9911796707
TMI Blog2021 (12) TMI 696X X X X Extracts X X X X X X X X Extracts X X X X ..... paid any interest on delay payments against consideration to the above suppliers on their sale/Job Works, if any, nor charged any interest from them on delay payments received either as sale consideration or advances in connection with the commercial expediency. Considering the totality of facts and circumstances of the case, mater placed on record and the case laws relied upon by the ld. AR, we found merit in the contentions raised by the assessee and the ld. DR has not brought on record any new material to rebut or controvert the submissions and documents placed before us, therefore, we direct to delete the disallowances confirmed by the ld. CIT(A) - Decided in favour of assessee. Disallowance of interest to Bajaj Finance Ltd. - HELD THAT:- Assessee has taken finance from Baja] Finance Limited in 2011. The repayment was made accordingly to the monthly installment. As per the provisions, the assessee has debited TDS deducted on the interest paid in the account of the company. The assessee time and again required M/s Bajaj Finance Limited to reimburse the same. However, in spite of the repeated request no such reimbursement of the tax deducted at source was made. Accordin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... parties, and added in the returned income, it is further clarified that these are not loans, and are relating to business transactions. thus, the impugned assessment order as well as appellate order, both are against the provisions of the Act, bad in law, erroneous and liable to be quashed and addition of ₹ 22,06,319/ liable to be deleted, hence, the same may kindly be deleted, and the interest paid may kindly be allowed as business expenditure u/s 36(1)(iii) of the Act. 3. That, the Learned Appellate Authority has grossly erred on the facts and on the law in sustaining assessment order of the Assessing authority dated 27/12/2016 by which he disallowed interest of ₹ 45,130/- partly on borrowings to the Bajaj Finance Ltd. thus, the impugned assessment order as well as appellate order both are against the provisions of the Act, bad in law, erroneous and liable to be quashed and addition of ₹ 45,130/ liable to be deleted, hence, the same may kindly be deleted and the interest paid may kindly be allowed as business expenditure u/s 36(1)(iii) of the Act. 4. That, we are assuming that the impugned appellate order has been served on 29/12/2019 within ten d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t for adjudication by your honour. That, in view of the above facts and circumstances of the case, it is clearly apparent that I could not submit the appeal in time limit as prescribed under section 253(3) of the Act on the reasons which were beyond our control, in support of the above facts an affidavit duly signed and notarized is enclosed herewith. Therefore, it is humbly prayed that the delay caused on the above reasons may kindly be condoned delay of 50 days only in submitting the appeal, the appeal may kindly be granted for adjudication in the interest of natural justice and oblige. 4. On the other hand, the ld DR could not rebut the facts submitted by the assessee before us for seeking condonation of delay. 5. We have considered the rival submissions as well as relevant material on record. As regards the sufficiency of cause for filing the appeals belatedly, it is settled principles of law that the Courts have to take liberal approach while interpreting the expression sufficient cause for condonation of delay. In case of Collector, Land Acquisition Vs. Mst. Katiji (1987) 167 ITR 471, the Hon ble Supreme Court has laid down the principle that the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d by the order of the ld. CIT(A), the assessee has preferred the present appeal before the ITAT on the grounds mentioned above. 10. Grounds No. 1 and 2 of the appeal raised by the assessee are interrelated and interconnected and relates to challenging the order of the ld. CIT(A) in confirming the disallowance of ₹ 22,06,319/-. In this regard, the ld. AR appearing on behalf of the assessee has reiterated the same arguments as were raised before the ld. CIT(A) and also relied on the written submissions filed before the Bench and the contents of the same are as under: That the appellant-assessee is a Pvt. Ltd. Company registered with the Registrar of Companies, Rajasthan in the year 1995 has been dealing in manufacturing and selling thereof in all kinds of Iron and Steel such as Round Bars, MS Angle, Sections, Channels etc. the appellant-Company was consisted by two director namely Rajesh Natani and Shri Babu Lal Natani during the period under consideration, That, the appellant-assessee has been dealing in purchases of raw material from various dealers within the State of Rajasthan as well as outside the State of Rajasthan also, sales to various dealers within ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 532510 2 2 nd 0 0 3 TOTAL 532510 4 2011-12 2 nd 0 18373987 5 3 rd 0 10297054 6 TOTAL 0 28671041 7 2012-13 1 st 0 7573004 8 2 nd 0 13350476 9 3 rd 0 15822263 10 4 th 3403832 2507456 11 TOTAL ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g account of transactions of purchases/sale and payments (Considerations) as well as advances in the business/Commercial expediency, if any, for your kind perusal and satisfaction we have submitted a summary statement and copies of accounts of the SMCPL in the books of accounts of the appellant-assessee since the assessment year 2010-11 to 2014-15 in form of paper book on 20/09/2021 at page numbers 28 to 37. Apart from the above sold goods to the SMCPL, the sales have been reported to the Commercial Taxes Department through its required statutory quarterly returns in the prescribed Form VAT-10 along with attachments thereof in the Form VAT-07A (Summery details of purchases from registered dealers) and Form VAT-08A (Summery details of sales to registered dealers as well as unregistered persons), the quarter wise detail is reproduced here under:- Sl. No. Asst. Year Name of the quarter Form VAT-07A (Summery of purchases) Excluding tax Form VAT-08A (Summery of sales) Excluding tax 1. 2010-11 1 st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he appellant-assessee since the assessment year 2011-12 to 2014-15 in the paper book at page numbers 28 to 37. It is further more clarified that the SMCPL is sister concern of the appellant as one of the directors (Rajesh Natani) of the appellant-assessee is also director in the SMCPL and all the transactions were purely business transaction in the business expediency. It is further more clarified that the assessing authority as well as the appellate authority has not pointed out any advances to the SMCPL without any business expediency i.e other than business purposes i.e for personal purposes. It is further more clarified that some time remained credit balance of the SMCPL and sometimes remained debit balance, in both the situations there was no any transaction of interest either debit or credit because it was a current account of business instead of loan account. It is further more clarified that out of the outstanding of ₹ 87,26,342/- as on 31/03/2014 ₹ 54,06,309/- was opening balance as on 01/04/2013, hence, the addition of interest on ₹ 87,26,342/- far away from the facts of the case. It is further brought to your kind notice that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3 rd 419664 0 4 TOTAL 6,79,099 0 5 2011-12 4 th 1252429 0 6 TOTAL 1252429 0 7 2012-13 4th 0 26030 8 0 9 TOTAL 0 26030 It is clarified that purchases/sales in the paper have been declared gross amount including tax, whereas, the above table is bare amount excluding tax on purchases as well as sales also. It is further more clarified that the appellant-assessee adjusted the output tax liability on sale from Input Tax Credit because the appellant-assessee paid taxes on it s purchases from registered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the business smoothly and will supply goods to the appellant-assessee subsequently. The appellant-assessee took in to consideration request of the NIPL and further advanced ₹ 10,00,000/- in the business expediency for the continuation of the business purposes, However, out of the ₹ 10,00,000/- ₹ 8,16,818/- used in payments to two creditors, thus, net advance during the year remained ₹ 1,83,182/ only (10,00,000 8,16,818. We would like to have your kind attention that the assessing authority disallowed interest paid on loan to bank (CC Limit) ₹ 65,37,685/-, Term Loan ₹ 3,64,011/- and to others ₹ 9,90,371/- total amounting to ₹ 79,11,256/- under section 36 (iii). On perusal of the sub-Section (iii) of Section 36, three ingredients are required for allowing interest paid which are as under;- 1. There should be borrowing of funds 2. Borrowing should be for business purpose, and 3. There should be payment of interest. That, the appellant fulfills all the above three conditions, as the appellant-assessee borrowed the funds from the bank as well as other, the borrowing was for the business purpose ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... discussing all the material facts and circumstances of the case. 12. We have heard the rival contentions of both the parties and have also gone through the written submissions filed by the assessee. We have also deliberated upon the decisions cited in the orders passed by the authorities below as well as cited before us and we have also gone through the orders passed by the revenue authorities. As per facts of the present case, we observed that the assessee is deriving its income from manufacturing and trading of all kinds of Iron and Steel such as MS Bars, MS Angles, Sections and Channels etc. The assessee filed its return of income on 26/11/2014 declaring net taxable income of ₹ 10,89,570/-. 13. We observed from perusal of the record that the assesse took a short loan credit (SLC) of ₹ 50 Lakh from the formerly State bank of Bikaner and Jaipur which subsequently merged with State Bank of India, Branch-Ram Nagar, Shastri Nagar, Jaipur and there was over draft of ₹ 29,78,648/- over and above the CC limit for the business purposes during the assessment year under consideration. The assessee advanced in terms of business to other companies as well as firm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate of Rajasthan as well as outside the State of Rajasthan also, sales to various dealers within the State of Rajasthan as well as dealers of outside the State of Rajasthan also, apart from the manufacturing by itself, looking to the urgency of finished goods for sale to others purchased as well as got done job work from other job workers also namely Natani Steel Industries Neelkanth Industries (Pvt.) Ltd. 16. During the course of business looking to the business/commercial expediency the assessee advanced in terms of business/Commercial expediency to other Companies i.e. sister companies as well as sister firms/concerns for maintaining business relations with them i.e. purchasing of raw material, getting done job works also. The Natani Steel Industries (NSI) is job worker as well as supplier of goods also to the assessee. The NSI did job work regarding manufacturing of goods since the financial year 2009-10 to 2011-12 because according to the market conditions the assessee got done job work and purchased goods for sale. The assessee has submitted year wise statement of the Job Work and sale to NSI which is at page number-7 of the paper book and statements of account which ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gross amount including tax, whereas, the above table is bare amount excluding tax on purchases as well as sales also. 17. It is further clarified that the assessee adjusted the output tax liability on sale from Input Tax Credit because the assessee paid taxes on it s purchases from registered dealers of the State of Rajasthan under the Rajasthan Value Added Tax Act, 2003 and/or deposited, as the case may be. It is further more clarified that the assessee was maintaining a running account of all the transactions of job work as well as purchases/sale also and payments (Considerations) as well as advances in the business expediency. Copies of summary statement and copies of accounts of the NSI in the books of accounts of the assessee for the A.Y. 2010-11 to 2014-15 are at page numbers 7 to 27 of the paper book. 18. We further observed that the NSI is sister concern of the assessee as one of the directors (Rajesh Natani) of the assessee is also partner in the NSI, and all the transactions were purely business transaction in the business expediency. Both the lower authorities had not pointed out any advances to the NSI without any business expediency i.e. other than business p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 6 2011-12 3 rd 4105556 0 7 2011-12 4 th 9987378 0 8 TOTAL 1,91,10,396 0 9 2012-13 1 st 11941216 0 10 2012-13 2 nd 9569510 132810 11 2012-13 3 rd 241619 0 12 TOTAL 2,17,52,345 132810 From the above chart, it can be clarified that purchases/sales in the paper have been declared gross amount including tax, whereas, the above table is bare amount excluding tax on purchases as well as sales also. 20. It is to further point out that the assessee adjusted the output tax liability on sale from Input Tax Credit because t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of summary statement and copies of accounts of the NIPL in the books of accounts of the assessee for the assessment year 2010-11 to 2014-15 are at page numbers 01 to 06 of the paper book. Apart from the above the assessee sold goods to the NIPL, the sales have been reported to the Commercial Taxes Department through its required statutory quarterly returns in the prescribed Form VAT-10 along with attachments thereof in the Form VAT-07A (Summery details of purchases from registered dealers) and Form VAT-08A (Summery details of sales to registered dealers as well as unregistered persons), the quarter wise detail is reproduced here under:- Sl. No. Asst. Year Name of the quarter Form VAT-07A (Summery of purchases) Excluding tax Form VAT-08A (Summery of sales) Excluding tax 1. 2010-11 1 st 259435 0 2 2010-11 2 nd 0 0 3 2010-11 3 rd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee. This fact can be verified from the account statement of the NIPL in the books of accounts of the assessee which is available at page number 6 of the paper book submitted on 20/09/2021. Thus, it is crystal clear that the amount of ₹ 10,00,000/- was advanced in the business/commercial expediency only. It is further noted that although there was no any transaction of purchases/sale during the period under consideration but the NIPL requested to the assessee for some advance for the business so that it can run the business smoothly and will supply goods to the assessee subsequently. The assessee took into consideration request of the NIPL and further advanced ₹ 10,00,000/- in the business expediency for the continuation of the business purposes. However, out of ₹ 10,00,000/- ₹ 8,16,818/- used in payments to two creditors, thus, net advance during the year remained ₹ 1,83,182/ only (10,00,000 8,16,818.). 23. We further observed that A.O. disallowed interest paid on loan to bank (CC Limit) ₹ 65,37,685/-, Term Loan ₹ 3,64,011/- and to others ₹ 9,90,371/- total amounting to ₹ 79,11,256/- U/s 36 (iii) of the Act. For ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n view point but that of a prudent businessmen. As already stated above, we have to see the borrowed funds to a sister concern from the point of view of commercial expediency and not from the point of view whether the amount was advanced for earning profits. 22. In view of the above, we allow the appeals and set aside the impugned judgments of the High Court, The Tribunals and other authorities and remand the matter to the Tribunal for a fresh decision, in accordance with law and in the light of the observations made above. We also make it clear that we are not setting aside the order of the Tribunal or other Income Tax Authorities in relation to the other points dealt with by these authorities, except the point of deduction of interest on the borrowed funds. We also draw strength from the decision of the Hon ble Rajasthan High Court in the case of Commissioner of Income Tax Vs Vijay Solvex Ltd. (2015) 274 CTR (Raj.) 384, wherein judgment of the Hon ble Apex court in the case of S.A. builders has been followed. The relevant abstract of the judgment of the Hon ble Jurisdictional High court is reproduced here under:- 8. It may be that the assessee on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he debtors, no notional interest or hypothetical interest could have been disallowed on such facts. The Revenue has failed to prove nexus. In our view, the Tribunal has correctly appreciated the facts and law. In view of our observations hereinabove, the Tribunal was correct in deleting the notional interest, disallowed by the AO at ₹ 5,80,215 and accordingly, the appeal is decided against the Revenue and in favour of the assessee. No costs. Thus, in view of the above facts and circumstances of the case all are the business transactions either of purchases/sale/Job work as well as payments/receipts through banks as the case may be in the business/Commercial expediency. In the business transaction neither the assessee paid any interest on delay payments against consideration to the above suppliers on their sale/Job Works, if any, nor charged any interest from them on delay payments received either as sale consideration or advances in connection with the commercial expediency. 24. Considering the totality of facts and circumstances of the case, mater placed on record and the case laws relied upon by the ld. AR, we found merit in the contentions raised by the assesse ..... X X X X Extracts X X X X X X X X Extracts X X X X
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