M.J. EXPORTS P. LTD, MUMBAI v. ITO 3(2)(2), MUMBAI

ITA 6594/MUM/2009 | 2003-2004
Pronouncement Date: 25-11-2011 | Result: Partly Allowed

Appeal Details

RSA Number 659419914 RSA 2009
Assessee PAN AAACM5804H
Bench Mumbai
Appeal Number ITA 6594/MUM/2009
Duration Of Justice 1 year(s) 10 month(s) 27 day(s)
Appellant M.J. EXPORTS P. LTD, MUMBAI
Respondent ITO 3(2)(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 25-11-2011
Appeal Filed By Assessee
Order Result Partly Allowed
Bench Allotted J
Tribunal Order Date 25-11-2011
Date Of Final Hearing 15-11-2011
Next Hearing Date 15-11-2011
Assessment Year 2003-2004
Appeal Filed On 29-12-2009
Judgment Text
1 M J EXPORTS PVT LTD IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI J BENCH MUMBAI BENCHES MUMBAI BEFORE SHRI PRAMOD KUMAR AM & SHRI VIJAY PAL RAO JM ITA NO. 6594/MUM/2009 (ASST YEAR 2003-04 ) M J EXPORTS PVT LTD C/O H N MOTIWALLA & CO 508 SHARDA CHAMBERS 33 NEW MARINE LINES MUMBAI 20 VS THE INCOME TAX OFFICER WARD 3(2)(2) MUMBAI (APPELLANT) (RESPONDENT) PAN NO. AAACM5804H ASSESSEE BY SH H M MOTIWALLA REVENUE BY SH PARTHASARTHY NAIAK DT.OF HEARING 15 TH NOV 2011 DT OF PRONOUNCEMENT 25 TH NOV 2011 PER VIJAY PAL RAO JM THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 12.11.2009 OF THE CIT(A) FOR THE AY 2003-04. 2. THE ASSESSEE HAS TAKEN THE FOLLOWING EFFECTIVE G ROUNDS IN THIS APPEAL: I) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) VII MUMBAI ERRED IN CONFIR MING DISALLOWANCE OF 25% OF INTEREST PAID ON THE GROUND THAT INTEREST FREE ADV ANCES HAVE BEEN GIVEN TO FOUR SISTER CONCERNS WITHOUT APPRECIATING THE FACT THAT A S ON MARCH 31 2003 THE APPELLANT HAD CAPITAL PLUS RESERVE AMOUNTING RS. 8 78 49 896/- WHILE ADVANCES TO SISTER CONCERNS WERE RS. 7 94 98 135/- AND THUS NOT FO LLOWING THE DECISION OF THE APEX COURT IN MUNJAL SALES CORPORATION VS. CIT [298 ITR 298 (SC)] II). ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE THE SAID LEARNED COMMISSIONER OF INCOME TAX HAS ALSO ERRED IN CONFIRM ING INTEREST INCOME AMOUNTING TO RS. 2 90 666/- AS INCOME FROM OTHER SO URCES INSTEAD PROFITS & GAINS OF BUSINESS WITHOUT APPRECIATING THE FOLLOWING DC 2 M J EXPORTS PVT LTD 3. WE HAVE HEARD THE LD AR OF THE ASSESSEE AS WELL AS THE LD DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. AT THE OUTSET WE NOTE THAT THIS ISSUE HAS BEEN CONSIDERED AND ADJUDICATED BY THE TRIBUNAL IN ASSES SEES OWN CASE FOR THE AY 2003- 03 IN ITA NO 2711/MUM/2006 VIDE ORDER DATED14.7.200 8. THE TRIBUNAL HAS DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE IN PARA 5 AS U NDER: 5. WE HAVE PERUSED THE FACTS OF THE CASE AND ALSO CA REFULLY HEARD THE MADE BY THE LD. COUNSELS. REVENUE HAS NOT DISPUTED THE FACT THAT A.O ESTABLISH THE NEXUS BETWEEN ASSESSEES BORROWED FUN DS AND LOANS SISTER CONCERNS. THERE IS ALSO NO DISPUTE TO THE FACT THAT ITS SHARE WAS ALMOST RS. 2 CRORES IN EXCESS OF SUCH LOANS. EVEN IF WE ACCEPT T HE LOANS WERE NOT GIVEN OUT OF COMMERCIAL EXPEDIENCY AND THE DICTUM LAID DOWN B Y THE HONBLE SUPREME COURT VIDE S.A. BUILDERS ((SUPRA)) IS NOT A PPLICABLE STILL IN ASSESSEES CASE THE LOANS GIVEN TO SISTER CONCERN WERE MUCH LOWER THAN ITS SHARE CAPITAL AND RESERVES. WHEN THE FUNDS ARE SO MIXED UP THAT NO N EXUS CAN BE ESTABLISHED BETWEEN LOANS GIVEN AND FUNDS BORROWED IT WOULD NOT BE CORRECT FOR THE A.O. TO PRESUME SUCH NEXUS AND MAKE DISALLOWANCES. THEREFORE WE FEEL THAT LEARNED CIT(A) WAS VERY MUCH C ORRECT IN DELETING SUCH DISALLOWANCE. 4 RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE WE DEICIDE THIS ISSUE IN FAVOUR OF THE ASSESSEE. 5 NEXT GROUND IS REGARDING ASSESSING INTEREST INCOM E AS INCOME FROM OTHER SOURCES. 6 WE HAVE HEARD THE LD AR OF THE ASSESSEE AS WELL A S THE LD DR AND CONSIDERED THE RELEVANT MATERIAL ON RECORD. THIS ISSUE IS COVE RED AGAINST THE ASSESSEE BY THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE O F LIBERTY INDIA VS CIT REPORTED IN 317 ITR 218. THE LD AR OF THE ASSESSEE HAS BEEN FAI RLY CONCEDED THAT THIS ISSUE IS COVERED AGAINST THE ASSESSEE. ACCORDINGLY WE UPHE LD THE ORDER OF THE LD CIT(A) QUA THIS ISSUE. 3 M J EXPORTS PVT LTD 7 IN THE RESULT THE APPEAL FILED BY THE ASSESSEE I S PARTLY ALLOWED. ORDER PRONOUNCED ON THE 25 TH DAY OF NOV 2011. SD/ SD/- ( PRAMOD KUMAR ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 25 TH NOV 2011 RAJ* COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR ITAT MUMBAI