Income Tax Appellate Tribunal - Ahmedabad
Sahajanand Technologies (P) Ltd.,, ... vs Assessee on 20 April, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD BENCH "A "
Before Shri MUKUL Kr. SHRAWAT, JUDICIAL MEMBER and
Shri D.C. AGRAWAL, ACCOUNTANT MEMBER
Date of hearing : 20/04/2011 Drafted on: 20/04/2011
ITA No.2641/Ahd/2009
Assessment Year : 2006-07
Sahajanand Technologies Vs. The ACIT
(P) Ltd. Circle-4
Sahajanand House Surat
Parsi Street,Saiyedpura
Surat - 395 003
PAN/GIR No. : AADCS 4343 N
(APPELLANT) .. (RESPONDENT)
Appellant by : Written submission
Respondent by: Shri Dhanesta, Sr. D.R.
ORDER
PER SHRI MUKUL Kr. SHRAWAT, JUDICIAL MEMBER :
This is an appeal at the behest of the Assessee which has emanated from the order of the Learned CIT(Appeals)-III, Surat dated 22/07/2009. Grounds are decided as follows:-
2. Ground No.1 The learned ACIT was not justifying in disallowance proportionate interest of Rs.1,34,78,113/- on account of interest free loans given to sister concern.
2.1. Facts in brief as emerged from the corresponding assessment order passed u/s. 143(3) of the I.T. Act, 1961 dated 14/05/2008 were that the assessee-company is in the business of manufacturing of laser ITA No.2641/Ahd/2009 Sahajanand Technologies (P) Ltd. vs. ACIT Asst.Year - 2006-07 -2- machines, polishing machines, etc. It was noticed by the Assessing Officer that the assessee-company had advanced certain loans to Directors and sister-concerns without charging any interest. The Assessing Officer has listed the names of the said four parties and the total amount of loan as per Assessing Officer was to the tune of Rs.8,96,11,000/-. On the other hand, it was also noted by the Assessing Officer that the assessee-company had paid interest amounting to Rs.1,51,52,887/- on the loans borrowed from the bank, etc. A show- cause notice was issued as to why the proportionate interest @ 12% be not disallowed. A detailed reply was furnished, however, the Assessing Officer was not convinced and after discussing certain case laws, disallowed the interest of Rs.1,34,78,113/-. The matter was carried before the first appellate authority.
3. The Learned CIT(Appeals) has discussed the provisions of section 36(1)(iii) of the I.T.Act in respect of allowability of interest as also few case laws and affirmed the action of the Assessing Officer.
4. Now before us, through a written submission dated 15/04/2011, it is informed that in assessee's own case on identical facts for Assessment Year 2003-04 the question of disallowance of interest has already been decided in its favour by Respected Co-ordinate Bench "A" ITAT Ahmedabad in ITA No.82/Ahd/2007 titled as Assistant CIT vs. Sahajanand Technologies Pvt.Ltd., order dated 08/01/2010, wherein vide paragraph No.7, it was held as under:-
ITA No.2641/Ahd/2009Sahajanand Technologies (P) Ltd. vs. ACIT Asst.Year - 2006-07 -3- "7. We have considered the rival submissions and perused the material on record. A similar view we have taken in the case of Core Health Care Ltd. in ITA Nos.85 and 86/Ahd/2007 for Assessment Years 1996-97 and 1997-98 decided on 16-10-2009.
Therein we have held that if assessee has sufficient interest-free capital and reserves, then the onus is on the Revenue to show that inspite of assessee having sufficient interest-free capital and reserves, it did not have enough cash at the point of time when money was lent interest-free to the sister concerns/their Directors and such lending was actually out of interest bearing borrowings. For the sake of convenience, we reproduce paras-7 to 12 from that order as under:-
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Since it is undisputed fact that the assessee had sufficient interest- free capital and reserves of more than Rs.12 crores and in addition to this, there were current year's profits, then presumption arises in view of the above judgment that interest-free advances were out given out of such interest-free funds. The onus shifts now to the Revenue to show that at the point of time when such interest-free advances were given, assessee did not have sufficient cash of itself and lending was actually done out of interest bearing borrowings. Since there is no material on record to support this view, and Revenue has not discharged the onus lying on it, we uphold the order of the CIT(A). This ground of Revenue is therefore rejected."
4.1. Likewise, for Assessment Year 2004-05 in assessee's own case, there was disallowance of interest and in that year too ITAT "A" Bench Ahmedabad in ITA No.3189/Ahd/2007 titled as Assistant CIT vs. Sahajanand Technology Pvt.Ltd., order dated 09/04/2010, followed the above referred decision of the Tribunal and dismissed the appeal of the Revenue. The same recourse was followed for Assessment Year 2005-06 by the Respected Co-ordinate Bench "D" Ahmedabad (Surat Camp) in ITA No.2641/Ahd/2009 Sahajanand Technologies (P) Ltd. vs. ACIT Asst.Year - 2006-07 -4- ITA No.2066/Ahd/2008, order dated 11/06/2010, wherein assessee's appeal was allowed with the observation that since the facts were identical and the assessee had sufficient interest-free capital, therefore, following the orders pronounced in the past for Assessment Years 2003- 04 and 2004-05, the addition of disallowance of interest was deleted. As per above background, it is now settled that if the assessee has sufficient interest-free capital or has surplus reserves or even if the assessee has earned sufficient profits during the year and those funds have been utilized towards interest-free advances to sister-concerns, then there was no question of such disallowance. The Respected Co-ordinate Benches have given the finding in favour of the assessee only on appreciation of the facts that the assessee had sufficient non-interest bearing funds, hence, the presumption was that out of those interest-free funds the assessee would have advanced the interest-free loans to sister-concerns.
However, in the present case, we are unable to examine whether the assessee had sufficient interest-free funds during the year. For this limited purpose, we hereby restore this ground back to the stage of the Assessing Officer to examine the said facts and if it is found correct, then the natural consequence should be to follow the past history of the case and allow the claim as per the settled legal position. We order accordingly. This ground of the assessee may be treated as allowed but for statistical purposes.
5. Ground No.2
2. The learned ACIT was not justifying in disallowance prior period expenses of Rs.5,61,589/- on account of Rent expenses ITA No.2641/Ahd/2009 Sahajanand Technologies (P) Ltd. vs. ACIT Asst.Year - 2006-07 -5- Rs.14,839/-, Lease Rent written off Rs.5,37,750/- and Legal & Professional charges Rs.9,000/-.
5.1. It was noticed by the Assessing Officer that the assessee has debited certain prior period expenses. A show-cause notice was issued, however, the assessee failed to place on record that how those prior period expenses have arisen in the current period and why those expenditure were not debited in the earlier years. As per Assessing Officer, the reply of the assessee was ambiguous, hence, disallowed the claim. The matter was carried before the first appellate authority and in the absence of any explanation, the action of the Assessing Officer was confirmed as follows:-
"4.2. On careful consideration of the facts of the case and the submissions made by the learned AR, I find that the contentions of the appellant have no merit. Admittedly, the aforesaid expenses claimed by the assessee do not pertain to the year under consideration and do not constitute an allowable deduction against the income relating to the year under consideration. Apart from stating that these expenses were incurred in the earlier year for the purpose of the business, the assessee has not furnished any details or justification as to why such expenses were not debited in the relevant previous year pertaining to the earlier year and how they have arisen in the year under consideration. As these expenses related to rent, lease rent written off and legal charges, the same should ordinarily have been taken into consideration at the time of finalization of a/cs for the year in which the same were incurred, as per the mercantile system of accounting followed by the appellant. In the absence of any evidence or justification as to why these expenses could not be debited in the earlier years to which they pertained, the disallowance made by the Assessing Officer in respect of the prior period expenses of Rs.5,61,589/- is ITA No.2641/Ahd/2009 Sahajanand Technologies (P) Ltd. vs. ACIT Asst.Year - 2006-07 -6- held to be in order and is accordingly confirmed. This ground of appeal is dismissed."
6. We have perused the written submission through which no contention in respect of the above ground has been raised which means that the assessee did not want to contest this ground. Moreover, in the absence of any other cogent material from the side of the assessee, we have no option but to confirm the findings on facts of the authorities below. This ground of the assessee is dismissed.
7. In the result, assessee's appeal is partly allowed but for statistical purposes.
Order signed, dated and pronounced in the Court on 21st April, 2011.
Sd/- Sd/-
( D.C. AGRAWAL) ( MUKUL Kr. SHRAWAT )
ACCOUNTANT MEMBER JUDICIAL MEMBER
Ahmedabad; Dated 21 / 04 /2011
T.C. NAIR, Sr. PS
Copy of the Order forwarded to :
1. The Assessee.
2. The Department.
3. The CIT Concerned
4. The ld. CIT(Appeals)-III, Surat
5. The DR, Ahmedabad Bench
6. The Guard File.
BY ORDER,
स×याǒपत ूित //True Copy//
(Dy./Asstt.Registrar), ITAT, Ahmedabad
ITA No.2641/Ahd/2009
Sahajanand Technologies (P) Ltd. vs. ACIT
Asst.Year - 2006-07
-7-
1. Date of dictation.......................20/04/2011
2. Date on which the typed draft is placed before the Dictating Member 20/04/2011.................. Other Member.....................
3. Date on which the approved draft comes to the Sr.P.S./P.S.................
4. Date on which the fair order is placed before the Dictating Member for pronouncement......
5. Date on which the fair order comes back to the Sr.P.S./P.S....21/4/2011
6. Date on which the file goes to the Bench Clerk............... 21/4/2011
7. Date on which the file goes to the Head Clerk..................................
8. The date on which the file goes to the Assistant Registrar for signature on the order..........................
9. Date of Despatch of the Order..................