The ITO, Ward-5(1), Baroda V. M/s. Unnati Developers, Baroda

ITA 2554/AHD/2010

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 94879 (ITAT-AHMEDABAD)
• Duration Of Justice: 5 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-12-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 26-11-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 25-08-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: USHA SHROLE
• Assessee Lawyers: K C PATEL

Judgement Text

, B IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA NO.2554/AHD/2010 [ASSTT/YEAR 2007-2008] ITO, WARD-5(1) BARODA. VS M/S.UNNATI DEVELOPERS 5, ANAND INDUSTRIAL COMPLEX OPP: YAMUNA MLL, DABHOI ROAD BARODA. PAN :AABFU 7921 M / (APPELLANT) / (RESPONDENT) REVENUE BY : MS.USHA SHROLE, SR.DR ASSESSEE BY : SHRI K.C. PATEL, AR ! / DATE OF HEARING : 26/11/2015 '#$ ! / DATE OF PRONOUNCEMENT: 09/12/2015 %& / O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDE R OF THE LD.CIT(A)-V, BARODA DATED 9.6.2010 PASSED FOR THE A SSTT.YEAR 2007-08. 2. SOLITARY GRIEVANCE OF THE REVENUE IS THAT LD.CIT (A) HAS ERRED IN DELEING THE DISALLOWANCE OF INTEREST OF RS.7,10,446 /-. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE-FI RM IS ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION. IT HAS FILED RETUR N OF INCOME ON 12.10.2007 DECLARING INCOME AT RS.NIL. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICE UNDER S ECTION 143(2) WAS ISSUED AND SERVED UPON THE ASSESSEE. ON PERUSAL OF THE RECORD IT ITA NO.2554/AHD/2010 2 REVEALED TO THE AO THAT THE ASSESSEE HAD GIVEN AN A DVANCE OF RS.64,50,000/- TO THE PARTNERS VIZ. SHRI ASHOK THAK KAR, SHRI ASHWIN THAKKAR AND SHRI PANKAJ THAKKAR. THE ASSESSEE HAS N OT CHARGED INTEREST ON THESE ADVANCES, THEREFORE, THE LD.AO HA RBOURED A BELIEF THAT THE INTEREST BEARING FUND HAVE BEEN DIVERTED TOWARD S INTEREST FREE ADVANCES. IN OTHER WORDS, INTEREST BEARING FUNDS H AVE BEEN USED FOR NON-BUSINESS PURPOSES. ACCORDINGLY, THE LD. AO HAS WORKED OUT THE INTEREST EXPENSES RELATABLE TO THESE ADVANCES AT RS .7,10,446/- BECAUSE THE ASSESSEE HAS DEBITED TOTAL INTEREST EXPENDITURE AT RS.12,78,968/-. THE AO HAS DISALLOWED RS.7,10,446/-. 4. ON APPEAL, THE LD.CIT(A) HAS DELETED THE DISALLO WANCE ON THE GROUND THAT THESE ADVANCES WERE GIVEN TOWARDS COST OF LAND WHICH THE ASSESSEE-FIRM HAS TAKEN FROM THE PARTNERS FOR DEVEL OPMENT. 5. WITH THE ASSISTANCE OF THE LD. REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. THE LD.COUNSEL FOR T HE ASSESSEE POINTED OUT THAT THE PARTNERS HAD PURCHASED PROPERTY COMPRI SING AT RS NO.115 PAIKI AND 957 PAIKI SUB-PLOT NO.4/A ETC. AT MOJE VA DODARA, KASBA. SHRI ASHOK R. THAKKAR HAS PURCHASED 677.81 SQ.METERS. S HRI ASHWINBHAI R. THAKKAR PURCHASED 734.57 SQ.METERS AND SHRI PANKAJ R. THAKKAR PURCHASED 621.33 SQ.METERS. THESE LANDS WERE PURCH ASED BY THE PARTNERS IN THE YEAR 1999. MUTATION OF OWNERSHIP W ITH REGARD TO THIS LAND HAS BEEN ENTERED IN THEIR NAMES. THEY ENTERED INTO JOINT DEVELOPMENT AGREEMENT WITH THE ASSESSEE-FIRM AND IN LIEU OF THAT AGREEMENT FIRM HAD GIVEN RS.64,35,000/- TO THE PART NERS WHICH IS 50% OF THE LAND VALUE. REST OF THE 50% WAS STATED TO BE PARTNERS CAPITAL CONTRIBUTION IN THE ASSESSEE-FIRM. THE COPIES OF T HE JOINT DEVELOPMENT AGREEMENT HAVE BEEN PLACED ON RECORD. ON THE STREN GTH OF THIS AGREEMENT, THE LD.CIT(A) ARRIVED AT A CONCLUSION TH AT NO INTEREST ITA NO.2554/AHD/2010 3 BEARING FUNDS WERE USED BY THE ASSESSEE FOR NON-BUS INESS PURPOSE, RATHER, THE ADVANCES WERE GIVEN TO THE PARTNERS FOR INVESTMENT IN THE LAND WHICH WAS OWNED BY THE PARTNERS. CONSIDERING THIS DOCUMENT AND THE FINDINGS OF THE CIT(A), WE DO NOT FIND ANY MERI T IN THIS APPEAL, BECAUSE, THE ADVANCES WERE NOT MADE BY THE ASSESSEE -FIRM FOR NON- BUSINESS PURPOSE, RATHER THE PAYMENT WAS MADE FOR A CQUIRING RIGHTS IN THE LANDS, WHICH IS TO BE ULTIMATELY DEVELOPED BY T HE ASSESSEE. IN VIEW OF THE ABOVE DISCUSSION, THE APPEAL OF THE REVENUE IS DISMISSED. 6. IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSE D. ORDER PRONOUNCED IN THE COURT ON 9 TH DECEMBER, 2015 AT AHMEDABAD. SD/- SD/- (MANISH BORAD) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER