ACIT, New Delhi v. M/s. Exotique Exports, New Delhi

ITA 1409/DEL/2010 | 2004-2005
Pronouncement Date: 15-07-2011 | Result: Dismissed

Appeal Details

RSA Number 140920114 RSA 2010
Assessee PAN AAFPR0049K
Bench Delhi
Appeal Number ITA 1409/DEL/2010
Duration Of Justice 1 year(s) 3 month(s) 13 day(s)
Appellant ACIT, New Delhi
Respondent M/s. Exotique Exports, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 15-07-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 15-07-2011
Date Of Final Hearing 16-06-2011
Next Hearing Date 16-06-2011
Assessment Year 2004-2005
Appeal Filed On 01-04-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH B NEW DELHI) BEFORE SHRI RAJPAL YADAV JUDICIAL MEMBER AND SHRI K.G. BANSAL ACCOUNTANT MEMBER I.T.A. NO.1409/DEL/2010 ASSESSMENT YEAR : 2004-05 ACIT ACIT ACIT ACIT VS. VS. VS. VS. M/S EXOTIQUE EXPORTS M/S EXOTIQUE EXPORTS M/S EXOTIQUE EXPORTS M/S EXOTIQUE EXPORTS CIRCLE CIRCLE CIRCLE CIRCLE- -- -22(1) 22(1) 22(1) 22(1) Z ZZ Z- -- -45 OKHLA INDL. AREA 45 OKHLA INDL. AREA 45 OKHLA INDL. AREA 45 OKHLA INDL. AREA NEW DELHI NEW DELHI NEW DELHI NEW DELHI PHASE PHASE PHASE PHASE- -- -II NEW DELHI II NEW DELHI II NEW DELHI II NEW DELHI PAN NO.AAFPR 0049 K (APPELLANT) (RESPONDENT) APPELLANT BY : MS. Y. KAKKAR SR. DR RESPONDENT BY : SHRI R.S. SINGHVI CA ORDER PER RAJPAL YADAV:JM: THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDE R OF CIT(A) DATED 13.01.2010 PASSED FOR ASSESSMENT YEAR 2004- 05. THE SOLITARY SUBSTANTIAL GRIEVANCE OF THE REVE NUE IS THAT LEARNED CIT(A) HAS ERRED IN DELETING THE DISALLOWAN CE OF `32 05 767/- WHICH WAS DISALLOWED U/S 14A OF THE I NCOME- TAX ACT 1961 BY THE ASSESSING OFFICER. 2. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND EXPORT OF GARMEN TS. IT HAS FILED ITS INCOME-TAX RETURN ON 26.10.2004 DECLA RING A LOSS OF `4 87 05 475/-. THE CASE OF THE ASSESSEE W AS SELECTED FOR SCRUTINY ASSESSMENT AND A NOTICE U/S 1 43(2) AND 2 142(1) WERE ISSUED AND SERVED UPON THE ASSESSEE. O N SCRUTINY OF THE ACCOUNTS IT REVEALED TO THE ASSESSI NG OFFICER THAT ASSESSEE HAD MADE FRESH INVESTMENT IN MUTUAL F UNDS. THE NET INVESTMENT IN MUTUAL FUND AS ON 31.03.2004 WERE `12 66 29 523/-. HE ALSO FOUND THAT ASSESSEE HAD M ADE ADVANCES TO SISTER CONCERN WITHOUT CHARGING INTERES T. THE DETAILS OF SUCH ADVANCES HAVE BEEN NOTICED AT PAGE 2 OF THE ASSESSMENT ORDER WHICH READ AS UNDER:- M/S MANJULA EXPORTS (P) LTD. ` 21 49 042/- M/S R.R. ENTERPRISES ` 1 87 26 185/- M/S ROHIT ENTERPRISES `2 55 57 036/- 3. ACCORDING TO THE ASSESSING OFFICER THE ASSESSEE HAD PAID INTEREST OF `32 05 767/-. HE OBSERVED THAT IF THE ASSESSEE HAD NOT ADVANCED THE MONEY TO THE SISTER C ONCERN AND MADE INVESTMENT IN MUTUAL FUNDS THEN FOR THE P URPOSE OF BUSINESS IT WOULD NOT REQUIRE TO RAISE LOAN FROM THE BANKS AND INCUR INTEREST EXPENSES. HE DISALLOWED THE TOT AL INTEREST EXPENSES CLAIMED BY THE ASSESSEE. ON APPEAL LEARN ED CIT(A) DELETED THE DISALLOWANCE. THE FINDINGS RECO RDED BY THE LEARNED CIT(A) IN THIS CONNECTION IS WORTH TO N OTE WHICH READ AS UNDER:- 10) NOW WE SHALL ANALYSE WHETHER THE PROVISIONS OF SECTION 36(1)(III) CAN BE INVOKED IN THE ASSESSEES CASE. THE LEARNED ASSESSING OFFICER IN THE IMPUGNED ORDER WAS OF THE OPINION THAT IF THE ASSESSEE HAD NOT MADE INVESTMENTS IN MUTUAL FUNDS UNITS AND GIVEN INTEREST FREE ADVANCES TO THE 3 SISTER CONCERNS IT WOULD NOT HAVE HAD THE NECESSITY TO BORROW FUNDS AND PAY INTEREST THEREON. THE IMPORTANT ISSUE HEREIN IS WHETHER /THE ASSESSEE HAD SURPLUS CASH OVER AND ABOVE THE LOAN TAKEN FOR INVESTMENTS IN MUTUAL FUNDS UNITS AND INTEREST FREE ADVANCES TO THE SISTER CONCERNS. ANALYSING THE SUBMISSIONS MADE BY THE ASSESSEE IT IS CRYSTAL CLEAR THAT THERE WERE ENOUG H FUNDS WITH THE ASSESSEE AND EVEN AFTER MAKING THE SAID INVESTMENTS AND PROVIDING INTEREST FREE ADVANCES IT HAD A SURPLUS CASH OF `6 75 49 238/-. ONCE IT IS CLEAR THAT THE ASSESSEE HAD SURPLUS CASH ANY DISALLOWANCE UNDER SECTION 36(1)(III) CANNOT BE MADE NOTWITHSTANDING THE FACT THAT IN THE QUESTIONNAIRES DATED 24.07.2006 AND 15.11.2006 THIS ISSUE WAS NEVER RAISED AT ALL AND ARE PART OF THE PAPER BOOK SUBMITTED BY THE ASSESSEE AT PAGES 34 AND 35. SINCE THE ASSESSEE HAD SURPLUS CASH RELYING ON THE DECISION OF CIT VS . TIN BOX CO. (2003) 260 ITR 637 (DELHI) IT IS HELD THAT THERE WAS NO EVIDENCE TO INDICATE THAT INTEREST BEARING BORROWINGS WERE DIVERTED TO SISTER CONCERNS OR INVESTMENTS MADE IN MUTUAL FUNDS UNITS DISALLOWANCE UNDER SECTION 36(1)(III) CANNOT BE MADE. THE MATTER ALSO GETS FURTHER SETTLED IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THE APEX COURT IN S.A. BUILDERS LTD. VS. CIT (2007) 288 ITR 1 (SUPREME COURT). 4. WITH THE ASSISTANCE OF REPRESENTATIVE WE HAVE G ONE THROUGH /THE RECORD CAREFULLY. LEARNED FIRST APPEL LATE AUTHORITY HAS DELETED THE DISALLOWANCE ON THE GROUN D THAT ASSESSEE HAS MORE SURPLUS INTEREST FREE FUNDS THAN THE ADVANCES AND INVESTMENT. IN OTHER WORDS ON THE REC ORD ASSESSING OFFICER FAILED TO ESTABLISH THAT INTEREST BEARING FUNDS WERE USED EITHER FOR MAKING ADVANCES TO THE S ISTER 4 CONCERN OR FOR INVESTMENT IN THE MUTUAL FUNDS. IF THAT BE SO THEN HOW DISALLOWANCE CAN BE MADE. THE STAND OF TH E ASSESSING OFFICER IS THAT ASSESSEE SHOULD HAVE USED ITS OWN FUND INSTEAD OF INTEREST BEARING BORROWINGS FOR RUN NING THE BUSINESS. IN OUR OPINION ASSESSING OFFICER CANNOT FORCE THE ASSESSEE TO EARN INTEREST INCOME OR SAVE INTEREST E XPENSES FOR RUNNING THE BUSINESS. THE ASSESSING OFFICER WA S UNABLE TO DEMONSTRATE THAT INTEREST BEARING LOANS WERE USE D BY THE ASSESSEE OTHER THAN BUSINESS PURPOSE. LEARNED FIRS T APPELLATE AUTHORITY HAS APPRECIATED THE FACTS AND CIRCUMSTANCES IN RIGHT PERSPECTIVE AND WE DO NOT SE E ANY REASON TO INTERFERE IN HIS ORDER. HENCE THIS APPE AL OF THE REVENUE IS DISMISSED. 5. IN RESULT APPEAL OF THE REVENUE IS DISMISSED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT ON 15.07.2011. SD/- SD/- ( K.G. BANSAL ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DT. 15.07.2011. NS 5 COPY FORWARDED TO:- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT 4. THE CIT (A)- NEW DELHI. 5. THE DR ITAT LOKNAYAK BHAWAN KHAN MARKET NEW DELHI. TRUE COPY. BY ORDER (ITAT NEW DELHI).