Shri Rajesh J.Desai, Mehsana V. The ACIT.,Mehsana Circle, Mehsana

CO 101/AHD/2013

• Counselvise Citation: [2016] 123 COUNSELVISE.COM (IT) 1991 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 2 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 18-03-2016
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Assessment Year: 2009-2010
• Appeal Filed On: 15-04-2013
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: LALA PHILIPS
• Assessee Lawyers: S N DIVETIA
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: S H RI PRAMOD KUMAR , ACCOUNTANT MEMBER AND SHR I S. S. GODARA , JUDICIAL MEMBER RAJESH J. DESAI, 5, ASHOKNAGAR SOCIETY, RADHANPUR ROAD, MEHSANA - 384002 PAN: AAWPD3248B (CROSS OBJECTOR ) VS THE ACIT, MEHSANA CIRCLE, MEHSANA (RESPONDENT) REVENUE BY : S H RI LALA PHILIPS , SR. D . R. ASSESSEE BY: S H RI S.N. DIVETIA , A.R. DATE OF HEARING : 02 - 03 - 2 016 DATE OF PRONOUNCEMENT : 18 - 03 - 2 016 / ORDER P ER : S. S. GODARA , J UDICIAL MEMBER : - THIS ASSESSEE S CROSS OBJECTION FOR A.Y. 2009 - 10 , AR ISES FROM ORDER OF THE CIT(A) - I, AHMEDABAD DATED 22 - 11 - 2012 IN APPEAL NO. CIT(A) - I/CC.1(2)/222/2011 - 12 , IN PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . C.O. NO. 101/AHD/2013 ( IN I T A NO . 275 / A HD/20 13 ) A SSESSMENT YEAR 200 9 - 10 C.O. NO. 101/AHD/2013(IN I.T.A NO. 275 /AHD /2013 ) A.Y. 2009 - 10 PAGE NO RAJESH J. DESAI VS. ACIT 2 2. THE ASSESSEE S SOLITARY SUBSTANTIVE GROUND ASSAILS THE LOWER APPELLATE ORDER IN CONFIRMING INTEREST DISALLOWANCE OF RS. 3,47,197/ - OUT OF RS. 1,29,43,122/ - AS MADE BY THE ASSESSING OFFICER IN ASSESSMENT ORDER DATED 29 - 12 - 2011. IT EMERGES FROM TH E CASE RECORD THAT WE HAVE ALREADY DEALT WITH REVENUE S CORRESPONDING PLEA SEEKING TO REVIVE THE REMAINING DISALLOWANCE SUM IN ITS MAIN APPEAL DECIDED ON 11/03/2016 CONTAINING OUR FOLLOWING FINDINGS ON THE VERY ISSUE. 8. THIS LEAVES US WITH REVENUE S TH IRD AND FINAL SUBSTANTIVE SEEKING TO RESTORE INTEREST DISALLOWANCE OF RS. 1,29,43,122/ - MADE ON ACCOUNT OF INTEREST EXPENDITURE NOT INCURRED FOR THE PURPOSE OF THE BUSINESS. THE ASSESSEE CLAIMED THIS SUM AS LOSS INCURRED FROM FINANCIAL SERVICES. HE FURTH ER STATED TO HAVE INCURRED INTEREST EXPENDITURE OF RS. 2,44,36,874/ - COMPRISING OF BANK INTEREST, INTEREST PAYABLE AND INTEREST EXPENDITURE. THE ASSESSEE SOUGHT TO EXPLAIN HIS BORROWING TO HAVE BEEN UTILIZED FOR BUSINESS PURPOSES ONLY. THE ASSESSING OFFI CER WENT THROUGH HIS BALANCE SHEET, INTEREST FREE FUNDS ALONG WITH INVESTMENTS AND DEPOSITS TO HOLD THAT HE HAD UTILIZED INTEREST BEARING FUNDS FOR THE IMPUGNED INVESTMENTS THEREBY DIVERTING INTEREST BEARING FUNDS. 9. THE ASSESSEE HAS SUCCEEDED IN THE L OWER APPELLATE PROCEEDINGS AS UNDER: - 8. I HAVE GONE THROUGH THE ASSESSMENT ORDER AND SUBMISSION OF THE A.R. OF THE APPELLANT CAREFULLY. IT IS SEEN THAT THE ASSESSING OFFICER HAS NOT MADE DETAILED EXAMINATION OF THE FACTS IN THE CASE OF THE ASSESSEE BEF ORE THE DISALLOWING THE CLAIM OF INTEREST U/S.36(1)(III) OF THE I.T. ACT. THE ASSESSING OFFICER HAS OBSERVED THE FIGURES OF THE BALANCE SHEET TO SAY THAT THE INTEREST FREE FUNDS AVAILABLE WITH THE APPELLANT WERE RS.5.29 CRORES WHEREAS THE INVESTMENT MADE W HICH DID NOT YIELD ANY INTEREST WERE TO THE EXTENT OF RS. 19.02 CRORES. HENCE, HE HELD THAT THE APPELLANT HAD UTILISED INTEREST BEARING FUNDS IN MAKING INVESTMENT WHICH DID NOT YIELD ANY INTEREST. C.O. NO. 101/AHD/2013(IN I.T.A NO. 275 /AHD /2013 ) A.Y. 2009 - 10 PAGE NO RAJESH J. DESAI VS. ACIT 3 8.1 THE ABOVE CONTENTION OF THE ASSESSING OFFICER IS NOT RIGHT. THOUGH THE FINDING THAT THE INTEREST FREE FUNDS AVAILABLE WITH THE APPELLANT WERE TO THE EXTENT OF RS.5.29 CRORES IS CORRECT, HOWEVER, THE ASSESSING OFFICER COULD NOT HAVE BEEN DISALLOWED ANY AMOUNT OF INTEREST IN RESPECT OF LOANS AND ADVANCES GIVE N TO THE EXTENT OF RS. 10.42 CRORES BECAUSE THE APPELLANT WAS CHARGING INTEREST ON THESE ADVANCES. FURTHER, THE DEPOSITS GIVEN WERE FOR THE PURPOSE OF SECURING LANDS ETC. WHICH WERE FOR THE BUSINESS PURPOSE OF THE APPELLANT. IN VIEW OF THE ABOVE, THE ASSES SING OFFICER COULD NOT HAVE BEEN DISALLOWED ANY INTEREST ON ACCOUNT OF BORROWED MONIES BEING INVESTED IN DEPOSITS AND LOANS AND ADVANCES. 8.2 AS FAR AS THE INVESTMENTS ARE CONCERNED IT IS SEEN THAT MAJOR PART OF THE INVESTMENTS ARE IN SHARES IN FACT THE ASSESSEE HAS MADE INVESTMENTS OF RS.7.07 CRORES IN PURCHASE OF SHARES OF RJD INTEGRATED TEXTILE PARK LTD. INVESTMENTS IN SHARES CANNOT YIELD ANY INCOME WHICH IS CHARGEABLE TO TAX. HENCE, INTEREST EXPENDITURE ATTRIBUTABLE BORROWED FUNDS UTILIZED FOR THE PUR POSE OF MAKING INVESTMENTS IN SHARES CANNOT BE ALLOWED AS DEDUCTION U/S.36(1)(IIII) OF THE I.T. ACT. 8.3 THE APPELLANT WAS ASKED TO FURNISH THE DETAILS OF INVESTMENTS MADE IN SHARES. VIDE HIS REPLY FILED ON 20.11.2012, THE APPELLANT HAS FILED DETAILS OF INVESTMENT IN RJD INTEGRATED TEXTILE PARK LTD. WHICH SHOWS THAT THE OPENING BALANCE OF INVESTMENT WAS RS.2,42,500/ - THE SUM OF RS. 1 CRORE WAS INVESTED ON 23.02.2009, A SUM OF RS.5 LACS WAS INVESTED ON 25.02.200 AND RS.6 CRORE WAS INVESTED ON 27.02.2009. I N VIEW OF THE FACTS THAT THE OPENING BALANCE OF INVESTMENT OF APPELLANT WAS ONLY RS. 1,92,88,891/ - AND THE APPELLANT HAD INTEREST FREE FUNDS AVAILABLE OF RS.5, 29, 93,800/ - HENCE, ONLY TO THE EXTENT OF RS.3,30,0 1,822/ - (TOTAL INVESTMENTS OF RS.8,59,95,622 ( - ) TOTAL INTEREST FREE FUNDS OF RS.5, 29, 93, 800) OF BORROWED FUNDS WAS UTILIZED IN MAKING INVESTMENT WHICH DID NOT YIELD ANY TAXABLE INCOME. FROM THE DATES ON WHICH THIS INVESTMENT IS MADE IT IS CLEAR THAT INTEREST BEARING FUNDS WERE UTILISED IN MAKING THESE INVESTMENTS TO THE EXTENT OF RS.3,30,01,822/ - FROM 27.02.2009 TO 31.03.2009. THUS, THE INTEREST PAID BY THE APPELLANT ON THE MONEY BORROWED @ 12% PER ANNUM, HENCE THE INTEREST DISALLOWABLE C.O. NO. 101/AHD/2013(IN I.T.A NO. 275 /AHD /2013 ) A.Y. 2009 - 10 PAGE NO RAJESH J. DESAI VS. ACIT 4 IN THIS CASE, WORKS OUT TO RS.3,47,197 (RS.3,30,01,822 X 32 + 365 X 12 - 100). THE ADDITION OF RS. 1,29,43,122/ - IS HENCE REDUCED TO RS. 3,47,1 97/ - . 10. WE HAVE HEARD RIVAL CONTENTIONS. RELEVANT CASE RECORDS STAND PERUSED. IT EMERGES FROM THE LOWER APPELLATE FINDINGS THAT THE ASSESSEE HAD ALREADY AVAILABLE AT H IS DISPOSAL INTEREST FREE FUNDS TO THE TUNE OF RS. 5,29,93,800/ - . THE CIT(A) FINDS THAT THE ASSESSEE HAD ONLY UTILIZED INTEREST BEARING FUNDS IN THE INVESTMENTS IN QUESTION AMOUNTING TO RS. 3,30,01,822/ - FROM 27 - 02 - 2009 TO 31 - 03 - 2009. HE THEREAFTER REDUC ES THE IMPUGNED INTEREST DISALLOWANCES FOR THIS TIME PERIOD AS RS.3,47,197/ - . THIS CRUCIAL HAS GONE UN - REBUTTED IN THE COURSE OF HEARING BEFORE US. WE REJECT REVENUE S ARGUMENT ON THIS SCORE. IT FAILS IN THIS THIRD SUBSTANTIVE GROUND AS WELL. IT IS TO BE SEEN THAT THIS ASSESSEE S SOLITARY GROUND IN CROSS OBJECTION COULD NOT BE DECIDED BECAUSE OF OVERSIGHT. HOWEVER, THE NET EFFECT APPEARS TO BE THE VERY OUTCOME AS IN REVENUE S ARGUMENTS. THE ASSESSING OFFICER HAD MADE THE IMPUGNED DISALLOWANCE ALLEGING DIVERSION OF INTEREST BEARING FUNDS. THE CIT(A) HOLDS THAT THE ASSESSEE HAD UTILIZED HIS INTEREST BEARING FUNDS OF RS. 3,30,01,822/ - IN MAKING HIS INVESTMENTS IN QUESTION FROM 27 - 02 - 2009 TO 31 - 03 - 2009. THIS MADE HIM TO COMPUTE 12% PER ANNUM INTEREST DIS ALLOWANCE FOR TIME PERIOD OF 32 DAYS. THE ASSESSEE FAILS TO REBUT THIS CRUCIAL FINDING ALIKE THE REVENUE IN ITS MAIN APPEAL. WE SEE NO REASON TO INTERFERE IN CIT(A) S FINDINGS UNDER CHALLENGE IN THESE FACTS AND CIRCUMSTANCES COMPUTING THE IMPUGNED DISALL OWANCE TO RS. 3,47,197/ - IN QUESTION. THE CIT(A) S REASONING IS ACCORDINGLY AFFIRMED. C.O. NO. 101/AHD/2013(IN I.T.A NO. 275 /AHD /2013 ) A.Y. 2009 - 10 PAGE NO RAJESH J. DESAI VS. ACIT 5 3 . THIS ASSESSEE S CROSS OBJECTION IS DISMISSED. ORDER PR ONOUNCED IN THE OPEN C OURT ON 18 - 03 - 201 6 SD/ - SD/ - ( PRAMOD KUMAR ) ( S. S. GODARA ) ACCO UNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 18 /03 /2016 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,