9911796707
TMI Blog2018 (1) TMI 579X X X X Extracts X X X X X X X X Extracts X X X X ..... Officer - Decided against revenue - I. T. A. No. 1444 /Chd/ 2016 - - - Dated:- 24-10-2017 - Ms. Diva Singh (Judicial Member) And Dr. B. R. R. Kumar (Accountant Member) For the Appellant : Smt. Chandra Kanta For the Respondent : Sudhir Sehgal ORDER Ms. Diva Singh (Judicial Member).- 1. The present appeal has been filed by the Revenue assailing the correctness of the order dated September 28, 2016 of the Commissioner of Income-tax (Appeals)-4, Ludhiana pertaining to the 2013-14 assessment year on the following grounds : 1 Whether on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) was justified in restricting the addition to ₹ 4,80,000 against ₹ 3,16,618 (37,68,000+25,48,618) made by the Assessing Officer under section 36(1)(iii) for non-capitalisation of interest on advance given for land purchased and for non-capitalisation of interest on opening capital work-in-progress respectively ? 2. Whether on the facts and in the circumstances of the case, the learned Commissioner of Income-tax (Appeals) was justified in accepting that the assessee was having sufficient interest-free funds ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2016 (Chd. Trib.) ; Asst. CIT v. Rakesh Gupta (I. T. A. No. 822/Chd/2012) ; Hero Cycles P. Ltd. v. CIT [2015] 379 ITR 347 (SC), it was his submission that even the relief denied to the assessee by the Commissioner of Income-tax (Appeals) was allowable and in fact the entire addition should have been deleted. However, since the issue had not been challenged by the assessee, the relief granted on facts may not be varied. Accordingly, in these circumstances, he would rely, upon the impugned order. 3.1 Inviting attention to the specific reasoning taken on facts by the Commissioner of Income-tax (Appeals), in paragraph 6.2 to 6.4 of the impugned order, which finding of fact, it was submitted, has not been assailed by the Revenue by any, fact or evidence, it was submitted, was heavily relied upon by the assessee. The same is extracted hereunder for ready reference : 6.2. I have considered the observations of the Assessing Officer as made by her in the assessment order while making the impugned addition/disallowance. I have also considered the written submissions filed by the assessee-company vide letter dated September 28, 2016 on the issue under reference. I have also conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e spent on construction out of borrowed and own funds Rs. Nil Interest-free funds available with the assessee-company Share capital ₹ 1,00,000 Reserve and surplus ₹ 4,56,250 Loan from directors ₹ 41,319 ₹ 5,97,579 Interest bearing funds available with the assessee-company ₹ 34,02,000 As the net current assets with the assessee-company were to the extent of ₹ 39,36,721 and net investment in fixed assets was ₹ 6,45,797, it cannot be said that the assessee-company was having any amount with it out of current liabilities which include sundry creditors, provisions for tax and advances from customers which can be said to be given for the purchase of land. In view of these facts, it is clear that the majority of the advance paid for the purchase of the land has been given out of borrowed funds. Assessment year 2010-11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee was having sufficient interest-free funds to make advance of ₹ 2,40,00,000 for the purchase of land and spend ₹ 69,04,945 to make investment in the construction of godown. Assessment year 2012-13 Advance given for the purchase of land to directors Rs. Nil Amount spent on construction of godown ₹ 3,29,24,770 Amount stated to be spent on construction out of borrowed funds ₹ 1,90,00,000 Amount stated to be spent on construction out of own funds till end of the year ₹ 1.39,24,770 Interest-free funds available with the assessee-company Share capital ₹ 4,51,00,000 Reserve and surplus ₹ 4,98,85,429 Share application money Rs. nil ₹ 9,49,85,429 In view of these facts, it can be said thai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r paper book page Nos. 59, 107 and 157 in the respective years are considered, it can be seen that it is very difficult to say that only non-interest bearing funds were advanced. It was submitted, that since the bank account of the assessee constituted of mixed funds in the circumstances it was her argument that it was for the assessee to establish that own funds were not lying in inventories, sundry debtors, investments etc. 4.1 Accordingly, it was submitted, that since admittedly it is a case of mixed funds and it has not been established by the assessee that own funds have been utilised, the impugned order, it was her prayer, may be set aside and the respective additions made by the Assessing Officer be restored. Attention was invited to the fact that in 2012-13 assessment year, in fact the assessee is having a negative income. 5. We have heard the submissions and perused the material available on record. We find that the arguments of the learned senior Departmental representative that in the 2012-13 assessment year, there was a negative income is contrary to record. The year-wise availability of funds has specifically been considered by the Commissioner of Income-tax (App ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he extent of ₹ 16,39,010 out of the total claim of ₹ 20,53,120. Apart from that, the assessee had also advanced loans of ₹ 34 lakhs to its directors at the rate of 10 per cent. interest whereas on the bank loans, the assessee was paying interest at 18 per cent. The addition, by way of disallowance was sustained in appeal by the jurisdictional High Court following its own judgment in the case of CIT v. Abhishek Industries Ltd. (I. T. A. No. 110 of 2005) dated August 4, 2006) [2006] 286 ITR 1 (P H) affirming the principle that when loans were taken from the banks on which interest was paid for the purposes of business, the interest thereon could not be claimed as business expenditure. Their Lordships of the apex court in the aforesaid decision in the case of Hero Cycles held the approach to be faulty in law and concluded that it cannot be countenanced. In the facts as available before the apex court, commercial expediency stood demonstrated on facts for the interest-free loans advanced to the subsidiary. Their Lordships further considering the loans advanced to the directors, at a lesser rate of interest, relying upon the conclusion of the Commissioner of Income-tax ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ar as the legal and factual position as considered by the Commissioner of Income-tax (Appeals), we find there is no infirmity pointed out by the Revenue on record. The fact that to the extent relief has been granted, the conclusion has been drawn on the basis of facts that the purchase and construction was from the interest-free funds available to the assessee which finding of fact we note remains unassailed on record. Arguments to the contrary advanced by the learned senior Departmental representative are found to be exfacie contrary to facts on record. The facts on record that entire interest expenditure on term loan from Allahabad Bank has duly been capitalised is an accepted fact which remains unassailed and has constantly been argued even before the Assessing Officer. Thus, in the aforementioned peculiar facts and circumstances, finding ourselves in agreement with the conclusions drawn in paragraph 6.2 to 6.4 of the impugned order on the facts as they stand which has been extracted in the earlier part of this order, the Departmental appeal is dismissed. 6. In the result, the appeal of the Revenue is dismissed. 7. The order pronounced in the open court on October 24, 2017 ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
