BIDCO STUDS P. LTD, MUMBAI V. INCOME TAX OFFICER WARD-4(1), THANE

ITA 2065/MUM/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6285 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 04-04-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: CHAITANYA ANJARIA
• Keywords: Business expenditure
• Section: 37(1); 201; 11

Judgement Text

T HE INCOME TAX APPELLATE TRIBUNAL SMC BENCH, MUMBAI BEFORE SHRI SHAMIM YAHYA ( A M) I.T.A. NO. 2065 /MUM/ 201 8 (ASSESSMENT YEAR 20 12 - 13 ) M/S. BIDCO STUDS PVT. LTD. 203, CAPRI, OPPOSITE HDIL TOWERS, ANANT KANEKAR MARG BANDRA EAST, MUMBAI - 51. PAN : A AACB7122M V S . ITO WARD 4(1) ROOM NO. 3, 6 TH FLOOR A - WING, ASHAR IT PARK ROAD NO. 16 - Z, WAGLE INDUSTRIAL ESTATE THANE - 400 604. ( APPELLANT ) ( RESPONDENT ) ASSESSEE BY SHRI NIMESH THAR DEPARTMENT BY SHRI CHAITANYA ANJARIA DATE OF HEARING 15 . 7 . 201 9 DATE OF PRONOUNCEMENT 9 . 10 . 201 9 O R D E R THIS AP P E AL BY THE ASSESSEE IS DIRECTED AGAIN S T THE ORDER OF LEARNED CIT(A) DATED 1.12.2017 AND PERTAINS TO A.Y. 2012 - 13. 2. THE GROUND OF APPEAL IS THAT : LEARNED CIT(A) HAS ERRED IN LAW AND ON F ACTS IN UPHOLDING THE ASSESSING OFFICERS ACTION OF DISALLOWING INTEREST EXPENSES TO THE TUNE OF RS. 1,37,45,184/ - U/S. 36(1)(III) OF THE I.T. ACT, 1961 WHICH IS BAD IN LAW . 3. BRIEF FACTS OF THE CASE ARE THAT : RETURN OF INCOME DECLARING LOSS OF RS. 1,34 ,45,184/ - APPELLANT ON 1,34,45,1 84/ - WAS FILED BY THE ASSESSEE ON 1,34,45,184/ - . DURING THE COURSE OF ASSESSMENT PROCEEDINGS, T HE AO NOTICED THAT THE ASSESSEE HAS CLAIMED EXPENDITURE SU CH AS INTEREST OF RS.1,37,08,728/ - AND HAS SHOWN OTHER INCOME AT RS.3,0 0, 000/ - WHICH HAS RESULTED IN LOSS. IN REPLY, THE ASSESSEE SUBMITTED DETAILS ON 25.2.2015 STATING THAT MOU WAS ENTERED INTO WITH M/S. SAPPHIRE LAND DEVELOPMENT PVT. LTD. FOR PURCHASE OF TDR FOR A CONSIDERATION OF RS.60, 00 ,00,000/ - AND AS A PART OF ADVANCE PAYMENT THE COMPANY HAS PAID RS.30,00,00,000/ - TO SAPPHIRE LAND DEVELOPMENT PVT. LTD. ON VARIOUS DATES BY M/S. BIDCO STUDS PVT. LTD. 2 OBTAINING OVERDRAFT FACILITY FROM PUNJAB AND MAHARASHTRA CO - OP. BANK LTD. HOWEVER AND AMOUNT OF RS.1,37,08,728/ - WAS REFUNDED BACK TO THE ASSESSEE 18.07.2011 . THE AO, HOWEVER, REJECTED THE EXPLANATION OF THE ASSESSEE AS THE CLAIM OF THE ASSESSEE WAS NOT SUPPORTED BY THE DOCUM ENTARY EVIDENCE AND ALSO COPY OF MEMORANDUM OF ASSOCIATION WAS NOT PROVIDED BY THE ASSESSEE DURING ASSESSMENT PROCEEDINGS. THE REFORE, THE AO ADDED BACK THE AMOUNT OF RS.1,37,08,728/ - BY REJECTING THE LOSS CLAIMED BY THE ASSESSEE AND ADDING BACK THE DIFFERENTIAL AMOUNT OF RS.3,00,000/ - TO THE TOTAL INCOME OF THE ASSESSEE . 4. UPON ASSESSEES APPEAL LEARNED CIT(A) CONFIRMED THE ACT ION OF THE ASSESSING OFFICER BY HOLDING AS UNDER : - I HAVE CAREFULLY CONSIDERED THE SUBMISSIONS OF OBSERVATIONS OF THE APPELLANT, THE AO IN THE ASSESSMENT ORDER; CASE LAWS RELIED UPON BY THE APPELLANT AND THE FACTS OF THE CASE . (I) THE AO HAS DISALLOWE D THE CLAIM OF INTEREST ON THE FO LLOWING APPELLANT'S CONTENTION OF ADVANCING RS.30 CRORES TO M /S. SAPPHIRE LAND DEVELOPMENT PVT. LTD. AS A PART CONSIDERATION FOR THE PU RCHASE OF TDR IS NOT SUPPORTED BY ANY DOCUMENTARY EVIDENCE. B ) APPELLANT HA S FAILED TO P RODUCE THE MEMORANDUM OF UNDERSTANDING ENTERED WITH M/S. SAPPHIRE LAND DEVELOPMENT PVT. LTD. AND FAILED TO PROVE THAT THE MONE Y ADVANCED WAS FOR BUSINESS PURPOSE C) SINCE THE TIME THE MONEY WAS ADVAN CED, THE APPELLANT HAS NOT TAKEN ANY ACTION TO RECOVER THE MONEY ADVANCED O R MADE AN ATTEMPT TO ACQUIRE THE PROPERTY IN QUESTION. NO LEGAL ACTION HAS BEEN INITIATED. THEREFORE, THE AO CONCLUDED THAT THE ADVANCE AMOUNT OF R S. 30 CRORES IS NOT RELATED TO THE BUSINESS OF THE APPELLANT AND HENCE TH E CLAIM OF INTEREST AMOUNTING TO RS.1,37,08,728/ - IS DISALLOWED U/S.37(L) OF THE ACT. (II) ON THE OTHER HAND, THE AR OF THE APPELLANT HAS R ELIED UPON THE DECISION OF THE HON'BLE ITAT MUMBAI BENCH 'G' IN APPEL LANTS OWN CASE IN ITA NO.L504/MUM/201I A.Y.2003 - 04 WH EREIN THE ITAT HAS SE T ASIDE AND RESTORE BACK TO THE FILE OF THE AO. FURTHER, WITHOUT PREJUDICE, THE AR OF THE APPELLANT HAS STATED THAT TO DIRECT THE AO TO ALLOW CAPITALIZING INTERE ST EXPENSES. AFTER CONSIDERING THE TOTALITY OF THE CASE, I AM OF THE VIE W THAT THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE CLAIM OF INTEREST OF RS.1,37,08,728/ - U/S. 37(1) OF THE ACT ON THE FOLLOWING GROUNDS A) AS ALREADY DISCUSSED BY TH E ASSESSING OFFICER IN PARA 7 IN THE ASSESSMENT ORDER B) APPELLANT'S MAIN INCOME IS FROM OTHER SOURCES, THEREFORE, THERE IS NO EVIDENCE TO PROOF THAT THAT THE APPELLANT IS IN THE BUSINESS OF BUILDERS AND DEVELOPERS C) THE M/S. BIDCO STUDS PVT. LTD. 3 MONEY ADVANCED TO M/S. SAPPHIRE LAND DEVELOPMENT PVT. LTD. IS NOT SUPPORTED BY MEMORANDUM OF UNDERSTANDING THAT THE ADVANCE IS FOR, ACQUIRING TDR FOR APPELLANTS BUSINESS PURPOSE. I N FACT, THE APPELLANT IS JUST ACTING AS CONDUIT OF M/S. SAPPHIRE LAND DEVELOPMENT PVT. LTD. AS NO EFFORTS WERE M ADE TO RECOVER THE MONEY OR ACQUIRE THE PROPERTY EVEN AFTER A LAPSE OF SOME Y EARS. IN VIEW OF THE ABOVE STATED FACTS, THE APPEAL OF THE APPELLA NT IS DISMISSED AND THE DISALLOWANCE MADE U/S.37(L) BY THE AO IS SUSTAINED . 5. AGAINST THE ABOVE ORDER ASSESSEE IS IN APPEAL BEFORE THE ITAT. I HAVE HEARD BOTH THE COUNSEL AND PERUSED THE RECORDS. LEARNED COUNSEL REITERATED THE SUBMISSION MADE BEFORE THE AUTHORITIES BEFORE. HE SUBMITTED THAT THE ASSESSEE HA S ENTERED INTO A MOU WITH M/S. SAPPHIRE LAND DEVELOPMENT PVT. LTD. FOR PURCHASE OF TDR FOR CONSIDERATION OF R S. 60 CORES AND AS A PART OF ADVANCE PAYMENT TH E ASSESSEE HAS PAID RS.30,00,00,000/ - TO SAPPHIRE LAND DEVELOPMENT PVT. LTD. ON VARIOUS DATES DURING A.Y S . 2010 - 11 & 2011 - 12 BY OBTAINING OVERDRAFT FACILITY FROM PUNJAB AND MAHARASHTRA CO - OP. BANK LTD. HOWEVER, THE DEAL COULD NOT BE M ATERIALIZED AND ASSESSEE - COMPANY RECEIVED BACK THE ADVANCE AMOUNT AND CLOSED OVERDRAFT FACILITY ON 18.7.2011. HENCE IT HAS BEEN PLEADED THAT INTEREST EXPENSES SHOULD BE ALLOWED RS. 1,37,08,728/ - . IT HAS BEEN CONTENDED THAT IT IS VERY MUCH FOR THE PURPOSE O F BUSINESS AND ASSESSEE - COMPANY IS LEGALLY BOUND TO HONOR ITS COMMITMENT. IT HAS BEEN CLAIMED THAT RELIANCE PLACED UPON ITAT DECISION IN ASSESSEES OWN CASE VIDE ORDER DATED 18.11.2015 . 6. AS REGARDS LEARNED CIT(A)S CONTENTION THAT MONEY ADVANCED TO M/S. SAPPHIRE LAND DEVELOPMENT PVT. LTD. IS NOT SUPPORTED BY THE MOU I T HAS BEEN CLAIMED THAT THERE WAS FIRE IN THE OFFICE PREMISES OF HDIL (HDIL TOWERS) IN WHICH ENTIRE RECORDS , DATA DOCUMENTS WERE BURNT/DESTROYED. IN THIS REGARD LEARNED COUNSEL PLACED RELIAN CE UPON THE DECISION OF HON'BLE BOMBAY HIGH COURT DECISION IN THE CASE OF PR.CIT, PANJAJI VS. MILROC GOOD EARTH PROPERTY & DEVELOPERS LLP (93 TAXMANN.COM 484). LEARNED COUNSEL PLACED RELIANCE ON SEVERAL OTHER DECISIONS IN THIS REGARD. 7. PER CONTRA, LEA RNED DEPARTMENTAL REPRESENTATIVE SUBMITTED THAT THE ASSESSEE IS MAKING A SELF SERVING STATEMENT WITHOUT ANY DOCUMENTATION. THE M/S. BIDCO STUDS PVT. LTD. 4 ASSESSEE HAS DIVERTED THE LOAN TAKEN TO M/S. SA PPHIRE LAND DEVELOPMENT PVT. LIMITED . WITHOUT ANY INCOME OR ANY CORRESPONDING RECE IPT, IT IS CLAIMING EXPENSES OF RS. 1,37,08,728/ - AS EXPENSES, WHICH IS NOT AT ALL PERMISSIBLE. 8. UPON CAREFUL CONSIDERATION, I NOTE THAT AS POINTED OUT BY LEARNED CIT(A) THE ASSESSEES SUBMISS IONS ARE SELF SERVING STATEMENT. TH ERE IS NO DOCUMENTATION T O SUPPORT THAT ADVANCES OF RS. 30 CRORES GIVEN TO M/S. SAPPHIRE LAND DEVELOPMENT PVT. LTD. WAS PART OF CONSIDERATION FOR PURCHASE OF TDR. THE ASSESSEE HA S GIVEN A STORY THAT DOCUMENTS GOT DESTROYED IN FIRE IN HDIL. IT WAS ALSO S I M I LAR LY PLEADED BEFORE THE ITAT IN ASSESSEES OWN CASE IN EARLIER . T HIS CONDUCT OF THE ASSESSEE SHOWS THAT THE ASSESSEE IS IN HABIT OF NOT SHOWING DOCUMENTS ON A PLEA OF ITS DOCUMENTS HAVING GOT BURNT IN ITS GROUP COMPANY HDIL TOWER. IN ASSESSEES OWN CASE IN EARLIER YEAR ALSO THE T RIBUNAL HAS REMITTED THE MATTER ON THE GROUND THAT NO DOCUMENT WAS SHOWN ON THE PLEA THAT DOCUMENTS WERE GOT BURNT IN FIRE. IN MY CONSIDERED OPINION ASSESSEE HAS NO DOCUMENTS AND THE CLAIM IS THAT THE SAME HAVE GOT BURNT IN A FIRE. ASSESSEES CLAIM IS NOT BONAFIDE. FACTS OF THE CASE CLEARLY INDICATE THAT THE ASSESSEE HA S DIVERTED FUNDS FOR NO BENEFIT. IN THIS VIEW OF THE MATTER I DO NOT FIND ANY COGENCY IN THE ORDER OF LEARNED CIT( A). THE CASE LAWS RELIED UPON ARE NOT AT ALL APPLICABLE ON THE FACTS OF THE C ASE. IN THIS CASE IT IS AMPLY CLEAR THAT THE HDIL GROUP COMPANY HAS DIVERTED FUNDS TO OTHER HDIL GROUP COMPANY WITHOUT ANY BENEFIT AND HAS INCURRED INTEREST EXPENDITURE WHICH CANNOT BE ALLOWED AS BUSINESS EXPENDITURE. IN THIS VIEW OF THE MATTER, I DO NOT F IND ANY INFIRMITY IN THE ORDERS OF THE AUTHORITIES BELOW. ACCORDINGLY, I UPHOLD THE SAME. 9. IN THE RESULT, THIS APPEAL FILED BY THE ASSESSEE STANDS DISMISSED. ORDER HAS BE EN PRONOUNCED IN THE COURT ON 09 . 10 . 201 9 . SD/ - (SH A MIM YAHYA ) ACCOUNTANT MEMBER MUMBAI ; DATED : 9 / 10 / 20 1 9 M/S. BIDCO STUDS PVT. LTD. 5 COPY OF THE ORDER FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. CIT 5. DR, ITAT, MUMBAI 6. GUAR D FILE. BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR ) PS ITAT, MUMBAI