Riddhi Siddhi Gluco Biols Ltd, ... vs Department Of Income Tax

JCIT (OSD), Riddhi Siddhi Gluco Biols Ltd Circle-5, 701, Sakar-1, Opp. Gandigram Ahmedabad Railway Station, Ashram Road, Ahmedabad PAN : AABCR 3417 Q

अपीलाथ / अपीलाथ / (Appellant) ू यथ यथ / थ / (Respondent)

Revenue by : Shri M.K. Singh, Sr. DR.

Assessee(s) by : Shri Prakash D. Shah, AR

सु नवाई क! तार#ख / Date of Hearing : 21/05/2015 घोषणा क! तार#ख / Date of Pronouncement: 12 /06/2015

आदे श/O R D E R

PER G.D. AGRAWAL, VICE PRESIDENT:

This is an appeal filed by the Revenue and is directed against the order of the Commissioner of Income-tax (Appeals)-XI, Ahmedabad dated 28.11.2011, pertaining to the Assessment Year 2009-10.

2. Ground No.1 of the Revenue's appeal reads as under:-

i. The Ld. Commissioner of Income tax (A) has erred in law and on facts in deleting the addition made on account of deferment of sales tax liability u/s 43B of the Act, amounting to Rs.3,74,93,860/-.

3. We have heard both the parties and perused the material placed before us. The Ground No.1 is with regard to disallowance u/s 43B on ITA No.278/Ahd/2012 JCIT vs. Riddhi Siddhi Gluco Biols Ltd AY: 2009-10 2

account of sales tax liability in respect of which the assessee was availing the benefit of Sales Tax Deferment Scheme. We find that similar issue was considered by the ITAT in assessee's own case for Assessment Years 2005-06 and 2006-07, and also for Assessment Year 2008-09; and the ITAT held that the disallowance u/s 43B in respect of such sales tax liability on which the assessee is entitled to Sales Tax Deferment Scheme is not justified. The relevant portion of the order of the ITAT for Assessment Year 2008-09 vide ITA No.2395/Ahd/2010 is reproduced below for ready reference.

"3. As per the corresponding assessment order passed u/s.143(3) of the Act dated 29.3.2010, the assessee-company is manufacturing and trading of starch, tapioca, chemicals, maize grain and allied products.. It was noticed by the AO that the assessee had shown sales tax liability of Rs.14,54,26,795/- under the head "sales tax deferment". It was also noted by the AO that sales tax liability to the extent of Rs.2,44,70,672/- remained unpaid out of the sales tax collected during the year. The AO has thus invoked the provisions of section 43B of the Act and taxed the same in the hands of the assessee. When the matter was carried before the first appellate authority, the ld.CIT(A) has followed a decision of the Tribunal as per the following reference:

"3.1. I have considered the contentions of the A.R. of the appellant and the observations of the assessing officer in the assessment order. Similar issue arose in the appellant's own case for earlier assessment year. The Hon'ble ITAT, "B" Bench, Ahmedabad vide its order in ITA No.1500/Ahd/2009 dated 07-08- 2009 decided the said issue in favour of the appellant for the A.Y. 2003-04. The same was decided in favour of the appellant by me for A.Y. 2006-07. Therefore, having considered the facts and circumstances of the case and following the above decisions, I am inclined to direct the assessing officer to delete the disallowance made by him on account of Sales-tax Deferment of Rs.2,44,70,672/-. This ground of appeal is allowed."

4. Having heard the submission of both the sides, we have been informed that in assessee's own case ITAT "B" Bench Ahmedabad vide an order dated 04/09/2009 titled as "The Dy.CIT vs. M/s.Riddhi Siddhi Gluco Biols Ltd." bearing ITA No.1047/Ahd/2010 for A.Y.2005-06 & ITA No.1048/Ahd/2010 for A.Y. 2006-07, the Tribunal has followed the past history and dismiss the ITA No.278/Ahd/2012 JCIT vs. Riddhi Siddhi Gluco Biols Ltd AY: 2009-10 3

ground of the Revenue. Resultantly, for this year as well this ground of the Revenue is hereby dismissed."

4. The facts of the year under consideration are identical; we, therefore, respectfully following the above decision of Tribunal in assessee's own case for Assessment Year 2008-09, uphold the order of the CIT(A) and reject the ground No.1 of the Revenue's appeal.

5. Grounds Nos. 2 & 3 of the Revenue's appeal read as under:-

[

ii) The Ld. Commissioner of Income tax (A) has erred in law and on facts in deleting the disallowance of interest of Rs.32,82,282/- made by the Assessing Officer under proviso to Section 36(1)(iii) of the Act.

iii)The Ld. Commissioner of Income tax (A) has erred in law and on facts in deleting the disallowance of proportionate interest of Rs.1,44,000/- made by the Assessing Officer.

6. The facts of the case are that the Assessing Officer found that the assessee incurred expenditure of Rs.26.01 crores for capital work-in- progress. The assessee paid interest of Rs.6.09 crores on its borrowing. The Assessing Officer was of the opinion that the part of the interest payment was attributable to the funds utilized for creation of capital work-in- progress. He, therefore, made proportionate disallowance of interest which amounted to Rs.32,82,282/-. The same is deleted by the CIT(A); hence, the ground No.2 of the Revenue's appeal.

7. The Assessing Officer also found that during the year under consideration, the assessee gave advance of Rs.12 lacs without charging of interest. He, therefore, disallowed the interest of Rs.1,44,000/- thereon. On ITA No.278/Ahd/2012 JCIT vs. Riddhi Siddhi Gluco Biols Ltd AY: 2009-10 4

appeal, the CIT(A) deleted the same; hence, Ground No.3 of the Revenue's appeal.

8. At the time of hearing before us, both the parties agreed that the Grounds Nos. 2 & 3 are related and can be dealt with simultaneously.

9. The ld. Departmental Representative relied upon the order of the Assessing Officer and pointed out that there was the utilization of huge money for capital work-in-progress and also giving interest free advance to others. The assessee has borrowed the money and has paid interest of more than Rs. 6 crores thereon. Therefore, the Assessing Officer was fully justified in disallowing the proportionate interest. He, therefore, submitted that the order of the CIT(A) should be reversed and that of the Assessing Officer may be restored.

10. The Ld. Counsel for the assessee pointed out that the interest free fund available with the assessee is many times more than the investment in capital work-in-progress as well as advance without interest. He stated that the interest free funds available with the assessee is 289.08 crores (Rs. Rs.16.13 crores share capital, Rs.169.13 crores reserve and surplus and Rs.103.82 crores accumulated depreciation). That capital work-in-progress is only Rs.26.01 crores and the advance to others is only Rs.12 lacs. Thus, the interest free fund available with the assessee is several times more than the fund invested in capital work-in-progress and also interest free advance to others. He further stated that the Revenue has not pointed out that any borrowed money has been utilized for the purpose of investment in capital work-in-progress and also advance to others. He, therefore, submitted that the CIT(A) was fully justified in deleting the disallowance out of interest. In support of his contention, he relied upon the decision of Hon'ble Gujarat ITA No.278/Ahd/2012 JCIT vs. Riddhi Siddhi Gluco Biols Ltd AY: 2009-10 5

High Court in the case of CIT vs. Raghuvir Synthetics Ltd, reported in 354 ITR 222 (Guj.) and the decision of Bombay High Court in the case of CIT vs. Reliance Utility and Power Limited, reported in 313 ITR 340 (Bom.).

11. We have carefully considered the arguments of both the sides and perused the material placed before us. The Revenue has not disputed the availability of huge interest free fund of Rs.289.08 crores with the assessee. As against this interest free fund, the investment in capital work-in-progress is only Rs.26.01 crores and advance to others is Rs.12 lacs. Thus, the interest free fund available with the assessee is more than 10 times of the capital work-in-progress and advance to others. Admittedly, the Assessing Officer has not pointed out that any borrowed money has been utilized for the purpose of investment in capital work-in-progress or for advance to others. He made proportionate disallowance merely on the presumption that the proportionate borrowed money must have been utilized for investment in capital work-in-progress, etc. We find that under the similar circumstances, Hon'ble Gujarat High Court in the case of Raghuvir Synthetics Ltd (supra) upheld the decision of ITAT. In that case also the interest free fund available with the assessee was much more than the interest free loan given by the assessee. The Assessing Officer has not proved that the borrowed money has been utilized for giving of interest free advances. The Assessing Officer disallowed the interest on proportionate basis. The CIT(A) deleted the addition which was upheld by the ITAT. On appeal by the Department, the Hon'ble Jurisdictional High Court held as under:-

"Held, dismissing the appeal, that when there was no evidence brought on record by the Department for the Tribunal to hold otherwise than what had been concluded by way of any material, the assessee was eligible for allowance of interest."

ITA No.278/Ahd/2012 JCIT vs. Riddhi Siddhi Gluco Biols Ltd AY: 2009-10 6

The facts of the assessee's case are identical to the facts before the Hon'ble jurisdictional High Court in the case of Raghuvir Synthetics Ltd(supra); we, therefore, respectfully following the above decision of Hon'ble jurisdictional High Court, uphold the order of the CIT(A) and reject the Grounds Nos. 2 & 3 of the Revenue's appeal.

12. In the result, the Revenue's appeal is dismissed.

Order pronounced in the Court on 12th June, 2015 at Ahmedabad.

Sd/- Sd/-

(S. S. GODARA) (G.D. AGRAWAL) JUDICIAL MEMBER VICE-PRESIDENT Ahmedabad; Dated 12/06/2015 Biju T., PS

षत Copy आदे श क! ूितिल)प अमे)षत/ of the Order forwarded to : 1. अपीलाथ / The Appellant 2. ू यथ / The Respondent. 3. संबंिधत आयकर आयु, / Concerned CIT 4. आयकर आयु,(अपील) / The CIT(A)

5. )वभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad

6. गाड फाईल / Guard file.

/ BY ORDER, आदे शानु सार

TRUE COPY Dy./Asstt.Registrar) उप/सहायक पंजीकार ( उप/ अिधकरण, अहमदाबाद / आयकर अपीलीय अिधकरण, ITAT, Ahmedabad