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Income Tax Appellate Tribunal, AHMEDABAD “A” BENCH AHMEDABAD
PER S. S. GODARA, JUDICIAL MEMBER
This Revenue’s appeal for assessment year 2010-11 arises against the CIT(A)-XX, Ahmedabad’s order dated 04.02.2014, in case no. CIT(A)-XX/126/12- 13, upholding disallowance of tube well expenses of Rs.5,60,243/- and interest expenses of Rs.4,68,243/-; respectively, in proceedings u/s.143(3) of the Income Tax Act, 1961; in short “the Act”. Heard both sides. Case file perused.
ITA No. 1228/Ahd/14 (Shri Dalpatlal M. Shah vs. ACIT) A.Y. 2010-11 - 2 -
We come to the abovestated former issue of disallowance of tube well repair expenses of Rs.5,60,243/- made by both the lower authorities. There is no dispute about the genuineness of the impugned expenses involving a total amount of Rs.6,59,110/-. The dispute between the parties is about its nature i.e. capital or revenue expenditure. Both the lower authorities treat the same as capital expenditure eligible for depreciation @ 15%.
Learned Authorized Representative takes us to the instant case file. He vehemently contends that the impugned claim is that of repair only wherein the main tube well already existed earlier. He therefore seeks to treat the same as revenue expenditure. The Revenue strongly supports the CIT(A)’s action confirming the impugned disallowance. We sought clarification from both the parties about treatment given to the tube-well in the preceding assessment year. Learned Departmental Representative takes us to page 12 of the paper book comprising of Schedule A (depreciation statement) demonstrating the above tube well to form a capital asset entitled for depreciation. The assessee fails to rebut this factual position. Nor is it able to controvert the CIT(A)’s clinching finding that it had replaced the entire tube well set itself. We therefore see no reason to interfere with the CIT(A)’s above conclusion confirming Assessing Officer’s action. The assessee fails in its first substantive ground.
We now come to assessee’s latter substantive ground assailing correctness of Rs.4,68,243/-. The assessee admittedly had debited interest expenses in its P&L account amounting to Rs.17,66,699/- as against interest income of Rs.8,18,663/-. The Assessing Officer came across its interest free advances made to various parties without serving its business purpose. The said six parties had availed total advances amount of Rs.39,02,031/-. The Assessing Officer therefore invoked the impugned interest disallowance @12% coming to Rs.4,68,243/- in assessment order dated 15.01.2013.
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The CIT(A) affirms Assessing Officer’s action as under:
“4.3. I have considered the facts of the case and submission made by the appellant. The AO has made the disallowance of the interest expenses of Rs.4,68,243/- for the reason that interest bearing funds have been utilized for the purpose of interest free advances. It has been observed by the AO that the advances to 6 parties totaling to Rs.39,02,031/- has been made while the appellant had claimed the interest expenditures amounting to Rs. 17,66,699/- in the profit and loss account. The appellant has failed to establish that such advances were made for the business purposes. During the course of assessment proceedings, although assessee attended on 10.1.2013 before the A.O. but did not reply to the show cause so given. 4.4. During the course of appellate proceedings the appellant has made the submission that the AO has disallowed the interest on the advances for the whole year without considering the date of deposit. Further contended that the appellant had sufficient own capital of Rs.32,92,240/- besides some interest free loans. Here it is to be mentioned that even as per the appellant the own capital was at Rs.32,92,240/- while the advances were much more than the above i.e. Rs.39,02,031/-. So, it cannot be said that the own capital and interest free loans was utilized for the purpose of interest free advances. The appellant has not given any details showing the interest free advances were made out of the own capital of the assessee or interest free loans. It is seen from the copy of the balance sheet attached for 31.3.2010 that there were a number of assets in various forms and the sources thereof were only from the capital and other borrowed funds., All the submissions alongwith ledger account copies were made first time in the appellate proceedings and hence those were in the nature of additional evidence under Rule 46A. The appellant has not made any request for admission of such details and additional evidences. Neither any good and sufficient reasons were explained for non-submission of those before the A.O. in assessment proceedings hence same are liable to be rejected. Even the appellant has not given any details of the availability of the interest free funds on the date of advances to the aforesaid parties. Since no details in respect of the issue have been submitted before the A.O. and hence the AO was unable to establish the direct nexus of the interest free advances with the interest free funds. In view of the above, the case law cited by the appellant are not applicable over the facts. Therefore, the disallowance made by the A.O. is justified and the same is confirmed. This ground of appeal is dismissed.”
Heard both the parties. Case file perused. It is not in dispute that the assessee had filed additional evidence in course of the lower appellate proceedings along with ledger account forming part of paper book. The CIT(A)’s above extracted findings decline the same on the ground that there has not been any additional evidence petition filed at the assessee’s behest. He has not paid attention to assessee’s ledger books qua the instant issue at all so as to comment upon the correctness
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thereof vis-à-vis the impugned interest disallowance. We therefore deem it appropriate that the learned CIT(A) needs to re-decide the instant issue afresh after affording adequate opportunity of hearing to the assessee. This latter substantive ground is accepted for statistical purpose.
This assessee’s appeal is partly allowed for statistical purpose.
[Pronounced in the open Court on this the 27th day of September, 2017.]
Sd/- Sd/- (AMARJIT SINGH) (S. S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 27/09/2017 True Copy S.K.SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।