M/s. Regent Garage Pvt. Ltd., New Delhi V. ITO, New Delhi

CO 295/DEL/2014

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 0996 (ITAT-DELHI)
• Duration Of Justice: 8 month(s) 19 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 03-07-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: F
• Assessment Year: 2010-2011
• Appeal Filed On: 15-10-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: K K JAISWAL
• Assessee Lawyers: M P RASTOGI SHRI R A BANSAL
• Keywords: Proportionate interest
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH SMC SMC SMC SMC : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G.C. GUPTA BEFORE SHRI G.C. GUPTA BEFORE SHRI G.C. GUPTA BEFORE SHRI G.C. GUPTA, VICE , VICE , VICE , VICE PRESIDENT PRESIDENT PRESIDENT PRESIDENT ITA NO ITA NO ITA NO ITA NO . .. . 173/DEL/2014 173/DEL/2014 173/DEL/2014 173/DEL/2014 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2010 2010 2010 2010 - -- - 11 1111 11 INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, WARD WARD WARD WARD- -- -15(3), 15(3), 15(3), 15(3), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. VS. VS. VS. VS. M/S REGENT GARAGE PVT.LTD., M/S REGENT GARAGE PVT.LTD., M/S REGENT GARAGE PVT.LTD., M/S REGENT GARAGE PVT.LTD., B BB B- -- -1/E 1/E1/E 1/E- -- -20, MOHAN COOPE 20, MOHAN COOPE 20, MOHAN COOPE 20, MOHAN COOPERATIVE RATIVE RATIVE RATIVE INDL.AREA, INDL.AREA, INDL.AREA, INDL.AREA, MATHURA ROAD, MATHURA ROAD, MATHURA ROAD, MATHURA ROAD, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 044. 110 044. 110 044. 110 044. PAN : AACCR6439D. PAN : AACCR6439D. PAN : AACCR6439D. PAN : AACCR6439D. (APPELLANT) (RESPONDENT) CROSS OBJECTION CROSS OBJECTION CROSS OBJECTION CROSS OBJECTION NO NONO NO .295/DEL/2014 .295/DEL/2014 .295/DEL/2014 .295/DEL/2014 ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : ASSESSMENT YEAR : 2010 2010 2010 2010 - -- - 11 1111 11 M/S REGENT GARAGE PVT.LTD., M/S REGENT GARAGE PVT.LTD., M/S REGENT GARAGE PVT.LTD., M/S REGENT GARAGE PVT.LTD., B BB B- -- -1/E 1/E1/E 1/E- -- -20, MOHAN COOPERATIVE 20, MOHAN COOPERATIVE 20, MOHAN COOPERATIVE 20, MOHAN COOPERATIVE INDL.AREA, INDL.AREA, INDL.AREA, INDL.AREA, MATHURA ROAD, MATHURA ROAD, MATHURA ROAD, MATHURA ROAD, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 044. 110 044. 110 044. 110 044. PAN : AACCR6439D. PAN : AACCR6439D. PAN : AACCR6439D. PAN : AACCR6439D. VS. VS. VS. VS. INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, INCOME TAX OFFICER, WARD WARD WARD WARD- -- -15(3), 15(3), 15(3), 15(3), NEW DELHI. NEW DELHI. NEW DELHI. NEW DELHI. (APPELLANT) (RESPONDENT) REVENUE BY : SHRI K.K. JAISWAL, SR.DR. ASSESSEE BY : SHRI M.P. RASTOGI, ADVOCATE, SHRI R.A. BANSAL AND SHRI S.S. AGRAWAL, CAS. DATE OF HEARING : 04.06.2015 04.06.2015 04.06.2015 04.06.2015 DATE OF PRONOUNCEMENT : 03.07.2015 03.07.2015 03.07.2015 03.07.2015 ORDER ORDER ORDER ORDER THIS APPEAL BY THE REVENUE AND THE CROSS-OBJECTION B Y THE ASSESSEE FOR THE ASSESSMENT YEAR 2010-11 ARE DIRECTED AGAIN ST THE ORDER OF LEARNED CIT(A)-XVIII, NEW DELHI DATED 29 TH OCTOBER, 2013. SINCE IDENTICAL ISSUE IS INVOLVED IN THE APPEAL PREFER RED BY THE REVENUE ITA-173/D/2014 & C.O. 295/D/2014 2 AND THE CROSS-OBJECTION PREFERRED BY THE ASSESSEE, THESE ARE BEING DISPOSED OF WITH THIS CONSOLIDATED ORDER. 2. THE GROUNDS OF APPEAL RAISED BY THE REVENUE IN ITS APPEAL READ AS UNDER:- 1. ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, TH E LD.CIT(A) HAS ERRED IN REDUCING THE ADDITION TO RS.8,32,098/- AGAINST RS.21,66,798/- MADE ON ACCOUNT O F DISALLOWANCE OF PROPORTIONATE INTEREST. 1.1 ON THE FACTS & IN THE CIRCUMSTANCES OF THE CASE, TH E LD.CIT(A) HAS ERRED IN REDUCING THE SAID ADDITION BY NOT APPRECIATING THE FACT THAT EXCLUSION OF THE WORKING CAPITAL AND TERM LOAN WHILE CALCULATING THE PROPORTIONATE I NTEREST CAN NOT BE SAID AS A CORRECT APPROACH. 3. THE GROUNDS RAISED BY THE ASSESSEE IN ITS CROSS-OBJECTI ON READ AS UNDER:- 1. IN THE ABSENCE OF ANY NEXUS BETWEEN THE INTEREST BEARING BORROWED FUNDS AND INTEREST FREE ADVANCES GIVE N, THE PROPORTIONATE DISALLOWANCE OF INTEREST ALLEGED TO HAVE BEEN RELATING TO INTEREST FREE ADVANCES IS ARBITRARY, UNJUST AND AT ANY RATE VERY EXCESSIVE. 2. THAT WITHOUT PREJUDICE TO GROUND NO.1 ABOVE, THE ASSESSEE IS HAVING SUFFICIENT INTEREST FREE FUNDS IN THE FO RM OF CAPITAL, RESERVE AND INTEREST FREE LOANS AND ADVANC ES TO COVER UP THE INTEREST FREE ADVANCES SO MADE AND ACCORDINGLY THE DISALLOWANCE OF PROPORTIONATE INTER EST OF RS.8,32,058/- SUSTAINED BY THE CIT(APPEALS) IS BASED ON PRESUMPTION AND ASSUMPTION AND BAD IN LAW. 4. LEARNED DR SUBMITTED THAT THE ASSESSEE HAS NOT FILED EXACT CALCULATION OF INTEREST ON AMOUNTS ADVANCED INTEREST-F REE BEFORE THE ASSESSING OFFICER OR BEFORE THE LEARNED CIT(A). HE SUBM ITTED THAT THE CIT(A) HAS NOT GIVEN ANY LOGIC FOR PARTLY ALLOWING T HE GROUNDS OF APPEAL OF THE ASSESSEE. HE SUBMITTED THAT THERE IS A MISTAKE IN THE DETAILS OF ITA-173/D/2014 & C.O. 295/D/2014 3 INTEREST-FREE FUNDS AS WORKED OUT BY THE ASSESSEE AND COP Y FILED AT PAGE 12 OF THE COMPILATION BEFORE THE TRIBUNAL AND, IN FACT, THE NET WORTH OF THE ASSESSEE COMPANY WAS ONLY ABOUT `58 LAKHS. HE SUBMITTED THAT THE ASSESSEE HAS GIVEN INTEREST FREE ADVANC ES OF `2.18 CRORES AND, THEREFORE, THE PROPORTIONATE DISALLOWANCE MADE BY THE ASSESSING OFFICER WAS JUSTIFIED. HE REFERRED TO THE RELE VANT PORTION OF THE ASSESSMENT ORDER IN SUPPORT OF HIS ARGUMENTS. HE REL IED ON THE ORDER OF THE ASSESSING OFFICER. 5. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT ALL T HREE CONDITIONS AS LAID OUT IN THE VARIOUS DECISIONS OF THE HONBLE HIGH COURTS AND HONBLE SUPREME COURT ARE SATISFIED FOR ALL OWANCE OF INTEREST PAID AND CLAIMED BY THE ASSESSEE. HE RELIED ON THE FOLLOWING DECISIONS IN SUPPORT OF HIS ARGUMENTS :- (I) RAM KISHAN OIL MILLS VS. CIT, U.P. [1965] 56 IT R 186 (MP). (II) MADHAV PRASAD JATIA VS. CIT, U.P. [1979] 118 I TR 200 (SC). (III) CIT, BOMBAY CITY II VS. BOMBAY SAMACHAR LTD., BOMBAY [1969] 74 ITR 723 (BOMBAY). (IV) REGAL THEATRE VS. CIT [1997] 225 ITR 205 (DEL HI). HE SUBMITTED THAT THE BORROWINGS WERE ONLY FOR THE BU SINESS PURPOSES OF THE ASSESSEE. HE REFERRED TO THE DETAILS OF INTEREST PAID FOR THE RELEVANT YEAR, COPY FILED IN THE COMPILATION AT PAG E 11 BY THE ASSESSEE AND ALSO THE DETAILS OF INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE, COPY FILED AT PAGE 12 OF THE COMPILATION OF THE ASSESSE E. HE SUBMITTED THAT THE ASSESSEE WAS HAVING `4.51 CRORES AS TOTAL INTEREST FREE FUNDS AS PER THE DETAILS FILED. HE RELIED ON THE FOLLOWING DECISIONS:- (I) CIT AND ANOTHER VS. RADICO KHAITAN LTD. [2005 ] 274 ITR 354 (ALLAHABAD). ITA-173/D/2014 & C.O. 295/D/2014 4 (II) CIT VS. PREM HEAVY ENGINEERING WORKS P.LTD. [2 006] 285 ITR 554 (ALLAHABAD). (III) CIT VS. RELIANCE UTILITIES AND POWER LTD. [20 09] 313 ITR 340 (BOMBAY). (IV) CIT VS. BHARTI TELEVENTURE LTD. [2011] 331 IT R 502 (DELHI). 6. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT I N THE IMMEDIATELY SUCCEEDING ASSESSMENT YEAR 2011-12, THE ASSESSIN G OFFICER, IN SCRUTINY ASSESSMENT, HAS HIMSELF ACCEPTED THE BIFURCATION FORMULA FOR DISALLOWANCE AS DONE BY THE CIT(A) IN THE IMPUGNED ORDER FOR THE RELEVANT ASSESSMENT YEAR 2010-11. 7. I HAVE CONSIDERED THE RIVAL SUBMISSIONS CAREFULLY AN D HAVE PERUSED THE ORDER OF THE ASSESSING OFFICER AND THE CIT(A ) AND ALSO THE COPIES OF VARIOUS DETAILS FILED IN THE COMPILATION BEF ORE THE TRIBUNAL. I FIND THAT THE CIT(A) HAS PASSED A WELL-REASONED SPEAKIN G ORDER ON THE ISSUE. IT COULD NOT BE SAID THAT THE ASSESSEE HAS NOT FIL ED THE REQUISITE DETAILS OF THE INTEREST ON AMOUNT ADVANCED AS INTEREST FREE BY IT. THE ORDER PASSED BY THE CIT(A) SEEMS TO BE LOGICAL. THE CI T(A) HAS GIVEN A FINDING THAT THE ASSESSEE WAS HAVING SURPLUS INTEREST FREE FUNDS AMOUNTING TO `2.32 CRORES AS DEMONSTRATED BY THE ASSESSEE BEFORE HIM. HE HAS RECORDED IN HIS APPELLATE ORDER THAT AN ANALYSIS OF DETAILS OF INTEREST PAYMENT SHOWS THAT OUT OF THE INTEREST PAYM ENT OF `2.00 CRORES, THE ASSESSEE HAS PAID `1.60 CRORES ON ACCOUNT OF W ORKING CAPITAL AND THE AMOUNT OF `2.63 LAKHS AS INTEREST ON M ISCELLANEOUS PAYMENTS AND THAT THE PAYMENT OF INTEREST AMOUNTING T O `37.58 LAKHS WAS ON UNSECURED LOANS. THE CIT(A), AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, HELD IT REASONABLE TO MAKE PROPORTIONAT E DISALLOWANCE OF INTEREST PAYMENT ON UNSECURED LOAN AND THE CLAIM O F THE ASSESSEE FOR PAYMENT OF INTEREST ON TERM LOAN AND WORKING CAP ITAL AND MISCELLANEOUS PAYMENTS WAS ACCEPTED AS THEY WERE FOR T HE BUSINESS ITA-173/D/2014 & C.O. 295/D/2014 5 REQUIREMENT OF THE ASSESSEE. THE TOTAL INTEREST PAID ON UNSECURED LOAN WAS BIFURCATED IN THE PROPORTION OF TOTAL UNSECURED L OAN AND INTEREST FREE LOANS AND ADVANCES AND, ACCORDINGLY, A SUM OF `8 ,32,058/- WAS DISALLOWED OUT OF TOTAL DISALLOWANCE OF `21,66,798/- AND THE BALANCE DISALLOWANCE WAS DELETED. I FIND THAT IN THE IMMEDI ATELY SUCCEEDING ASSESSMENT YEAR 2011-12, THE ASSESSMENT WAS FRAMED IN SCRUTI NY ASSESSMENT UNDER SECTION 143(3) AND THE ASSESSING OFFICER H AS ACCEPTED AND FOLLOWED THE FORMULA FOR MAKING PROPOR TIONATE DISALLOWANCE OUT OF INTEREST EXPENSES CLAIMED AS HELD R EASONABLE BY THE LEARNED CIT(A) IN THE IMPUGNED ORDER FOR THE RE LEVANT ASSESSMENT YEAR 2010-11. IN THESE FACTS OF THE CASE, I AM OF THE VIEW THAT THE ORDER OF LEARNED CIT(A) WAS JUSTIFIED AND NO INTERFER ENCE IN HIS ORDER IS CALLED FOR, WHICH IS ACCORDINGLY CONFIRMED, AND THE GROUNDS OF APPEAL OF THE REVENUE AND THE GROUNDS OF THE CROSS-OBJECTION OF THE ASSESSEE ARE DISMISSED. 8. IN THE RESULT, BOTH THE APPEAL OF THE REVENUE AND THE CROSS- OBJECTION OF THE ASSESSEE ARE DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 03.07.2015. SD/- (G. (G. (G. (G. C. GUPTA C. GUPTA C. GUPTA C. GUPTA ) )) ) VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VK. COPY FORWARDED TO: - 1. REVENUE : INCOME TAX OFFICER, WARD INCOME TAX OFFICER, WARD INCOME TAX OFFICER, WARD INCOME TAX OFFICER, WARD- -- -15(3), NEW DELHI. 15(3), NEW DELHI. 15(3), NEW DELHI. 15(3), NEW DELHI. 2. ASSESSEE : M/S REGENT GARAGE PVT.LTD., M/S REGENT GARAGE PVT.LTD., M/S REGENT GARAGE PVT.LTD., M/S REGENT GARAGE PVT.LTD., B BB B- -- -1/E 1/E1/E 1/E- -- -20, MOHAN COOPERATIVE INDL.AREA, 20, MOHAN COOPERATIVE INDL.AREA, 20, MOHAN COOPERATIVE INDL.AREA, 20, MOHAN COOPERATIVE INDL.AREA, MATHURA ROAD, NEW DELHI MATHURA ROAD, NEW DELHI MATHURA ROAD, NEW DELHI MATHURA ROAD, NEW DELHI 110 044. 110 044. 110 044. 110 044. 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR