Restaurant Shreyas, Pune V. Income-tax Officer, Ward - 3(5), Pune

ITA 206/PUN/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 7753 (ITAT-PUNE)
• Duration Of Justice: 11 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-01-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 03-01-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 22-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ABHAY A AVCHAT
• Keywords: Business expenditure; Commercial expediency
• Section: 143(3)

Judgement Text

] IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE BEFORE SHRI ANIL CHATURVEDI, AM . / ITA NO.206/PUN/2018 / ASSESSMENT YEAR : 2012-13 RESTAURANT SHREYAS, 759/31, DECCAN GYMKHANA, PUNE 411 004. PAN : AABFR4431M. . / APPELLANT V/S THE INCOME TAX OFFICER, WARD 3(5), PUNE. . / RESPONDENT ASSESSEE BY : SHRI ABHAY A. AVCHAT. REVENUE BY : SHRI RAJESH GAWALI. / ORDER PER ANIL CHATURVEDI, AM : 1. THIS APPEAL FILED BY THE ASSESSEE IS EMANATING OUT OF THE ORDER OF COMMISSIONER OF INCOME TAX (A) PUNE 3, DT.22.11.2017 FOR THE ASSESSMENT YEAR 2012-13. 2. THE RELEVANT FACTS AS CULLED OUT FROM THE MATERIAL ON R ECORD ARE AS UNDER :- ASSESSEE IS A PARTNERSHIP FIRM STATED TO BE ENGAGED IN RESTAURANT AND CATERING BUSINESS. ASSESSEE FILED ITS RET URN OF INCOME FOR A.Y. 2012-13 ON 30.09.2012 DECLARING TOTAL INCOME OF RS.20,38,530/-. THE CASE WAS SELECTED FOR SCRUTINY AND T HEREAFTER / DATE OF HEARING : 03.01.2019 / DATE OF PRONOUNCEMENT: 09.01.2019 2 ITA NO.206/PUN/2018 ASSESSMENT WAS FRAMED U/S 143(3) OF THE ACT VIDE ORDER DT.26.03.2015 AND THE TOTAL INCOME WAS DETERMINED AT RS.23,19,479/-. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CARRIED THE MATTER BEFORE LD.CIT(A), WHO VIDE ORDER DT.22.11.2017 (IN APPEAL NO.CIT(A), PUNE-3/10384/2015-16) GRANTED PARTIAL RE LIEF TO THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESS EE IS NOW IN APPEAL AND HAS RAISED THE FOLLOWING GROUNDS : 1. THE LEARNED INCOME TAX OFFICER, WARD 3(5) HAS E RRED IN DISALLOWING PART OF INTEREST COST TO THE EXTENT OF RS.2,59,794/- AND THE COMMISSIONER OF INCOME TAX (APPEALS), PUNE- 3 HAS ERRED IN CONFIRMING THE SAME. 2. THE LEARNED INCOME TAX OFFICER, WARD 3(5) HAS E RRED IN MAKING DISALLOWANCE OF GENUINE BUSINESS EXPENDITURE BY WRONGLY INVOKING PROVISIONS OF SEC.36(1)(III) OF RS .2,59,794/- UNDER PRETEXT THAT ASSESSEE HAS NOT BEEN ABLE TO ES TABLISH COMMERCIAL EXPEDIENCY FOR GIVING INTEREST FREE ADVA NCES TO GROUP CONCERNS. THE COMMISSIONER OF INCOME TAX (AP PEALS), PUNE-3 HAS ERRED IN CONFIRMING THE SAME. 3. BOTH THE GROUNDS BEING INTER-CONNECTED ARE CONSI DERED TOGETHER. 4. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, AO NOTICED THAT ASSESSEE HAD TAKEN UNSECURED LOANS AND HAS PAI D INTEREST TO 13 PERSONS, INTEREST RANGING FROM 8 TO 13% AND T HE AGGREGATE INTEREST PAID WAS RS.25,84,073/-. HE AL SO NOTED THAT THE UNSECURED LOANS HAVE NEITHER YIELDED EXPA NSION OF BUSINESS OF THE ASSESSEE BUT THE ASSETS WERE IN THE FORM OF DEPOSITS WITH OTHER BANKS AND ADVANCES. AO ALSO N OTICED THAT ASSESSEE HAD GIVEN LOANS AND ADVANCES IN THE FORM O F CALL DEPOSITS OF RS.90,20,000/- AND ASSESSEE HAS EARNED INTEREST OF RS.1,35,300/- ON SUCH CALL DEPOSITS. AO WAS OF T HE VIEW THAT 3 ITA NO.206/PUN/2018 ASSESSEE WAS NOT ABLE TO EXPLAIN ABOUT THE COMMERCI AL EXPEDIENCY FOR GIVING INTEREST FREE ADVANCES. HE W AS THEREFORE OF THE VIEW THAT REASONABLE PORTION OF INTEREST EX PENSES IS LIABLE TO BE DISALLOWED U/S SEC.36(1) OF THE ACT. HE ACCORDINGLY DISALLOWED INTEREST EXPENSES AT RS.2,59,794/- AND M ADE ITS ADDITION. AGGRIEVED BY THE ORDER OF AO, ASSESSEE CA RRIED THE MATTER BEFORE LD.CIT(A), WHO UPHELD THE ORDER OF AO . AGGRIEVED BY THE ORDER OF LD.CIT(A), ASSESSEE IS NOW IN APPEA L. 5. BEFORE ME, LD.A.R. POINTED TO THE DETAILS OF DEP OSITS WHICH WAS REPRODUCED AT PAGE 6.2 OF THE ORDER OF L D.CIT(A). HE POINTED TO THE COPY OF THE PROFIT AND LOSS ACCOU NT WHICH IS PLACED IN PAPER BOOK AND SUBMITTED THAT THE ADVANCE S ARE FOR THE PURPOSE OF BUSINESS AS THERE ARE TRANSACTIONS B Y THE ASSESSEE WITH THE AFORESAID PARTIES AND THEREFORE I T CANNOT BE SAID THAT THERE IS NO COMMERCIAL EXPEDIENCY. HE FU RTHER POINTED TO THE BALANCE-SHEET AT PAGE 9 OF THE PAPER BOOK AND SUBMITTED THAT ASSESSEE HAD INTEREST FREE ADVANCES AGGREGATING TO RS.1.35 CRORES AS AGAINST THE DEPOSITS OF RS.90. 20 LAKHS WHICH SHOWS THAT AVAILABILITY OF INTEREST FREE FUND S WERE MORE THAN THE AMOUNT ADVANCED. HE SUBMITTED THAT SINCE THE AVAILABILITY OF INTEREST FREE FUNDS ARE MORE THAN THE AMOUNT ADVANCED, NO DISALLOWANCE OF INTEREST IS CALLED FOR AND FOR TH IS PROPOSITION, HE RELIED ON THE DECISION OF HONBLE BOMBAY HIG H COURT IN THE CASE OF RELIANCE UTILITIES & POWER LTD REPORT ED IN [2009] 313 ITR 340 (BOM). HE THEREFORE SUBMITTED THAT T HE ADDITION BE DELETED . LD.D.R. ON THE OTHER HAND, SUPPORTED THE 4 ITA NO.206/PUN/2018 ORDER OF AO AND LD.CIT(A) AND FURTHER SUBMITTED THA T ASSESSEE HAS NOT DEMONSTRATED THE COMMERCIAL EXPEDIENCY FOR GIVING THE ADVANCES AND IN SUCH A SITUATION, AO WAS FULLY JUST IFIED IN DISALLOWING THE EXPENSES. 6. I HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIAL ON RECORD. THE ISSUE IN THE PRESENT GROUN D IS WITH RESPECT TO DISALLOWANCE OF INTEREST EXPENSES U/S 36 (1) OF THE ACT. BEFORE ME, ASSESSEE HAS PLACED THE AUDITED B ALANCE- SHEET OF THE FIRM IN THE PAPER BOOK. THE PERUSAL O F THE AUDITED BALANCE-SHEET REVEALS THE AVAILABILITY OF INTEREST FREE FUNDS AT RS.1.35 CRORES AS AGAINST THE ADVANCES GIVEN BY THE ASSESSEE OF RS.90.20 LAKHS WHICH ITSELF DEMONSTRATES THAT THE A VAILABILITY OF INTEREST FREE FUNDS TO BE MORE THAN THE AMOUNTS ADVANCED. I FIND THAT HONBLE BOMBAY HIGH COURT IN THE CASE O F RELIANCE UTILITIES (SUPRA) HAS HELD THAT IF THERE BE INTERES T-FREE FUNDS AVAILABLE TO AN ASSESSEE SUFFICIENT TO MEET ITS INV ESTMENTS AND AT THE SAME TIME, THE ASSESSEE HAD RAISED A LOAN, I T CAN BE PRESUMED THAT THE INVESTMENTS WERE FROM THE INTERES T FREE FUNDS AVAILABLE. I THEREFORE RELYING ON THE DECISION OF CIT VS. RELIANCE UTILITIES (SUPRA), HOLD THAT NO DISALLOWAN CE OF INTEREST CAN BE MADE IN THE PRESENT CASE. I FURTHER FIND T HAT TO THE PARTIES TO WHOM THE ASSESSEE HAD ADVANCED HAS ENTER ED INTO COMMERCIAL TRANSACTIONS DURING THE YEAR AND IN SUCH A SITUATION, IT CANNOT BE SAID THAT THERE HAS BEEN NO COMMERCIAL EXPEDIENCY IN ADVANCING THE ADVANCES. CONSIDERING THE TOTALITY OF THE AFORESAID FACTS, I AM OF THE VIEW THAT NO AD DITION IS CALLED 5 ITA NO.206/PUN/2018 FOR IN THE PRESENT CASE. I THEREFORE RELYING ON TH E DECISION OF CIT VS. RELIANCE UTILITIES (SUPRA), DIRECT TO DELET E THE ADDITION MADE BY AO. THUS, THE GROUNDS OF THE ASSESSEE ARE ALLOWED. 7. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THE 9 TH DAY OF JANUARY, 2019. S SD/- ( ANIL CHATURVEDI ) ' / ACCOUNTANT MEMBER PUNE; DATED : 9 TH JANUARY, 2019. YAMINI #$%&'(' % / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. 4. 5 6. CIT(A)-3, PUNE. PR. CIT-2, PUNE. '#$ %%&',) &', *+ / DR, ITAT, SMC PUNE; $-.// GUARD FILE. / BY ORDER // TRUE COPY // 012%3&4 / SR. PRIVATE SECRETARY ) &' , / ITAT, PUNE.