Jayram Lilaram Makhija, Ahmedabad V. The ITO, Ward-1(3)(2), Ahmedabad

ITA 1495/AHD/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 5279 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 7 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 16-06-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SONIA KUMAR
• Assessee Lawyers: PRAVEEN KUMAR SAHU
• Keywords: Proportionate interest
• Section: 143(3)

Judgement Text

, SMC IN THE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, AHMEDABAD BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMEBR ./ I.T.A. NO. 1495/AHD/2017 ( ASSESSMENT YEAR : 2012-13) JAYRAM LILARAM MAKHIJA C/O. SHIVAM, 632, OPP. SUNRISE RESTAURANT, O/S. PANCHKUVA DARWAJA, AHMEDABAD 380 001 / VS. ITO WARD 1(3)(2), PRATYAKSHKAR BHAVAN, PANJARAPOL, AMBAVADI, AHMEDABAD-7 ./ ./ PAN/GIR NO. : ABLPM8898E ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI PRAVEEN KUMAR SAHU, A.R. / RESPONDENT BY : SMT. SONIA KUMAR, SR.D.R. DATE OF HEARING 22/01/2019 !'# / DATE OF PRONOUNCEMENT 29/01/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEAL HAS BEEN FILED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE CIT(A)-10, AHMEDA BAD (CIT(A) IN SHORT), DATED 17.03.2017 ARISING IN THE ASSESSMENT ORDER DATED 06.03.2015 PASSED BY THE ASSESSING OFFICER (AO) UND ER S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) CONCERNING AY 20 12-13. ITA NO. 1495/AHD/17 [JAYRAM LILARAM MAKHIJA VS. ITO] A.Y. 2012-13 - 2 - 2. THE SOLITARY GRIEVANCE OF THE ASSESSEE IN THE INSTANT CASE IS TOWARDS DISALLOWANCE OF INTEREST AMOUNTING TO RS.5, 57,312/- UNDER S.36(1)(III) OF THE ACT ON THE GROUND THAT A PART O F THE BORROWED FUNDS HAVE BEEN DIVERTED AND UTILIZED TOWARDS INTEREST FR EE LOANS AND ADVANCES OF NON-BUSINESS NATURE. 3. WHEN THE MATTER WAS CALLED FOR HEARING, THE LEA RNED AR FOR THE ASSESSEE ADVERTED OUR ATTENTION TO THE BALANCE SHEE T OF THE ASSESSEE AND SUBMITTED THAT ASSESSEE HAS INTEREST FREE OWN F UNDS TO THE TUNE OF RS.79,77,239/- AT ITS DISPOSAL. THEREFORE, THE ALL EGED DIVERSION OF FUNDS TO THE TUNE OF RS.13,56,712/- TOWARDS INTERES T FREE LOANS AND ADVANCES AND INVESTMENT IN BUNGALOW RS.32,87,900/- SHOULD BE PRESUMED TO HAVE BEEN MADE OUT OF SUCH OWN FUNDS. 4. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDERS OF THE LOWER AUTHORITIES. 5. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE MAINTAINABILITY OF PROPORTIONATE DISALLOWANCE OF IN TEREST EXPENDITURE UNDER S.36(1)(III) OF THE ACT IS IN QUESTION. IT I S THE CASE OF THE ASSESSEE THAT WHEN THE ASSESSEE HAS SUFFICIENT INTE REST FREE FUNDS IN THE FORM OF CAPITAL AND RESERVES AND AT THE SAME TIME T HE ASSESSEE HAS BORROWED FUNDS IN THE FORM OF LOANS, IT CAN BE REAS ONABLY PRESUMED THAT INVESTMENT IN QUESTION MADE BY THE ASSESSEE WE RE MADE FROM THE INTEREST FREE FUNDS AVAILABLE. WE FIND OURSELVES I N AGREEMENT WITH THE AFORESAID PLEA OF THE ASSESSEE IN THE LIGHT OF THE DECISION RENDERED IN THE CASE OF (I) CIT VS. UTI BANK LTD. [2013] 32 TAX MANN.COM 370 (GUJ), (II) CIT VS. RELIANCE UTILITIES & POWER LTD. [2009] 313 ITR 340 (BOM.) & (III) CIT VS HDFC BANK LTD. 366 ITR 505 (B OM.). THEREFORE, AS DEMONSTRATE ON BEHALF OF THE ASSESSEE TOWARDS AVAILABILITY OF INTEREST FREE SURPLUS FUNDS SUFFICI ENT TO MEET THE ITA NO. 1495/AHD/17 [JAYRAM LILARAM MAKHIJA VS. ITO] A.Y. 2012-13 - 3 - CORRESPONDING INVESTMENTS (NOT YIELDING TAXABLE INC OME), THE ACTION OF THE REVENUE TOWARDS PROPORTIONATE INTEREST DISALLOW ANCE IS DEVOID OF ANY LEGALLY SOUND BASIS. WE THEREFORE SET ASIDE TH E ORDER OF THE CIT(A) ON THIS SCORE AND DIRECT THE AO TO DELETE TH E DISALLOWANCE MADE ON THIS SCORE. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . SD/- SD/- (MAHAVIR PRASAD) (PRADIP KUMA R KEDIA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED 29/01/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 29/01/201 9