The ACIT,(OSD)Circle-8, Ahmedabad V. Tower Overseas Ltd., Ahmedabad

ITA 1678/AHD/2012

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 1180 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 11 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-07-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 16-06-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 31-07-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SAMIR S JANI
• Keywords: Speculation loss
• Section: 143(3); 43(5)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, AHMEDABAD .., , !' BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER 1. ./ I.T.A. NO.1396/AHD/2012 2. ./ I.T.A. NO.1678/AHD/2012 ( / ASSESSMENT YEAR : 2009-10) 1. TOWER OVERSEAS LTD. 7, GADHAVI SOCIETY NR. ISHITA TOWER NAVRANGURA,AHMEDABAD 2. THE ACIT(OSD) CIRCLE-8, AHMEDABAD / VS. 1. THE ACIT CIRCLE-8 AHMEDABAD 2. TOWER OVERSEAS LTD., AHMEDABAD $ ./ ./ PAN/GIR NO. : AABCT 6695 C ( $' / APPELLANT ) .. ( ()$' / RESPONDENT ) ASSESSEE BY : SHRI SAMIR S. JANI, AR REVENUE BY : SHRI K. MADHUSUDAN, SR.DR *+ / DATE OF HEARING 6/06/2016 ,-.+ / DATE OF PRONOUNCEMENT 07/07/2016 / O R D E R PER SHRI ANIL CHATURVEDI, ACCOUNTANT MEMBER : THESE CROSS-APPEALS BY THE ASSESSEE AND REVENUE A RE DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-XIV, ITA NO.1396/AHD/2012 (BY ASSESSEE) AND ITA NO.1678/AHD/2012 (BY REVENUE) TOWER OVERSEAS LTD. VS. ACIT ASST.YEAR 2009-10 - 2 - AHMEDABAD DATED 25/05/2012 PASSED FOR ASSESSMENT YE AR (AY) 2009- 10. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATE RIALS ON RECORD ARE AS UNDER:- 2.1. ASSESSEE IS A COMPANY STATED TO BE ENGAGED IN THE BUSINESS OF TRADING OF COATED COTTON FABRICS, FOAM BOARD, NYLON AND FLEX BANNER. ASSESSEE INITIALLY FILED ITS RETURN OF INCOME ON 30 /09/2009. SUBSEQUENTLY IT REVISED ITS RETURN OF INCOME ON 04/05/2010. T HE CASE WAS SELECTED FOR SCRUTINY AND THEREAFTER ASSESSMENT WAS FRAMED U/S. 143(3) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED TO AS 'THE ACT' ) VIDE ORDER DATED 15/12/2011 AND THE TOTAL LOSS WAS DETERMINED AT R S.2,14,88,054/-. AGGRIEVED BY THE ORDER OF THE ASSESSING OFFICER (AO ), ASSESSEE CARRIED THE MATTER BEFORE THE LD.CIT(A), WHO VIDE ORDER DAT ED 25/05/2012 (IN APPEAL NO.CIT(A) XIV/ACIT.CIR.8/156 /2011- 12) GRANTED PARTIAL RELIEF TO THE ASSESSEE. AGGRIEVE D BY THE ORDER OF LD.CIT(A), ASSESSEE AND REVENUE ARE NOW IN CROSS-AP PEALS BEFORE US. 3. GROUNDS RAISED BY THE ASSESSEE IN ITA NO.1396/AH D/2012ARE AS UNDER:- 1. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACT S IN PARTLY CONFIRMING THE ASSESSMENT ORDER PASSED BY THE ASSES SING OFFICER U/S.143(3) OF THE ACT. ITA NO.1396/AHD/2012 (BY ASSESSEE) AND ITA NO.1678/AHD/2012 (BY REVENUE) TOWER OVERSEAS LTD. VS. ACIT ASST.YEAR 2009-10 - 3 - 2. THE LEARNED CIT(A) HAS ERRED IN HOLDING THE LOSS ON ACCOUNT OF TRANSACTIONS CARRIED OUT THROUGH KARVY STOCK BROKIN G LTD. AS SPECULATIVE LOSS IN SPITE OF THE PLEA OF THE APPELL ANT THAT THE SAME IS HEDGING LOSS. THE SAME IS PRAYED FOR TREATMENT AS BUSINESS LOSS. 3. THE LEARNED CIT(A) HAS ERRED IN LAW AND ON FACTS IN UPHOLDING ORDER OF THE ASSESSING OFFICER ONLY ON THE ERRONEOU S BASIS THAT THE EXPENDITURE INCURRED FOR RAISING THE CAPITAL BY PAY MENT TO ROC IS CAPITAL IN NATURE AND ALSO IGNORING THE JUDICIAL PR ECEDENT CITED BY THE APPELLANT. THE SAME IS PRAYED FOR ALLOWANCE. 4. THE LEARNED CIT(A) HAS ERRED IN NOT ADJUDICATIN G THE GROUND NO.3 OF ALTERNATE PRAYER FOR ALLOWANCE ROC FEES PAID UND ER SECTION 35D. THE SAME IS PRAYED TO YOUR HONOR. 5. THE APPELLANT HUMBLY REQUESTS THAT COST BE AWAR DED IN THIS APPEAL ON ACCOUNT OF ARBITRARY MANNER IN WHICH THE ORDER I S PASSED BY THE DEPARTMENT. 3.1. ON THE OTHER HAND, THE GROUNDS RAISED BY THE R EVENUE IN ITA NO.1678/AHD/2012 ARE AS UNDER:- 1) THE LD.COMMISSIONER OF INCOME-TAX (APPEALS)-XIV , AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN PARTLY DELETING THE DI SALLOWANCE MADE BY SPECULATION LOSS U/S.43(5) OF THE ACT. 2) THE LD.COMMISSIONER OF INCOME-TAX (APPEALS)-XIV , AHMEDABAD HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISAL LOWANCE MADE U/S.36(1)(VIII) OF THE ACT. 3) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE, THE LD.COMMISSIONER OF INCOME-TAX (APPEALS)-XIV, AHMEDA BAD OUGHT TO HAVE UPHELD THE ORDER OF THE ASSESSING OFFICER. ITA NO.1396/AHD/2012 (BY ASSESSEE) AND ITA NO.1678/AHD/2012 (BY REVENUE) TOWER OVERSEAS LTD. VS. ACIT ASST.YEAR 2009-10 - 4 - 3. IT IS THEREFORE, PRAYED THAT THE ORDER OF THE LD.C OMMISSIONER OF INCOME-TAX (APPEALS)-XIV, AHMEDABAD MAY BE SET-ASID E AND THAT OF THE ORDER OF THE ASSESSING OFFICER BE RESTORED. 4. WE FIRST TAKE UP THE REVENUES APPEAL IN ITA NO .1678AHD/2012. 4.1. FIRST GROUND IS WITH RESPECT TO DELETING THE D ISALLOWANCE OF SPECULATION LOSS U/S.43(5) OF THE ACT. 4.2. BEFORE US, AT THE OUTSET, LD.SR.DR SUBMITTED T HAT GROUND NO.1 RAISED BY THE REVENUE AND GROUND NO.2 RAISED BY THE ASSESSEE ARE INTER- CONNECTED AND THEREFORE IT CAN BE CONSIDERED TOGETH ER. 4.3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS A ND ON PERUSING THE PROFIT &LOSS ACCOUNT, AO NOTICED THAT ASSESSEE HAS DEBITED RS.39,33,576/- IN THE P&L ACCOUNT UNDER THE HEAD L OSS ON FORWARD COVER TRANSACTIONS. ASSESSEE WAS ASKED TO SHOW-C AUSE AS TO WHY THE LOSS IN FOREX DERIVATIVE NOT BE TREATED AS SPECULAT IVE LOSS U/S.43(5) OF THE ACT TO WHICH THE ASSESSEE INTER-ALIA SUBMITTED THAT THE LOSS IS A USUAL PHENOMENA IN THE IMPORT EXPORT BUSINESS AND IS DIFF ERENT FROM MARK TO MARGIN LOSS AND IS FULLY ALLOWABLE. AO DID NOT ACC EPT THE ASSESSEES CONTENTION. HE AFTER CONSIDERING THE CBDT INSTRUCT ION NO.3 OF 2010 DATED 23/03/2010, WAS OF THE VIEW THAT THE TRANSACT ION OF FOREX DERIVATIVE HAS NOT BEEN CARRIED OUT ON A RECOGNIZED EXCHANGE A ND IT DOES NOT FULFILL THE CONDITION LAID DOWN IN SECTION 43(5) OF THE ACT AND THEREFORE IT IS IN THE NATURE OF SPECULATIVE TRANSACTION AND ANY LOSS FROM SPECULATIVE ITA NO.1396/AHD/2012 (BY ASSESSEE) AND ITA NO.1678/AHD/2012 (BY REVENUE) TOWER OVERSEAS LTD. VS. ACIT ASST.YEAR 2009-10 - 5 - TRANSACTION CAN BE SET OFF AGAINST PROFIT ONLY FROM SPECULATIVE BUSINESS. HE AFTER CONSIDERING THE FACTS THAT THE TRANSACTION OF FOREX DERIVATIVES WERE CARRIED WITH THE BANK AND NOT RECOGNIZED EXCHA NGE, DISALLOWED RS.39,33,576/-. AGGRIEVED BY THE ORDER OF AO, ASSE SSEE CARRIED THE MATTER BEFORE THE LD.CIT(A), WHO AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSEE, GRANTED PARTIAL RELIEF TO THE ASSESSEE BY HOLDING AS UNDER:- 3.3. DECISION : I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER AN D THE SUBMISSION FILED BY THE APPELLANT. THE A.O. HAS DI SALLOWED THE LOSS OF RS.39,33,576/- UNDER THE HEAD LOSS ON FORWARD COVER TRANSACTION BY TREATING IT AS SPECULATIVE TRANSACTION. THE APPELLA NT HAS SUBMITTED THAT IT WAS DOING BUSINESS OF IMPORTING GOODS FROM FOREI GN COUNTRIES AND IT HAS IMPORTED GOODS OF MORE THAN RS.50 CRORES DURING THE YEAR, THE PAYMENT FOR WHICH HAS TO BE MADE AFTER 5-6 MONTHS A T THE PREVAILING MARKET RATES OF THE CURRENCY. THE RATE OF FOREIGN E XCHANGE VARY FROM TIME TO TIME AND, THEREFORE, TO HEDGE AGAINST THE P OSSIBLE LOSS DUE TO VOLATILITY OF MARKET FLUCTUATION, THE IMPORTERS ENT ER INTO CONTRACT WITH AUTHORIZED BANKERS TO PURCHASE THE FOREIGN CURRENCY AT THE PREVAILING MARKET RATE AT THE TIME OF ENTERING THE IMPORT CONT RACT. THE APPELLANT HAS, FURTHER, GIVEN CERTAIN INSTANCES WHEREIN IT HA S BEEN DEMONSTRATED BY HIM THAT THE APPELLANT HAS INCURRED A LOSS OF RS .23,60,000/- ON ACCOUNT OF SUCH TYPE OF TRANSACTION. THE TRANSACTIO N WAS FOR RS.4 LAC US $ WITH HDFC BANK. IN THIS CASE, THE LETTER OF CREDI T THROUGH WHICH THE IMPORT IS DONE WAS OPENED IN THE MONTH OF JUNE AND JULY AND THE PAYMENT DUE DATE WAS IN THE MONTH OF FEBRUARY AND M ARCH. TO SAFEGUARD AGAINST THE FUTURE RISK THE APPELLANT HAD HEDGED RS. 4 LAC US $ WITH HDFC BANK ON 27/08/2008 AFTER THE OPENING OF LC. SINCE THE APPELLANT EXPECTED THE DOLLAR TO RISE UP TO 52, HE DECIDED TO CANCEL THE CONTRACT INCURRING THE LOSS OF RS.23.6 LACS. THE AP PELLANT HAS FURTHER GIVEN DETAILS OF TOTAL TRANSACTIONS OF SUCH HEDGING CONTRACT AND IT HAS ITA NO.1396/AHD/2012 (BY ASSESSEE) AND ITA NO.1678/AHD/2012 (BY REVENUE) TOWER OVERSEAS LTD. VS. ACIT ASST.YEAR 2009-10 - 6 - BEEN SUBMITTED THAT IN SOME TRANSACTION THERE IS A LOSS BUT IN SOME CASES, THE APPELLANT HAS EARNED PROFIT ALSO. HOWEVE R, THERE IS OVERALL LOSS IN THE ACCOUNT. THE APPELLANT HAS FURTHER SUBM ITTED THAT THE ADVICE TO ENTER INTO HEDGING TRANSACTION WAS GIVEN BY THE HDFC BANK AS LETTER OF CREDIT WAS OPENED WITH IT AND IT WAS A GENERAL T RADE PRACTICE. LATER ON THE FOREIGN EXCHANGE TRANSACTION, WERE ALSO DONE THROUGH KARVY STOCK BROKING LTD. THE APPELLANT HAS FURTHER RELIED ON THE DECISION OF GUJARAT HIGH COURT IN THE CASE OF M/S. FRIENDS AND FRIENDS SHIPPING PVT. LTD. IN TAX APPEAL NO. 251 OF 2010 DATED 23/08 /2011. AFTER CONSIDERING THE FACTUAL POSITION, THE SUBMISS ION OF THE APPELLANT AND THE FINDING OF THE A. O., I AM OF THE OPINION THAT THE CLAIM OF THE APPELLANT IS PARTLY CORRECT. IT IS NOTED FRO M THE LEDGER ACCOUNT OF THE FOREIGN EXCHANGE PROFIT / LOSS INCURRED BY THE APPELLANT THAT THE TRANSACTIONS WHICH HAVE BEEN DONE THROUGH HDFC BANK ARE VERY FEW AND ARE NOT FREQUENTLY DONE. HOWEVER, THE TRANSACTI ONS DONE THROUGH KARVY STOCK BROKING LTD. ARE FREQUENTLY DONE AND AR E DONE ON REGULAR BASIS. IT IS NOTED THAT THERE WAS ONLY ONE TRANSACT ION OF LOSS ON 29/11/2008. THE NEXT TRANSACTION WAS ON 31/12/2008 AND AFTER THAT THE APPELLANT HAS STARTED MAKING TRANSACTIONS THROUGH K ARVY STOCK BROKING' LTD. AND THERE ARE MANY TRANSACTIONS IN TH E MONTH OF JANUARY, FEBRUARY AND MARCH WHICH SHOW THAT THE TRANSACTIONS ARE NOT IN THE NATURE OF HEDGING TRANSACTION BUT ARE IN THE NATURE OF SPECULATIVE TRANSACTION. IT IS ALSO NOTED THAT THE TRANSACTIONS ARE IN TRADING OF CURRENCY FUTURES. THE LAW LAID DOWN BY THE HONOURAB LE GUJARAT HIGH COURT IN THE CASE MENTIONED BY THE APPELLANT IS ALS O SIMILAR. THE HONOURABLE COURT HAS HELD THAT THE ONUS IS ON THE A PPELLANT TO PROVE THAT THE TRANSACTION WAS NOT SPECULATIVE BUT HEDGIN G. THE TRANSACTION THAT ARE DONE THROUGH HDFC BANK ARE CLEARLY LINKED WITH THE BUSINESS OF THE APPELLANT AND CAN BE CONSIDERED AS HEDGING T RANSACTIONS. HEDGING IN FOREIGN EXCHANGE IS A NORMAL PRACTICE FO R THE PERSONS ENGAGED IN IMPORT OF EXPORT. WHEREAS THE TRANSACTIO NS DONE THROUGH KARVY STOCK BROKING LTD. ARE NOT IN THE NATURE OF H EDGING TRANSACTIONS BUT ARE IN THE NATURE OF SPECULATIVE TRANSACTIONS A S THESE ARE FOR TRADING IN CURRENCY FUTURES. THE A. O. IS, THEREFORE, DIREC TED TO TREAT THE LOSS INCURRED THROUGH THE TRANSACTION DONE THROUGH HDFC BANK AS NON- ITA NO.1396/AHD/2012 (BY ASSESSEE) AND ITA NO.1678/AHD/2012 (BY REVENUE) TOWER OVERSEAS LTD. VS. ACIT ASST.YEAR 2009-10 - 7 - SPECULATIVE AND BUSINESS LOSS. THE TRANSACTIONS CAR RIED OUT THROUGH KARVY STOCK BROKING LTD. SHOULD ACCORDINGLY BE TREA TED AS SPECULATIVE IN NATURE AND THE LOSS IS ACCORDINGLY DIRECTED TO B E DISALLOWED. THEREFORE, THE LOSS TO THAT EXTENT WILL BE ALLOWED AS BUSINESS LOSS AND THE BALANCE IS DIRECTED TO BE TREATED AS SPECULATIV E LOSS WHICH CAN BE CARRIED FORWARD FOR THE NEXT A.Y. AND ONWARDS. THE A.O. IS DIRECTED TO WORK OUT THE EXACT FIGURES ACCORDINGLY. THE GROUND OF APPEAL IS ACCORDINGLY PARTLY ALLOWED. 4.3. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE AND REVENUE ARE NOW IN APPEAL BEFORE US. 4.4. BEFORE US, LD.SR.DR SUPPORTED THE ORDER OF AO. LD.AR, ON THE OTHER HAND, REITERATED THE SUBMISSIONS MADE BEFORE THE LD.CIT(A) AND AO AND SUBMITTED THAT THE LD.CIT(A) HAS ERRED IN CONSI DERING THE LOSS INCURRED FROM THE TRANSACTIONS DONE THROUGH KARVY S TOCK BROKING LTD. AS SPECULATIVE TRANSACTIONS. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) WHILE DECIDING THE ISSUE HAS NOTED THAT THE ASSESSEE HAD DONE TRANSACTIONS THROUGH HDFC BANK AN D KARVY STOCK BROKING LTD., THE TRANSACTIONS DONE THROUGH HDFC BA NK WERE VERY FEW, WHEREAS THE TRANSACTIONS DONE THROUGH KARVY STOCK B ROKING LTD. WERE FREQUENT AND THE NUMBER OF TRANSACTIONS DONE WITH K ARVY STOCK BROKING LTD. INDICATED THAT THEY WERE NOT IN THE NATURE OF HEDGING TRANSACTIONS BUT WERE IN THE NATURE OF SPECULATIVE TRANSACTIONS AND FOR ARRIVING AT AFORESAID ITA NO.1396/AHD/2012 (BY ASSESSEE) AND ITA NO.1678/AHD/2012 (BY REVENUE) TOWER OVERSEAS LTD. VS. ACIT ASST.YEAR 2009-10 - 8 - CONCLUSION, HE ALSO RELIED ON THE DECISION OF HONB LE GUJARAT HIGH COURT IN THE CASE OF M/S.FRIENDS AND FRIENDS SHIPPING PVT .LTD. IN TAX APPEAL NO.251 OF 2010 DATED 23/08/2011. HE THEREFORE CONC LUDED THAT THE TRANSACTIONS DONE THROUGH HDFC BANK WERE LINKED WIT H THE BUSINESS OF THE ASSESSEE AND THEREFORE COULD BE CONSIDERED AS H EDGING TRANSACTIONS, WHEREAS THE TRANSACTIONS THROUGH KARVY STOCK BROKIN G LTD. WERE IN THE NATURE OF SPECULATIVE TRANSACTIONS. HE ACCORDINGLY DIRECTED THE LOSS INCURRED ON THE TRANSACTIONS THROUGH HDFC BANK BE A LLOWED AND THE LOSS INCURRED ON THE TRANSACTIONS WITH KARVY STOCK BROKI NG LTD. BE CONSIDERED IN SPECULATIVE IN NATURE. BEFORE US, AS SESSEE AND REVENUE HAVE NOT PLACED ANY MATERIAL ON RECORD TO CONTROVER T THE FINDINGS OF LD.CIT(A). IN VIEW OF THE AFORESAID FACTS, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF LD.CIT(A) AND THUS THIS GROUND OF REVENUE AND ASSESSEE IS DISMISSED. 6. SECOND GROUND OF REVENUE IS WITH RESPECT TO DELE TING THE ADDITION MADE U/S.36(1)(VII) OF THE ACT. 6.1. AO NOTICED THAT ASSESSEE HAD CLAIMED INTEREST EXPENSE OF RS.3,99,02,123/-. HE ALSO NOTICED THAT ASSESSEE HA S GIVEN INTEREST-FREE LOANS OF RS.18,84,892/- TO THE DIRECTOR OF THE COMP ANY. AO THEREFORE CONCLUDED THAT ASSESSEE HAD DIVERTED THE INTEREST-B EARING FUNDS FOR THE PURPOSE OF NON-BUSINESS USE AND THEREFORE TO THE EX TENT OF INTEREST PAID ITA NO.1396/AHD/2012 (BY ASSESSEE) AND ITA NO.1678/AHD/2012 (BY REVENUE) TOWER OVERSEAS LTD. VS. ACIT ASST.YEAR 2009-10 - 9 - ON THE AMOUNT ADVANCED TO DIRECTOR CANNOT BE ALLOWE D AS DEDUCTION. HE THEREAFTER WORKED OUT THE INTEREST DISALLOWANCE @ 1 1.5% AND DISALLOWED RS.2,16,762/- AGGRIEVED BY THE ORDER OF THE ASSESS ING OFFICER (AO), ASSESSEE CARRIED THE MATTER BEFORE THE LD.CIT(A), W HO AFTER CONSIDERING THE SUBMISSION OF THE ASSESSEE, DELETED THE ADDITIO N BY OBSERVING AS UNDER:- 5.3. DECISION: I HAVE CAREFULLY CONSIDERED THE ASSESSMENT ORDER AN D THE SUBMISSION FILED BY THE APPELLANT. THE APPELLANT H AS SUBMITTED THAT THE TRANSACTION WITH SHRI AMBANI ARE CURRENT ACCOUNT TY PE TRANSACTION WITH THE COMPANY. THERE WAS AN OPENING CREDIT BALANCE O F RS.66,59,425/- IN THE ACCOUNT FOR WHICH MR.AMBANI DID NOT CHARGE ANY INTEREST FROM THE COMPANY. SIMILARLY, THE APPELLANT COMPANY HAS ALSO NOT CHARGED THE INTEREST. IT HAS FURTHER BEEN SUBMITTED BY THE APP ELLANT THAT THE COMPANY IS HAVING ITS OWN CAPITAL OF RS.2.5 CRORES AND ANOTHER RS.4 CRORES OF SHARE APPLICATION MONEY WHICH ARE INTERES T FREE. IN ADDITION TO THESE FUNDS, THE RESERVES AND SURPLUS OF RS.93,4 5,302/- WERE ALSO THERE IN THE BEGINNING OF THE YEAR AND, THEREFORE, IT HAD SUFFICIENT INTEREST FREE FUNDS TO GIVE THE INTEREST FREE LOAN TO THE DIRECTOR. I AM INCLINED TO ACCEPT THE SUBMISSION GIVEN BY THE APPELLANT. THE APPELLANT HAD SUFFICIENT INTEREST FREE FUNDS AN D THE DECISION OF RELIANCE UTILITIES AND POWER LIMITED (2009) 313 ITR 340 (BOM) IS SQUARELY APPLICABLE ON THESE FACTS. FURTHER, IT IS ALSO NOTED THAT THE DIRECTOR IS ALSO NOT CHARGING ANY INTEREST FROM THE COMPANY FOR GIVING THE LOAN AND ACCORDINGLY THE A.O. WAS NOT JUSTIFIED IN MAKING THE DISALLOWANCE U/S.36(1)(III) OF THE ACT. THE ADDITI ON IS THEREFORE, DIRECTED TO BE DELETED AND THE GROUND OF APPEAL IS ACCORDINGLY ALLOWED. ITA NO.1396/AHD/2012 (BY ASSESSEE) AND ITA NO.1678/AHD/2012 (BY REVENUE) TOWER OVERSEAS LTD. VS. ACIT ASST.YEAR 2009-10 - 10 - 6.2. BEFORE US, LD.SR.DR SUPPORTED THE ORDER OF AO. ON THE OTHER HAND, LD.AR REITERATED THE SUBMISSIONS MADE BEFORE THE AO AND LD.CIT(A) AND THUS SUPPORTED THE ORDER OF LD.CIT(A). 7. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED THE MATERIAL AVAILABLE ON RECORD AND GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. WE FIND THAT THE LD.CIT(A) WHILE DECIDING THE ISSUE IN FAVOUR OF ASSESSEE HAS NOTED THAT THE TRANSACTIONS WITH THE DIRECTORS WERE OF CURRENT ACCOUNT TYPE AND THERE WAS OPENING CREDIT BALANCE IN THE AC COUNT FOR WHICH THE DIRECTORS DID NOT CHARGE ANY INTEREST FROM THE ASSE SSEE AND ASSESSEE HAS ALSO NOT CHARGED THE INTEREST. HE HAS FURTHER GIV EN FINDING THAT THE INTEREST-FREE FUNDS IN THE FORM OF SHARE CAPITAL WE RE FAR IN EXCESS OF THE AMOUNT ADVANCED TO THE DIRECTOR AND IN VIEW THE DEC ISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIE S AND POWER LTD. REPORTED IN (2009) 313 ITR 340 (BOM), NO DISALLOWAN CE U/S.36(1)(III) OF THE ACT WAS CALLED FOR. BEFORE US, REVENUE HAS N OT PLACED ANY MATERIAL ON RECORD TO CONTROVERT THE FINDINGS OF LD.CIT(A) N OR HAS PLACED ANY BINDING DECISION IN ITS SUPPORT. IN VIEW OF THE AF ORESAID FACTS, WE SEE NO REASON TO INTERFERE WITH THE ORDER OF LD.CIT(A) AND THUS THIS GROUND OF REVENUE IS DISMISSED. 8. IN THE RESULT, REVENUES APPEAL IN ITA NO.1678/A HD/2012 FOR AY 2009-10 IS DISMISSED. ITA NO.1396/AHD/2012 (BY ASSESSEE) AND ITA NO.1678/AHD/2012 (BY REVENUE) TOWER OVERSEAS LTD. VS. ACIT ASST.YEAR 2009-10 - 11 - 9. NOW WE TAKE UP THE ASSESSEES APPEAL IN ITA NO.1 396/AHD/2012 FOR AY 2009-10. 9.1. BEFORE US, LD.AR SUBMITTED THAT GROUND NOS.1 & 5 ARE GENERAL IN NATURE AND THEREFORE NOT PRESSED. IN VIEW OF LD.A RS SUBMISSION, THESE GROUNDS ARE DISMISSED. 9.2. AS GROUND NO.2 RAISED BY THE ASSESSEE BEING IN TER-CONNECTED WITH GROUND NO.1 RAISED BY REVENUE, WE HEREINABOVE, WHIL E DECIDING THE GROUND OF REVENUE HAVE DISMISSED THE GROUND OF ASSE SSEE AND REVENUE. 10. GROUND NOS.3 & 4 ARE NOT PRESSED BY THE LD.AR A ND THEREFORE THE SAME ARE DISMISSED AS NOT PRESSED. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. 12. IN THE COMBINED RESULT, REVENUES APPEAL AND A SSESSEES APPEAL ARE DISMISSED. THIS ORDER PRONOUNCED IN OPEN COURT ON 07/07/2016 SD/- SD/- .. () () ( R.P. TOLANI ) ( ANIL CHATURVEDI ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 07/ 07 /2016 2..,.../ T.C. NAIR, SR. PS ITA NO.1396/AHD/2012 (BY ASSESSEE) AND ITA NO.1678/AHD/2012 (BY REVENUE) TOWER OVERSEAS LTD. VS. ACIT ASST.YEAR 2009-10 - 12 - !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. $' / THE APPELLANT 2. ()$' / THE RESPONDENT. 3. 345 6 / CONCERNED CIT 4. 6 ( ) / THE CIT(A)-XIV, AHMEDABAD 5. 789(45 , 45. , 3 / DR, ITAT, AHMEDABAD 6. 9;<* / GUARD FILE. / BY ORDER, )7( //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD 1. DATE OF DICTATION .. 17.6.16 (DICTATION-PAD 11- PAGES ATTACHED AT THE END OF THIS APPEAL-FILE) 2. DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE THE DICTATING MEMBER 4.7.16 3. OTHER MEMBER 4. DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR.P. S./P.S.. 5. DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE D ICTATING MEMBER FOR PRONOUNCEMENT 6. DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR.P .S./P.S.7.7.16 LATE EVENING 7. DATE ON WHICH THE FILE GOES TO THE BENCH CLERK 8.7.16 8. DATE ON WHICH THE FILE GOES TO THE HEAD CLERK ... 9. THE DATE ON WHICH THE FILE GOES TO THE ASSISTANT RE GISTRAR FOR SIGNATURE ON THE ORDER.. 10. DATE OF DESPATCH OF THE ORDER