Assistant Commissioner of Income-Tax, Bangalore V. M/s.GMR Projects Pvt. ltd., Bangalore

ITA 2213/BANG/2016

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 5544 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-02-2018
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 17-07-2017
• Assessment Year: 2008-2009
• Appeal Filed On: 15-12-2016
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: JAGADISH K
• Keywords: Business income
• Section: 14A

Judgement Text

ITA.2213 TO 2215/BANG/2016 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BENGALURU BENCH 'C', BENGALURU BEFORE SHRI. JASON P. BOAZ, ACCOUNTANT MEMBER AND SHRI. LALIET KUMAR, JUDICIAL MEMBER I.T.A NOS.2213 TO 2215/BANG/2016 (ASSESSMENT YEAR : 2008-09 TO 2010-11 & 2011-12 ) ASST. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE -2(2), BENGALURU .. APPELLANT V. M/S. GMR PROJECTS P. LTD, IBC KNOWLEDGE PARK, PHASE -2, D BLOCK, 10 TH FLOOR, BANNERGHATTA ROAD, BENGALURU 560 029 .. RESPONDENT PAN : AAACN6998D ASSESSEE BY : SHRI.JAGADISH K, CA REVENUE BY : SHRI. HARINDER KUMAR, CIT - DR HEARD ON : 11.12.2017 PRONOUNCED ON : 21.02.2018 O R D E R PER LALIET KUMAR, JUDICIAL MEMBER : THESE ARE THREE APPEALS FILED BY THE REVENUE AGAIN ST THE ORDERS OF CIT (A) -11, BENGALURU, DT.29.04,.2015, F OR THE ASSESSMENT YEARS 2008-09, 2010-11 AND 2011-12 ON TH E GROUND THAT THE CIT (A) WAS NOT RIGHT IN DIRECTING THE AO TO CO NSIDER THE DISALLOWANCE OF INDIRECT EXPENSES AS PER RULE 8D. ITA.2213 TO 2215/BANG/2016 PAGE - 2 ITA.2213/BANG/2016 AY 2008-09 : 02. THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAS TAKEN LOAN FROM ICICI BANK FOR BUSINESS PURPOSES. BUT HOWEVER THE SAME WAS UTILISED BY MAKING FIXED DEPOSITS AND THE ASSESSEE EARNED INTEREST THEREFROM. AS THE LOANS WERE NOT UTILISED FOR BUSI NESS PURPOSES DESPITE THAT THE ASSESSEE HAS ADDED BACK THE INTERE ST PAID WHILE COMPUTING THE BUSINESS INCOME AND SIMULTANEOUSLY TH E ASSESSEE HAS CLAIMED THE INTEREST PAID AS DEDUCTION WHILE COMPUT ING THE INCOME FROM OTHER SOURCES. CONSIDERING THE ABOVE SAID FAC TS THE AO HAS RESTRICTED THE INTEREST EXPENDITURE TO THE AMOUNT O F INTEREST EARNED BY THE ASSESSEE AND ACCORDINGLY THE AMOUNT OF RS.7, 11,74,770/- WAS ADDED BACK TO THE INCOME OF THE ASSESSEE. FEELING AGGRIEVED BY THE ADDITION, THE ASSESSEE FILED APPEAL BEFORE THE CIT (A). 03. THE CIT (A) IN PARAS 6.3.2 AND 6.3.3 HAS HELD A S UNDER : 6.3.2 I HAVE GONE THROUGH THE OBSERVATION OF THE ASSESSING OFFICER AS WELL AS THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND VARIOUS DECISIONS RELIED UPON BY THE APPELLANT IN SUPPORT O F ITS CLAIM AS WELL AS THE DECISION OF CIT(APPEALS) GIVEN IN THE APPELLANT'S OWN CASE FOR AY 2009-10 THAT THE ENTIRE AMOUNT OF INTEREST EXPENSES INCURRED AND LAID OUT FOR EARNING OF INTEREST INCOME UNDER THE HEAD INCOME FROM OTHER SOURCES IS TO BE ALLOWED EXCEPT THE AMOUNT OF INTEREST ATTRIBUTABLE TO INTEREST FREE LOANS AND ADVANCES. THUS, THE APPELLA NT ARGUED THAT THE ACTION OF THE ASSESSING OFFICER IN RESTRICTING THE CLAIM OF INTEREST DEDUCTION TO THE EXTENT OF INTEREST INCOME EARNED IS NOT CORRECT AND IS CONTRARY TO THE DECISIONS RELIED UPON BY THE APPELL ANT INCLUDING THE DECISION OF JURISDICTIONAL ITAT AND T HE CIT(APPEALS) IN ITS OWN CASE WHEREIN IT HAS BEEN HELD THAT THE CLAIM OF INTEREST EXPENSES PERTAINING TO ITA.2213 TO 2215/BANG/2016 PAGE - 3 THE INTEREST INCOME CHARGEABLE UNDER SECTION 57(III ) NEEDS TO BE ALLOWED AS DEDUCTION UNDER SECTION 57(III). FURTHER, IT WAS ARGUED THAT THE CIT(APPEAL S)- I, BANGALORE HAS DEALT WITH THIS ISSUE ON IDENTICAL FACTS IN APPEAL ITA. NO. 196/DC-11(3)/A-I/11-12 ORDER DT. 17.10.2013 FOR THE AY 2009-10 AND WHEREIN HAVING REGARD TO THE FACTS AND CIRCUMSTANCE OF THAT YEAR HE HAS DIRECTED FOR ALLOWING THE AMOUNT OF INTEREST WHICH HAS BEEN TREATED AS DEDUCTIBLE BY HIM IN THE APPELLATE UNDER SECTION 36(1)(III) OF THE INCOME-TA X ACT, 1961 BY HOLDING IN PARA 5.2 TO 5.4 THAT THE AMOUNT OF INTEREST CORRESPONDING TO INTEREST FREE LOANS IS TO BE CONSIDERED FOR DISALLOWANCE. 6.3.3 FURTHER, IT WAS SUBMITTED BY THE APPELLANT TH AT IN THE CASE OF THE APPELLANT FOR THE AY 2009-10, TH E CIT(A) IN THE ORDER PASSED HAS ALLOWED THE CLAIM OF INTEREST EXPENSES INCURRED UNDER SECTION 36(1)(III)/ 57(III) AND HAS RESTRICTED THE DISALLOW ANCE OF INTEREST EXPENSES TO THE EXTENT OF INTEREST ATTRIBUTABLE TO INTEREST FREE ADVANCES GIVEN OUT OF THE BORROWED FUNDS. THE CIT(A) IN PARA 5.2, 5.3 AND 5.4 OF THE ORDER FOR AY 2009-10 HAS HELD AS UNDER: 5.2THUS, THE INTEREST TO THE EXTENT OF PS. 51, 07,85,271 (RS. 102,32,841-PS. 51,24,40,570) WAS DISALLOWED BY THE AO ON THE REASON THAT INTEREST WAS NOT INCURRED WHOLLY AND EXCLUSIVELY IN RELATION TO THE ACTIVITY OF EARNING INTEREST. HOWEVER, THE OBSERVATION OF THE A O IS GENERAL IN NATURE AND NOT POINTED OUT WHY SO MUCH OF INTEREST WAS NOT INCURRED FOR EARNING OF INTEREST FOR THE PURPOSES OF BUSINESS. 5.3 AS DISCUSSED ABOVE, THERE WAS NO INTEREST FREE FUND AND AS SUCH THE APPELLANT APPLIED INTEREST BEARING FUNDS TOWARDS WORKING CAPITAL, FIXED ASSET, INVESTMENT, PD'S AND ALSO LOAN AND ADVANCE. IT IS OBSERVED THAT THE APPELLANT HAD MADE ADVANCE OF RS. 142,32,76,570/- L. Y. 216,76,409) AND INTEREST OFFE RED ONLY RS. 41,73,437/- 5.4 SINCE THESE WERE INTEREST FREE OR NOMINAL RATE WHEREAS INTEREST CHARGED AT THE RATE OF 13.86%. IF AT ALL, INTEREST TO THE EXTENT OF RS. - ITA.2213 TO 2215/BANG/2016 PAGE - 4 199,72,66,124/- IS DISALLOWABLE NOT PERTAINING APPELLANT'S BUSINESS. IN REVISED COMPUTATION OF INCOME RS. 2,70 1 74,9281- DISALLOWED BEING INTEREST ON AMOUNT UTILIZED FOR INTEREST FREE LOAN, BUT IT WAS CONSIDERED ON THE PART OF THE LOANS AND ADVANCES. IN FACT, LOANS AND ADVANCES OUTSTANDING ADS ON 31.03.2009 AT RS. 142,32,76,570. THE MERE CONTENTION THAT THE BORROWED FUNDS BUSINESS, CANNOT BE TAKEN AS REASONABLE GROUND TO ACCEPT THE PLEA OF THE APPELLANT. CONSIDERING THE FACT THAT CONSISTENTLY LOAN AND ADVANCE GIVEN TO THE OTHERS WITHOUT CORRESPONDING RETURN THEREOF AND WITH NO BETTER PERFORMANCE IN THE BUSINESS OF THE APPELLANT IN THE CIRCUMSTANCES, THE ARGUMENTS PLACED BY THE APPELLANT DEVOID MERIT AND HENCE REJECTED. IN VIEW OF THIS FACT, THEREFORE, DISALLOWANCE TO THE EXTENT OF RS. 19,72,66,124/- IS CONFIRMED. THE APPELLANT THUS GETS RELIEF FOR RS. 31,35,19,147/- IN VIEW OF THE ORDER OF CIT(A) AS ABOVE, IT WAS ARG UED THAT THE AMOUNT OF INTEREST CORRESPONDING TO THE AMOUNT ATTRIBUTABLE TO INTEREST FREE ADVANCES NEEDS TO BE DISALLOWED SINCE NO RETURN ON SUCH AMOUNT IS EAR NED BY THE APPELLANT. FEELING AGGRIEVED BY THE ABOVE SAID ORDER OF THE CI T (A), REVENUE IS IN APPEAL BEFORE THIS TRIBUNAL. 04. AT THE OUTSET, IT WAS SUBMITTED BY THE PARTIES BEFORE US THAT IN THE CASE OF THE ASSESSEE, FOR AY 2009-10, THE TRIBU NAL VIDE ITA NO.185/BANG/2014, DT.16.06.2017, HAD HELD AS UNDER : 22. HAVING CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS THE RELEVANT MATERIAL ON RECORD, WE ARE OF THE VIEW THAT WHEN THE DISALLOWANCE MADE UNDER SECTION 57(III) AS WELL AS UNDER SECTION 36(1)(III) HAS BEEN REMANDED TO TH E RECORD OF THE ASSESSING OFFICER FOR PROPER VERIFICA TION THEN THIS ISSUE OF DISALLOWANCE ON ACCOUNT OF INTEREST EXPENDITURE UNDER SECTION 14A HAS A DIRECT NEXUS WI TH THE ITA.2213 TO 2215/BANG/2016 PAGE - 5 OUTCOME OF THE DISALLOWANCE MADE UNDER SECTION 57(I I) AND 36(1)(III) OF THE ACT. THE CIT (APPEALS) HAS R ESTRICTED THE DISALLOWANCE BY CONSIDERING THE DISALLOWANCE MA DE BY THE ASSESSING OFFICER UNDER SECTION 57(III) OF THE ACT. ACCORDINGLY, WHEN THE OTHER ISSUES ARE SET ASIDE TO THE RECORD OF THE ASSESSING OFFICER THEN THE ISSUE OF DISALLOWANCE UNDER SECTION 14A IS ALSO SET ASIDE TO THE RECORD OF THE ASSESSING OFFICER FOR DECIDING THE SA ME AFRESH AS PER THE OUTCOME OF THE VERIFICATION AND EXAMINATION OF THE OTHER CONNECTED ISSUES OF AVAILA BILITY OF FUND, ETC. IT WAS SUBMITTED THAT THE ISSUE BEFORE US IS SIMILA R TO THE ISSUE IN THE SUBSEQUENT YEAR AND THEREFORE THE ISSUE IS REQUIRED TO BE DECIDED IN ACCORDANCE WITH THE FINDING GIVEN BY THE TRIBUNAL F OR AY 2009-10. 05. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE FINDING RECORDED BY THE CIT (A) IN PARAS 6.3.2 AND 6.3.3 WAS RENDERED AFTER RELYING UPON THE ORDER OF THE CIT(A) FOR AY 2009-10 (SUPRA PARA 6.3.3), WHICH WAS DECIDED BY IN ITA NO.185/BANG/2014, DT.16.06.2017 MENTIONED HEREIN AB OVE. FOLLOWING THE DECISION OF THE TRIBUNAL FOR THE AY 2 009-10, WE HEREBY DIRECT THE AO TO DECIDE THE GROUND RAISED I N THE PRESENT APPEAL IN THE LIGHT OF THE DIRECTION GIVEN BY THE T RIBUNAL IN ITA NO.185/BANG/2014. ITA NOS.2214 & 2215/BANG/2016 AYS. 2010-11 AND 20 11-12 : 06. THESE APPEALS ARE ON IDENTICAL FACTS AND CIRCUM STANCES AS IN THE APPEAL FOR AY 2008-09, ADJUDICATED BY US IN THE ABOVE PARAGRAPHS. FOLLOWING THE SAME, WE DIRECT THE AO T O DECIDE THE ITA.2213 TO 2215/BANG/2016 PAGE - 6 ISSUE IN THE LIGHT OF THE DIRECTION GIVEN BY THE TR IBUNAL IN ITA NO.185/BANG/2014 FOR AY 2009-10. 07. IN THE RESULT, REVENUE APPEALS ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST DAY OF FEBRUARY, 2018. SD/- SD/- (JASON P. BOAZ) (LALIET KUMAR) ACCOUNTANT MEMBER JUDICIAL MEMBER BENGALURU DATED : 21.02.2018 MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER SENIOR PRIVATE SECRETARY ITAT, BENGALURU