DCIT, New Delhi V. M/s Maharani Paints India Pvt. Ltd., Faridabad

ITA 2636/DEL/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 58489 (ITAT-DELHI)
• Duration Of Justice: 7 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-01-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Next Hearing Date: 23-12-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 23-05-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S MOHANTHY
• Assessee Lawyers: TAR UN KUMAR ADVS; SSH ASHWANI TANEJA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH E NEW DELHI) BEFORE SHRI RAJPAL YADAV AND SHRI B.C. MEENA ITA NO. 2636/DEL/2011 ASSESSMENT YEAR: 2007-08 DEPUTY COMMISSIONER OF IT, VS. M/S. MAHARANI PAINT S INDIA PVT. CIRCLE 6(1), LTD., PLOT NO.5L/156, NIT NEW DELHI. FARIDABAD (HR.) (PAN: AAACM6316Q) (APPELLANT) (RESPONDENT) APPELLANT BY: SMT. S. MOHAN THY, SR. DR RESPONDENT BY: S/SH. ASHWANI TA NEJA & TARUN KUMAR, ADVS. DATE OF HEARING : 23.12.2011 DATE OF PRONOUNCEMENT : 13 .01.2012 ORDER PER RAJPAL YADAV: JUDICIAL MEMBER THE REVENUE IS IN APPEAL BEFORE US AGAINST THE ORDE R OF LEARNED CIT(APPEALS) DATED 27.01.2011 PASSED FOR ASSESSMENT YEAR 2007-08. THE SOLITARY GRIEVANCE OF THE REVENUE IS THAT THE LEARN ED CIT(APPEALS) HAS ERRED IN DELETING THE ADDITION OF RS.15 LACS WHICH WAS AD DED BY THE ASSESSING OFFICER BY MAKING THE DISALLOWANCE OUT OF INTEREST EXPENSES. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E COMPANY AT THE RELEVANT TIME WAS ENGAGED IN THE BUSINESS OF MANUFA CTURING OF PAINTS. IT HAS FILED ITS RETURN OF INCOME-TAX ON 31.10.2007 DECLAR ING AN INCOME OF 2 RS.7,48,75,337. THE CASE OF THE ASSESSEE WAS SELECT ED FOR SCRUTINY ASSESSMENT AND A NOTICE UNDER SEC.143(2) DATED 20.9 .2008 WAS ISSUED TO THE ASSESSEE WHICH WAS DULY SERVED UPON IT. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE ASSESSING OFFICER THAT ASSESSEE HAS SHOWN INTEREST EXPENSES OF RS.1.81 CRORES IN THE P & L ACCOUNT WHEREAS THE INTEREST EXPENSES IN THE IMMEDIATELY PRECEDING YEAR WAS OF RS.92,35,000. ASS ESSING OFFICER OBSERVED THAT A SUM OF RS.1.5 CRORES WAS GIVEN BY T HE ASSESSEE AS ADVANCE TO UCC BUILDERS AND HEMA ENGINEERING WITHOUT CHARGING ANY INTEREST, THEREFORE, ASSESSING OFFICER SOUGHT TO DISALLOW PRO PORTIONATE INTEREST EXPENSES OUT OF THE TOTAL INTEREST EXPENSES. ASSESS ING OFFICER WAS OF THE OPINION THAT ASSESSEE HAS GIVEN INTEREST FREE ADVAN CE TO THE TWO CONCERNS, OUT OF THE BORROWED FUNDS, THEREFORE, IT AMOUNTS TO NON -UTILIZATION OF THE BORROWED FUNDS FOR THE PURPOSE OF THE BUSINESS. IN RESPONSE TO THE QUERY OF THE ASSESSING OFFICER, IT WAS CONTENDED BY THE ASSE SSEE THAT ADVANCE WAS GIVEN TO THESE TWO CONCERNS FOR PROCURING LAND IN R OORKEE, HARIDWAR AND FARIDABAD. THESE LANDS WERE TO BE PROCURED FOR THE PURPOSE OF THE BUSINESS. THE ASSESSEE HAS NOT CLAIMED DEDUCTION OF INTEREST EXPENSES QUA THE FUNDS INVESTED FOR THE PURCHASE OF LAND RATHER IT HAS CAP ITALIZED SUCH INTEREST EXPENSES. THE ASSESSEE HAS SUBMITTED THAT TOTAL EXP ENSES TOWARDS INTEREST IS OF RS.2,88,63,793 OUT OF THAT A SUM OF RS.1,06,97,3 76 HAS BEEN CAPITALIZED 3 AND THE DEDUCTION WAS CLAIMED AT RS.1,81,66,417. LE ARNED ASSESSING OFFICER DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE. HE E STIMATED THE INTEREST EXPENSES ON THE FUNDS OF RS.1.50 CRORES AT RS.15 LA CS AND MADE THE DISALLOWANCE. 3. ON APPEAL, LEARNED CIT(APPEALS) HAS DELETED THE ADDITION. 4. WITH THE ASSISTANCE OF LEARNED REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORDS CAREFULLY. IT APPEARS THAT LEARNED ASSE SSING OFFICER HAS MISERABLY FAILED TO CONSTRUE THE TRUE TRANSACTION. HE MADE A REFERENCE OF SECTION 36(1)(III) AND OBSERVED THAT DEDUCTION OF INTEREST EXPENSE INCURRED ON THE FUNDS USED FOR ACQUISITION OF AN ASSET FOR EXTENSIO N OF BUSINESS WOULD NOT BE ALLOWED TILL THE ASSET WAS NOT PUT TO USE. BUT HE F AILED TO NOTE THAT THE ASSESSEE HAS NOT CLAIMED THE DEDUCTION OF INTEREST EXPENSES ON THE FUNDS ALLEGED TO HAVE BEEN GIVEN AS ADVANCE FOR THE PURCH ASE OF LAND. IT HAS ALREADY CAPITALIZED THE INTEREST EXPENSES ATTRIBUTA BLE TO SUCH ADVANCES. LEARNED FIRST APPELLATE AUTHORITY HAS REPRODUCED TH E DETAILS SUBMITTED BY THE ASSESSEE IN A TABULAR FORM EXHIBITING THE FUNDS AVAILABLE WITH IT, USED FOR INVESTMENT AND THE INTEREST EXPENSES WHICH INCURRED BY IT. IT HAS POINTED OUT THAT THE TOTAL EXPENSE WAS MORE THAN RS.2.88 CRORES OUT OF THAT RS.1.06 4 CRORES WAS CAPITALIZED AND ONLY RS.1.81 CORES HAS B EEN CLAIMED AS REVENUE EXPENSES. IT CAN EASILY BE ASCERTAINED THAT INTERES T EXPENSES ON THE ALLEGED ADVANCE OF RS.1.5 CRORES COULD NOT BE MORE THAN RS. 1.06 CRORES CAPITALIZED BY THE ASSESSEE. AFTER TAKING INTO CONSIDERED THE O RDER OF THE LEARNED CIT(APPEALS), WE ARE OF THE VIEW THAT NO INTERFEREN CE IS CALLED FOR IN IT. 5. IN THE RESULT, THE APPEAL FILED BY THE REVENUE I S DISMISSED. DECISION PRONOUNCED IN THE OPEN COURT ON 13.01.2012 SD/- SD/- ( B.C. MEENA ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 13/01/2012 MOHAN LAL COPY FORWARDED TO: 1) APPELLANT 2) RESPONDENT 3) CIT 4) CIT(APPEALS) 5) DR:ITAT ASSISTANT REGISTRAR