The ACIT, Circle-5, Ahmedabad V. M/s. RJP Infrastructure Pvt. Ltd., Ahmedabad

ITA 1914/AHD/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9739 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-12-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 05-12-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 08-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ROOP CHAND
• Assessee Lawyers: ANUJ SHAH

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD D BENCH (BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER & SHRI MAHAVIR PRASAD, JUDICIAL MEMBER) ITA. NO: 1914/AHD/2013 (ASSESSMENT YEAR: 2009-10) ACIT, CIRCLE-5, AHMEDABAD V/S M/S. RJP INFRASTRUCTURE PVT. LTD. 206, SHEFALI CENTRE, PALDI, AHMEDABAD- 380007 (APPELLANT) (RESPONDENT) PAN: AACCR9599J APPELLANT BY : SHRI ROOP CHAND, SR. D.R. RESPONDENT BY : SHRI ANUJ SHAH, A.R. ( )/ ORDER DATE OF HEARING : 05 -12-201 6 DATE OF PRONOUNCEMENT : 06 -12-2016 PER N.K. BILLAIYA, ACCOUNTANT MEMBER: 1. THIS APPEAL BY THE REVENUE IS PREFERRED AGAINST THE ORDER OF LD. CIT(A)-XI, AHMEDABAD DATED 26.104.2013 PERTAINING TO A.Y. 2009 -10. ITA NO. 1914 /AHD/2013 . A.Y. 2009-10 2 2. THE ONLY GRIEVANCE OF THE REVENUE IS THAT THE LD. C IT(A) ERRED IN DELETING THE ADDITION OF RS. 37,11,298/- ON ACCOUNT OF DISALLOWA NCE OF INTEREST MADE U/S.36(1)(III) OF THE ACT. 3. THE ASSESSEE COMPANY IS ENGAGED IN CONSTRUCTION OF VARIOUS INDUSTRIAL & GOVERNMENT PROJECTS AS CONTRACTOR. THE RETURN FOR T HE YEAR UNDER CONSIDERATION WAS FILED ON 30.09.2009. THE RETURN W AS SELECTED FOR SCRUTINY ASSESSMENT AND ACCORDINGLY STATUTORY NOTICES WERE I SSUED AND SERVED UPON THE ASSESSEE. 4. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEE DINGS, THE A.O. NOTICED THAT THE ASSESSEE HAS ADVANCED RS. 3,09,27,482/- TO M/S. JARCY BUILDERS, A RELATED CONCERN OF THE ASSESSEE. THE A.O. FURTHER F OUND THAT THE ASSESSEE HAS NOT CHARGED INTEREST ON THE SAID ADVANCE. THE A .O. FURTHER FOUND THAT THE ASSESSEE HAS PAID INTEREST @ 12% TO VARIOUS PAR TIES. SINCE THE ASSESSEE HAD BORROWED FUNDS ON WHICH INTEREST HAS BEEN PAID, THE ASSESSEE WAS ASKED TO SHOW CAUSE WHY INTEREST @ 12% ON ADVANCE T O M/S. JARCY BUILDERS SHOULD NOT BE DISALLOWED U/S. 36(1)(III) OF THE ACT . 5. IN ITS REPLY, THE ASSESSEE STATED THAT DURING THE Y EAR UNDER CONSIDERATION THERE WAS AN OPENING BALANCE OF RS. 40,81,350/- IN THE ACCOUNT OF M/S. JARCY BUILDERS. IT WAS FURTHER BROUGHT TO THE NOTIC E OF THE A.O. THAT THE ASSESSEE COMPANY HAS ALSO RECEIVED AN AMOUNT OF RS. 2,19,98,000/- FROM M/S. JARCY BUILDERS. IT WAS CLAIMED THAT THE ASSESS EE WAS HAVING SUFFICIENT ITA NO. 1914 /AHD/2013 . A.Y. 2009-10 3 OWN FUNDS TO MAKE THE ADVANCE, THEREFORE, THERE IS NO QUESTION FOR ANY DISALLOWANCE. 6. THE SUBMISSIONS OF THE ASSESSEE DID NOT FIND ANY FA VOUR WITH THE A.O. WHO PROCEEDED BY COMPUTING THE DISALLOWANCE AT RS. 37,1 1,298/-. 7. ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) A ND REITERATED ITS CONTENTION. THE FIRST APPELLATE AUTHORITY WAS CONVI NCED WITH THE ASSESSEE AND DELETED THE DISALLOWANCE OF RS. 37,11,298/-. 8. AGGRIEVED BY THIS, THE REVENUE IS BEFORE US. THE LD . D.R. STRONGLY SUPPORTED THE FINDINGS OF THE A.O. PER CONTRA, THE LD. COUNSE L FOR THE ASSESSEE REITERATED WHAT HAS BEEN STATED BEFORE THE LOWER AU THORITIES. 9. WE HAVE GIVEN A THOUGHTFUL CONSIDERATION TO THE ORD ERS OF THE AUTHORITIES BELOW. THE UNDISPUTED FACT IS THAT THE ASSESSEE HAS MADE ADVANCES TO ITS SISTER CONCERN M/S. JARCY BUILDERS FROM ITS BANK AC COUNT MAINTAINED WITH CANARA BANK. THE FIRST APPELLATE AUTHORITY FOUND TH AT THIS ACCOUNT HAD ALWAYS A DEBIT BALANCE WHEN THE ADVANCES WERE MADE TO SISTER CONCERN. THEREFORE, IT CAN BE SAFELY CONCLUDED THAT THE A.O. FAILED TO DEMONSTRATE THAT INTEREST BEARING FUNDS WERE DIVERTED TOWARDS I NTEREST FREE ADVANCES. WE FURTHER FIND THAT THE ASSESSEE WAS HAVING CAPITA L AND RESERVES OF RS. 1,71,81,166/- AND THE MAXIMUM INTEREST FREE ADVANC ES TO ITS SISTER CONCERN WAS RS. 1,06,44,482/-. ITA NO. 1914 /AHD/2013 . A.Y. 2009-10 4 10. THE HONBLE HIGH COURT OF BOMBAY IN THE CASE OF REL IANCE UTILITIES & POWER LTD 313 ITR 340 WHICH WAS FOLLOWED IN THE CASE OF H DFC LTD. 366 ITR 505. IT WAS HELD THAT IF THERE ARE MIXED FUNDS AVAILABLE WITH THE ASSESSE E THEN THE PRESUMPTION WOULD BE THAT INTEREST FREE FUNDS HAVE BEEN UTILIZED FOR MAKING INTEREST FREE ADVANCES. THEREFORE, NO PART OF INTER EST ON BORROWINGS CAN BE DISALLOWED ON THE BASIS OF THAT INVESTMENTS WERE MA DE OUT OF INTEREST BEARING FUNDS. 11. CONSIDERING THE FACTS IN HAND, IN THE LIGHT OF THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT (SUPRA), WE DECLINE TO IN TERFERE WITH THE FINDINGS OF THE LD. CIT(A). 12. APPEAL FILED BY THE REVENUE IS ACCORDINGLY DISMISSE D. ORDER PRONOUNCED IN OPEN COURT ON 06 - 12- 20 16. SD/- SD/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER TRUE COPY ACCOUNTANT MEMBER AHMEDABAD: DATED 06 /12/2016 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD