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TMI Blog2024 (7) TMI 212X X X X Extracts X X X X X X X X Extracts X X X X ..... purchase in the instant case does not fall within the provisions of section 43(5) of the Act 61 and are not speculative transactions - Decided against revenue. Disallowance of interest u/s 36(1)(iii) - no interest is charged by the assessee on such advance made to 3 parties - HELD THAT:- Dealing with G H Crop Protection Private Limited are fully business dealing and the amount has been paid by way of advance for procuring of materials and since the said materials were not supplied due to unavoidable circumstances the funds has been refunded by the said party. Moreover, name of the party G H Crop Protection Private Limited is appearing in the schedule of loans taken/ accepted and repayments made during the year. This is just to establish that there is regular business dealing with the said party and the amounts advanced or taken, does not necessarily bear interest at all times. This transaction has been out of business exigency. DR has not disputed or controverted the arguments of the assessee on the aspect of availability of interest free funds, as shown to have been reflected in the audited balance sheet. We are of the opinion that there is neither any reason nor any material to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Others. 3. That the respondent craves leave to add or amend any grounds of appeal before the appeal is finally heard or disposed off. 4. Subsequently to the filing of CO, the assessee has also raised additional grounds of CO along with an application dated 10/06/2022, that the same is a legal ground and all facts are borne out from assessment records and the same may be permitted to be taken in view of the Hon ble Apex court judgment in the case of NTPC vs CIT ( 229 ITR 383 ). 5. The additional grounds in CO are as follows: 1. That the Ld. CIT(A)-5, Ludhiana has erred in dismissing the grounds of appeal with regard to action of the Assessing Officer u/s 148 as there was neither any tangible material in possession of the Assessing Officer nor any reason to believe that the income of the assessee has escaped assessment. 2. That the Ld. CIT(A)-5, Ludhiana has failed to appreciate that there was only mechanical approval by the Ld. PCIT while granting permission u/s 151 of the Income Tax Act, 1961. 6. The brief facts of this case is that the assessee a private limited company has filed its return of income u/s 139(1) of the Act 61, disclosing a total income of Rs.14,93,400/- which was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tocks and shares is periodically or ultimately settled otherwise than by the actual delivery or transfer of the commodity or scrips. 13. From the above provisions of section 43(5) of the Act 61, we find, that the most pertinent point to be examined is whether, in the instant transaction, there has been actual delivery of goods or whether the transaction has been ultimately settled otherwise than by actual delivery. 14. In order to arrive at the conclusion, we take note of the modus operandi of the business of the assessee, which has been explained by the assessee by way of a written submission filed before the AO and also before the first appellate authority which is reproduced as follows: (i) That the selling party loads the goods in ship and hands over the following documents to the assessee: - a) Invoice b) Bill of lading c) Weight and Quality Certificate (ii) That during the course of transportation of goods from the country where the seller is located to India, the edible oil is sold by the assessee by handing over the following documents to the subsequent purchaser: - a) Sale Invoice b) High Seas Sale Agreement c) Copy of original Import Invoice d) Copy of bill of Lading (iii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e port of delivery in India. 15. On the face of the above factual aspects of the matter the Ld DR, relied on the order of the AO and on the judgments of the Hon ble Supreme court in the case of Davenport and Co ( Pvt ) Ltd vs CIT ( 1975 ) 100 ITR 715, Nirmal Trading Co vs CIT ( 1980 ) 121 ITR 56 and in the case of Jute Investment Co Ltd 121 ITR 56, and argued that in the instant case there is failure on the part of the assessee to prove with evidence that there was actual delivery taken by assessee, and this failure renders the transactions of sale and purchase as speculative. 16. We also observed that the Ld DR in course of his argument has not taken into cognizance the fact that in the instant case, the goods ( edible oil ), has been actually delivered and has been taken physical delivery of by the end user, ( the ultimate buyer ) at the port of arrival. 16.1 The judgments cited by the Ld DR, are all distinguishable on facts because in the cited cases there has been no physical delivery of goods at any stage and these cases has been distinguished by the Ld CIT(A) in his order. 17. The Ld. AR of the assessee submits, that considering the above chain of events supported by all rele ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssive sales of same commodity coupled with delivery or transfer of the commodity and the physical delivery is only taken by the ultimate purchaser, the transaction does not fall within the sweep of speculative transaction and the Hon ble High Court has elaborated this finding by way of example in para 6 which is reproduced as under: - For example, if A sells certain commodity to B and transfers possession of the commodity by parting with the commodity either by putting the commodity on the carrier, rail or any other transport, and on the way B, the purchaser, sells the commodity to some third party C, the purchase by the first purchaser B cannot, in our view, be treated as speculative transaction for the simple reason that the delivery or transfer of the commodity contemplated under clause (5) of section 43, has taken place. Further, the Hon ble High Court held that under the sale of goods Act the delivery of goods can be made either by physical delivery of commodity directly to the purchaser or to the carrier for him or by transferring the documents of title to the commodity and the relevant part reads as under: - 9. In view of the above discussion of case law with regard to the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d handed them over to the carrier which would amount to delivery to the buyer, the transaction cannot be regarded as speculative transaction. 17.6 The Ld. AR, also brought to our notice, the judgment of the Amritsar Bench of the ITAT, in the assessee own case in ITA No: 56/ASR/2020, for the Assessment year: 2016-17, where on identical facts the issue has been decided in favour of the assessee. (Copy of the said order has been filed on record). 18. We have heard both the parties and considered the materials on record and we find that the chain of events as laid down by the assessee, supported by documentary evidences, has not been disputed by the AO and in fact, the documentary evidences in support of the same is accepted by the AO, and actual physical delivery of the goods has been taken by the last buyer as a result of the transaction carried out by the assessee. 18.1 It is not a case, where delivery of the goods were not contemplated at all, but it is a case where goods where physically purchased by the importer from the foreign seller, who loaded the goods on the ship, and thereafter, the assessee has purchased the goods from the importer while on the high seas in transit, and t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal. 24. The Ld. AR of the assessee argued that the dealing with G H Crop Protection Private Limited are fully business dealing and the amount has been paid by way of advance for procuring of materials and since the said materials were not supplied due to unavoidable circumstances the funds has been refunded by the said party. Moreover, our attention was also drawn to the auditor report in Form 3 CD annexure -2 and annexure - 3 of the report, where the name of the party G H Crop Protection Private Limited is appearing in the schedule of loans taken/ accepted and repayments made during the year. This is just to establish that there is regular business dealing with the said party and the amounts advanced or taken, does not necessarily bear interest at all times. This transaction has been out of business exigency. 25. In respect of the remaining two parties Homeland Enclave Limited, and J P Singh and Co, the amounts advanced for procurement of materials were much lesser amount of Rs. 19 lakhs and Rs.14 lakhs only, which according to the Ld. AR has been funded out of interest free funds available with the assessee as reflected in the audited balance sheet under the head long term borro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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