IN INCOME TAX APPELLATE TRIBUNAL AHMEDABAD B BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI S.S. GODARA, JUDICIAL MEMBER) ITA. No: 1807/AHD/2013 (Assessment Year: 2008-09) Assistant Commisioner of V/S Gujarat Insecticides Ltd, Income-tax, Bharuch Plot No. 805-806, GIDC Circle, Bharuch Indl.Estate, Ankleshwar, Dist. Bharuch-393002 (Appellant) (Respondent) PAN: AAACK8054D Appellant by : Shri Jamesh Kurian Sr. D.R,. Respondent by : Shri Arti N. Shah, A.R. ORDER Date of hearing : 14 -10-2016 Date of Pronouncement : 20 -10-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. This appeal by Revenue is preferred against order of Ld. CIT(A)-II, Baroda dated 14.03.2013 pertaining to A.Y. 2008-09. 2 ITA No. 1807/Ahd/2013 . A.Y. 2008-09 2. sole grievance of revenue is that ld. CIT(A) erred in directing to cancel disallowance of interest on interest free credit to Gharda Chemicals Limited. 3. At very outset, ld. counsel for assessee pointed out that grievance of revenue is decided by Tribunal in favour of assessee and against revenue. ld. D.R. could not bring any distinguishing decision in favour of revenue nor ld. D.R. could controvert submissions made by ld. counsel. 4. We have considered contentions of ld. counsel and have carefully perused orders of authorities below. We find force in contention of ld. counsel. Transactions with Gharda Chemicals Ltd. were considered in earlier years also when similar disallowance on account of interest was made. same finds support from findings of ld. CIT(A) which reads as under:- 1.6. Similar issue was involved in earlier year and Hon ble ITAT B Bench, Ahmedabad vide order dated 31.05.2011 (Common order for A.Y. 2001-02 and 2002-03) has allowed our appeal and dismissed appeal filed by Department. Copy of order is placed on page 28 to 70 of paper book. Relevant paras are on page 29 and 35 to 37 of paper book. Learned CIT(A)-VI, Baroda has also deleted such addition following this ITAT order in case of Appellant for A.Y. 2009-10. Copy of order is on page no. 18 to 27 of paper book. 3 ITA No. 1807/Ahd/2013 . A.Y. 2008-09 5. We also find that Co-ordinate Bench in assessee s own case in A.Y. 2001-02 & 2002-03 in ITA Nos. 460 & 461/Ahd/2008 and 499 & 500/Ahd/2008 has considered similar disallowance made by A.O. relevant findings of Tribunal which read as under:- 5. We have heard both sides at some length. We have also carefully perused several evidences placed on record. It is not in dispute that sales made to GCL remained outstanding and on other hand, assessee had bank liability. fundamental objection of AO was that had assessee recovered outstanding dues from GCL, then there would not be liability of that extent of interest of bank as it was debited to Profit & Loss account under head "interest and financial charges". That objection was dealt with in following manner. That as far as liability towards bank was concerned, ld.AR has placed on record certain figures to demonstrate that said bank liability had gone down in comparison to last year. That it has also been argued before us that even notional interest @ 15% was incorrect because prevailing rate charged by Bank was only 11.25% during year. That assessee was otherwise having regular business transactions of purchase and sales with GCL. That said GCL was major customer during that year. That it has also been placed on record that assessee was purchasing certain raw-material from GCL which was its monopoly product. That vehement contention was that in like manner assessee was also enjoying credit facility against purchases made from GCL. That it was not case of mere purchase and sale as it has happened with other debtors or customers ITA Nos.460 & 461/Ahd/2008 (By Assessee) & ITA Nos.499 & 500/Ahd/2008 (By Revenue) M/s.Gujarat Insecticides Ltd. vs. Dy.CIT Asst.Years - 2001-02 & 2002-03 but business relationship with GCL was on different terms being holding company and in that capacity GCL has provided specialized services to assessee in field of manufacturing and marketing. All these facts were narrated to ld.CIT(A) through written submissions which were placed before us on page Nos.138 to 190 of paper-book. From this discussion, it is evident that assessee-company had regular 4 ITA No. 1807/Ahd/2013 . A.Y. 2008-09 business transaction and it was not for any extraneous consideration. In regular course of business purchases and sales have been made with said concern and not with intention to siphon out borrowed funds. factum of case thus demonstrated that assessee has taken commercial decision keeping in mind interest of its business and other surrounding circumstances under which assessee was getting facilities. Once it was commercial decision, then Courts have held that it is not proper for revenue authorities to step into shoes of business man to decide whether such commercial decision was advantageous or not. Rather, we are of view that AO has proceeded merely on this presumption that borrowed funds of Bank of Baroda have been siphoned to GCL, but no specific instance or transaction was demonstrated. As far as ld.CIT(A)'s view was concerned, grant of four months credit facility also appeared to be on presumption because that facility must not be applied in uniform manner to all parties. In general, as per business trend, each customer has its own terms and condition and, therefore, terms of payment differ from one party to another party. businessman's view point must be seen and for that, test of commercial expediency to be adjudged from business benefit. Therefore by one single yard- stick all transactions having different nature of character or modalities must not be measured. We are of view that this is not case where some undue advantage was passed on to said holding company. In light of above discussion, we therefore conclude that disallowance was made merely on certain presumptions which could not be substantiated through some cogent evidence therefore view taken by AO deserves to be reversed. Likewise, we are also of view that part relief granted by ld.CIT(A) was also on presumption that credit facility to all customers against sales was uniform, so assessee should have given credit facility of four months to GCL as well. This presumption had no substance, therefore, considering totality of circumstances of case, we hereby reverse said view of ld.CIT(A) as well. This ground of assessee is, therefore, allowed. 5 ITA No. 1807/Ahd/2013 . A.Y. 2008-09 6. In light of aforementioned findings of Co-ordinate Bench, we do not find any reason to interfere with findings of ld. CIT(A). Appeal filed by Revenue is dismissed. Order pronounced in Open Court on 20 - 10- 2016. Sd/- Sd/- (S. S. GODARA) (N. K. BILLAIYA) JUDICIAL MEMBER ACCOUNTANT MEMBER Ahmedabad: True Copy Rajesh Copy of Order forwarded to:- 1. Appellant. 2. Respondent. 3. CIT (Appeals) 4. CIT concerned. 5. DR., ITAT, Ahmedabad. 6. Guard File. By ORDER Deputy/Asstt.Registrar ITAT,Ahmedabad Assistant Commisioner of Income-tax, Bharuch Circle, Bharuch v. Gujarat Insecticides Ltd