RANCHHODDAS BHAICHAND & CO. ( COMMISSION DEPARTMENT), MUMBAI V. ITO 13(3)(1), MUMBAI

ITA 1142/MUM/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 75918 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2014
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 24-03-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 07-02-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: M A PAREKH

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL D B ENCH, MUMBAI . . , , !'#$ , % & BEFORE SHRI I.P. BANSAL, JM AND SHRI N.K. BILLAI YA, AM ./ I.T.A. NO.1142/MUM/2011 ( ' ' ' ' / ASSESSMENT YEAR :2007-08 MESSRS RANCHHODDAS BHAICHAND & CO., 199-A NARSI NATHA STREET, BHAT BAZAR, MUMBAI-400 009 / VS. THE ITO-13(3)(1), AAYAKAR BHAVAN, MUMBAI-400 020 ( % ./ )* ./ PAN/GIR NO. : AAAFR 0967P ( (+ / APPELLANT ) .. ( ,-(+ / RESPONDENT ) (+ . / APPELLANT BY: SHRI M.A. PAREKH ,-(+ / . / RESPONDENT BY: SHRI P.K. SINGH / 0% / DATE OF HEARING :24.03.2014 12' / 0% / DATE OF PRONOUNCEMENT :27.03.2014 3 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-24, MUMBAI DT.18.11.2010 PERTAINING TO A.Y. 2007-08. 2. THE SUM AND SUBSTANCE OF THE GRIEVANCE OF THE AS SESSEE IS THAT THE LD. CIT(A) ERRED IN HOLDING THAT PART OF INTEREST A MOUNTING TO RS. 3,07,518/- WAS NOT ALLOWABLE U/S. 36(1)(III) OF THE I.T. ACT. ITA NO. 1142/M/2011 2 3. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS DEB ITED INTEREST OF RS. 5,25,800/- TO ITS PROFITS AND LOSS ACCOUNT. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAS PAID INTEREST ON LOANS TAKEN WHERE AS NO INTEREST HAS BEEN CHARGED ON LOANS GIVEN BY THE ASSESSEE. THE ASSESS EE WAS ASKED TO EXPLAIN WHY THE INTEREST SHOULD NOT BE DISALLOWED. THE ASSESSEE DID NOT FURNISH ANY REPLY. THE AO COMPUTED THE INTEREST ON INTEREST FREE LOANS OF RS. 91 LAKHS AT THE RATE OF 12% PER ANNUM AND DISAL LOWED THE INTEREST OF RS. 5,25,800/-. 4. AGGRIEVED, ASSESSEE CARRIED THE MATTER BEFORE TH E LD. CIT(A). IT WAS EXPLAINED THAT THE ASSESSEE HAD INTEREST FREE F UNDS AVAILABLE WITH IT. IT WAS CLAIMED THAT THE DISALLOWANCE IF ANY SHOULD BE RESTRICTED TO RS. 3,07,518/- , IF IT IS CONSIDERED THAT INTEREST HAS TO BE DISALLOWED ON THE INTEREST FREE LOANS GRANTED IN THE PRIOR YEARS. TH E DISALLOWANCE SHOULD BE BASED ON THE WEIGHTED AVERAGE COST OF BORROWINGS. 4.1. AFTER CONSIDERING THE FACTS AND THE SUBMISSION S IN THE LIGHT OF THE PROVISIONS OF SEC. 36(1)(III) OF THE ACT, THE LD. C IT(A) AT PARA 2.2 OF HIS ORDER OBSERVED THAT THE LOANS PERTAINED TO EARLIER YEAR AND NO NEW LOAN WAS TAKEN DURING THE YEAR AND THE ASSESSEE HAD SUF FICIENT INTEREST FREE FUNDS AVAILABLE FOR ADVANCING OF THE LOANS. THE LD . CIT(A) FURTHER OBSERVED THAT THE ASSESSEE ITSELF HAS STATED THAT I F THE DISALLOWANCE HAS TO BE MADE AT ALL THEN IT HAS TO BE LIMITED TO RS. 3, 07,518/-. THE LD. CIT(A) CONCLUDED THAT THE DISALLOWANCE MADE BY THE AO DESE RVES TO BE RESTRICTED TO RS. 3,07,518/- BASED ON THE WEIGHTED AVERAGE COS T OF BORROWINGS WHICH WORKING WAS GIVEN BY THE ASSESSEE DURING THE COURSE OF THE APPELLATE PROCEEDINGS. THE LD. CIT(A) DIRECTED THE AO TO VER IFY THE SAME SUBJECT TO THE VERIFICATION, THE DISALLOWANCE WAS RESTRICTE D TO RS. 3,07,158/-. ITA NO. 1142/M/2011 3 5. AGGRIEVED BY THIS, THE ASSESSEE IS BEFORE US. T HE LD. COUNSEL FOR THE ASSESSEE STRONGLY SUBMITTED THAT THE ASSESSEE H AD SUFFICIENT INTEREST FREE FUNDS WITH IT FROM WHICH IT HAS GIVEN INTEREST FREE LOANS, THEREFORE THE ACTION OF THE REVENUE AUTHORITIES IS NOT BASED ON F ACTS. 6. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUPPORTED THE FINDINGS OF THE LOWER AUTHORITIES. 7. WE HAVE CAREFULLY PERUSED THE ORDER OF THE LOWER AUTHORITIES AND THE MATERIAL EVIDENCES BROUGHT ON RECORD. WE FIND THAT THE ASSESSEE HAS INTEREST FREE BORROWINGS TO THE TUNE OF RS. 31,79,8 35/- AND INTEREST BEARING BORROWINGS AT RS. 41,86,319/-. A PERUSAL OF THE OR DER OF THE LD. CIT(A) SHOWS THAT THE LD. CIT(A) HAS ACCEPTED THE ALTERNAT IVE PLEA OF THE ASSESSEE FOR RESTRICTING THE ADDITION TO RS. 3,07,5 18/- WHICH WAS BASED ON THE WORKING GIVEN BY THE ASSESSEE. THEREFORE, WE D O NOT FIND ANY REASON FOR THE ASSESSEE TO HAVE ANY GRIEVANCE ON THIS ISSU E. SINCE THE LD. CIT(A) HAS ACCEPTED THE ALTERNATIVE PLEA OF THE ASSESSEE A ND DIRECTED THE AO TO VERIFY THE WORKINGS GIVEN BY THE ASSESSEE, WE DO NO T FIND ANY REASON TO INTERFERE WITH THE FINDINGS OF THE LD. CIT(A). 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 27 TH MARCH, 2014 . 3 / 2' % 4 56 27.3.2014 2 / 7 SD/- SD/- (I.P. BANSAL ) (N.K. BILLAIYA) /JUDICIAL MEMBER % / ACCOUNTANT MEMBER MUMBAI; 5 DATED 27.3.2014 . . ./ RJ , SR. PS ITA NO. 1142/M/2011 4 3 3 3 3 / // / ,0! ,0! ,0! ,0! 8!'0 8!'0 8!'0 8!'0 / COPY OF THE ORDER FORWARDED TO : 1. (+ / THE APPELLANT 2. ,-(+ / THE RESPONDENT. 3. 9 ( ) / THE CIT(A)- 4. 9 / CIT 5. !:7 ,0 , , / DR, ITAT, MUMBAI 6. 7 ; / GUARD FILE. 3 3 3 3 / BY ORDER, -!0 ,0 //TRUE COPY// < << < / = = = = ) ) ) ) (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI