ASST CIT 9(2), MUMBAI V. MAYROSE CAPFIN P.LTD, MUMBAI

ITA 2200/MUM/2011

• Counselvise Citation: 220019914 RSA 2011
• Duration Of Justice: 2 year(s) 11 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-03-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 05-03-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 17-03-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MOURYA PRATAP
• Assessee Lawyers: RAKESH JOSHI
• Section: 143(3)

Judgement Text

B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI .. , ; BEFORE SHRI P.M. JAGTAP, AM AND SHRI VIVEK VARMA, J M ./ I.T.A. NO.2200 /MUM/2011 ( / ASSESSMENT YEAR : 2007-2008 ACIT 9(2), ROOM NO. 218, 2 ND FLOOR, AAYAKAR BHAVAN, M.K. MARG, MUMBAI 20. / VS. M/S MAYROSE CAPFIN PVT. LTD., KRISHNA NIWAS, IST FLOOR, KALBADEVI ROAD, MUMBAI 400 002. ./ PAN :AACCM4957H ( # / APPELLANT ) .. ( $%# / RESPONDENT ) A PPELLANT BY SHRI MOURYA PRATAP R E SPONDENT BY : SHRI RAKESH JOSHI ) * / DATE OF HEARING : 05-03-2014 ) * / DATE OF PRONOUNCEMENT : 0710312014 [ / O R D E R PER P.M. JAGTAP, A.M . : .. , THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST THE ORDER OF LD. CIT(A) - 20, MUMBAI DATED 11-01-2011 WHEREBY HE DELETED THE ADDITION OF RS. 16,30,381/- MADE BY THE A.O. ON ACCOUNT OF DISALLOW ANCE OUT OF INTEREST EXPENDITURE. 2. THE ASSESSEE IN THE PRESENT CASE IS A COMPANY WH ICH IS ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND SECURITIES. THE R ETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION WAS FILED BY IT ON 31-10-2007 D ECLARING LOSS OF RS. 8,09,81,648/-. DURING THE COURSE OF ASSESSMENT PROC EEDING, IT WAS NOTICED BY THE A.O. THAT A TOTAL SUM OF RS. 1,51,25,000/- HAS BEEN ADVANCED BY THE ITA 2200/M/11 2 ASSESSEE TO THREE PARTIES NAMELY M/S HEMKANAK MERCA NTILE PVT. LTD., M/S SPEEDWAY TRADING CO. P. LTD. AND M/S DEDHIA INVESTM ENT P. LTD. ACCORDING TO THE A.O., THESE ADVANCES WERE MADE BY THE ASSESS EE OUT OF INTEREST BEARING BORROWED FUNDS AND HE, THEREFORE, REQUIRED THE ASSE SSEE TO EXPLAIN AS TO WHY INTEREST EXPENDITURE CLAIMED BY IT AS ATTRIBUTABLE TO THESE INTEREST FREE ADVANCES SHOULD NOT BE DISALLOWED. IN REPLY, IT WAS SUBMITTED BY THE ASSESSEE THAT THE ADVANCES IN QUESTION WERE GIVEN BY IT FOR THE PURPOSE OF BUSINESS. IT WAS ALSO SUBMITTED THAT THE SAID ADVANCES WERE GIVE N OUT OF INTEREST FREE UN- SECURED LOAN AVAILABLE WITH THE ASSESSEE AT THE REL EVANT TIME TO THE TUNE OF RS. 9.60 CRORES. THIS SUBMISSION OF THE ASSESSEE W AS NOT FOUND ACCEPTABLE BY THE A.O. ACCORDING TO HIM, THE ASSESSEE COULD NOT E STABLISH THAT THE ADVANCES IN QUESTION WERE ACTUALLY NOT MADE OUT OF INTEREST BEARING BORROWED FUNDS. HE, THEREFORE, PRESUMED THAT THE SAID ADVANCES WERE GIVEN BY THE ASSESSEE OUT OF A MIXED BAG CREATED OUT OF INTEREST BEARING FUNDS AND NON-INTEREST BEARING FUNDS AND PROPORTIONATE DISALLOWANCE OUT OF INTEREST ATTRIBUTABLE TO THE SAID ADVANCES AS WORKED OUT BY HIM AT RS. 16,30 ,381/- WAS MADE BY HIM IN THE ASSESSMENT COMPLETED U/S 143(3) OF THE INCOM E TAX ACT, 1961 VIDE AN ORDER DATED 10-12-2009. 3. AGAINST THE ORDER PASSED BY THE A.O. U/S 143(3) OF THE ACT, AN APPEAL WAS PREFERRED BY THE ASSESSEE BEFORE THE LD. CIT(A) DISPUTING THE DISALLOWANCE MADE BY THE A.O. OUT OF INTEREST EXPENDITURE AND AF TER CONSIDERING THE SUBMISSION MADE BY THE ASSESSEE AS WELL AS THE RELE VANT MATERIAL ON RECORD, THE LD. CIT(A) DELETED THE SAID DISALLOWANCE FOR TH E FOLLOWING REASONS GIVEN IN PARA 4 OF HIS IMPUGNED ORDER:- 4. I HAVE CONSIDERED THE ISSUE, I FIND THAT THE AO HAS NOT DISPUTED THE CLAIM OF THE APPELLANT THAT IT HAD INTEREST FRE E UNSECURED LOANS OF RS.9.60 CRORES AND THUS HAD SUFFICIENT FUND TO MAKE SHORT TERM ADVANCES FOR BUSINESS PURPOSES. IRRESPECTIVE OF WHE THER TWO OUT OF THREE PARTIES WERE DEBTORS OR NOT, THE APPELLANT HA D SUFFICIENT INTEREST FREE LOAN FUND OF RS. 9.60 CRORES TO COVER THE IMPU GNED ADVANCES. IN THESE CIRCUMSTANCES THE A.O. WAS NOT CORRECT TO HOL D THAT THE APPELLANT WAS STILL OBLIGED TO PROVE THAT NO INTEREST BEARING BORROWED FUND FOUND ITA 2200/M/11 3 WAY INTO IMPUGNED ADVANCES. IN THESE CIRCUMSTANCES, I CANNOT SUSTAIN ACTION OF THE AO IN DISALLOWING THE PROPORTIONATE I NTEREST PAID ON BORROWED FUND. I DELETE THE ADDITION MADE OF RS. 16 30381/- ON ACCOUNT OF SAID DISALLOWANCE. AGGRIEVED BY THE ORDER OF THE LD. CIT(A), THE REVEN UE HAS PREFERRED THIS APPEAL BEFORE THE TRIBUNAL. 4. WE HAVE HEARD THE ARGUMENTS OF BOTH THE SIDES AN D ALSO PERUSED RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS OBSERV ED THAT THE DISALLOWANCE MADE BY THE A.O. ON ACCOUNT OF INTEREST EXPENDITURE ALLEGEDLY ATTRIBUTABLE TO THE INTEREST FREE ADVANCES GIVEN BY THE ASSESSEE WA S DELETED BY THE LD. CIT(A) AFTER HAVING FOUND THAT THE INTEREST FREE UN-SECURE D LOANS OF RS. 9.60 CRORES WERE AVAILABLE WITH THE ASSESSEE AT THE RELEVANT TI ME TO GIVE THE SAID ADVANCES. AS POINTED OUT BY THE LD. COUNSEL FOR THE ASSESSEE FROM THE RELEVANT PORTION OF THE ASSESSMENT ORDER, THIS FACTUAL POSIT ION BROUGHT TO THE NOTICE OF THE A.O. WAS NOT DISPUTED BY HIM. AT THE TIME OF H EARING BEFORE US, THE LD. D.R. HAS NOT BEEN ABLE TO REBUT OR CONTROVERT THE F INDING OF FACTS RECORDED BY THE LD. CIT(A) IN HIS IMPUGNED ORDER THAT SUFFICIEN T INTEREST FREE UN-SECURED LOANS TO THE TUNE OF RS. 9.60 CRORES WERE AVAILABLE WITH THE ASSESSEE AT THE RELEVANT TIME TO GIVE THE INTEREST FREE ADVANCES IN QUESTION. WE, THEREFORE, FIND NO JUSTIFIABLE REASON TO INTERFERE WITH THE IMPUGNE D ORDER OF THE LD. CIT(A) DELETING THE DISALLOWANCE MADE BY THE A.O. OUT OF I NTEREST EXPENDITURE AND UPHOLDING THE SAME, WE DISMISS THE APPEAL FILED BY THE REVENUE. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH MARCH, 2014. . ) 7 8 0710312014 ) SD/- SD/- (VIVEK VARMA) (P.M. JAGTAP ) JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; 8 DATED 0710312014 ITA 2200/M/11 4 [ .../ RK , SR. PS ' #%& '& / COPY OF THE ORDER FORWARDED TO : 1. # / THE APPELLANT 2. $%# / THE RESPONDENT. 3. ; () / THE CIT(A)20 MUMBAI. 4. ; / CIT 9 MUMBAI 5. $? , * ? , / DR, ITAT, MUMBAI H BENCH 6. / GUARD FILE. / BY ORDER, % $ //TRUE COPY// / ( DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI