The DCIT, Circle-4,, Ahmedabad v. Gujarat Apollo Industries Ltd.,, Ahmedabad

ITA 207/AHD/2013 | 2006-2007
Pronouncement Date: 29-04-2014 | Result: Dismissed

Appeal Details

RSA Number 20720514 RSA 2013
Assessee PAN AAACG7248P
Bench Ahmedabad
Appeal Number ITA 207/AHD/2013
Duration Of Justice 1 year(s) 3 month(s) 7 day(s)
Appellant The DCIT, Circle-4,, Ahmedabad
Respondent Gujarat Apollo Industries Ltd.,, Ahmedabad
Appeal Type Income Tax Appeal
Pronouncement Date 29-04-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted D
Tribunal Order Date 29-04-2014
Date Of Final Hearing 02-04-2014
Next Hearing Date 02-04-2014
Assessment Year 2006-2007
Appeal Filed On 22-01-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH AHMEDABAD BEFORE SHRI D.K.TYAGI JUDICIAL MEMBER AND .. SHRI T.R. MEENA ACCOUNTANT MEMBER !.. ' # $ # $ # $ # $ ITA NO. 207/AHD/2013 ASSESSMENT YEAR :2006-07 THE DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-4 1 ST FLOOR NAVJIVAN TRUST BLDG. OFF. ASHRAM ROAD AHMEDABAD V/S . GUJARAT APOLLO INDUSTRIES LIMITED APOLLO HOUSE NR. MITHAKALI CIRCLE NAVRANGPURA AHMEDABAD 380009 PAN NO. A AA CG7248P (APPELLANT) .. (RESPONDENT) %& ' ( / BY APPELLANT SHRI K. C. MATHEWS SR.D.R. )%& ' ( /BY RESPONDENT SHRI U. S. BHATI A.R. *+ ' -' /DATE OF HEARING 02.04.2014 ./0 ' -' /DATE OF PRONOUNCEMENT 29.04.2014 O R D E R PER : SHRI T.R.MEENA ACCOUNTANT MEMBER THIS IS AN APPEAL AT THE BEHEST OF REVENUE WHICH HA S EMANATED FROM THE ORDER OF CIT(A)-VIII AHMEDABAD DATED 18. 10.2012 FOR ASSESSMENT YEAR 2006-07. THE SOLE GROUND OF REVENU ES APPEAL IS AGAINST DELETING THE DISALLOWANCE OF RS.71 43 000/- ON ACCOUNT OF INTEREST EXPENSES. 2. THE A.O. OBSERVED THAT THE ASSESSEE HAS BORROWED FUND OF RS.32 16 58 192/-. THE ASSESSEE HAD INCURRED AVERA GE INTEREST AT THE RATE OF 12% APPROXIMATELY WHEREAS ON THE AMOUNT OF RS.1383.94 LACS ITA NO. 207/AHD/13 A.Y. 06-07 DCIT VS. GUJARAT APOLLO INDUSTRIES LIMITED PAGE 2 ADVANCED TO RELATED PARTIES THE INTEREST HAD BEEN CHARGED AT A MUCH LESSER RATE OF 6.84%. THUS THE ASSESSEE HAD CHARG ED LESSER INTEREST TO THE EXTENT OF RS.71.43 LACS BY WAY OF DIVERSION OF BORROWED FUNDS TO RELATED PARTIES. THE A.O. GAVE REASONABLE OPPORTUN ITY OF BEING HEARD WHICH WAS NOT FOUND CONVINCING TO THE A.O. THUS H E MADE ADDITION OF RS.71 43 000/- AND ADDED TO THE INCOME OF THE ASSES SEE. 3. BEING AGGRIEVED BY THE ORDER OF THE A.O. THE AS SESSEE CARRIED THE MATTER BEFORE THE CIT(A). BEFORE HIM THE APPELLAN T SUBMITTED SAME REPLY FURNISHED BEFORE THE A.O. THE LD. CIT(A) ALLOWED T HE APPEAL BY OBSERVING AS UNDER: 3.3. I HAVE GONE THROUGH THE ASSESSMENT ORDER THE RE-ASSESSMENT ORDER AND THE SUBMISSION OF THE APPELLANT CAREFULLY . THE ASSESSING OFFICER HAS DISALLOWED AN AMOUNT OF RS. 71 43 000/- AND ADDED TO THE INCOME OF THE APPELLANT COMPANY ON THE GROUND THAT THE APPELLANT HAS DIVERTED ITS INCOME BY CHARGING INTEREST AT LOWER R ATE THAN AT THE RATE ON WHICH AMOUNT WAS BORROWED BY THEM. THE APPELLANT HAS SUBMITTED THAT THE NET INTEREST OF RS. 1 64 90 408/- HAS BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT. IT COULD BE SEEN FROM THE LEDGER ACCOUNT OF INTEREST THAT INTEREST HAS BEEN CHARGED AT THE RATE OF AROUN D 10 TO 12 PERCENT. THE RATE OF INTEREST PAID IS ACTUALLY LESS THAN THE RATE OF INTEREST CHARGED ON LOANS AND ADVANCES: THE REASONS FOR REOP ENING OF THE ASSESSMENT ON THE GROUND THAT THE APPELLANT HAS PAI D AVERAGE INTEREST AT THE RATE OF 12 PER CENT AND CHARGED AT THE RATE OF 6.84 PER CENT ARE FACTUALLY WRONG. THE APPELLANT HAS SUBMITTED THE CO NSOLIDATED TABLE FOR THE INTEREST CHARGED ON THE ADVANCES GIVEN AND THE INTEREST PAID ON THE LOAN TAKEN AS ABOVE. THE APPELLANT HAS ALSO SUB MITTED THE SAME FACTS BEFORE THE AO AS 'THE TOTAL AVERAGE BORROWING DURING THE YEAR UNDER CONSIDERATION WAS ABOVE RS.30 CRORES (OPENING 29.68 + CLOSING 32.17) ON WHICH WE HAVE PAID TOTAL INTEREST OF RS.2 58 LACS I.E. THE ITA NO. 207/AHD/13 A.Y. 06-07 DCIT VS. GUJARAT APOLLO INDUSTRIES LIMITED PAGE 3 AVERAGE COST OF THE FUNDS IS AROUND 8% WHEREAS WE H AVE CHARGED THE INTEREST FROM THE ASSOCIATE COMPANY @ 10% I.E. 25% HIGHER THAN THE AVERAGE COST TO THE COMPANY'. AFTER GOING THROUGH T HE SUBMISSION OF THE APPELLANT IT IS SEEN THAT APPELLANT IS CHARGIN G MORE % OF INTEREST ON THE ADVANCES GIVEN THAN WHAT HE IS PAYING ON THE LO ANS TAKEN WHICH HAS BEEN PUT ON THE RECORD BEFORE THE AO AND HAS BE EN DEMONSTRATED WITH FACTS BEFORE ME ALSO. I DON'T SEE ANY REASON H OW THE AO HAS CALCULATED AND WHY THE ADDITION HAS BEEN MADE WHEN THE FACTS ARE JUST OPPOSITE AS HAS BEEN OBSERVED BY THE AO. IN VIEW OF THE ABOVE THE ADDITION MADE BY THE AO DOES NOT HAVE ANY BASIS AND IS FACTUALLY WRONG APPRECIATION OF THE FACTS. THEREFORE THE AO IS DIRECTED TO DELETE THE ADDITION OF RS. 71 43 000/- AND ADDED TO THE IN COME OF THE APPELLANT COMPANY ON THE GROUND THAT THE APPELLANT HAS DIVERTED ITS INCOME BY CHARGING INTEREST AT LOWER RATE OF INTERE ST THEN AT THE RATE ON WHICH AMOUNT WAS BORROWED BY THEM. THE GROUND OF TH E APPELLANT IS ALLOWED. 4. NOW THE REVENUE IS BEFORE US. LD. SR. D.R. RELI ED UPON THE ORDER OF THE A.O. AT THE OUTSET LD. COUNSEL FOR THE APPELL ANT REITERATED THE SUBMISSION MADE BEFORE THE A.O. AS WELL AS CIT(A). LD. A.R. FURTHER ARGUED THAT ASSESSEE HAD SHARE CAPITAL AT RS.3.5 CR ORE AND RESERVE & SURPLUS OF RS.24.25 CRORE. THE ASSESSEE HAS PROFIT DURING THE YEAR RS.15.68 CRORE. THE TURNOVER HAS INCREASED SUBSTAN TIALLY FROM RS.69.52 CRORE IN PRECEDING YEAR TO RS.114.01 CRORE IN THE Y EAR UNDER CONSIDERATION. THE ASSESSEE HAS CHARGED INTEREST @ 10% PER ANNUM F ROM APOLLO INDUSTRIES & PROJECTS LTD. 9% FROM HIGHWAY SAFETY SYSTEMS PVT. LTD. & 12% FROM CIRCUIT SYSTEMS (INDIA) LTD. WHICH HAS BE EN SHOWN AS INCOME BY THE APPELLANT (PAGE NO.46 OF PAPER BOOK). THERE FORE THE ORDER OF CIT(A) MAY BE CONFIRMED. ITA NO. 207/AHD/13 A.Y. 06-07 DCIT VS. GUJARAT APOLLO INDUSTRIES LIMITED PAGE 4 5. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. THE ASSESSEE COMPANY HAS OWN MONEY IN FORM OF SHARE CAPITAL RESERVE & SURPLUS AND PROFIT EARNED DURING THE YEAR . THE INTEREST CHARGED FROM THE SISTER CONCERN AS PER THE PREVAILING MARKE T RATE. FURTHER THEY HAVE ALSO ASSESSED TO TAX (IN SAME TAX BRACKET) AND THERE IS NO LOSS OF REVENUE. THE CBDT HAS ISSUED CIRCULAR ON THIS ISSU E WHEREIN IT HAS BEEN DECIDED BY THE BOARD THAT NO ADDITION SHOULD BE MAD E WHERE THE SISTER CONCERNS FALL IN THE SAME TAX BRACKET. THE LD. SR. D.R. HAS NOT CONTROVERTED THE FINDINGS OF THE CIT(A). THUS WE CONFIRM THE ORDER OF THE CIT(A). 6. IN THE RESULT REVENUES APPEAL IS DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 29.04.2014 SD/- SD/- ( D.K.TYAGI ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA 1 1 1 1 ' '' ' )-2 )-2 )-2 )-2 320- 320- 320- 320- / COPY OF ORDER FORWARDED TO:- 1. %& / APPELLANT 2. )%& / RESPONDENT 3. - *7 / CONCERNED CIT 4. *7- / CIT (A) 5. 2; )-+ / DR ITAT AHMEDABAD 6. = >? / GUARD FILE. BY ORDER/ 1 @/ B $