Balkrishna Textile Pvt.Ltd.,, Ahmedabad v. The ACIT(OSD),Range-1,, Ahmedabad

ITA 2067/AHD/2012 | 2009-2010
Pronouncement Date: 25-10-2013 | Result: Partly Allowed

Appeal Details

RSA Number 206720514 RSA 2012
Assessee PAN AABCB5213G
Bench Ahmedabad
Appeal Number ITA 2067/AHD/2012
Duration Of Justice 1 year(s) 1 month(s) 11 day(s)
Appellant Balkrishna Textile Pvt.Ltd.,, Ahmedabad
Respondent The ACIT(OSD),Range-1,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 25-10-2013
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted B
Tribunal Order Date 25-10-2013
Date Of Final Hearing 01-10-2013
Next Hearing Date 01-10-2013
Assessment Year 2009-2010
Appeal Filed On 13-09-2012
Judgment Text
ITA NO 2067 /AHD/201 2 . A.Y. 2009- 10 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH AHMEDABAD (BEFORE SHRI MUKUL KR. SHRAWAT J.M. & SHRI ANIL C HATURVEDI A.M.) I.T. A. NO. 2067 /AHD/2012 (ASSESSMENT YEAR:2009-10) BALKRISHNA TEXTILE PVT. LTD. BOMBAY HIGHWAY NAROL AHMEDABAD (APPELLANT) VS. THE A.C.I.T (OSD) RANGE-1 AHMEDABAD (RESPONDENT) PAN: AABCB5213G APPELLANT BY : SHRI A.L. THAKKAR RESPONDENT BY : SHRI P.L. KUREEL SR. D.R. ( )/ ORDER DATE OF HEARING : 01-10-201 3 DATE OF PRONOUNCEMENT : 25 -10-2013 PER SHRI ANIL CHATURVEDI A.M. 1. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER OF CIT(A)-6 AHMEDABAD DATED 16.07.2012 FOR A.Y. 2009-10. 2. THE FACTS AS CULLED OUT FROM THE ORDER OF LOWER AUT HORITIES ARE AS UNDER:- 3. ASSESSEE IS A PRIVATE LIMITED COMPANY ENGAGED IN TH E BUSINESS OF MANUFACTURING AND PROCESSING OF TEXTILE FABRICS. IT FILED ITS RETURN OF INCOME FOR A.Y. 2009-10 ON 30.09.2009 DECLARING TOT AL INCOME OF RS. 2 32 64 890/-. THE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER THE ITA NO 2067 /AHD/201 2 . A.Y. 2009- 10 2 ASSESSMENT WAS FRAMED UNDER SECTION 143(3) VIDE ORD ER DATED 26.12.2011 AND THE TOTAL INCOME WAS DETERMINED AT RS. 2 71 25 791/-. AGGRIEVED BY THE ORDER OF A.O ASSESSEE CARRIED THE MATTER BEFOR E CIT(A). CIT(A) VIDE ORDER DATED 16.07.2012 GRANTED PARTIAL RELIEF TO TH E ASSESSEE. AGGRIEVED BY THE AFORESAID ORDER OF CIT(A) THE ASSESSEE IS N OW IN APPEAL BEFORE US AND HAS RAISED THE FOLLOWING GROUNDS. 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN CONFIRMING THE DISALLOWANCE OF RS.2 691/- MADE BY THE ASSESSING OF FICER U/S 14AOF THE INCOME TAX ACT 1961. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN CONFIRMING THE DISALLOWANCE OF RS. 11 97 016/- MADE BY THE ASSESSI NG OFFICER BEING AN AMOUNT OF RS.3 11 611/- OUT OF CAR DEPRECIATION AND RS.8 85 4 05/- OUT OF MOTOR CAR EXPENSES AS CLAIMED BY THE APPELLANT CO. 3. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN CONFIRMING AND DIRECTING THE ASSESSING OFFICER TO RE-COMPUTE THE D ISALLOWANCE OF INTEREST EXPENSES FOR THE PERIOD FOR WHICH ALLEGED INTEREST FREE ADVANCES WITH SUN INSULATORS PVT. LTD. REMAINED OUTSTANDING COMPLETEL Y IGNORING THE EVIDENCES FURNISHED WHICH CLEARLY ESTABLISHED DIRECT NEXUS OF INTEREST FREE LOANS & ALLEGED INTEREST FREE ADVANCE DURING THE YEAR. 4. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN CONFIRMING AND DIRECTING THE ASSESSING OFFICER TO RE-COMPUTE THE D ISALLOWANCE OF INTEREST EXPENSES FOR THE PERIOD FOR WHICH ALLEGED INTEREST FREE ADVANCES WITH SHREE AMBICA GEOTECHS PVT. LTD. REMAINED OUTSTANDING WHER E IT WAS CLEARLY ESTABLISHED THAT THE ALLEGED INTEREST FREE ADVANCES WERE OUT OF SALE PROCEEDS & NOT INTEREST BEARING FUNDS. 5. ALTERNATIVELY & WITHOUT PREJUDICE TO THE ABOVE THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) FAILED TO CONSIDER THE FACT TH AT THE ADVANCE TO SHRI AMBICA GEOTECHS PVT. LTD. WAS RS.33.00 LACS ONLY DURING TH E YEAR UNDER APPEAL. 6. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S FURTHER ERRED IN DIRECTING THE A.O. TO EXAMINE THE APPELLANT'S CLAIM WITH THE NECESSARY DOCUMENTS IN RESPECT OF ADVANCE GIVEN TO SOHAM INTEGRATED TEX TILE PARK PVT. LTD. WHEN ALL SUCH EVIDENCES & MATERIAL HAVE BEEN FURNISHED AT TH E TIME OF ASSESSMENT AS WELL AS APPELLATE STAGE. GROUND NO. 1 IS NOT PRESSED AND THEREFORE DISMISSED . GROUND NO. 2 IS WITH RESPECT TO DEPRECIATION ON CAR . ITA NO 2067 /AHD/201 2 . A.Y. 2009- 10 3 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A.O. N OTICED THAT THOUGH THE MOTOR CAR WAS IN THE NAME OF THE DIRECTOR OF TH E COMPANY BUT THE DEPRECIATION OF RS. 3 11 611/- AND MOTOR CAR EXPENS ES OF RS. 8 85 405/- WAS CLAIMED BY THE ASSESSEE. THE ASSESSEE WAS ASKE D TO JUSTIFY ITS CLAIM. THE ASSESSEE INTERALIA SUBMITTED THAT THE PA YMENT OF VEHICLE WAS MADE BY THE ASSESSEE COMPANY THOUGH THE COMPANY WAS NOT A REGISTERED OWNER BUT HOWEVER IT WAS THE BENEFICIAL OWNER OF TH E ASSET. IT WAS FURTHER SUBMITTED THAT IT IS NOT NECESSARY FOR THE PURPOSE OF MAKING THE CLAIM OF DEPRECIATION THAT THE REGISTERED OWNER-SHI P OF THE ASSET SHOULD BE WITH THE COMPANY. IT ALSO RELIED ON CERTAIN JUDICI AL PRONOUNCEMENTS. THE SUBMISSIONS OF THE ASSESSEE WAS NOT FOUND ACCEPTABL E TO THE A.O. HE WAS OF THE VIEW THAT FOR CLAIMING DEPRECIATION ON A SSETS BY THE COMPANY THE ASSETS SHOULD BE OWNED BY THE COMPANY AND SHOUL D BE PUT TO USE FOR THE BUSINESS OF THE COMPANY. HE WAS FURTHER OF THE VIEW THAT SINCE THE COMPANY AND THE DIRECTORS OF THE COMPANY ARE SEPARA TE ENTITIES AND THEREFORE THE CAR PURCHASED IN THE NAME OF THE DIRE CTOR CANNOT BE SAID TO BE OWNED BY THE COMPANY AND THEREFORE IT CANNOT BE CONSIDERED AS PUT TO USE EXCLUSIVELY FOR THE PURPOSE OF THE COMPANY. HE WAS FURTHER OF THE VIEW THAT THE ASSESSEE HAS FAILED TO PROVE THE USE OF VEHICLE FOR THE BUSINESS PURPOSE AS NO LOG BOOKS OR ANY OTHER DETAI LS WERE PROVIDED BY THE ASSESSEE. HE ACCORDINGLY REJECTED THE CLAIM OF DEPRECIATION OF RS. 3 11 611/- AND MOTOR CAR EXPENSES OF RS. 8 85 405/- . AGGRIEVED BY THE ORDER OF A.O ASSESSEE CARRIED THE MATTER BEFORE CI T(A). CIT(A) UPHELD THE ORDER OF A.O. BY HOLDING AS UNDER:- 4.3 I HAVE CONSIDERED THE FACTS OF THE CASE; ASSESSMENT ORDER AND APPELLANTS WRITTEN SUBMISSION. THE BASIC FACT IS THAT DIRECTOR OF THE COMPANY PURCHASED MOTOR CAR IN HIS NAME AND THE BILL FOR THE SAID PURCHASE IS A LSO IN THE NAME OF DIRECTOR. THEREFORE APPELLANT COMPANY IS NOT THE LEGAL OWNER OF THE MOTOR CAR. FOR CLAIM ITA NO 2067 /AHD/201 2 . A.Y. 2009- 10 4 OF DEPRECIATION THE TWO CONDITIONS ARE TO BE FULFI LLED NAMELY-APPELLANT MUST BE OWNER OF THE ASSET AND IT MUST BE USED FOR THE PURP OSE OF APPELLANT'S BUSINESS. IN THIS CASE APPELLANT IS NOT THE OWNER SINCE THE OWNE RSHIP VESTS WITH THE DIRECTOR WHO IS SEPARATE ENTITY THAN THE APPELLANT COMPANY. AS REGARDS USE OF THESE CARS FOR THE PURPOSE OF BUSINESS THE SAME WERE NOT FURN ISHED. THEREFORE USE OF CAR FOR THE PURPOSE OF COMPANY'S BUSINESS IS NOT ESTABLISHE D BY THE APPELLANT. ALTHOUGH THE ONUS TO PROVE THE USER OF ASSET WAS ON THE APPE LLANT THE SAME WAS NOT DISCHARGED EITHER BEFORE THE ASSESSING OFFICER OR B EFORE THE UNDERSIGNED. CLAIM OF AN EXPENSE IN THE COMPANY ACCOUNTS IS NOT AN EVI DENCE TO PROVE THAT ASSET WAS USED FOR THE BUSINESS OF THE COMPANY. IN THE ABSENCE OF ANY TANGIBLE EVIDENCE TO PROVE THE BUSINESS USE OF THE MOTOR CAR PURCHASED I N THE NAME OF DIRECTOR IT IS HELD THAT THE MOTOR CAR WAS NOT USED FOR THE PURPOS E OF APPELLANT'S BUSINESS. COMING TO THE APPELLANT'S ARGUMENT OF BENEFICIAL OW NERSHIP APPELLANT SUBMITTED THAT PAYMENT FOR THE CAR WAS MADE BY THE COMPANY AN D HENCE THE APPELLANT IS THE BENEFICIAL OWNER. PAYMENT WILL NOT DETERMINE THE OW NERSHIP SINCE PAYMENT CAN BE MADE BY WAY OF LOAN ALSO. IN FACT MAJOR PAYMENT IS MADE BY FINANCE COMPANY BUT IT IS NOT THE BENEFICIAL OWNER. SINCE BOTH APPELLAN T AND ITS DIRECTOR ARE SEPARATE ENTITIES AND DIRECTORS ARE NOT PERMANENT IT CANNOT BE SAID THAT APPELLANT COMPANY HAS GOT COMPLETE DOMINION OVER THE MOTOR CAR. SINCE MOTOR CAR IS IN POSSESSION AND CONTROL OF THE DIRECTORS IN WHOSE NAME THE SAME STAND THERE IS NO DOMINION OR CONTROL OF THE APPELLANT COMPANY ON THE SAID MOT OR CARS. THOUGH PURCHASED FROM THE FUNDS PROVIDED BY IT APPELLANT CANNOT BE SAID TO BE BENEFICIAL OWNER FOR THE PURPOSE OF CLAIMING DEPRECIATION. APPELLANT RE LIED UPON THE DECISIONS OF ITAT AHMEDABAD AND ALSO CERTAIN HIGH COURTS INCLUDI NG SUPREME COURT DECISION IN THE CASE OF MYSORE MINERALS LTD. IT WOULD BE VERY RELEVANT TO REFER THREE-MEMBER DEC ISION OF HONORABLE SUPREME COURT IN THE CASE OF TAMIL NADU CIVIL SUPPLIES CORP ORATION LTD VERSUS CIT REPORTED IN 249 ITR 214. IN THIS LARGER BENCH DECISION OF APEX COURT EARLIE R DECISION OF MYSORE MINERALS LTD WAS ALSO CONSIDERED . THE SAID DECISION WAS DISTINGUISHED ON FACTS AND IT WAS HELD THAT SINCE A SSESSEE HAS NOT ACQUIRED DOMINION OVER ASSET IN QUESTION CLAIM OF DEPRECIAT ION IS NOT ALLOWED. IN ANOTHER DECISION OF DELHI HIGH COURT IN THE CASE OF MM FISH ERIES PRIVATE LTD VERSUS CIT 277 ITR 204 ON THE IDENTICAL ISSUE OF CLAIM OF DEPRECIATION ON VEHICLES REGISTERED IN THE NAME OF DIRECTORS THE SAME WAS DECIDED AGAI NST THE ASSESSEE. IN THE LIGHT OF THESE TWO LANDMARK DECISIONS THE ISSUE IS NOT HELD TO BE COVERED BY THE DECISION OF JURISDICTIONAL ITAT SINCE THESE DECISIONS WERE N OT CONSIDERED THEREIN. ONUS IS ON THE APPELLANT TO PROVE THE DOMINION OVER THE ASS ET AS WELL AS USE FOR THE PURPOSE OF BUSINESS. IF APPELLANT IS NOT ABLE TO PR OVE EITHER IN THE LIGHT OF LARGER BENCH DECISION OF SUPREME COURT CLAIM OF DEPRECIAT ION ON ASSETS STANDING IN OTHERS NAME CANNOT BE ALLOWED. THE DECISIONS OF OTHER HIGH COURTS HAVE BEEN CONSID ERED. IN ALL THOSE DECISIONS THE USER OF ASSET NAMELY TRANSPORT BUSES ETC WERE B Y THE COMPANIES AND THE COMPANIES WERE DISCLOSING THE INCOME FROM HIRING TH OSE VEHICLES. THE USER OF ASSET FOR THE PURPOSE OF BUSINESS WAS PROVED IN ALL THESE CASES BEYOND DOUBT. WITH THE USER OF ASSET DOMINION AND CONTROL IS ALSO PRO VED. THEREFORE CLAIM OF DEPRECIATION IN THESE CASES WERE ALLOWED BY VARIOUS HIGH COURTS. HOWEVER IN THE ITA NO 2067 /AHD/201 2 . A.Y. 2009- 10 5 APPELLANT'S CASE USE FOR THE PURPOSE OF BUSINESS I S NOT AT ALL PROVED AND THE DOMINION AND CONTROL ALSO REMAINED UNPROVED THEREFO RE THESE DECISIONS DO NOT HELP THE APPELLANT. CONSIDERING THE LARGER BENCH DE CISION OF APEX COURT AND THE DELHI HIGH COURT DECISION IN THE CASE OF MM FISHERI ES PRIVATE LTD THE DECISION OF JURISDICTIONAL ITAT IS NOT FOLLOWED WHICH HAS NO T CONSIDERED THESE DECISIONS. IT IS THEREFORE HELD THAT THE DEPRECIATION CLAIMED BY THE APPELLANT IS CORRECTLY DISALLOWED BY THE ASSESSING OFFICER. IN VIEW OF THE FINDINGS IN EARLIER PARA THAT MOTOR CAR WAS NOT USED FOR THE PURPOSE OF APPELLANTS BUSINESS THE MOTOR CAR EXPENSES CLA IMED BY THE APPELLANT ARE NOT ALLOWABLE. ACCORDINGLY THE DISALLOWANCE OF EXPENSES RELATING TO THIS MOTOR CAR IS JUSTIFIED. 5. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE IS N OW IN APPEAL BEFORE US. BEFORE US THE LD. A.R. REITERATED THE SUBMISSI ONS MADE BEFORE A.O. AND CIT(A). HE FURTHER RELIED ON THE DECISION OF C O-ORDINATE BENCH IN THE CASE OF SWATI AUTO LINK PRIVATE LIMITED ITA NO. 1471/A/2010 ORDER DATED 15.02.2013. HE ALSO PLACED THE COPY OF THE S AME ON RECORD. THE LD. D.R. ON THE OTHER HAND SUBMITTED THAT THE USE O F CAR FOR THE PURPOSE OF COMPANIES BUSINESS WAS NOT ESTABLISHED BY THE ASSES SEE EITHER BEFORE THE A.O. OR CIT(A) THOUGH THE ONUS TO PROVE THE USE OF ASSET WAS ON THE ASSESSEE. HE FURTHER SUBMITTED THAT THE CLAIM OF A N EXPENSE IN THE COMPANIES ACCOUNT IS NOT AN EVIDENCE TO PROVE THE A SSET WAS USED FOR THE PURPOSE OF BUSINESS. HE THUS SUPPORTED THE ORDER O F A.O. AND CIT(A). 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. 7. IT IS AN UNDISPUTED FACT THAT THE MOTOR CAR ON WHIC H THE ASSESSEE CLAIMS DEPRECIATION AND EXPENSES ARE IN THE NAME OF THE DI RECTOR AND NOT THE ASSESSEE. BEFORE US THOUGH THE LD. A.R. HAS SUBMIT TED THAT THE FUNDS OF THE ASSESSEE WERE USED FOR THE PURPOSE OF ACQUISITI ON OF MOTOR CAR AND THE MOTOR CAR WAS USED FOR THE PURPOSE OF BUSINESS BUT HOWEVER THE LD. ITA NO 2067 /AHD/201 2 . A.Y. 2009- 10 6 A.R. DID NOT PRODUCE THE COPY OF THE ANNUAL ACCOUNT S TO SUBSTANTIATE ITS CLAIM THAT THE FUNDS OF THE ASSESSEE HAS BEEN USED FOR ACQUISITION OF MOTOR CAR. FURTHER THE ASSESSEE HAS NEITHER BROUGH T ANY MATERIAL ON RECORD TO PROVE THAT THE ASSET WAS USED BY THE ASSE SSEE FOR THE PURPOSE OF BUSINESS AND THE ASSESSEE WAS EXERCISING ITS DOMAIN POSSESSION AND OWNERSHIP OVER THE ASSET TO THE EXCLUSION OF ALL OT HERS. . FURTHER HE HAS ALSO NOT BROUGHT ANY MATERIAL BEFORE US TO SHOW THA T AS TO HOW THESE EXPENSES WERE TREATED IN EARLIER YEARS. WE FURTHER FIND THAT THE A.O. HAS NOTED THAT THE ASSESSEE HAS NEITHER PROVIDED ANY DE TAILS OR FURNISHED ANY LOG BOOKS TO PROVE THE USE OF VEHICLE FOR THE BUSIN ESS PURPOSES OF THE ASSESSEE. IN THE AFORESAID FACTS WE ARE OF THE VI EW THAT IN THE INTEREST OF JUSTICE AND FAIR PLAY ONE MORE OPPORTUNITY BE GRANT ED TO THE ASSESSEE TO SUBSTANTIATE HIS CLAIM OF EXPENSES BEFORE THE A.O. TO HIS SATISFACTION. WE THUS REMIT THE MATTER TO THE FILE OF A.O. AND DIREC T HIM TO DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW AND AFTER CONSIDERING THE SUBMISSIONS MADE BY THE ASSESSEE. THE ASSESSEE IS ALSO DIRECTED TO COOPERATE WITH THE A.O. BY FURNISHING ALL THE NECESSARY DETAILS RE QUIRED BY HIM PROMPTLY FAILING WHICH THE A.O. SHALL BE FREE TO DECIDE THE MATTER ON THE BASIS OF MATERIAL ON RECORD. THUS THIS GROUND OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. GROUND NO. 3 4 5 & 6 ARE INTERCONNECTED AND ARE WI TH RESPECT TO DISALLOWANCE OF INTEREST EXPENSES AND THEREFORE CON SIDERED TOGETHER. 8. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A.O. N OTICED THAT ASSESSEE HAS GRANTED INTEREST FREE LOANS AND ADVANCES TO FOL LOWING PARTIES:- (I) SHREE AMBIKA GEO TAX PVT LTD. RS. 33 00 000/- ITA NO 2067 /AHD/201 2 . A.Y. 2009- 10 7 (II) SOHAM INTEGRATED TEXTILE PARK P. LTD. RS. 1 55 80 000/- (III) SUN INSULATORS PVT. LTD. RS. 14 50 000/- TOTAL INTEREST FREE ADVANC ES RS. 2 03 30 000/- 9. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE INT EREST EXPENSE NOT BE DISALLOWED TO THE EXTENT OF INTEREST FREE ADVANCE G RANTED. THE ASSESSEE INTERALIA SUBMITTED THAT ASSESSEE WAS HAVING INTER EST FREE FUNDS IN THE FORM OF SHARE CAPITAL INTEREST FREE LOANS AND RESE RVES WHICH WERE IN EXCESS OF INTEREST FREE ADVANCE AND THEREFORE NO DI SALLOWANCE WAS CALLED FOR. HE ALSO RELIED ON CERTAIN DECISIONS OF HIGH CO URTS. THE SUBMISSION OF THE ASSESSEE WAS NOT FOUND ACCEPTABLE TO THE A.O. H E WAS OF THE VIEW THAT THE DISALLOWANCE NEEDS TO BE MADE AS THE EXPEN DITURE WAS NOT INCURRED FOR THE PURPOSE OF BUSINESS. HE THEREFORE COMPUTED THE DISALLOWANCE AT AVERAGE RATE OF 12% ON THE TOTAL IN TEREST FREE ADVANCE OF RS. 2 03 30 000/- AND ACCORDINGLY WORKED OUT THE IN TEREST DISALLOWANCE TO THE EXTENT OF RS. 24 39 600/-. AGGRIEVED BY THE OR DER OF A.O. ASSESSEE CARRIED THE MATTER BEFORE CIT(A) CIT(A) AFTER CONS IDERING THE SUBMISSIONS OF THE ASSESSEE GRANTED PARTIAL RELIEF TO THE ASSESSEE BY HOLDING AS UNDER:- 5.3 I HAVE CONSIDERED THE FACTS OF THE CASE; ASSESS MENT ORDER AND APPELLANT'S WRITTEN SUBMISSION. ASSESSING OFFICER MADE DISALLOWANCE OF INTEREST ON THE GROUND THAT APPELLANT GAVE INTEREST FREE ADVANCES AND DIVERTED INTEREST-BEARING BUSINESS FUNDS TO NON-BUSINESS PURPOSES. APPELLANT SUBMITTED THAT IT HAD SUFFICIENT INTEREST FREE FUNDS IN THE FORM OF SHARE CAPITAL AND RESERVES AND ALSO PRO FIT FOR THE YEAR WHICH WAS SUFFICIENT TO FUND SUCH INTEREST FREE ADVANCES. APP ELLANT ALSO ARGUED THAT INTEREST FREE LOAN OF RS 14.50 LAKHS GIVEN TO SUN INSULATORS PRIV ATE LTD WAS GIVEN BY CHEQUE ON 23-03-2009 WHICH WAS CLEARED ON 30-03 2009 AND THER EFORE FUNDS WERE GIVEN ONLY FOR TWO DAYS IN THIS FINANCIAL YEAR WHERE ASSESSING OFFICER COMPUTED INTEREST DISALLOWANCE FOR THE WHOLE YEAR. AS REGARDS SHREE A MBICA GEOTECHS PRIVATE LTD THE ADVANCE OF RS 33 LAKHS WAS GIVEN ON 22-11- 2008 OUT OF SALE PROCEEDS. IN THE CASE OF SOHAM INTEGRATED TEXTILE PARK PVT LTD IT WAS ARGUE D THAT ADVANCE GIVEN IS ONLY RS 30.50 LAKHS AND NOT RS 155.80 LAKHS. FURTHER IT WAS GIVEN AGAINST BOOKING OF THE UNIT IN TEXTILE PARK AND ACCORDINGLY IT IS BUSINESS ADVA NCE NOT LIABLE FOR INTEREST ITA NO 2067 /AHD/201 2 . A.Y. 2009- 10 8 DISALLOWANCE. ALL THE ARGUMENTS OF THE APPELLANT HA VE BEEN CONSIDERED ALONG WITH THE JUDICIAL DECISIONS CITED BY IT. AS REGARDS APPELLANT'S ARGUMENT OF SUFFICIENT INTER EST FREE FUNDS AVAILABLE FOR FUNDING INTEREST FREE ADVANCES IT IS CLEAR THAT APPELLANT' S TOTAL CAPITAL AND RESERVES OF RS 9.25 CRORES WERE INVESTED IN FIXED ASSETS AND INVENTORY EXCEEDING RS 26 CRORES AND THEREFORE THE SAME IS NOT AVAILABLE FOR PROVIDING INTEREST FREE ADVANCES. THEREFORE APPELLANT'S ARGUMENT IN THIS REGARD ALONG WITH JUDI CIAL DECISIONS RELIED UPON ARE NOT APPLICABLE AND HENCE THE SAME IS REJECTED. AS REGARDS APPELLANT'S ARGUMENT THAT ADVANCES TO SU N INSULATORS PRIVATE LTD AND SHREE AMBICA GEO TECHS PRIVATE LTD WERE GIVEN ONLY FOR THE PART OF THE PERIOD DURING THE YEAR I AGREE WITH THE APPELLANT THAT IN TEREST DISALLOWANCE CANNOT BE MADE FOR THE WHOLE YEAR. THE APPELLANT'S ARGUMENT REGARD ING IMMEDIATE SOURCE NOT FROM INTEREST-BEARING BORROWED FUNDS IS NOT FOUND ACCEPT ABLE SINCE APPELLANT HAS BORROWED SUBSTANTIAL INTEREST-BEARING FUNDS TO THE EXTENT OF RS 24.66 CRORES WHICH IS MIXED WITH OTHER BUSINESS FUNDS. WHEN APPELLANT IS PAYING SUBSTANTIAL INTEREST ON BORROWED FUNDS THERE IS GO LOGIC FOR DIVERTING INT EREST BEARING FUNDS TO NON-BUSINESS ADVANCES. CONSIDERING THIS IT IS HELD THAT INTEREST DISALLOWANCE IN RESPECT OF ADVANCES TO SUN INSULATORS PRIVATE LTD AND SHREE AMBICA GEOT ECH PRIVATE LTD IS NECESSARY AND ACCORDINGLY AO'S ACTION IS CONFIRMED. HOWEVER THE I NTEREST CANNOT BE DISALLOWED FOR THE WHOLE YEAR WHEN SUCH ADVANCES WERE GIVEN ONLY F OR THE PART OF THE PERIOD. ASSESSING OFFICER IS THEREFORE DIRECTED TO RECOMPUT E THE INTEREST DISALLOWANCE IN RESPECT OF THESE TWO PARTIES ONLY FOR THE PERIOD FO R WHICH INTEREST FREE ADVANCES WERE OUTSTANDING DURING THE YEAR. AS REGARDS SOHAM INTEGRATED TEXTILE PARK PVT LTD A PPELLANT SUBMITTED THAT IT WAS FOR THE BOOKING OF UNIT IN TEXTILE PARK AND THEREFORE I T IS A BUSINESS ADVANCE. IT IS NOT IN DISPUTE THAT INTEREST ON BUSINESS ADVANCE CANNOT BE DISALLOWED SINCE IN THIS SITUATION BORROWED FUNDS HAVE- BEEN USED FOR THE PURPOSE OF B USINESS. HOWEVER IF THE ADVANCE IS NOT FOR THE PURPOSE OF BUSINESS THEN INTEREST DI SALLOWANCE IS JUSTIFIED. ASSESSING OFFICER IS THEREFORE DIRECTED TO EXAMINE THE APPELL ANT'S CLAIM WITH THE NECESSARY DOCUMENTS AND IF IT IS CLEAR THAT ADVANCE TO SOHAM INTEGRATED TEXTILE PARK PVT. LTD WAS GIVEN FOR BOOKING OF UNIT IN TEXTILE PARK NO I NTEREST DISALLOWANCE WILL BE MADE. IF THE ADVANCE GIVEN TO SOHAM INTEGRATED TEXTILE PA RK PVT LTD IS NOT FOUND TO BE FOR BUSINESS PURPOSE THE INTEREST DISALLOWANCE IS TO B E MADE FOR THE PERIOD OF ADVANCE REMAINED OUTSTANDING DURING THE YEAR. 10. AGGRIEVED BY THE ORDER OF CIT(A) THE ASSESSEE IS N OW IN APPEAL BEFORE US. BEFORE US THE LD. A.R. WITH RESPECT TO LOAN OF RS. 14.5 LACS GIVEN TO SUN INSULATORS PVT. LTD. SUBMITTED THAT IT WAS OUT OF THE LOAN RECEIPT FROM VIJAY STATIONERS PVT. LTD. HE FURTHER SUBMITTED TH AT NO INTEREST WAS PAID OF LOANS GRANTED TO VIJAY STATIONERS AND THEREFORE THE QUESTION OF DISALLOWING INTEREST DOES NOT ARISE. HE FURTHER SUB MITTED THAT THE LOAN WAS ITA NO 2067 /AHD/201 2 . A.Y. 2009- 10 9 ADVANCED ONLY ON 30.03.2009 AND THEREFORE INTEREST IF AT ALL CHARGEABLE WOULD BE FOR ONE DAY AND NOT FOR THE ENTIRE YEAR. W ITH RESPECT TO THE ADVANCE TO RS. 33 LACS TO SHRI AMBIKA GEO TAX PVT. LTD. HE SUBMITTED THAT THE SAME WAS OUT OF THE SALE RECEIPTS BY THE C OMPANY AND THEREFORE NO INTEREST BEARING FUNDS WERE USED FOR THE PURPOSE OF GRANTING OF ADVANCE. WITH RESPECT TO LOAN GRANTED TO SOHAM INT EGRATED TEXTILE PARK PVT. LTD. THE LD. A.R. SUBMITTED THAT THE AMOUNT PA ID DURING THE YEAR UNDER CONSIDERATION WAS ONLY RS. 30 50 000/- AND NO T RS. 1 55 80 000/- AS ALLEGED BY THE A.O. IT WAS FURTHER SUBMITTED THA T IT WAS A BOOKING AMOUNT PAID FOR SETTING UP UNDERTAKING IN THE TEXTI LE PARK THE ADVANCE WAS PURELY OUT OF BUSINESS CONSIDERATION AND NOT TH E LOAN. HE FURTHER SUBMITTED THAT THE ASSESSEE WAS HAVING SUFFICIENT I NTEREST FREE FUNDS IN THE NATURE OF CAPITAL RESERVES AND SURPLUS AND INT EREST FREE LOANS WHICH HAS BEEN USED FOR THE PURPOSE OF GRANTING OF ADVANC E. HE THEREFORE RELYING ON THE DECISION IN THE CASE OF RELIANCE UTI LITIES AND POWER LTD. 313 ITR 340 (BOM.) TORRENT FINANCIERS (2001) 73 TTJ 624 (AHD.) SUBMITTED THAT WHEN INTEREST FREE FUNDS AVAILABLE W ITH THE ASSESSEE ARE FAR IN EXCESS OF THE INTEREST FREE ADVANCES NO DIS ALLOWANCE CAN BE MADE. HE THUS SUBMITTED THAT THE ADDITION MADE BY THE A.O . BE DELETED. THE LD. D.R. ON THE OTHER HAND SUPPORTED THE ORDER OF CIT(A ). 11. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. BEFORE US THE LD. A.R. HAS SUBMITTED THAT THE AMOU NT ADVANCE TO SUN INSULATOR PVT. LTD. AMOUNTING TO RS. 14 50 000/- WA S OUT OF THE LOANS RECEIPTS FROM THE VIJAY STATIONERS PVT. LTD. AND FU RTHER NO INTEREST HAS BEEN PAID TO VIJAY STATIONERS PVT. LTD. ITA NO 2067 /AHD/201 2 . A.Y. 2009- 10 10 12. BEFORE US THERE WAS NO DETAILS ARE AVAILABLE WITH RESPECT TO THE INTEREST PAID BY THE ASSESSEE. FURTHER THERE IS NO FINDING O F A.O OR CIT(A) THAT THE ASSESSEE HAS NOT PAID ANY INTEREST TO VIJAY STA TIONERS. WE THEREFORE FEEL THAT THIS FACTUAL ASPECT NEEDS TO BE VERIFIED BY A.O. WE THEREFORE REMIT THE ISSUE TO THE FILE OF A.O. AND DIRECT HIM TO VERIFY THE FACTS AND THEREAFTER DECIDE THE MATTER AS PER LAW. 13. WITH RESPECT TO SHREE AMBIKA GEO TAX PVT. LTD. TH E LD. A.R. HAS SUBMITTED THAT THE AMOUNT WAS ADVANCED OUT OF THE S ALE PROCEEDS RECEIVED BY IT BUT HOWEVER NO SUPPORTING EVIDENCE WAS PLACED BEFORE US. BEFORE US THE LD. A.R. HAS NOT PLACED ANY MATERIAL ON RECORD TO SUBSTANTIATE ITS CLAIM THAT THE ASSESSEE WAS HAVING SUFFICIENT INTEREST FREE ADVANCE WHICH HAS BEEN UTILIZED FOR THE PURPOSE OF ADVANCING THE AFORESAID AMOUNTS. WE FURTHER FIND THAT CIT(A) HAS GIVEN A FINDING THAT ASSESSEES TOTAL CAPITAL AND RESERVES OF RS. 9.25 C RORE WERE INVESTED IN FIXED ASSETS AND INVENTORY EXCEEDING RS. 26 CRORE A ND THEREFORE THE SAME WAS NOT AVAILABLE FOR PROVIDING INTEREST FREE ADVAN CES. BEFORE US THE LD. A.R. COULD NOT CONTROVERT THE FINDINGS OF CIT(A). I N VIEW OF THE AFORESAID FACTS HOWEVER IN THE INTEREST OF JUSTICE AND FAIR PLAY WE ARE OF THE VIEW THAT THE ASSESSEE BE GRANTED ONE MORE OPPO RTUNITY TO SUBSTANTIATE ITS CLAIM OF USE OF INTEREST FREE FUND S FOR MAKING ADVANCES. WE THEREFORE REMIT THE MATTER TO THE FILE OF A.O. T O DECIDE THE ISSUE IN ACCORDANCE WITH LAW AND AFTER CONSIDERING THE SUBMI SSIONS AND EVIDENCE PLACED BY THE ASSESSEE. ASSESSEE IS ALSO DIRECTED T O FULLY CO-OPERATE BY FURNISHING THE NECESSARY EVIDENCE PROMPTLY SO THAT THE A.O. CAN DECIDE THE ISSUE. ITA NO 2067 /AHD/201 2 . A.Y. 2009- 10 11 14. WITH RESPECT TO THE ADVANCE GIVEN TO SOHAM INTEGRATED TE XTILE PARK PVT. LTD. WE FIND THAT CIT(A) HAS DIRECTED THE A.O. TO VERIFY THE CLAIM OF ASSESSEE THAT THE ADVANCE GRANTED BY THE ASSESSEE WAS IN THE NATURE OF BUSINESS ADVANCE AND IF SO THEN NO DISALLOWANCE OF INTEREST BE MADE AND THEREAFTER TO DECIDE THE ISSUE. WE FIND NO INFIRMI TY IN THE ORDER OF CIT(A) WITH RESPECT TO THIS ISSUE. NOTHING HAS BEEN BROUGHT ON RECORD TO SHOW THAT PURSUANT TO THE DIRECTIONS OF CIT(A) AN ORDER HAS BEEN PASSED BY A.O. 15. IN THE RESULT THIS GROUND OF THE ASSESSEE IS PART LY ALLOWED FOR STATISTICAL PURPOSES. 16. IN THE RESULT THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 25 -10 - 2013. SD/- SD/- (MUKUL KR. SHRAWAT) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD. TRUE COPY RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR. ITAT AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT AHMEDABAD