKING PURCHASES OF BIDI THE ASSESSEE HAS TO MAKE ADVANCE PAYMENTS. THE VOLUME OF PURCHASES IS RS.160 CRORES OR MORE IN ONE YEAR. FOR THIS PURPOSE THE ASSESSEE HAS TO BORR OW MONEY FROM DIFFERENT PERSONS. SINCE IT IS NOT CERTAIN AS TO EX ACTLY WHEN SUCH PAYMENT WILL BE REQUIRED TO BE MADE AND IT MAY NOT BE POSSIBLE TO SECURE SUCH LOANS IMMEDIATELY WHEN PAYMENT IS REQUI RED TO BE MADE FOR SMOOTH RUNNING OF THE BUSINESS THE ASSESSEE HA S TO BORROW SUCH FUNDS IN ADVANCE AND KEEP THE SAME READY AT ITS DIS POSAL. UNDER THE CIRCUMSTANCES INSTEAD OF KEEPING SUCH FUNDS IDLE THE ASSESSEE PARKED THE SAME IN SHORT TERM FIXED DEPOSITS WHICH IN TURN WERE USED FOR MAKING PAYMENT AGAINST PURCHASE OF BIDIS. MOREOVER AS NOTICED HEREINABOVE OBTAINING LOANS FROM BANKS IS A CUMBER SOME PROCESS AND THE INTEREST RATE IS ALSO HIGH HENCE THE ASSESSEE HAS OBTAINED UNSECURED LOANS FROM RELATIVES OF PARTNERS AT THE R ATE OF 18%. THE COMMISSIONER (APPEALS) HAS HELD THAT TO KEEP THE FU NDS IN FIXED DEPOSITS IS PART AND PARCEL OF THE BUSINESS EXPEDIE NCY OF THE ASSESSEE. HE HAS ALSO HELD THAT INTEREST PAYMENT TO RELATIVES OF PARTNERS IS AN ALLOWABLE EXPENDITURE BUT HAS DISALLOWED THE SAME T O THE EXTENT THE SAME EXCEEDED THE INTEREST PAID TO TRANSPORTERS AND AGAINST GOODS ITA NO.1209/AHD/2013 (BY ASSESS EE) AND ITA NO.1398/AHD/2013 (BY REVENUE) SHREE LAXMI BIDI TRADING CO. VS.JT.CIT ASST.YEAR 2009-10 - 9 - DEPOSITS. THE TRIBUNAL HAS NOTED THAT THE AMOUNT H AS BEEN BORROWED IN EARLIER YEARS AS WELL AS DURING THE YEARS UNDER CON SIDERATION AT A STIPULATED RATE OF INTEREST AND WHICH HAS BEEN UTIL ISED FOR THE PURPOSE OF BUSINESS; THE INTEREST RATE COULD NOT HAVE BEEN REN EGOTIATED FROM THE EARLIER YEAR. THEREFORE THE RATE OF INTEREST PAID BY THE ASSESSEE IS QUITE REASONABLE. CONSIDERING THE FACTS OF THE CASE IN TH EIR TOTALITY IT IS APPARENT THAT THE ASSESSEE HAS BORROWED FUNDS AND U SED THE SAME FOR ITS BUSINESS PURPOSES. BOTH THE COMMISSIONER (APPEALS) AS WELL AS THE TRIBUNAL HAVE CONCURRENTLY FOUND THAT THE BORROWED FUNDS HAVE BEEN USED FOR BUSINESS PURPOSES AND HAVE HELD THAT INTER EST ON SUCH BORROWED FUNDS IS AN ALLOWABLE EXPENDITURE. THE ONL Y DIFFERENCE IN OPINION IS TO THE EXTENT OF INTEREST ALLOWABLE ON S UCH BORROWED FUNDS. THE COMMISSIONER (APPEALS) HAS RESTRICTED SUCH ALLO WANCE TO THE INTEREST PAID TO TRANSPORTERS AND TOWARDS GOODS DE POSITS WHEREAS THE TRIBUNAL HAS HELD THE INTEREST PAID AT THE RATE OF 18% TO BE REASONABLE. HAVING REGARD TO THE FINDINGS RECORDED BY THE TRIBU NAL FOR HOLDING THE RATE OF INTEREST AT 18% TO BE REASONABLE IT IS NOT POSSIBLE TO STATE THAT THERE IS ANY LEGAL INFIRMITY IN THE CONCLUSION ARRI VED AT BY THE TRIBUNAL SO AS TO GIVE RISE TO A QUESTION OF LAW MUCH LESS A SUBSTANTIAL QUESTION OF LAW WARRANTING INTERFERENCE. 7.3. THE REVENUE HAS NOT PLACED ANY CONTRARY MATERI AL ON RECORD SUGGESTING THAT THE FACTS AND CIRCUMSTANCES IN THE YEAR ARE DIFFERENT. THEREFORE FOLLOWING THE JUDGEMENT OF HONBLE JURIS DICTIONAL HIGH COURT IN ASSESSEES OWN CASE IN TAX APPEAL NOS.851 TO 856 OF 2014 VIDE ORDER DATED 01/09/2014 AND THE DECISION OF COORDINATE BE NCH OF THIS TRIBUNAL IN ITA NO.2325/AHD/2012 FOR AY 2008-09 WE ARE OF T HE CONSIDERED VIEW THAT THE LD.CIT(A) WAS NOT JUSTIFIED IN SUSTAI NING THE DISALLOWANCE AMOUNTING TO RS.32 31 486/- AND HEREBY DIRECTED TO DELETE THE SAME. THUS THIS GROUND OF ASSESSEES APPEAL IS ALLOWED. 8. AS A RESULT THE APPEAL OF THE ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSES. ITA NO.1209/AHD/2013 (BY ASSESS EE) AND ITA NO.1398/AHD/2013 (BY REVENUE) SHREE LAXMI BIDI TRADING CO. VS.JT.CIT ASST.YEAR 2009-10 - 10 - 9. NOW WE TAKE UP THE REVENUES APPEAL IN ITA NO.1 398/AHD/2013 FOR AY 2009-10. THE REVENUE HAS RAISED THE FOLLOWI NG GROUNDS OF APPEAL:- (1) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN RESTRICTING THE DISALLOWANCE OF INTEREST OF RS.3 15 09 824/- MA DE BY AO U/S.36(1)(III) OF THE ACT TO RS.32 31 486/- AND THE REBY ALLOWING RELIEF TO THE EXTENT OF RS.2 82 78 338/- WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE. (2) THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS I N DELETING THE ADDITION OF RS.34 78 372/- MADE ON ACCOUNT OF RATE DIFFERENCE/COMMISSION PAID TO PETA DEALERS WITHOUT CONSIDERING THE FACTS OF THE CASE AND THE FINDINGS BROUGHT OUT BY THE AO. (3) ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LD.CIT(A) OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFF ICER. (4) IT IS THEREFORE PRAYED THAT THE ORDER OF THE LD .CIT(A) MAY BE SET ASIDE AND THAT OF THE ORDER OF THE ASSESSING OF FICER BE RESTORED TO THE ABOVE EXTENT. 10. APROPOS TO GROUND NO.1 OF REVENUES APPEAL THE LD.SR.DR AND THE LD.COUNSEL FOR THE ASSESSEE ADVANCED THEIR ARGU MENTS AS WERE MADE IN ITA NO.1209/AHD/2013 FOR AY 2009-10 (ASSESSEES APP EAL-SUPRA). SINCE WE HAVE DECIDED THE ISSUE IN FAVOUR OF THE AS SESSEE BY FOLLOWING THE JUDGEMENT OF HONBLE JURISDICTIONAL HIGH COURT IN ASSESSEES OWN CASE IN TAX APPEAL NOS.851 TO 856 OF 2014(SUPRA) AN D THE DECISION OF COORDINATE BENCH OF THIS TRIBUNAL IN ITA NO.2325/AH D/2012(SUPRA) AND THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES O F THE CASE WE DISMISS ITA NO.1209/AHD/2013 (BY ASSESS EE) AND ITA NO.1398/AHD/2013 (BY REVENUE) SHREE LAXMI BIDI TRADING CO. VS.JT.CIT ASST.YEAR 2009-10 - 11 - THE GROUND NO.1 OF REVENUES APPEAL FOR THIS YEAR. THUS THIS GROUND OF REVENUES APPEAL IS DISMISSED. 11. APROPOS TO GROUND NO.2 OF REVENUES APPEAL THE SR.DR SUBMITTED THAT THE AO OBSERVED THAT IN RESPECT OF COMMISSION MADE TO DEALERS AND PETA-DEALERS THE ASSESSEE HAD PAID COMMISSION @ R S.2/- APPROX. PER 1000 TO DEALERS AND FURTHER COMMISSION OF RS.0.19 T O RS.0.59 IS CLAIMED TO HAVE BEEN MADE TO THE DEALERS FOR MAKING PAYMENT BY THEM TO THE PETA-DEALERS. HE SUBMITTED THAT BEFORE AO THE ASSE SSEE FAILED TO FURNISH THE EVIDENCES IN RESPECT OF ITS CLAIM. 11.1. ON THE CONTRARY THE LD.COUNSEL FOR THE ASSES SEE SUBMITTED THAT ALL DETAILS WERE FURNISHED BY THE ASSESSEE. HE SUBMITT ED THAT THE LD.CIT(A) HAS THOROUGHLY EXAMINED THE ISSUE AND HAS RIGHTLY C AME TO THE CONCLUSION IN FAVOUR OF THE ASSESSEE. HE FURTHER SUBMITTED TH AT THE PAYMENTS HAVE BEEN MADE THROUGH BANKING CHANNELS AND ALL APPLICAB LE TAX DEDUCTIONS OF THE PROVISIONS HAVE BEEN COMPLIED WITH AND WHEREVER ASSESSEE WAS REQUIRED TO DEDUCT THE TAX HE DEDUCTED THE TAX AND THE EVIDENCE OF DEDUCTION OF TAX AND THE PAYMENTS MADE THROUGH BANK ING CHANNELS WERE PRODUCED AND THE LD.CIT(A) HAS EXAMINED AND RIGHTLY CAME TO THE CONCLUSION IN FAVOUR OF THE ASSESSEE. 12. WE HAVE HEARD THE RIVAL SUBMISSIONS PERUSED TH E MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. ITA NO.1209/AHD/2013 (BY ASSESS EE) AND ITA NO.1398/AHD/2013 (BY REVENUE) SHREE LAXMI BIDI TRADING CO. VS.JT.CIT ASST.YEAR 2009-10 - 12 - WE FIND THAT THE LD.CIT(A) HAS GIVEN A FINDING ON F ACT AT PARA-6.2 OF HIS ORDER WHICH IS REPRODUCED HEREINBELOW:- 6.2 I HAVE CAREFULLY CONSIDERED THE FACTS OF THE C ASE AND SUBMISSIONS MADE BY THE APPELLANT. PERUSAL OF THE ASSESSMENT OR DER INDICATES THAT THE PAYMENT OF RS.34 78 373/- IS RELATABLE TO APPEL LANTS SALE OF 623.02 CRORE BIDIS. THUS THEIR EXIST A DIRECT RELATIONS HIP BETWEEN COMMISSION PAID AND THE CORRESPONDING SALES. THE ARGUMENT OF T HE AO THAT THERE IS NO WRITTEN CONTRACT BETWEEN THE APPELLANT AND HIS A GENTS AND OR SUB AGENTS PETA DEALERS IS UNTENABLE SINCE LAW RECOGNIZ ES EVEN INFORMAL ORAL CONTRACTS. THE ARGUMENT OF THE LD AO THAT IT I S THE RESPONSIBILITY OF THE AGENTS TO PAY COMMISSION TO THE SUB AGENTS / PE TA DEALERS IS ALSO NOT TENABLE SINCE THE APPELLANT HAS EXPLAINED THAT IT H AS PAID COMMISSION TO AGENTS FOR THEIR PERFORMANCE AND TO AGENTS SEPARATE LY FOR BEING PASSED ON TO PETA DEALERS FOR PERFORMANCE OF LATTER AND HA D ALSO ADDUCED NECESSARY EVIDENCE IN THIS REGARD. NOW ONCE THERE E XISTED AN EVIDENCE THAT AN AMOUNT OF COMMISSION FLOWED FROM APPELLANT TO PETA DEALERS THROUGH AGENTS A DISALLOWANCE ON THE ABSENCE OF CO MMERCIAL EXPEDIENCY WAS NOT REQUIRED TO BE MADE. FOR ESTABLI SHING GENUINENESS OF A COMMISSION WHAT IS REQUIRED TO BE PROVED IS W HETHER IT WAS ACTUALLY PAID WHETHER THE PAYMENT WAS RELATABLE TO A GENUINE BUSINESS TRANSACTION WHETHER THE PARTY TO WHOM PAYMENT WAS MADE IS IDENTIFIABLE WHETHER THE PAYMENT WAS MADE USING BA NKING CHANNELS AND NECESSARY ENTRIES RECORDED IN THE BOOKS OF A/C AND WHETHER REQUISITE TDS IF ANY WAS MADE ON THE AMOUNTS OF CO MMISSION PAID WHETHER THE PARTIES TO WHOM COMMISSION WAS PAID HAV E IN TURN INCLUDED THE SAME IN THEIR BOOKS OF ACCOUNTS / RETURN OF INC OME ETC. IT IS SEEN THAT THE ANSWER TO ALL THESE QUERIES IN THIS CASE A RE IN AFFIRMATIVE. THE LD AO ON HIS PART HAS NOT MADE ANY INQUIRIES OR AN INV ESTIGATION ON HIS PART OR BROUGHT ON ANY EVIDENCES TO INDICATE THAT P AYMENT OF COMMISSION WAS RESULT OF AN INGENUINE TRANSACTION. CONSEQUENTLY THE DISALLOWANCE AND THE ADDITION MADE BY THE LD AO IS HELD TO BE BASED UPON INADEQUATE AND INAPPROPRIATE UNDERSTANDING OF THE FACTS. THE ADDITION MADE BY THE LD AO IS THEREFORE DELETED AND THE GROUND OF APPEAL RAISED IS ALLOWED. 12.1 THE ABOVE FINDING OF THE LD.CIT(A) HAS NOT BEE N CONTROVERTED BY THE REVENUE BY PLACING ANY CONTRARY MATERIAL ON REC ORD THEREFORE WE DO ITA NO.1209/AHD/2013 (BY ASSESS EE) AND ITA NO.1398/AHD/2013 (BY REVENUE) SHREE LAXMI BIDI TRADING CO. VS.JT.CIT ASST.YEAR 2009-10 - 13 - NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LD.CIT(A) SAME IS HEREBY UPHELD. THUS GROUND NO.2 OF REVENUES APP EAL IS REJECTED. 13. GROUND NOS.3 & 4 ARE GENERAL IN NATURE REQUIRE NO INDEPENDENT ADJUDICATION. 14. IN THE COMBINED RESULT THE APPEAL OF THE ASSES SEE IS ALLOWED FOR STATISTICAL PURPOSES WHEREAS THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE COURT ON FRIDAY THE 28 TH DAY OF NOVEMBER 2014 AT AHMEDABAD. SD/- SD/- ( ) ( ) ( ANIL CHATURVEDI ) ( KUL BHARAT ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD; DATED 28/ 11 /2014 1.. .../ T.C. NAIR SR. PS !'#$#%! / COPY OF THE ORDER FORWARDED TO : 1. '% / THE APPELLANT 2. &''% / THE RESPONDENT. 3. 234 5 / CONCERNED CIT 4. 5 ( ) / THE CIT(A)-XVI AHMEDABAD 5. 67& 34 34- 2 / DR ITAT AHMEDABAD 6. 79:;( / GUARD FILE. / BY ORDER '6 & //TRUE COPY// / ( DY./ASSTT.REGISTRAR) / ITAT AHMEDABAD ITA NO.1209/AHD/2013 (BY ASSESS EE) AND ITA NO.1398/AHD/2013 (BY REVENUE) SHREE LAXMI BIDI TRADING CO. VS.JT.CIT ASST.YEAR 2009-10 - 14 - 1. DATE OF DICTATION .. 27.11.14(DICTATION-PAD 15- P AGES ATTACHED AT THE END OF THIS FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 27.11.14 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 5. DATE ON WHICH THE FAIR ORDER COMES BA CK TO THE SR.P.S./P.S.28.11.14 6. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 28.11.14 7. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 8. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 9. DATE OF DESPATCH OF THE ORDER