M/s. LMJ Services Limited, Kolkata V. DCIT, Circle - 8, Kolkata, Kolkata

ITA 1620/KOL/2017

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 4769 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 7 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-02-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 10-07-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ROBIN CHOWDHURY
• Assessee Lawyers: ARATI DEBNATH
• Keywords: Notional interest
• Section: 14A

Judgement Text

1 ITA NO.1620/KOL/2017 M/S. LMJ SERVICES LTD. AY- 2010-11 IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH, B AT KOLKATA () . . , . , ) [BEFORE SHRI A. T. VARKEY, JM & DR. A. L. SAINI, A M] I.T.A. NO. 1620/KOL/2017 ASSESSMENT YEAR: 2010-11 M/S. LMJ SERVICES LTD. [PAN: AAACL 4868 Q] VS. DCIT, CIRCLE 8, KOLKATA APPELLANT RESPONDENT DATE OF HEARING 22.01.2019 DATE OF PRONOUNCEMENT 15.02.2019 FOR THE APPELLANT MS. ARATI DEBNATH, FCA FOR THE RESPONDENT SHRI ROBIN CHOWDHURY, ADDL. CIT , SR. DR ORDER PER SHRI A.T.VARKEY, JM THIS IS AN APPEAL PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A) 15, KOLKATA DATED 01.06.2017 FOR ASSESSMENT YEAR 2010-1 1. 2. AT THE OUTSET, THE LEARNED AR DREW OUR ATTENTION TO GROUND NO. 2 WHICH IS AGAINST THE ACTION OF THE LD. CIT(A) CONFIRMING THE ACTION OF THE AO IN DISALLOWING RS. 45,550/- U/S 14A READ WITH RULE 8D(2)(III) OF THE ACT AND SU BMITTED THAT SHE DOES NOT WISHES TO PRESS THIS GROUND OF APPEAL FOR SMALLNESS OF AMOUNT AND SHOULD NOT COME IN THE WAY LATER ON AS A JUDICIAL PRECEDENT. IN THE LIGHT OF THE AFO RESAID SUBMISSION, THIS GROUND OF APPEAL IS DISMISSED FOR SMALLNESS OF AMOUNT AND WILL NOT BE T REATED AS JUDICIAL PRECEDENT ON THIS ISSUE IN OTHER ASSESSMENT YEARS. 3. COMING TO GROUND NO. 1 WHICH IS AGAINST THE ACTI ON OF THE LD. CIT(A) IN CONFIRMING THE ACTION OF THE AO FOR DISALLOWING THE NOTIONAL INTEREST ON LOAN OF RS. 15,35,793/- ON THE REASON THAT THE LOAN AMOUNT WAS ADVANCED TO GROUP COMPANIES WITHOUT CHARGING ANY INTEREST. 4. BRIEF FACTS OF THE CASE IS THAT DURING THE ASSES SMENT PROCEEDINGS, THE AO NOTED THAT THE ASSESSEE COMPANY HAD TAKEN LOAN FROM BANK BY PA YING HUGE INTEREST TO THE TUNE OF RS. 67,01,604/-. HOWEVER HE NOTED THAT THE ASSESSEE COM PANY HAD SHOWN TO HAVE KEPT SECURITY 2 ITA NO.1620/KOL/2017 M/S. LMJ SERVICES LTD. AY- 2010-11 DEPOSIT WITH M/S. LMJ PROJECTS PVT. LTD. TO THE TUN E OF RS. 80,78,612/- ON WHICH NO INTEREST WAS BEING CHARGED FROM M/S. LMJ PROJECTS PVT. LTD. WHICH IS A SISTER CONCERN OF THE SAME GROUP, SO ACCORDING TO THE AO, THE ASSESSEE COMPANY IS EARNING NOTIONAL INTEREST ON THE SECURITY DEPOSIT AND THEREFORE, HE ADDED RS. 15,35, 793/-. ON APPEAL, THE LD. CIT(A) CONFIRMED THE ORDER OF THE AO. AGGRIEVED THE ASSESS EE IS BEFORE US. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE R ECORD. AT THE OUTSET ITSELF, THE LEARNED COUNSEL FOR THE ASSESSEE BROUGHT TO OUR NOT ICE THAT THE ASSESSEE HAD OWN FUNDS TO THE TUNE OF RS. 9,26,88,324/- AND THE ASSESSEE HAS GIVEN INTEREST FREE ADVANCE TO ITS SISTER CONCERN ONLY TO THE TUNE OF RS. 80,78,612/-. THEREF ORE, APPLYING THE RATIO LAID BY THE HONBLE BOMBAY HIGH COURT IN RELIANCE UTILITY AND P OWERS LTD. VS CIT 312 ITR 340 (BOM.) WHEREIN THEIR LORDSHIP HELD WHERE THE ASSESS EE IS POSSESSED OF MIXED FUNDS WHICH INCLUDES ITS OWN FUNDS IN SUFFICIENT QUANTITY, THE PRESUMPTION THAT ITS OWN FUNDS WERE UTILIZED FOR THE ADVANCES IS TO BE DRAWN. WE NOTE T HAT THE LD. CIT(A) HAS NOT APPRECIATED THE FACT THAT THE ASSESSEE HAD ITS OWN FUNDS IS TO THE TUNE OF RS. 9.26 CRORES AND THE INTEREST FREE LOAN TO THE SISTER CONCERN IS ONLY TO THE TUNE OF RS. 80 LACS. WE NOTE THAT SINCE THE ASSESSEE POSSESSED MIXED FUNDS WHICH INCLUDES ITS O WN FUNDS IN SUFFICIENT QUANTITY, A PRESUMPTION THAT ITS OWN FUNDS WERE UTILIZED FOR TH E ADVANCES IS TO BE DRAWN AND THEREFORE, QUESTION OF NOTIONAL INTEREST BEING ADDED ON THE AD VANCE GIVEN TO THE SISTER CONCERN OF THE ASSESSEE ON WHICH NO INTEREST WAS CHARGED, DOES NOT ARISE AND THE CASE LAWS REFERRED BY THE LEARNED DR IS NOT APPLICABLE TO THE FACTS AND LAW O F THE CASE. THE ADDITION OF RS. 15,35,793/- IS DIRECTED TO BE DELETED. THEREFORE, W E ALLOW THE APPEAL OF THE ASSESSEE ON THIS GROUND. 6. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 15TH F EBRUARY, 2019 SD/- SD/- (DR. A. L. SAINI) (ABY. T. VARKEY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 15TH FEBRUARY, 2019 BISWAJIT (SR.P.S.) 3 ITA NO.1620/KOL/2017 M/S. LMJ SERVICES LTD. AY- 2010-11 COPY OF THE ORDER FORWARDED TO: 1 . APPELLANT M/S. LMJ SERVICES LTD., 15B, HEMANTA BA SU SARANI, KOLKATA 700 001. 2 RESPONDENT DCIT, CIRCLE - 8, KOLKATA 700 069. 3 . THE CIT(A), 4. 5. CIT , DR, / TRUE COPY, BY ORDER, ASSISTANT REGISTRAR/H.O.O ITAT, KOLKATA