SHREE GEETA TRADING CO.,PATAN vs. THE INCOME TAX OFFICER, WARD-1, PATAN

SMC-ITA No. 517/Ahd/2014 Shree Geeta Trading Co.Vs. ITO Assessment year: 2010-11 Page 2 of 3 5. I have noted the main contention of the assessee is that the deposits which were placed by the assessee @ 12% interest were only in respect of temporary surplus funds and thus constituting optimum utilization of idle money for short periods. My attention was also invited to the order of the co-ordinate bench of this Tribunal in the case of Patel Jayantilal Bhavanbhai & Co. Vs. ITO in ITA No.689/Ahd/2012 dated 06.12.2013, wherein, on materially identical facts, the Tribunal has held that such temporary borrowing of funds at a lower rate would not constitute diversion of interest bearing funds at lower rates. While doing so, the co- ordinate bench has observed as follows:- “6. I have considered rival submissions and perused the orders of the AO and the CIT(A), and copies of various account of parties, and account statement of the assessee, as filed in the compilation before me. I find that the AO himself has admitted that the assessee is dealing with the purchase and sale of agriculture produce, which is apparently seasonal business. I find that the assessee has prudently used its money not immediately required in the business of purchase and sale of agricultural produce and by depositing the same with different parties, and has earned 6% per annum interest thereon. It is not a case of diversion of funds by the assessee. I find that there are number of entries of deposits and withdrawals in the account of three parties, copies of which has been filed in the compilation before the Tribunal. The opening and closing balance in the account of these parties has a huge difference. I find that CIT(A) has not given any valid reason for confirming the addition made by the AO. The assessee has tried to make best use of the idle money for short period, whenever possible, and it is not a case of diversion of borrowed money to the third party. In these facts of the case, I find that no case of disallowance of interest could be made out by the Revenue, and the issue is decided in favour of the assessee, and the ground of the appeal of the assessee is allowed.” 6. The views so expressed by the co-ordinate bench apply to the present facts and circumstances as well. There is no dispute that the short term deposits @ 12% were temporary in nature and could thus be indeed viewed as optimum utilization of surplus funds. That exactly was the situation before the co-ordinate bench. Respectfully following the views of the co-ordinate bench, I uphold the plea of the assessee and, accordingly, direct the Assessing Officer to delete the impugned disallowance of Rs.5,32,280/-. In the result, appeal is allowed. Pronounced in the open court today on the 2nd 7. February, 2018. Sd/-

Pramod Kumar (Accountant Member) Ahmedabad, the 2nd day of February, 2018 **bt

SMC-ITA No. 517/Ahd/2014 Shree Geeta Trading Co.Vs. ITO Assessment year: 2010-11 Page 3 of 3 Copies to: (1) The appellant (2) The respondent (3) Commissioner (4) CIT(A) (5) Departmental Representative (6) Guard File By order TRUE COPY Assistant Registrar Income Tax Appellate Tribunal Ahmedabad benches, Ahmedabad