Naval Technoplast Ind.Ltd.,, ... vs Department Of Income Tax

IN THE INCOME TAX APPELLATE TRIBUNAL " D " BENCH, AHMEDABAD (BEFORE SHRI SHAILENDRA Kr. YADAV, J.M. & SHRI ANIL CHATURVEDI, A.M.)

I.T. A. No.2456 /AHD/2011 (Assessment Year: 2008-09)

I.T.O., Ward-5(1), V/S M/s. Naval Technoplast Ahmedabad Industries Ltd. 36-38, While House, Panchvati, Ellisbridge, Ahmedabad (Appellant) (Respondent)

PAN: AAACN4950B

Appellant by : Smt. Sonia Kumar, Sr. D.R. Respondent by : Written Submssion

(आदे श)/ORDER

Date of hearing : 28-04-2015 Date of Pronouncement : 07 -05-2015

PER SHRI ANIL CHATURVEDI,A.M.

1. This appeal filed by the Revenue is against the order of CIT(A)-XI, Ahmedabad dated 21.07.2011 for A.Y. 2008-09.

2. In this case, none appeared on behalf of Assessee but however written submissions dated 24.04.2015 were filed by the Assessee. We therefore proceed to decide the appeal, ex parte qua the Assessee on the basis of material on record and written submissions.

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3. The relevant facts as culled out from the material on record are as under.

4. Assessee is a company stated to be engaged in the business of manufacturing and trading of bobbins, tubes, cones etc. Assessee filed its return of income for A.Y. 2008-09 on 06.12.2008 declaring total income at Rs. 62,10,920/-. The case was selected for scrutiny and thereafter the assessment was framed under section 143(3) vide order dated 24.12.2010 and the total income was determined at Rs. 73,59,070/-. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who vide order dated 21.07.2011 granted partial relief to the Assessee. Aggrieved by the aforesaid order of ld. CIT(A), Revenue is now in appeal before us and has raised the following effective ground;-

1. The ld.CIT(A) has erred in law and on facts in deleting the addition of Rs. 11,48,154/- on account of disallowance of interest expenses.

5. During the course of assessment proceedings and on perusing the Profit and Loss account, A.O noticed that Assessee has claimed interest expenses of Rs. 1,16,94,435/- which included interest paid to banks and other unsecured loans. He also noticed that Assessee had outstanding balance of capital investments of Rs. 95,67,950/- and various other advances also. The Assessee was therefore asked to justify the claim of interest on the capital investment and was also asked to explain as to why proportionate disallowance of interest on the capital investment made be not disallowed to which Assessee interalia submitted that the advance for capital goods were made in F.Y. 95-96 and were for the business purposes and that no new advances were given during the year. The submission of the Assessee was not found acceptable to the A.O. He was also of the view that similar issue 3 ITA No 2456/AHD/2011 . A.Y. 2008-09 arose in assessee's own case for A.Y. 05-06 and the similar explanation given by the Assessee was not found acceptable and therefore the disallowance of interest was made. He, following the decision in the case of Ratanlal Omprakash vs. CIT reported in 132 ITR 640, was of the view that the interest on the capital investment was disallowable as it was not made for the purpose of business. He thereafter on the basis of interest rate of 12% worked out the disallowance of interest of Rs. 11,48,154/- (on the capital advance) and added to the income. Aggrieved by the order of A.O., Assessee carried the matter before ld. CIT(A) who by following the decision of Ahd Tribunal in Assessee's own case for A.Y. 2002-03 and A.Y. 05-06 deleted the addition by holding as under:-

2.2. I have considered the submissions made by the A. R. of the appellant and the observations of the assessing officer in the assessment order. It is seen that the similar issue arose in the appellant's own case for A.Y. 2002-03 and A.Y. 2005-06. The same has already been decided by the Hon'ble ITAT, Aahmedabad in favour of the appellant vide its order, referred to above, wherein at para-8 of the order, it is observed by the ITAT as under:-

" 8. On consideration of the rival submissions, we do not find any merit in this ground of appeal of the revenue. The Id. Counsel for the assessee referred to PB-17 to show that the assessee has funds of Rs. 7,38,14,637/- by way of share capital and reserves and surplus on which no interest is incurred. He has also referred to PBO-22 to refer to Schedule-J to show that loans and advances and deposits as on 31-03-2001 was in a sum of Rs. 4,64,64,815/- which have reduced in the assessment year under appeal i.e. ending 31st March 2002 in a sum of Rs. 4,44,41,459/-. He has also submitted that the advances to the concerns in which directors were interested have also reduced from earlier years of Rs. 1,79,65,707/- to Rs. 1,66,21,000/- under appeal. It would, therefore, show that no new advances have been given in the assessment year under appeal as was explained before the authorities below. It is also explained that no addition has been made in the preceding assessment year on this issue, therefore, there is no question of making the addition on the same given set of facts and circumstances. The Id. CIT(A), therefore, rightly noted that no notional interest can be added and further no addition can be made on this issue. We, therefore, do not find any merit in this ground of appeal of the revenue. Same is accordingly dismissed."

2.1. Since the issue for the assessment year under consideration is similar to that of the above assessment year, I am of the view that the A.O. is not justified in making addition on this account. The A.O. is directed to delete the addition made by him of Rs.11,48,154/- Thus, this ground of appeal is allowed.

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6. Aggrieved by the aforesaid order of ld. CIT(A), Revenue is now in appeal before us.

7. Before us. Ld. D.R. relied on the order of A.O. On the other hand Assessee has filed written submissions wherein it is submitted that on identical issue in Assessee's own case A.Y. 2002-03 and A.Y. 2005-06 the issue was decided in favour of the Assessee by Hon'ble Tribunal. It is further stated that against the order of Tribunal, Revenue had preferred appeal before Hon'ble Gujarat High Court and the appeal was dismissed. The copy of the High court order was also placed on record.

8. We have heard the ld. D.R. and perused the material on record. We find that ld. CIT(A) while deleting the addition has followed the decision of Hon'ble Tribunal in Assessee's own case for A.Y. 02-03 and A.Y. 05-06. We further find that against the order of Tribunal, Revenue had preferred appeal before Hon'ble High Court. Hon'ble High Court in Tax Appeal No. 1416 of 2011 order dated 24.09.2012 dismissed the appeal of the Assessee by holding as under:-

With respect to question No.2, we notice that the Assessing Officer made addition of Rs.16,62,000 of the interest on advances made by the assessee - company to certain concerns in which the Directors of the Companies were interested. The CIT (Appeals), however, noted that the assessee had funds more than. Rs.7,38,14,637 by way of share capital reserves and surplus on which no interest was incurred. The Commissioner, therefore, was of the opinion on that the assessee had sufficient funds to make interest-free advances and that borrowed funds on interest were not directed for making interest free advances. Such conclusions of the Commissioner (Appeals) were confirmed by the Tribunal in the impugned judgment. Here also we notice that the observations of the Commissioner (Appeals), as confirmed by the Tribunal, are based on appreciation of evidence and material on record. When two authorities found on facts that no interest bearing funds were directed for making interest-free advances, in our view, no question of law would arise.

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9. In view of the aforesaid facts and in the absence of contrary binding decision, we find no reason to interfere with the order of ld. CIT(A) and thus this ground of Revenue is dismissed.

10. In the result, the appeal of the Revenue is dismissed.

Order pronounced in Open Court on 07- 05 - 2015.

Sd/- Sd/- (SHAILENDRA Kr. YADAV) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad. TRUE COPY Rajesh

Copy of the Order forwarded to:- 1. The Appellant. 2. The Respondent. 3. The CIT (Appeals) - 4. The CIT concerned. 5. The DR., ITAT, Ahmedabad. 6. Guard File. By ORDER

Deputy/Asstt.Registrar ITAT,Ahmedabad