LAXMI DIAMOND PVT LTD., Mumbai V. DCIT-5(2), Mumbai

ITA 2350/MUM/2019

• Counselvise Citation: [2020] 110 COUNSELVISE.COM (IT) 4363 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-10-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2010-2011
• Appeal Filed On: 12-04-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MICHAEL JERALDLD
• Assessee Lawyers: SUCHEK ANCHALIYA LD
• Section: 143(3); 5(2); 201; 22

Judgement Text

M/S. LAXMI DIAMOND PRIVATE L IMITED ITA NO.2350/M UM/2019 ASSESSMENT YEAR :201 0 - 11 1 IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, MUMBAI , , BEFORE HONBLE SHRI AMARJIT SINGH, JM AND HONBLE SHRI MANO J KUMAR AGGARWAL, AM (HEARING THROUGH VIDEO CONFER ENCING MODE) ./ I TA NO . 2350 / MU M/ 201 9 ( / ASSESSMENT YEAR : 201 0 - 11 ) LAXMI DIAMOND PRIVATE LIMITED EW - 220 0, BHARAT DIAMOND BOURSE BANDRA KURLA COMPLEX BA ND RA (E), MUMBAI 400 051 / VS. DCIT - 5(2) 5 TH F LOOR, AAYKAR B HAWAN M .K.MARG MUMBAI 400 02 0 ./ ./ PAN/GIR NO. AA BCL - 1815 - G ( / APPELLANT ) : ( / RESPONDENT ) ASSESSEE BY : SHRI SUCHE K ANCHALIYA , LD. AR REVENUE BY : SHRI MICHAEL JERALD - LD. D R / DATE OF HEARING : 19 /10/2020 / DAT E OF PRO NOUNCEMENT : 22/10/2020 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. AFOR ESAID APPEAL BY ASSESSEE FOR ASSESSMENT YEAR (A Y) 2 010 - 2011 CONTEST THE ORDER OF LD. COMMISSI ON ER OF INCOME TAX (APPEALS) - 10, MUMBAI, APPEAL NO. CIT(A) - 10/DC/5(2)(1)/138/2014 - 15 DATED 18/ 0 1/2019 O N FOLLOWING GROUNDS: - 1. THE L EARNED CIT(A) ERRED ON FACTS AND IN LAW IN SUSTAINING THE DISALLOWANCE OF INTEREST OF RS.7150119/ - U/S 36(1)(III) M/S. LAXMI DIAMOND PRIVATE L IMITED ITA NO.2350/M UM/2019 ASSESSMENT YEAR :201 0 - 11 2 2. THE LE ARNED CIT(A) ERRED IN FOLLOWING HIS OWN ORDER FOR A Y 2013 - 14 INAS MUCH AS THE FACTS THEREIN ARE DISTINGUISHABLE . A S EVID E NT, THE SOLE ISSUE THAT ARISES FOR OUR CONSIDERATION IS INTEREST DISALLOWANCE U/S 36(1)(III) FOR RS.71,50,119/ - . 2 . THE LEARN ED AUTHO RI ZED REPRESENTATIVE FOR ASSESSEE (AR) , AT THE OUTSET , SUBMITTED THAT SIMI LAR ISSUE AROSE IN PRECEDING AY 2009 - 10 WHEREIN VIDE I T A NO. 1106/MUM/2016 IN REVENU E S APPEAL, ORDER DATED 22/11/2019 , THE TRIBUNAL DELE T ED THE SIMILAR ADDIT IONS MADE BY LD. AO. THE C OPY OF THE ORDER HAS BEEN P L A CED ON RECORD. THE LD. AR ALSO TOOK US THROUGH FINANCIAL STATEMENTS TO SUPPORT THE SUBMIS SIONS THAT FACTS ARE IDENTICAL IN THIS YEAR AND IN SUPPORT O F THE SUBM I SSIONS THAT THE ASSESSEE HA D SUFFICIENT OWN INTEREST FREE FUNDS TO MAKE THE INVE STMENTS UNDER CONS IDERATION . THE LD. DR , ON THE OTHER HAND, CONTROVERTED THE SUBMISSIONS BY STATING THAT FACT S ARE DIFFERENT IN THIS YEAR . IT HAS BEEN SU BMITTED THAT THE ASSESSEE DI D NOT FILE ANY FUND FLOW STATEMENTS IN SUPPORT OF T HE SUBMIS S IONS THAT OWN FUNDS WERE USE D TO MAKE THE INVE STMENTS IN CERTAIN PR EMI SES, AGAINST WHICH THE DISAL LOWANCE HAS BEEN COMPUTED BY LOWER AUTHORITIES . 3. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMIS SIONS AND PERUSED RELEVANT MATERIAL ON RECORD INCLUD I NG ORDERS OF LOWER AUTHORITIES , ASSES SEE S FINANCIAL STATEMENTS FOR THE YEAR UNDER CONSIDERATION A S WELL AS THE CITED ORDER OF TRIBUNAL IN A SSESSEE S OWN CASE FOR AY 2009 - 10 WHICH HAS BEEN C O - AUTHORED BY ONE OF US. OUR ADJUDICATION TO THE SUBJECT MATTER O F APPEAL W OULD BE AS GIVEN IN SUCCEEDI NG PARAGRAPHS. 4 . THE MATERIAL FACTS ARE THAT A N ASSESSMENT WAS FRAMED U/S 143(3) ON 24/03/2014 FOR THE Y E AR UNDER CONSIDERATION WHEREIN THE ASSESSEE M/S. LAXMI DIAMOND PRIVATE L IMITED ITA NO.2350/M UM/2019 ASSESSMENT YEAR :201 0 - 11 3 WAS SADDLED WITH INTEREST DISALLOWANCE U/S 36(1)(III) FO R RS. 71 ,50,1 19/ - . THE ASSESSEE IS STATED TO B E ENG AGED IN IMPORT , EXPORT AND POLISHING OF DIAMONDS. I T SO TRANSPIRED THAT THE ASSESSEE ADVANCED AMOUNT OF RS.19.86 C RORES FOR PURCHASE OF CERTAIN PREMISES AT BHARAT DIAMOND BOURSE AND AT SURAT. NONE OF THE PREM ISES WAS P UT TO USE DURING THE YEAR WHI C H LED LD . AO TO DISALLOW PROPORTIONATE DISALLOWANCE U/S 36(1) (III) OU T OF INTEREST EXPENDITURE OF RS.34.09 CR ORES CLAIMED BY THE ASSESSEE . THE ASSESSEE S UBMITTED THAT NO SP ECIFIC BORROWING S WERE TAKEN TO MAKE THE SAID PAYMENT AND THE AS SESSEE HA D SUFFICIENT OWN FU NDS IN THE SHAPE OF SHARE CAPITAL, SHARE PREMIUM & ACCUMULATED RESERVES AGGREGAT ING T O RS.225.28 C RORES BESI DES UNSECURED INTEREST FREE LOANS OF RS.58.72 CRORES AT Y E AR END. THE INTEREST EXPENSES W ERE STATED T O B E INCU RRED ONLY IN RESPECT OF PAC KING CREDI T OR POST - SHIPMENT CREDIT WHICH WAS NOT MEANT FOR FUNDING THE PAYMENT MADE FOR PU RCHASE OF THE SE PREMISES. HOWEVER , NOT CON VINCED, LD. AO COMPUTED PROPORTIONATE INTER E ST DISALLOWANCE OF RS.71.50 LA CS WHICH HAS BEEN ARRI VED AT IN PROPORTION OF AVERA GE INVES TMEN T S VIS - - VIS A V ERAGE OF TOTAL ASSETS EMPLOYED BY THE ASSESSEE . 5. UP O N FURTHER APPEAL, L D. CIT(A) CHOSE THE CONFIRM THE DISALLOWANCE IN THE LIGHT OF HIS ADJUDICATION IN AY 2013 - 14 . AGGRIEVED , THE ASSESSEE IS UNDER FURTHER AP PEAL BEFORE US. 6. THE PERU SAL OF AS SESSEE S FINANCIAL STATEMENTS WOULD SHOW THAT THE ASSESSEE HAS OWN FUNDS IN THE SH APE OF SHARE CAPITAL & RESERVES AGG REGATING TO RS.225.2 8 CR ORES AT YEAR END AS AGAINST O PENING FUNDS OF RS.153.15 CRORES. BESIDE S THE ABOV E FUNDS, THE ASSESSEE HAS I NTEREST FREE UNSECURED L OANS OF RS.58.7 2 CR ORES AT IT S DISPOSAL AT YEAR END. A S M/S. LAXMI DIAMOND PRIVATE L IMITED ITA NO.2350/M UM/2019 ASSESSMENT YEAR :201 0 - 11 4 A GA INS T THIS , THE CAPITAL AD VANCE S AT YE AR END STOOD AT RS .20. 23 CRORES AS AGAI NST OPENING BALANCE OF RS. 19 . 83 CR ORES WHICH WOULD SHOW THAT THERE WAS ONLY A MARGINAL INCREASE OF RS. 40 LACS DURING THE YEAR . FURTHER, THE INTEREST - BEARING SECURED LOANS OBTAINED BY THE ASSESSEE WERE MEANT ONLY FOR S PECIFIC PURPOSE S I.E. PACKING C REDIT OR POST - SHIPMENT CREDIT . IN THE BACKGROUND OF AFO RESAID FACTS , IT COULD VERY W ELL BE CONCLUDED THAT THERE WAS NO NEXUS OF BORROWED FUNDS WITH THE CAPITAL AD VANCES MADE BY THE ASSESSEE AND THE ASSESSEE HAD SUFFICIENT OWN FUNDS TO MAKE THE AF ORESAID INVE STMENTS. WITHOUT ESTABLISHING ANY DIRECT NEXUS OF BORROWED FUNDS VIS - - VIS CAPITAL ADVANC ES, NO SUCH DISALLOW ANCE COULD HA V E BEEN MAD E B Y REVENUE AUTHORITIES . 7. IN FACT, THE COORDINATE BENCH OF THE TRIBUNA L, ON IDENTICAL SET OF FACT S , DELE TED THE SIMILAR ADDITIONS IN AY 2009 - 10 VIDE ITA NO.1106/MUM/2016 ORDER DATED 22 /11/2019 B Y RELYING UP ON THE BINDING DECISION OF HON BLE BOMBAY HIGH COURT IN THE CASE OF CIT V/S RELIANCE UTIL ITY & POWER LTD. ( 2009 313 ITR 340 ) AS WEL L AS IN CIT V/S HDFC BANK LTD . ( 2014 366 ITR 505 ). WE FI ND THE FACTU AL MATRIX TO BE SIM ILAR IN THIS YE AR. THE REF ORE, ON THE FACTS AND CIRCUMSTAN C ES OF THE CASE, THE IMPUGNED INTEREST DISALLOWANCE IS NOT SUSTAINABLE IN LAW. BY DELETING THE SAME, WE ALLO W THE APPEAL. 8 . THE APPEAL STANDS ALLOWED. O RDER PR ONOUNCED ON 22 ND OC TOBE R, 2020. SD/ - SD/ - ( AMA RJIT SINGH ) (MANOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER M/S. LAXMI DIAMOND PRIVATE L IMITED ITA NO.2350/M UM/2019 ASSESSMENT YEAR :201 0 - 11 5 MUMBAI; DATED : 22/10/2020 SR.PS , JAI SY VARGHESE / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / TH E RESPONDENT 3. ( ) / THE CIT(A) 4. / CIT CONCERNED 5. , , / DR, ITAT, MU MBAI 6. / GUARD FILE / BY ORDER, / (DY./AS STT.REGISTRAR) , / ITAT, MUMBAI .