Deputy Commissioner Of Income Tax, Circle- 4(1)(1), Bangalore V. M/s. Karnataka Wildlife Resorts Private Limited, Bangalore

ITA 1560/BANG/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 5089 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-09-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 28-09-2021
• Assessment Year: 2015-2016
• Appeal Filed On: 28-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRIYADARSHI MISHRA

Judgement Text

ITA NO.1560/BANG/2019 M/S. KARNATAKA WILDLIFE RESORTS PVT. LTD., BANGALOR E IN THE INCOME TAX APPELLATE TRIBUNAL BBENCH: BANGALORE BEFORE SHRI GEORGE GEORGE K., JUDICIAL MEMBER AND SHRI B.R. BASKARAN, ACCOUNTANT MEMBER ITA NO.1560/BANG/2019 ASSESSMENTYEAR:2015-16 DEPUTY COMMISSIONER OF INCOME-TAX CIRCLE-4(1)(1) BANGALORE VS. M/S. KARNATAKA WILDLIFE RESORTS PVT. LTD. NO.23/2, COFFEE DAY SQUARE VITTAL MALLYA ROAD BANGALORE 560 001 PAN NO : AACCK7942G APPELLANT RESPONDENT APPELLANT BY : SHRI PRIYADARSHI MISHRA, D.R. RESPONDENT BY : N O N E DATE OF HEARING : 28.09.2021 DATE OF PRONOUNCEMENT : 28.09.2021 O R D E R PER B.R. BASKARAN, ACCOUNTANT MEMBER: THE REVENUE HAS FILED THIS APPEAL CHALLENGING THE O RDER DATED 9.4.2019 PASSED BY LD. CIT(A)-4, BENGALURU AND IT R ELATES TO ASSESSMENT YEAR 2015-16. THE REVENUE IS AGGRIEVED BY THE DECISION OF LD. CIT(A) IN DELETING THE DISALLOWANCE OF INTER EST EXPENDITURE OF RS.5.75 CRORES MADE BY THE A.O. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE, EVEN TH OUGH THE NOTICE OF HEARING WAS SENT BY REGISTERED POST TO TH E ASSESSEE ON ITA NO.1560/BANG/2019 M/S. KARNATAKA WILDLIFE RESORTS PVT. LTD., BANGALOR E PAGE 2 OF 5 MORE THAN ONE OCCASIONS. HENCE, WE PROCEED TO DISP OSE OF THE APPEAL EX-PARTE, WITHOUT PRESENCE OF THE ASSESSEE. 3. THE FACTS RELATING TO THE ISSUE ARE STATED IN BR IEF. THE ASSESSEE IS ENGAGED IN THE BUSINESS OF OPERATING OF RESORTS. THE A.O. NOTICED THAT THE ASSESSEE HAS CLAIMED INTEREST EXPENDITURE OF RS.5.75 CRORES AS DETAILED BELOW:- PARTICULARS AMOUNT IN RS. BANK CHARGES 9,12,980 INTEREST PAID TO STANDARD CHARTERED INVESTMENTS & LOANS INDIA LTD. 5,47,65,611 INTEREST PAID TO OTHERS 18,36,597 TOTAL 5,75,15,188 THE A.O. NOTICED THAT THE ASSESSEE HAS BORROWED RS. 55 CRORES FROM STANDARD CHARTERED INVESTMENT AND LOANS INDIA LTD. AND PAID INTEREST THEREON. 4. THE ASSESSEE EXPLAINED THAT IT HAD TAKEN LOANS F ROM YES BANK LTD. IN EARLIER YEARS AND THE SAME WAS REPAID BY BO RROWING MONEY FROM A RELATED CONCERN NAMED M/S. COFFEE DAY HOTELS & RESORTS PVT. LTD. IT WAS SUBMITTED THAT THE ASSESSEE BORRO WED MONEY FROM M/S. STANDARD CHARTERED & INVESTMENT AND LOANS INDI A LTD. AND USED THE PROCEEDS TO REPAY THE BORROWING FROM M/S. COFFEE DAY HOTELS & RESORTS PVT. LTD. IT WAS SUBMITTED THAT T HE ASSETS SIDE OF BALANCE SHEET CONTAINS ONLY BUSINESS ASSETS, MEANIN G THEREBY THE LOAN PROCEEDS HAVE BEEN USED FOR BUSINESS PURPOSES ONLY. ACCORDINGLY, IT WAS SUBMITTED THAT THE ENTIRE INTER EST EXPENDITURE IS ALLOWABLE AS DEDUCTION U/S 36(1)(III) OF THE ACT. THE A.O. WAS NOT CONVINCED WITH THE EXPLANATION GIVEN BY THE ASSESSE E. HE TOOK THE VIEW THAT THE ASSESSEE HAS DIVERTED INTEREST BEARIN G LOANS FOR GIVING INTEREST FREE ADVANCE TO THE RELATED CONCERNS AND A CCORDINGLY ITA NO.1560/BANG/2019 M/S. KARNATAKA WILDLIFE RESORTS PVT. LTD., BANGALOR E PAGE 3 OF 5 DISALLOWED THE ENTIRE INTEREST CLAIM OF RS.5.75 CRO RES. THE LD. CIT(A) DELETED THE DISALLOWANCE AND HENCE THE ASSES SEE HAS FILED THIS APPEAL BEFORE US. 5. THE LD. D.R. SUPPORTED THE ORDER PASSED BY THE A .O. HE SUBMITTED THAT THE LOAN TAKEN FROM STANDARD CHARTER ED INVESTMENT & LOANS INDIA LTD. HAVE BEEN USED BY THE ASSESSEE T O PAY TO M/S. COFFEE DAY HOTELS & RESORTS PVT. LTD, MEANING THERE BY, THE ABOVE SAID LOAN WAS NOT USED FOR ACQUIRING ASSETS FOR THE PURPOSE OF BUSINESS. ACCORDINGLY, HE SUBMITTED THAT THE A.O. WAS JUSTIFIED IN DISALLOWING THE INTEREST EXPENDITURE. 6. WE HEARD LD. D.R. AND PERUSED THE RECORD. THE A SSESSEE HAS FILED WRITTEN SUBMISSIONS BEFORE LD. CIT(A), WHICH READ AS UNDER: I) THE APPELLANT HAD AN OUTSTANDING AMOUNT OF RS.4 5 CRORES PAYABLE TO YES BANK, AS ON 01.04.2014. IN THE ANNEX URE-3 SUBMITTED HEREWITH, IT MAY BE NOTED THAT THE APPELL ANT RECEIVED RS.44.10 CRORES FROM M/S COFFEE DAY HOTELS AND RESO RTS . PRIVATE LIMITED TO REPAY THE LOAN BORROWED FROM YES BANK. II) SUBSEQUENTLY, THE APPELLANT ENTERED INTO THE FA CILITY AGREEMENT WITH M/S STANDARD CHARTERED INVESTMENTS AND LOANS M ELIA LIMITED, MARKED AS ANNEXURE-4, TO REPAY THE LOAN OBTAINED FR OM M/S COFFEE DAY HOTELS AND RESORTS PRIVATE LIMITED. THE PURPOSE OF THE LOAN WITH M/S STANDARD CHARTERED INVESTMENTS IS ALSO FOR THE REPAYMENT OF LOAN OBTAINED FROM M/S COFFEE DAY. HOTELS AND RESOR TS PRIVATE LIMITED. 1.05) IN NUTSHELL, THE APPELLANT HAD RECEIVED LOAN FROM M/S COFFEE DAY HOTELS AND RESORTS PRIVATE LIMITED TOWARDS THE REPAYMENT OF LOAN TAKEN FROM YES BANK LTD. SUBSEQUENTLY, THE LOA N WAS AVAILED FROM STANDARD CHARTERED INVESTMENT & LOANS INDIA LI MITED TO REPAY LOAN TAKEN FROM M/S COFFEE DAY HOTELS AND RESORTS P RIVATE LIMITED. THE OBSERVATION OF THE LEARNED AO THAT THE LOAN TAK EN FROM M/S STANDARD ('BARTERED INVESTMENT & LOANS INDIA LIMITE D ARE DIVERTED AS INTEREST FREE ADVANCES TO RELATED PARTIES IS CON TRARY TO THE FACTS OF ITA NO.1560/BANG/2019 M/S. KARNATAKA WILDLIFE RESORTS PVT. LTD., BANGALOR E PAGE 4 OF 5 THE CASE. INSTEAD THE LOAN HAS BEEN UTILIZED FOR RE PAYMENT OF LOAN AVAILED FROM RELATED PARTIES. ACCORDINGLY, THE INTEREST EXPENDITURE IS AN ALLOWAB LE EXPENDITURE. 1.06) WITH REGARD TO BANK CHARGES, IT MAY BE NOTED THAT THE APPELLANT COMPANY IS OPERATING A RESORT IN BANDIPUR, KARNATAK A. THE GUESTS WHO CHECK IN TO THE RESORT USUALLY SETTLE THEIR PAYMENS THROUGH CARDS. THE BANK CHARGES ARE THE CHARGES DEBITED BY THE BANKS, WHICH IS MAINLY ON ACCOUNT OF SWIPING OF CREDIT AND DEBIT CARDS. THIS EXPENDI TURE IS NECESSARILY IN CONNECTION WITH THE BUSINESS OF THE APPELLANT AND H ENCE ALLOWANCE EXPENDITURE. THE LD. AG HAS ERRED IN DISALLOWING B ANK CHARGES OF RS.9,12,890/- U/S 36(1)(III) WHICH PROVIDES FOR INT EREST PAID IN RESPECT OF CAPITAL BORROWED. SINCE THE BANK CHARGES IS NOT RE LATED TO CAPITAL BORROWED, THE SAME IS AN ALLOWABLE EXPENDITURE. 7. THE LD. CIT(A) ALSO NOTICED THAT THE AMOUNT DISA LLOWED BY THE A.O. INCLUDED BANK CHARGES OF RS.9.12 LAKHS, WHICH HAVE BEEN CHARGED BY THE BANK FOR ACCEPTING CREDIT/DEBIT CARD S. THE LD. CIT(A) ALSO NOTICED THAT THE ASSET SIDE OF THE BALA NCE SHEET CONTAINS ONLY ASSETS, WHICH ARE APPLIED FOR BUSINESS PURPOSE S. HE NOTICED THAT THE BORROWINGS MADE BY THE ASSESSEE FROM M/S. COFFEE DAY HOTELS & RESORTS PVT. LTD. WERE USED TO REPAY THE T ERM LOAN TAKEN FROM YES BANK LTD. THE PRESENT LOAN TAKEN FROM STA NDARD CHARTERED INVESTMENT & LOANS INDIA LTD. HAS BEEN US ED TO REPAY THE LOAN TAKEN FROM COFFEE DAY HOTELS & RESORTS PVT . LTD. THESE FACTS SHOW THAT THE ASSESSEE WAS ONLY RESHUFFLING I TS LOAN PORTFOLIO BY CHANGING THE LENDERS, I.E., IT IS NOT A CASE, WH ERE THE ASSESSEE HAS DIVERTED INTEREST BEARING FUNDS TO ITS RELATED CONCERNS, AS PRESUMED BY THE A.O. IF THAT BE SO, THEN THE AMOUN T DIVERTED TO RELATED CONCERN SHOULD HAVE FOUND PLACE IN THE ASSE TS SIDE OF THE BALANCE SHEET. WE NOTICE THAT THE LD. CIT(A) HAS G IVEN A CLEAR FINDING THAT THE ASSET SIDE OF THE BALANCE SHEET CO NTAINS ONLY BUSINESS ASSETS. ITA NO.1560/BANG/2019 M/S. KARNATAKA WILDLIFE RESORTS PVT. LTD., BANGALOR E PAGE 5 OF 5 8. UNDER THESE SET OF FACTS, WE ARE OF THE VIEW THAT THERE IS NO REASON TO INTERFERE WITH THE DECISION RENDERED BY L D. CIT(A) ON THIS ISSUE. ACCORDINGLY, WE CONFIRM THE ORDER PASSED BY LD. CIT(A). 9. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH SEPT, 2021 SD/- (GEORGE GEORGE K.) JUDICIAL MEMBER SD/- (B.R. BASKARAN) ACCOUNTANT MEMBER BANGALORE, DATED 28 TH SEPT, 2021. VG/SPS COPY TO: 1. THE APPLICANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASST. REGISTRAR, ITAT, BANGALORE.