Asst.CIT., Circle-7(1),, Hyderabad v. M/s Ramacharan Oil Industries,, Hyderabad

ITA 1821/HYD/2013 | 2008-2009
Pronouncement Date: 25-04-2014 | Result: Dismissed

Appeal Details

RSA Number 182122514 RSA 2013
Assessee PAN AADFR4621B
Bench Hyderabad
Appeal Number ITA 1821/HYD/2013
Duration Of Justice 3 month(s) 29 day(s)
Appellant Asst.CIT., Circle-7(1),, Hyderabad
Respondent M/s Ramacharan Oil Industries,, Hyderabad
Appeal Type Income Tax Appeal
Pronouncement Date 25-04-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 25-04-2014
Assessment Year 2008-2009
Appeal Filed On 27-12-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES B : HYDERABAD BEFORE S/SHRI B. RAMAKOTAIAH A.M. & SAKTIJIT DEY J.M. ITA.NO. A.Y. APPELLANT RESPONDENT 1820/HYD/2013 2007-08 THE ACIT CIRCLE 7(1) HYDERABAD. M/S. RAMCHARAN OIL INDUSTRIES HYDERABAD. PAN AADFR4621B 1821/HYD/2013 2008-09 1822/HYD/2013 2009-10 1823/HYD/2013 2010-11 FOR REVENUE : MR. B. YADAGIRI FOR ASSESSEE : MR. K.C. DEVDAS DATE OF HEARING : 23.04.2014 DATE OF PRONOUNCEMENT : 25.04.2014 ORDER PER B. RAMAKOTAIAH A.M. THESE FOUR APPEALS ARE BY REVENUE WHEREIN REVENUE HAS RAISED COMMON FOLLOWING GROUNDS AGAINST THE ORDERS OF THE CIT(A)-VI HYDERABAD DATED 06.09.2013 . 1. THE LD. CIT(A) ERRED IN FACTS AND LAW. 2. THE LD. CIT(A) OUGHT TO HAVE CONFIRMED THE DISALLOW ANCE OF INTEREST ON LOANS FOR PURCHASE OF MACHINERY WHIC H WAS NEVER PUT TO USE. 3. ANY OTHER GROUND THAT MAY BE URGED AT THE TIME OF HEARING. 1.1. SINCE COMMON ISSUES ARE INVOLVED IN THESE APPEALS THESE ARE HEARD TOGETHER AND DECIDED AS UN DER : 2 ITA.NO. 1820 TO 1823/HYD/2013 M/S. RAMCHARAN OIL INDUSTRIES HYDERABAD 2. BRIEFLY STATED ASSESSEE IS CARRYING ON THE BUS INESS OF TRADING AND MANUFACTURING OF EDIBLE AND NON-EDIB LE OILS. ASSESSEE ACQUIRED LAND AND MACHINERY FROM M/S. SURA NA OILS AND DERIVATIVES (INDIA) LTD. FOR A TOTAL CONSIDERAT ION OF RS.3.07 CRORES IN THE FINANCIAL YEAR 2004-05 RELEVANT FOR A .Y. 2005-06. HOWEVER DUE TO CERTAIN ADMINISTRATIVE PROBLEMS LIK E POLLUTION CONTROL CERTIFICATES ETC. ASSESSEE COULD NOT DO AN Y BUSINESS IN THAT UNIT. HOWEVER IT GAVE THE PLANT AND MACHINERY ON LEASE TO ANOTHER COMPANY EFFECTIVE FROM 03.11.2008. LD. CIT IN A.Y. 2008-09 NOTICED THAT A.O. DID NOT EXAMINE THE ISSUE OF ALLOWANCE OF INTEREST UNDER SECTION 36(1)(III) INI TIATED PROCEEDINGS UNDER SECTION 263 AND HELD THAT HAD ASS ESSEE NOT DIVERTED THE FUNDS FOR PURCHASE OF THE ASSETS IN EA RLIER YEAR ASSESSEE WOULD NOT HAVE BORROWED FUNDS AND PAID INT EREST. ACCORDINGLY THE LD. CIT SET ASIDE THE ASSESSMENT F OR THAT A.Y. CONSEQUENT TO THAT THE A.O. HAS REOPENED THE ASSES SMENT IN A.Y. 2007-2008 AND FOLLOWED THE SAME IN A.YS. 2009- 2010 AND 2010-2011 ALSO COMPLETING THE ASSESSMENT FOR A.Y. 2008-09 CONSEQUENT TO THE ORDERS UNDER SECTION 263. IN ALL THESE YEARS THE A.O. WAS OF THE OPINION THAT THE FUNDS BORROWED FROM STATE BANK OF HYDERABAD ON WHICH INTEREST PAID WAS FOR NO N- BUSINESS PURPOSES AND ACCORDINGLY INTEREST PAID TO THAT BANK ACCOUNT IN RESPECTIVE A.YS AS PER THE FOLLOWING TAB LE WAS DISALLOWED. FINANCIAL YEAR INTEREST 2007-08 10 16 759 2008-09 16 58 364 2009-10 11 95 812 2010-11 7 76 096 3 ITA.NO. 1820 TO 1823/HYD/2013 M/S. RAMCHARAN OIL INDUSTRIES HYDERABAD 3. LD. CIT(A) ON CONSIDERING ASSESSEES SUBMISSION S HELD THAT ASSESSEE HAS NOT DIVERTED ANY FUNDS FOR N ON-BUSINESS PURPOSES AND THE PURCHASE OF PROPERTY FROM M/S. SUR ANA OILS AND DERIVATIVES (INDIA) LTD. WAS OUT OF OWN FUNDS A ND NO PART OF THE BORROWALS WERE UTILIZED IN ACQUIRING THE AS SETS AS EVIDENT FROM THE REALISATION FROM DEBTORS BEFORE O BTAINING/ UTILIZING LOAN FROM THE BANK. IT WAS FURTHER NOTICE D THAT ASSESSEE DID PUT TO USE THE ASSETS ACQUIRED FROM TH E SAID COMPANY AND INFACT HAS LEASED ASSETS IN A.Y. 2009- 2010 ON WHICH INCOMES WERE OFFERED. HE WAS OF THE OPINION T HAT IN SPITE OF REFERENCE OF THIS INFORMATION A.O. DID NOT CONT ROVERT THE CLAIMS OF ASSESSEE. THE LD. CIT(A) WAS OF THE OPINI ON THAT THE PHRASE PUT TO USE NOT ONLY INCLUDE ACTIVE USE BUT ALSO PASSIVE USE. THEREFORE LD. CIT(A) BASED ON THE FACTS HELD THAT INTEREST CLAIMED BY ASSESSEE WAS PROVED TO BE EXPENSES RELAT ABLE TO THE BUSINESS AND AS SUCH CANNOT BE DISALLOWED INVOKING THE PROVISIONS OF SECTION 36(1)(III) OF THE I.T. ACT 1 961. REVENUE IS AGGRIEVED IN ALL THE ASSESSMENT YEARS AS STATED IN THE ABOVE GROUND. 4. LEARNED D.R. RELIED ON THE FINDINGS OF THE A.O. WHEREAS LD. COUNSEL RELIED ON THE FINDINGS OF THE LD. CIT(A). NOT ONLY THAT HE HAS PLACED ON RECORD THE ORDER OF ITAT IN A.Y. 2008-09 ON APPEAL AGAINST THE ORDER UNDER SECTION 2 63 OF THE CIT AND ALSO THE FINDING OF THE A.O. IN ASSESSMENT ORDER UNDER SECTION 143(3) READ WITH SECTION 147 OF THE ACT DAT ED 17.01.2014 ALLOWING ASSESSEES CLAIM IN A.Y. 2011-2 012. 5. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSED THE DETAILS PLACED ON RECORD IN THE FORM OF PAPER BOOK IN ALL THE YEARS. AT THE OUTSET THERE IS A FINDING IN THE ITAT ORDER FOR A.Y. 2008-09 IN ITA.NO.156/HYD/2013 DATED 4 ITA.NO. 1820 TO 1823/HYD/2013 M/S. RAMCHARAN OIL INDUSTRIES HYDERABAD 04.07.2013 THAT CIT HIMSELF DOES NOT HAVE ANY MATER IAL ON RECORD TO DISPUTE THE FACT THAT NO BORROWED FUND HA S BEEN UTILIZED FOR THE PURPOSE OF ACQUISITION OF THE PLAN T AND MACHINERY AND LAND. CONSEQUENT TO THAT FINDING THE ITAT HELD THAT CIT CANNOT SET ASIDE THE ASSESSMENT FOR ROVING OR FISHING ENQUIRY WHICH IS NOT PERMISSIBLE WHILE EXERCISING T HE JURISDICTION UNDER SECTION 263. THERE ARE ALSO FIND INGS THAT ASSESSEE HAS KEPT THE MACHINERY IN RUNNING CONDITIO N AND HAS IN FACT LATER YEAR IN A.Y. 2009-2010 HAS LEASED OUT THE MACHINERY. SINCE ACQUISITION OF MACHINERY IS FOR TH E PURPOSE OF BUSINESS AND ALSO ON THE FINDING THAT NO BORROWED F UND WAS DIVERTED FOR ACQUIRING THE ABOVE ASSETS THE ORDER UNDER SECTION 263 WAS SET ASIDE. CONSEQUENT TO THAT APPEAL AGAIN ST CONSEQUENTIAL ORDER PASSED IN A.Y. 2008-09 IN THE I MPUGNED APPEALS DOES NOT SURVIVE. THEREFORE REVENUE APPEA L FOR A.Y. 2008-09 BECOMES INFRUCTUOUS IN VIEW OF THE ORDER O F THE ITAT SETTING ASIDE THE ORDER UNDER SECTION 263. 6. IN THE REMAINING THREE ASSESSMENT YEARS FACTS ARE SIMILAR. SINCE IN THE YEAR OF ACQUISITION ASSESSEE COULD ESTABLISH THAT IT HAS NOT DIVERTED ANY BORROWED FUN DS. DISALLOWANCE OF INTEREST ON THE LOANS OBTAINED FOR WORKING CAPITAL FROM STATE BANK OF HYDERABAD ALONE AS WAS D ONE BY THE A.O. IS NOT PROPER WHEN THE FACTS INDICATE THAT THE LOAN WAS UTILIZED FOR THE PURPOSE OF BUSINESS. THEREFORE ON THE FACTS OF THE CASE AND ALSO KEEPING THE FINDINGS IN THE ORDER UNDER SECTION 263 AS WELL AS ITAT ORDER IN A.Y. 200 8-09 THERE IS NO MERIT IN REVENUE CONTENTIONS. FURTHER AS SEE N FROM THE ORDERS THE A.O. DISALLOWED THE INTEREST PAID FROM A.Y. 2007-08 TO 2010-2011 ON THE REASON THAT THESE BORROWED FUND S WERE NOT UTILIZED FOR THE PURPOSE OF BUSINESS. THERE IS CLEAR FINDING THAT THE FUNDS ARE USED FOR THE PURPOSE OF BUSINESS AND ALSO A 5 ITA.NO. 1820 TO 1823/HYD/2013 M/S. RAMCHARAN OIL INDUSTRIES HYDERABAD FINDING THAT ASSESSEE HAS PUT THE ASSETS TO ACTIVE USE FROM A.Y. 2009-10 ONWARDS. THEREFORE REVENUE RAISING THE GRO UND THAT MACHINERY WAS NEVER PUT TO USE IS NOT CORRECT ON FA CTS. THE GROUND ITSELF PER SE IS WRONG. IN VIEW OF THIS THERE IS NO MERIT AT ALL IN THE REVENUE GROUND IN A.YS. 2009-10 AND 2 010-11 AS ASSESSEE PUT TO MACHINERY TO ACTIVE USE IN THE YEAR S. ONLY FOR A.Y. 2007-08 ASSESSEE HAS NOT ACTIVELY USED THE MAC HINERY BUT AS ALREADY DECIDED BY THE LD. CIT(A) THERE IS A PAS SIVE USE AND THERE IS NOT MUCH OF DIFFERENCE BETWEEN ACTIVE AN D PASSIVE USE AS FAR AS THE PHRASE PUT TO USE IS CONCERNE D. THERE IS ALSO A FINDING THAT ACQUISITION OF MACHINERY IS FOR THE PURPOSE OF BUSINESS. THEREFORE NO PART OF INTEREST CAN BE DISALLOWED UNDER SECTION 36(1)(III) OF THE ACT. FOR THESE REAS ONS WE UPHOLD THE ORDERS OF THE CIT(A) IN A.YS. 2007-08 2009-10 AND 2010- 11. AS ALREADY STATED BY THE LD. COUNSEL IN A.Y. 2 011-12 A.O. HIMSELF ACCEPTED ASSESSEES CLAIM AND NO DISALLOWAN CE WAS MADE EVEN WHEN THE ASSESSMENT WAS REOPENED UNDER SE CTION 147 FOR THE SPECIFIC PURPOSE OF DISALLOWING INTERES T. 7. IN THE RESULT APPEALS OF REVENUE ARE DISMISSE D. ORDER PRONOUNCED IN THE OPEN COURT ON 25.04.2014. SD/- SD/- (SAKTIJIT DEY) (B.RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD DATED 25 TH APRIL 2014 VBP/- 6 ITA.NO. 1820 TO 1823/HYD/2013 M/S. RAMCHARAN OIL INDUSTRIES HYDERABAD COPY TO : 1. ACIT CIRCLE 7(1) 2 ND FLOOR B-BLOCK I.T. TOWERS A.C. GUARDS HYDERABAD. 2. M/S. RAMCHARAN OIL INDUSTRIES 15-2-449/7 KISHA NGUNJ HYDERABAD. C/O. SRI K.C. DEVDAS C.A. 133/4 R. P. ROAD SECUNDERABAD-03. 3. CIT(A)-VI 6A I.T. TOWERS A.C. GUARDS HYDERAB AD-500004. 4. CIT-VI HYDERABAD 5. D.R. ITAT B BENCH HYDERABAD.