9911796707
TMI Blog2021 (12) TMI 696X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of Rs. 22,06,319/ liable to be deleted, hence, the same may kindly be deleted, and the interest paid may kindly be allowed as business expenditure u/s 36(1)(iii) of the Act. 2. That, the Learned Appellate Authority has grossly erred on the facts and on the law in sustaining assessment order of the Assessing authority dated 27/12/2016 by which he disallowed interest Rs. 22,06,319/- paid as expenditure for getting supply of goods / getting done job work in regular manner from the other parties, and added in the returned income, it is further clarified that these are not loans, and are relating to business transactions. thus, the impugned assessment order as well as appellate order, both are against the provisions of the Act, bad in law, erroneous and liable to be quashed and addition of Rs. 22,06,319/ liable to be deleted, hence, the same may kindly be deleted, and the interest paid may kindly be allowed as business expenditure u/s 36(1)(iii) of the Act. 3. That, the Learned Appellate Authority has grossly erred on the facts and on the law in sustaining assessment order of the Assessing authority dated 27/12/2016 by which he disallowed interest of Rs. 45,130/- partly on borr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as above, I took legal consultancy from advocates and came to decide to file an appeal before the Hon'ble Income Tax Appellate Tribunal. 3. That, although, as per my memory and records we have not received the appellate order till now, However, I am assuming normal ten days from the date of order i.e. 19/11/2019 and service thereof on 29/11/2019. 4. That, the dispute is regarding question of law which is very important for adjudication by your honour. That, in view of the above facts and circumstances of the case, it is clearly apparent that I could not submit the appeal in time limit as prescribed under section 253(3) of the Act on the reasons which were beyond our control, in support of the above facts an affidavit duly signed and notarized is enclosed herewith. Therefore, it is humbly prayed that the delay caused on the above reasons may kindly be condoned delay of 50 days only in submitting the appeal, the appeal may kindly be granted for adjudication in the interest of natural justice and oblige." 4. On the other hand, the ld DR could not rebut the facts submitted by the assessee before us for seeking condonation of delay. 5. We have considered the rival submiss ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the assessee at Rs. 34,48,960/- by making additions/disallowances. 8. Being aggrieved by the order of the A.O., the assessee carried the matter before the ld. CIT(A), who after considering the submissions of both the parties and material placed on record, upheld the disallowance of interest of Rs. 22,04,319/- and disallowance of interest of Rs. 45,130/-. 9. Being aggrieved by the order of the ld. CIT(A), the assessee has preferred the present appeal before the ITAT on the grounds mentioned above. 10. Grounds No. 1 and 2 of the appeal raised by the assessee are interrelated and interconnected and relates to challenging the order of the ld. CIT(A) in confirming the disallowance of Rs. 22,06,319/-. In this regard, the ld. AR appearing on behalf of the assessee has reiterated the same arguments as were raised before the ld. CIT(A) and also relied on the written submissions filed before the Bench and the contents of the same are as under: "That the appellant-assessee is a Pvt. Ltd. Company registered with the Registrar of Companies, Rajasthan in the year 1995 has been dealing in manufacturing and selling thereof in all kinds of Iron and Steel such as Round Bars, MS Angle, Sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sl. No. Asst. Year Name of the quarter Form VAT-07A (Summery of purchases) Excluding tax Form VAT-08A (Summery of sales) Excluding tax 1. 2010-11 1st 532510 2 2nd 0 0 3 TOTAL 532510 4 2011-12 2nd 0 18373987 5 3rd 0 10297054 6 TOTAL 0 28671041 7 2012-13 1st 0 7573004 8 2nd 0 13350476 9 3rd 0 15822263 10 4th 3403832 2507456 11 TOTAL 3403832 3,92,53,199 It is clarified that purchases/sales in the paper have been declared gross amount including tax, whereas, the above table is bare amount excluding tax on purchases as well as sales also. (b) It is further more clarified that the appellant-assessee adjusted the output tax liability on sale from Input Tax Credit because the appellant-assessee paid taxes on it's purchases from registered dealers of the State of Rajasthan under the Rajasthan Value Added Tax Act, 2003 and/or deposited, as the case may be. It is further more clarified that the appellant-assessee was maintaining a running account of all the transactions of job work as well as purchases/sale also and payments (C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wise detail is reproduced here under:- Sl. No. Asst. Year Name of the quarter Form VAT-07A (Summery of purchases) Excluding tax Form VAT-08A (Summery of sales) Excluding tax 1. 2010-11 1st 0 0 2 2010-11 4th 5693174 204949 3 TOTAL 5693174 204949 4 2011-12 1st 1595955 0 5 2011-12 2nd 3421507 0 6 2011-12 3rd 4105556 0 7 2011-12 4th 9987378 0 8 TOTAL 1,91,10,396 0 9 2012-13 1st 11941216 0 10 2012-13 2nd 9569510 132810 11 2012-13 3rd 241619 0 12 TOTAL 2,17,52,345 132810 It is clarified that purchases/sales in the paper have been declared gross amount including tax, whereas, the above table is bare amount excluding tax on purchases as well as sales also. It is further more clarified that the appellant-assessee adjusted the output tax liability on sale from Input Tax Credit because the appellant-assessee paid taxes on it's purchases from registered dealers of the State of Rajasthan under the Rajasthan Value Added Tax Act, 2003 and/or deposited in cash, as the case may be. It is further more clarified that the appellant-assessee was maintaining a running ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of purchases/sale and payments (Considerations) as well as advances in the business/Commercial expediency, if required, for your kind perusal and satisfaction we have submitted a summary statement and copies of accounts of the NIPL in the books of accounts of the appellant-assessee since the assessment year 2010-11 to 2014-15 in form of paper book on 20/09/2021 at page numbers 1 to 6. Apart from the above the appellant-assessee sold goods to the NIPL, the sales have been reported to the Commercial Taxes Department through its required statutory quarterly returns in the prescribed Form VAT-10 along with attachments thereof in the Form VAT-07A (Summery details of purchases from registered dealers) and Form VAT-08A (Summery details of sales to registered dealers as well as unregistered persons), the quarter wise detail is reproduced here under:- Sl. No. Asst. Year Name of the quarter Form VAT-07A (Summery of purchases) Excluding tax Form VAT-08A (Summery of sales) Excluding tax 1. 2010-11 1st 259435 0 2 2010-11 2nd 0 0 3 2010-11 3rd 419664 0 4 TOTAL 6,79,099 0 5 2011-12 4th 1252429 0 6 TOTAL 1252429 0 7 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is crystal clear that the amount of Rs. 10,00,000/- was advanced in the business/commercial expediency only. Hence, the addition of interest on Rs. 30,16,987/- far away from the facts of the case. It is further more clarified that although there was no any transaction of purchases/sale during the period under consideration but the NIPL requested to the appellant for some advance for the business so that it can run the business smoothly and will supply goods to the appellant-assessee subsequently. The appellant-assessee took in to consideration request of the NIPL and further advanced Rs. 10,00,000/- in the business expediency for the continuation of the business purposes, However, out of the Rs. 10,00,000/- Rs. 8,16,818/- used in payments to two creditors, thus, net advance during the year remained Rs. 1,83,182/ only (10,00,000 - 8,16,818. We would like to have your kind attention that the assessing authority disallowed interest paid on loan to bank (CC Limit) Rs. 65,37,685/-, Term Loan Rs. 3,64,011/- and to others Rs. 9,90,371/- total amounting to Rs. 79,11,256/- under section 36 (iii). On perusal of the sub-Section (iii) of Section 36, three ingredients are required for a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g towards the various above debtors are in the form of outstanding of business transactions as well as advances in the Commercial expediency." 11. On the other hand, the ld. DR has vehemently supported the order of the lower authorities and submitted that the ld. CIT(A) has passed a well reasoned order discussing all the material facts and circumstances of the case. 12. We have heard the rival contentions of both the parties and have also gone through the written submissions filed by the assessee. We have also deliberated upon the decisions cited in the orders passed by the authorities below as well as cited before us and we have also gone through the orders passed by the revenue authorities. As per facts of the present case, we observed that the assessee is deriving its income from manufacturing and trading of all kinds of Iron and Steel such as MS Bars, MS Angles, Sections and Channels etc. The assessee filed its return of income on 26/11/2014 declaring net taxable income of Rs. 10,89,570/-. 13. We observed from perusal of the record that the assesse took a short loan credit (SLC) of Rs. 50 Lakh from the formerly State bank of Bikaner and Jaipur which subsequently merged with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as got done job work from other job workers also namely Natani Steel Industries Neelkanth Industries (Pvt.) Ltd. 16. During the course of business looking to the business/commercial expediency the assessee advanced in terms of business/Commercial expediency to other Companies i.e. sister companies as well as sister firms/concerns for maintaining business relations with them i.e. purchasing of raw material, getting done job works also. The Natani Steel Industries (NSI) is job worker as well as supplier of goods also to the assessee. The NSI did job work regarding manufacturing of goods since the financial year 2009-10 to 2011-12 because according to the market conditions the assessee got done job work and purchased goods for sale. The assessee has submitted year wise statement of the Job Work and sale to NSI which is at page number-7 of the paper book and statements of account which are at page numbers 8 to 27 of the paper book. Apart from the above, complete details of raw material issued for job work and received the finished goods for the financial years 2009-10, 2010-11 and 2012-13 are also attached as Annexures B-1 to B-34 (Raw Material issued and finished goods recd.). Apart ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... both the situations there was no any transaction of interest either debit or credit because it was a current account of business instead of loan account. It was pointed out that out of the outstanding of Rs. 99,48,395/- as on 31/03/2014 Rs. 55,82,683/- was opening balance as on 01/04/2013, hence, the addition of interest on Rs. 99,48,395/- far away from the facts of the case. 19. We also observed from perusal of the record that the Supreme Meta Cast (PVT.) Ltd. (SMCPL) is supplier of goods (raw material-Ingots) to the assessee, the SMCPL has been supplying goods since financial year 2010-11 and was maintaining a running account of transactions of purchases/sale and payments (Considerations) as well as advances in the business/Commercial expediency. Copies of summary statement and copies of accounts of the SMCPL in the books of accounts of the assessee for the assessment year 2010-11 to 2014-15 are at page numbers 28 to 37 of the paper book. Apart from the above sold goods to the SMCPL, the sales have been reported to the Commercial Taxes Department through its required statutory quarterly returns in the prescribed Form VAT-10 along with attachments thereof in the Form VAT-07A (Sum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding of Rs. 87,26,342/- as on 31/03/2014 Rs. 54,06,309/- was opening balance as on 01/04/2013. It is also necessary to mention that both the lower authorities had not pointed out any advances to the other business concerns without any business expediency i.e. other than business purposes i.e. for personal purposes. There was no any transaction of purchases/sale during the period under consideration but the SMCPL requested to the assessee for some advance for the business so that it can run the business smoothly and will supply goods to the assessee subsequently. The assessee took into consideration request of the SMCPL and further advanced Rs. 34,20,033/- in the business expediency for the continuation of the business purposes. 21. We further observed that the Neelkanth Industries (PVT.) Ltd. (NIPL) is supplier of goods to the assessee, the NIPL has been supplying goods since financial year 2010-11 and was maintaining a running account of transactions of purchases/sale and payments (Considerations) as well as advances in the business/Commercial expediency, if required. Copies of summary statement and copies of accounts of the NIPL in the books of accounts of the assessee for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... making payments of both the dealers the assessee transferred Rs. 10,00,000/- to NIPL on 17/05/2013 out of this amount of Rs. 10,00,000/- the NIPL has made payments to both the above creditors of the assessee. This fact can be verified from the account statement of the NIPL in the books of accounts of the assessee which is available at page number 6 of the paper book submitted on 20/09/2021. Thus, it is crystal clear that the amount of Rs. 10,00,000/- was advanced in the business/commercial expediency only. It is further noted that although there was no any transaction of purchases/sale during the period under consideration but the NIPL requested to the assessee for some advance for the business so that it can run the business smoothly and will supply goods to the assessee subsequently. The assessee took into consideration request of the NIPL and further advanced Rs. 10,00,000/- in the business expediency for the continuation of the business purposes. However, out of Rs. 10,00,000/- Rs. 8,16,818/- used in payments to two creditors, thus, net advance during the year remained Rs. 1,83,182/ only (10,00,000 - 8,16,818.). 23. We further observed that A.O. disallowed interest paid on lo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the assesse and see how to prudent businessmen would act. The authorities must not look at the matter from their own view point but that of a prudent businessmen. As already stated above, we have to see the borrowed funds to a sister concern from the point of view of commercial expediency and not from the point of view whether the amount was advanced for earning profits." "22. In view of the above, we allow the appeals and set aside the impugned judgments of the High Court, The Tribunals and other authorities and remand the matter to the Tribunal for a fresh decision, in accordance with law and in the light of the observations made above. We also make it clear that we are not setting aside the order of the Tribunal or other Income Tax Authorities in relation to the other points dealt with by these authorities, except the point of deduction of interest on the borrowed funds. We also draw strength from the decision of the Hon'ble Rajasthan High Court in the case of Commissioner of Income Tax Vs Vijay Solvex Ltd. (2015) 274 CTR (Raj.) 384, wherein judgment of the Hon'ble Apex court in the case of S.A. builders has been followed. The relevant abstract of the judgment of the Ho ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s/reserves being substantially higher than, even otherwise, the advances to the debtors, no notional interest or hypothetical interest could have been disallowed on such facts. The Revenue has failed to prove nexus. In our view, the Tribunal has correctly appreciated the facts and law. In view of our observations hereinabove, the Tribunal was correct in deleting the notional interest, disallowed by the AO at Rs. 5,80,215 and accordingly, the appeal is decided against the Revenue and in favour of the assessee. No costs." Thus, in view of the above facts and circumstances of the case all are the business transactions either of purchases/sale/Job work as well as payments/receipts through banks as the case may be in the business/Commercial expediency. In the business transaction neither the assessee paid any interest on delay payments against consideration to the above suppliers on their sale/Job Works, if any, nor charged any interest from them on delay payments received either as sale consideration or advances in connection with the commercial expediency. 24. Considering the totality of facts and circumstances of the case, mater placed on record and the case laws relied upon by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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