GTPL Hathway Private Limited, Ahmedabad V. The Dy. Commissioner of Income Tax, Circle- 2(1)(1), Ahmedabad

CO 86/AHD/2016

• Counselvise Citation: [2018] 123 COUNSELVISE.COM (IT) 3833 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 9 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 06-06-2018
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2012-2013
• Appeal Filed On: 27-06-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: T P HEMANI
• Keywords: Earning of tax free income; Proportionate interest
• Section: 143(3); 14A

Judgement Text

ITA NO.1180/AHD/2016 & CO NO.86/AHD/2016 ASSESSMENT YEAR: 2012-13 PAGE 1 OF 4 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND RAJPAL YADAV JM] ITA NO.1180/AHD/2016 ASSESSMENT YEAR: 2012-13 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2(1)(1), AHMEDABAD. ..................APPELLANT VS. GTPL HATHWAY PRIVATE LIMITED, ............................RESPONDENT 202, SAHAJANAND SHOPPING CENTRE, 2 ND FLOOR, OPP. SWAMINARAYAN MANDIR, SHAUHIBAUG, AHMEDABAD 380 004. [PAN : AACCG 6676 M] C.O. NO.86/AHD/2016 (IN ITA NO.1180/AHD/2016) ASSESSMENT YEAR: 2012-13 GTPL HATHWAY PRIVATE LIMITED, ..................APPELLANT 202, SAHAJANAND SHOPPING CENTRE, 2 ND FLOOR, OPP. SWAMINARAYAN MANDIR, SHAUHIBAUG, AHMEDABAD 380 004. [PAN : AACCG 6676 M] VS. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE 2(1)(1), AHMEDABAD. ............................RESPONDENT APPEARANCES BY T.P. HEMANI FOR THE ASSESSEE SAURABH SINGH FOR THE REVENUE HEARING CONCLUDED ON: 15.03.2018 ORDER PRONOUNCED ON : 06.06.2018 O R D E R PER PRAMOD KUMAR, AM: ITA NO.1180/AHD/2016 & CO NO.86/AHD/2016 ASSESSMENT YEAR: 2012-13 PAGE 2 OF 4 1. THIS SET OF APPEAL AND THE CROSS OBJECTION ARE D IRECTED AGAINST LEARNED CIT(A)S ORDER DATED 29.02.2016 IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT, 1961, FOR THE ASSESSMENT YEAR 2012-13. 2. IN THE FIRST GROUND OF APPEAL, THE APPELLANT HAS RAISED THE FOLLOWING GRIEVANCE: - 1. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.58,51,129/- MADE U/S.36(1)(III) OF THE ACT, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD 3. DURING THE COURSE OF SCRUTINY ASSESSMENT PROCEED INGS, THE ASSESSING OFFICER NOTICED THAT THE CAPITAL WORK IN PROGRESS CAPITALIS ED BY THE ASSESSEE DOES NOT HAVE ANY INTEREST COMPONENT, EVEN THOUGH THE ASSESSEE HAS TA KEN HUGE SECURED AND UNSECURED LOANS WHICH MUST HAVE BEEN USED FOR SUCH CAPITAL WO RK IN PROGRESS AS WELL. THE PLEA OF THE ASSESSEE THAT IT HAD SUFFICIENT INTEREST FREE F UNDS WAS REJECTED. IT WAS IN THIS BACKDROP THAT THE ASSESSING OFFICER PROCEEDED TO MA KE THE DISALLOWANCE OF RS.58,51,129/- BY OBSERVING, INTER ALIA , AS FOLLOWS :- 3.5 THUS IN THE ABSENCE OF ANY EVIDENCE PROVING NE XUS THAT THE SURPLUS FUNDS AVAILABLE WITH THE ASSESSEE WAS UTILISED FOR CWIP, THE CLAIM OF THE ASSESSEE IS NOT FOUND ACCEPTABLE AND HENCE INTEREST U/S.36(1)(I II) OF THE ACT, IS CAPITALISED AS PER THE WORKING GIVEN BELOW. SINCE, THE ASSESSEE H AS NOT GIVEN ANY DAY TO DAY DETAILS OF ADDITIONS TO CWIP AND TRANSFER FROM CWIP TO THE RESPECTIVE BLOCK OF ASSETS DURING THE YEAR; IT IS DIFFICULT TO WORK OUT THE INTEREST CAPITALISATION TO CWIP. ACCORDINGLY, THE ISSUE WAS DISCUSSED WITH TH E A.R. OF THE ASSESSEE AND THE INTEREST HAS BEEN CAPITALISED ON ADOPTING FOLLO WING FORMULA. BORROWED FUND AS ON 01.04.2011 657670818 BORROWED FUND AS ON 31.03.2012 820682045 AVERAGE BORROWED FUND (A) 1478352863 739176431 INTEREST PAID DURING THE YEAR (B) 97178573 WIP FOR THE YEAR AS ON 01.04.2011 53279835 WIP FOR THE YEAR AS ON 31.03.2012 35731905 AVERAGE WIP (C) 89011740 44505870 PROPORTIONATE INTEREST DISALLOWANCE ON CWIP (B X C/A) 5851129 3.6 ACCORDINGLY, OUT OF TOTAL INTEREST EXPENSES DEB ITED IN THE P&L A/C., A SUM OF RS.5851129/- AS CALCULATED ABOVE, IS CAPITALISED TOWARDS CWIP U/S. 36(1)(III) OF THE ACT AND ADDED TO THE TOTAL INCOME OF THE ASS ESSEE. 4. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE LEARNED CIT(A) WHO REVERSED THE ACTION OF THE ASSESSING OFFICER ON THE BASIS OF REASONING SET OUT BELOW:- ITA NO.1180/AHD/2016 & CO NO.86/AHD/2016 ASSESSMENT YEAR: 2012-13 PAGE 3 OF 4 4.2 I HAVE CONSIDERED THE ASSESSMENT ORDER, THE SU BMISSIONS MADE BY THE APPELLANT AND THE CASE LAWS CITED BY THE APPELLANT. THE AO DISALLOWED THE AMOUNT OF RS.58,51,129/- U/S. 36(1)(III) OF THE IT ACT SINCE THE APPELLANT DID NOT ESTABLISH ANY NEXUS TO SHOW THAT ITS OWN FUNDS HAD BEEN UTILISED TOWARDS CWIP AND SINCE INTEREST EXPENSES HAD BEEN DEBITED TO THE PROFIT AND LOSS ACCOUNT. THE APPELLANT ON THE OTHER HAND, SUBMITTED THAT IT HAD SUFFICIENT FUNDS OF ITS OWN WHICH WERE USED BY IT FOR INVESTMENT IN CWIP. A PERUSAL OF THE SUBMISSIONS MADE BY THE APPELLANT SHOWS THAT THE APPELLANT HAD SUFFICIENT INTEREST FREE FUNDS DURING THE YEAR. IT IS SETTLED LAW THAT IF INTEREST FREE FUNDS AVAILABLE WITH AN APPELLANT ARE SUFFICIENT TO MEET ITS INVESTMENTS, THEN IT IS TO BE PRESUMED THAT THE INV ESTMENTS HAVE BEEN MADE FROM THE INTEREST FREE FUNDS AVAILABLE. THIS VIEW HAS BEEN TAKEN BY THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. MUNJAL SALES C ORPORATION 298 ITR 298 (SC). THIS VIEW HAS ALSO BEEN HELD BY THE HONBLE ITAT, AHMEDABAD IN THE CASE OF TORRENT FINANCIERS V. ACIT (2001) 73 TTJ 624 (AH D.), BY THE HONBLE GUJARAT HIGH COURT IN CIT VS. TORRENT POWER 363 ITR 474, BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. RELIANCE UTILITIES & POWER LTD. 31 3 ITR 340, AND BY THE HONBLE GUJARAT HIGH COURT IN CIT VS. SUZLON ENERGY LTD. 35 4 ITR 630. CONSIDERING THE FACTS OF THE CASE, THE SUBMISSIONS MADE, AND THE CASE LAWS ON THE MATTER, THE DISALLOWANCE OF RS.58,51,12 9/- U/S. 36(1)(III) OF THE I.T. ACT MADE BY THE ASSESSING OFFICER IS DELETED. GROU ND OF APPEAL NO.1 IS ALLOWED. 5. THE ASSESSING OFFICER IS AGGRIEVED OF THE RELIEF SO GRANTED BY THE LEARNED CIT(A) AND IS IN APPEAL BEFORE US. 6. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE AP PLICABLE LEGAL POSITION. 7. AS LEARNED CIT(A) RIGHTLY POINTS OUT THE LEGAL P OSITION, IN THE LIGHT OF BINDING JUDICIAL PRECEDENT, IS THAT WHEN ASSESSEE HAS SUFFI CIENT INTEREST FREE FUNDS TO MEET ITS INVESTMENTS, THE PRESUMPTION HAS TO BE THAT INVESTM ENTS ARE MADE OUT OF SUCH INTEREST FREE FUNDS. ACCORDINGLY, NO INTEREST DISALLOWANCE CAN BE MADE FOR THAT REASON. THAT PRECISELY IS THE SITUATION BEFORE US. IN THIS VIEW OF THE MATTER, NO PORTION OF INTEREST COSTS OF THE ASSESSEE IS REQUIRED TO BE CAPITALISED . FOR THIS SHORT REASON ALONE, WE MUST APPROVE THE CONCLUSIONS ARRIVED AT BY THE LEAR NED CIT(A). THEREFORE, WE NEED NOT REALLY DEAL WITH THE ALTERNATE PLEA OF THE ASSESSEE THAT, AS ON THE RELEVANT POINT OF TIME, CAPITALISATION REQUIREMENT UNDER PROVISO TO SECTION 36(1)(III) WAS RESTRICTED TO ASSET FOR EXTENSION OF EXISTING BUSINESS OR PROFESSION WHERE AS NO SUCH EXTENSION OF THE BUSINESS IN THE PRESENT CASE. 8. GROUND NO.1 IS THUS DISMISSED. ITA NO.1180/AHD/2016 & CO NO.86/AHD/2016 ASSESSMENT YEAR: 2012-13 PAGE 4 OF 4 9. IN GROUND NO.2, THE APPELLANT HAS RAISED THE FOL LOWING GRIEVANCE :- 2. THE LD. CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF RS.67,78,613/- MADE U/S.14A OF THE ACT, WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE AND THE MATERIAL BROUGHT ON RECORD 10. LEARNED REPRESENTATIVES FAIRLY AGREE THAT THIS ISSUE IS COVERED, IN FAVOUR OF THE ASSESSEE, BY HONBLE JURISDICTIONAL HIGH COURTS JU DGEMENT IN THE CASE OF CIT VS. CORRTECH ENERGY PVT. LTD. [(2015) 372 ITR 97 (GUJ)] INASMUCH AS THE ASSESSEE DID NOT HAVE ANY TAX EXEMPT INCOME IN THIS YEAR AND, THEREF ORE, THE DISALLOWANCE UNDER SECTION 14A COULD NOT HAVE BEEN MADE AT ALL. 11. GROUND NO.2 IS, THEREFORE, DISMISSED. 12. NO SPECIFIC ARGUMENTS ARE RAISED IN SUPPORT OF THE CROSS OBJECTION. THE GROUNDS RAISED IN THE CROSS OBJECTION ARE THUS DISMISSED AS NOT PRESSED. 13. IN THE RESULT, THE APPEAL AS ALSO THE CROSS OBJ ECTION ARE DISMISSED. PRONOUNCED IN THE OPEN COURT ON THIS 6 TH DAY OF JUNE, 2018. SD/- SD/- RAJPAL YADAV PRAM OD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: 6 TH JUNE, 2018. PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPONDE NT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD