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TMI Blog2016 (5) TMI 538X X X X Extracts X X X X X X X X Extracts X X X X ..... ase in the finance charges has occurred despite reduction in the loan funds. He noted that the loan funds amounted to Rs. 5.70 crores as on 31-03-2008 has gone down to Rs. 4.38 crores as on 31- 03-2009. Further, current liabilities and provisions are also lesser as compared to the preceding year. However, there is substantial increase in the sundry debtors as on 31-03-2009 as compared to the immediately preceding year. The sundry debtors have increased from Rs. 6.15 crores as on 31-03- 2008 to Rs. 9.51 crores as on 31-03-2009. From the details of sundry debtors furnished by the assessee the AO noted that assessee has advanced huge amount to associate concerns without charging interest, the details of which are as under : Name of the debtor Balance as on 31-03-2008 (in Rs.) Balance as on 31-03-2009 (in Rs.) Amit Garment 3,45,29,367/- 5,28,41,575/- Amit Apparel 80,35,328/- 1,08,12,872/- Sparkon Textile 1,52,20,499/- 1,37,84,936/- Total 5,77,85,194/- 7,74,39,383/- 4. From the ledger account of these parties he noted that none of the transactions of receipts and payments related to sale of goods or services by the assessee or the concerned parties and the transactions a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... advances given/taken. However, since the interest is only an expense of current year, it is logical only to consider changes of receipt and payment of advances during the year. The fund flow statement was filed before the CIT(A) to substantiate that the interest free advances given to sister concerns are from interest free surplus funds available with the assessee and not from interest bearing loan funds. It was also submitted that the entities from whom advances have been taken and to whom advances have been given are all tax payer entities at the maximum marginal rate of income tax and they have filed their income tax returns. Therefore, the notional disallowance in one entity would result in corresponding reduction of income in another entity and thus tax impact as a whole will be NIL. Relying on various decisions it was submitted that the disallowance made by the AO needs to be deleted. 7. Based on the arguments advanced by the assessee the Ld.CIT(A) deleted the finance charges of Rs. 88,68,694/-. While doing so, he held that the finance charges are in the nature of regular interest/charges of sanctioned bank limits for the purpose of business. The interest free advances recei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... permissible in view of the decision of Hon'ble Bombay High Court in the case of Reliance Utilities and Power Ltd. (Supra). He submitted that the Coordinate Benches of the Tribunal are consistently taking the view that when sufficient interest free funds are available with the assessee which far exceeds the interest free advances given to sister concerns no disallowance of proportionate interest is called for. For the above proposition he relied on the following decisions : 1. DCIT Vs. A2Z Online services Pvt. Ltd. - ITA No.1566/PN/2013 (Pune Tribunal) 2. M/s. Mihir Bakre Projects Vs. ACIT- ITA No.1710/PN/2012 (Pune Tribunal) 12. We have considered the rival arguments made by both the sides, perused the orders of the AO and CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions cited before us. From the various details furnished by the assessee in the paper book we find the assessee during the impugned assessment year has received interest free advances of Rs. 2,77,72,986/- from the sister concerns which are as under : Sr.No. Name of the sister concern Net Amt. received during the year (Rs.) 1 Sparkon Equipments 49,54,690 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ertain creditors of the assessee. Some of the creditors have replied directly to the office and in certain cases the assessee filed confirmations from some creditors. On verification of the confirmations raised from the creditors, vis-à-vis ledger account of the assessee the AO noted the following difference : Sr. No. Name of creditor Balance as per assessee's books (Rs.) Balance as per creditor's books Differences 1 Tirumala Enterprises 6,50,628/- 6,49,960/- 668/- 2 Phinolek Steel & Engg. Co. 49,79,106/- 16,22,500/- 33,56,606/- 3 Shri Mahaveer Metal 28,81,946/- 33,67,629/- (-)4,85,683/- 4 Advance Metal Corp. P. Ltd. 69,89,667/- Nil 69,89,667/- 5 United Metal Industries 9,24,491 11,33,373/- (-)2,08,882/- 6 Shree Sai Industries Pvt. Ltd. 31,63,296/- 31,36,857/- 26,439/- 7 Domet Trading Pvt. Ltd. 10,38,049/- 2,25,259/- 8,12,790/- 8 Jindal Stainless Steel 7,36,467/- 13,393/- 7,23,074/- 9 Prathmesh Enterprises 19,78,730/- 13,62,584/- 6,16,146/- 10 Sun Impex 21,83,848/- 43,69,367/- (-)21,85,519/- 17. The AO asked the assessee to reconcile the difference between the books of the assessee and the balance in the books of the cr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 44,849 8 Interest for delayed payment booked by assessee and paid in full 1,14,809 Total 41,89,763 19. It was submitted that the assessee has already booked the bills for lower amounts, i.e. shown higher income for the year under consideration. He is again subject to tax because of this amount which amounts to double addition. It was argued that the assessee has booked all the purchases correctly for the year under consideration. The addition is on account of opening balance difference which should not be taxed for the year under consideration. Only the current liabilities should have been added. 20. So far as the purchases booked for lesser amount due to various reasons amounting to Rs. 11,40,331/- is concerned the assessee filed the following details by giving the party wise details : Sr.No. Name of the Party Amount (Rs.) 1 Jindal Stainless Ltd. 63,453 2 Shri Mahaveer Metal 33,837 3 United Metal Industries 15,575 4 Sun Impex 7,22,614 5 Domet Trading Pvt. Ltd. 2,05,872 6 Philolek Steel and Eng. Co. 51,408 7 Prathamesh Enterprises 21,133 8 Shree Sai Industries 26,439 Total 11,40,331 21. For the purpose of difference on account of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erence due to earlier years transactions. No transactions during the year, amounts not credited to P&L by the assessee Allowed (direct case law cited) 2 Bills passed and accepted for lesser amounts due to rate difference, difference in qty, P.O. terms etc. 9,28,855 Liability already reduced and profit increased in assessee's books Allowed (Section 41(1) not applicable) 3 Confirmation of different party considered by A.O. 7,99,925 Proper confirmation of correct party Jindal Steelway (similar name), purchase bill and payment proof produced by the assessee Allowed as there is no difference 4 Net amounts booked by the creditors, i.e. payment net of LC charges, interest, bank charges, LC discounting charges, etc booked by creditors 4,20,956 Liability already reduced in assessee's books Allowed Section 41(1) not applicable 5 Miscellaneous differences 1,25,326 Liability appearing more in assessee's books Disallowed Total 41,90,433 Considering the above, I am of the opinion that in the facts and circumstances of the case, the question of disallowance of financial charges and disallowance of difference in creditors should be answered in favour ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me of Advance Metal Corporation Pvt. Ltd. amounting to Rs. 69,89,667/- is concerned we find the Ld.CIT(A)deleted this amount on the ground that the assessee has already offered the above amount in his application before the Settlement Commission and has paid due taxes on the same. Since the Ld.CIT(A) on the basis of perusal of the order of the Settlement Commission on this issue has given a finding that assessee has already declared this amount before the Settlement Commission and paid the taxes and interest thereon, therefore, in absence of any contrary material brought to our notice by the Ld. Departmental Representative the order of the CIT(A) on this issue is upheld. 32. So far as the balance amount of Rs. 41,90,433/- is concerned we find the Ld.CIT(A) deleted an amount of Rs. 40,65,107/- and sustained an amount of Rs. 1,25,326/-. The amount Rs. 40,65,107/-consists of 4 items as per the Table given at para 25 of this order. From the details furnished before the Ld.CIT(A) we find the assessee has given the difference on account of opening balance at Rs. 6,49,223 + Rs. 19,44,849 amounting to Rs. 25,94,072/- whereas the CIT(A) has deleted an amount of Rs. 19,15,371/- on account o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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