SHALIMAR TEXTILES P.LTD, MUMBAI V. ASST CIT 5(3), MUMBAI

ITA 1501/MUM/2012

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0629 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-05-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: E
• Next Hearing Date: 15-09-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 05-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NEIL PHILIP
• Assessee Lawyers: DR K SHIVARAM
• Keywords: Opportunity of being heard; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH E , MUMBAI BEFORE SHRI R.C. SHARMA , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 1501 /M/201 2 ASSESSMENT YEAR: 200 7 - 08 M/S. SHALIMAR TEXTILES PVT. LTD. , SHALIMAR HOUSE, 335, GRANT ROA D, MUMBAI 400 0 07 PAN: AAECS 9222R VS. ASST. COMMISSIONER OF INCOME TAX 5(3) , MUMBAI (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : DR. K. SHIVARAM , A.R. REVENUE BY : SHRI NEIL PHILIP , D.R. DATE OF HEARING : 23.03. 201 5 DATE OF PRONOUNCEMENT : 27.05. 2015 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER DATED 12.12.2011 OF THE COMMISSIONER OF INCOME TAX (APPEALS) [(HEREINAFTER REFERRED TO AS CIT(A)] RELEVANT TO ASSESSMENT YEAR 2007 - 08. 2. THE ONLY ISSUE TAKEN BY THE ASSESSEE, THROUGH ITS GROUNDS OF APPEAL, IS RELATING TO THE DISALLOWANCE OF INTEREST EXPENDITURE OF RS.1,72,84,944/ - DEBITED IN THE PROFIT & LOSS A CCOUNT IN RELATION TO THE INTEREST BEARING FUNDS WHICH HAVE BEEN DIVERTED/ADVANCED BY THE ASSESSEE AS INTEREST FREE LOANS TO SISTER CONCERNS. THE ASSESSING OFFICER (HEREINAFTER REFERRED TO AS THE AO) OBSERVED THAT THE ASSESSEE HAD DEBITED THE INTEREST AMO UNT IN QUESTION TO THE PROFIT & LOSS ACCOUNT ON THE LOANS TAKEN FROM BANKS AMOUNTING TO RS.10,15,30,826/ - AND FROM OTHERS OF RS.1,17,76,384/ - . IT HAD ADVANCED LOANS AMOUNTING TO RS.7,91,28,341/ - TO ITS VARIOUS SISTER CONCERNS. THE ASSESSEE EXPLAINED THAT IT ITA NO.1501/M/2012 M/S. SHALIMAR TEXTILES PVT. LTD. 2 WAS HAVING ITS OWN SUFFICIENT INTEREST FREE LOANS AND THE LOANS TO SISTER CONCERNS WERE ADVANCED OUT OF ITS OWN FUNDS AND NOT OUT OF INTEREST BEARING FUNDS. IT HAD BEEN FURTHER CLAIMED THAT THE FUNDS WERE ADVANCED TO SISTER CONCERNS OUT OF BUSINESS EX IGENCY. THE AO, HOWEVER, HELD THAT THE ASSESSEE HAD FAILED TO PROVE THAT IT WAS HAVING FREE RE SERVES OUT OF WHICH THE INTEREST FREE LOANS WERE GIVEN. HE FURTHER OBSERVED THAT IT WAS FOR THE ASSESSEE TO PROVE THAT THE INTEREST FREE LOANS WERE GIVEN TO THE SISTER CONCERNS OUT OF BUSINESS EXIGENCY BUT THE ASSESSEE HAD FAILED TO DO SO. HE, THEREFORE, DISALLOWED THE INTEREST EXPENDITURE OF RS.1,72,84,944/ - AND ADDED BACK THE SAME TO THE INCOME OF THE ASSESSEE. 3. IN APPEAL, THE LD. CIT(A) ALSO OBSERVED THA T THE ASSESSEE HAD FAILED TO PROVE THAT THE LOANS WERE ADVANCED TO THE SISTER CONCERNS FOR BUSINESS PURPOSE AND THAT EVEN THE ASSESSEE HAD FAILED TO PROVIDE PARTY WISE DETAILS OF INTEREST FREE LOANS. HE, THEREFORE, UPHELD THE DISALLOWANCE MADE BY THE AO. 4. BEFORE US, THE LD. A.R. OF THE ASSESSEE, HAS REITERATED HIS SUBMISSIONS STATING THAT THE ASSESSEE HAD USED ITS OWN FUNDS FOR THE ADVANCEMENT OF LOAN TO SISTER CONCERNS. HE HAS RELIED UPON THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES AND POWER LTD. [2009] 313 ITR 340 (BOM.) . HE HAS FURTHER BROUGHT OUR ATTENTION TO THE DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL IN THE OWN CASE OF THE ASSESSEE FOR EARLIER ASSESSMENT YEAR I.E. A.Y. 2005 - 06 VIDE ORDER D ATED 31.05.11 PASSED IN ITA NO.6112/M/2009 OBSERVING AS UNDER: 7. WE HAVE HEARD THE LEARNED REPRESENTATIVES OF THE PARTIES AND PERUSED THE RECORD. WE FIND THAT THE REVENUE AUTHORITIES MAINLY DISALLOWED THE INTEREST AMOUNT OF RS.76,56,763/ - PAID BY THE AS SESSEE ON BORROWED FUNDS ON THE GROUND THAT THE ASSESSEE HAS NOT FILED PARTY WISE DETAILS OF INTEREST FREE LOANS GIVEN TO ESTABLISH THAT THE LOANS ARE GIVEN ON ACCOUNT OF COMMERCIALLY EXPEDIENCY. WHEN A CLAIM IS MADE, IT IS THE DUTY OF THE ASSESSEE TO SUBS TANTIATE ITS CLAIM BY WAY OF DOCUMENTARY EVIDENCE AND ALSO WHEN THE ASSESSEE CLAIMED THAT INTEREST FREE LOANS ARE GIVEN ON ACCOUNT OF COMMERCIAL EXPEDIENCY, THE ONUS LIES ON THE ASSESSEE TO PROVE THE COMMERCIAL EXPEDIENCY. THE HON'BLE JURISDICTIONAL HIGH C OURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD. (SUPRA) HELD THAT 'IF THERE ITA NO.1501/M/2012 M/S. SHALIMAR TEXTILES PVT. LTD. 3 WERE FUNDS AVAILABLE BOTH INTEREST FREE AND OVERDRAFT AND/OR LOANS TAKEN, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF INTEREST FREE FUNDS GENERATED OR AVA ILABLE WITH THE COMPANY. IF THE INTEREST FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS'. IN VIEW OF THE RATIO LAID DOWN BY THE HON'BLE JURISDICTIONAL HIGH COURT IN THE SAID CASE, WE REMIT THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WITH A DI RECTION TO EXAMINE ALL THE RELEVANT FACTS OF THE CASE AND DECIDE THE ISSUE KEEPING IN THE MIND THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD. (SUPRA) AND AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. 5. THE LD. A.R. OF THE ASSESSEE HAS FURTHER SUBMITTED THAT THE LOANS WERE ADVANCED BY THE ASSESSEE IN EARLIER ASSESSMENT YEARS AND THAT DURING THE YEAR UN DER CONSIDERATION THERE HAS BEEN A REPAYMENT OF THE SOME OF THE ADVANCES AND THE TOTAL ADVANCED AMOUNT HAS REDUCED. 6. SINCE THE IDENTICAL ISSUE IN RELATION TO THE ADVANCEMENT OF FUNDS HAS BEEN RESTORED BY THE CO - ORDINATE BENCH OF THE TRIBUNAL TO THE FI LE OF THE AO AND THE DECISION OF THE AO IN THE EARLIER ASSESSMENT YEAR ON THIS ISSUE WILL BE RELEVANT FOR THE YEAR UNDER CONSIDERATION ALSO, HENCE RESPECTFULLY FOLLOWING THE DECISION OF THE CO - ORDINATE BENCH OF THE TRIBUNAL FOR EARLIER ASSESSMENT YEAR, THI S ISSUE IS ALSO RESTORED TO THE FILE OF THE AO FOR DECISION AFRESH IN TERMS OF THE ORDER OF THE TRIBUNAL DATED 31.05.2011 FOR A.Y. 2005 - 06. 7 . IN THE RESULT, THE APPEAL OF THE ASSESSEE IS THEREFORE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 27.05. 201 5 . SD/ - SD/ - ( R.C. SHARMA ) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 27.05.2015. * KISHORE , SR. P.S. ITA NO.1501/M/2012 M/S. SHALIMAR TEXTILES PVT. LTD. 4 COPY TO: TH E APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.