Sh. Harmanjot Singh Gosal, Chandigarh V. ACIT, Chandigarh

ITA 1091/CHANDI/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 57587 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2007-2008
• Appeal Filed On: 09-11-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: JAI SHREE SHARMA
• Assessee Lawyers: SUNIL KUMAR
• Keywords: Capital asset; Proportionate interest; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B CHANDIGARH BEFORE MS.SUSHMA CHOWLA, JUDICIAL MEMBER AND SHRI MEHAR SINGH, ACCOUNTANT MEMBER ITA NO. 1091/CHD/2011 ASSESSMENT YEAR: 2007-08 SHRI HARMANJOT SINGH GOSAL, V ACIT, CIRCLE 2(1), PROP. M/S PLATINUM SALES, CHANDIGARH. SCO 14, SECTOR 17-E, CHANDIGARH. PAN: AFOPG-1763P (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SUNIL KUMAR RESPONDENT BY : SMT.JAISHREE SHARMA DATE OF HEARING : 12.01.2012 DATE OF PRONOUNCEMENT : 13.01.2012 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE ASSESSEE IS DIRECTE D AGAINST THE ORDER DATED 12.01.2012 PASSED BY THE LD . CIT(A) U/S 250(6) OF THE INCOME-TAX ACT,1961 (IN SHORT 'TH E ACT'). 2. IN THIS APPEAL, THE ASSESSEE HAS RAISED THE FOLL OWING GROUNDS OF APPEAL: 1. THAT THE ORDER OF THE LD. CIT(A) CHANDIGARH IS PARTLY DEFECTIVE, BOTH IN LAW AND FACTS OF THE CASE. 2. THAT THE LD. CIT(A) HAS NOT BEEN JUSTIFIED IN UPHOLDING ADDITION OF RS.8,53,294/- MADE UNDER THE PROVISIONS OF SECTION 36(1)(III). 3. THAT ANY OTHER GROUND WHICH MAY BE TAKEN UP AT THE TIME OF HEARING WITH THE KIND PERMISSION. 2 3. GROUND NOS. 1 & 3 ARE GENERAL IN NATURE AND NEED NO SEPARATE ADJUDICATION. 4. THE BRIEF FACTS OF THE CASE ARE THAT THE AO FOUN D THAT INTEREST FREE ADVANCES OF RS.65,63,800/- HAD BEEN M ADE TO M/S INDUS VALLEY RESORTS PVT.LTD. FOR PURCHASE OF L AND, DURING THE PERIOD UNDER REFERENCE. AS THE LAND WAS NOT DISCLOSED IN THE BALANCE SHEET, THE AO CONCLUDED TH AT THE SAME WAS NOT PUT TO USE. HOWEVER, THE ASSESSEE CLA IMED INTEREST IN THE PROFIT & LOSS ACCOUNT WHICH WAS DIS ALLOWED TO PROPORTIONATE BASIS AT RS.8,53,294/- BY THE AO U /S 36(1)(III) OF THE ACT BY PLACING RELIANCE ON THE DE CISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CI T V ABHISHEK INDUSTRIES, 286 ITR 1 (P&H). 5. IN THE COURSE OF PRESENT APPELLATE PROCEEDINGS B EFORE THE BENCH, LD. 'AR' STATED THAT NO LAND WAS PURCHAS ED AND THE ADVANCE IS STILL OUTSTANDING. HOWEVER, THE LD. 'AR' FAILED TO ESTABLISH THAT THE ADVANCE WAS MADE FOR THE PURP OSE OF BUSINESS. 6. ON THE OTHER HAND, LD. 'DR' SUPPORTED THE ORDER OF THE LOWER AUTHORITIES AND VEHEMENTLY CONTENDED THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF ABHISHEK I NDUSTRIES (SUPRA). 7. A CAREFUL PERUSAL AND CONSIDERATION OF THE RELEV ANT RECORDS REVEALS THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN THE CA SE OF 3 ABHISHEK INDUSTRIES (SUPRA) AND THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF M/S S.A.BUILDERS LTD. 288 ITR (1) IS NOT APPLICABLE TO THE FACTS OF THE PRESENT C ASE. IT IS RELEVANT TO REPRODUCE FINDINGS OF THE LD. CIT(A), W HICH IS WELL REASONED AND BASED ON THE DECISION OF THE HON'BLE JURISDICTIONAL HIGH COURT AND THE APEX COURT: 3.3 I HAVE CONSIDERED THE SUBMISSION OF THE LD. COUNSEL FOR THE APPELLANT. THE AMOUNT GIVEN TO M/S INDUS VALLEY RESORTS PVT.LTD. WAS ONLY AN ADVANCE. WHETHER THIS ADVANCE WAS FOR PURCHASE OF LAND HAS N OT BEEN PROVED BY THE APPELLANT WITH EVIDENCE, WHAT TO TALK OF THE LAND TO BE USED FOR BUSINESS PURPOSES. THE LAND HAD NOT BEEN PURCHASED DURING THE YEAR UNDER CONSIDERATION AND SO THE AMOUNT REMAINED AS ADVANCE . THE LD. COUNSEL FOR THE APPELLANT HAS PLACED RELIAN CE ON THREE JUDGMENTS OF HON'BLE SUPREME COURT, WHICH ARE DISCUSSED AS UNDER : (I) M/S S.A.BUILDERS LTD. (288 ITR 1) IN THIS CASE THE HON'BLE SUPREME COURT HAD ONLY HELD THAT IN THE CASE OF INTEREST FREE LOANS, TEST IS WHETHER THIS WAS DONE AS A MEASURE OF COMMERCIAL EXPEDIENCY. IN THE INSTANT CASE, THE APPELLANT HAD NOT EVEN PROVED THAT IT WAS AN ADVANCE FOR PURCHASE OF LAND AND WHAT WAS THE COMMERCIAL EXPEDIENCY IN GIVING THIS INTEREST FREE ADVANCE. II) M/S MUNJAL SALES CORPORATION (298 ITR 298) THE ADVANCES IN THIS CASE WERE FOR BUSINESS PURPOSE AND THAT IS WHY THE HON'BLE APEX COURT HAD HELD THAT DEDUCTION U/S 36(1)(III) WAS ALLOWABLE. IN THE INSTANT CASE, THE AMOUNT OF ADVANCE IS NOT FOR BUSINESS PURPOSE AND EVEN THE 4 PURPOSE OF ADVANCING LOAN HAS NOT BEEN PROVED WITH EVIDENCE. III) M/S CORE HEALTH CARE LTD. (298 ITR 194) THE HON'BLE APEX COURT IN THIS CASE HAD ONLY HELD THAT DEDUCTION U/S 36(1)(III) IS ALLOWABLE ON BORROWED CAPITAL IRRESPECTIVE OF WHETHER THE CAPITAL IS BORROWED TO ACQUIRE REVENUE ASSETS OR A CAPITAL ASSET. THIS JUDGMENT WAS UNDER THE OLD PROVISIONS OF SECTION 36(1)(III) AND IS NOT APPLICA BLE TO THE AMENDED PROVISIONS OF SECTION 36(1)(III). IV) M/S KERALA ROAD LINES (299 ITR 343) THE ISSUE BEFORE THE HON'BLE APEX COURT IN THIS CASE WAS WHETHER THE ASSESSEE WAS ENTITLED TO CLAIM THE AMOUNT OF INTEREST PAID ON DELAYED PAYMENT OF PURCHASE CONSIDERATION. THE FACTS IN THIS CASE ARE DISTINGUISHABLE TO THE INSTANT CASE. 3.31 FROM THE FOREGOING DISCUSSION, IT IS EVIDEN T THAT VARIOUS JUDGMENTS OF APEX COURT QUOTED BY THE LD. COUNSEL FOR THE APPELLANT ARE DISTINGUISHABLE/NOT APPLICABLE TO THE CASE OF THE APPELLANT. THE DECIS IONS OF VARIOUS HIGH COURTS QUOTED BY THE LD. COUNSEL FOR T HE APPELLANT ARE ALSO DISTINGUISHABLE ON FACTS. HENCE , IT IS HELD THAT AO WAS RIGHT IN DISALLOWING PROPORTIONATE INTEREST U/S 36(1)(III) ON ACCOUNT OF INTEREST FREE ADVANCES AND THE ADDITION MADE ON THIS ACCOUNT IS CONFIRMED GROUND OF APPEAL NO.2 IS DISMISSED. 8. IN THE PRESENT CASE, WE ARE OF THE CONSIDERED OP INION THAT THE IMPUGNED ADVANCES WERE NOT MADE FOR THE PU RPOSE OF BUSINESS, THEREFORE, FINDINGS OF THE LD. CIT(A) THAT DECISION OF M/S S.A.BUILDERS LTD.(SUPRA), RENDERED BY THE HON'BLE SUPREME COURT IS NOT APPLICABLE TO THE FACT S OF THE PRESENT CASE, ARE VALID. HOWEVER, THE DECISION APP LIED BY 5 THE LD. CIT(A) IN THE CASE OF ABHISHEK INDUSTRIES ( SUPRA) RENDERED BY THE HON'BLE JURISDICTIONAL HIGH COURT I S APPLICABLE TO THE FACTS OF THE PRESENT CASE. IN VI EW OF THE ABOVE LEGAL AND FACTUAL DISCUSSION, WE ARE OF THE C ONSIDERED OPINION THAT THERE IS NO REASON TO INTERFERE WITH T HE FINDINGS OF THE LD. CIT(A). HENCE, THE SAME ARE UPHELD AND THE GROUND OF APPEAL RAISED BY THE ASSESSEE IS DISMISSE D. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH JAN.,2012. SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 13 TH JAN.,2012. POONAM COPY TO: THE APPELLANT, THE RESPONDENT, THE CIT(A), THE CIT,DR ASSISTANT REGISTRAR, ITAT CHANDIGARH