Commissioner Of Income Tax, Kota v. M/S. Shiv Agrevo Ltd., Kalmanda Road, Baran

HIGH COURT OF JUDICATURE FOR RAJASTHAN BENCH ATJAIPUR D.B. Income Tax Appeal No. 460 / 2009 COMMISSIONER OF INCOME TAX, Kota ----Appellant Versus M/s. Shiv AGREVO LTD., KALMANDA ROAD, BARAN ----Respondent Connected With D.B. Income Tax Appeal No. 547 / 2009 COMMISSIONER OF INCOME TAX, KOTA ----Appellant Versus M/S SHIV AGREVO LTS., KALMANDA ROAD, BARAN ----Respondent D.B. Income Tax Appeal No. 37 / 2010 COMMISSIONER OF INCOME TAX, KOTA ----Appellant Versus M/S SHIV AGREVO LTD., KALMANDA ROAD, BARAN ----Respondent D.B. Income Tax Appeal No. 72 / 2010 COMMISSIONER OF INCOME TAX, Kota ----Appellant Versus M/s SHIV AGREVO LTD., KALMANDA ROAD, BARAN ----Respondent D.B. Income Tax Appeal No. 348 / 2011 Commissioner of Income Tax, Kota ----Appellant Versus M/S Shiv Agrevo Ltd. Jhalawar Road, Baran. ----Respondent D.B. Income Tax Appeal No. 365 / 2011 COMMISSIONER OF INCOME TAX, KOTA ----Appellant Versus M/S SHIV AGREVO LTD. JHALAWAR ROAD, BARAN. ----Respondent_____________________________________________________ For Appellant(s) : Mrs. Parinitoo Jain with Ms. Shiva GoyalFor Respondent(s) : Mr. Mahendra Gargiya _____________________________________________________ HON'BLE MR. JUSTICE K.S. JHAVERI HON'BLE MR. JUSTICE INDERJEET SINGH Judgment 01/08/2017 1.Since in all these appeals, common questions of law andfacts are involved, they are decided by this common judgment. 2.By way of these appeals, the appellants have challenged thejudgment and order of the Tribunal whereby the Tribunal haspartly allowed the appeals of the assessee and dismissed theappeal of the department modifying the order of the CIT(A)whereby the CIT(A) has allowed the appeal in favour of theassessee. 3.In Appeal No.460/2009, originally the matter was admittedby the order dated 02.09.2009 only on one issue which wassubsequently amended by us on 24.2.2017 pursuant to the application preferred by the department which reads as under:- “(i)Whether in the facts and circumstances of thecase, the ITAT was justified in law in deleting andrestricting the trading additions which was made afterrejecting books of accounts u/s.145(3) of the Act?. (ii)Whether in the facts and circumstances of thecase, the ITAT was justified in law in allowing thededuction u/s.80IA when the assessee does not fall inthe same? (iii)Whether in the facts and circumstances of thecase, the ITAT was justified in law in directing to allowthe higher rate of interest to the persons specifiedu/s.40A(2)(b) of the Act.” D.B. INCOME TAX APPEAL NO.547/2009 admitted on -07.09.2009: “(i)Whether in the facts and circumstances of thecase, the ITAT was justified in law in deleting andrestricting the trading additions which was made afterrejecting books of accounts u/s.145(3) of the Act?. (ii)Whether in the facts and circumstances of thecase, the ITAT was justified in law in allowing thededuction u/s.80IA when the assessee does not fall inthe same? (iii)Whether in the facts and circumstances of thecase, the ITAT was justified in law in directing to allowthe higher rate of interest to the persons specifiedu/s.40A(2)(b) of the Act.” D.B. INCOME TAX APPEAL NO.37/2010 admitted on -3.2.2011: “(i)Whether in the facts and circumstances of thecase, the ITAT was justified in law in deleting andrestricting the trading additions which was made afterrejecting books of accounts u/s.145(3) of the Act?. (ii)Whether in the facts and circumstances of thecase, the ITAT was justified in law in allowing thededuction u/s.80IA when the assessee does not fall inthe same? (iii)Whether in the facts and circumstances of thecase, the ITAT was justified in law in directing to allowthe higher rate of interest to the persons specifiedu/s.40A(2)(b) of the Act.” D.B. INCOME TAX APPEAL NO.37/2010 admitted on -3.2.2011: “(i)Whether in the facts and circumstances of thecase, the ITAT was justified in law in deleting andrestricting the trading additions which was made afterrejecting books of accounts u/s.145(3) of the Act?. (ii)Whether in the facts and circumstances of thecase, the ITAT was justified in law in allowing thededuction u/s.80IA when the assessee does not fall inthe same? (iii)Whether in the facts and circumstances of thecase, the ITAT was justified in law in directing to allowthe higher rate of interest to the persons specifiedu/s.40A(2)(b) of the Act.” D.B. INCOME TAX APPEAL NO.72/2010 admitted on03.02.2011:_ (i)Whether in the facts and circumstances of thecase, the ITAT was justified in law in allowing thededuction u/s.80IB when the assessee does not fall inthe same? D.B. INCOME TAX APPEAL NO.348/2011 admitted on-12.10.2011: “(i)Whether the Tribunal was justified in answeringthe issue contained in paragraph 17 and 19 of theimpugned order as ground no.1 and 2 against theRevenue (appellant herein) without assigning anyreasons except to rely upon their earlier view said tohave been taken by the Tribunal in respect of this veryassessee for the previous year without quoting as towhat was that view? (ii)Whether Tribunal was justified in holding thatassessee is entitled to claim deduction ofRs.1,29,629/- by taking recourse to the provisions ofSection 40A(2)(b) of the Act? (iii)Whether Tribunal was justified in holding thatassessee is entitled to claim benefit of deletion ofRs.80,91,340/- as required under Section 80IB of theAct?” D.B. INCOME TAX APPEAL NO.365/2011 admitted on -9.4.2012: “(i)Whether under the facts and circumstances ofthe case ITAT is justified in confirming the order ofCIT(A) of allowing the deduction under Section 80IBof Rs.48,29,638/- which was disallowed by the AO,particularly when the assessee does not fulfill theconditions laid down for claim of deduction underSection 80IB of the Act? (ii)Whether under the facts and circumstances ofthe case and in law, the ITAT is justified in confirmingthe order of CIT(A) of deleting the addition ofRs.3,15,647/- made by the AO on account of interestpaid to specified persons u/s. 40A(2)(b)? (iii)Whether under the facts and circumstances ofthe case the ITAT is justified in confirming the orderthe CIT(A) directing the AO to allow expenses ofInsurance of Rs.80,122/- relating to earlier year?. 4.Counsel for the appellant has taken us to the order of the AOas well as the order of CIT(A) and contended that the issue ofSection 145(3) which has been adjudicated by the AO has wronglybeen considered by the CIT (A) and the Tribunal. On the questionof deduction made u/s.80IA, she further contended that thebenefits were not granted in view of the short fall which was madein view of the observations made by the AO. Even as per Section40A(2)(b), the rate of interest which was paid to the familymembers was not consistent with the other persons whereas thefamily members were granted amount on a higher side, andtherefore, the Tribunal has seriously committed an error inallowing these expenses. 5.In one of the appeal No.365/11, additional issue is framedregarding insurance expenses which reads as under:- “Whether under the facts and circumstances of thecase, the ITAT is justified in confirming the order ofCIT(A) directing the AO to allow expenses of Insurance of Rs.80,122/- relating to earlier year?” 6.After considering the said issue, the AO has observed in para 6 which reads as under:- “Prepaid Insurance Expenses 5.In one of the appeal No.365/11, additional issue is framedregarding insurance expenses which reads as under:- “Whether under the facts and circumstances of thecase, the ITAT is justified in confirming the order ofCIT(A) directing the AO to allow expenses of Insurance of Rs.80,122/- relating to earlier year?” 6.After considering the said issue, the AO has observed in para 6 which reads as under:- “Prepaid Insurance Expenses Vide letter dated 11.12.2007, the assessee hasfiled the details of insurance expenses debited to theP&L account at Rs.6,50,098/- in response to questionNo.5 dated 30.11.2007. This claim of expenditureincludes a sum of Rs.80,122/- of prepaid expensespertaining to the previous year. Further, from theassessment records of the preceding year, it is seenthat while finalizing the assessment proceedings forthe assessment year 2004-05, the Assessing Officerhas not made any additions on this account. Thus,considering the accounting method of the assessee,this expenditure is not allowable in this year, hencethe same is disallowed and added back to the totalincome of the assessee.” 7.The Tribunal while considering the observations of CIT(A) which is contrary to the evidence on record has observed in para10 as under:- “10. The fourth ground of the Revenue is as under:- “on the facts and in the circumstances of the case, theld. CIT(A), Kota has erred in deleting the disallowanceof Rs.80,122/- made by the AO on account ofinsurance expenses despite the fact that the same wasnot allowable considering the method of accountingfollowed by the assessee.” 8.Counsel for the respondent has placed reliance on thejudgments in the case of CIT Vs. Satellite Engineering Ltd. (1978)113 ITR 208(Guj), CIT Vs. Seeyan Plywoods (1991) 190 ITR 564(Guj) and CIT Vs. Bhawani Forge P. Ltd. in Tax Appeal No.1321,1326 & 1328/2006 decided on 1.12.2014 (Guj.) 9.We have heard the counsel for the parties. 10.On the first issue, in our considered opinion, in view of theobservations made by the tribunal with regard to section 145(3),unelss the books of accounts which have been found not genuineand the reasons for rejecting the books of accounts is just andproper, the view taken by the Tribunal is required to be upheld. Inthat view of the matter, the issue is answered in favour of theassessee. 11.With regard to second issue, counsel for the respondent hasplaced reliance on the judgment rendered in the case of CIT Vs.Bhawani Forge P. Ltd. in Tax Appeal No.1321,1326 & 1328 decided on 1.12.2014wherein it has been observed as under:- “In view of the aforesaid, we are of the opinion thatthe Tribunal has given cogent and convincing reasonsin arriving at the conclusion and we are in completeagreement with the view taken by the Tribunal. TheTribunal after considering the material on record hasrightly held that the assessee has satisfied all theconditions in order to avail benefit of Section 80IA ofthe Income Tax Act. Apart from that, learnedadvocate for the appellant-revenue is not in a positionto show how the findings of the Tribunal are bad inlaw and on facts. In that view of the matter, we do not find any error inthe order of the Tribunal. Hence, the present appealsare dismissed. Accordingly, the question of law posedin these appeals is answered in favour of the assesseeand against the revenue.” 12.In view of the observations made, the second issue is alsoanswered in favour of the assessee. 13.With regard to issue of loan which was advanced by thefamily members, the Triubnal has rightly observed in para 13 which reads as under:- In that view of the matter, we do not find any error inthe order of the Tribunal. Hence, the present appealsare dismissed. Accordingly, the question of law posedin these appeals is answered in favour of the assesseeand against the revenue.” 12.In view of the observations made, the second issue is alsoanswered in favour of the assessee. 13.With regard to issue of loan which was advanced by thefamily members, the Triubnal has rightly observed in para 13 which reads as under:- “13. We have heard the rival contentions and perusedthe facts of the case. We are convinced with thearguments of the ld. AR as to prevailing market ratefor the loands of the permanent in natur and long termloans is between 18% to 24% whereas the casescompared by the AO are pertaining to the loans of thetemporary in nature. Also the assessee has advancedthe money for the purpose of business needs, is notunder dispute. Therefore, in such circumstances andfacts of the case, the AO is not justified in consideringthe said payment of interest as excessive orunreasonable and the same is directed to be deleted.Thus ground No.1 of the CO of the assessee is allowed. 14.With regard to additional issue of insurance, the Tribunal has rightly observed in para 11 which reads as under:- “11. The facts of the case are that the assessee hasclaimed the insurance expenses of Rs.6,50,098/- inthe Profit & Loss A/c. On being asked, it is explainedthat the amount of Rs.6,50,098/- also includes theexpenses of Rs.80,122/- of prepaid expensespertaining to previous year. The AO found from theassessment record of the preceding year that in theassessment year 2004-05, the AO has not madeaddition on this account. Thus according to the AO andconsidering the accounting method of the assessee,this expenditure is not allowable in this year and hencehe made the addition of Rs.80,122/-” 15.In that view of the matter, all the issues are answered in favour of the assessee and against the department. 16.The appeals stand dismissed. A copy of this order be placed in each file. (INDERJEET SINGH),J. (K.S. JHAVERI),J. Pdaiya/29-34