Income Tax Appellate Tribunal - Chandigarh
Shelly Bansal, Chandigarh vs Dcit, Chandigarh on 28 April, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
DIVISION BENCH, CHANDIGARH
BEFORE MS.DIVA SINGH, JUDICIAL MEMBER
AND MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER
ITA No.1110/Chd/2016
(Assessment Year : 2012-13)
Shelly Bansal, Vs. The D.C.I.T.,
H.No.1376, Sector 40-B, Circle 4(1),
Chandigarh. Chandigarh.
PAN: AENPB4396P
(Appellant) (Respondent)
Appellant by : Shri K. Vrind Jain
Respondent by : Shri S.K. Mittal, DR
Date of hearing : 03.04.2017
Date of Pronouncement : 28.04.2017
O R D E R
PER ANNAPURNA GUPTA, A.M. :
Th i s appeal ha s been f i l ed by the a s s e ss ee against th e o rd e r of CI T( A p pe a l s ) - 2 , Chandigarh d a t ed 1 2 . 8 . 2 0 1 6 r e l a ti n g t o a s se s s m e nt y e a r 2 0 12 - 1 3 .
2. Ground N o .1 is g e n e r al and needs no a d j u d i c a ti o n .
3. G r o u n d N o s . 2 a nd 3 r a i s e d b y t h e a s s e s s e e a r e o n t h e i s s u e o f r e str i c t i o n o f d i s a l l o w a n c e o f d e d u ct io n c l a i m e d u / s 8 0I C , t o 2 5% a s a g a i n s t 1 00 % . Th e s a i d g r o u n d s r e a d as under:
2 That the Ld. CIT Appeals has erred on law while interpreting the provisions of the Section 80IC.
3 That the Ld. CIT Appeals has erred in law as well as on facts of the case while restricting the deduction to the tune of 25% rather than 100% deduction u/s 80IC, from the profits of the eligible business undertaking.2
So the disallowance of Rs.6109195/- may please be allowed as deduction wrongly denied by the A.O.
4. Brief facts r el at i n g to the i s su e are that t he a s s e s s e e h a d c l ai m e d d e d uc t i o n u / s 8 0I C o f t h e In c o m e Ta x A c t , 1 9 6 1 ( i n s ho r t ' t h e A ct ' ) a mo u n t i n g t o R s . 8 1, 4 5 , 5 9 3 / - @ 1 0 0 % o f th e el i g i b l e pr o f i t s. Th e i n d u s t r i a l un d e r t a k i ng of the a s s e ss ee had c o m m e nc e d o p e r a ti o n / ac t i v i t y on 6 . 1 1 . 2 0 0 6 an d th e i n i t i a l as s e ss m e n t y e a r wa s 2 0 0 7 - 0 8 . Th e a s s e s s e e h ad c l a i m e d 10 0 % d e d u c t i o n f r o m th e p r o f i t s d u r i n g f i r s t f i v e a s s e s s m e n t y ea r s . I n t h e r el e v a n t y e a r u n d e r c on s i d e ra ti o n i . e. 6 t h y e a r fr o m c o mm e n c e me n t o f t h e p r o d u c t i on , t h e a s s e s s e e a ga i n cl a i m e d d e d uc t i on u / s 8 0I C @ 1 0 0 % f r o m t he e l i g i b l e p r o fi t s c l a i m i n g t h a t substantial expansion of th e undertaking was carried out during a s s e s s m e nt y e a r 2 0 1 0 - 1 1 . Th e A s s e s s i n g O f fi c e r e l a b o r a t e l y d i s c u s s e d t h e i ss u e i n th e a s se ss m e n t o r de r a n d r e s t r i ct e d t h e c l a i m o f d e du c t i o n t o t h e e xt e n t o f 2 5 % o n a c c o u n t o f t h e i m p u gn e d y ea r b e i n g t h e 6 t h a s s e s s m en t y e ar f r o m the i n i t i a l a s s e ss m en t y e a r i . e. A .Y 2 0 0 7 -0 8 . Th e L d . CI T ( A p p e a l s ) u p h e l d t h e o r d e r of t h e A s s e s s i n g O f f i c er f o l l o w i ng t h e d e c i si o n of th e I . T. A . T. , C h an d i g a r h Be n c h i n t h e c a se o f H y c ro n E l e ct ro n i c s V s . I TO i n I TA N o . 7 98 / C h d/ 2 0 1 2 .
5. D u r i n g t h e c o u rs e o f h e a r i n g be f o r e us t he L d. c o u n s e l f o r th e a s s e s s e e f a i r l y ad m i t t e d t h a t t h e i s s u e w a s c o v e r e d a ga i n s t i t b y t h e d e c i s i o n o f t h e I . T. A . T. i n t h e c a se o f H y c ro n E l e ct ro n i c s ( s up r a ) .
3
6. We have heard both the parties. We find no i n f i r m i t y i n t h e o r d e r o f t he CI T ( A p p e a l s ) . Th e u n d i s p u t ed f a c t s i n t h e p r e se n t c a s e are that the assessee commenced its m a nu f a c t uri n g a c ti v i t y o n 06 . 1 1 . 2 0 0 6 i . e a f te r s e c ti o n 8 0 I C w as b r o ugh t o n St a t u t e v i d e F i n a nc e A ct , 2 0 0 3 w . e. f 0 1 . 0 4 . 2 0 04 . I t i s a l s o n o t d e ni e d t h a t t h e a s se s s e e h a d a l r e a d y c l a i me d 1 0 0 % d e du c t i o n o f i ts p ro f i t s f or t h e f i r st f i v e y e ar s . Th e i m p u g ne d y e ar i s t h e s i x t h ye a r s i nc e c o m m e n c e me n t of b u s i n e s s o p e r at i o n s a n d t h e a ss e s s e e h a s claimed d e d u c ti o n @ 10 0 % on a c c o u nt of substantial e x p a n s i o n c a r ri ed o u t by i t i n A . Y 2 0 1 0- 1 1 . Th e I . T. A . T. C h a n d i g a rh B e nc h , in the c a se of Hycron Electronics ( s u p r a ) , h as c a t eg o r i c a l l y he l d t ha t a n e w u n i t w hi c h c o m e s into e x i s t e n ce after the p r o v i si o n of section 80IC was b r o u g h t o n S t a tu t e , i s n o t e n t i tl e d t o d e d u ct i o n @ 1 0 0 % o n a c c o u n t o f su b s ta n t i a l e x pa n s i o n u n d e r t a k e n. Th e I . T. A . T. h a s f u r t h er h e l d t h a t a n e l i g i b l e a s s e s se e i s e n t i t l e d to c l a i m o n l y o n e i n i t i a l a s s e ss m e nt y e a r f o r t h e pu r p o s e o f c l a i m i n g d ed u c t i o n @ 1 0 0 % o f i t s p r o f i t s a nd th a t i n a n y c a s e a u n i t s e t u p i n H i m a c h a l P r a d e s h i s en t i t l e d t o d e d u c t i o n @ 1 00 % o f i t s p r o f i ts o n l y f or a p e ri o d o f f i v e y e a r s a n d t h e r e af t e r @ 2 5% . I n vi e w o f t he s a m e , t h e i s s ue i n t h e p r e s e n t ca s e b e i n g s q u are l y c o v e r e d b y th e d e c i s i o n o f t h e I . T. A . T. , C h a n d i g a rh B e nc h i n t he c a s e o f H y c ro n E l e c t r o n i c s ( s u pr a ) t h e CI T ( A p pe a l s ) , w e h o l d , h a s r i g h t l y u p h e l d t h e o r d er o f t h e As s e s s i n g O f f i c er r e s tr i c t i n g t h e 4 d e d u c t i o n c l a i m ed t o 2 5 % o f th e p r o f i t s . G r o u n d N o s . 2 a nd 3 r a i s e d b y t h e as s e s s e e ar e , t he re f o r e , di s m i s s ed .
7. G r o u n d N o . 4 o f t h e a s s e s s e e ' s a p p e a l r e a d s as under:
"4. That the Ld. CIT Appeals has erred in law as well as on facts while reducing an addition to the tune of Rs.90000/- on account of interest not charged on loan and advances, the addition may kindly be deleted."
8. Brief f ac t s r el ev a n t to the i ssu e are t ha t t he a s s e s s e e w a s p a y i n g i n t e r e st o n b o r r o w e d f u n d s f r o m b a nk a n d o n t h e o t he r h a n d , n o i n te r e s t w a s c h ar ge d o n t h e loans and a d va n c e s made to one Shri H em a n t G a rg a m o u n t i n g t o Rs . 9 l a c s . Th e r e f o r e , t h e A s s e s si n g O f f i c er m a d e a d d i t i o n on a c c o u n t o f i nt e r e s t i n c om e on t h e s a i d l o a n @ 1 6 % a m ou n t i n g t o R s. 1 , 44 , 0 0 0 / - t r e a ti n g t h e sa m e a s i n c o m e f ro m ot h e r s o u r c es . Th e L d . CI T ( A p p e a l s ) u p h e l d t h e a d d i t i on , h o l d i n g t h a t n o m a te r i a l h a d b e e n br o u g h t on r e c o r d b y t he as s e s s e e t o pr o ve t h a t n o i n te r es t b e a r i n g f u n d s ha d b ee n d i v e r t e d f o r m a ki n g i n te r e s t f r e e a d v a n ce s. Th e L d . C I T ( A pp e a l s ) , h o w e v e r , r e s t r i c te d t h e i nt e r e s t r a te t o 1 0 % i ns t e a d o f 1 6 % a pp l i e d b y t h e A ss e s s i ng O f f i c er, h o l d i n g t h e s a me t o b e r e a s o n a b l e a n d t h e r e b y r e s t r i c t ed t h e a d d i ti o n t o th e e x t e n t o f R s. 90 , 0 0 0 / - .
9. B e f o r e us , L d . c o u n s e l fo r t he a s s e s s e e a r g u ed t h a t n o a d d i ti o n w a s t o b e m a de s i n c e t h e a sse s s e e h a d s u f f i c i e nt o w n i nt e r e s t f r e e f un d s f o r m a k i n g t h e i m p u g n e d advance. Th e Ld . c o u n s el f o r as s e s s e e dr e w our a t t e n ti o n t o t h e B a l an c e S h e e t o f t he a s se s s e e ' s p ro p r i e tar y c o n c e r n 5 i . e . M / s H i m sh e l l I n d u s tr i e s , B a dd i , p l a ce d b e fo r e u s i n t h e P a p e r B o o k f i l e d a n d p o i n t ed o u t t h a t t h e c ap i t a l a c c o u n t o f t h e p r o p ri e t o r sh o w e d a b a l a n c e o f R s . 2, 0 6 , 7 6, 97 8 / - . Th e L d . c o u n s el f o r t h e a s s e s se e f u rt h e r p o i n te d o u t t h a t t he a d v a n c e g i v en t o S h r i H e m a n t G ar g w a s R s . 9 l a c s o n l y a n d t h u s i t w a s c l e a r a n d e v i d e nt t h a t o w n i n t e r es t f r ee f u n d s of t h e a s s e s se e w e re s u f f i c i en t t o ma k e t h e s a i d a d va n c e a n d, t h e r e f o r e, c a l l e d f o r n o a d d i t i o n t o b e ma d e o n a c c o u n t of i n t e r e s t.
10. Th e L d . D R , o n t h e o t h e r ha n d , r e l i e d u p on t h e o r d e r o f t h e L d. C I T ( A p p ea l s ) .
11. W e h a v e h e a r d t h e r i v al c o nt e nt i o n s . We find m e r i t i n th e c o n te n t i o n s of t h e L d. c o u n s e l f o r t h e a s s e s s e e. A s d e m o n s tr a t e d b y t h e L d . c o un s e l f o r t h e a s se s s e e t he own i n t e r es t f re e funds of t he assessee a mo u n t e d to R s . 2 , 0 6 , 76 , 9 7 8 /-, w h i l e i n t e r e st f r e e a d v a n c e s g i v e n w a s o n l y R s . 9 l a c s . Th e L d . D R h as no t c o n t r o ve r t e d t h i s f a c t. Th u s c l e a r l y , t he r e w a s s u f f i ci en t i n t e re s t f re e o w n f u n d s a v a i l a b l e wi t h th e a s s e s s e e f or m a k i n g t h e s a i d a d v a n c e s a n d t h e p r e s u mp t i o n i n s u c h ca s e s i s t h a t a dv a n c e h as been made out of the same. T h e H o n ' b l e J u r i s d i c t i o n al H i g h C o u rt i n t he c a s e o f B r i g h t E n t e r p r i s e s i n I TA N o . 2 2 4 of 2013 (O & M) d a t ed 2 4. 7 .2 0 1 5 h as laid down t he a f o r e s a i d p r o p os i t i o n a t pa r a 1 6 of i t s o rd e r as f o l l o w s :
"16. As we noted earlier, the funds/reserves of the appellant were sufficient to cover the interest free advances made by it of Rs.10.29 crores to its sister company. We are entirely in agreement with the judgment of 6 the Bombay High Court in Commissioner of Income Tax vs. Reliance Utilities & Power Ltd., (2009) 313 ITR 340, para-10, that if there are interest free funds available a presumption would arise that investment would be out of the interest free funds generated or available with the company if the interest free funds were sufficient to meet the investment."
12. I n vi e w o f t he a bo v e , w e h o l d t h a t t h e r e i s n o ca s e f o r m a k i n g a ny a d d i t i o n o f i n t e re s t o n a c c o u nt of d i v e r s i o n o f i n t e r e s t be a r i n g f u n d s f o r m ak i n g i n t e r es t f r ee a d v a n c es a n d t h e a dd i t i o n u p h e l d i n t h e pr e s e n t c as e o f Rs . 9 0 , 0 0 0 /- i s , t h e re f o r e , d i re c t e d t o b e d e l e te d .
13. I n t he r e s u l t, t he a p p e a l o f t h e as s e s s e e i s p a rt l y allowed.
O r d e r p r on o u n c ed i n t h e o p e n cou r t .
Sd/- Sd/-
(DIVA SINGH) (ANNAPURNA GUPTA)
JUDICIAL MEMBER ACCOUNTANT MEMBER
Dated : 28 t h April, 2017
*Rati*
Copy to:
1. The Appellant
2. The Respondent
3. The CIT(A)
4. The CIT
5. The DR
Assistant Registrar,
ITAT, Chandigarh