M/s. MAYTAG UDYOG P. LTD., MUMBAI v. ITO Wd. 3(2)(2), MUMBAI

ITA 7203/MUM/2005 | 2001-2002
Pronouncement Date: 15-07-2011 | Result: Allowed

Appeal Details

RSA Number 720319914 RSA 2005
Assessee PAN AAACM3906E
Bench Mumbai
Appeal Number ITA 7203/MUM/2005
Duration Of Justice 5 year(s) 7 month(s) 6 day(s)
Appellant M/s. MAYTAG UDYOG P. LTD., MUMBAI
Respondent ITO Wd. 3(2)(2), MUMBAI
Appeal Type Income Tax Appeal
Pronouncement Date 15-07-2011
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted H
Tribunal Order Date 15-07-2011
Date Of Final Hearing 07-07-2011
Next Hearing Date 07-07-2011
Assessment Year 2001-2002
Appeal Filed On 09-12-2005
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL H BENCH: MUMBAI BEFORE SHRI P.M. JAGTAP ACCOUNTANT MEMBER AND SHRI R.S. PADVEKAR JUDICIAL MEMBER ITA NO.7203/MUM /2005 (ASSESSMENT YEAR: 2001-02) MAYTAG UDYOG P. LTD. THAKUR COMPOUND GALA NO.5/6 BH. SANJHA CHULA HOTEL RAJI SATI MARG CENTURY BHAVAN DR. A.B. ROAD WORLI MUMBAI -400 030 ....... APPELLANT VS ACIT 6(2) AAYAKAR BHAVAN MUMBAI ..... RESPONDENT PAN: AAACM 3906 E APPELLANT BY: SHRI SATISH MODY RESPONDENT BY: SHRI A.G. NAYAK O R D E R PER R.S. PADVEKAR JM IN THIS APPEAL THE ASSESSEE HAS CHALLENGED THE IMPU GNED ORDER OF THE LD. CIT III MUMBAI DATED 17.10.20045 FOR THE A.Y. 2001-02. GROUND NO.1 READS AS UNDER:- 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THAT THE LD. CIT-APPEAL-III MUMBAI ERRED IN HAVING CONF IRMED THE ACTION OF THE AO IN HAVING DISALLOWED THE INTEREST OF ` ` 25 91 969/-. 2. THE ASSESSEE HAS DEBITED AMOUNT OF ` ` 31 13 630/- TOWARDS FINANCE CHARGES. IN THE SCHEDULE TO THE PROFIT & L OSS ACCOUNT THE ASSESSEE HAS SHOWN THE BILL DISCOUNTING CHARGES NET AT ` ` 16 53 767/- AND INTEREST ELEMENT OF ` ` 14 62 080 + ` ` 1 783/-. THE A.O. SOUGHT ITA 7203/MUM/2005 MAYTAG UDYOG P. LTD. 2 THE EXPLANATION OF THE ASSESSEE IN RESPECT OF THE B ILL DISCOUNTING CHARGES CLAIMED BY THE ASSESSEE AS WELL AS PAYMENT OF INTEREST OTHER THAN TO THE BANKS I.E. ` ` 14 62 080/-. THE ASSESSEES EXPLANATION IS PRODUCED BY THE A.O. IN THE ASSESSMENT ORDER ON PAG E NO.3 & 4. THE ASSESSEE CONTENDED THAT THE SAME ARE THE BILL DISCO UNTING CHARGES MAINLY PAID TO M/S. NATIONAL CO-OPERATIVE BANK SHA NTI ENTERPRISES AND HIGH CUT INTERNATIONAL. THE ASSESSEE CONTENDED THAT BILL DISCOUNTING CHARGES PAID TO M/S. NATIONAL CO-OPERAT IVE BANK AND M/S. SHANTI ENTERPRISES ARE DIRECTLY RELATED TO THE TRADING PURCHASES MADE BY THE ASSESSEE. IN RESPECT OF BILL DISCOUNTI NG CHARGES PAID M/S. SHANTI ENTERPRISES THE ASSESSEE CONTENDED THAT IN FACT THE SAME ARE THE FINANCIAL CHARGES PAID ON THE LOAN OF ` ` 75 00 000/- BORROWED FROM THE SAID COMPANY IN THE EARLIER YEARS AND ` 50 LAKHS TAKEN FROM THEM IN THE RELEVANT YEAR. THE ASSESSEE ALSO CONTENDED THAT YEAR PRIOR TO THE A.Y. 2001-02 THE INTEREST W AS PAID ON THE SAID LOANS BUT FROM THE A.Y. 2001-02 THE SAID LOANS WERE CONVERTED INTO BILL OF EXCHANGE AND FINANCIAL CHARGES WERE LEVIED ON THE ASSESSEE BY WAY OF BILL DISCOUNTING CHARGES. THE ASSESSEE ALSO EXPLAINED NECESSITY FOR HIGH INTEREST PAYMENT TO THE OTHER PARTIES CONT ENDING THAT IT IS AN NET AMOUNT AND IF THE INTEREST PAID TO M/S. SHANTI ENTERPRISES IS CONSIDERED THE ASSESSEE ALSO CONTENDED THAT INTERE ST BEARING FUNDS HAVE BEEN USED TO FINANCE THE NET CURRENT ASSETS OF ` ` 1 27 97 319/- AND FOR THE INVESTMENT IN THE SHARES OF ` ` 85 49 549/-. THE ASSESSEE ALSO CONTENDED THAT INCOME GENERATED FROM THE INVES TMENT AND CURRENT ASSET IS NOT EXEMPT FROM THE TAX AND HENCE NO DISALLOWANCE CAN BE MADE. THE A.O. WAS NOT IMPRESSED WITH THE S UBMISSIONS AND CONTENTIONS OF THE ASSESSEE IN RESPECT OF THE FINAN CIAL CHARGES AS WELL AS THE INTEREST PAYMENT. THE A.O. THEREFORE DISAL LOWED THE NET INTEREST OF ` ` 25 91 969/-. THE REASONS GIVEN BY THE A.O. FOR TH E SAID DISALLOWANCE ARE AS UNDER:- THE ABOVE VARIOUS SUBMISSIONS OF THE ASSESSEE WAS CAREFULLY GONE THROUGH AND VERIFIED FROM THE FACTS OF THE CAS E FROM THE OLD ITA 7203/MUM/2005 MAYTAG UDYOG P. LTD. 3 CASE OF THE ASSESSEES COMPANY AND ALSO THE LAW ON THE SUBJECT WAS STUDIED. I FIND THAT THE ASSESSEE HAS A LOTS O F CONFUSION ABOUT ITS OWN CONTENTIONS AND ABOUT THE FACTS OF TH E CASE. TO MAKE THE FACTS STRAIGHT I WOULD LIKE TO MENTION TH AT FROM THE PAST RECORDS OF THE ASSESSEES COMPANY IT IS SEEN THAT THE PAID UP SHARE CAPITAL OF ` ` ` 1 25 40 000 IS IN FACT DUE TO THE REVALUATION OF ITS FIXED ASSET AND SUBSEQUENT ISSUE OF BONUS SHARE S TO ITS SHARE HOLDERS. THE ISSUE OF BONUS SHARES AND REVALUATION OF FIXED ASSET WAS DONE IN AY 1993-94. THEREFORE THE CLAIM OF THE ASSESSEE IS COMPLETELY MISPLACED THAT INVESTMENT IS OUT OF SHARE CAPITAL AS CLAIMED. NOW THE ASSESSEE IS LEFT WITH LOAN FUNDS SECURED AND UNSECURED OF ` ` 2 28 19 453/- AND ALSO WITH RESERVE AND SURPLUS OF ` ` 1 57 090. THE TOTAL OF LOAN FUND AVAILABLE IS ` ` 2 28 19 453. THIS LOAN FUND HAS BEEN UTILISED EITHER IN INTEREST FREE LOAN OR AN INVESTM ENT. IT IS SEEN FROM THE DETAILED FILE THAT DURING THE YEAR THE ASS ESSEE HAS ADVANCED A LOAN OF ` ` 1 24 19 453 TO ONE M/S. SATYAM VYAPAR PVT. LTD. THE ASSESSEE WAS ASKED TO FURNISH THE SHARE HOLDING PATTERN OF BOTH M/S. SATYAM VYAPAR PVT. AND M/S. MAYTAX UDYOG PVT. LTD. THE ASSESSEE HAS FILED THE SHARE HOLDING PATTERN OF BOTH THE COMPANIES. IT IS SEEN FROM THE DETAILS THERE ARE NUMBER OF SHARE HOLDERS WHO ARE COMMON TO BOTH THE COMPANIES. IN F ACT THE BAJAJ FAMILY AND ITS MEMBERS CONTROLS BOTH THE COMPANIES AND THEY ARE SISTER CONCERNS. OTHER THAN THE ABOVE TWO APPLICATIONS OF INTEREST B EARING FUNDS THE ASSESSEE HAS ALSO ADVANCED ITS FUND FOR VARIOUS REASONS TO DIFFERENT PARTIES ON WHICH IT IS NOT EARNING ANY IN TEREST WHEREAS THE ASSESSEE IS MAKING INTEREST THE PRINCIPAL AMOUN T OF WHICH IT CLAIMS TO HAVE UTILIZED FOR SHORT TERM BUSINESS PUR POSES. ITA 7203/MUM/2005 MAYTAG UDYOG P. LTD. 4 GIVEN THE FACTS OF THE CASE I AM CONVINCED THAT THE ASSESSEE HAS NOT DEPLOYED ITS FUND FOR THE PURPOSE OF BUSINESS A ND THE BALANCE AMOUNT OF INTEREST I.E. AFTER CONSIDERING INTEREST PAID AND INTEREST RECEIVED OF ` ` 25 91 969 IS HELD TO BE NOT ALLOWABLE U/S.36(1)( III) OR U/S.37 OF THE I.T. ACT 1961. 3. ALTERNATIVELY THE A.O. ALSO HELD THAT THE ASSES SEE HAS UTILISED INTEREST BEARING FUNDS IN THE SHARES WHICH DIVIDEN D IS EXEMPT U/S.10(33) OF THE ACT HENCE THE INTEREST INCURRED ON THE AMOUNT OF ` ` ` 85 49 549/- IS DISALLOWABLE U/S.14A OF THE ACT BUT HE DID NOT MAKE ANY DISALLOWANCE ON SAID REASONING AS THE ENTIRE DI SALLOWANCE OF INTEREST EXPENDITURE CLAIMED BY THE ASSESSEE WAS MA DE. THE ASSESSEE CHALLENGED THE SAID DISALLOWANCE BEFORE THE LD. CIT (A) AND GOT THE PART RELIEF TO THE EXTENT THAT THE INTEREST ATTRIBU TABLE TO THE AMOUNT OF THE INVESTMENT MADE IN THE SHARES WAS SUSTAINED. I N RESPECT OF THE ADVANCES MADE TO M/S. SATYAN FINANCE LTD. THE ASSES SEE HAS DECLARED THE INCOME OF ` ` 5 96 559/- THAT WAS CLAIMED TOWARDS DISCOUNTING OF THEIR PURCHASE BILLS. THE ASSESSEE ALSO CONTENDED THAT AMOUNT OF ` ` 18 59 186/- WAS OUTSTANDING AS INTEREST-FREE CREDIT S AND THE A.O. HAS NOT GIVEN ANY ADJUSTMENT OF INTEREST ON SUCH INTERE ST-FREE LOAN FOR PURCHASES AND AFTER EXCLUDING OF THIS AMOUNT THE IN VESTMENT IN THE SHARE OUT OF THE INTEREST BEARING FUNDS WOULD BE ` ` 63 69 363/-. IN SUM AND SUBSTANCE THE ENTIRE DISALLOWANCE WAS CONF IRMED. NOW THE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE GONE THROUGH THE FACTS AND ALSO PERUSED THE RECORDS AND ALSO HEARD THE LD. COUNSEL. WE FIND THAT THE F ACTS ARE NOT CLEAR IN THIS CASE. AS RECORDED BY THE A.O. THE ASSESSEE HA S CLAIMED PAYMENT OF THE FINANCE CHARGES. NOW HE SUBSEQUENTLY TOOK THE STAND THAT IT WAS THE DISCOUNTING CHARGES OF THE BILLS. BEFORE T HE LD. CIT (A) HE AGAIN TOOK A DIFFERENT STAND BEFORE US ALSO PROPER MATERIAL IS NOT PLACED TO UNDERSTAND THE PROPER FACTS OF THIS CASE. AT ONE END THE ITA 7203/MUM/2005 MAYTAG UDYOG P. LTD. 5 ASSESSEE ARGUED THAT HE HAS RAISED THE INTEREST-FRE E FUNDS FOR INVESTMENT ON THE ANOTHER END HE ARGUES THAT THE IN COME EARNED WHICH IS EXEMPT. AS THERE ARE LOT OF CONTRADICTION S AND ALSO CONFUSION IN THE FACTS OF THIS CASE WE CONSIDER IT FIT TO RE STORE THIS ISSUE TO THE FILE OF THE A.O. FOR FRESH ADJUDICATION. NEEDLESS TO SAY THAT THE A.O. IS DIRECTED TO BRING ON RECORD ALL RELEVANT FACTS AND ACCORDINGLY DECIDE THE MATTER AFRESH. IN THE RESULT GROUND NO.1 IS A LLOWED FOR STATISTICAL PURPOSES. 5. THE LD. COUNSEL SUBMITS THAT HE IS NOT PRESSING GROUND NO.2 AS THE SAME IS COVERED AGAINST HIM BY THE DECISION OF THE HONBLE JURISDICTIONAL HIGH COURT BEING 226 CTR 13 (BOM). AS GROUND NO.2 IS NOT PRESSED THE SAME IS DISMISSED AS NOT PRESSED. 6. IN THE RESULT ASSESSEES APPEAL IS PARTLY ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 1 5TH JULY 2011. SD/- SD/- ( P.M. JAGTAP ) ACCOUNTANT MEMBER ( R.S. PADVEKAR ) JUDICIAL MEMBER MUMBAI DATE : 15TH JULY 2011 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)III MUMBAI. 4) THE CIT-3 MUMBAI. 5) THE D.R. H BENCH MUMBAI. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T. MUMBAI *CHAVAN ITA 7203/MUM/2005 MAYTAG UDYOG P. LTD. 6 SR.N. EPISODE OF AN ORDER DATE INITIALS CONCERNED 1 DRAFT DICTATED ON 08.07.2011 SR.PS 2 DRAFT PLACED BEFORE AUTHOR 11.07.2011 SR.PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER JM/AM 5 APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS/PS 6 KEPT FOR PRONOUNCEMENT ON SR.PS/PS 7 FILE SENT TO THE BENCH CLERK SR.PS/PS 8 DATE ON WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER