M/s. Park Avenue Associates, Ahmedabad V. The Income tax Officer,Ward-9(1), Ahmedabad

ITA 2719/AHD/2009

• Counselvise Citation: [2010] 137 COUNSELVISE.COM (IT) 0147 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-01-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 21-01-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 30-09-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M C
• Assessee Lawyers: VIJAY RANJAN

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE S/SHRI T.K. SHARMA, JM AND D.C.AGRAWAL, AM M/S PARK AVENUE ASSOCIATES, 4 TH FLOOR, COMMERCE HOUSE, OPP. RAJVANSH APARTMENT, JUDGES BUNGALOW ROAD, AHMEDABAD. V/S . INCOME-TAX OFFICER, WAD 9(1), ASHRAM ROAD, AHMEDABAD. PAN NO.AAIFP 3192 J (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI VIJAY RANJAN, AR RESPONDENT BY:- SHRI M.C. PANDIT, SR. DR O R D E R PER D.C. AGRAWAL, ACCOUNTANT MEMBER. THIS IS AN APPEAL FILED BY THE ASSESSEE RAISING FOL LOWING GROUNDS :- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) ERRED IN DISMISSING THE ASSESSEES APPEAL AND HE FU RTHER ERRED IN CONFIRMING DISALLOWANCE OF RS.2,76,489/- PURPORTEDL Y OUT OF INTEREST WHICH WAS CLAIMED AS DEDUCTION U/S 36(1)(I II). 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE COMP ANY IS ENGAGED IN THE BUSINESS AS LAND DEVELOPER AND ORGANIZER. IT HA D SEVERAL ASSOCIATE CONCERNS WHICH ARE ENGAGED IN BUSINESS OF PURCHASE AND SALE/IMPORT OF GOODS USED BY THE ASSESSEE AND OTHER GROUP CONCERNS IN CONSTRUCTIONS ACTIVITIES. THE DISPUTE DURING THE YEAR IS ABOUT IN TEREST CLAIM IN THE P & L ACCOUNT. THE ASSESSEE HAS SHOWN RECEIPT OF INTEREST OF RS.35.25 LACS AND ITA NO.2719/AHD/2009 ASST. YEAR : 2006-07 2 PAYMENT OF INTEREST AT RS.34.91 LACS, WHICH INCLUDE D RS.21.99 LACS TO PARTNERS AND 12.29 LACS TO OTHERS. THE AO NOTICED T HAT ASSESSEE HAS NOT CHARGED INTEREST ON SOME ADVANCE GIVEN TO SISTER CO NCERNS. THE ASSESSEE ON THE OTHER HAND PAID INTEREST ON CREDIT BALANCES OF PARTNERS A/C AND ALSO ON SUMS BORROWED FROM OTHERS. AO NOTICED THAT ASSES SEE HAS GIVEN RS.55,15,000/-, RS.43,81,451/- AND RS.10,00,000/- T O SHRI TANMAY T. AGARWAL, GALAXY GLOBAL (P) LTD. AND GOYAL & CO. CO NSTRUCTION (P) LTD. RESPECTIVELY. THE ASSESSEE HAS NOT CHARGED INTEREST FROM THESE PERSONS/ CONCERNS. THE AO ACCORDINGLY ISSUED SHOW CAUSE NOTI CE TO THE ASSESSEE AND AFTER CONSIDERING THE REPLY MADE THE DISALLOWAN CE UNDER SECTION 36(1)(III) TOTALING TO RS.2,76,489/-, ON THE GROUND THAT INTEREST BEARING FUNDS WERE USED TO GIVE INTEREST FREE ADVANCES TO S ISTER CONCERNS. LD. CIT(A) DISMISSED THE APPEAL OF THE ASSESSEE ON THE SAME GROUND AS TAKEN BY THE AO. 3. BEFORE US LD. AR FOR THE ASSESSEE SUBMITTED THAT SO FAR AS GALAXY GLOBAL (P) LTD. IS CONCERNED ASSESSEE HAD COMMERCIA L TRANSACTIONS WITH THIS PARTY. MONEY WAS PAID AS TRADING ADVANCE. IT I S CREDITED BY OTHER PARTY IN THE RUNNING ACCOUNT OF THE ASSESSEE. ASSES SEE HAS BEEN PURCHASING MATERIAL IMPORTED BY THAT CONCERN AND AD VANCE WAS ACCORDINGLY PAID TO BE ADJUSTED AGAINST SUCH PURCHA SES. IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF S. A. BUILDERS VS. CIT (2007) 288 ITR 1 (SC) NO PROPORTIONATE DISALLOWANCE OF INTEREST SHOULD TO BE MADE. 4. LD. DR ON THE OTHER HAND SUBMITTED THAT ASSESSEE DID NOT FURNISH ANY INFORMATION BEFORE THE AO. 3 5. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE CONSIDERED VIEW THAT SO FAR AS THE PROPORTIONATE DISALLOWANCE OF INTEREST IN RESPECT OF LOAN GIVEN TO TANMAY AGARWAL IS CONCERNED WE CONFIR M THE ORDER OF AO AS NO EXPLANATION IS FORTH-COMING FROM THE ASSESSEE . HOWEVER, IN THE CASE OF GALAXY GLOBAL (P) LTD. WE RESTORE THE MATTER TO THE FILE OF AO. THE ASSESSEE WILL PRODUCE NECESSARY EVIDENCE INCLUDING COPY OF ACCOUNT OF THAT PARTY IN HIS BOOKS AND COPY OF ASSESSEES ACCO UNT IN THE BOOKS OF THAT PARTY TO SHOW THAT ADVANCES WERE TRADING ADVANCES A ND NOT FRIENDLY LOAN TO THE SISTER CONCERN WITHOUT INTEREST. IN CASE ADV ANCES ARE FOUND TO BE COMMERCIAL ADVANCES LENT IN THE COURSE OF BUSINESS, NO PROPORTIONATE DISALLOWANCE OF INTEREST SHOULD BE MADE IN VIEW OF THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF S.A. BUILDERS VS. CIT (SUPRA). 6. THIS PART OF THE GROUND OF ASSESSEE IS ALLOWED F OR STATISTICAL PURPOSES. 7. AS A RESULT, APPEAL FILED BY THE ASSESSEE IS PAR TLY ALLOWED FOR STATISTICAL PURPOSES. SD/- SD/- (T.K. SHARMA) (D.C.AGRAWAL) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD, DATED : 29/01/2010 MAHATA/- ORDER PRONOUNCED IN OPEN COURT ON 29/01/2010 4 COPY OF THE ORDER FORWARDED TO :- 1. THE APPELLANT. 2. THE RESPONDENT. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD