The ACIT, Bhopal v. M/s. Bhaskar Exxoils Ltd.,, Bhopal

ITA 392/IND/2009 | 2006-2007
Pronouncement Date: 18-01-2011 | Result: Dismissed

Appeal Details

RSA Number 39222714 RSA 2009
Bench Indore
Appeal Number ITA 392/IND/2009
Duration Of Justice 1 year(s) 5 month(s) 22 day(s)
Appellant The ACIT, Bhopal
Respondent M/s. Bhaskar Exxoils Ltd.,, Bhopal
Appeal Type Income Tax Appeal
Pronouncement Date 18-01-2011
Appeal Filed By Department
Order Result Dismissed
Bench Allotted DB
Tribunal Order Date 18-01-2011
Date Of Final Hearing 13-01-2011
Next Hearing Date 13-01-2011
Assessment Year 2006-2007
Appeal Filed On 27-07-2009
Judgment Text
1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH INDORE BEFORE SHRI JOGINDER SINGH JUDICIAL MEMBER AND SHRI R.C. SHARMA ACCOUNTANT MEMBER ITA NO.392/IND/2009 A.Y. 2006-07 ASSTT. COMMISSIONER OF INCOME TAX 1(2) BHOPAL APPELANT VS. M/S BHASKAR EXXOILS LIMITED BHOPAL PAN AAACB-6091M RESPONDENT APPELLANT BY : SHRI K.K. SINGH RESPONDENT BY : SHRI S.S. DESHPANDE O R D E R PER JOGINDER SINGH JUDICIAL MEMBER THIS IS AN APPEAL BY REVENUE AGAINST THE ORDER OF T HE LEARNED CIT(A) DATED 13.5.2009 ON THE GROUND THAT THE LEARN ED COMMISSIONER OF INCOME TAX (APPEALS) WAS NOT JUSTIFIED IN DELETING THE ADDITION OF RS.94 74 715/- MADE BY THE ASSESSING OFFICER ON ACC OUNT OF DISALLOWANCE OF INTEREST EXPENDITURE. 2 2. DURING HEARING OF THIS APPEAL WE HAVE HEARD SHR I K.K. SINGH LEARNED CIT DR AND SHRI S.S. DESHPANDE LD. COUNSE L FOR THE ASSESSEE. MR. SINGH LD. CIT DR MERELY RELIED ON T HE ASSESSMENT ORDER WHEREAS MR. DESHPANDE RELIED ON THE ORDER OF THE LE ARNED COMMISSIONER OF INCOME TAX (APPEALS). THE ASSESSEE HAS ALSO FILED PAPER BOOK RUNNING INTO 1 TO 15 PAGES WHICH IS KEPT ON RECORD. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON RE CORD. BRIEF FACTS ARE THAT THE ASSESSING OFFICER DISALLOWED INTEREST EXPE NSES OF RS.94 74 715/- AND ADDED BACK TO THE INCOME OF THE ASSESSEE ON THE GROUND THAT ADVANCES ARE NOT BUSINESS ADVANCES RATH ER LOAN GIVEN WITHOUT INTEREST. ACCORDINGLY HE WORKED OUT THE I NTEREST AT THE INTEREST RATE OF 12% AMOUNTING TO RS.94 74 715/-. THE TOTAL INTEREST EXPENSES WERE CLAIMED TO BE TO THE TUNE OF RS.7 20 19 678/- OUT OF WHICH THE IMPUGNED AMOUNT OF RS.94 74 715/- WAS DISALLOWED. ON APPEAL THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) DELETE D THE ADDITION BY OBSERVING AS UNDER :- 7. I HAVE CAREFULLY CONSIDERED THE ABOVE SUBMISSIONS ADVANCED ON HEHALF OF THE APPELLANT AFTER PERUSING THE IMPUGNED ASSESSMENT ORDER. I AM AFRAID THE A.O. HAS NOT AT ALL MADE OUT A CASE OF DISALLOWANCE. THE APPELLANT HAS GIVEN THE BREAK UP OF THE INTEREST ON TERM LOANS INTEREST ON TUF LOANS A ND INTEREST ON WORKING CAPITAL AGGREGATING TO RS. 17 20 19 678/- T HAT HAS BEEN MADE TO THE FINANCIAL INSTITUTIONS AND NATIONALISED BANKS BOTH AT THE ASSESSMENT STAGE AND BEFORE E. THE APPELLANT C OMPANY HAS ALSO TAKEN UNSECURED LOAN AMOUNTING TO RS.56.54 LAC S FROM THE PROMOTERS/DIRECTORS AND RS. 22.75 CRORES FROM RELAT ED CONCERNS 3 ON WHICH IT IS NOT PAYING ANY INTEREST. THESE FACT S SHOULD NOT HAVE BEEN OVERLOOKED WHILE TAKING THE VIEW FOR DISA LLOWING INTEREST EXPENSES. IN FACT EVERY CASE HAS TO BE DE CIDED ON THE BASIS OF THE FACTS AND CIRCUMSTANCES PECULIAR TO IT . IT IS NOTEWORTHY THAT THE APPELLANT COMPANY HAS PAID UP C APITAL OF RS.5.00 CRORE AND FREE RESERVE OF MORE THAN RS. 16. 83 CRORES AT THE BEGINNING OF THE FINANCIAL YEAR I.E. TOTAL R S. 21.83 CRORE WHICH ROSE TORS. 25.75 CRORES AT THE END OF THE YEA R ON WHICH NO INTEREST EXPENSE IS INCURRED BY THE APPELLANT COMPA NY. IN FACT THE A.O. HAS NOT ESTABLISHED ANY NEXUS BETWEEN THE AMOUNTS LENT AND THOSE RAISED ON INTEREST SO AS TO JUSTIFY THE D ISALLOWANCE OF THE RELEVANT PERCENTAGE. UNLESS THERE IS A CLEAR CA SE OF DIVERSION OF FUNDS THAT DULY ESTABLISHED BY THE A.O. THE ADD ITION MADE CANNOT BE SUSTAINED. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE IMPUGNED ADDITION IS DELETED. WE FIND FROM THE RECORD THAT THE ASSESSING OFFICER HAS NOWHERE OBSERVED THAT THE ASSESSEE COMPANY HAS NOT UTILISED ITS BORROWED FUNDS WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF ITS BUSIN ESS. THE ASSESSEE COMPANY HAS GIVEN BREAK UP OF INTEREST ON TERM LOAN S INTEREST ON TUF LOANS AND INTEREST ON WORKING CAPITAL AGGREGATING T O RS.17 20 19 678/- WHICH HAS BEEN MADE TO THE FINANCIAL INSTITUTIONS A ND NATIONALIZED BANKS. WE ALSO FIND THAT THE ASSESSEE COMPANY HAS ALSO TAKEN UNSECURED LOANS OF RS. 56.54 LACS FROM THE PROMOTER S/DIRECTORS AND RS. 22.75 CRORES FROM RELATED CONCERNS ON WHICH THE ASSESSEE COMPANY DID NOT PAY ANY INTEREST. WE ALSO FIND THAT THE AS SESSEE COMPANY HAS PAID UP CAPITAL OF RS.5.00 CRORES AND FREE RESERVE OF MORE THAN RS. 16.83 CRORES AT THE BEGINNING OF THE FINANCIAL YEAR I.E. TOTAL RS. 21.83 CRORES WHICH ROSE TO RS.25.75 CRORES AT THE END OF THE YEAR ON WHICH THE ASSESSEE COMPANY DID NOT PAY ANY INTEREST. IT IS A LSO INTERESTING TO NOTE THAT THE LEARNED ASSESSING OFFICER DID NOT ESTABLIS H ANY NEXUS BETWEEN 4 THE AMOUNTS LENT AND THE AMOUNTS TAKEN ON INTEREST WHICH IS A VITAL REQUIREMENT FOR DISALLOWING THE INTEREST EXPENSES. IN THIS VIEW OF THE MATTER WE DO NOT FIND ANY INFIRMITY IN THE FINDING S OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) AND UPHOLD THE SAME. THIS GROUND OF APPEAL OF THE REVENUE IS THEREFORE DISM ISSED. 4. IN THE RESULT THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 18 TH JANUARY 2011. (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 18 TH JANUARY 2011 COPY TO: APPELLANT RESPONDENT CIT CIT(A) DR G UARD FILE DN/-