DCIT, CHENNAI V. Indonet Global Limited, CHENNAI

ITA 2014/CHNY/2015

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96577 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 25-09-2015
• Court: TRIBUNAL
• Department Lawyers: P RADHAKRISHNAN
• Assessee Lawyers: S SRIDHAR
• Keywords: Proportionate interest

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH : CHENNAI . . . , . ! , ' # $ [ BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ] ./ I.T.A.NO. 2014/MDS/2015 / ASSESSMENT YEAR : 2008-09 THE DY. COMMISSIONER OF INCOME-TAX CORPORATE CIRCLE 2(2) CHENNAI VS. M/S INDONET GLOBAL LTD KOTHARI BUILDING 114, MAHATMA GANDHI SALAI NUNGAMBAKKAM, CHENNAI - 34 [PAN AAACI 6476 K ] ( %& / APPELLANT) ( '(%& /RESPONDENT) / APPELLANT BY : SHRI P RADHAKRISHNAN, JCIT /RESPONDENT BY : SHRI S SRIDHAR, AD VOCATE / DATE OF HEARING : 23 - 1 1 - 2015 ! / DATE OF PRONOUNCEMENT : 09 - 1 2 - 2015 / O R D E R PER N.R.S.GANESAN, JUDICIAL MEMBER THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)-6, CHENNA I, DATED 19.5.2015 AND PERTAINS TO ASSESSMENT YEAR 2008-09 . 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS DISALLOW ANCE OF PROPORTIONATE INTEREST ON THE LOANS ADVANCED TO GRO UP CONCERNS. 3. SHRI P RADHAKRISHNAN, LD. DEPARTMENTAL REPRESENTATI VE SUBMITTED THAT THE ASSESSING OFFICER FOUND THAT THE ASSESSEE ITA NO. 2014/15 :- 2 -: BORROWED SUBSTANTIAL LOANS FROM THE BANKS AND PAID INTEREST TO THE EXTENT OF ` 54,34,853/-. THE ASSESSEE HAS ALSO ADVANCED MONE Y TO THE GROUP CONCERNS FREE OF INTEREST. SINCE THE BOR ROWED FUNDS WERE DIVERTED WITHOUT CHARGING ANY INTEREST, THE ASSESSI NG OFFICER DISALLOWED PROPORTIONATE INTEREST ON THE DIVERSION OF BORROWED FUNDS TO THE EXTENT OF ` 28,11,250/-. ACCORDING TO THE LD. DR, THE ASSESS EE CLAIMED BEFORE THE CIT(A) THAT THE RESERVES AND SUR PLUS AS ON 31.3.2008 IS ` 6,05,89,122/-. THE LOAN ADVANCED TO GROUP CONCERN S IS ONLY ` 1,89,75,000/- AND ANOTHER SUM OF ` 1,68,21,517/-. THEREFORE, THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE. ACC ORDING TO THE LD. DR, WHEN THE BORROWED FUNDS WERE DIVERTED FOR NON-B USINESS PURPOSE, PROPORTIONATE INTEREST HAS TO BE DISALLOWED. THERE FORE, THE CIT(A) IS NOT JUSTIFIED IN ALLOWING THE CLAIM OF THE ASSESSE E. 4. ON THE CONTRARY, SHRI S SRIDHAR, LD. COUNSEL FOR TH E ASSESSEE SUBMITTED THAT AS ON 31.3.2008 THE INTEREST FREE FU NDS IN THE FORM OF SHARE CAPITAL AND RESERVES WAS AVAILABLE TO THE EXT ENT OF ` 6.06 CRORES. WHAT WAS ADVANCED TO GROUP CONCERNS M/S BEEKAY PROP ERTIES LTD IS ONLY ` 1,89,75,000/- AND TO M/S LOYAL CREDIT & INVESTMEN TS LTD IS ONLY ` 1,68,21,517/-, THEREFORE, NO BORROWED FUNDS WERE D IVERTED FOR ADVANCING TO SISTER CONCERNS. HENCE, THERE IS NO QU ESTION OF ANY DISALLOWANCE OF INTEREST PAID BY THE ASSESSEE ON T HE BORROWED FUNDS. ITA NO. 2014/15 :- 3 -: 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITHER SIDE AND ALSO PERUSED THE MATERIAL AVAILABLE ON RECORD. AS ON 31.3.2008, THE ASSESSEES OWN INTEREST FREE FUNDS IN THE FORM OF S HARE CAPITAL AND RESERVES IS AVAILABLE TO THE EXTENT OF ` 6.06 CRORES AND SURPLUS TO THE EXTENT OF ` 4.87 CRORES. THE RESERVES AND SURPLUS INCLUDES THE ACCUMULATED PROFIT OF ` 3.55 CRORES AS ON 31.3.2007. WHAT WAS ADVANCED TO M/S BEEKAY PROPERTIES LTD IS ONLY A SUM OF ` 1,89,75,000/- . ANOTHER SUM OF ` 1,68,21,517/- WAS ADVANCED TO M/S LOYAL CREDIT & INVESTMENTS LTD. SINCE THE RESERVES AND SURPLUS IS AVAILABLE MORE THAN THE MONEY ADVANCED TO GROUP CONCERNS, THE CIT( A) FOUND THAT THERE WAS NO DIVERSION OF BORROWED FUNDS FOR NON-BU SINESS PURPOSE. WHEN THE AVAILABLE SURPLUS AND RESERVES IS NOT IN D ISPUTE, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A ). ACCORDINGLY, THE SAME IS CONFIRMED. 6. IN THE RESULT, THE APPEAL OF THE REVENUE STANDS DI SMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 9 TH DECEMBER, 2015, AT CHENNAI. SD/- SD/- ( . ! ) (A. MOHAN ALANKAMONY) ' / ACCOUNTANT MEMBER ( . . . ' ) (N.R.S. GANESAN) / JUDICIAL MEMBER #$ / CHENNAI %& / DATED: 9 TH DECEMBER, 2015 RD ITA NO. 2014/15 :- 4 -: &' ()*) / COPY TO: 1 . / APPELLANT 4. + / CIT 2. / RESPONDENT 5. ),- . / DR 3. +/' / CIT(A) 6. -01 / GF