Shri Mihir Pravinchandra Desai, Ahmedabad V. The Income Tax Officer, Ward 10(1), Ahmedabad

ITA 2037/AHD/2013

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6181 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 8 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 08-02-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 31-07-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: K MADHUSUDAN HEARING
• Assessee Lawyers: P D SHAH
• Keywords: Deemed dividend
• Section: 143(3)

Judgement Text

ITA NO. 2037 / AHD/201 3 ASSESSMENT Y EAR: 20 0 9 - 10 PAGE 1 OF 3 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD A BENCH, AHMEDABAD [CORAM: PRAMOD KUMAR AM AND MAHAVIR PRASAD JM] ITA NO. 2037 /AHD/20 13 ASSESSMENT Y EAR: 200 9 - 10 MI H IR PRAVINCHANDRA DESAI ... .......... . APPELLANT C/O. MEHTA LODHA & CO. ,CHARTERED ACCOUNTANTS, 105, SAKAR - I, ASHRAM ROAD, AHMEDABAD 380 009 . [PAN: A GVPD 7750 K ] VS. INCOME TAX OFFICER , WARD 10(1) , AHMEDABAD. ... .. ......... RESPONDENT APPEARANCES BY P.D. SHAH FOR THE A PPELLANT K . MADHUSUDAN FO R THE R E SPONDENT HEARING CONCLUDED ON: 0 8 .02 .2017 ORDER PRONOUNCED ON : 27 . 0 4 .2017 O R D E R PER PRAMOD KUMAR , AM: 1. BY WAY OF THIS APPEAL, THE ASSESSEE APPELLANT HAS CHALLENGED CORRECTNESS OF LEARNED CIT(A) S ORDER DATED 3 RD JUNE 20 13, IN THE MATTER OF ASSESSMENT UNDER SECTION 143(3) OF THE INCOME TAX ACT 1961, FOR THE ASSESSMENT YEAR 2009 - 10. 2. IN THE FIRST GROUND OF APPEAL, THE ASSESSEE HAS RAISED THE FOLLOWING GRIEVANCE: THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS BY CON FIRMING 50% (RS.6,88,555/ - ) OF THE DISALLOWANCE OUT OF TOTAL INTEREST EXPENDITURE OF RS.13,77,110/ - AND THEREFORE THE LEARNED AO BE DIRECTED TO ALLOW THE ENTIRE CLAIM OF INTEREST EXPENSE . 3. TO ADJUDICATE ON THIS GRIEVANCE OF THE ASSESSEE, ONLY A FEW MATE RIAL FACTS NEED TO BE TAKEN NOTE OF. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTED THAT AS AGAINST AN INTEREST INCOME OF RS 13,77,110, THE ASSESSEE HAS CLAIMED A DEDUCTION OF INTEREST EXPENDITURE AMOUNTING TO RS 14,39,661. HE PRO BED THE MATTER FURTHER, AND NOTED THE CONTENTION OF THE ASSESSEE TO THE EFFECT THAT INTEREST BORROWINGS WERE FROM SARAFA MARKET AT A HIGHER RATE AND INTEREST EARNINGS ARE FROM ITA NO. 2037 / AHD/201 3 ASSESSMENT Y EAR: 20 0 9 - 10 PAGE 2 OF 3 UNSECURED LOANS. HE WAS OF THE VIEW , INTER ALIA, THAT ALTHOUGH THE BORROWINGS M IGHT HAVE FACILITATED THE ACTIVITY OF ADVANCING OF LOANS, THE SAME ARE NOT WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF EARNING OF INTEREST INCOME FROM ADVANCES (AS) COPIES OF LEDGER ACCOUNTS SUBMITTED SHOW THAT THERE IS NO NEXUS OF BORROWING OF FUNDS AND ADV ANCING OF LOANS . ENTIRE CLAIM OF DEDUCTION WAS THUS DISALLOWED. AGGRIEVED, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A) WHO RESTRICTED THE DISALLOWANCE TO 50% OF THE CLAIM OF DEDUCTION ON THE GROUND THAT LOAN ADVANCED COULD NOT BE SHOWN TO BE O UT OF BORROWED FUNDS IN ENTIRETY. THE ASSESSEE IS STILL NOT SATISFIED AND IS IN APPEAL BEFORE US. 4. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEGAL POSITION. 5. WE FIND THAT THERE IS NO DISPUTE THAT THE ASSESSEE IS ENGAGED IN THE ACTIVITY OF ADVANCING LOANS AND EARNING INTEREST FROM THE SAME, AND THAT THE ASSESSEE HAD BORROWED THE FUNDS DURING THE COURSE OF THIS ACTIVITY. AS LONG AS THESE FACTS ARE NOT IN DISPU TE, AS IS THE POSITION IN THE PRESENT CASE, IT IS NOT EVEN MATERIAL THAT EVERY RUPEE THAT HE BORROWED WAS ACTUALLY ADVANCED ON INTEREST OR NOT; ALL THAT MATTERS IS THAT THE BORROWINGS IN THE COURSE OF THIS ACTIVITY. THAT ASPECT CANNOT EVEN BE IN CHALLENGE AS THE CIT(A) HAS ALLOWED DEDUCTION OF 50% OF INTEREST PAID, AND THE ASSESSING OFFICER HAS NOT CHALLENGED THAT FINDING. IN ANY CASE, THERE IS NO BASIS WHATSOEVER, EXCEPT VAGUE GENERALIZATIONS , TO SUPPORT THE DISALLOWANCE OF ONLY A PART OF THE INTEREST. IN VIEW OF THESE DISCUSSIONS, AS ALSO BEARING IN MIND ENTIRETY OF THE CASE, WE DEEM IT FIT AND PROPER TO DELETE THE PARTIAL DISALLOWANCE OF INTEREST SUSTAINED BY THE ASSESSEE. THE ASSESSEE GETS THE RELIEF ACCORDINGLY. 6. IN THE SECOND GROUND OF APPEAL, THE A SSESSEE HAS RAISED THE FOLLOWING GRIEVANCE: THAT THE LEARNED CIT(A) HAS ERRED IN LAW AND FACTS BY CONFIRMING THE ADDITION TO THE EXTENT OF RS.63,582/ - U/S. 2(22)(E) AND THEREFORE THE LEARNED ASSESSING OFFICER BE DIRECTED TO DELETE THE ADDITION MADE U/S 2 (22)(E) OF THE ACT. 7. SO FAR AS THIS GRIEVANCE OF THE ASSESSEE IS CONCERNED, THE SHORT CONTENTION OF THE ASSESSEE IS THAT THESE AMOUNTS WERE RECEIVED BY THE ASSESSEE IN THE COURSE OF BUSINESS, AND, THEREFORE, THE SAME CANNOT BE TREATED AS ADVANCES IN NA TURE. IT IS ON THIS ITA NO. 2037 / AHD/201 3 ASSESSMENT Y EAR: 20 0 9 - 10 PAGE 3 OF 3 BASIS THAT THE ASSESSEE SEEKS DELETION OF THE AMOUNT OF RS 63,582 FROM THE DEEMED DIVIDEND HELD TO BE TAXABLE IN THE HANDS OF THE ASSESSEE. FOR THE SAKE OF COMPLETENESS, IT MAY BE MENTIONED THAT THE TOTAL DEEMED DIVIDEND BROUGHT TO TAX IN THE HANDS OF THE ASSESSEE, BY THE ASSESSING OFFICER, WAS RS 45,63,583 BUT, FOR THE DETAILED REASONS SET OUT IN THE LEARNED CIT(A) S ORDER - WHICH, TO THAT EXTENT, IS NOT IN CHALLENGE BEFORE US, THE ADDITION WAS RESTRICTED TO RS 63,582. THAT ASPECT OF THE MATTER HAS ATTAINED FINALITY AS THE SAID DECISION, TO THAT EXTENT, HAS BEEN ACCEPTED BY THE ASSESSING OFFICER. 8. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE MATERIAL ON RECORD AND DULY CONSIDERED FACTS OF THE CASE IN THE LIGHT OF THE APPLICABLE LEG AL POSITION. 9. WE FIND THAT THE ASSESSEE HAS NOT BROUGHT ON RECORD ANY EVIDENCE OR ANY OTHER MATERIAL IN SUPPORT OF THE FACTUAL ELEMENTS EMBEDDED IN THE CONTENTIONS OF THE ASSESSEE. THERE IS NO MATERIAL WHATSOEVER TO SUPPORT THE CLAIM. THE QUANTUM OF ADD ITION BEING VERY SMALL, THE ASSESSEE MAY NOT BE KEEN TO PURSUE THE MATTER FURTHER. SUCH BEING THE POSITION, WE HAVE NO CHOICE BUT TO TREAT THE MATTER AS NOT PRESSED AND DISMISS IT AS SUCH. 10. GROUND NO. 2 IS THUS DISMISSED. 11. IN THE RESULT, THE APPEAL IS PARTLY ALLOWED IN THE TERMS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF APRIL , 2017 . SD/ - SD/ - MAHAVIR PRASAD PRAMOD KUMAR (JUDICIAL MEMBER) (ACCOUNTANT MEMBER) DATED: AHMEDABAD, THE 2 7 TH DAY OF APRIL , 201 7 . PBN/* COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, A HMEDABAD