D.Sailaja, CHENNAI V. ACIT, CHENNAI

ITA 1146/CHNY/2015

• Counselvise Citation: [2016] 121 COUNSELVISE.COM (IT) 3953 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-11-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 15-05-2015
• Court: TRIBUNAL
• Department Lawyers: N GOPI KRISHNA
• Assessee Lawyers: PURUSHOTHAMAN

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI , . !' BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G.PAVAN KUMAR, JUDICIAL MEMBER ./ I.T.A.NO.1146/MDS./2015 / ASSESSMENT YEAR : 2010-11 MRS.D.SAILAJA, NO.4,10 TH STREET, NANDANAM EXTENSION, NANDAM, CHENNAI-35. VS. THE ACIT, BUSINESS CIRCLE II, CHENNAI 34. [PAN AAOPS 2743J ] ( #$ / APPELLANT) ( %&#$ /RESPONDENT) / APPELLANT BY : MR.PURUSHOTHAMAN, C.A /RESPONDENT BY : MR.N.GOPIKRISHNA, JCIT, D.R / DATE OF HEARING : 05 - 1 0 - 201 6 !' / DATE OF PRONOUNCEMENT : 23 - 11 - 2016 ' / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)- 2, CHENNAI DATED 27.02.2015 PERTAINING TO ASSESS MENT YEAR 2010-11. 2. THE ONLY ISSUE IN THIS APPEAL IS WITH REGARD TO ALLOWABILITY OF INTEREST PAID BY THE ASSESSEE TO BORROWERS. ITA NO.1146 /MDS./2015 :- 2 -: 3. THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE BO RROWED THE FUNDS OF ` 3.45 CRORES FROM RANJINI C. REDDY FOR WHICH THE AS SESSEE HAS PAID THE INTEREST @ 15% P.A. HOWEVER, THE ASSE SSEE LENT MONEY TO A PRIVATE LIMITED COMPANY, NAMELY M/S.CENTWIN E STATES AND INDUSTRIES PVT LTD., FOR WHICH THE ASSESSEE HAS CHA RGED INTEREST @ 6% P.A. SINCE THERE IS A DIFFERENCE BETWEEN INTEREST PAID BY THE ASSESSEE AND THE INTEREST RECEIVED BY THE, THE AO COMPUTED T HIS DIFFERENCE AND DISALLOWED A SUM OF ` 31.05 LAKHS. ON APPEAL, THE LD.CIT(A) CONFIRMED THE ACTION OF THE AO ON THIS ISSUE. AGAINST THIS, T HE ASSESSEE IS IN APPEAL BEFORE US. 4. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN OUR OPINION, THE ASSESSEE BORROWED THE F UNDS AT A HIGHER RATE OF INTEREST I.E.15% PER ANNUM AND LEND THE SA ME AT A VERY LOW RATE AT 6% PER ANNUM. NO SHREWD BUSINESSMAN WOULD D O SO. MORE SO, THE ASSESSEE BORROWED THE FUND FROM RANJINI C. REDD Y ON A PARTICULAR DAY AND THE SAME WAS ADVANCED TO SISTER CONCERN AT A LOWER RATE OF INTEREST. IN OUR OPINION, THERE IS NO REASON FOR A DVANCING BORROWED FUNDS AT SUCH A LOWER RATE OF INTEREST AND THAT EXP ENDITURE CANNOT BE SAID TO BE WHOLLY AND EXCLUSIVELY INCURRED FOR THE PURPOSE OF BUSINESS AND THE ASSESSEE TRIED TO DIVERT THE ENTIRE BORROWE D FUNDS TO A SISTER CONCERN WITH A SOLE INTENTION OF REDUCING ITS PROFI TS AND THIS KIND OF ACT CANNOT BE APPRECIATED AND IT IS A DUBIOUS METHOD FO LLOWED BY THE ITA NO.1146 /MDS./2015 :- 3 -: ASSESSEE SO AS TO EVADE THE TAX. ACCORDINGLY, IN O UR OPINION THE LOWER AUTHORITIES IS JUSTIFIED IN TREATING THE BORROWED F UNDS NOT USED FOR THE PURPOSE OF BUSINESS AND IT IS DIVERTED TO SISTER CO NCERN. ACCORDINGLY, WE UPHOLD THE ORDER OF LOWER AUTHORITIES. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS D ISMISSED. ORDER PRONOUNCED ON 23 RD NOVEMBER, 2016, AT CHENNAI. SD/ - SD/ - ( . ) ( G.PAVAN KUMAR ) / JUDICIAL MEMBER ( ) (CHANDRA POOJARI) / ACCOUNTANT MEMBER #$ / CHENNAI %& / DATED: 23 RD NOVEMBER , 2016. K S SUNDARAM &'(()*( +* / COPY TO: ( 1 . / APPELLANT 3. ( ,(- . / CIT(A) 5. */0 (1 / DR 2. / RESPONDENT 4. ( , / CIT 6. 02(3 / GF