Principal Commissoner Of Income Tax 1 v. Diamond Textile Mill Pvt Ltd

IN THE HIGH COURT OF GUJARAT AT AHMEDABADR/TAX APPEAL NO. 615 of 2018With R/TAX APPEAL NO. 616 of 2018 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE M.R. SHAH and HONOURABLE MR.JUSTICE A.Y. KOGJE =============================================== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India or any order made thereunder ? =============================================== PRINCIPAL COMMISSONER OF INCOME TAX 1 Versus DIAMOND TEXTILE MILL PVT LTD ===============================================Appearance:MRS MAUNA M BHATT(174) for the PETITIONER(s) No. 1 for the RESPONDENT(s) No. 1 =============================================== CORAM: HONOURABLE MR.JUSTICE M.R. SHAHand HONOURABLE MR.JUSTICE A.Y. KOGJE Date : 18/06/2018 ORAL JUDGMENT(PER : HONOURABLE MR.JUSTICE M.R. SHAH) 1.As common question of law and facts arise in both these appeals and arises out of impugned common judgement and order passed by the learned Income Tax Appellate Tribunal, Ahmedabad Bench, Ahmedabad but with respect to different Assessment Years, both these Appeals are decided and disposed of by this common order. 2.Feeling aggrieved and dis-satisfied with the impugned common Judgement and order passed by the Income Tax Appellate Tribunal (hereinafter referred as “the learned Tribunal”) passed in ITA No.2709/AHD/2016 for A.Y 2012-2013 revenue has preferred Tax Appeal No. 615 of 2016 with following proposed questions of law: “2 (A)Whether the Appellate Tribunal has erred in law and on facts in deleting the dis-allowance on interest free loans and advances amount to Rs.49,79,253/-? (B)Whether the Appellate Tribunal has erred in law in not holding that the assessee has failed to prove that interest expenses incurred wholly and exclusively for business? (C)Whether the Appellate Tribunal has erred in law and on facts in deleting the addition of Rs.51,00,000/- made u/s 68 of the Act? (D) Whether the Appellate Tribunal has erred in on facts in holding that the advances were adjusted by allotment of shares during the year?” 3.Feeling aggrieved and dis-satisfied with the impugned common judgement and order passed by the learned Tribunal passed in ITA No.1071/Ahd/2017 for the A.Y 2013-2014, Revenue has preferred Tax Appeal No.616 of 2018 with following proposed question of law: “2(A)Whether the Appellate Tribunal has erred in law and on facts in deleting the dis-allowance on interest free loans and advances amounting to Rs.43,59,961/-? (B)Whether the Appellate Tribunal has erred in law in not holding that the assessee has failed to prove that interest expenses were incurred wholly and exclusively for business?” 4.At the outset it is required to be noted that so far as the proposed question of law 2(A) and 2(B) are concerned, they are common in both the appeals. For convenience, facts in Tax Appeal No.615 of 2018 arising out of ITA No.2709/Ahd/2016 for A.Y 2012-2013 are narrated. 5.The assessee filed the return of income for A.Y 2012-2013 declaring total income at Rs. 9,72,48,980/-. The learned Assessing Officer made the dis-allowance of the interest on interest free loans and advances of Rs.49,79,253/-. The learned Assessing Officer also made the addition of Rs.51,00,000/- under Section 68 of Income Tax Act. 6.Feeling aggrieved and dis-satisfied with the order 4.At the outset it is required to be noted that so far as the proposed question of law 2(A) and 2(B) are concerned, they are common in both the appeals. For convenience, facts in Tax Appeal No.615 of 2018 arising out of ITA No.2709/Ahd/2016 for A.Y 2012-2013 are narrated. 5.The assessee filed the return of income for A.Y 2012-2013 declaring total income at Rs. 9,72,48,980/-. The learned Assessing Officer made the dis-allowance of the interest on interest free loans and advances of Rs.49,79,253/-. The learned Assessing Officer also made the addition of Rs.51,00,000/- under Section 68 of Income Tax Act. 6.Feeling aggrieved and dis-satisfied with the order passed by the Assessing Officer making dis-allowance of interest free loans and advances amount of Rs.49,79,253/- and making the addition of Rs.51,00,000/- under Section 68 of the Act, the Assessee preferred the appeal before the learned CIT (A). The learned CIT (A) dismissed the appeal and confirmed the dis-allowance and also the addition. 7.Feeling aggrieved and dis-satisfied by the order passed by the learned CIT(A), the Assessee preferred the appeal before the learned ITAT being ITA No.2709/Ahd/2016 (for A.Y 2012-2013). Similar appeal was preferred by the learned Assessee challenging the order passed by the learned CIT(A) (for A.Y 2013-2014) for making dis-allowance of Rs.43,59,961/- on interest free loans and advances. 8.By impugned common judgement and order, the learned Tribunal has allowed both the appeals preferred by the Assessee and has deleted the dis-allowance on interest free loans and advances amount of Rs.49,79,253/- (A.Y 2012-2013) and deleted the dis-allowances of Rs.43,59,961/- on interest free loans and advances (for A.Y 2013-2014). The learned Tribunal has also deleted the addition of Rs.51,00,000/-made under Section 68 of the Act (for A.Y 2012-2013). 9.Feeling aggrieved and dis-satisfied, the common impugned order passed by the learned ITAT, the Revenue has preferred the present appeals with the aforesaid proposed question of law. 10.We have heard Ms.Mauna Bhatt, learned Counsel appearing on behalf of the Revenue at length. We have also gone through and considered in detail the orders passed by the Assessing Officer, the learned CIT(A) as well as the learned Tribunal. 11.Now so far as the dis-allowance on interest free loans and advances is concerned, at the outset it is required to be noted that while deleting the said dis-allowance, the learned Tribunal has specifically observed and found that the Assessee was having interest free funds available with it totaling to Rs.48.58 crores. The learned Tribunal has specifically given the finding that the Assessee took the loan from various parties shown in the books of accounts and claimed by him for the business purpose and the same have been utilized in fixed assets and the capital work in progress. In paragraph 21, the learned Tribunal has observed as under: “21. We have carefully considered the orders of the authorities below. A perusal of the documentary evidences shows that assessee was having interest free funds available with it totaling to Rs.48.58 crores and the impugned advances were at Rs.12.78 crores. This shows that the interest free funds available with the assessee were far more in excess of the interest free advances. We further find that long term loan from banks, maturity term loan and unsecured loans taken by the assessee amounting to Rs.32.80 crores whereas the total project expenses which included fixed assets and capital work in progress amounted to Rs.64.76 crores. This shows that the term loans taken by the assessee have been utilised in fixed assets and capital work in progress.” “21. We have carefully considered the orders of the authorities below. A perusal of the documentary evidences shows that assessee was having interest free funds available with it totaling to Rs.48.58 crores and the impugned advances were at Rs.12.78 crores. This shows that the interest free funds available with the assessee were far more in excess of the interest free advances. We further find that long term loan from banks, maturity term loan and unsecured loans taken by the assessee amounting to Rs.32.80 crores whereas the total project expenses which included fixed assets and capital work in progress amounted to Rs.64.76 crores. This shows that the term loans taken by the assessee have been utilised in fixed assets and capital work in progress.” 12.Considering the facts and circumstances and after having found and on perusal of the documentary evidences that the Assessee was already having a huge interest free funds available with it and that even the amount of loans and advances were utilized for the business purpose, more particularly in fixed assets and capital work in progress and thereafter that the learned Tribunal has deleted the dis-allowance and interest free loans and advances, it cannot be said that the learned Tribunal has committed any error to call for any interference by this Court. 13.We are in complete agreement with the view taken by the learned Tribunal deleting the dis-allowance on interest free loans and advances. No specific question of law arises. 14.Now so far as the additional ground in Tax Appeal No.615 of 2018 namely deleting the addition of Rs.51,00,000/- made under Section 68 of the Act is concerned, the learned Tribunal has firstly noted that as such the loan and advances of Rs.51,00,000/- from one Bhupendrabhai J. Patel was taken by cheque on 1.2.2008. Thus, the said loan and advances was not taken by the Assessee in the year under consideration. Under the circumstances when there was no unsecured loan during the year under consideration, the learned Tribunal has rightly observed and held that the provisions of Section 68 shall not be applicable. Even otherwise it is required to be noted that even the said loan was adjusted by the Assessee subsequently by allotment of Rs.51,000/- shares of Rs.100/- each. Considering the aforesaid facts and circumstances when the learned Tribunal has deleted the addition of Rs.51,00,000/-, the same cannot be said to be erroneous. We confirm the deletion of the addition of Rs.51,00,000/- by the Tribunal. No substantial question of law arises. 15.In view of the above and for the reasons stated in the order, both the appeals fail and the same deserve to be dismissed and accordingly dismissed. (M.R. SHAH, J) NAIR SMITA V. (A.Y. KOGJE, J)