JANAK HOLDINGS P.LTD, MUMBAI V. DCIT CIR 36, MUMBAI

ITA 242/MUM/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71588 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 10-10-2013
• Assessment Year: 2008-2009
• Appeal Filed On: 10-01-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Opportunity of being heard

Judgement Text

` `` ` , IN THE INCOME TAX APPELLATE TRIBUNAL J B ENCH, MUMBAI , ! ' ' ' ' , #$ %&'( , ) ! * BEFORE SHRI VIJAY PAL RAO, JM AND SHRI N.K. BILLA IYA, AM ./ I.T.A. NO. 242/MUM/2012 ( # # # # + + + + / ASSESSMENT YEAR : 2008-09 M/S. JANAK HOLDINGS PVT. LTD., 220 COMMERCE HOUSE, 140, N.M. ROAD, FORT, MUMBAI-400 023 THE DCIT, CENT. CIR 36, AAYAKAR BHAVAN, MUMBAI-400 020 !, ) ./ - ./PAN/GIR NO. : AAACJ 1074A ( ,. /APPELLANT ) .. ( /0,. / RESPONDENT ) ,. 1 / APPELLANT BY : ` SHRI VIPUL JOSHI /0,. 2 1 /RESPONDENT BY : SHRI R.K. SAHU # 2 3 ) / DATE OF HEARING :10.10.2013 45+ 2 3 ) / DATE OF PRONOUNCEMENT : 23.10.2013 6 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. CIT(A)-41, MUMBAI DT.09.12.2011 PERTAINING TO A.Y. 2008-09. 2. THE ASSESSEE HAS RAISED TWO SUBSTANTIVE GROUNDS OF APPEAL. GROUND NO. 1 RELATES TO THE DISALLOWANCE OF RS. 32,62,457/ - BEING INTEREST AND FINANCE EXPENSES INCURRED WHICH HAS BEEN CONFIRMED BY THE LD. CIT(A). ITA NO.242/M/2012 2 3. THE ASSESSEE IS IN THE BUSINESS OF REAL ESTATE. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS GIVEN LOAN OF RS. 7.75 CRORES TO M /S. DISHA HOLDING PVT. LTD. THE AO FOUND THAT NO INTEREST HAS BEEN CHARGE D BY THE ASSESSEE ON THIS LOAN. THE AO FURTHER NOTICED THAT THE ASSESSE E HAS TAKEN LOAN OF RS. 6 CRORES FROM SREI INFRASTRCTURE FINANCE LTD., ON W HICH IT HAS CHARGED PROFIT AND LOSS ACCOUNT BY RS. 32,62,457/- AS INTER EST AND FINANCE EXPENSES. THE AO WAS OF THE FIRM BELIEF THAT THE A SSESSEE HAS LENT TO ITS SISTER CONCERN OUT OF ITS BORROWED FUND THEREFORE T HE CLAIM OF THE ASSESSEE FOR INTEREST AND FINANCE CHARGES AT RS. 32,62,457/- DESERVES TO BE DISALLOWED. THE AO ACCORDINGLY DISALLOWED THE SAME AND ADDED BACK TO THE TOTAL INCOME OF THE ASSESSEE. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. C IT(A) BUT WITHOUT ANY SUCCESS. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THERE IS NO NEXUS BETWEEN THE BORROWED FUNDS AND THE AMOUNT GIVEN TO ITS SISTER CONCERN BECAUSE THE AMOUNT BORROWED AT RS. 6 CRORES FROM M/S. SREI INFRSTRUCTURE FINANCE LTD., WAS DIRECTLY PAID BY TH E FINANCIER TO THE SUPPLIER OF THE WIND MILL PROJECT M/S. SUZLON ENER GY LTD., THEREFORE, IT CANNOT BE SAID THAT THE AMOUNT BORROWED HAS BEEN GIVEN INTEREST FREE TO ITS SISTER CONCERN. THE LD. COUNSEL FOR THE ASSESS EE FURTHER SUBMITTED THAT THE ALLEGED LOAN OF RS. 7.75 CRORES TO SISTER CONCE RN M/S. DISHA HOLDING PVT. LTD. WAS OUT OF INTEREST FREE BORROWINGS FROM ANOTHER SISTER CONCERN M/S. SUMER BUILDERS PVT. LTD. IT IS THE SAY OF THE LD. COUNSEL THAT THIS FACT HAS BEEN GROSSLY IGNORED BY THE LOWER AUTHORIT IES. 6. THE LD. DEPARTMENTAL REPRESENTATIVE STRONGLY SUP PORTED THE FINDINGS OF THE LD CIT(A). ITA NO.242/M/2012 3 7. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND CAR EFULLY PERUSED THE ORDERS OF THE LOWER AUTHORITIES AND THE RELEVAN T MATERIAL EVIDENCE BROUGHT ON RECORD IN THE FORM OF PAPER BOOK. IT IS A FACT THAT RS. 6 CRORES WAS PAID DIRECTLY BY M/S. SREI INFRASTRUCTURE FINAN CE LTD., TO M/S. SUZLON ENERGY PVT. LTD. A PERUSAL OF THE COPY OF O RIENTAL BANK OF COMMERCE EXHIBITED AT PAGE-59 OF THE PAPER BOOK SHO WS THAT THE ASSESSEE HAS BORROWED RS. 7,90,60,000/- FROM M/S. S UMER BUILDERS PVT. LTD., ON 26.3.2008. IT IS FURTHER SEEN FROM THE SA ME BANK ACCOUNT THAT ON THE SAME DATE I.E. 26.3.2008, THE ASSESSEE LENT RS. 7.75 CRORES TO M/S. DISHA HOLDINGS PVT. LTD. THE INTEREST FREE BORROWIN GS HAVE A DIRECT NEXUS WITH THE INTEREST FREE LENDING. THESE TRANSACTIONS ARE EASILY VERIFIABLE FROM THE BANK STATEMENT OF ORIENTAL BANK OF COMMERC E AT PAGE-60 OF THE PAPER BOOK. WITH THESE FACTS ON RECORD, IN OUR CON SIDERATE VIEW, THE LOWER AUTHORITIES HAVE GROSSLY ERRED IN HOLDING THA T THE ASSESSEE HAS USED THE BORROWED FUND OF RS. 6 CRORES FOR GIVING TO IT S SISTER CONCERN ON INTEREST FREE. WE, ACCORDINGLY DIRECT THE AO TO DE LETE THE ADDITION OF RS. 32,62,457/-. GROUND NO. 1 IS ACCORDINGLY ALLOWED. 8. GROUND NO. 2 RELATES TO THE DISALLOWANCE OF RS. 1,38,745/-. THE AO ADDED THIS AMOUNT FOR WANT OF DETAILS. THE LD. CIT(A) CONFIRMED THE DISALLOWANCE MADE BY THE AO IN THE ABSENCE OF ANY E VIDENCE. 9. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT THE INSURANCE CHARGES HAVE BEEN PAID IN RESPECT OF WIND MILL PROJECT. THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE INSURANCE POLICY AS EXHIBITED AT PAGE-63 OF THE PAPER BOOK. IN OUR HUM BLE OPINION, THIS INSURANCE POLICY NEED TO BE VERIFIED BY THE AO AS I T WAS NEVER FILED BEFORE THE LOWER AUTHORITIES. THEREFORE, WE RESTOR E THIS ISSUE BACK TO THE FILES OF THE AO. THE ASSESSEE IS DIRECTED TO FILE THE DETAILS OF INSURANCE BEFORE THE AO. THE AO IS DIRECTED TO VERIFY THE SA ME AFTER GIVING ITA NO.242/M/2012 4 REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESS EE. GROUND NO. 2 IS ALLOWED FOR STATISTICAL PURPOSE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.10.2013 . 6 2 5+ ) 7 #8 9 23.10.20135 2 ? SD/- SD/- ( VIJAY PAL RAO ) ( N.K. BILLAIYA ) ! /JUDICIAL MEMBER ) ! / ACCOUNTANT MEMBER MUMBAI; 7 # DATED 23/10/2013 . # . ./ RJ , SR. PS 6 2 /3@ A+3 6 2 /3@ A+3 6 2 /3@ A+3 6 2 /3@ A+3 / COPY OF THE ORDER FORWARDED TO : 1. ,. / THE APPELLANT 2. /0,. / THE RESPONDENT. 3. B ( ) / THE CIT(A)- 4. B / CIT 5. C? /3# , , / DR, ITAT, MUMBAI 6. ?D E / GUARD FILE. 6# 6# 6# 6# / BY ORDER, 03 /3 //TRUE COPY// F FF F / G G G G (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI ITA NO.242/M/2012 5 DATE INITIALS 1. DRAFT DICTATED ON: 17.10.2013 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 18.10.2013 SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: SR. PS/PS 6. ORDER PRONOUNCED ON: SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: 8. DATE ON WHICH FILE GOES TO THE HEAD CLERK: SR. PS/PS 9. DATE ON WHICH FILE GOES TO AR 10. DATE OF DISPATCH OF ORDER: