Income Tax Appellate Tribunal - Ahmedabad
Turakhia Overseas Pvt.Ltd.,, ... vs Acit.,Circle-8,, Ahmedabad on 16 December, 2016
आयकर अपील
य अ धकरण, अहमदाबाद यायपीठ 'ए', अहमदाबाद ।
IN THE INCOME TAX APPELLATE TRIBUNAL
" A " BENCH, AHMEDABAD
सव ी एस.एस.गोदारा, या यक सद य एवं द प कुमार के डया, लेखा सद य के सम ।
BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER And
SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER
आयकर अपील सं./I.T.A.No.1563/Ahd/2013
( नधा रण वष / Assessment Year : 2009-10)
Turakhia Overseas Pvt.Ltd. बनाम/ The ACIT
B-203, Pushpavan Vs. Circle-8
Apartments Ahmedabad 380 054
Opp. Ruchi Bunglows,
Bodakdev
Ahmedabad
थायी ले खा सं . /जीआइआर सं . / PAN/GIR No. : AAACT 5636 N
(अपीलाथ' /Appellant) .. ( (यथ' / Respondent)
अपीलाथ' ओर से /Appellant by : Shri Parin Shah, AR
(यथ' क* ओर से/Respondent by : Shri K. Madhusudan, Sr.DR
ु वाई क* तार ख /
सन Date of Hearing 01/12/2016
घोषणा क* तार ख /Date of Pronounce ment 16/12/2016
आदे श / O R D E R
PER PRADIP KUMAR KEDIA, AM:
This appeal by the Assessee is directed against the order of the Commissioner of Income Tax(Appeals)-XIV, Ahmedabad dated 25/04/2013 for Assessment Year (AY) 2009-10.
2. The Assessee has raised the following grounds of appeal:-
ITA No. 1563/Ahd/2013Turakhia Overseas Pvt.Ltd. vs. The ACIT Asst.Year - 2009-10 -2- (1) The learned Commissioner of Income Tax (Appeals) XIV Ahmedabad has erred both in law and on facts of the case in passing an appellate order for A.Y. 2009-2010 on 25.04.2013.
(2) The Ld. CIT(A) has erred in confirming the disallowance of interest of Rs.2,25,890/-.
(3) The learned CIT(A) Ahmedabad has erred in not adjudicating ground relating to initiation of penalty proceedings.
3. Briefly stated, the assessee is engaged in the business of manufacturing of Decorative Veneers, Plywoods and related products. The assessee filed the return of income for AY 2009-10 at Rs.3,33,95,601/-. The return filed by the assessee was subjected to scrutiny assessment. In the course of assessment proceedings, the Assessing Officer (AO) noticed that the assessee has paid interest on borrowed funds @15% whereas no interest was charged for the advances given to the following parties:-
Sr.No. Particulars Amount (₹)
(i) Amiben B.Shah 18,50,000
(ii) Smitaben D.Turakhia 2,16,038
(iii) Vasumatiben P. Turakhia 40,076
(iv) Arpan D.Turakhia 4,546
4. The AO found that the assessee had advanced certain funds noted above without any interest while it incurred liability to pay interest and therefore the advances made as aforesaid were for non-business purposes. He accordingly observed that interest @ 15% p.a. on advances ITA No. 1563/Ahd/2013 Turakhia Overseas Pvt.Ltd. vs. The ACIT Asst.Year - 2009-10 -3- given to various parties on which no interest has been charged which works out to Rs.3,16,599/- requires to be disallowed. He accordingly enhanced the returned income of the assessee to this extent.
5. The CIT(A) in first appeal endorsed the action of AO in making disallowance by restoring to section 36(1)(iii)of the Income Tax Act, 1961 (hereinafter referred to as "the Act"). However, the assessee remained aggrieved by the disallowance amount to Rs.2,25,890/- reworked by the AO as per the direction of the CIT(A) based on date- wise working of funds deployed and interest thereon.
6. The Ld.AR for the assessee Mr.Parin Shah submitted that out of total advance of Rs.21.10 lakhs, the advance to one party, namely, Amiben B.Shah is of Rs.18,50,000/- who happens to be wife of one of our employees Mr.Bhargav Shah serving the company for more than 16 years. The Ld.AR contended that interest-free advances to staff is normal feature of a corporate employer. Such action on the part of the assessee has improved the confidence and mutual trust between the employer and the employees. Since the interest-free advance given to these parties, has indirectly served for interest of assessee, it ought to have been accepted as part of normal business feature. The Ld.AR for the assessee thereafter contended that the assessee is having its own fund of Rs.507.94 lakhs against which a meager advance of Rs.21.10 lakhs ITA No. 1563/Ahd/2013 Turakhia Overseas Pvt.Ltd. vs. The ACIT Asst.Year - 2009-10 -4- have been extended without charging interest and therefore in view of long line of judicial precedents referred to by the Coordinate Bench of the Tribunal in the case of Paresh Lalchand Shah vs. ITO in ITA No.3408/Ahd/2010 for Ay 2007-08, dated 29/04/2013, the disallowance under section 36(1)(iii) of the Act sustained by the CIT(A) is not justified at all.
7. The Ld.DR, on the other hand, submitted that the advance was given to the wife of Director of the assessee-company and was thus the advance extended was in the personal benefit of the Director without any traces of commercial expediency in such advance. He accordingly submitted that the reasons cited by the CIT(A) in sustaining the disallowance does not call for any interference.
8. We have carefully heard the rival submissions and perused the orders of authorities below. At the outset, we note that the interest-free own funds available at the disposal of the assessee stands at Rs.352.91 lakhs as on 31/03/2008 and Rs.507.94 lakhs as on 31/03/2009. The corresponding interest-free advance as on 31/03/2009 stands at Rs.21.10 lakhs. In such a situation, where interest-free own funds available to the assessee are far in excess of the interest-free advance, the presumption would arise in favour of assessee that the advances were made from ITA No. 1563/Ahd/2013 Turakhia Overseas Pvt.Ltd. vs. The ACIT Asst.Year - 2009-10 -5- interest-free funds available with the assessee. On this issue, we find guidance from the judgement of Hon'ble Bombay High Court in the case of CIT vs. Reliance Utilities and Power Ltd. reported in (2009) 313 ITR 340 (Bom). Hon'ble Jurisdictional High Court is also in parity with the decision of the Hon'ble Bombay High Court in the case of CIT vs. Raghuvir Synthetics Ltd. (judgement dated 05/12/2011 in Tax Appeal No.829 of 2007). In view of the huge funds available with the assessee without any interest liability, we find that the issue is squarely covered by the aforesaid decisions. Thus, the disallowance of interest towards interest-free advance is uncalled for. Accordingly, we find merit in the grievance of the assessee. Ground No.2 is accordingly allowed.
9. Other grounds of appeal raised by the assessee are either general in nature or premature or consequential and therefore does not require any specific adjudication.
10. In the result, Assessee's appeal is allowed.
This Order pronounced in Open Court on 16/12/2016
Sd/- Sd/-
(एस.एस.गोदारा) ( द प कुमार के डया)
या यक सद य ले खा सद य
( S.S. GODARA ) ( PRADIP KUMAR KEDIA )
JUDICIAL MEMBER ACCOUNTANT MEMBER
Ahmedabad; Dated 16/ 12 /2016
ट .सी.नायर, व. न.स./T.C. NAIR, Sr. PS
ITA No. 1563/Ahd/2013
Turakhia Overseas Pvt.Ltd. vs. The ACIT
Asst.Year - 2009-10
-6-
आदे श क ! त#ल$प अ%े$षत/Copy of the Order forwarded to :
1. अपीलाथ' / The Appellant
2. (यथ' / The Respondent.
3. संबं6धत आयकर आयु8त / Concerned CIT
4. आयकर आयु8त(अपील) / The CIT(A)-XIV, Ahmedabad
5. 9वभागीय त न6ध, आयकर अपील य अ6धकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड फाईल / Guard file.
आदे शानुसार/ BY ORDER, स(या9पत त //True Copy// उप/सहायक पंजीकार (Dy./Asstt.Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad
1. Date of dictation .. 15.12.16 (dictation-pad 10- pages attached at the end of this appeal-file)
2. Date on which the typed draft is placed before the Dictating Member ...16.12.16
3. Other Member...
4.
5. Date on which the approved draft comes to the Sr.P.S./P.S.................
6. Date on which the fair order is placed before the Dictating Member for pronouncement......
6. Date on which the fair order comes back to the Sr.P.S./P.S.......16.12.2016
7. Date on which the file goes to the Bench Clerk.....................16.12.2016
8. Date on which the file goes to the Head Clerk..........................................
9. The date on which the file goes to the Assistant Registrar for signature on the order..........................
10. Date of Despatch of the Order..................