DCIT, Pondicherry V. Hotel Annamalai Internatiional Private Limited, Pondicherry

ITA 120/CHNY/2015

• Counselvise Citation: 12021714 RSA 2015
• Duration Of Justice: 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 28-10-2015
• Assessment Year: 2011-2012
• Appeal Filed On: 16-01-2015
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: T VASUDEVAN

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . . . , . ! , ' # $ [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO.120/MDS/2015 / ASSESSMENT YEAR : 2011-12 THE DY. COMMISSIONER OF INCOME-TAX CIRCLE I, PUDUCHERRY VS. M/S HOTEL ANNAMALAI INTERNATIONAL PVT. LTD NO.479 KAMARAJ SALAI PONDICHERRY [PAN AAACH 8533 Q ] ( %& / APPELLANT) ( '(%& /RESPONDENT) / APPELLANT BY : SHRI A.B KOLI, JCIT /RESPONDENT BY : SHRI T. VASUDEVAN, ADVOCATE / DATE OF HEARING : 28 - 10 - 2015 ! / DATE OF PRONOUNCEMENT : 13 - 11 - 2015 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-VI, CHENN AI, DATED 30.10.2014 AND PERTAINS TO ASSESSMENT YEAR 2011-12 . 2. SHRI A.B KOLI, LD. DEPARTMENTAL REPRESENTATIVE SUBM ITTED THAT THE ASSESSEE-COMPANY GAVE LOAN TO ITS DIRECTOR, SHR I K.A. SHENBAGARAJAN TO THE EXTENT OF ` 1,10,00,000/- AND ANOTHER DIRECTOR, SHRI A. RAJASEKARAN TO THE EXTENT OF ` 1,25,00,000/-. HOWEVER, NO ITA NO.120/15 :- 2 -: INTEREST WAS CHARGED. THE ASSESSEE EXPLAINED BEF ORE THE ASSESSING OFFICER THAT THE MONEY ADVANCED TO SHRI SHRI SHENBA GARAJAN AND SHRI RAJASEKARAN WAS TOWARDS DEPOSITS FOR USUFRUCTUARY M ORTGAGE OF THE LAND OWNED BY THEM. THE LD. DR FURTHER POINTED OUT THAT THE LAND ON WHICH THE HOTEL BUILDING WAS CONSTRUCTED WAS PURCHA SED BY THE ABOVE PERSONS IN THE YEAR 1996 AND THE ASSESSEE-COMPANY I S NOW CLAIMING THAT THE AMOUNTS ADVANCED REPRESENT THE DEPOSIT MAD E BY THEM FOR USUFRUCTUARY MORTGAGE OF THE LAND. IN THE ABSENC E OF ANY PROPER EXPLANATION, THE ASSESSING OFFICER COMPUTED THE INT EREST ON THE MONEY ADVANCED TO THE DIRECTORS @ 18% AND ADDED THE SAME TO THE TOTAL INCOME OF THE ASSESSEE. HOWEVER, ON APPEAL BY THE ASSESSEE, THE CIT(A) FOUND THAT NO INTEREST EXPENDITURE WAS INCUR RED DURING THE YEAR UNDER CONSIDERATION. THE CIT(A) HAS ALSO FOUND THA T THE ASSESSEE HAD SUFFICIENT RESERVES AS ON 31.3.2011, THEREFORE, HE DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. ACCORDING T O THE LD. DR, THE ADVANCE MADE TO THE DIRECTORS ARE MADE FROM COMMON POOL OF THE ASSESSEE-COMPANY, THEREFORE, IT CANNOT BE SAID THAT THE ADVANCE WAS MADE FROM INTEREST FREE FUNDS AVAILABLE WITH THE A SSESSEE. THE LD. DR FURTHER POINTED OUT THAT NO MATERIAL WAS FILED BEFO RE THE LOWER AUTHORITIES TO ESTABLISH THAT THE ADVANCE MADE BY T HE ASSESSEE IS FOR USING THE LAND BELONGS TO THE DIRECTORS, THEREFORE, THE CIT(A) OUGHT NOT TO HAVE DELETED THE ADDITION MADE BY THE ASSESS ING OFFICER. ITA NO.120/15 :- 3 -: 3. ON THE CONTRARY, SHRI T. VASUDEVAN, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE DIRECTORS OF THE ASSESS EE-COMPANY SHRI K.A SHENBAGARAJAN AND SHRI A. RAJASEKARAN ADMITTEDL Y PURCHASED THE LANDED PROPERTY IN THE YEAR 1996 AND THE SHAREHOLDE RS CONSENTED TO PUT UP A HOTEL BUILDING IN THE SAID LAND. IN THE Y EAR 1996, NO DEPOSIT WAS GIVEN TO THE DIRECTORS. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE-COMPANY ADVANCED MONEY TO THE RESPECTIVE D IRECTORS FOR USING THE LAND BELONGS TO THEM. THEREFORE, ACCORDI NG TO THE LD. COUNSEL, IT IS NOT A LOAN AT ALL. HENCE, THERE IS NO QUESTION OF DISALLOWANCE OF ANY INTEREST ON NOTIONAL BASIS. TH E LD. COUNSEL FURTHER SUBMITTED THAT IT IS NOT IN DISPUTE THAT THE ASSES SEE HAD SUFFICIENT RESERVES TO THE EXTENT OF ` 90,26,44,250/- AS ON 31.3.2011, THEREFORE, EVEN IF IT IS A LOAN, IT CANNOT BE CONSTRUED THAT T HERE WAS DIVERSION OF BORROWED FUNDS. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. IT I S NOT IN DISPUTE THAT THE LAND BELONGS TO THE DIRECTORS NAMELY, SHRI K.A SHENBAGARAJAN AND SHRI A. RAJASEKARAN. THE ASSESSEE-COMPANY PUT UP A HOTEL BUILDING IN THE LAND OWNED THEM, THEREFORE, NOTHING WRONG IN PA YMENT OF MONEY FOR THE USE OF THE SAID LAND. THE ASSESSEE-COMPANY AND THE DIRECTORS IN THEIR INDIVIDUAL CAPACITY ARE DIFFERENT PERSONAL ITIES IN THE EYE OF LAW. ITA NO.120/15 :- 4 -: THEREFORE, THE DIRECTORS IN THEIR INDIVIDUAL CAPACI TY CAN ALWAYS CLAIM DAMAGES OR/RENT FOR USE OF THEIR LAND BY THE ASSESS EE-COMPANY. THEREFORE, THIS TRIBUNAL IS OF THE CONSIDERED OPIN ION THAT WHEN THE MONEY WAS ADVANCED FOR USE OF THE LAND, THERE IS NO QUESTION OF ANY DISALLOWANCE OF INTEREST. EVEN IF WE CONSIDER FOR ARGUMENT SAKE THAT WHAT WAS ADVANCED IS A LOAN, THE ASSESSEE HAS SUFF ICIENT RESERVES TO THE EXTENT OF ` 90,26,44,250/- AS ON 31.3.2011, THEREFORE, NO BORROWED FUNDS WERE DIVERTED TO THE DIRECTORS. HEN CE, THE CIT(A) HAS RIGHTLY DELETED THE DISALLOWANCE MADE BY THE ASSESS ING OFFICER. THIS TRIBUNAL DO NOT FIND ANY REASON TO INTERFERE WITH T HE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, THE SAME IS CONFIRMED. 5. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 TH NOVEMBER, 2015, AT CHENNAI. SD/- SD/- ( . ! ) (A. MOHAN ALANKAMONY) ' / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 13 TH NOVEMBER, 2015 RD &' ()*) / COPY TO: 1 . / APPELLANT 3. +,' / CIT(A) 5. )-. / / DR 2. / RESPONDENT 4. + / CIT 6. .01 / GF