Kumarans, CHENNAI V. ACIT, CHENNAI

ITA 1874/CHNY/2016

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6436 (ITAT-CHENNAI)
• Duration Of Justice: 2 year(s) 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-01-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2011-2012
• Appeal Filed On: 22-06-2016
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R CLEMENT RAMESH KUMAR

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : CHENNAI . . . , . , [BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER ] ./I.T.A. NO.1874/CHNY/2016 / ASSESSMENT YEAR : 2011-2012 M/S. KUMARANS, NO.12, NAGESWARAN ROAD, T. NAGAR, CHENNAI 600 017. VS. THE ASSISTANT COMMISSION ER OF INCOME TAX, NON CORPORATE CIRCLE 1, CHENNAI 600 034. [PAN AAHFK 5277A] ( / APPELLANT) ( /RESPONDENT) / APPELLANT BY : SHRI. KAUSHIK, ADVOCATE /RESPONDENT BY : SHRI. R. CLEMENT RAMESH KUMAR, ADDL. CIT. /DATE OF HEARING : 14 - 0 1 - 201 9 /DATE OF PRONOUNCEMENT : 17 - 0 1 - 201 9 / O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER IN THIS APPEAL FILED BY THE ASSESSEE, WHICH IS D IRECTED AGAINST AN ORDER DATED 30.03.2016 OF LD. COMMISSION ER OF INCOME TAX (APPEALS)-2, CHENNAI, IS AGGRIEVED ON DISALLOWANC E OF INTEREST OF 31,15,941/-. 2. LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT DISAL LOWANCE OF 31,15,941/- WAS MADE BY THE LD. ASSESSING OFFICER RELYING ON SECTION 40A(2) OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT). AS PER THE LD. ITA NO. 1874/CHNY/2016. :- 2 -: AUTHORISED REPRESENTATIVE, IT WAS TRUE THAT ASSESSE E HAD PROVIDED INTEREST FREE LOANS TO FOLLOWING THREE PARTIES. (I) KUMARAN FINANCE 3,40,57,804.90 (II) P R K UMAR 5,87,52,961.36 (III) KUMARAN RESORTS LIMITED 5,64,32,889.10 HOWEVER, AS PER THE LD. AUTHORISED REPRESENTATIVE, SUCH LOANS WERE GIVEN OUT OF INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE. CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE WA S THAT BALANCE SHEET OF THE ASSESSEE AS ON 31.03.2011 CLEARLY INDI CATED THAT IT HAD CREDIT BALANCE IN PARTNERS CAPITAL ACCOUNT AGGREG ATING TO 8,38,51,391.71. ACCORDING TO HIM, IT WAS TRUE THAT LOANS OF 3,51,04,090.12 RAISED FROM BANKS, WHICH REMAINED OUTSTANDING AS ON 31.03.2011, WERE USED FOR GIVING INTEREST FREE L OANS. HOWEVER, ACCORDING TO HIM, INTEREST ON SUCH LOANS WERE NEVER CHARGED TO THE PROFIT AND LOSS ACCOUNT AND NEVER CLAIMED BY THE AS SESSEE. CONTENTION OF THE LD. AUTHORISED REPRESENTATIVE WA S THAT INTEREST OF 31,15,941/- CHARGED TO THE PROFIT AND LOSS ACCOUN T WERE RELATED TO OTHER LOANS AND NOT LOANS RAISED BY THE BANKS. SU CH LOAN AS PER THE LD. AUTHORISED REPRESENTATIVE WERE NEVER USED FOR F UNDING THE ADVANCES TO THE SISTER CONCERNS. ACCORDING TO HIM, DESPITE THESE FACTS BEING POINTED OUT TO THE LD. COMMISSIONER OF INCOME TAX (APPEALS), NO RELIEF WAS GIVEN TO THE ASSESSEE. AS PER THE L D. AUTHORISED ITA NO. 1874/CHNY/2016. :- 3 -: REPRESENTATIVE, ON 1 ST APRIL, 2005 WHEN THE ASSESSEE FIRM TOOK OVER THE BUSINESS OF BUYING AND SELLING GARMENTS, EARLI ER CARRIED ON BY A TRUST, THERE WERE NO SUCH ADVANCES. ADVANCES, ACC ORDING TO HIM, WERE GIVEN IN LATER YEAR. AS PER THE LD. AUTHORIS ED REPRESENTATIVE, DISALLOWANCE OF INTEREST WAS INCORRECT AND HAD TO B E DELETED. 3. PER CONTRA, LD. DEPARTMENTAL REPRESENTATIVE STRONG LY SUPPORTED THE ORDERS OF THE LOWER AUTHORITIES. 4. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PERUSE D THE ORDERS OF THE AUTHORITIES BELOW. CLAIM OF THE ASSE SSEE IS THAT LOANS FROM BANK, THOUGH IT WAS USED FOR PROVIDING INTERES T FREE LOANS TO VARIOUS PARTIES, INTEREST ON SUCH LOANS WERE NEVER CHARGED TO ITS PROFIT AND LOSS ACCOUNT NOR CLAIMED AS AN EXPENDITU RE. WE FIND THAT THERE IS A CHARGE OF INTEREST OF 31,15,941/- IN TH E PROFIT AND LOSS ACCOUNT FOR THE PREVIOUS YEAR ENDING 31.03.2011. IF THE INTEREST ON THE LOANS FROM THE BANKS, USED FOR GIVING INTEREST FREE LOANS WERE NOT CHARGED TO PROFIT AND LOSS ACCOUNT, THEN THE QUESTI ON ARISES AS TO WHAT THE INTEREST OF 31,15,941/- APPEARING IN THE PROFI T AND LOSS ACCOUNT REPRESENTED. WE ARE OF THE OPINION THAT THE QUES TION WHETHER THE INTEREST ON LOANS, IF ANY, USED FOR THE PURPOSE OF PROVIDING INTEREST FREE LOANS TO RELATED PARTIES, WAS CHARGED TO THE PROFIT AND LOSS ACCOUNT OR NOT REQUIRES A VERIFICATION BY THE LD. A SSESSING OFFICER. ITA NO. 1874/CHNY/2016. :- 4 -: LOWER AUTHORITIES HAD ALSO NOT GONE INTO THE COMPO NENTS OF THE INTEREST OF 31,15,941/- APPEARING IN THE PROFIT AN D LOSS ACCOUNT OF THE ASSESSEE, BEFORE MAKING THE DISALLOWANCE. CONSIDER ING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE SET ASIDE THE ORDERS OF THE LOWER AUTHORITIES AND REMIT THE QUESTION REGARDING DISAL LOWANCE OF INTEREST BACK TO THE FILE OF THE LD. ASSESSING OFFICER FOR C ONSIDERATION AFRESH IN ACCORDANCE WITH LAW. 5. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED ON THURSDAY, THE 17TH DAY OF JA NUARY, 2019, AT CHENNAI. SD/- SD/- ( . . . ) ) (N.R.S. GANESAN) / JUDICIAL MEMBER ( . ) (ABRAHAM P. GEORGE) / ACCOUNTANT MEMBER / CHENNAI / DATED: 17TH JANUARY, 2019. KV / COPY TO: 1 . / APPELLANT 3. ( ) / CIT(A) 5. / DR 2. / RESPONDENT 4. / CIT 6. / GF