Dy. CIT, Pune V. A2Z Online Services P.Ltd, Mumbai

ITA 1566/PUN/2013

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 88922 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 6 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-02-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 16-03-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 08-08-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B C MALAKAR

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI R.K. PANDA, ACCOUNTANT MEMBER AND SHRI VIKAS AWASTHY, JUDICIAL MEMBER ITA NO.1566/PN/2013 (ASSESSMENT YEAR : 2007-08) DY.CIT, CENTRAL CIRCLE-2(1), PUNE .. APPLICANT VS. A2Z ONLINE SERVICES PVT. LTD., 31A, GOPALRAO DESHMUKH MARG, MUMBAI- 40026 .. RESPONDENT PAN NO.AACCA5376J APPLICANT BY : SHRI DHARMESH SHAH DEPARTMENT BY : SHRI B.C. MALAKAR DATE OF HEARING : 21-05-2015 DATE OF PRONOUNCEMENT : 22-05-2015 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE REVENUE IS DIRECTED AGAINST THE ORDER DATED 20-05-2013 OF THE CIT (A) CENTRAL, PUNE RELAT ING TO ASSESSMENT YEAR 2007-08. 2. THE REVENUE IN ITS ONLY GROUND HAS CHALLENGED THE OR DER OF THE CIT(A) IN DELETING THE ADDITION OF RS.27,90,697/- MADE BY THE ASSESSING OFFICER ON ACCOUNT OF INTEREST ATTRIBUTABLE TO INT EREST FREE LOANS GIVEN. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF SERVICES RELATING TO ACCOUNTING, PROJECT MANAGEMENT, LEGAL, FINANCE PROCUREMENT AND COMPLIANCES. IT FILED ITS RETURN OF INCOME ON 31-10-2007 DECLARING TOTAL INCOME OF RS.15,57,70,005/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT ASSESSEE 2 HAS TAKEN SEVERAL LOANS DURING THE YEAR AND HAS REPAID SOME OF THEM. THE LOANS TAKEN ARE BOTH INTEREST BEARING AND INT EREST FREE. THE ASSESSEE HAS ALSO ADVANCED LOANS TO SEVERAL PERSO NS. THE LOANS ADVANCED ARE ALSO INTEREST BEARING AS WELL AS INTERE ST FREE. HE FURTHER NOTED THAT THE RATE OF INTEREST VARIES FROM 6 .5% TO 30%. HE, THEREFORE, ASKED THE ASSESSEE TO EXPLAIN AS TO WHY IN TEREST ATTRIBUTABLE TO INTEREST FREE LOANS SHOULD NOT BE DISALLOWED. IT WAS ARGUED BY THE ASSESSEE THAT NO INTEREST CAN BE DISALLOW ED AS THE INTEREST IS PAID FOR BUSINESS PURPOSE. FURTHER, THERE IS N O NEXUS BETWEEN THE INTEREST BEARING FUNDS AND INTEREST FREE ADV ANCES GIVEN AND HENCE NO INTEREST CAN BE DISALLOWED. IT WAS AR GUED THAT THE ASSESSEE ALSO HAS OWN FUNDS AS WELL AS INTEREST FREE LOANS TAKEN WHICH ARE UTILISED FOR GIVING INTEREST FREE ADVANCES. 4. HOWEVER, THE ASSESSING OFFICER WAS NOT SATISFIED WITH THE EXPLANATION GIVEN BY THE ASSESSEE ON THE GROUND THAT T HE FUNDS FLOW STATEMENT OF EACH LOAN COULD NOT BE FURNISHED BY THE ASSESSEE. THEREFORE, THE SUBMISSION OF THE ASSESSEE AS T O THE NEXUS BETWEEN THE INTEREST FREE FUNDS AND INTEREST FREE ADVANCES IS NOT SUBSTANTIATED. ON BEING ASKED BY THE ASSESSING O FFICER TO GIVE A DETAILED WORKING OF INTEREST ATTRIBUTABLE TO INTEREST FREE ADVANCES, THE ASSESSEE FILED WITHOUT PREJUDICE A DETAILED W ORKINGS BASED ON PRODUCTS METHOD AS PER THE WORKING FOR THE IM MEDIATELY PRECEDING ASSESSMENT YEAR. AS PER SUCH WORKING FILED BY THE ASSESSEE THE INTEREST ATTRIBUTABLE TO INTEREST FREE LOANS AND ADVANCES OUT OF INTEREST BEARING LOANS AMOUNTED TO RS.27,90,697/-. THE ASSESSING OFFICER ACCORDINGLY MADE ADDIT ION OF RS.27,90,697/- BEING INTEREST ATTRIBUTABLE TO INTEREST FRE E LOANS GIVEN. 3 5. BEFORE CIT(A) THE ASSESSEE SUBMITTED THAT AS AGAINST THE AGGREGATE FUNDS OF RS.138,91,44,536/- THE INTEREST FREE FUND S ADVANCED BY THE ASSESSEE WERE ONLY RS.12,35,36,632/- AS AT THE END OF THE YEAR. AS SUCH THE ASSESSEE HAD SUBSTANTIAL OWN FUNDS FOR THE PURPOSE OF GIVING LOANS AND THEREFORE NO DISALLOWANC E COULD HAVE BEEN MADE. VARIOUS DECISIONS WERE ALSO BROUGH T TO THE NOTICE OF THE CIT(A). IT WAS FURTHER ARGUED THAT IDEN TICAL ISSUE HAS BEEN DECIDED BY THE CIT(A) IN THE PRECEDING ASSESSMENT YEAR. 6. BASED ON THE ARGUMENTS ADVANCED BY THE ASSESSEE AND FOLLOWING THE DECISION OF THE CIT(A) IN ASSESSEES OWN CASE IN THE IMMEDIATELY PRECEDING ASSESSMENT YEAR THE CIT(A) DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER. 7. AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE REVENUE IS IN APPEAL BEFORE US. 8. THE LD.COUNSEL FOR THE ASSESSEE AT THE OUTSET FILED A COPY OF THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR A.Y. 2006-07 VIDE ITA NO.4955/MUM/2009 ORDER DATED 30-04-2014 AND SUBMITTED THAT UNDER IDENTICAL FACTS AND CIRCUMSTANCES TH E APPEAL FILED BY THE REVENUE WAS DISMISSED BY THE TRIBUNAL. THEREFORE, THIS BEING A COVERED MATTER IN FAVOUR OF THE AS SESSEE THE GROUND RAISED BY THE REVENUE SHOULD BE DISMISSED. 9. THE LD. DEPARTMENTAL REPRESENTATIVE FAIRLY AGREED T HAT THE ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE ORDER OF THE TRIBUNAL. 10. AFTER HEARING BOTH THE SIDES, WE FIND THE MUMBAI BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE VIDE ITA NO.4955/MU M/2009 ORDER DATED 30-04-2014 FOR A.Y. 2006-07 HAS DECIDED THE ISSUE IN 4 FAVOUR OF THE ASSESSEE AND THE APPEAL FILED BY THE REVEN UE HAS BEEN DISMISSED BY OBSERVING AS UNDER : 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL CONTENTI ONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE MAIN D ISPUTE IS DISALLOWANCE OF INTEREST ON THE GROUND THAT THE ASSESSEE HAS GIVEN INTEREST FREE LOANS OUT OF INTEREST BEARING FUNDS. FROM THE MATERIAL PLACED ON RECORDS, IT IS SEEN THAT THE ASSESSEE HAS GIVEN INTEREST FREE LOAN TO VARIOUS PERSONS AS ON 31 ST MARCH 2006 AT RS.9,39,79,832. THE AVAILABILITY OF VARIOUS INTEREST FREE LOANS AND FUNDS H AVE ALSO BEEN PROVIDED WHICH GOES TO SHOW THAT AT THE YEAR END SUCH INTEREST FREE LOANS WERE AT RS.29,76,48,648. BESIDES THIS, THE ASSESSEE HA D CURRENT YEAR'S PROFIT OF MORE THAN RS.5.81 CRORES. THE AVAILAB ILITY OF INTEREST FREE FUNDS HAVE ALSO BEEN NOTED BY THE LEARNED COMMISSI ONER (APPEALS) WHICH HAS BEEN INCORPORATED ABOVE IN THE FO RGOING PARAGRAPH. BASED ON THESE AVAILABILITY OF FUNDS, THE L EARNED COMMISSIONER (APPEALS) HAS HELD THAT INTEREST FREE LOAN IS OUT OF THESE FUNDS ONLY. SUCH A FINDING OF THE LEARNED COMMI SSIONER (APPEALS) APPEARS TO BE PRIMA-FACIE CORRECT. FROM THE DETAILS, WHICH HAS BEEN SUBMITTED, IT IS SEEN THAT DURING THE MONTH OF APRIL 2005 ITSELF, THE ASSESSEE HAS RECEIVED HUGE INTEREST FREE LOANS WHICH AGGREGATED TO MORE THAN RS.50 CRORES. OUT OF THESE FUN DS, THE ASSESSEE HAS ALSO GIVEN INTEREST FREE LOANS IN THE MONTH OF APRIL. BESIDES THIS, IF THE AVAILABILITY OF OVER ALL INTEREST FREE LOANS HAS TO BE SEEN, THEN THE ASSESSEE HAS RECEIVED MORE THAN RS. 71.95 C RORES OUT OF WHICH INTEREST FREE LOAN DURING THE YEAR GIVEN WA S AT RS.19,60,10,696. FROM THESE FACTS, A PRESUMPTION CAN B E DRAWN THAT THE INTEREST FREE LOAN HAS BEEN GIVEN OUT OF THESE INT EREST FREE UNSECURED LOANS RECEIVED BY THE ASSESSEE. THUS, WE DO NOT FIND ANY REASON TO DEVIATE FROM THE CONCLUSION DRAWN BY THE LE ARNED COMMISSIONER (APPEALS). BESIDES THIS, IT IS ALSO NOTED THAT THE ASSESSEE HAS ALSO GIVEN HUGE LOANS WHICH ARE INTEREST BEARI NG AND ON WHICH THE ASSESSEE HAD SHOWN INTEREST INCOME OF RS. 1.96 C RORES. THE INTEREST WHICH HAS BEEN INCURRED FOR THE PURPOSE OF TH E BUSINESS, HAS BEEN SHOWN AT RS.1.83 CRORES, WHICH HAS BEEN CLAIMED A S DEDUCTION UNDER SECTION 36(1)(III). SUCH A CLAIM OF DEDUCTION CANNOT BE DISALLOWED, UNLESS IT HAS BEEN SHOWN THAT THE ASSESSEE HAS AC TUALLY DIVERTED ITS INTEREST BEARING LOAN EITHER FOR SOME NON -BUSINESS PURPOSE OF FOR PERSONAL USE. THERE IS NO DIVERSION OF IN TEREST BEARING LOAN FOR ANY OTHER PURPOSE EXCEPT FOR THE PURPOSE OF THE BUSINESS. HENCE, THE CLAIM OF THE ASSESSEE UNDER SECTION 36(1)(III ) CANNOT BE DISALLOWED. THUS, THE FINDING AND THE CONCLUSION DRAWN BY THE LEARNED COMMISSIONER (APPEALS) APPEARS TO BE FACTUALLY AND LEGALLY CORRECT AND WE DECLINE TO INTERFERE IN THE MATTER A S SUCH. THUS, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 10.1 FACTS BEING SIMILAR, THEREFORE, RESPECTFULLY FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE IMME DIATELY PRECEDING ASSESSMENT YEAR, WE FIND NO INFIRMITY IN THE ORDER OF THE CIT(A) DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICE R. ACCORDINGLY, THE GROUND RAISED BY THE REVENUE IS DISMISSED. 5 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 22-05-2015. SD/- SD/- (VIKAS AWASTHY) (R.K. PANDA) JUDICIAL MEMBER ACCOUNTANT MEMBER SATISH PUNE DATED: 22 ND MAY, 2015 COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A) CENTRAL, PUNE 4. CIT CENTRAL, PUNE 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // ASSISTANT REGISTRAR ITAT, PUNE BENCHES, PUNE