The ACIT.Circle-4,, Baroda v. M/s TML Industries Ltd, Baroda

ITA 2597/AHD/2012 | 2009-2010
Pronouncement Date: 11-10-2013 | Result: Dismissed

Appeal Details

RSA Number 259720514 RSA 2012
Assessee PAN AABCT0793K
Bench Ahmedabad
Appeal Number ITA 2597/AHD/2012
Duration Of Justice 10 month(s) 29 day(s)
Appellant The ACIT.Circle-4,, Baroda
Respondent M/s TML Industries Ltd, Baroda
Appeal Type Income Tax Appeal
Pronouncement Date 11-10-2013
Appeal Filed By Department
Order Result Dismissed
Bench Allotted B
Tribunal Order Date 11-10-2013
Date Of Final Hearing 12-08-2013
Next Hearing Date 12-08-2013
Assessment Year 2009-2010
Appeal Filed On 12-11-2012
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH AHMEDABAD BEFORE SHRI D.K.TYAGI JUDICIAL MEMBER AND SHRI T.R. MEENA ACCOUNTANT MEMBER ITA NOS. 2596 & 2597/AHD/2012 ASSESSMENT YEARS :2008-09 & 2009-10 ASSISTANT COMMISSIONER OF INCOME TAX CIR-4 BARODA V/S . M/S. TML INDUSTRIES LTD. 301 B TOWER ALKAPURI ARCADE R.C.DUTT ROAD BARODA-390007. PAN NO. AABCT0793K (APPELLANT) .. (RESPONDENT) C.O. NOS. 30 & 31/AHD/2013 ASSESSMENT YEARS : 2008-09 & 2009-10 M/S. TML INDUSTRIES LTD. 301 B TOWER ALKAPURI ARCADE R.C.DUTT ROAD BARODA-390007. V/S . ASSISTANT COMMISSIONER OF INCOME TAX CIR-4 BARODA (APPELLANT) .. (RESPONDENT) BY REVENUE SHRI P. L. KUREEL SR. D.R. /BY ASSESSEE SHRI SANJAY R. SHAH A.R. /DATE OF HEARING 12.08.2013 /DATE OF PRONOUNCEMENT 11.10.2013 O R D E R PER BENCH THESE ARE TWO APPEALS AT THE BEHEST OF THE REVENUE AND TWO C.OS. OF THE ASSESSEE WHICH HAVE EMANATED FROM THE ORDERS OF CIT(A)-III BARODA DATED 29.08.2012 FOR BOTH ASSESSMENT YEARS. THE RE VENUES APPEALS AND ASSESSEES C.OS. WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NOS. 2596 & 2597/AHD/12 & C.O. NOS. 30 & 31/AHD /13 A.YS. 08-09 & 09-10. PAGE 2 2. THE EFFECTIVE GROUNDS OF REVENUES APPEALS AND ASSESSEES C.OS. FOR BOTH YEARS ARE AS UNDER: GROUNDS OF ITA NO. 2596/AHD/2012 (A.Y. 08-09) 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITI ON OF RS.3 39 456/- ON ACCOUNT OF DISALLOWANCE OF INTERES T ON ADVANCE PAID TO M/S. OASIS AGRITECH LTD. A SUBSIDI ARY COMPANY WITHOUT APPRECIATING THE FACT THAT THE ASSE SSEE FAILED TO PROVE THE TEST OF BUSINESS EXPEDIENCY IN RESPECT OF HIS CLAIM. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LEARNED CIT(A) HAS ERRED IN EXCLUDING THE INVES TMENTS MADE IN SHARES OF M/S. NIBBANA LTD. PRAGATI SAHAKA RI BANK ALKAPURI ARCADE PREMISES OWNERS CO-OP. SOCIETY LTD. AND MUMUKSHU FINANCE & SERVICES LTD. WITHOUT CONSIDERIN G THE FACT THAT THE ASSESSEE WAS NOT ABLE TO GIVE ANY JUS TIFICATION WITH SUPPORTING EVIDENCES TO SHOW THAT NO INTEREST BEARING FUND WAS DIVERTED TO MAKE INVESTMENT. GROUNDS OF C.O. NO. 30/AHD/2013 (A.Y. 08-09) 1. THE AO AS WELL AS THE CIT(A) ERRED IN NOT APPRE CIATING THE FACT THAT NO NEW EXEMPTED INVESTMENT HAS BEEN MADE DURIN G THE YEAR THEREFORE AMOUNT OF RS.57 905/- DISALLOWED B Y ASSESSEE IS REASONABLE. IT IS TO BE SO HELD NOW. 2. THE LEARNED AO AS WELL AS THE LD. CIT(A) ERRED I N INVOKING RULE 8D WITHOUT PROVING THE EXPENDITURE OF RS.57 905/- DISA LLOWED BY THE ASSESSEE AS UNREASONABLE OR WITHOUT ESTABLISHING DI RECT NEXUS OF ANY EXPENDITURE INCURRED WITH EXEMPT INCOME. IT IS TO BE SO HELD NOW. ITA NOS. 2596 & 2597/AHD/12 & C.O. NOS. 30 & 31/AHD /13 A.YS. 08-09 & 09-10. PAGE 3 3. THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE U/S 14A TO THE EXTENT INVESTMENT IN EXCEL INDUSTRIES LTD. EXCEL C ROP CARE LTD. TRANSPEK INDUSTRY LTD. AGROCEL PESTICIDES LTD. HUN NARSHAALA ENVIRO INFRASTRUCTURE CO. LIMITED OASIS AGRITECH L IMITED BY INVOKING RULE 8D OF THE I.T. RULES. IT BE SO HELD NOW. GROUNDS OF ITA NO. 2596/AHD/2012 (A.Y. 09-10) 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW THE LEARNED CIT(A) HAS ERRED IN EXCLUDING THE INVES TMENTS MADE IN SHARES OF M/S. NIBBANA LTD. PRAGATI SAHAKA RI BANK ALKAPURI ARCADE PREMISES OWNERS CO-OP. SOCIETY LTD. AND MUMUKSHU FINANCE & SERVICES LTD. WITHOUT CONSIDERIN G THE FACT THAT THE ASSESSEE WAS NOT ABLE TO GIVE ANY JUS TIFICATION WITH SUPPORTING EVIDENCES TO SHOW THAT NO INTEREST BEARING FUND WAS DIVERTED TO MAKE INVESTMENT. GROUNDS OF C.O. NO. 31/AHD/2013 (A.Y. 09-10) 1. THE AO AS WELL AS THE CIT(A) ERRED IN NOT APPRE CIATING THE FACT THAT NO NEW EXEMPTED INVESTMENT HAS BEEN MADE DURIN G THE YEAR THEREFORE AMOUNT OF RS.2 13 770/- DISALLOWED BY ASSESSEE IS REASONABLE. IT IS TO BE SO HELD NOW. 2. THE LEARNED AO AS WELL AS THE LD. CIT(A) ERRED I N INVOKING RULE 8D WITHOUT PROVING THE EXPENDITURE OF RS.2 13 770/- DI SALLOWED BY THE ASSESSEE AS UNREASONABLE OR WITHOUT ESTABLISHIN G DIRECT NEXUS OF ANY EXPENDITURE INCURRED WITH EXEMPT INCOM E. IT IS TO BE SO HELD NOW. 3. THE CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE U/S 14A TO THE EXTENT INVESTMENT IN EXCEL INDUSTRIES LTD. EXCEL C ROP CARE LTD. TRANSPEK INDUSTRY LTD. AGROCEL PESTICIDES LTD. HUN NARSHAALA ENVIRO INFRASTRUCTURE CO. LIMITED OASIS AGRITECH L IMITED BY INVOKING RULE 8D OF THE I.T. RULES. IT BE SO HELD NOW. ITA NOS. 2596 & 2597/AHD/12 & C.O. NOS. 30 & 31/AHD /13 A.YS. 08-09 & 09-10. PAGE 4 WE FIRST TAKE REVENUES APPEALS IN BOTH YEARS : 3. GROUND NO.1 IN A.Y. 08-09 IS AGAINST DELETING TH E ADDITION OF RS.3 39 456/- ON ACCOUNT OF DISALLOWANCE OF INTERES T ON ADVANCE PAID TO M/S. OASIS AGRITECH LTD. THE A.O. OBSERVED THAT THE ASS ESSEE HAS GIVEN ADVANCE TO ITS 100% SUBSIDIARY OF RS.34 79 559/- AS A LOAN NAMELY OASIS AGRITECH LTD. THE OPENING BALANCE WAS RS. 29.36 LACS AND AD VANCE GIVEN DURING THE YEAR WAS RS.5.43 LACS. IT IS FURTHER OBSERVED THAT ASSESSEE HAD PAID INTEREST OF RS. 3 49 14 629/- ON ITS BORROWED FUND. THE A.O . GAVE REASONABLE OPPORTUNITY OF BEING HEARD WHY NOT LOAN GIVEN TO TH E SUBSIDIARY COMPANY SHOULD BE TREATED DIVERSION OF INCOME TO THAT EXTEN T INTEREST PAID ON LOAN GIVEN TO IT. THE ASSESSEE SUBMITTED THE EXPLANATION BEFO RE THE A.O. AND CLAIMED THAT IT WAS GIVEN FOR BUSINESS PURPOSE AND THERE WA S A COMMERCIAL EXPEDIENCY. IT RELIED UPON THE HONBLE SUPREME COU RT DECISION IN CASE OF S.A. BUILDERS 288 ITR 1 (SC) AND ALSO ON RELIANCE UTILITIES & POWER LTD. 313 ITR 034 (BOM.) . THE A.O. WAS NOT SATISFIED BY THE ASSESSEES SUB MISSION AS THERE WAS NO DIRECT NEXUS BETWEEN EXPENDITURE INCUR RED AND LOAN ADVANCED TO THE SUBSIDY COMPANY AND NO BUSINESS EXPEDIENCY WAS FOUND TO THE A.O. THERE WAS NO PURCHASE-SALE BETWEEN ASSESSEE AND THE SUBSIDIARY. FURTHER HE ALSO HELD THAT THE ADVANCES WERE GIVEN WITHOUT C HARGING ANY INTEREST AND BORROWING TO THAT EXTENT COULD NOT BE HELD FOR BUSI NESS PURPOSES U/S. 36(1)(III) OF THE ACT. HE ALSO RELIED UPON VARIOUS CASE LAWS AND DISALLOWED INTEREST @ 11% AT RS. 3 39 456/-. ITA NOS. 2596 & 2597/AHD/12 & C.O. NOS. 30 & 31/AHD /13 A.YS. 08-09 & 09-10. PAGE 5 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A ) WHO HAD DELETED THE ADDITION BY FOLLOWING CIT(A) ORDER IN A.Y. 07-08. 5. NOW THE REVENUE IS BEFORE US. LD. SR. D.R. VEH EMENTLY RELIED UPON THE ORDER OF THE A.O. AND ARGUED THAT THE ASSESSEE HAD PAID INTEREST WHEREAS NO INTEREST HAS BEEN CHARGED FROM THE SUBSIDIARY CO MPANY OF LOAN GIVEN TO IT. THUS A.O. WAS RIGHT TO DISALLOW THE INTEREST. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A) AND REQU ESTED TO UPHOLD THE ORDER OF THE CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD. IT IS NOT CLEAR FROM THE PAPER BOOK WHETHE R THE REVENUE HAS FILED THE APPEAL BEFORE THE ITAT IN A.Y. 07-08. HOWEVER FAC T OF THE CASE SHOWS THAT THE LOAN GIVEN TO THE SUBSIDIARY COMPANY WAS RS. 34 .79 LACS AND DURING THE YEAR ONLY RS.5.43 LACS WAS ADVANCED TO SUBSIDIARY. THE SUBSIDIARY COMPANY IS IN TRADING OF VARIOUS AGRICULTURAL PRODUCTS INCL UDING ORGANIC FARMING AND POST-HARVESTING PROCESS . THE ASSESSEE COMPANY HAS DIRECT BUSINESS CONNECTION WITH OASIS AGRITECH LTD. SINCE IT IS DI RECTLY DEALING WITH FARMERS AND AGRICULTURE SECTOR AND POST HARVESTING PROCESS. THE INVESTMENT IN COMPANY WAS MADE IN A.Y. 05-06 THROUGH ITS OWN CAPI TAL. THE ADVANCES WERE GIVEN IN A.Y. 07-08 AT RS. 18.31 LACS AND YEAR UNDER CONSIDERATION FRESH ADVANCES HAVE BEEN GIVEN OUT OF OWN FUNDS. HE HAD DRAWN OUR ATTENTION ON RETURNED INCOME WHICH IS RS.2.29 CRORE. BESIDES TH IS THE ASSESSEE ALSO HAVE RESERVES AND SURPLUS OF RS.25.21 CRORE AS ON 31 ST MARCH 2008. KEEPING IN VIEW OF THE FINANCIAL POSITION OF THE ASSESSEE COMP ANY THE ADVANCES GIVEN TO ITA NOS. 2596 & 2597/AHD/12 & C.O. NOS. 30 & 31/AHD /13 A.YS. 08-09 & 09-10. PAGE 6 THE SUBSIDIARY ARE VERY MINUSCULE AMOUNT. THEREFOR E WE HAVE CONSIDERED VIEW THAT CIT(A) WAS RIGHT IN DELETING THE ADDITION . 7. GROUND NO.2 IN A.Y. 08-09 & GROUND NO.1 IN A.Y. 09-10 ARE AGAINST EXCLUDING THE INVESTMENTS MADE IN SHARES OF M/S. NI BBANA LTD. PRAGATI SAHAKARI BANK ALKAPURI ARCADE PREMISES OWNERS CO-O P. SOCIETY LTD. AND MUMUKSHU FINANCE & SERVICES LTD. THE A.O. OBSERVED THAT THE ASSESSEE HAD EXEMPTED INCOME AT RS. 3 59 545/- OF INVESTMENT RS.5.31 CRORE. THE ASSESSEE BORROWED FUND TO THE EXTENT OF RS.35.21 CR ORE. THE A.O. GAVE REASONABLE OPPORTUNITY OF BEING HEARD ON COMPUTATIO N OF DISALLOWANCE U/S. 14A R.W. RULE 8D WHICH WAS SUBMITTED BY THE ASSESS EE AND CONSIDERED BY THE A.O. A DETAILED DISCUSSION HAS BEEN MADE IN AS SESSMENT ORDER FROM PAGE NOS. 6 TO 14 BY THE A.O. AND HELD THAT THE ASS ESSEE HAD NOT BEEN ABLE TO GIVE ANY JUSTIFICATION WITH EVIDENCE TO SHOW THAT N O INTEREST BEARING FUND WAS DIVERTED TO MAKE INVESTMENT. FURTHER THE ASSESSEE MUST HAVE INCURRED SOME EXPENDITURES LIKE TELEPHONE STATIONERY PERSONAL C OSTS ETC. FOR INVESTMENT IN MUTUAL FUNDS. HE FURTHER RELIED IN CASE OF CHEMINVEST LTD. VS. ITO IN ITA NO. 87/DEL/2008 WHEREIN IT WAS HELD THAT EVEN THERE IS NO TAX FREE INCOME THE DISALLOWANCE U/S. 14A CAN BE MADE. THE A.O. DISALL OWED RS.10 41 933/- U/S. 14A OF THE IT ACT. 8. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A ) WHO HAD DIRECTED TO THE A.O. TO RE-COMPUTE THE DISALLOWANCE AS PER FIND ING GIVEN IN CIT(A)S ORDER. THE DETAIL DISCUSSION FROM PAGE NOS. 9 TO 37 IN HIS ORDER DATED 29.08.2012 WHEREIN IT WAS HELD THAT THE A.O. IS DIRECTED NOT T O CONSIDER THE INVESTMENT ITA NOS. 2596 & 2597/AHD/12 & C.O. NOS. 30 & 31/AHD /13 A.YS. 08-09 & 09-10. PAGE 7 MADE IN THE SHARES OF NIBBANA LTD. ALKAPURI ARCADE PREMISES ONUS CO-OP. SOCIETY LTD. PRAGATI SAHAKARI BANK LTD. AND MUMUKS HU FINANCE & SERVICES LTD. FOR MAKING COMPUTATION AS PER RULE 8D FOR MAKI NG DISALLOWANCES OUT OF INTEREST PAYMENT ON VARIOUS REASONS MENTIONED IN PA RA 7.3.5 7.3.6 & 7.3.7 AT PAGE NOS. 35 & 36 OF ORDER OF CIT(A). INVESTMENT I N MUMUKSHU FINANCE & SERVICES LTD. WERE MADE IN A.Y. 1997-98 AND 98-99 O N ICD LOAN WHICH WAS RE-PAID IN A.Y. 03-04 WHICH HAS BEEN ACCEPTED BY T HE REVENUE IN A.Y. 03-04. THE SIMILAR FINDINGS WERE GIVEN FOR A.Y. 09-10 9. NOW THE REVENUE IS BEFORE US. LD. SR. D.R. VEH EMENTLY RELIED UPON THE ORDER OF THE A.O. AT THE OUTSET LD. COUNSEL F OR THE ASSESSEE SUPPORTED THE ORDER OF THE CIT(A). 10. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIAL ON RECORD IN BOTH THE YEARS. THE DIVIDEND IN CASE OF NIBBANA LT D. IS TAXABLE BEING A FOREIGN COMPANY WHEREAS INVESTMENTS IN PRAGATI SAH AKARI BANK LTD. AND ALKAPURI ARCADE PREMISES ONUS CO-OP. SOCIETY LTD. W ERE MADE FOR BUSINESS PURPOSES AS THE ASSESSEE PURCHASED THE MAJORITY SHA RES OF THE COMPANY TO CONTROL THE MANAGEMENT IN CASE OF ALKAPURI ARCADE PREMISES ONUS CO-OP. SOCIETY LTD. THE INVESTMENT IS ONLY RS. 1500/- OF 3 0 SHARES AND IN CASE OF PRAGATI SAHAKARI BANK LTD. RS.50 000/-. THE INVEST MENT IN SHARES OF NIBBANA LTD. IS RS.3.02 CRORE WHICH WERE PURCHASED BY THE A SSESSEE COMPANY IN THE YEAR 1997-98 FROM ICD LOAN WHICH WAS RE-PAID IN A. Y. 03-04 FROM OWN FUNDS WHICH HAS BEEN ACCEPTED BY THE DEPARTMENT IN PRECED ING YEARS. THE ASSESSEE ALSO RELIED IN CASE OF RELIANCE UTILITIES WHICH IS SQUARELY APPLICABLE ITA NOS. 2596 & 2597/AHD/12 & C.O. NOS. 30 & 31/AHD /13 A.YS. 08-09 & 09-10. PAGE 8 IN CASE OF ASSESSEE AS IT HAS SHARE CAPITAL RESERVE S AND SURPLUS AND OPERATING PROFIT DURING CURRENT YEAR. THUS AFTER CONSIDERIN G THE SUBMISSION AND FACTS OF THE CASE WE UPHOLD THE ORDER OF THE CIT(A). 11. IN THE RESULT REVENUES APPEALS ARE DISMISSED. NOW WE TAKE ASSESSEE'S C.O. FOR BOTH YEARS 12. GROUND NOS. 1 & 2 IN BOTH YEARS HAVE NOT BEEN PRESSED BY THE ASSESSEE. THEREFORE THE SAME ARE DISMISSED. 13. GROUND NO.3 IN BOTH YEARS OF THE ASSESSEE ARE A GAINST CONFIRMING THE DISALLOWANCE U/S. 14A TO THE EXTENT OF INVESTMENT I N EXCEL INDUSTRIES LTD. EXCEL CROP CARE LTD. TRANSPEK INDUSTRY LTD. AGROC EL PESTICIDES LTD. HUNNARSHAALA ENVIRO INFRASTRUCTURE CO. LIMITED OA SIS AGRITECH LIMITED BY INVOKING RULE 8D. THE A.O. MADE DISALLOWANCE UNDER RULE 14A BY CONSIDERING INVESTMENT MADE IN SHARES OF THE ABOVE COMPANIES AT PAGE NO. 7 OF THE ASSESSMENT ORDER AND CALCULATED THE DISALLOW ANCE UNDER RULE 8D AT RS. 10 41 933/- WHICH WAS CHALLENGED BEFORE CIT(A) BY ASSESSEE WHO HAS DIRECTED THE A.O. TO EXCLUDE ONLY INVESTMENT MADE I N SHARE OF NIBBANA LTD. ALKAPURI ARCADE PREMISES ONUS CO-OP. SOCIETY LTD. PRAGATI SAHAKARI BANK LTD. AND MUMUKSHU FINANCE & SERVICES LTD. TO CALCUL ATE THE DISALLOWANCE UNDER RULE 8D. 14. NOW THE ASSESSEE IS BEFORE US IN BOTH YEARS. L D. COUNSEL FOR THE APPELLANT ARGUED THAT THE INVESTMENT MADE IN SHARES OF THESE COMPANIES WERE OUT OF ICD BORROWINGS MADE IN YEAR 1997-98 AND 98-9 9 WHICH WAS REPAID IN THE YEAR 03-04. AT THE OUTSET LD. SR. D.R. HAS DR AWN OUR ATTENTION ON PAPER ITA NOS. 2596 & 2597/AHD/12 & C.O. NOS. 30 & 31/AHD /13 A.YS. 08-09 & 09-10. PAGE 9 BOOK SUBMITTED BY THE ASSESSEE WHICH SHOWS THAT TO TAL INVESTMENT IN SHARES OF ABOVE COMPANIES WERE INCLUDING OTHER COMPANY ARE MUCH MORE THAN SOURCE EXPLAINED BY THE ASSESSEE. THUS IT SHOULD BE CONFIRMED. 15. WE HAVE HEARD THE RIVAL CONTENTIONS OF THE ASSE SSEE AND PERUSED THE MATERIAL ON RECORD. AFTER CONSIDERING THE INVESTME NT IN THESE COMPANIES IN BOTH THE YEARS IT APPEARS THAT THIS ISSUE IS REQUI RED FURTHER CONSIDERATION IN THE INTEREST OF JUSTICE. ACCORDINGLY WE SET ASIDE THIS GROUND OF APPEAL TO THE CIT(A). 16. IN THE RESULT ASSESSEES C.O. IS PARTLY ALLOWE D. 17. IN THE COMBINED RESULT THE REVENUES APPEALS I N BOTH YEARS ARE DISMISSED AND ASSESSEES C.OS. IN BOTH YEARS ARE PA RTLY ALLOWED. THESE ORDERS PRONOUNCED IN OPEN COURT ON 11.10.2013 SD/- SD/- ( D.K.TYAGI ) (T.R. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. / ASSESSEE 3. $%$& ' '( / CONCERNED CIT 4. ' '(- + / CIT (A) 5. -.+' & ' ++' & 01 % / DR ITAT AHMEDABAD 6. .34 56 / GUARD FILE. BY ORDER/ 7/0' $+ ' ++' & 01 % 9