Rekvina Laboratories Limited, Baroda v. The Dy.CIT., Circle-4,(1),, Baroda

ITA 1543/AHD/2010 | 2004-2005
Pronouncement Date: 06-08-2010 | Result: Allowed

Appeal Details

RSA Number 154320514 RSA 2010
Bench Ahmedabad
Appeal Number ITA 1543/AHD/2010
Duration Of Justice 2 month(s) 26 day(s)
Appellant Rekvina Laboratories Limited, Baroda
Respondent The Dy.CIT., Circle-4,(1),, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 06-08-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted D
Tribunal Order Date 06-08-2010
Assessment Year 2004-2005
Appeal Filed On 11-05-2010
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE SHRI N.S.SAINI ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH JUDICIAL MEMBER ITA NO.1543/AHD/2010 ASSESSMENT YEAR:2004-05 DATE OF HEARING:30.7.10 DRAFTED:2.8.10 REKVINIA LABORATORIES LTD. 328 PARADISE COMPLEX SAYAJIGUNJ BARODA PAN NO.AABCR0054R V/S . DY. COMMISSIONER OF INCOME-TAX CIRCLE- 4(1) BARODA (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI SUNIL H TALATI AR RESPONDENT BY:- SHRI SUDHANSHU S JHA DR O R D E R PER MAHAVIR SINGH JUDICIAL MEMBER:- THIS APPEAL BY THE ASSESSEE IS ARISING OUT OF THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-III BARODA IN APPEAL NO.CAB/A -III-201/06-07DATED 15-12- 2009. THE ASSESSMENT WAS FRAMED BY ACIT CIRCLE-4(1 ) BARODA U/S.143(3) OF THE INCOME-TAX ACT 1961 (HEREINAFTER REFERRED TO AS T HE ACT) VIDE HIS ORDER DATED 17-10- 2006 FOR THE ASSESSMENT YEAR 2004-05. 2. THE ONLY ISSUE IN THIS APPEAL OF THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) CONFIRMING THE DISALLOWANCE OF INTEREST FOR DIVERTI NG THE SAME IN GIVING INTEREST FREE ADVANCES. FOR THIS ASSESSEE HAS RAISED THE FOLLOWI NG GROUND NO.2 :- 2. THE HONBLE CIT(A) HAS ERRED IN CONFIRMING DISA LLOWANCE OF RS.1 97 704/- BEING INTEREST CALCULATED BY AO ON THE ADVANCES INF ERRING THAT INTEREST BEARING FUNDS HAVE BEEN DIVERTED IN GIVING INTEREST FREE AD VANCES. YOUR APPELLANT SUBMITS THAT THERE BEING NO DIVERSION OF BORROWED F UND IN GIVING INTEREST FREE ADVANCES AND HENCE DISALLOWANCE MADE IS UNWARRANTED AND SAME BE DELETED NOW. ITA NO.1543/AHD/2010 A. Y. 2004-05 REKVINIA LABORATORIES LTD. V. DCIT CIR-4(1) BRD PAGE 2 3. THE BRIEF FACTS LEADING TO THE ABOVE ISSUE ARE THAT THE ASSESSEE HAD DEBITED INTEREST ON BANK LOAN OF RS.1 76 988/- INTEREST TO OTHER RS.1 149/- AND BANK COMMISSION AND CHARGES RS.19 567/- TOTALING TO RS.1 97 704/-. THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS NOTICED FROM THE BALANCE-SHEET THAT THE ASSESSEE HAS SHOWN LOANS AND ADVANCES AT R S.99 79 128/- AND ACCORDINGLY THE ASSESSEE WAS REQUESTED TO FURNISH DETAILS OF TH E SAME ALONG WITH RATE OF INTEREST CHARGED ON THESE LOANS. THE ASSESSEE VIDE ITS SUBMI SSION DATED 18-09-2006 HAS STATED THAT THE ASSESSEE HAS SHOWN LOAN AND ADVANCE IN BALANCE-SHEET FOR RS.99 79 128/- OUT OF THIS RS.86 46 905/- IS LOAN G IVEN TO THE FOLLOWING PARTIES:- OP. BALANCE CL. BALANCE (I) REDIANT PARENTERALS LTD. RS. RS.65 00 000 RS .32 50 000 (II) SPANDANA FINANCE PVT. LTD. RS.53 96 905 RS. 53 96 905 IT IS STATED BY THE ASSESSEE THAT THE LOAN WAS GIVE N IN EARLIER YEARS AND NO INTEREST HAS BEEN CHARGED ON THESE LOANS. THE ASSESSING OFFI CER HAS CONSIDERED THE REPLY OF THE ASSESSEE AND NOTED THAT ON THE ONE HAND THE ASS ESSEE IS PAYING HEAVY INTEREST ON THE BORROWED FUNDS AND ON THE OTHER HAND IT IS G IVING INTEREST FREE LOANS TO OTHER CONCERNS. ACCORDINGLY HE HELD THAT THE ASSESSEE HA S DIVERTED ITS INTEREST BEARING FUNDS FOR ADVANCING NON-INTEREST BEARING LOANS TO T HE ABOVE P[ARTIES AND THE INTEREST EXPENSES DEBITED AMOUNTING TO RS.1 97 704/- IS DISA LLOWED AND ADDED TO THE TOTAL INCOME OF ASSESSEE. AGGRIEVED ASSESSEE PREFERRED A PPEAL BEFORE CIT(A). THE CIT(A) CONFIRMED THE DISALLOWANCE BY GIVING FOLLOWI NG FINDINGS IN PARA-6.2 OF HIS APPELLATE ORDER:- 6.2 I HAVE CONSIDERED THE FACTS OF THE CASE AND SU B SUBMISSIONS. THE APPELLANTS CONTENTION THAT THE INTEREST FREE FUNDS WAS ADVANCED FROM THE PUBLIC ISSUE MONEY AND THEREFORE FROM OWN FUNDS IS SPACIOUS ARGUMENT. MONEY THROUGH PUBLIC ISSUE ARE COLLECTED FOR A SPEC IFIC BUSINESS PURPOSE. THE PUBLIC ISSUE MONEY IS NEVER INTENDED FOR ADVANCING INTEREST FREE LOAN. SECONDLY THE PUBLIC ISSUE FUNDS IS ALWAYS A SUPPLEM ENT OR A SUBSTITUTE FOR THE LOANS. IN OTHER WORDS IF PUBLIC ISSUE FUND IS DIVE RTED FOR NON BUSINESS PURPOSES THE BURDEN OF INTEREST LOAN INCREASES TO THAT EXTEND. THIS GROUND OF APPEAL IS THEREFORE REJECTED. AGGRIEVED ASSESSEE CAME IN SECOND APPEAL BEFORE US . ITA NO.1543/AHD/2010 A. Y. 2004-05 REKVINIA LABORATORIES LTD. V. DCIT CIR-4(1) BRD PAGE 3 4. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS AND CIRCUMSTANCES OF THE CASE. BEFORE US THE LD. COUNSE L FOR THE ASSESSEE SHRI SUNIL H TALATI FILED COPY OF BALANCE-SHEET AND STATED THAT THE SHARE CAPITAL IS TO THE TUNE OF RS.3 01 40 000/- AND RESERVE AND SURPLUSES AT RS.16 30 251/- AND THE LOAN & ADVANCES ARE TO THE EXTENT OF RS.99 79 128/- WHICH IS CARRIED OVER FROM THE LAST YEAR. HE MADE TWO FOLD ARGUMENTS THAT THE ASSESSEE HAS AVAILABILITY OF INTEREST FREE FUNDS I THE SHAPE OF SHARE CAPITAL AS WELL AS RESER VE AND SURPLUSES. HE ALSO STATED THAT EVEN IN EARLIER YEAR NO SUCH DISALLOWANCE IS M ADE BY THE ASSESSING OFFICER. ONCE THIS IS THE POSITION WE ARE OF THE VIEW THAT NO DISALLOWANCE IS CALLED FOR AND ACCORDINGLY THE ORDERS OF THE LOWER AUTHORITIES ARE REVERSED ON THIS COUNT. 5. IN THE RESULT ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 06/08/2010 SD/- SD/- (N.S.SAINI) (MAHAVIR SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD DATED : 06/08/2010 *DKP COPY OF THE ORDER FORWARDED TO : 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-XXI AHMEDABAD 4. THE CIT CONCERNS. 5. THE DR ITAT AHMEDABAD 6. GUARD FILE. BY ORDER /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT AHMEDABAD