Income Tax Appellate Tribunal - Jaipur
Assistant Commissioner Of Income Tax, ... vs M/S Shiv Agrevo Ltd., Baran on 7 March, 2018
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IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR
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BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM
vk;dj vihy la-@ITA No. 684/JP/2017
fu/kZkj.k o"kZ@Assessment Year : 2013-14
The ACIT, cuke M/s Shiv Agrevo Ltd.
Circle-2, Vs. Jhalawar Road, Kalmanda,
Kota. Baran(Raj).
LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AACCS 7224 F
vihykFkhZ@Appellant izR;FkhZ@Respondent
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s Assessee by : Md. Mahendra Gargiea (Adv.)
jktLo dh vksj ls@ Revenue by : Shri K.C. Gupta (JCIT)
lquokbZ dh rkjh[k@ Date of Hearing : 01/03/2018
mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 07/03/2018
vkns'k@ ORDER
PER: VIJAY PAL RAO, J.M. This appeal by the Revenue is directed against the order of dated 12.06.2017 of CIT(A), Kota for A.Y. 2013-14. The Revenue has raised the following grounds:-
" On the facts and in the circumstances of the case, the CIT (A) has erred in:-
i) Whether on the facts and in the circumstances of the case, the ld. CIT(A) has erred in deleting the Trading Addition of Rs.
60,22,485/- whether the assessee has declared more g.p. in the previous year in comparison to this year.
ITA No.684/JP/2017
ACIT vs. M/s Shiv Agrevo Ltd.
ii) Whether on the facts and in the circumstances of the case, the ld. CIT(A) has erred in deleting the more interest paid of Rs. 1360558/- in comparison to received interest on advance money.
iii) Whether on the facts and in the circumstances of the case, the ld. CIT(A) has erred in deleting the interest addition amount of Rs. 3038814/- u/s 36(1)(iii) where interest free loan was provided to Shiv Health Food Ltd."
2. Ground No. 1 is regarding the trading addition made by the AO was deleted by ld. CIT(A). The assessee company is engaged in the business of Solvex Plant with Refinery and Pungent Plant. During the assessment proceedings, the AO rejecting the books of accounts of the assessee by invoking the provisions of Section 145(3) of the Act. The AO has determined the income of the assessee by applying G.P. rate 6.385% and accordingly, the addition of Rs. 72,22,485/- was made. On appeal, the ld. CIT(A) though upheld the rejection of books of accounts u/s 145(3) however, restricting the addition of Rs. 12,00,000/- as against Rs. 72,22,485/- made by the AO.
3. We have heard ld. DR as well as ld. AR and considered the relevant material on record the AO has computed the weighted average G.P. rate as per turnover of the assessee instead of applying the average of GP rate declared by the assessee in the past years which is accepted or the GP Rate attained finality. The ld. CIT(A) restricted the 2 ITA No.684/JP/2017 ACIT vs. M/s Shiv Agrevo Ltd.
addition by taking an adhoc lump sum disallowance of Rs. 12 lacs instead of applying any reasonable and proper basis. The ld. AR of the assessee has relied upon the decision of this Tribunal in assessee's own case for the assessment year 2011-12 however, we find that the Tribunal for the year A.Y. 2011-12 has not gone into issue of reasonable and proper estimate by applying the average G.P. rate of the past history of the assessee as held by the Hon'ble Jurisdiction High Court in case of CIT vs. Gupta K.N. Construction Co. 116 DTR 377 as well as other decisions on this point wherein it has been held that the best guide in the cases of fair estimation is past history of GP rate declared by the assessee.
4. On the other hand ld. DR has strongly relied upon the order of the Assessing Officer and submitted that the AO applying weighted average GP rate which is more proper. We find that except for the assessment years 2009-10 and 2011-12 for other assessment years 2008-09 and 2010-11 the GP rate declared by the assessee was accepted by the AO. For the assessment year 2009-10 the G.P. rate was adopted at 5.30% as against the GP rate declared by the assessee at 5.13%. For the assessment year 2011-12 the assessee declared GP rate 4.09% and the Tribunal has estimated GP rate of 4.20%. Therefore, the 3 ITA No.684/JP/2017 ACIT vs. M/s Shiv Agrevo Ltd.
G.P. which has attained finality shall be consider for taking the average of G.P. The income of the assessee shall be computed on the basis of the average G.P. rate declared and attained finality for the last 5 years which is as under:-
A.Y. GP Rate 2008-09 5.34% 2009-10 5.30% 2010-11 2.43% 2011-12 4.20% 2012-13 6.996% 5 year's average 4.8532
The GP rate declared by the assessee for the year under consideration is 6.056%. Therefore,if we compare the average G.P. of past history with the G.P. declared for the year under consideration the G.P. for the year under consideration is more than the average figure of GP and therefore, even if the books of accounts of the assessee are rejected it may not necessary by lead to any addition to the total income of the assessee. Accordingly, we do not find any reason to interfere with the order of the ld. CIT(A) on this issue.
4 ITA No.684/JP/2017
ACIT vs. M/s Shiv Agrevo Ltd.
5. Ground No. 2 and 3 are regarding disallowance of interest on account of charging short interest or interest free loan to the sister concerns. The Assessing Officer has made a proportionate disallowance on account of interest expenditure on the ground that the assessee has given loan to its sister concerns by charging short interest in comparison to the interest paid by the assessee as well as the loan given to the sister concerns free of interest. The ld. CIT(A) deleted the disallowance made by the AO by holding that the assessee's own fund are sufficient for advancing money to the sister concerns.
6. We have heard ld. DR as ld. AR and considered the relevant material on record. The ld. DR has relied upon the order of the Assessing Officer and submitted that when the assessee has failed to establish the nexus between the interest free fund available with the assessee and advance given to the associated concerns the disallowance of proportionate interest is justified.
7. On the other, ld. AR has relied upon the order of this Tribunal for the assessment year 2011-12 and submitted that an identical issue has been decided by the Tribunal in favour of the assessee. The ld. AR has also relied upon the various decisions as under:- 5 ITA No.684/JP/2017
ACIT vs. M/s Shiv Agrevo Ltd.
• ACIT vs. M/s Shiv Agrevo ALtd. In ITA No. 453/JP/2016 dated 11.05.2017.
• ACIT vs. Ram Kishan Verma 143 TTJ 1.
• CIT vs. Ram Kishan Verma 132 DTR 107.
• Munjal Sales Corporation vs. CIT 298 ITR 298.
8. Having considered the rival submissions as well as relevant material on record we are of the view that as far as the principle laid down in the various decisions as relied upon by the ld. AR there is no quarrel that if the assessee's own funds is more sufficient to advance the interest free loan to the sister concerns then no disallowance is called for on account of interest expenditure. This Tribunal in assessee's own case for the assessment year 2011-12 had upheld the order of the ld. CIT(A) on the ground that the assessee's own funds are sufficient for giving the loan advances to the sister concerns therefore, to the extent of loan and advances given in the earlier years the issue is covered by the decision of this Tribunal in assessee's own case for A.Y. 2011-12. However, we find that during the year under consideration the assessee has given fresh loan and advances to the tune of Rs. 9.7 Croes. Therefore, to the extent of the loan and advances given during the year under consideration the availability of assessee's own funds is required to be examined. We note that as per the balance sheet as on 6 ITA No.684/JP/2017 ACIT vs. M/s Shiv Agrevo Ltd.
31.03.2013 at page 19 of the paper book the assets and liabilities reveals that during the year under consideration the assessee has added fixed asset of about Rs. 1 crore and further there is an increase of trade debtor from Rs. 2.27 Crores to Rs. 4.08 Crores. The current liabilities show that the borrowing are only for the short term and therefore, are not meant for acquiring the fixed asset. Thus the availability of the assessee's own fund is required to be examined and verified by considering all the facts. Neither the AO nor the ld. CIT(A) has gone only the factual aspect of the issue. The ld. CIT(A) has just taken into consideration the balance of share capital and reserved fund without examining the application of the fund during the year under consideration other than the loan and advances given to the sister concerns. The assessee is also required to filed the proper fund/cash flow statement to show that the availability of the assessee's own funds for fresh loan and advances given during the year to the tune of Rs. 9.7 Crores. Accordingly in the facts and circumstances of the case we set aside this issue to the record of the AO to examine the availability of the assessee's own fund to the extent of the loan and advances given to the sister concerns during the year under consideration. 7 ITA No.684/JP/2017
ACIT vs. M/s Shiv Agrevo Ltd.
In the result, the appeal of the Revenue is partly allowed for statistical purposes Order pronounced in the open court on 07/03/2018.
Sd/- Sd/-
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(Vikram Singh Yadav) (Vijay Pal Rao)
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Tk;iqj@Jaipur
fnukad@Dated:- 07/03/2018.
*Santosh.
vkns'k dh izfrfyfi vxzfs 'kr@Copy of the order forwarded to:
1. vihykFkhZ@The Appellant- ACIT, Circle-2, Kota.
2. izR;FkhZ@ The Respondent- M/s Shiv Agrevo Ltd., Baran.
3. vk;dj vk;qDr@ CIT
4. vk;dj vk;qDr@ CIT(A)
5. foHkkxh; izfrfuf/k] vk;dj vihyh; vf/kdj.k] t;iqj@DR, ITAT, Jaipur.
6. xkMZ QkbZy@ Guard File {ITA No. 684/JP/2017} vkns'kkuqlkj@ By order, lgk;d iathdkj@Asst. Registrar 8