GRISHMA CONSTRUCTION & TRADING P.LTD, MUMBAI V. DCIT 9(1), MUMBAI

ITA 1293/MUM/2012

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84447 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 9 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 24-09-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 24-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SANJAY R PARIKH

Judgement Text

, G GG G IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL G GG G BENCH, BENCH, BENCH, BENCH, MUMBAI MUMBAI MUMBAI MUMBAI , . . , !' !' !' !' BEFORE BEFORE BEFORE BEFORE SHRI SHRI SHRI SHRI VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM VIJAY PAL RAO, JM & & & & SHRI SHRI SHRI SHRI . D. D.D. D.K KK KARUNAKARA ARUNAKARA ARUNAKARA ARUNAKARA RAO RAO RAO RAO , ,, , AM AMAM AM , , , , ./ I.T.A. NO. I.T.A. NO. I.T.A. NO. I.T.A. NO.1293 1293 1293 1293/MUM/2012 /MUM/2012 /MUM/2012 /MUM/2012 ( # # # # $ $ $ $ / ASSESSMENT YEAR : 2007-08) M/S. GRISHMA CONSTRUCTION AND TRADING PRIVATE LIMITED, G-1, GROUND FLOOR, NIRMAL NEST, VAYUDEVTA COMPLEX, DEVIDAS ROAD, BORIVALI (W), MUMBAI 400103 # # # # / VS. DEPUTY COMMISSIONER OF INCOME TAX -9(1), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI '% ./ & ./ PAN/GIR NO. : AAACG1277C ( %' / APPELLANT APPELLANT APPELLANT APPELLANT) .. ( ()%' / RESPONDENT RESPONDENT RESPONDENT RESPONDENT) %' %' %' %' * * * * / APPELLANT BY : SHRI. SANJAY R. PARIKH ()%' ()%' ()%' ()%' + ++ + * * * * /RESPONDENT BY : SHRI. R.N. DISOUZA (DR) # # # # + ++ + , , , , / DT. OF HEARING : 10 TH DECEMBER 2014 -.$ -.$ -.$ -.$ + ++ + , , , , / DT.OFPRONOUNCEMENT: 17 TH DECEMBER 2014 !/ / O R D E R PER : , . . / VIJAY PAL RAO, JM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 05.11.2011 OF THE COMMISSIONER OF INCOME TAX (APPEALS) FOR THE ASSESSMENT YEAR 2007-08. 2. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS IN THIS APPEAL; A) DISALLOWANCE OF INTEREST PAID DISALLOWANCE OF INTEREST PAID DISALLOWANCE OF INTEREST PAID DISALLOWANCE OF INTEREST PAID- -- -RS.2,40,000/ RS.2,40,000/ RS.2,40,000/ RS.2,40,000/- -- - 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-19 , MUMBAI [CIT(A) ERRED ON FACTS AND IN LAW IN UPHOLDING THE ORDER OF THE DEPU TY COMMISSIONER OF INCOME TAX, 9(1), MUMBAI (AO) DISALLOWING INTEREST PAID ON BORR OWED FUNDS AMOUNTING TO RS.2,40,000/-. 2. THE LEARNED CIT(A) ERRED ON FACTS AND IN LAW IN NOT CONSIDERING THE LETTER 17 NOVEMBER, 2011 FILED BY THE APPELLANT ALONG WITH CH ART GIVING THE UTILIZATION OF BORROWED FUNDS. 3. THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE BO RROWED FUNDS WERE USED FOR THE PURPOSE OF THE BUSINESS AND THE DISALLOWANCE OF INT EREST WAS UNCALLED FOR. ITA NO1293/M/12. . 2 4. THE APPELLANT PRAYS THAT THE DISALLOWANCE OF INTERE ST AMOUNTING TO RS.2,40,000/- MADE BY THE AO AND AS UPHELD BY THE CIT(A) MAY BE D ELETED. B) GENERAL GENERAL GENERAL GENERAL 5. THE ABOVE GROUNDS OF APPEAL ARE WITHOUT PREJUDIC E TO ONE ANOTHER AND THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND, DELETE OR MODIFY ANY OF THE ABOVE GROUNDS OF APPEAL. 3. THE SOLITARY ISSUE ARISING FOR OUR CONSIDERATION AND ADJUDICATION IS REGARDING DISALLOWANCE OF INTEREST RS.2,40,000/- ON ACCOUNT O F INTEREST FREE ADVANCES GIVEN TO SISTER CONCERN. THE ASSESSEE HAD GIVEN INTEREST FRE E ADVANCES TO VARIOUS PARTIES INCLUDING ITS SISTER CONCERN TO THE TUNE OF RS.2,90 ,78,322/-. OUT OF THE ABOVE, AN AMOUNT OF RS.81,91,818/- WAS TOWARDS INTER CORPORAT E DEPOSITS WHICH WERE GIVEN IN THE EARLIER YEARS AND THE BALANCE AMOUNT OF RS.2,07,79, 025/- WAS GIVEN TO OTHER PARTIES. THE AO NOTED THAT INTEREST FREE ADVANCES GIVEN BY T O VARIOUS PARTIES FOR NONE BUSINESS PURPOSE, WHEREAS THE ASSESSEE HAS RECEIVED THE UNSE CURED LOAN OF RS.20 LACS ON WHICH INTEREST OF RS.2,40,000/- WAS PAID @ 12% PER ANNUM. ACCORDINGLY, AO MADE DISALLOWANCE OF INTEREST OF RS.2,40,000/- PAID ON B ORROWED FUND. ASSESSEE CHALLENGED THE ACTION OF THE AO BEFORE CIT(A) AND S UBMITTED THAT ADVANCES WERE GIVEN TO THE SERVICE PROVIDERS AS WELL AS FOR ACQUISITION OF LAND. THE ASSESSEE HAS ALSO RELIED UPON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES & POWER LTD. (2009) 313 ITR 340 (BOM). THE CIT(A) DID NOT ACCEPTED CONTENTION OF THE ASSESSEE AND CONFIRMED THE DISALLOWANCE MADE BY THE AO. 4. BEFORE US, LD. AR HAS REFERRED THE DETAILS FILED BY THE ASSESSEE BEFORE THE AO AND ALSO BEFORE CIT(A) VIDE ITS LETTER DATED 17 TH NOVEMBER 2011 AT PAGE NOS.80 TO 89 OF THE PAPER BOOK AND SUBMITTED THAT THE ASSESSEE E XPLAINED THE UTILISATION OF THE BORROWED FUND AS WELL AS ADVANCES MADE TO THE VARIO US PARTIES FROM ASSESSEES OWN FUND. HE HAS FURTHER CONTENDED THAT THE ASSESSEE HA S FURNISHED THE DETAILS TO SHOW THAT THE MAJOR AMOUNT OF ADVANCES WERE TO THE NONE RELAT ED PARTIES FOR BUSINESS PURPOSE AND NOT AS INTEREST FREE ADVANCES TO THE SISTER CON CERN AS CLEAR FROM THE DETAILS AT PAGE NO.66 OF THE PAPER BOOK. THUS, LD. AR HAS SUBMITTED THAT NEITHER AO NOR CIT(A) ITA NO1293/M/12. . 3 CONSIDERED THE DETAILS FILED BY THE ASSESSEE AND MA DE THE DISALLOWANCE WHICH IS CONTRARY TO THE FACTS BROUGHT ON RECORD BY THE ASSE SSEE. ON THE OTHER HAND, LD. DR HAS SUBMITTED THAT THE ASSESSEE HAS NOT FURNISHED THE P ROPER DETAILS BEFORE AUTHORITIES BELOW TO SUBSTANTIAL ITS CLAIM THAT ADVANCES WERE G IVEN FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE ASSESSEE HAS CLAIMED THAT ITS OWN FUND WAS SUFF ICIENT FOR GIVING ADVANCES TO THE VARIOUS PARTIES AND FURTHER THE ADVANCES WERE GIVEN FOR SUPPLY AS WELL AS FOR PURCHASE OF LAND THEREFORE, NO DISALLOWANCE IS CALLED FOR ON ACCOUNT OF INTEREST PAID ON THE BORROWED FUND. WE FIND THAT THE ASSESSEE WAS HAVING SUFFICIENT FUND AS RECEIVED FROM THE ADVANCE BOOKING FROM THE FLATS PURCHASERS AND D ISALLOWANCE HAS BEEN MADE BY THE AO ONLY WITH RESPECT TO THE BORROWED FUND WAS RS.20 LACS. ONCE THE ASSESSEES OWN FUND IS MORE THAN SUFFICIENT FOR GIVING TO THE ADV ANCE TO THE PARTIES THEN MERELY BECAUSE THE ASSESSEE HAVE BORROWED FUND WOULD NOT LEAD TO I NTER THAT BORROWED FUND WAS USED BY THE ASSESSEE FOR GIVING THE ADVANCE TO SISTER CO NCERN. EVEN OTHERWISE THE ASSESSEE HAS POINTED OUT THAT OUT OF THE TOTAL AMOUNT OF RS. 2,07,79,025/- A SUM OF RS.1.65 CRORES WAS GIVEN TO NON-SISTER CONCERN PARTIES AND FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. LD. AR HAS SUBMITTED THAT A SUM OF RS.1,5 2,97,979/- WAS GIVEN TO ONE S. RAM DAS WHO WAS TENANT IN THE PROPERTY AND THE AMOU NT WAS PAID FOR GETTING THE PROPERTY VACATED. IT IS PERTINENT TO NOTE THAT IF S AID AMOUNT WAS PART OF THE WORKING PROGRESS THEN NO DISALLOWANCE CAN BE MADE BY TREATI NG THE SAID AMOUNT AS INTEREST FREE ADVANCES. ACCORDINGLY, IN THE FACTS AND CIRCUMSTANC ES OF THE CASE WE SET ASIDE THIS ISSUE TO THE RECORD OF THE ASSESSING OFFICER FOR PR OPER VERIFICATION OF FACTS AS POINTED OUT BY THE ASSESSEE BEFORE US AND THEN DECIDE THE ISSUE IN THE LIGHT OF ABOVE OBSERVATION. ITA NO1293/M/12. . 4 6. IN THE RESULT, THE APPEAL OF ASSESSES IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON THIS 17 TH DAY OF DECEMBER, 2014. SD/- SD/- ( . ) !' (D. KARUNAKARA RAO) ACCOUNTANT MEMBER ( ) !' (VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 17 TH DECEMBER 2014 A.K.PATEL COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI