ACIT, Jaipur V. SHRI PRAMOD CHAND MAHNOT, Jaipur

ITA 1135/JPR/2011

• Counselvise Citation: 113523114 RSA 2011
• Duration Of Justice: 3 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2007-2008
• Appeal Filed On: 29-12-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: G G MUNDRA
• Keywords: Salary income

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR JH VKJ-IH-RKSYKUH] U;KF;D LNL; ,OA JH VH-VKJ-EHUK] YS[KK LNL; DS LE{K BEFORE: SHRI R.P. TOLANI, JM & SHRI T.R. MEENA, AM VK;DJ VIHY LA- @ ITA NO. 1135/JP/2011 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2007-08 THE A.C.I.T. CIRCLE-3, JAIPUR. CUKE VS. SHRI PRAMOD CHAND MAHNOT C-345, HANS MARG, MALVIYA NAGAR, JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ L A-@ PAN/GIR NO.: AAPPM 5898 M VIHYKFKHZ @ APPELLANT IZR;FKHZ @ RESPONDENT JKTLO DH VKSJ LS @ REVENUE BY : SHRI AJAY MALIK. FU/KZKFJRH DH VKSJ LS @ ASSESSEE BY : SHRI G.G. MUNDRA LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 01/12/2014 ?KKS'K .KK DH RKJH[ K @ DATE OF PRONOUNCEMENT : 13/02/2015 VKNS'K @ ORDER PER: R.P. TOLANI, J.M. THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER DATED 07/10/2011 BY THE LEARNED CIT(A)-I, JAIPUR FOR A.Y. 2007-08. THE SOLE GROUND OF APPEAL IS AS UNDER:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LEARNED CIT(A) IS JUSTIFIED IN DELETING T HE DISALLOWANCE ITA 1135/JP/2011_ ACIT VS. SHRI PRAMOD CHAND MAHNOT 2 OF RS. 9,37,816/- MADE BY THE A.O. ON ACCOUNT OF I NTEREST ETC. PAID BY THE ASSESSEE ON AMOUNT TAKEN ON LOAN AND FO RWARDED TO M/S JVS FOODS P. LTD. WHERE HE IS A DIRECTOR. 2. THE LEARNED D.R. RELIED ON THE ORDER OF THE ASSES SING OFFICER. 3. LEARNED COUNSEL FOR THE ASSESSEE CONTENDS THAT T HE ASSESSEE IS AN INDIVIDUAL DERIVING INCOME FROM SALARY, HOUSE PR OPERTY, INCOME FROM OTHER SOURCES I.E. INTEREST. DURING THE COURSE OF A SSESSMENT PROCEEDINGS, THE ASSESSING OFFICER WITHOUT CONSIDERI NG THE INTEREST INCOME OF THE ASSESSEE, DISALLOWED THE ABOVE AMOUNT OF INTEREST PAID BY THE ASSESSEE ON BORROWINGS RAISED BY HIM FOR ADVA NCING THEM TO THE COMPANIES M/S JVS FOODS PVT. LTD AND FLORA O FOODS. 3.1 THE ASSESSEE IS PROMOTER OF JVS FOODS PVT. LTD. AND HIS DAUGHTER IS PROMOTER OF FLORA O FOODS. AS PER COMPANY LAW, T HE COMPANIES ARE DEBARRED FROM PAYING INTEREST EXCEEDING 12.5% PER A NNUM. IN ORDER TO HELP THE COMPANIES PROMOTED BY THEM IN RAISING FUND S ASSESSEE RAISED THE FUNDS FROM MARKET @ 12.5% AND ADVANCED TO COMPAN IES @ 12%. THE LEARNED CIT(A) AFTER CONSIDERING THE FACTS AND C IRCUMSTANCES, DELETED THE ADDITION BY FOLLOWING OBSERVATIONS: I HAVE CAREFULLY PERUSED THE ORDER OF THE A.O. AND THE SUBMISSIONS OF THE AR. THE ORDER OF THE A.O. IS A VE RY CRYPTIC AND DOES NOT CONTROVERT SIMILAR SUBMISSIONS MADE BY THE ITA 1135/JP/2011_ ACIT VS. SHRI PRAMOD CHAND MAHNOT 3 ASSESSEE DURING THE COURSE OF ASSESSMENT PROCEEDING S. IT IS A FACT THAT THE ASSESSEE IS A PROMOTER AND DIRECTOR I N THE COMPANY M/S JVS FOODS PVT. LTD. HE ACCEPTED THE LOA NS FROM VARIOUS PARTIES AND BANK AT MARKET RATE AND PAID BR OKERAGE AND BANK CHARGES BECAUSE THE COMPANY WAS DEBARRED FR OM TAKING LOAN FROM GENERAL PUBLIC BY COMPANY LAW. THESE FUNDS WERE IN TURN ADVANCED TO THE COMPANY FROM WHOM THE ASSESSEE RECEIVED INTEREST @ 12%. AT BEST WHAT CAN B E DISALLOWED IS THE DIFFERENCE IN RATE OF INTEREST PAI D BY THE ASSESSEE AND THAT RECEIVED BY HIM FROM THE COMPANY IN WHICH HE WAS A MAJOR STAKE HOLDER. AS PER SECTION 3 OF ACC EPTANCE OF DEPOSITS RULES OF COMPANY, IT HAS BEEN LAID DOWN TH AT NO COMPANY SHALL INVEST OR ACCEPT OR RENEW ANY DEPOSIT IN ANY FORM AT A RATE OF INTEREST EXCEEDING 12.5% PER ANNU M. FROM THE PERUSAL OF THE ORDER IT REVEALS THAT THE COMPANY PAID INTEREST @ 12% TO THE ASSESSEE. IT WAS SUBMITTE D THAT THE COMPANY PAID 12% RATE OF INTEREST INSTEAD 12.5% DUE TO POOR FINANCIAL CONDITIONS. IT IS A SETTLED LEGAL POSITIO N THAT THE DEPARTMENT CANNOT DIRECT THE ASSESSEE ON HOW TO RUN HIS BUSINESS OR HOW TO TAKE BUSINESS DECISIONS. IT WAS TH E BUSINESS DECISION OF THE ASSESSEE TO ADVANCE LOAN TO THE COM PANY @ 12% RATHER THAN 12.5% WHICH HAS AT BEST RESULTED IN A LOSS OF RS. 31,297/- IN HIS HANDS. IT WAS THE BUSINESS DECIS ION OF THE APPELLANT TO INCUR THE LOSS OF RS. 31,297/- IN HIS INDIVIDUAL CAPACITY THAN IN THE HANDS OF THE COMPANY. THE DEPAR TMENT CANNOT QUESTION THIS DECISION AS BOTH THE ENTITIES ARE TAXABLE. ITA 1135/JP/2011_ ACIT VS. SHRI PRAMOD CHAND MAHNOT 4 GIVEN THE ABOVE FACTS AND LAW, THE IMPUGNED ADDITION OF RS. 9,37,816/- IS DIRECTED TO BE DELETED. 4. LEARNED COUNSEL FOR THE ASSESSEE RELIED ON SECTI ON 56(2), WHICH STIPULATES THAT THE EXPENDITURE INCURRED BY THE ASS ESSEE FOR EARNING THE INCOME FROM OTHER SOURCES I.E. INTEREST IS AN ALLOWA BLE DEDUCTION. SINCE FOR EARNING THE INTEREST FROM THESE COMPANIES, THE ASSESSEE BORROWED THE FUNDS FROM MARKET, THE INTEREST PAID IN THIS BE HALF IS AN ALLOWABLE EXPENDITURE. 5. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL AVAILABLE ON THE RECORD. AS TH E FACTS EMERGE, THE LEARNED ASSESSING OFFICER FAILED TO APPRECIATE THAT THE ASSESSEE WAS OFFERING THE INTEREST INCOME ALBEIT @ 12%. DUE TO S OME LEGAL RESTRICTIONS ON THE BORROWINGS BY THE COMPANIES THIS COURSE WAS ADOPTED RAISING FUNDS @ 12.5% INTEREST AND ADVANCING TO COMPANIES AT 12%, THE DIFFERENCE WAS MEAGRE RS. 31,297/-. THE LEAR NED CIT(A) HELD THAT IT WAS A PRUDENT BUSINESS DECISION AS THE BETTE R FINANCIAL HEALTH OF PROMOTED COMPANIES WOULD HAVE BENEFITTED THE ASSESSE E AS WELL. BOTH THE ENTITIES ARE TAXABLE AT THE HIGHEST RATE. CONSE QUENTLY, THERE IS NO ITA 1135/JP/2011_ ACIT VS. SHRI PRAMOD CHAND MAHNOT 5 LOST REVENUE. WE SEE NO INFIRMITY IN THE ORDER OF T HE LEARNED CIT(A), WHICH IS UPHELD. 6. IN THE RESULT, REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13/02/2015. SD/- SD/- VH-VKJ-EHUK VKJ-IH-RKSYKUH (T.R. MEENA) (R.P.TOLANI) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ @ JAIPUR FNUKAD @ DATED:- 13 TH FEBRUARY, 2015 *RANJAN VKNS'K DH IZFRFYFI VXZSFKR @ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ @ THE APPELLANT- THE ACIT, CIRCLE-3, JAIPUR. 2. IZR;FKHZ @ THE RESPONDENT-SHRI PRAMOD CHAND MAHNOT, JAIPUR. 3. VK;DJ VK;QDRVIHY @ THE CIT(A)-I, JAIPUR. 4. VK;DJ VK;QDR @ CIT, JAIPUR 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ @ DR, ITAT, JAIPUR 6. XKMZ QKBZY @ GUARD FILE (ITA NO. 1135/JP/2011) VKNS'KKUQLKJ @ BY ORDER, LGK;D IATHDKJ @ ASST. REGISTRAR