Shree Rama Multi-Tech Ltd., Ahmedabad V. The Dy.CIT.,Crcle-8, Ahmedabad

ITA 216/AHD/2014

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 5601 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 28-08-2019
• Assessment Year: 1998-1999
• Appeal Filed On: 22-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: O P SHARMA; L P JAIN
• Keywords: Notional interest
• Section: 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH (BEFORE SHRI MAHAVIR PRASAD, JUDICIAL MEMBER & SHRI AMARJIT SINGH, ACCOUNTANT MEMBER) ITA. NO: 216/AHD/2014 (ASSESSMENT YEAR: 1998-99) SHREE RAMA MULTI-TECH LTD. 603, SHIKHAR BUILDING, NAVRANGPURA, AHMEDABAD-380009 V/S DY.CIT, CIRCLE-8, AHMEDABAD (APPELLANT) (RESPONDENT) PAN: AAJCS 1563N APPELLANT BY : SHRI BANDISH SOPARKAR, AR RESPONDENT BY : SHRI O.P. SHARMA, CIT/DR & L.P. JAIN, SR. D.R. ( )/ ORDER DATE OF HEARING : 11 -07-201 9 DATE OF PRONOUNCEMENT : 16 -09-2019 PER MAHAVIR PRASAD, JUDICIAL MEMBER 1. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER OF THE LD. CIT(A)-I, AHMEDABAD DATED 25.11.2013 PERTAINING TO A.Y. 1998-99 AND ITA NO. 216/ AHD/2014 . A.Y. 1998-99 2 SOLELY GROUND HAS BEEN TAKEN BY THE ASSESSEE THAT L D. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING ADDITION BY A.O. MADE ON ACCOUNT OF NOTIONAL INTEREST EARNED OF RS. 68,40,000/- ON ADVANCES GIVE N FOR BUSINESS PURPOSE. 2. THE FACTS OF THE CASE ARE A SURVEY ACTION WAS CARRI ED OUT AT THE PREMISES OF THE ASSESSEE COMPANY ON 17.09.1997. AND THEREAFTER A NOTICE U/S. 142(1) OF THE ACT FOR THE PERIOD OF THREE YEARS FROM 1/4/1996 TO 30/09/1996 WAS SERVED AND RELEVANT COPIES OF ACCOUNTS PURCHASED BY THE AS SESSEE WERE SCRUTINIZED AND FOLLOWING FACTS WERE DERIVED. ASSESSEE COMPANY GIVEN INTEREST FREE LOAN OF RS. 15000000/- TO ITS SISTER CONCERN SHREE RAMA ASSOCIATES AND RS. 23000000/- WERE GIVEN TO ITS SISTER CONCERN BABUBHA I & CO. WERE GIVEN FOR BUSINESS PURPOSE. AND STATED THAT RS. 15000000/- ON ADVANCES WERE GIVEN FOR CONSTRUCTION OF CORPORATE HOUSE AND SAME WERE F OR BUSINESS PURPOSE. AND RS. 23000000/- WERE GIVEN AS AND WHEN ADVANCES PAYMENT FOR OFFICE BUILDING AND THIS FACT WAS ALSO MENTIONED IN THE NA RRATION PART OF THE ENTRY FOR ADVANCES AS AND WHEN GIVEN AND SAME WAS ALSO FO R BUSINESS PURPOSE. 3. IN PARA 5.8 OF THE ASSESSMENT ORDER, LD. A.O. HAS N ARRATED FEW ENTRIES OF BORROWINGS MADE FROM YANKI FIANANCE AND M.B. & CO. ASSUMING THAT BORROWINGS ARE INTEREST BEARING BORROWINGS AND SINC E ADVANCES MADE TO SHREE RAMA ASSOCIATES AND BABUBHAI & CO. WERE FROM THIS FUND AND MADE ADDITION OF RS. 6840000/- AS NOTIONAL INTEREST @ 18 % PER ANNUM. 4. AGAINST THE SAID ORDER, ASSESSEE PREFERRED FIRST ST ATUTORY APPEAL BEFORE THE LD. CIT(A) WHO CONFIRMED THE ACTION OF THE A.O. 5. NOW BY WAY OF SECOND STATUTORY APPEAL, ASSESSEE HAS COME BEFORE US. ITA NO. 216/ AHD/2014 . A.Y. 1998-99 3 6. WE HAVE GONE THROUGH THE RELEVANT RECORD AND IMPUGN ED ORDER AND HEARD BOTH THE PARTIES. ASSESSEE HAS GIVEN ADVANCES FOR B USINESS PURPOSE AND IN ORDER TO STRENGTHEN ITS CLAIM, ASSESSEE SUBMITTED D ETAILS BEFORE THE LOWER AUTHORITIES INCLUDING BALANCE SHEET OTHER RELEVANT PAPERS STRENGTHENING THE CLAIM OF ASSESSEE THAT IT WAS HAVING SUFFICIENT RES ERVE AND SURPLUS IN ITS ACCOUNT. 7. AND IN SUPPORT OF ITS CONTENTION, LD. A.R. CITED AN D ORDER OF HONBLE SUPREME COURT OF INDIA IN THE MATTER OF CIT VS. REL IANCE INDUSTRIES LTD. [2019] 102 TAXMANN.COM 52 (SC) WHEREIN IT IS HELD: SECTION 36(1)(III) OF THE INCOME-TAX ACT, 1961 - IN TEREST ON BORROWED CAPITAL INTEREST /FREE LOANS TO SUBSIDIARIES) - ASS ESSMENT YEARS 2003- 04 TO 2006-07 - IN COURSE OF ASSESSMENT, ASSESSING OFFICER REJECTED ASSESSEE'S CLAIM UNDER SECTION 36(1)(III) TAKING A VIEW THAT INTEREST WOULD NOT HAVE BEEN PAYABLE TO BANKS IF FUNDS WERE NOT PROVIDED TO SUBSIDIARIES - TRIBUNAL FINDING THAT INTEREST FREE FUNDS WERE AVAILABLE TO ASSESSEE WHICH WERE SUFFICIENT TO MEET ITS INVES TMENT IN SUBSIDIARIES, ALLOWED ASSESSEE'S CLAIM - HIGH COURT UPHELD ORDER PASSED BY TRIBUNAL - WHETHER ON FACTS, IMPUGNED ORD ER PASSED BY HIGH COURT DID NOT REQUIRE ANY INTERFERENCE - HELD, YES [PARA 8] [IN FAVOUR OF ASSESSEE] 8. SINCE ASSESSEE WAS HAVING INTEREST FREE SUFFICIENT RESERVE AND SURPLUS AND RESPECTFULLY FOLLOWING AFORESAID HONBLE APEX COURT JUDGMENT, WE ALLOW THE APPEAL OF THE ASSESSEE. ITA NO. 216/ AHD/2014 . A.Y. 1998-99 4 9. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS ALLO WED. ORDER PRONOUNCED IN OPEN COURT ON 16 - 09- 2019 SD/- SD/- (AMARJIT SINGH) (MAHAVIR PRASAD) ACCOUNTANT MEMBER TRUE COPY JUDICIAL MEMBER AHMEDABAD: DATED 16/09/2019 RAJESH COPY OF THE ORDER FORWARDED TO: - 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT (APPEALS) 4. THE CIT CONCERNED. 5. THE DR., ITAT, AHMEDABAD. 6. GUARD FILE. BY ORDER DEPUTY/ASSTT.REGISTRAR ITAT,AHME DABAD