ACIT, Ludhiana V. Sh. Pawan Kumar Goel, Ludhiana

ITA 1438/CHANDI/2010

• Counselvise Citation: 143821514 RSA 2010
• Duration Of Justice: 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 18-10-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 22-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AKHILESH GUPTA
• Assessee Lawyers: S R CHHABRA
• Keywords: Reason to believe
• Section: 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCH B BEFORE MS SUSHMA CHOWLA, JM AND SHRI MEHAR SINGH, AM ITA NO. 1438/CHANDIGARH/2010 ASSESSMENT YEAR 2007-08 A.C.I.T. C-VI, LUDHIANA V. PAWAN KUMAR GOEL 259-INDL. AREA, A, LUDHIANA PAN: ABGPG 2298 F (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AKHILESH GUPTA RESPONDENT BY: SHRI S.R. CHHABRA DATE OF HEARING: 18.10.2011 DATE OF PRONOUNCEMENT: 31 .10.2011 ORDER PER MEHAR SINGH, AM THE PRESENT APPEAL FILED BY THE REVENUE FOR ASSESS MENT YEAR 2007- 08, IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-II, LUDHIANA DATED 28.10. 2010 U/S 250 (6) OF THE INCOME-TAX ACT (IN SHORT THE ACT). 2. THE REVENUE HAS TAKEN THE FOLLOWING GROUNDS OF A PPEAL:- 1 ON THE FACTS AND CIRCUMSTANCES OF THE CASE, T HE LD. CIT(A)-II, LUDHIANA HAS ERRED IN DELETING THE ADDITION OF RS. 17,32,811/- MADE BY THE AO ON ACCOUNT OF DISALLOWANCE OF INTEREST E XPENSES U/S 57. 2 THAT THE ORDER OF THE LD. CIT(A), LUDHIANA BE SE T ASIDE AND THAT OF THE AO BE RESTORED. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE DE RIVED INTEREST INCOME OF RS. 48,16,940/- FROM VARIOUS PARTIES AND CLAIMED DEDUCTION OF INTEREST EXPENDITURE OF RS. 29,02,158/- PAID TO FOUR PARTIES AND THREE BANKS. THUS, THE ASSESSEE DISCLOSED NET INTEREST INCOME AT RS. 1 9,14,082/-. THE BONE OF CONTENTION IN THE CASE IS THAT DCIT HAS WRONGLY HEL D THAT INTEREST EXPENDITURE IS NOT WHOLLY AND EXCLUSIVELY INCURRED FOR EARNING THE INTEREST ITA NO. 1438/CHANDI/2010 A.C.I.T. V. PAWAN KUMAR GOEL 2 INCOME. ACCORDINGLY, THE AO DISALLOWED PROPORTIONA TELY RS. 17,32,811/- OUT OF THE TOTAL INTEREST EXPENDITURE AT RS. 29,02 ,158/- WITHIN THE MEANING OF SECTION 57 OF THE ACT. 3(I) IN THE COURSE OF APPELLANT PROCEEDINGS BEFORE US, THE LD. 'DR' PLACED RELIANCE ON THE DECISION IN THE CASE OF ABHISHEK IN DUSTRIES, 286 ITR 1 AND IN THE CASE OF PADMAVATI JAYKRISHAN V. CIT, GUJARAT , 131 ITR 653. THE LD. 'DR' PLACED RELIANCE ON THE ASSESSMENT ORDER. 3(II). THE 'AR' VEHEMENTLY CONTENDED THAT THE ASSE SSEES OWN FUND AND BORROWED FUNDS WERE POOLED INTO A COMMON KITTY. TH EREFORE, BORROWED FUNDS AND THE OWN FUNDS CANNOT BE IDENTIFIED WITH D ISTINCT COLOUR. HOWEVER, THE LD. 'AR' CONTENDED THAT THE ASSESSEE S OWN FUND EXCEEDED THE BORROWED FUNDS AS IS EVIDENT FROM TABLE 3, AT P AGE 13 OF THE ASSESSMENT ORDER. THE LD. 'AR' PLACED RELIANCE, IN THE CASES OF HIGHWAYS CONSTRUCTION CO. PVT LTD V. CIT, 199 ITR 702 (GAU) AND APPOLLO TRADE LINKS V. I.T.O. B-WARD, 204 ITR (AT) 78 (DELHI). 4. WE HAVE CAREFULLY PERUSED THE FACTS OF THE CASE, RIVAL SUBMISSIONS AND THE CASE LAWS RELIED ON BY BOTH THE PARTIES INC LUDING THE PAPER BOOK. IN THIS CASE THE ASSESSEE SUBMITTED BEFORE THE LD. CIT(A), AS RECORDED AT PAGE 2 OF THE APPELLATE ORDER THAT OWN FUND OF THE ASSESSEE EXCEEDED BORROWED FUNDS, ON WHICH THE INTEREST WAS PAID. IT WAS, FURTHER, DEMONSTRATED IN THE FORM OF SUBMISSION FIELD BEFORE THE LD. CIT(A) THAT THROUGH OUT THE YEAR BORROWED FUND IS ON THE LOWER SIDE AS COMPARED TO FUND GIVEN ON INTEREST. AS SUCH IT WAS CONTENDED THAT NO DISALLOWANCE ON THIS COUNT IS CALLED FOR. THE RELEVANT DATA IN THE MATTER IS EXTRACTED FROM THE ORDER OF LD. CIT(A) AND IS REPRODUCED HEREUNDER :- ITA NO. 1438/CHANDI/2010 A.C.I.T. V. PAWAN KUMAR GOEL 3 APR MAY JUN JUL AUG SEP OCT NOV DEC JAN FEB MAR LOA NS 3855 8141 3334 1690 3467 9302 3780 7751 9 3958 8321 4036 5023 4277 0940 4306 6078 3141 8311 2529 8453 2525 2867 3643 3087 INTT FEE FUND S 7591 4896 7599 1489 6 7680 1991 7629 8737 7672 2115 7731 7117 7870 5903 7670 1032 7670 8532 7781 2646 7875 0669 7660 6773 TOTA L 1144 7303 7 1092 5658 6 1114 8129 3 1143 7425 6 1163 1043 6 1176 8214 0 1214 7684 3 1197 6711 0 1081 2684 3 1031 1109 9 1040 0353 6 1130 3986 0 YIEL DING ASS ETS 5625 1648 5291 6147 5373 8458 5058 2405 4899 6978 5138 8978 5488 8978 5038 8978 2889 8978 3312 1518 3423 9690 4161 1767 NON YIEL DNG 5822 1389 5634 0439 5774 2835 6379 1851 6731 3458 6629 3162 6658 7865 6937 8132 7922 7865 6998 9581 6976 3846 7142 8093 BAL SHEE T TOTA L 1144 7303 7 1092 5658 6 1114 8129 3 1143 7425 6 1163 1043 6 1176 8214 0 1214 7684 3 1197 6711 0 1081 2684 3 1031 1109 9 1040 0353 6 1130 3986 0 4.1 THE LD. CIT(A) IN HIS FINDINGS CLEARLY HELD THA T THE ASSESSEE HAD GIVEN RS. 4,25,86,325/-, ON INTEREST TO DIFFERENT P ARTIES. THE ASSESSEE HAS TAKEN AN AMOUNT OF RS. 3,48,27,666/-, ON INTEREST. IN VIEW OF THIS, IT WAS HELD BY THE LD. CIT(A) THAT THE FUNDS FOR EARNING I NTEREST IS HIGHER THAN THE AMOUNT OF BORROWED FUNDS. THEREFORE, IN THE EN TIRETY OF THE FACTS AND CIRCUMSTANCES OF THE CASE, IT IS EVIDENT THAT THE B ORROWED FUNDS HAD NOT BEEN USED FOR OTHER PURPOSES THAN EARNING INTEREST. REFERENCE MADE BY THE LD. 'AR', TO THE CONTENTS OF TABLE 3 AND 4 HAS FORCE. DEPLOYED FUNDS FOR INTEREST IS ALWAYS HIGHER THAN THE BORROWED FUN DS EXCEPT FOR THE MONTH OF DECEMBER, 2006. IN VIEWS OF THIS, THE DECISION OF HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF ABHISHEK I NDUSTRIES RELIED UPON BY THE LD. 'AR' IS NOT APPLICABLE TO FACTS OF THE C ASE. SIMILARY, THE DECISION IN THE CASE OF PADMMAVATI JAYKRISHNA V. CIT, 131 IT R 653 (GUJ) DOES NOT SUPPORT THE CASE OF THE REVENUE HAVING REGARD TO TH E FACTS OF THE CASE. 4.2 THE FINDINGS OF THE LD. CIT(A) ARE GIVEN HEREUN DER: I HAVE CAREFULLY CONSIDERED THE CONTENTION OF THE LD. COUNSEL FOR THE APPELLANT AND PERUSED THE RELEVANT RECORD. THE ASSESSEE HAS GIVEN RS. 4,25,86,325/- TO DIFFERENT PARTIES ON INT EREST. SIMILARLY THE ASSESSEE HAS TAKEN RS. 3,48,27,666/- ON INTERES T. SINCE FUND DEPLOYED FOR EARNING INTEREST IS HIGHER THAN THE AM OUNT OF BORROWED FUND HENCE IN TOTALITY IT SEEMS THAT BORROWED FUND HAS NOT USED FOR ITA NO. 1438/CHANDI/2010 A.C.I.T. V. PAWAN KUMAR GOEL 4 OTHER PURPOSES THAN THE EARNING OF INTEREST. THE L D. COUNSEL FOR THE ASSESSEE HAS ALSO POINT OUT THAT DISALLOWANCE OF IN TEREST EXPENDITURE AT THE RATIO OF 36.81 IS AGAINST THE FACT OF THE CA SE. THE LD. COUNSEL FOR THE ASSESSEE HAS FURTHER SUBMITTED THAT AS PER TABLE 3 PREPARED BY THE AO DEPLOYED FUND FOR INTEREST IS ALWAYS HIGH ER THAN THE BORROWED FUND EXCEPT FOR THE MONTH OF DECEMBER 2006 . THE LD. COUNSEL IN HIS SUBMISSION HAS SUBMITTED THAT TABLE 4 AS CALCULATED BY THE AO HAS BEEN TAKEN AS A BASIS FOR CALCULATING THE AMOUNT OF INTEREST NOT UTILIZED WHOLLY AND EXCLUSIVELY FOR TH E PURPOSE OF EARNING OF INTEREST. CONCLUSION OF FUND DEPLOYMENT AS PER TABLE 4 DOES NOT IN ACCORDANCE WITH A CONCLUSION OF FUND DE PLOYED AS PER BALANCE SHEET. THE ARGUMENT PUT FORTH BY THE LD. C OUNSEL HAS STRONG REASON TO BELIEVE THAT THE RATIO TAKEN BY THE DY. C OMMISSIONER FOR DISALLOWING INTEREST EXPENDITURE IS NOT CORRECT. IN VIEW OF THE ABOVE DISCUSSION THE EXPENDITURE OF RS. 17,32,811/- IS DI RECTED TO BE CONSIDERED AS EXPENDITURE. THIS GROUND OF APPEAL I S THEREFORE, ALLOWED. 4.3 THE DECISION RELIED UPON BY THE LD. 'AR' IN THE CASE OF APPOLLO TRADE LINKS V. ITO, B-WARD, 204 ITR (AT) 78 SUPPORT S THE CASE OF THE ASSESSEE. 5. IN VIEW OF THE ABOVE DETAILED LEGAL AND FACTUAL DISCUSSIONS, IT IS EVIDENT THAT BORROWED FUNDS WERE NOT USED FOR ADVAN CING LOANS. HOWEVER, THE ASSESSEE USED HIS SURPLUS FUNDS FOR EARNING THE INTEREST. CONSEQUENTLY, DISALLOWANCE OF INTEREST BY THE AO UN DER SUCH FACT- SITUATION IS NOT JUSTIFIED, THEREFORE, WE DO NOT FI ND ANY INFIRMITY IN THE FINDINGS OF THE LD. CIT(A) AND, HENCE, THE SAME AR E UPHELD. 6. IN THE RESULT, APPEAL FILED BY THE REVENUE IS DI SMISSED. ORDER PRONOUNCED ON 31.10.2011 SD/- SD/- (SUSHMA CHOWLA) (MEHAR SINGH) JUDICIAL MEMBER ACCOUNANT MEMBER CHANDIGARH, THE 31.10.2011 SURESH COPY TO: THE APPELLANT/THE RESPONDENT/THE CIT/THE CIT(A)/THE DR ITA NO. 1438/CHANDI/2010 A.C.I.T. V. PAWAN KUMAR GOEL 5