ACIT, New Delhi v. M/s. SAM Overseas, New Delhi

ITA 644/DEL/2013 | 2009-2010
Pronouncement Date: 14-11-2014 | Result: Dismissed

Appeal Details

RSA Number 64420114 RSA 2013
Assessee PAN ABFFS1117G
Bench Delhi
Appeal Number ITA 644/DEL/2013
Duration Of Justice 1 year(s) 9 month(s) 12 day(s)
Appellant ACIT, New Delhi
Respondent M/s. SAM Overseas, New Delhi
Appeal Type Income Tax Appeal
Pronouncement Date 14-11-2014
Appeal Filed By Department
Order Result Dismissed
Bench Allotted G
Tribunal Order Date 14-11-2014
Date Of Final Hearing 16-10-2014
Next Hearing Date 16-10-2014
Assessment Year 2009-2010
Appeal Filed On 01-02-2013
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH G : NEW DELHI) BEFORE SHRI I.C. SUDHIR JUDICIAL MEMBER AND SHRI B.C. MEENA ACCOUNTANT MEMBER ITA NO.644/DEL./2013 (ASSESSMENT YEAR : 2009-10) ACIT CIRCLE 24 (1) VS. M/S. SAM OVERSEAS NEW DELHI. NO.9 OAK LANE DLF CHATTARPUR FARMS NEW DELHI 110 057. (PAN : ABFFS1117G) (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI M.P. RASTOGI ADVOCATE REVENUE BY : SHRI B.R.R. KUMAR SENIOR DR ORDER PER B.C. MEENA ACCOUNTANT MEMBER : THIS APPEAL FILED BY THE REVENUE EMANATES FROM THE ORDER OF THE CIT (APPEALS)-XXIII NEW DELHI DATED 30.11.2012 FOR THE ASSESSMENT YEAR 2009-10. 2. THE ASSESSEE IS A PROPRIETORSHIP FIRM ENGAGED IN THE BUSINESS OF MANUFACTURE AND EXPORT OF READYMADE GARMENTS. THE RETURN OF INCOME WAS FILED ON 30.09.2009 DECLARING INCOME OF RS.88 8 7 500/-. THE ASSESSING OFFICER MADE AN ADDITION OF RS.36 40 518/ - FOR NOT ALLOWING THE INTEREST ON LOAN. THE ASSESSING OFFICER HELD T HAT ASSESSEE HAS ADVANCED LOANS TO VARIOUS RELATED PERSONS/ENTITIES WITHOUT CHARGING ITA NO.644/DEL/2013 2 INTEREST FROM THE BORROWED FUNDS ON WHICH THE INTER EST WAS BEING PAID BY THE ASSESSEE. IT WAS ALSO HELD THAT ASSESSEE HAS N O BUSINESS PURPOSE FOR ADVANCING THESE INTEREST FREE LOANS. AS PER ASSESS ING OFFICERS VERSION THE BORROWED FUNDS WERE NOT SQUARELY USED FOR BUSIN ESS PURPOSES AS THE ASSESSEE HAS NOT SHOWN ANY BUSINESS EXIGENCY FOR GR ANTING SUCH INTEREST FREE LOANS OUTSTANDING AS ON 31.03.2009 OF RS.58 75 670/- TO SHRI SUNEET KUMAR RS.5 90 50 000/- TO M/S. SPICE CINE VISION RS.15 10 000/- TO SHRI JASJEET SINGH SHERGILL AND RS.7 18 137 TO SHRI KRISHAN KUMAR. THE CIT (A) HAS GRANTED THE RELIEF TO THE ASSESSEE BY H OLDING AS UNDER :- 4. THE ABOVE WRITTEN SUBMISSIONS HAVE BEEN CAREFU LLY CONSIDERED. I HAVE ALSO PERUSED THE JUDGEMENTS RE LIED UPON BY THE APPELLANT AND THE ASSESSING OFFICER. THE APP ELLANT HAS CONTENDED THAT IT WAS HAVING ITS OWN FUNDS IN THE FORM OF PARTNERS' CAPITAL TO THE EXTENT OF RS.15 30 18 684 /- AT THE BEGINNING OF THE YEAR WHICH INCREASED TO RS.15 45 96 046/- AS ON 31.03.2009. CURRENT PROFITS OF RS.69 01 494/- W ERE CREDITED TO THE CAPITAL ACCOUNTS OF THE PARTNERS DU RING THE YEAR. IT IS THE APPELLANT'S CASE THAT THE LOANS WERE ADVA NCED OUT OF ITS OWN FUNDS AND THE LOANS ADVANCED OF RS.6 59 25 670 /- WERE MUCH LESS THAN ITS OWN NON-INTEREST BEARING FUNDS. IT IS ALSO NOTED THAT THE SECURED LOAN ON WHICH INTEREST HAS B EEN PAID CONSISTS OF FACILITY WITH SYNDICATE BANK FOR NEGOTIATING/DISCOUNTING FOREIGN BILLS. THE ASSESSIN G OFFICER'S MAIN GROUNDS FOR DISALLOWANCE IS THAT THE APPELLANT HAS NOT PROVEN THE BUSINESS EXIGENCY FOR ADVANCING LOANS AN D ADVANCES TO SISTER CONCERNS. HOWEVER THE APPELLANT HAS ARGUED THAT SUCH A PLEA WAS NEVER TAKEN BY IT RATHER IT W AS SUBMITTED DURING THE ASSESSMENT PROCEEDINGS THAT THE LOANS AN D ADVANCES WERE MADE OUT OF THE INTEREST FREE FUNDS AVAILABLE WITH IT. THE APPELLANT HAS PLACED PARTICULAR RELIANCE ON THE JUD GEMENT OF THE ITAT DELHI IN THE CASE OF DCIT VS U.K. PAINTS (INDIA) LTD.(2010) 4 ITR (TRIB.) 455 (DEL). IN THAT CASE T HE HON'BLE ITAT HELD THAT THE DECISION OF THE PUNJAB & HARYANA HIGH COURT IN THE CASE OF CIT VS ABHISHEK INDUSTRIES LTD . (2006) ITA NO.644/DEL/2013 3 286 ITR 1 WAS AT VARIANCE WITH THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CASES OF CIT VS TI N BOX CO. (2003) 260 ITR 637 AND CIT VS ORISSA CEMENT LTD (20 01) 252 ITR 878. AS PER LAW OF PRECEDENCE THE DECISION OF THE JURISDICTIONAL HIGH COURT WILL PREVAIL OVER THE DEC ISION OF OTHER HIGH COURTS. MOREOVER THE DECISION OF THE PU NJAB & HARYANA HIGH COURT IN THE CASE OF ABHISHEK INDUSTRI ES LTD. (SUPRA) WAS FOLLOWED IN THE CASES OF MUNJAL SALES C ORPN. VS CIT AT 298 I TR 288 (P&H) AND AT 298 ITR 294 (P&H) WHICH HAVE BEEN OVERRULED BY THE. HON'BLE SUPREME COURT I N THE CASE OF MUNJAL SALES CORPN. VS CIT(2008) 298 ITR 298. TH E APEX COURT HELD IN THAT CASE THAT IN VIEW OF SUFFICIENT NON-INTEREST BEARING FUNDS WITH THE ASSESSEE NO DISALLOWANCE CO ULD BE MADE ON ACCOUNT OF FUNDS DIVERTED TO SISTER CONCERN S. CERTAINLY NO CASE HAS BEEN MADE OUT BY THE ASSESSING OFFICER THAT THE INTEREST BEARING FUNDS HAVE BEEN DIVERTED TO SISTER CONCERNS. IN THE LIGHT OF THE ABOVE MATERIAL I AGREE WITH THE C ONTENTION ADVANCED BY THE APPELLANT THAT IT HAD SUFFICIENT IN TEREST FREE FUNDS OF RS. 15 30 18 684/- AT ITS DISPOSAL FOR MAK ING LOANS AND ADVANCES OF RS. 6 71 53 807/-. NO DISALLOWANCE OF INTEREST PAID TO THE BANK IS JUSTIFIED WITHOUT REBUTTAL OF T HE APPELLANT'S CONTENTION THAT THE ADVANCES HAD BEEN GIVEN FROM IT S OWN CAPITAL AND INTERNALLY GENERATED FUNDS. ACCORDINGLY THE DISALLOWANCE MADE OF RS.36 40 514/- OUT OF INTEREST IS DELETED. THE APPELLANT THEREFORE SUCCEEDS AT GROUND OF APPE AL NO.1. NOW THE REVENUE IS IN APPEAL BY TAKING THE FOLLOWI NG GROUNDS OF APPEAL:- 1. ON THE FACTS AND ON THE CIRCUMSTANCES OF THE CA SE THE LD CIT(A) HAS ERRED IN DELETING DISALLOWANCE OF INT EREST OF RS.36 40 518/- INSPITE OF THE FACTS THAT THE ASSESS EE COULD NOT ESTABLISH THAT ADVANCE WAS GIVEN FOR THE PURPOSE OF THE BUSINESS EVEN WHEN IT WAS PAYING INTEREST ON SECURE D LOAN TAKEN. 2. THE APPELLANT CRAVES LEAVE TO ADD ALTER OR AMEN D ANY OF THE GROUNDS OF APPEAL BEFORE OR DURING THE COURS E OF THE HEARING OF THE APPEAL. ITA NO.644/DEL/2013 4 3. WHILE PLEADING ON BEHALF OF THE REVENUE LD. DR SUBMITTED THAT THE ASSESSEE HAS DEPOSITED RS.1 03 15 895/- UNDER THE H EAD BANK CHARGES AND INTEREST TO ITS PROFIT & LOSS ACCOUNT. THE AS SESSEE HAS SECURED LOAN OF RS.10 33 63 997/- FROM THE SYNDICATE BANK. THE ASSESSEE HAS CHARGED INTEREST @ 8% FROM M/S. M/S. NALINI SILK MILLS ON T HE ADVANCE OF RS.11 24 86 647/-. HOWEVER ON THE OTHER LOAN AND ADVANCES NO INTEREST HAS BEEN CHARGED. SINCE THE ASSESSEE IS PAYING INT EREST ON THE BORROWED FUNDS AND THE ASSESSEE HAS FAILED TO ESTABLISH THE BUSINESS NECESSITY FOR ADVANCING SUCH INTEREST FREE LOANS THEREFORE THE CIT (A) WAS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSEE. H E PLEADED TO SUSTAIN THE ORDER OF THE ASSESSING OFFICER ON THIS ISSUE. HE A LSO PLEADED THAT SECTION 36(1)(III) OF THE INCOME-TAX ACT 1961 PROVIDES FOR DEDUCTION OF INTEREST ON LOAN RAISED FOR BUSINESS PURPOSES AND ONCE SUCH CLAIM HAS BEEN MADE THEN ONUS LIES ON THE ASSESSEE TO SATISFY THAT WHAT EVER INTEREST PAID ON THE LOANS WERE PAID FOR THE BUSINESS PURPOSES OF THE AS SESSEE. IF THE ASSESSEE HAS FAILED TO SATISFY THEN SUCH INTEREST DO NOT DES ERVE TO BE ALLOWED AS BUSINESS EXPENDITURE. IN ASSESSEES CASE THE ASSE SSEE HAS FAILED TO JUSTIFY THE ADVANCE OF INTEREST FREE LOANS TO THE GROUP PER SONS/CONCERNS THEREFORE THE ASSESSEE HAS NOT DISCHARGED THE ONUS FOR JUSTIFYING THE INTEREST FREE LOANS WHEN THE ASSESSEE ITSELF IS PAY ING HEAVY INTEREST ON THE LOANS BORROWED FROM BANKS. HE PLEADED TO SUSTAIN T HE ORDER OF THE ASSESSING OFFICER. ITA NO.644/DEL/2013 5 4. ON THE OTHER HAND LD. AR SUBMITTED THAT THE ASS ESSEE IS A 100% EXPORT ORIENTED UNIT AND THE INCOME IS EXEMPTED U/S 10B OF THE ACT. IT WAS ALSO SUBMITTED THAT THESE INTEREST FREE LOANS H AVE BEEN MADE OUT OF OWN CAPITAL FUND AND RELIANCE WAS PLACED ON VARIOUS DECISIONS WHICH INCLUDE CIT VS. RELIANCE UTILITIES 313 ITR 340 ( BOM.) AHUJA PLATINUM PROPERTIES P. LTD. VS. JCIT ITA NO.4723/ MUM/2007 DATED 24.06.2011 YAMUNA PESHWA VS. DCIT ITA NO.416/JD. /2009 DATED 09.12.2011 ITO VS. STRIDES ARCOLAB LTD. 153 TTJ 181 (ITAT-MUMBAI) AND M/S. AMOD STAMPING (P.) LTD. VS. CIT (2014) 4 5 TAXMANN.COM 427 (GUJARAT). 5. WE HAVE HEARD BOTH THE SIDES ON THE ISSUE. WE H AVE ALSO CONSIDERED THE CASE LAWS RELIED UPON BY BOTH THE SI DES. THE ASSESSEE WAS HAVING INTEREST FREE OWN FUNDS OF RS.15 45 96 046.9 4 AT THE END OF THE FINANCIAL YEAR 2008-09 I.E. AS ON 31.03.2009. THE INTEREST FREE ADVANCES WERE OF RS.6 59 25 670/-. IN VIEW OF THE VARIOUS C ASE LAWS RELIED UPON BY THE LD. AR INCLUDING THE HON'BLE BOMBAY HON'BLE HIG H COURT DECISION IN THE CASE OF CIT VS. RELIANCE UTILITIES CITED SUPRA THE CIT (A) WAS JUSTIFIED IN DELETING THE ADDITION. IN THE AFORESA ID DECISION THE HON'BLE BOMBAY HIGH COURT HAS HELD AS UNDER :- ..IT NOTED THAT TO RAISE THE PRESUMPTION THERE W AS SUFFICIENT MATERIAL AND THE ASSESSEE HAD URGED THE CONTENTION BEFORE THE HIGH COURT. THE PRINCIPLE THEREFORE WOULD BE THA T IF THERE ARE ITA NO.644/DEL/2013 6 FUNDS AVAILABLE BOTH INTEREST-FREE AND OVER DRAFT A ND / OR LOANS TAKEN THEN A PRESUMPTION WOULD ARISE THAT INVESTME NTS WOULD BE OUT OF THE INTEREST-FREE FUND GENERATED OR AVAIL ABLE WITH THE COMPANY IF THE INTEREST-FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS. IN VIEW OF THIS WE DISMISS THE GROUND TAKEN BY THE REVENUE IN THIS APPEAL. 6. IN THE RESULT THE APPEAL OF THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON THIS 14 TH DAY OF NOVEMBER 2014. SD/- SD/- (I.C. SUDHIR) (B.C. MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED THE 14 TH DAY OF NOVEMBER 2014/TS COPY FORWARDED TO: 1.APPELLANT 2.RESPONDENT 3.CIT 4.CIT(A)-XXIII NEW DELHI. 5.CIT(ITAT) NEW DELHI. AR/ITAT