Vimal Proteins Inds. (JND) P. Ltd., v. The ACIT, Circle-1,

ITA 799/RJT/2005 | 2001-2002
Pronouncement Date: 23-12-2010 | Result: Allowed

Appeal Details

RSA Number 79924914 RSA 2005
Assessee PAN AAACV7084N
Bench Rajkot
Appeal Number ITA 799/RJT/2005
Duration Of Justice 5 year(s) 6 month(s) 14 day(s)
Appellant Vimal Proteins Inds. (JND) P. Ltd.,
Respondent The ACIT, Circle-1,
Appeal Type Income Tax Appeal
Pronouncement Date 23-12-2010
Appeal Filed By Assessee
Order Result Allowed
Bench Allotted DB
Tribunal Order Date 23-12-2010
Date Of Final Hearing 16-12-2010
Next Hearing Date 16-12-2010
Assessment Year 2001-2002
Appeal Filed On 09-06-2005
Judgment Text
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH RAJKOT BEFORE SHRI A.L. GEHLOT (AM) AND SHRI D.T. GARASIA (JM) I.T.A. NO.799/RJT/2005 (ASSESSMENT YEAR 2001-02) VIMAL PROTEINS INDUSTRIES VS THE ACIT CIR.1 (JUNAGADH) PVT LTD JUNAGADH DOLATTARA RAJKOT ROAD JUNAGADH PAN : AAACV7084N (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIMAL DESAI RESPONDENT BY : SHRI AVINASH KUMAR O R D E R GARASIA : THIS APPEAL BY THE ASSESSEE IS DIRECTED A GAINST THE ORDER DATED 14-03-2005 PASSED BY CIT(A) VALSAD HOLDING CONCURR ENT JURISDICTION OF CIT(A)-IV RAJKOT FOR THE ASSESSMENT YEAR 2001-02. 2. THE FOLLOWING EFFECTIVE GROUNDS ARE RAISED IN TH E APPEAL: 2. THE LEARNED ASSESSING OFFICER HAS ERRED IN LAW AND ON FACTS IN MAKING AN ADDITION OF RS.13 220/- ON ACCOU NT OF NOTIONAL INTEREST ON INTEREST FREE ADVANCE OF RS.1 10 143/- TO SHRI ATULKUMAR BHAGWANJIBHAI. THE LEARNED CIT(A) HAS ERRED IN CONFIRMING IT. 3. THE LEARNED ASSESSING OFFICER HAS ERRED IN LAW A ND ON FACTS IN MAKING DISALLOWANCE OF RS.12 19 193/- ON ACCOUNT OF INTEREST PAID TO PERSONS COVERED U/S 40A(2)(B). THE LEARNED CIT(A) HAS ERRED IN CONFIRM ING IT. 3. WE HAVE HEARD SHRI VIMAL DESAI THE LD.AR OF THE ASSESSE AND SHRI AVINASH KUMAR THE LD.DR. ITA NO.799/RJT/2005 2 4. WITH REGARD TO GROUND NO. 1 WE FIND THAT THERE I S NO DISPUTE THAT THE ASSESSEE HAS NOT CHARGED INTEREST ON THE LOAN ADVAN CED TO SHRI ATULKUMAR BHAWANJIBHAI. THE CIT(A) FOLLOWING THE ORDER PAS SED BY THE CIT(A)- IV AHMEDABAD FOR THE ASSESSMENT YEAR 2000-01 HAS U PHELD THE ORDER OF ASSESSING OFFICER ON THIS ISSUE. BUT WE FIND THAT THE ORDER OF THE CIT(A) FOR ASSESSMENT YEAR 2000-01 HAS BEEN TURNED DOWN BY THE TRIBUNAL IN ITS ORDER DATED 03-07-2008 IN ITA NO.3674/AHD/2003. TH E OBSERVATIONS OF THE TRIBUNAL ARE AS FOLLOWS: 2. IN RESPECT OF GROUND NO.1 WE HAVE HEARD THE RI VAL SUBMISSIONS. WE FIND THAT NO DISALLOWANCE IN RESPE CT OF INTEREST WAS MADE IN THE CASE OF THE ASSESSEE BY TH E AO IN THE EARLIER YEAR IN WHICH LOANS AND ADVANCES WERE G IVEN BY THE ASSESSEE. THE CASE OF THE ASSESSEE IN OUR OPI NION IS DULY COVERED BY THE DECISION OF THE KARNATAKA HIGH COURT IN THE CASE OF 192 ITR 165 WHEREIN IT WAS HELD THAT THE AMOUNT DUE FROM N ON THE FIRST DAY OF THE ACCOUNTING YEAR WAS THE AMOUNT THAT STOOD OUTSTANDI NG ON THE LAT DAY OF THE PREVIOUS ACCOUNTING YEAR AND THEREFORE ITS NATURE AND STATUS COULD NOT BE DIFFE RENT FROM ITS NATURE AND STATUS AS ON THE LAST DAY OF TH E PREVIOUS YEAR. REGARDING PAST YEARS THE ASSESSEE S CLAIMS FOR DEDUCTION WERE ALLOWED IN RESPECT OF THE SUMS ADVANCED DURING THOSE YEARS. THIS COULD BE ON LY ON THE ASSUMPTION THAT THOSE ADVANCES WERE NOT OUT OF BORROWED FUNDS OF THE ASSESSEE. THIS FINDING DURIN G THE PREVIOUS YEARS WAS THE VERY BASIS OF THE DEDUCTIONS PERMITTED DURING THE PAST YEARS. IT WOULD NOT BE EQUITABLE TO PERMIT THE REVENUE TO TAKE A DIFFERENT STAND NW IN RESPECT OF THE AMOUNTS WHICH WERE THE SUBJECT - MATTER OF PREVIOUS YEARS ASSESSMENTS. THIS IS AN ADMITTED FACT THAT THESE LOANS / ADVANCE S WERE NTO MADE BY THE ASSESSEE DURING THE YEAR. NO CONTRARY DECISION WAS BROUGHT TO OUR KNOWLEDGE BY THE LEARNED DR. WE ITA NO.799/RJT/2005 3 THEREFORE DELETE THE DISALLOWANCE OF RS.54 812. TH US THIS GROUND STANDS ALLOWED. THERE BEING NO CHANGE IN THE FACTS AND CIRCUMSTANCE S ON THE ISSUE DURING THE YEAR UNDER CONSIDERATION WE ARE AT A LOSS TO F IND A DIFFERENT VIEW THAN THE ONE ALREADY ARRIVED AT BY THE COORDINATE BENCH OF THE TRIBUNAL ON THE SAME SET OF FACTS AND CIRCUMSTANCES. IN THIS VIEW OF THE MATTER WE DIRECT THE ASSESSING OFFICER TO DELETE THE ADDITION. GROU ND NO.1 OF THE ASSESSEE SUCCEEDS. 5. WITH REGARD TO GROUND NO.2 PERTAINING TO DISALLO WANCE OF INTEREST OF RS.1 19 193 PAID TO PERSONS COVERED U/S 40A(2)(B) W E FIND THAT THIS ISSUE IS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE SA ID CITED ORDER OF THE TRIBUNAL FOR THE ASSESSMENT YEAR 2000-01. ADMITTED LY THERE IS NO CHANGE IN THE FACTS AND CIRCUMSTANCES OF THE CASE. HERE A LSO THE LD.CIT(A) FOLLOWED THE ORDER OF THE CIT(A)-IV AHMEDABAD FOR THE ASSESSMENT YEAR 2000-01. WE FIND THAT THE ORDER OF CIT(A)-IV AHME DABAD WAS NOT FOUND ACCEPTABLE TO THE TRIBUNAL AND THE DISALLOWANCE WAS DELETED VIDE ORDER NUMBER AND DATE CITED ABOVE. THE OBSERVATIONS OF T HE TRIBUNAL IN THIS REGARD ARE AS FOLLOWS: 3. IN RESPECT OF GROUND NO.2 WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS. WE HAVE ALSO GON E THROUGH THE ORDER OF THE TAX AUTHORITIES. WE FIND THAT IN THIS CASE THE ASSESSEE HAS ALLOWED INTEREST @18% TO THE PARTIES A S SPECIFIED U/S 40A(2)(B). THE ASSESSEE WAS PAYING I NTEREST ON CASH CREDITS @16% IN ADDITION TO OTHER PARTIES. TH EREFORE UNDER THESE CIRCUMSTANCES IN OUR OPINION THE RATE OF INTEREST 18% IS NOT MORE THAN THE MARKET RATE. THE LEARNED DR ALTHOUGH CONTENDED THAT THE ASSESSEE HAS PAID THE I NTEREST TO SOME OF THE OTHER PARTIES @12% AND THEREFORE THE AO WAS RIGHT IN DISALLOWING THE EXCESS INTEREST. WE DO NO T AGREE WITH THIS PLEA OF THE LEARNED DR WHEN THE ASSESSEE HAS P AID THE INTEREST ON CASH CREDITS MUCH MORE THAN 16% DURING THE YEAR. ITA NO.799/RJT/2005 4 NOT ONLY THIS THE ASSESSEE CANNOT BE EXPECTED TO P AY INTEREST AT THE UNIFORM RATE TO ALL THE PARTIES FROM WHOM LO ANS HAVE BEEN TAKEN. IT WILL DEPEND ON MUTUAL AGREEMENT AND TERMS AND CONDITIONS AS WELL AS PREVAILING MARKET RATE OF INTEREST AND THE ASSESSEE MAY BE IN NEED OF THE MONEY FOR THE PU RPOSE OF BUSINESS IT DOES NOT MEAN THAT THE ASSESSEE MAY PA Y THE INTEREST ONLY AT SUCH RATE OF INTEREST AT WHICH HE HAS ALREADY TAKEN THE MONEY FR4ROM SOME OTHER PARTIES EARLIER./ IN OUR OPINION NO THUMB RULE CAN BE LAID DOWN THAT THE IN TEREST WILL BE PAID BY THE ASSESSEE AT A PARTICULAR RATE OF INT EREST. UNDER THE FACTS AND CIRCUMSTANCES OF THE CASE IN OUR OPI NION THE RATE OF INTEREST PAID BY THE ASSERSWSEE4 WAS REASON ABLE AND NO DISALLOWANCE IS CALLED FOR. CONSISTENT WITH THE PRECEDENT WE DIRECT THE ASSESS ING OFFICER TO DELETE THE DISALLOWANCE. THE SECOND GROUND OF THE ASSESSEE IS ALLOWED. 6. IN THE RESULT APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23-12-2010 SD/- SD/- (A.L. GEHLOT) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI DT : 23 RD DECEMBER 2010 PK/- COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A)-IV RAJKOT 4. THE CIT-III RAJKOT 5. THE DR (TRUE COPY) BY ORDER ASSTT.REGISTRAR ITAT RAJKOT