Income Tax Appellate Tribunal - Cuttack
Umang Associates Pvt. Ltd., Cuttack vs Acit, Circle-2(1), Cuttack on 24 April, 2018
आयकर अपीऱीय अधिकरण, कटक न्यायपीठ,कटक
IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH CUTTACK
BEFORE SHRI N.S.SAINI, AM & SHRI PAVAN KUMAR GADALE, JM
आयकर अऩीऱ सं./ITA No.500/CTK/2017
( नििाारण वषा / Assessment Year :20 12-2013)
Umang Associates Pvt. Ltd., Vs. ACIT, Circle -2(1), Cuttack
Friends Colony,
Cuttack-753001
स्थायी लेखा सं ./ जीआइआर सं ./ PAN/GIR No. : AAACU 6703 D
(अऩीऱाथी /Appellant) .. (प्रत्यथी / Respondent)
ननधााररती की ओर से /Assessee by : Shri Anil Kumar Agarwal, AR
राजस्व की ओर से /Revenue by : Shri A.Tigga, CITDR
सुनवाई की तारीख / Date of Hearing : 23/04/2018
घोषणा की तारीख/Date of Pronouncement 24/04/2018
आदे श / O R D E R
Per Shri Pavan Kumar Gadale, JM:
This is an appeal filed by the assessee against the order of the CIT(A), Cuttack, passed in IT Appeal No.0092/15-16, dated 27.10.2017 for the assessment year 2012-2013.
2. The assessee has raised sole substantive ground on the disallowance confirmed by the CIT(A) u/s.36(1)(iii) of the Act, Rs.4,31,213/-.
3. Brief facts of the case are that the assessee is engaged in the business of dealing in edible oil under the name and style M/s Umang Associates Pvt. Ltd. and the return of income for the assessment year 2012-2013 was filed on 24.09.2012 declaring total income of Rs.99,69,130/-. Subsequently, the case was selected under CASS and notice u/s.143(2) & 142(1) of the Act were issued. In compliance, ld. AR of the assessee appeared from time to time and furnished details and 2 ITA No.500/CTK/2017 documents and the ld. AO considered the financial statements and on verification of the balance sheet the AO found that the assessee has made investment in the land and building amounting to Rs.2,26,00,804/- and is of the opinion that the asset acquired by the assessee is not for commercial asset or work-in-progress. Similarly, the AO found that the assessee has obtained termed loan against the asset which is in the nature of cash credit and OD account. The AO considered the assessee's submission that the investment in land and building is out of Revenue income and the assessee has produced the ledger account of land and building and copy of construction works. The AO on perusal of the ledger account formed the opinion that the assessee has diverted substantial funds from OD account and cash credit account towards construction of building. The AO applied the provisions of Section 36(1)(iii) of the Act and observed that interest bearing funds utilised in investment of the building is not an allowable expenditure unless the asset is acquired for a commercial purpose and put to use and finally the AO calculated the interest disallowance at page 4.4 of the order and disallowed Rs.4,31,213/- with other additions and assessed the total income of Rs.1,11,09,090/- and passed order u/s.143(3) of the Act, dated 26.03.2015.
4. Aggrieved by the order, the assessee preferred appeal before the CIT(A). In the appellate proceedings, ld. AR of the assessee argued the grounds and reiterated the submissions made before the AO. The CIT(A) dealt on the findings of the AO and also the written submissions made by 3 ITA No.500/CTK/2017 the assessee in the appellate proceedings and the evidences were filed, referred to at para 3 & 4 of the order and has confirmed the findings of AO and also distinguished the case laws relied on by the assessee.
5. On further appeal before the Tribunal, the AR of the assessee submitted that the assessee is maintaining the overdraft and cash credit facilities with Bank Of India and most of the business transactions are carried though the overdraft account and cash credit account. The business receipts are credited to the cash credit account though assessee is maintaining a separate current account and these receipts are in the nature of sale proceeds from the customers. Further, the credits in the bank account have been utilised for the purpose of construction of the building and such transaction cannot be treated as diversion of the funds and no interest can be disallowed. The ld. AR submitted his arguments with paper book and referred to calculation of the interest disallowance and the usage of the funds and further supported with judicial decisions that since the funds are utilised wholly and exclusively for the purpose of business and the assessee has surplus funds, hence prayed for an opportunity to substantiate these facts and allow the appeal.
6. Contra, ld. DR of the Revenue relied on the order of AO.
7. We have heard rival submissions and perused the material on record. The sole matrix of the disputed issue relates to disallowance made by the AO u/s.36(1)(iii) of the Act in respect of the interest on cash credit estimated at 14% which was utilised for the purpose of building construction, the d. AR's contention that the assessee has utilised the 4 ITA No.500/CTK/2017 funds for construction out of the sale proceeds credited to cash credit account. The AR emphasized that the assessee had adequate reserves and surplus funds and can substantiate that the funds utilised for the purpose of building construction are non-interest bearing and the asset is disclosed in the balance sheet. We find the contention of ld. AR that the building is constructed for the purpose of commercial exploitation and shall be used wholly and exclusively for the purpose of business. We considering the apparent facts and circumstances and the business operations of the assessee and as submitted by the ld. AR of the assessee, we provide an opportunity to substantiate with evidence that the funds utilised for the purpose of construction of building was out of the revenue receipts of sale and the surplus fund of the assessee. Hence, we remit this issue to the file of AO and the assessee shall cooperated in submitting the information and allow the grounds of appeal of the assessee for statistical purposes.
8. In the result, appeal of the assessee is allowed for statistical purposes.
Order pronounced in the open court on this 24/04/2018.
Sd/- Sd/-
(N. S. SAINI) (PAVAN KUMAR GADALE)
ऱेखा सदस्य / ACCOUNTANT MEMBER न्यानयक सदस्य / JUDICIAL MEMBER
कटक Cuttack; ददनांक Dated 24/04/2018
प्र.कु.मि/PKM, Senior Private Secretary
आदे श की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to :
1. Appellant-
2. Respondent
3. आयकर आयु क्त(अपील) / The CIT(A),
4. आयकर आयुक्त / CIT
5. विभागीय प्रविविवि, आयकर अपीलीय अविकरण, कटक / DR, ITAT, Cuttack 5 ITA No.500/CTK/2017
6. गार्ा पाईऱ / Guard file.
सत्यापऩत प्रनत //True Copy// आदे शािस ु ार/ BY ORDER, (Senior Private Secretary) आयकर अपीऱीय अधिकरण, कटक / ITAT, Cuttack