Income Tax Appellate Tribunal - Mumbai
Aplab Ltd, Thane vs Assessee on 31 January, 2013
आयकर अपील य अ धकरण "ए" यायपीठ मंुबई म।
IN THE INCOME TAX APPELLATE TRIBUNAL " A " BENCH, MUMBAI
ी दनेश कमार
ु अ वाल, या यक सद य एवं
ी डी. क णाकर राव, लेखा सद य के सम ।
BEFORE SHRI DINESH KUMAR AGARWAL, JM AND
SHRI D. KARUNAKARA RAO, AM
आयकर अपील सं./I.T.A. No. 6931/Mum/2010
( नधारण वष / Assessment Year : 2007-08)
M/s Aplab Limited, बनाम/
बनाम Addl. Commissioner of
Aplab House, Vs. Income-tax,
A-5, Wagle Industrial Range 1,
Estate, Thane,
Thane - 400604. Mumbai.
थायी ले खा सं . /PAN : AAACA 1030H
(अपीलाथ /Appellant) .. ( यथ / Respondent)
अपीलाथ क ओर से / Appellant by : Shri M. Subramanian
यथ क ओर से/ Respondent by : Shri Manoj Kumar
सनवाई
ु क तार ख / Date of Hearing : 31-01-2013
घोषणा क तार ख /Date of Pronouncement : 08-02-2013
आदे श / O R D E R
PER DINESH KUMAR AGARWAL, JM. :
This appeal preferred by the assessee is directed against the order dtd. 29-7-2010 passed by the ld. CIT(A)- II, Thane for the assessment year 2007-
08.
2. Briefly stated facts of the case are that the assessee company is engaged in the business of manufacturing, assembly, servicing & trading in power equipments, electronic instruments, test and measuring, industrial control 2 ITA No.6931/Mum/2010 equipments and fuel dispensing units, filed return declaring total income of Rs. 5,03,99,856/- which was processed u/s 143(1) of the Income Tax Act, 1961 (the Act). Thereafter, the case was selected for scrutiny and accordingly the A.O. issued statutory notices u/s 143(2) and 142(1) of the Act. During the course of assessment it was, inter alia, observed by the A.O. that the assessee had made an advance to it's subsidiary company viz. Intel Instruments and Systems Ltd. amounting to Rs.21,58,000/-. Similarly from the details submitted by the assessee the A.O. further observed that the assessee company had made an advance to a related concern viz. Aplabs Seba Electronics Ltd., amounting to Rs.23,13,002/-. It was further noticed that the assessee has taken loans amounting to Rs.25,71,19,000/- on which it has paid an interest of Rs.2,40,73,000/-. Thus on one hand the assessee is incurring huge expenses on account of interest paid and on the other hand it has made an advance to group concerns amounting to Rs. 45,02,637/- against which it has received little or no income. It was further observed that the assessee company had made an investment amounting to Rs. 1,75,00,000/- in the shares of it's subsidiary company viz. Intel Instrument and Systems Ltd. Similarly it has invested Rs. 5,00,000/- in another of it's subsidiary company viz. Spry Logic Technologies Ltd., formerly known as Aplab Softs Ltd. Against these investments the assessee company has derived practically no income or benefit. According to the A.O. this appeared to be prima facie diversion of interest bearing fund, to non interest generating investment/advances. The assessee was asked to show cause as to why proportionate disallowance of 3 ITA No.6931/Mum/2010 interest payment not be made. In it's reply the assessee had stated that "Loans and advances appearing in Books of accounts are not of the nature of loans but are actually advances of refunds or claims due from various parties and mainly from government departments. It also includes advance given to our wholly owned subsidiaries in the course of business. Detailed list is enclosed herewith for your reference and record." It has also given various case laws which would presumably support assessee's contention that no disallowance can be made under this head. However, the A.O. after considering the provisions of section 36(1)(iii) of the Act, the decision of the Hon'ble Supreme Court in S.A. Builders Ltd. v. CIT (2007) 288 ITR 1 (SC) and the balance sheet of the assessee made a disallowance u/s 36(1)(iii) Rs. 22,50,264/- being 10% of Rs. 2,25,02,637/- (investment made in subsidiary companies Rs. 1,80,00,000/- (+) advances made to related concerns Rs. 45,02,637-) and accordingly completed the assessment at an income of Rs. 5,26,50,120/- vide assessment order dtd. 2- 12-2009 passed u/s 143(3) of the Act. On appeal, the ld. CIT(A) while agreeing with the views of the A.O. upheld the disallowance made by the A.O.
3. Being aggrieved by the order of the ld. CIT(A) the assessee is in appeal before us.
4. Grounds No. 1 to 4 are against the denial of full and proper opportunity of being heard by the ld. CIT(A).
4ITA No.6931/Mum/2010
5. At the time of hearing the ld. Counsel for the assessee submits that he does not want to press the above grounds of appeal which was not objected to by the ld. D.R.
6. That being so and in the absence of any supporting material placed on record by the ld. counsel for the assessee, the grounds taken by the assessee are, therefore, rejected.
7. Ground No. 5 is against the sustenance of disallowance of interest Rs. 22,50,264/-.
8. At the time of hearing the ld. counsel for the assessee while referring to the assessee's balance sheet for the year ended 31-3-2007 showing the amount of share capital and reserves and surplus amounting to Rs. 29,25,76,000/- as on 31-3-2007 appearing at page 26 of the 42nd Annual Report of the company submits that in view of the order of the Tribunal in assessee's own case in ITA No. 3313/Mum/2010 for A.Y. 2006-07 order dtd. 23-12-2011 wherein the Tribunal has deleted the similar disallowance following the decision of the Hon'ble jurisdictional High Court in CIT vs. Reliance Utilities & Power Ltd. (2009) 313 ITR 340 (Bom) on the ground that the shareholders fund is much more than the amount advanced by the assessee without any interest to its sister concern, therefore, the disallowance of interest for the year under consideration made by the A.O. and sustained by 5 ITA No.6931/Mum/2010 the ld. CIT(A) be deleted. He also placed on record the copy of the said order of the Tribunal
9. On the other hand, the ld. D.R. supports the order of the A.O. and the ld. CIT(A).
10. We have carefully considered the submissions of the rival parties and perused the material available on record. We find that the facts are not in dispute inasmuch as it is also not in dispute that as on 31-3-2007 the shareholders funds are Rs. 29,25,76,000/- (share capital Rs. 5,00,00,000/- (+) reserves and surplus Rs. 24,25,76,000/-) as against the investment in subsidiary company and advances made by the assessee Rs. 2,25,02,637/- (supra). We further find that the Tribunal in assessee's own case (supra) has deleted the similar disallowance vide finding recorded in para 14 of the order as under:-
"14. From the above judgment, it is manifest that there can be no presumption that the shareholders' fund of a company is utilized for the purchase of fixed assets. If the assessee has interest free funds as well as interest bearing funds at its disposal, then the presumption would be that investments were made from interest fee funds at the disposal of the assessee. The facts of the instant case abundantly show that the shareholders fund is much more than the amount advanced by the assessee without any interest to its sister concerns. Respectfully following the precedent, we hold that the ld. CIT(A) was not justified in sustaining addition under the present circumstances. We, therefore, order for the deletion of addition. Ground no.5 is allowed."
11. In the absence of any distinguishing feature brought on record by the Revenue, we respectfully following the decision of the Tribunal in assessee's own case and the decision of the Hon'ble jurisdictional High Court (supra) 6 ITA No.6931/Mum/2010 delete the disallowance of interest of Rs. 22,50,264/- made by the A.O. and sustained by the ld. CIT(A). The ground taken by the assessee is, therefore, allowed.
12. In the result, assessee's appeal stands allowed.
प रणामतः नधा रती क अपील वीकत ृ क जाती है ।
Order pronounced in the open court on 8-02-2013 .
आदे श क घोषणा खले
ु यायालय म दनांकः 8-02-2013 को क गई ।
Sd/- Sd/-
(D. KARUNAKARA RAO) (DINESH KUMAR AGARWAL)
लेखा सद य / ACCOUNTANT MEMBER या यक सद य / JUDICIAL MEMBER
मंुबई Mumbai; दनांक Dated 8/02/2013
व. न.स./ r.k. , Sr. PS
आदे श क त ल प अ े षत/Copy
षत of the Order forwarded to :
1. अपीलाथ / The Appellant
2. यथ / The Respondent.
3. आयकर आयु (अपील) / The CIT(A)-II, Thane
4. आयकर आयु / CIT - 1, Thane
5. वभागीय त न ध, आयकर अपील य अ धकरण, मंुबई /
DR, ITAT, Mumbai 'A' Bench
6. गाड फाईल / Guard file.
स या पत त //True Copy//
आदे शानसार
ु / BY ORDER,
उप/
उप/सहायक पंजीकार (Dy./Asstt. Registrar)
आयकर अपील य अ धकरण,
धकरण, मंुबई / ITAT, Mumbai