MAHENDRA P. ANGARA, MUMBAI V. ASST CIT 16(3), MUMBAI

ITA 1919/MUM/2014

• Counselvise Citation: [2018] 118 COUNSELVISE.COM (IT) 8742 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 15-02-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 20-03-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MISHRA
• Assessee Lawyers: SMITHA PAWAR
• Section: 143(3)

Judgement Text

MAHENDRA P. ANGARA., MUMBAI ITA NO. 1919/MUM/2014 1 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH B, MUMBAI BEFORE SHRI JOGINDER SINGH, VICE-PRESIDENT AND SHRI M. BALAGANESH, ACCOUNTANT MEMBER ITA NO. : 1919/MUM/2014 (ASSESSMENT YEAR: 2009-10) SHRI MAHE N DRA P. ANGARA SHOP NO. 314, COOVER BUILDING, NO. 9, 1 ST FLOOR, PARSIWADA LANE. MUMBAI 400 004. .: PAN: AAJPA1300L VS ASST. CIT 16(3) MATRU MANDIR, MUMBAI 400 007. (APPELLANT) (RESPONDENT) APPELLANT BY : MS. SMITHA PAWAR (AR) RESPONDENT BY : SHRI S.K. MISHRA (DR) /DATE OF HEARING : 20-12-2018 / DATE OF PRONOUNCEMENT : 20-12-2018 ORDER PER M. BALAGANESH, AM : 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-27, MUMBAI DATED 31.12.2013 FOR THE A.Y 2009- 10, WHICH IN ITSELF DIRECTED AGAINST THE ORDER PASSED BY THE ASSESSING OFFICER (FOR SHORT THE A.O) U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (FOR SHORT THE ACT). 2. THE ONLY ISSUE TO BE DECIDED IN THE INSTANT APPEAL IS AS TO WHETHER THE LD. CIT(A) WAS JUSTIFIED IN UPHOLDING THE DISALLOWANCE OF INTEREST OF RS. 6,16,076/- U/S 36(1)(III) OF THE ACT IN THE FACTS AND CIRCUMSTANCES OF THE CASE. 3. NONE APPEARED ON BEHALF OF THE ASSESSEE. THE ADJOURNMENT PETITION PREFERRED BY THE ASSESSEE IS REJECTED AND WE PROCEED TO DISPOSE OF THE APPEAL ON HEARING THE LD. DR. MAHENDRA P. ANGARA., MUMBAI ITA NO. 1919/MUM/2014 2 4. WE FIND FROM THE MATERIAL AVAILABLE ON RECORD THAT THE ASSESSEE IS AN INDIVIDUAL CARRYING ON THE BUSINESS OF TRADING AND SUPPLYING OF FERROUS AND NON-FERROUS METALS ON WHOLESALE BASIS. THE RETURN OF INCOME FOR THE A.Y 2009-10 WAS FILED BY THE ASSESSEE ON 30.06.2009 DECLARING TOTAL INCOME OF RS.27,27,501/- . THE LD. AO OBSERVED THAT THE ASSESSEE DURING THE YEAR HAD GIVEN INTEREST FREE LOANS OF RS. 68,45,293/-, BUT ON THE OTHER HAND, HAD BORROWED LOANS FOR WHICH INTEREST WAS PAID BY THE ASSESSEE. THE LD. AO CONCLUDED THAT THE BARROWED FUNDS WERE DIVERTED FOR GIVING INTEREST FREE LOANS BY THE ASSESSEE WHICH IN THE OPINION OF THE LD. AO WAS FOR NON-BUSINESS PURPOSE. ACCORDINGLY, ON THE TOTAL INTEREST FREE ADVANCES GIVEN BY THE ASSESSEE TO THE TUNE OF RS. 68,45,293/-, THE LD. AO APPLIED THE INTEREST AS PER THE MARKET RATE @ 9% P.A. AND WORKED OUT THE PROPORTIONATE DISALLOWANCE OF INTEREST OF RS. 6,16,076/- U/S 36(1)(III) OF THE ACT. 5. THE ASSESSEE STATED THAT HE HAD RS. 4,59,31,904/- AS INTEREST FREE FUNDS AND THAT THE INTEREST FREE LOANS WERE GIVEN OUT OF THIS FUNDS. MOREOVER, THE ASSESSEE HAD A CAPITAL ACCOUNT BALANCE OF RS. 53,50,156/- WHICH ALSO WOULD PARTIALLY EXPLAIN THE AVAILABILITY OF OWN FUNDS WITH THE ASSESSEE FOR GIVING INTEREST FREE LOANS. 6. WE FIND THAT THE ASSESSEE HAD PLEADED BEFORE THE LOWER AUTHORITIES THAT THE ENTIRE BORROWINGS MADE BY THE ASSESSEE WERE UTILIZED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE AND HENCE THE INTEREST PAID THEREON WOULD BE SQUARELY ALLOWABLE AS DEDUCTION U/S 36(1)(III) OF THE ACT. WE FIND THAT THE LD. CIT(A) HAD DISMISSED THE PLEA OF THE ASSESSEE ON THE GROUND THAT HE HAD FURNISHED DIFFERENT FIGURES AT DIFFERENT POINT IN TIME AND HENCE FIGURES QUOTED BY THE ASSESSEE CANNOT BE RELIED UPON. 7. WE FIND FROM THE FINANCIAL STATEMENTS OF THE ASSESSEE AS ON 31.03.2009 DULY AUDITED WHICH ARE ENCLOSED IN PAGES 18 TO 30 OF MAHENDRA P. ANGARA., MUMBAI ITA NO. 1919/MUM/2014 3 THE PAPER BOOK FILED BY THE ASSESSEE, THAT THE OWN CAPITAL OF THE ASSESSEE AS ON 31.03.2009 WORKS OUT TO RS. 53,50,156/- AND THE BORROWED FUNDS OF THE ASSESSEE WORKS OUT TO RS. 4,31,62,403/-. WE FIND THAT THE UNSECURED LOANS RECEIVED FROM FRIENDS AND RELATIVES WERE TO THE TUNE OF RS. 4,27,86,786/-. WE FIND THAT THE TOTAL INTEREST PAID BY THE ASSESSEE ON ITS BORROWINGS IS ONLY RS. 74,10,923/-. APART FROM THIS, WE FIND THAT THAT THE ASSESSEE HAS SUNDRY CREDITORS FOR GOODS TO THE TUNE OF RS. 10,72,33,850/- ON WHICH NO INTEREST IS PAYABLE. HENCE IT COULD BE SAFELY CONCLUDED THAT THE INTEREST FREE LOANS TO VARIOUS PARTIES TO THE EXTENT OF RS. 68,45,293/- WERE GIVEN ONLY OUT OF AVAILABLE OWN FUNDS AND INTEREST FREE FUNDS OF THE ASSESSEE IN VIEW OF THE FACT THAT OWN FUNDS, INTEREST FREE FUNDS AND BORROWED FUNDS WERE INEXTRICABLY MIXED IN THE BANK ACCOUNT OF THE ASSESSEE. WE PLACE RELIANCE IN THIS REGARD ON THE DECISION OF HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF RELIANCE UTILITIES AND POWER LTD, REPORTED IN 313 ITR 340 (BOM). ACCORDINGLY THE GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH DECEMBER, 2018 SD/- SD/- (JOGINDER SINGH) (M. BALAGANESH) VICE PRESIDENT ACCOUNTANT MEMBER MUMBAI, DATE: 20 TH DECEMBER, 2018 / COPY TO:- 1) / THE APPELLANT. 2) / THE RESPONDENT. 3) THE CIT/DRP -11, MUMBAI. 4) THE CIT/DIT CONCERNED , MUMBAI. 5) , , / THE D.R. K BENCH, MUMBAI. 6) [ \