RGS Healthcare Private Limited, Mohali V. DCIT, C-6(1), Mohali

ITA 1208/CHANDI/2018

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8478 (ITAT-CHANDIGARH)
• Duration Of Justice: 6 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 27-03-2019
• Assessment Year: 2013-2014
• Appeal Filed On: 12-09-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MANJIT SINGH
• Keywords: Notional interest
• Section: 2

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH B , CHANDIGARH . . , ' # , $ %& BEFORE SHRI N.K. SAINI, VICE PRESIDENT AND SHRI SANJAY GARG, JUDICIAL MEMBER ./ 1208/CHD/2018 / ASSESSMENT YEAR : 2013-14 M/S RGS HEALTHCARE PVT. LTD., SECTOR 69, MOHALI, PUNJAB. THE D .C.I.T. , CIRCLE 6(1), LUDHIANA. ./PAN NO: AADCR1242B /ASSESSEE BY : SHRI TEJ MOHAN SINGH, ADV. / REVENUE BY : SHRI MANJIT SINGH, SR.DR ! /DATE OF HEARING : 27.03.2019 '#$% ! /DATE OF PRONOUNCEMENT: 03.04. 2019 /ORDER PER SANJAY GARG, JUDICIAL MEMBER : THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESS EE AGITATING THE ACTION OF THE LD. COMMISSIONER OF INC OME TAX (APPEALS)(HEREINAFTER REFERRED TO AS (LD.CIT(A) D ATED 2.8.2017, PASSED U/S 250(6 OF THE INCOME TAX ACT, 1 961 (IN SHORT THE ACT), RELATING TO ASSESSMENT YEAR 2013- 14. 2. THE SOLE ISSUE RAISED IN THIS APPEAL IS REGARDIN G THE CONFIRMATION OF THE DISALLOWANCE MADE BY THE A.O. I N RELATION TO INTEREST PAID ON CAPITAL WORK IN PROGRE SS. 3. BRIEF FACTS RELEVANT TO THE ISSUE UNDER CONSIDER ATION ARE THAT THE A.O. OBSERVED THAT THE ASSESSEE HAD SH OWED AN 2 AMOUNT OF RS.3,04,72,017/- UNDER THE HEAD CAPITAL WORK IN PROGRESS, BUT THE SAID ASSET WAS NOT PUT TO USE IN THE YEAR UNDER CONSIDERATION. THE A.O. FURTHER OBSERVED THAT THE ASSESSEE HAD BORROWED HUGE LOANS FOR BUSINESS A ND PAID INTEREST THEREON. THE A.O., THEREFORE, CAPITAL IZED THE NOTIONAL INTEREST @ 10.25% OF CAPITAL WORK IN PROGR ESS AND ADDED THE SAME TO THE RETURNED INCOME OF THE ASSESS EE. 4. IN APPEAL BEFORE THE LD.CIT(A), THE ASSESSEE SUB MITTED THAT IT HAD ITS OWN SUFFICIENT FUNDS TO MEET THE CA PITAL WORK IN PROGRESS. THAT NO BORROWED FUNDS WERE USED FOR C APITAL WORK IN PROGRESS. THAT NO FRESH LOANS WERE TAKEN BY THE ASSESSEE DURING THE YEAR UNDER CONSIDERATION. THE A SSESSEE DURING THE YEAR ALSO EARNED SUFFICIENT PROFITS. REL YING UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CA SE OF HERO CYCLES PVT. LTD. VS. CIT, 379 ITR 347 (SC), TH E LD. COUNSEL FOR ASSESSEE SUBMITTED THAT EVEN OTHERWISE, IN THE CASE OF MIXED FUNDS ALSO, THE PRESUMPTION WILL BE T HAT THE ASSESSEE HAD USED IT IS OWN FUNDS FOR MAKING THE INVESTMENTS. THE LD.CIT(A), HOWEVER, HELD THAT SINC E THE ASSESSEE HAD USED MIXED FUNDS, HENCE NOTIONAL INTER EST WAS RIGHTLY CALCULATED BY THE A.O. AND THUS WAS RIGHTLY ADDED TO THE INCOME OF THE ASSESSEE. 5. BEING AGGRIEVED BY THE ORDER OF THE LD.CIT(A), T HE ASSESSEE HAS COME UP IN APPEAL BEFORE US. 3 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND HAVE GON E THROUGH THE ORDERS OF THE LOWER AUTHORITIES. THERE IS NO DENIAL OR REBUTTAL TO THE PLEA OF THE ASSESSEE THAT THE ASSESSEE HAS BEEN POSSESSED OF OWN SUFFICIENT FUNDS TO MEET THE CAPITAL WORK IN PROGRESS. FURTHER THE ASSESSEE, FROM THE RECORD, HAS DEMONSTRATED THAT NO NEW LOANS WERE TAK EN DURING THE YEAR. IT HAS BEEN FURTHER SUBMITTED THAT EVEN THE LOANS TAKEN BY THE ASSESSEE WERE TERM LOANS FOR SPE CIFIC PURPOSES, WHICH COULD NOT BE USED FOR ANY OTHER PUR POSE THAN THE THAT FOR WHICH THE LOAN WAS TAKEN. THAT NO LOAN WAS TAKEN BY THE ASSESSEE DURING THE YEAR FOR ANY C APITAL ASSET. THE UNREBUTTED FACTS ON THE FILE ARE THAT TH E ASSESSEE WAS POSSESSED OF SUFFICIENT OWN FUNDS, WHICH INCLUD ED A SUM OF RS.12.34 CRORES OUT OF SHARE CAPITAL, RESERV ES AND SURPLUSES AND FURTHER THE PROFITS OF THE ASSESSEE F OR THE YEAR UNDER CONSIDERATION WERE AT RS.2 CRORES WHICH WERE SUFFICIENT TO MEET THE CAPITAL WORK IN PROGRESS OF RS.3.04 CRORES. THE PROPOSITION OF LAW LAID DOWN BY THE HON 'BLE SUPREME COURT IN THE CASE OF HERO CYCLES PVT. LTD. (SUPRA) WILL SQUARELY APPLICABLE TO THE FACTS OF THE CASE I N HAND. MOREOVER, THE ISSUE IS NOW COVERED BY THE LATEST DE CISION OF THE HON'BLE SUPREME COURT IN THE CASE OF CIT (LTU) VS. RELIANCE INDUSTRIES LTD. (2019) 410 ITR 466 (SC). THIS ISSUE IS ACCORDINGLY DECIDED IN FAVOUR OF THE A SSESSEE. THE DISALLOWANCE MADE BY THE LOWER AUTHORITIES IS ACCORDINGLY, DELETED. 4 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS HER EBY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT. SD/- SD/- . . !'# (N.K. SAINI (SANJAY GARG ) / VICE PRESIDENT $%& / JUDICIAL MEMBER (%! /DATED: 3 RD APRIL, 2019 * * #&' ()*) / COPY OF THE ORDER FORWARDED TO : 1. + / THE APPELLANT 2. ',+ / THE RESPONDENT 3. - / CIT 4. - ( )/ THE CIT(A) 5. )./' 0 , !0 , 123/4 / DR, ITAT, CHANDIGARH 6. /3 / GUARD FILE #& / BY ORDER, / ASSISTANT REGISTRAR