TaxTMI 
TaxTMI 
2021 (12) TMI 696
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....law, erroneous and liable to be quashed, and addition of Rs. 22,06,319/ liable to be deleted, hence, the same may kindly be deleted, and the interest paid may kindly be allowed as business expenditure u/s 36(1)(iii) of the Act. 2. That, the Learned Appellate Authority has grossly erred on the facts and on the law in sustaining assessment order of the Assessing authority dated 27/12/2016 by which he disallowed interest Rs. 22,06,319/- paid as expenditure for getting supply of goods / getting done job work in regular manner from the other parties, and added in the returned income, it is further clarified that these are not loans, and are relating to business transactions. thus, the impugned assessment order as well as appellate order, both are against the provisions of the Act, bad in law, erroneous and liable to be quashed and addition of Rs. 22,06,319/ liable to be deleted, hence, the same may kindly be deleted, and the interest paid may kindly be allowed as business expenditure u/s 36(1)(iii) of the Act. 3. That, the Learned Appellate Authority has grossly erred on the facts and on the law in sustaining assessment order of the Assessing authority dated 27/12/2016....
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....nd 2015-16 and thereafter login in the case of the Company. 2. That, after having received the order as above, I took legal consultancy from advocates and came to decide to file an appeal before the Hon'ble Income Tax Appellate Tribunal. 3. That, although, as per my memory and records we have not received the appellate order till now, However, I am assuming normal ten days from the date of order i.e. 19/11/2019 and service thereof on 29/11/2019. 4. That, the dispute is regarding question of law which is very important for adjudication by your honour. That, in view of the above facts and circumstances of the case, it is clearly apparent that I could not submit the appeal in time limit as prescribed under section 253(3) of the Act on the reasons which were beyond our control, in support of the above facts an affidavit duly signed and notarized is enclosed herewith. Therefore, it is humbly prayed that the delay caused on the above reasons may kindly be condoned delay of 50 days only in submitting the appeal, the appeal may kindly be granted for adjudication in the interest of natural justice and oblige." 4. On the other hand, the ld ....
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....the assessee. The assessee filed its reply and finally the assessment was completed U/s 143(3) of the Act on 27/12/2016 determining total income of the assessee at Rs. 34,48,960/- by making additions/disallowances. 8. Being aggrieved by the order of the A.O., the assessee carried the matter before the ld. CIT(A), who after considering the submissions of both the parties and material placed on record, upheld the disallowance of interest of Rs. 22,04,319/- and disallowance of interest of Rs. 45,130/-. 9. Being aggrieved by the order of the ld. CIT(A), the assessee has preferred the present appeal before the ITAT on the grounds mentioned above. 10. Grounds No. 1 and 2 of the appeal raised by the assessee are interrelated and interconnected and relates to challenging the order of the ld. CIT(A) in confirming the disallowance of Rs. 22,06,319/-. In this regard, the ld. AR appearing on behalf of the assessee has reiterated the same arguments as were raised before the ld. CIT(A) and also relied on the written submissions filed before the Bench and the contents of the same are as under: "That the appellant-assessee is a Pvt. Ltd. Company registered with the Registrar of C....
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....purchases from registered dealers) and Form VAT-08A (Summery details of sales to registered dealers as well as unregistered persons), the quarter wise detail is reproduced here under:- Sl. No. Asst. Year Name of the quarter Form VAT-07A (Summery of purchases) Excluding tax Form VAT-08A (Summery of sales) Excluding tax 1. 2010-11 1^st 532510 2 2^nd 0 0 3 TOTAL 532510 4 2011-12 2^nd 0 18373987 5 3^rd 0 10297054 6 TOTAL 0 28671041 7 2012-13 1^st 0 7573004 8 2^nd 0 13350476 9 3^rd 0 15822263 10 4^th 3403832 2507456 11 TOTAL 3403832 3,92,53,199 It is clarified that purchases/sales in the paper have been declared gross amount including tax, whereas, the above table is bare amount excluding tax on purchases as well as sales also. (b) It is further more clarified that the appellant-assessee adjusted the output tax liability on sale from Input Tax Credit because the appellant-assessee paid taxes on it's purchases from registere....
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....n reported to the Commercial Taxes Department through its required statutory quarterly returns in the prescribed Form VAT-10 along with attachments thereof in the Form VAT-07A (Summery details of purchases from registered dealers) and Form VAT-08A (Summery details of sales to registered dealers as well as unregistered persons), the quarter wise detail is reproduced here under:- Sl. No. Asst. Year Name of the quarter Form VAT-07A (Summery of purchases) Excluding tax Form VAT-08A (Summery of sales) Excluding tax 1. 2010-11 1^st 0 0 2 2010-11 4^th 5693174 204949 3 TOTAL 5693174 204949 4 2011-12 1^st 1595955 0 5 2011-12 2^nd 3421507 0 6 2011-12 3^rd 4105556 0 7 2011-12 4^th 9987378 0 8 TOTAL 1,91,10,396 0 9 2012-13 1^st 11941216 0 10 2012-13 2^nd 9569510 132810 11 2012-13 3^rd 241619 0 12 TOTAL 2,17,52,345 132810 It is clarified that purchases/sales in the paper have been declared gross amount including tax, whereas, the above table is bare amount excluding tax on ....
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.... and will supply goods to the appellant subsequently. The appellant-assessee took in to consideration request of the SMCPL and further advanced Rs. 34,20,033/- in the business expediency for the continuation of the business purposes. NEELKANTH INDUSTRIES PVT. LTD. That, the Neelkanth Industries (PVT.) Ltd. (NIPL) is supplier of goods to the appellant-assessee, the NIPL has been supplying goods since financial year 2010-11 and was maintaining a running account of transactions of purchases/sale and payments (Considerations) as well as advances in the business/Commercial expediency, if required, for your kind perusal and satisfaction we have submitted a summary statement and copies of accounts of the NIPL in the books of accounts of the appellant-assessee since the assessment year 2010-11 to 2014-15 in form of paper book on 20/09/2021 at page numbers 1 to 6. Apart from the above the appellant-assessee sold goods to the NIPL, the sales have been reported to the Commercial Taxes Department through its required statutory quarterly returns in the prescribed Form VAT-10 along with attachments thereof in the Form VAT-07A (Summery details of purchases from register....
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.... appellant-assessee was to pay Rs. 4,58,500/- to Arihant Engineering Works and Rs. 3,58,262/- to Om Steel Enterprises total amounting to Rs. 8,16,818/-, for making payments of both the dealers the appellant- assessee transferred Rs. 10,00,000/- to NIPL on 17/05/2013 out of this amount of Rs. 10,00,000/- the NIPL has made payments to both the above creditors of the appellant-assessee, this fact can be verified from the account statement of the NIPL in the books of accounts of the appellant-assessee which is available before your honour at page number 6 of the paper book submitted on 20/09/2021. Thus, it is crystal clear that the amount of Rs. 10,00,000/- was advanced in the business/commercial expediency only. Hence, the addition of interest on Rs. 30,16,987/- far away from the facts of the case. It is further more clarified that although there was no any transaction of purchases/sale during the period under consideration but the NIPL requested to the appellant for some advance for the business so that it can run the business smoothly and will supply goods to the appellant-assessee subsequently. The appellant-assessee took in to consideration request of the NIPL and further....
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....n with the commercial expediency. Without prejudice to the above it is further pointed out that the learned appellate authority observed in his appellate order from line number 7 of para number 4.3 at age number 7 as "Further, the appellant has not been able to show that the interest free advances were given for business purposes. Therefore, the disallowance of interest of Rs. 22,06,319/- made by the A.O. is hereby confirmed." It is pointed out that the appellate authority did not go in to rout of the facts and passed the order on the facts as mentioned in the assessment order by the assessing authority. Looking to the facts and circumstances of the case it is crystal clear that the outstanding towards the various above debtors are in the form of outstanding of business transactions as well as advances in the Commercial expediency." 11. On the other hand, the ld. DR has vehemently supported the order of the lower authorities and submitted that the ld. CIT(A) has passed a well reasoned order discussing all the material facts and circumstances of the case. 12. We have heard the rival contentions of both the parties and have also gone through the written submis....
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....he assessee is a Pvt. Ltd. Company registered with the Registrar of Companies, Rajasthan in the year 1995 has been dealing in manufacturing and selling thereof in all kinds of Iron and Steel such as Round Bars, MS Angle, Sections, Channels etc. . The assessee company was consisted by two directors namely Rajesh Natani and Shri Babu Lal Natani during the period under consideration. The assessee has been dealing in purchases of raw material from various dealers within the State of Rajasthan as well as outside the State of Rajasthan also, sales to various dealers within the State of Rajasthan as well as dealers of outside the State of Rajasthan also, apart from the manufacturing by itself, looking to the urgency of finished goods for sale to others purchased as well as got done job work from other job workers also namely Natani Steel Industries Neelkanth Industries (Pvt.) Ltd. 16. During the course of business looking to the business/commercial expediency the assessee advanced in terms of business/Commercial expediency to other Companies i.e. sister companies as well as sister firms/concerns for maintaining business relations with them i.e. purchasing of raw material, getting done ....
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....arified that the assessee was maintaining a running account of all the transactions of job work as well as purchases/sale also and payments (Considerations) as well as advances in the business expediency. Copies of summary statement and copies of accounts of the NSI in the books of accounts of the assessee for the A.Y. 2010-11 to 2014-15 are at page numbers 7 to 27 of the paper book. 18. We further observed that the NSI is sister concern of the assessee as one of the directors (Rajesh Natani) of the assessee is also partner in the NSI, and all the transactions were purely business transaction in the business expediency. Both the lower authorities had not pointed out any advances to the NSI without any business expediency i.e. other than business purposes i.e for personal purposes. Some time remained credit balance of the NSI and sometimes remained debit balance, in both the situations there was no any transaction of interest either debit or credit because it was a current account of business instead of loan account. It was pointed out that out of the outstanding of Rs. 99,48,395/- as on 31/03/2014 Rs. 55,82,683/- was opening balance as on 01/04/2013, hence, the addition of inter....
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.... and payments (Considerations) as well as advances in the business expediency, copies of summary statement and copies of accounts of the SMCPL in the books of accounts of the assessee for the assessment year 2010-11 to 2014-15 are at page numbers 28 to 37 of the paper book. It is also pointed out that the SMCPL is sister concern of the assessee as one of the directors (Rajesh Natani) of the assessee is also director in the SMCPL and all the transactions were purely business transaction in the business expediency. Both the lower authorities had not pointed out any advances to the SMCPL without any business expediency i.e. other than business purposes i.e. for personal purposes. Some time remained credit balance of the SMCPL and sometimes remained debit balance, in both the situations there was no any transaction of interest either debit or credit because it was a current account of business instead of loan account. It was also pointed out that that out of the outstanding of Rs. 87,26,342/- as on 31/03/2014 Rs. 54,06,309/- was opening balance as on 01/04/2013. It is also necessary to mention that both the lower authorities had not pointed out any advances to the other business concer....
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.... registered dealers of the State of Rajasthan under the Rajasthan Value Added Tax Act, 2003 and/or deposited in cash, as the case may be. It is further submitted that the assessee was maintaining a running account of all the transactions of purchases / sales also and payments (Considerations) as well as advances in the business expediency, if any. The NIPL is sister concern of the assessee as one of the directors (Rajesh Natani) of the assessee is also director in the NIPL and all the transactions were purely business transaction in the business expediency. Both the lower authorities had not pointed out any advances to the NIPL without any business expediency i.e other than business purposes i.e for personal purposes. It is further pointed out that out of the outstanding of Rs. 30,16,987/- as on 31/03/2014, Rs. 28,33,805/- was opening balance as on 01/04/2013. It is important to note here that the assessee was to pay Rs. 4,58,500/- to Arihant Engineering Works and Rs. 3,58,262/- to Om Steel Enterprises total amounting to Rs. 8,16,818/-, for making payments of both the dealers the assessee transferred Rs. 10,00,000/- to NIPL on 17/05/2013 out of this amount of Rs. 10,00,000/- the NI....
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....the bank as well as other, the borrowing was for the business purposes only and interest thereon was paid to the Bank as well as to others also. In this regard, we draw strength from the decision of the Hon'ble Supreme Court in the case of S.A. Builders Ltd. Vs Commissioner of Income Tax (Appeals), Chandigarh and Others, order dated 14/12/2006 reported in AIR 2007 SC 482, (2007)1 SCC 781, MANU/SC/8798/2006 wherein it was held as under: "20. We agree with the view taken by the Delhi High Court in CIT V. Dalmia Cement (Bhart) Ltd. MANU/DE/0309/2002 :[2002] 254 ITR 377 (Delhi) that once it is established that there was nexus between expenditure and the purpose of the business (which need not necessarily be the business the assessee itself), the revenue cannot justifiably claim to put itself in the arm-chair of businessmen or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessmen can be compelled to maximize its profit. The Income Tax Authorities must put themselves in the shoes of the assesse and see how to prudent businessmen would act. The authorities must not ....
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....e authorities and the Courts should examine the purpose for which the assessee advanced the money and what the sister concern did with the money. That the borrowed amount is not utilized by the assessee in its own business but had been advanced as interest-free loan to its sister concern is not relevant. What is relevant is whether the amount was advanced as a measure of commercial expediency and not from the point of view whether the amount was advanced for earning profits. Once it is established that there was nexus between the expenditure and purpose of the business (which need not necessarily be the business of the assessee itself) the Revenue cannot justifiably claim to put itself in the armchair of the businessman or in the position of the board of directors and assume the role to decide how much is reasonable expenditure having regard to the circumstances of the case. No businessman can be compelled to maximize his profits." 15. In view of the authoritative pronouncement of the apex Court and other judgments referred supra, in our view, the assessee admittedly had its own funds, as referred to earlier, and admittedly such funds/reserves being substantially ....