Harjeet Singh Kandhari, New Delhi V. ITO, New Delhi

ITA 1269/DEL/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4412 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2012-2013
• Appeal Filed On: 08-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SURENDER PAL
• Assessee Lawyers: SAHIL JAIN
• Keywords: Notional interest
• Section: 143(1)

Judgement Text

1 ITA NO. 1269/DEL/2016 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: F NEW DELHI BEFORE SHRI R. K. PANDA, ACCOUNTANT MEMBE R AND MS SUCHITRA KAMBLE, JUDIC IAL MEMBER ITA NO. 1269/DEL/2016 ( A .Y 2012-13) HARJEET SINGH KANDHARI C/O. R. S. AHUJA & CO. CAS C-353, DEFENCE COLONY NEW DELHI ABKPS7462F (APPELLANT) VS ITO WARD-53(4) NEW DELHI (RESPONDENT) APPELLANT BY SH. SAHIL JAIN, CA RESPONDENT BY SH. SURENDER PAL, SR. DR ORDER PER SUCHITRA KAMBLE, JM THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE OR DER DATED 01/01/2016 PASSED BY CIT(A)-18, NEW DELHI FOR ASSESSMENT YEAR 2012-13. 2. THE GROUNDS OF APPEAL ARE AS UNDER:- 1. THAT ON THE FACTS & CIRCUMSTANCES OF THE CASE TH E LEARNED ITO & THE CIT(A) ERRED IN: 1) MAKING AN ADDITION OF RS. 9,51,227/- THE INTERES T CHARGED TO PROFIT & LOSS ACCOUNT ON ACCOUNT OF NOTIONAL INTEREST ON LOANS G IVEN TO SISTER CONCERN. 3. THE ASSESSEE IS AN INDIVIDUAL AND DERIVES INCOME FROM BUSINESS AND PROFESSION, INCOME FROM OTHER SOURCES AND INCOME FR OM HOUSE PROPERTY. THE ASSESSEE FILED ITS E-RETURN U/S 139(1) ON 26/9/2012 DECLARING INCOME OF RS.9,14,242/- WHICH WAS PROCESSED U/S 143(1) OF THE INCOME TAX ACT, 1961. DATE OF HEARING 13.02.2019 DATE OF PRONOUNCEMENT 15.02.2019 2 ITA NO. 1269/DEL/2016 THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 1 43(2) WAS ISSUED WHICH WAS DULY SERVED TO THE ASSESSEE. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS GIVEN INTEREST FREE LOANS TO HIS SISTER CONCERN AMOUNTING TO RS.17,69,652/- AND RS.61,64,244/- TO M/S AURA INFOTECH PVT. LTD. A ND M/S R. R DESIGNS PVT. LTD. RESPECTIVELY. THE ASSESSING OFFICER OBSERVED THAT NO INTEREST WAS CHARGED ON THESE LOANS BY THE ASSESSEE. THUS, THE ASSESSIN G OFFICER CHARGED NOTIONAL INTEREST AT 12% PER ANNUM ON THESE LOANS AND ADDED BACK TO THE INCOME OF THE ASSESSEE. 4. BEING AGGRIEVED BY THE ASSESSING OFFICER, THE AS SESSEE FILED APPEAL BEFORE THE CIT(A). THE CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE. 5. THE LD. AR SUBMITTED THAT SIMILAR ISSUE HAS BEE N DECIDED BY THE TRIBUNAL IN ASSESSEES OWN CASE FOR ASSESSMENT YEA R 2011-12 BEING ITA NO. 1268/DEL/2016 AND HENCE THE ISSUE IS COVERED IN FAV OUR OF THE ASSESSEE. 6. THE LD. DR RELIED UPON THE ORDER OF THE CIT (A). 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE M ATERIAL AVAILABLE ON RECORD. THE TRIBUNAL HELD IN ASSESSMENT YEAR 2011- 12 READS AS UNDER:- 8.2 WITH REGARD TO GROUND NO. 2 RELATING TO DISALL OWANCE AMOUNTING TO RS. 8,86,386/- THE INTEREST CHARGED TO PROFIT AND LOSS ACCOUNT ON ACCOUNT OF NOTIONAL INTEREST ON LOANS GIVEN TO SISTER CONCERN IS CONCERNED, I FIND THAT THE AO HAS MADE ADDITION OF RS. 8,86,386/- FOR NOTIONAL INTEREST ON LOANS GIVEN AMOUNTING TO RS. 17,69,652/- AND RS. 61,24,244/- TO M/S ARURA INFOTECH P LTD. AND M/S RR DESIGN P LTD. AND LD. CIT(A) HAS CO NFIRMED THE ADDITION IN DISPUTE. HOWEVER, I FIND THAT THE ASSESSEE HAS ACTU ALLY GIVEN INTEREST FREE LOAN TO ITS SISTER CONCERNS OUT OF HIS OWN CONTRIBU TION IN THE PROPRIETORSHIP CONCERN AND UNSECURED LOAN RECEIVED FROM HIS PERSON AL CIRCLE AND NOT GIVEN FROM INTEREST BEARING SECURED LOAN FACILITY AVAILED FROM BANKS. I FURTHER FIND 3 ITA NO. 1269/DEL/2016 THAT THE ASSESSEE PROVIDED INTEREST FREE UNSECURED LOAN TO HIS SISTER CONCERN OUT OF .HIS OWN FUND AND NOTHING HAS BEEN CHARGED I N THE FORM OF. INTEREST AND NONE OF ANY OTHER INTEREST HAS BEEN TAKEN FROM THE COMPANIES FROM WHICH INTEREST FREE LOAN HAS BEEN- GIVEN. THE AO NOWHERE IN HIS ORDER PROVIDED THAT THE ASSESSE HAS TAKEN THE INTEREST ON THE LOAN OR A NY OTHER BENEFIT FROM THE COMPANIES IN ANY OTHER MANNER. I FIND THAT AS HAS B EEN HELD IN THE CASE OF CIT VS. KAJAL EXPORTS (GUJARAT) ITR 362 / 2014, THA T THE AVAILABILITY OF INTEREST FREE FUNDS (THAT IS OWN FUNDS SHALL BE TAKEN INTO C ONSIDERATION, FOR THE PURPOSE OF DISALLOWANCE OF INTEREST) HAS TO BE TAKEN CARE O F. I ALSO FIND THAT IT IS WELL SETTLED LAW THAT NOTIONAL INTEREST CANNOT BE CHARGED AS HEL D BY HONBLE GAUHATI HIGH COURT IN THE CASE OF HIGHWAYS CONSTRUCTIONS CO. PVT. LTD. VS. COMMISSIONER OF INCOME TAX 199 ITR 702 AND KESHRICHAND JAISUKHLAL CJT 122 TAXM AN 307 (GAU). IN VIEW OF THE ABOVE DISCUSSIONS AND RESPECTFULLY FOLLOWING THE PRECEDEN TS, AS AFORESAID THE ADDITION IN DISPUTE IS DELETED AND AC CORDINGLY, THE GROUND NO. 2 RAISED BY THE ASSESSEE STANDS ALLOWED . IN THE PRESENT YEAR, WE FIND FROM THE LEDGER ACCOUN TS OF M/S R.R DESIGNS AND M/S AURA INFO TECH PVT. LTD. THAT THE SAID LOAN S ARE CONTINUING AND THE INTEREST FREE LOAN WAS GIVEN TO ITS SISTER CONCERN OUT OF ASSESSEE OWN CAPITAL IN THE PROPRIETORSHIP CONCERN. THEREFORE, THE DECISIO N OF THE TRIBUNAL IS APPLICABLE IN THE PRESENT YEAR AS WELL. 9. IN RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 15 TH FEBRUARY, 2019 . SD/- SD/- (R. K. PANDA) (SUCHITRA KAMBLE) ACCOUNTANT MEMBER JUDICIAL MEM BER DATED: 15/02/2019 R. NAHEED 4 ITA NO. 1269/DEL/2016 COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(APPEALS) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI DATE OF DICTATION 14.02.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 14.02.2019 DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE OTHER MEMBER DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. PS/PS DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR. PS/PS 1 5 .02.2019 DATE ON WHICH THE FINAL ORDER IS UPLOADED ON THE WEBSITE OF ITAT 1 5 .02.2019 DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 1 5 .02.2019 DATE ON WHICH THE FILE GOES TO THE HEAD CLERK THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT REGISTRAR FOR SIGNATURE ON THE ORDER DATE OF DISPATCH OF THE ORDER