BRAHMAPUTRA FINLEASE PVT. LTD., NEW DELHI V. DCIT, CENTRAL CIRCLE- 15, NEW DELHI

ITA 1207/DEL/2018

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 2860 (ITAT-DELHI)
• Duration Of Justice: 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-08-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 20-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Commercial expediency
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH SMC, NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBER ITA NO.1207/DEL/2018 ASSESSMENT YEAR : 2014-15 BRAHMAPUTRA FINLEASE PVT. LTD., BRAHMAPUTRA HOUSE, A-7, NH-8, MAHIPALPUR CROSSING, NEW DELHI. VS. DCIT, CENTRAL CIRCLE- 15, NEW DELHI. PAN : AAACK3691G (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI GAUTAM JAIN, ADV. DEPARTMENT BY : SHRI ATIQ AHMED, SR. DR DATE OF HEARING : 02-08-2018 DATE OF PRONOUNCEMENT : 29-08-2018 O R D E R PER R. K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 22.11.2017 OF CIT(A)- XXVI, NEW DELHI RELATING TO A SSESSMENT YEAR 2014-15. 2. ALTHOUGH A NUMBER OF GROUNDS HAVE BEEN RAISED BY THE ASSESSEE, THESE ALL RELATE TO THE ORDER OF THE LD. CIT(A) IN SUSTAINING THE ADDITION OF RS.5,39,940/- ON ACCOUNT OF NON-CHARGING OF INTEREST ON LOANS FRO M THE RELATED PARTIES. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESS EE IS A COMPANY AND FILED ITS RETURN OF INCOME ON 29.09.2014 DECLARING NIL INCOME . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OBSER VED FROM THE AUDITED ACCOUNTS FOR THE YEAR UNDER CONSIDERATION THAT THE ASSESSEE COMPANY HAS DEBITED 2 ITA NO.1207/DEL/2018 INTEREST ON UNSECURED LOAN OF RS.7,69,096/- ON THE LOANS AND ADVANCES RECEIVED OF RS.7,00,68,520/-. HE FURTHER OBSERVED THAT THE ASSESSEE HAS RECEIVED INTEREST OF RS.2,30,068/- ON LOANS & ADVANCES BUT NOT CHARGE D INTEREST FROM OTHERS AND RELATED PARTIES. HE OBSERVED FROM THE BALANCE SHEE T THAT THE ASSESSEE HAS SHOWN INTEREST FREE LOANS AND ADVANCES GIVEN AT RS. 9,03,07,449/-. HE, THEREFORE, ASKED THE ASSESSEE TO JUSTIFY THE HUGE INTEREST EXP ENSES AND ALSO EXPLAIN AS TO WHY THE INTEREST WAS NOT CHARGED ON THE LOANS AND A DVANCES GIVEN BY THE ASSESSEE. IT WAS EXPLAINED BY THE ASSESSEE THAT TH E ADVANCES GIVEN BY THE ASSESSEE ARE IN THE COURSE OF BUSINESS AND THE ASSE SSEE ALSO FURNISHED A BREAKUP OF LOANS AND ADVANCES TAKEN AND GIVEN. HOWEVER, AC CORDING TO THE ASSESSING OFFICER, THE ASSESSEE FAILED TO FURNISH ANY CONFIRM ATION AND REASON FOR NOT CHARGING INTEREST ON LOANS AND ADVANCES. HE REFERR ED TO VARIOUS DECISIONS WHERE IT HAS BEEN HELD THAT THE ASSESSEE, WHICH ADVANCES ITS FUNDS AS INTEREST FREE LOANS, HAS NO JUSTIFICATION TO CLAIM INTEREST ON BO RROWINGS. SINCE THE ASSESSEE IN THE INSTANT CASE HAS ADVANCED MONEY FOR PURPOSES UN RELATED TO BUSINESS ACTIVITIES OF THE ASSESSEE AND THE ASSESSEE WAS PAY ING INTEREST ON LOAN AND ON THE OTHER HAND HAS DIVERTED ITS MONEY TO OTHERS FREE OF INTEREST, THEREFORE, THE ASSESSING OFFICER MADE ADDITION OF RS.5,39,028/- BY REDUCING THE INTEREST RECEIVED OF RS.2,30,068/- FROM THE INTEREST PAID AT RS.7,69,096/-. 3 ITA NO.1207/DEL/2018 4. IN APPEAL, THE LD. CIT(A) SUSTAINED THE ADDITION MADE BY THE ASSESSING OFFICER BY OBSERVING AS UNDER :- 5. I HAVE CONSIDERED THE FACTS OF THE CASE, THE BA SIS OF ADDITION MADE BY THE A.O. AND THE ARGUMENTS OF THE AR DURING ASSESSMENT AS WE LL AS APPELLATE PROCEEDINGS. THE ASSESSEE HAS RAISED FUNDS/LOANS FROM MARKET TO THE TUNE OF RS.7,00,68,520/- FOR THE PURPOSE OF BUSINESS AND THE ASSESSEE IS A REGIS TERED NBFC PAYING INTEREST OF RS.7,69,096/-. THE ASSESSEE HAS GIVEN LOANS AND AD VANCES OF RS.9,03,07,449/-, RECEIVING INTEREST OF RS.2,30,068/- ON SUCH ADVANCE S. LD. AR HAS SOUGHT TO JUSTIFY THE SAME ON ACCOUNT OF COMMERCIAL EXPEDIENCY. BUT REVE NUE CANNOT BE OBLIVIOUS TO THE FACT OF WHOLLY EXCLUSIVELY LAYING OUT OF THE CAPITA L FOR BUSINESS. THE ASSESSEE HAS TO FURNISH RELEVANT DETAINS WHICH HAS NOT BEEN DONE. IN ABSENCE OF ASSESSEE NOT DISCHARGING ONUS BEFORE THE A.O. AS ALSO THIS OFFIC E, THE ACTION OF THE A.O. APPEARS TO BE CORRECT AND IN TUNE WITH SECTION 37 OF THE I.T. ACT, 1961. 5. AGGRIEVED WITH SUCH ORDER OF THE LD. CIT(A), THE ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 6. THE LD. COUNSEL FOR THE ASSESSEE, AT THE OUTSET, DREW THE ATTENTION OF THE BENCH TO PAGE 6 OF THE ORDER OF THE LD. CIT(A) AND SUBMITTED THAT THE LD. CIT(A) HAS GIVEN A FINDING THAT THE NET OWN FUNDS OF THE C OMPANY AS ON 31.03.2014 IS RS.12,78,64,988/- AND THE LOANS AND ADVANCES AS ON 31.03.2014 IS RS.8,83,76,861/-. THUS, THE LOANS AND ADVANCES ARE FROM THEIR OWNED FUNDS AND, THEREFORE, THE DISALLOWANCE IS NOT JUSTIFIED. THE LD. COUNSEL, FOR THE ASSESSEE REFERRING TO VARIOUS DECISIONS SUBMITTED THAT WHEN THE ASSESSEES OWNED FUNDS ARE MORE THAN THE INTEREST FREE ADVANCES THEN NO DI SALLOWANCE IS CALLED FOR. FOR THE ABOVE PROPOSITION, HE RELIED ON THE FOLLOWING D ECISIONS :- (I) CIT VS. BHARTI TELEVENTURE LTD., 331 ITR 502 (D EL). 4 ITA NO.1207/DEL/2018 (II) VIRENDER KUMAR GUPTA VS. ITO, ITA NO.6293/D/2 016 FOR A.Y. 2013-14. (III) VIJAY PAL GARG VS. DCIT, ITA NO.1774/D/2014 FOR A.Y. 2011-12. (IV) DCIT VS. NAVBHARAT PRESS, ITA NO.160/RPR/2014 FOR A.Y. 2010-11. (V) VENUS AUTO VS. CIT, 396 ITR 477 (ALL). HE ACCORDINGLY SUBMITTED THAT THE ORDER OF THE LD. CIT(A) BE SET-ASIDE AND THE DISALLOWANCE BE DELETED. 7. THE LD. DR ON THE OTHER HAND HEAVILY RELIED ON T HE ORDER OF THE LD. CIT(A). 8. AFTER HEARING BOTH THE SIDES AND ON PERUSAL OF T HE RELEVANT MATERIAL ON RECORD, I FIND THE ASSESSING OFFICER DISALLOWED AN AMOUNT OF RS.5,39,940/- U/S 36(1)(III) ON THE GROUND THAT THE ASSESSEE HAS DIVE RTED ITS INTEREST BEARING FUNDS AS LOANS AND ADVANCES TO SISTER CONCERNS AND OTHERS WITHOUT CHARGING OF ANY INTEREST. I FIND THE LD. CIT(A) SUSTAINED THE ADDI TION MADE BY THE ASSESSING OFFICER, THE REASON OF WHICH HAS ALREADY BEEN REPRO DUCED IN THE PRECEDING PARAGRAPH. IT IS THE SUBMISSION OF THE LD. COUNSEL FOR THE ASSESSEE THAT SINCE THE NET OWNED FUNDS OF THE ASSESSEE COMPANY IS MUCH MOR E THAN THE INTEREST FREE FUNDS ADVANCED TO SISTER CONCERNS AND OTHERS, THERE FORE, NO DISALLOWANCE IS CALLED FOR U/S 36(1)(III). I FIND SOME FORCE IN TH E ABOVE ARGUMENT OF THE LD. COUNSEL FOR THE ASSESSEE. IT IS AN ADMITTED FACT T HAT NOTHING HAS BEEN BROUGHT ON RECORD THAT ANY SPECIFIC INTEREST BEARING BORROWED FUNDS HAS BEEN DIVERTED BY 5 ITA NO.1207/DEL/2018 THE ASSESSEE TO THE RELATED PARTIES FROM WHOM NO IN TEREST HAS BEEN CHARGED. SINCE THE NET OWNED FUNDS OF THE ASSESSEE COMPANY I N THE INSTANT CASE IS MUCH MORE THAN THE INTEREST FREE ADVANCES GIVEN TO RELAT ED PARTIES AND SINCE THE REVENUE HAS NOT BROUGHT ON RECORD ANY SPECIFIC INST ANCE OF INTEREST BEARING BORROWED FUNDS BEING DIVERTED TO THE RELATED PARTIE S FREE OF INTEREST, THEREFORE, I AM OF THE CONSIDERED OPINION THAT NO DISALLOWANCE U /S 36(1)(III) IS CALLED FOR. THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS . RELIANCE UTILITIES AND POWER LTD. REPORTED IN 313 ITR 340 HAS HELD THAT IF THERE ARE FUNDS AVAILABLE BOTH INTEREST FREE AND OVERDRAFT AND/OR LOANS TAKEN , THEN A PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF THE INTEREST FREE FUNDS GENERATED OR AVAILABLE WITH THE ASSESSEE COMPANY, IF THE INTERES T FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENT. VARIOUS OTHER DECISIONS RELIE D ON BY THE LD. COUNSEL FOR THE ASSESSEE IN THE SYNOPSIS AND PAPER BOOK ALSO SUPPOR T ITS CASE THAT WHERE THE ASSESSEE IS HAVING SUFFICIENT OWNED FUNDS WHICH IS MORE THAN THE INTEREST FREE FUNDS GIVEN OR ADVANCED TO RELATED PARTIES AND THE ASSESSEE IS MAINTAINING A COMMON BANK ACCOUNT AND THE REVENUE HAS NOT PROVED WITH ANY EVIDENCE THAT ANY INTEREST BEARING FUND HAS BEEN DIVERTED TO SIST ER CONCERNS OR RELATED PARTIES WITHOUT CHARGING ANY INTEREST THEN PROVISIONS OF SE CTION 36(1)(III) IS NOT APPLICABLE. I, THEREFORE, HOLD THAT THE LD. CIT(A) IN THE INSTANT CASE WAS NOT 6 ITA NO.1207/DEL/2018 JUSTIFIED IN SUSTAINING THE ADDITION. I, THEREFORE , SET-ASIDE THE ORDER OF THE LD. CIT(A) AND DIRECT THE ASSESSING OFFICER TO DELETE T HE ADDITION. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 29 TH AUGUST, 2018. SD/- (R. K. PANDA) ACCOUNTANT MEMBER DATED: 29-08-2018. SUJEET COPY OF ORDER TO: - 1) THE APPELLANT 2) THE RESPONDENT 3) THE CIT 4) THE CIT(A) 5) THE DR, I.T.A.T., NEW DELHI BY ORDER //TRUE COPY// ASSISTANT REGISTRAR ITAT, NEW DELHI