Shaligram Buildcon Pvt. Ltd., Ahmedabad V. The Dy. CIT, Cir.-4(1)(2)m, Ahmedabad

ITA 2721/AHD/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2781 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-02-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: SMC
• Next Hearing Date: 27-02-2020
• Assessment Year: 2013-2014
• Appeal Filed On: 05-12-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: N G GOYAL
• Assessee Lawyers: S N DIVETIA
• Keywords: Earning of tax free income
• Section: 143(2); 13

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD SMC BENCH BEFORE: SHR I KUL BHARAT , JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER SHALIGRAM BUILDCON PVT. LTD. SHALIGRAM HOUSE, B/H RAJPATH CLUB, S.G. HIGHWAY AHMEDABAD - 380059 PAN: AAKCS5621A (APPELLANT) VS THE DCIT , WARD - 4( 1 )(2 ) , AHMEDABAD (RESPONDENT) REVENUE BY : S H RI N.G. GOYAL , SR. D . R. ASSESSEE BY: SHRI S.N. DIVETIA , A.R. DATE OF HEARING : 27 - 0 2 - 2 020 DATE OF PRONOUNCEMENT : 28 - 02 - 2 020 / ORDER P ER : AMARJIT SINGH, ACCOUNTANT MEMBE R : - THIS ASSESSEE S APPEAL FOR A.Y. 2013 - 14 , ARI SES FROM ORDER OF THE CIT(A) - 8, AHMEDABAD DATED 05 - 10 - 2 017 , IN PROCEEDINGS UNDER SECTION 1 4 3(3) OF THE INCOME TAX ACT, 1961; IN SHORT THE ACT . 2. THIS APPEAL IS FILED BY THE ASSESSEE AGAINST THE DECISIO N OF LD. CIT(A) IN UPHOLDING THE DISALLOWANCE OF INCREASE IN DIRECTOR S REMUNERATION OF R S. 10.20, 000/ - AND INTEREST EXPENSES OF RS. 4,45,308/ - . THE ASSESSEE HAS FILED I T A NO . 2721 / A HD/20 17 A SS ESSMENT YEAR 2013 - 14 I.T.A NO. 2721 /AHD/20 17 A.Y. 2013 - 14 PAGE NO SHALIGRAM BUILDCON PVT. LTD. VS. DCIT 2 RETURN OF INCOME ON 28 TH SEP, 2013 DECLARING TOTAL INCOME AT RS. 38 , 20 , 170/ - . THE CAS E WAS SUBJECT TO SCRUTINY AND NOTICE U/S. 143(2) OF THE ACT WAS ISSUED ON 4 TH SEP, 2014. THE REMAINING FACT S OF THE C ASE ARE ADJUDICATED WHILE DECIDING THE GROUNDS OF APPEAL AS UNDER: - GROUND NO. 1 (DISALLOWANCE DIRECTOR S REMUNERATION) 3. DURING THE COU RSE OF ASSESSMENT, THE ASSESSING OFFICER HAS NOTICED THAT THERE WAS NO BUSINESS TRANSACTION HOWEVER THERE WAS INCREASE IN THE DIRECTORS REMUNERATION TO RS. 35,40,000/ - FROM RS. 25,20,000/ - CLAIMED IN THE PRECEDING ASSESSMENT YEAR. THEREFORE, THE ASSESSING OFFICER HAS DISALLOWED THE INCREASED AMOUNT OF RS. 10,20,000/ - INCURRED FOR D IRECTORS REMUNERATION COMPARED TO THE PRECEDING ASSESSMENT YEARS. 4. THE ASSESSEE HAS FI L E D APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASS ESSEE STATING THAT THERE WA S NO INCREASED IN BUSINESS DURING THE YEAR AND NORMAL BUSINESS WAS CARRIED OUT AND THE REMUNERATION PAID TO THE DIRECTOR S HAVE NOT RE SULTED INTO ADDITIONAL INCOME OF THE ASSESSEE COMPANY. 5. DURING THE COURSE OF APPELLATE PROCE EDINGS BEFORE US, THE LD. CO UNSE L CONTENDED THAT DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE LD. CIT(A) THE ASSESSEE HAS CLAIMED THAT BUSINESS WAS CONTINUED DURING THE YEAR AND THE ASSESSEE WAS ENGAGED IN BUSINESS OF BUILDING AND DEVELOPING OF L AND A ND SELLING OF LAND. THE LD. COUNSEL HAS SUBMITTED THAT DURING THE YEAR THE ASSESSEE HAS CARRIED OUT A NUMBER OF BUSINESS ACTIVITIES I.E. PURCHASE OF PLOT N O. 12 BODAKDEV FOR RS. 40 LACS AND THIS LAND WAS SOLD ON 18 TH JUNE, 2014 AT I.T.A NO. 2721 /AHD/20 17 A.Y. 2013 - 14 PAGE NO SHALIGRAM BUILDCON PVT. LTD. VS. DCIT 3 RS. 1.5 CRORE . D URING THE YEAR THE ASSESSEE HAS RECEIVED RS. 8,70,000/ - FROM GARDEN CORPORATE AS CONSULTING INCOME. IT WAS ALSO STATED THAT ASSESSEE HAS PURC HASED AND DEVELOPED THE LAND AT JAGA TPUR S H ALIG R AM FOR THE AMOUNT OF R S. 9,51,79,000/ - AND ALSO A NUMBER OF ACTIVITIES W ERE CARRIED OUT BY THE ASSESSEE PERTAINING TO DEVELOPMENT OF PROJECTS . THEREFORE, THE LD. COUNSEL HAS SUBMITTED THAT THE DECISION OF LD. CIT(A) IN DISALLOWING THE DIRECTORS REMUNERATION ON ASSUMPTION BASIS IS UNJUSTIFIED. ON THE OTHER HAND, LD. DEPARTME NTAL REPRESENTATIVE HAS SUPPORTED THE ORDER OF LOWER AUTHORITIES 6. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MATERIAL ON RECORD. THE ASSESSSEE COMPANY IS ENGAGED IN THE BUSINESS OF BUILDING AND DEVELOPING LAND AND SALE OF LAND OF PLOTS. THE ASS ESSEE HAS FILED PAPER BOOK COMPRISING COPY OF BALANCE SHEET, P& L A/C AND COMPUTATION OF INCOME F OR THE YEAR UNDER CONSIDERATION . THE ASSESSEE HAS ALSO FILED COPY OF PURCHASE DEEDS IN RESPECT OF SURVEY 208, 209 AND 210 FOR CONSIDERATION OF RS. 40 LACS AN D COPY OF SALE DEED FOR SALE OF RS. 1.50 CRORES AND COPIES OF LEDGER ACCOUNT S OF PARAM DEVELOPER AND SHREEJEE DEVELOPER FOR F. Y. 2012 - 13 ETC. AFTER PERUSAL OF THE MATERIAL ON RECORD, IT IS OBSERVED THAT SUBSTANTIAL ACTIVITIES WERE CARRIED OUT DURING THE Y EAR FOR THE BUSINESS OF THE ASSESSEE COMPANY WHICH DEMONSTRATE THAT DIRECTOR S OF THE COMPANY WERE INVOLVED IN THE VARIOUS ACTIVITIES I.E. PURCHASE OF LAND, STARING OF NEW PROJECT, ATTENDING MEETING OF STATE LEVEL APPRAISAL COMMITTEE, OBTAINING NOC FROM AIR PORT AUTHORITY AND AMC ETC. IT IS ALSO SUBMITTED THAT DIRECTOR S OF THE COMPANY WERE QUALIFIED ENGINEER AND WELL EXPERIENCED IN THE LIN E OF ACTIVITIES OF THE ASSESSEE COMPANY. ON PERUSAL OF THE MATERIAL AND NA TURE OF ACTIVITIES CARRIED OUT DURING THE YEAR , IT IS CLEAR THAT REMUNERATION WAS INCREASED BE CA USE OF I.T.A NO. 2721 /AHD/20 17 A.Y. 2013 - 14 PAGE NO SHALIGRAM BUILDCON PVT. LTD. VS. DCIT 4 THEIR INVOLVEMENT IN THE PROJECT WORK OF THE COMPANY. IN THE LIGHT OF THE ABOVE FACTS AND CIRCUMSTANCES , IT IS NOTICED THAT ASSESSING OFFICER HAS NOT GIVEN ANY FINDING THAT HOW THE REMUNERATION PAID TO THE DIRECTOR WAS EXCESSIVE OR UNREASONABLE WITH REGARD TO THE LEGITIMATE BUSINESS NEEDS OF T H E ASSESSEE. THEREFORE , WE DO NOT FIND ANY MERIT IN THE DECISION OF LD. CIT(A), THER EFORE, THIS GROUN D OF APPEAL OF THE ASSESSEE IS ALLOWED. GROUND NO. 2 ( I N TEREST EXPENSES OF RS. 4,45,308/ - ) 7. DURING THE COURSE OF ASSESSMENT, THE ASSESSING OFFICER HAS STATED THAT ASSESSEE HAS GIVEN ADVANCES TO DIFFERENT PARTIES AG GREGATING TO RS. 1 , 69 , 15 , 530/ - TO S HREEJEE INFRASTRUCTURE PVT. LTD. AND A SUM O F RS. 9. 50 CR OR ES AS ADVANCE FOR LAND. T HE ASSESS EE WAS ASKED TO EXPLAIN THE AMOUNT PAID AS IN TEREST ON BORROWED MONEY AND WHY THE SAME AMOUNT HAS BEEN PROVIDED AS INTEREST FREE LOANS / ADV ANCES TO THE DIFFERENT PERSON S. THE ASSESSEE HAS EXPLAINED THAT DURING THE YEAR IT HAS CLAIMED INTEREST EXPENSES OF RS. 5 , 83 , 675/ - AND IT HAS ADVANCED THE MONEY TO THE ENTITY FROM WHICH IT HAS EARNED EXEMPT INCOME AND HAD ALREADY MADE ADDITION U/S. 14 TO THE AMOUNT OF RS. 1 , 15 , 140/ - . THE ASSESSING OFFICER HAS NOT AGREED WITH THE SUBM ISSION OF THE ASSESSEE STATING THAT ASSESSEE COULD NOT PROVE BY WAY OF SUBMITTING FUND FLOW STATEMENT THAT THERE WAS DIVERSION OF INTEREST BEARING FUNDS. THEREFORE, THE ASSESSING OFFICER HAS DISALLOWED PROPORTIONATE INTERES T EXPENSES U/S. 36(I)(III) @ 12% ON THE AMOUNT OF LOAN ADVANCES TO THE AMOUNT OF RS. 5 ,8 3 , 675/ - . I.T.A NO. 2721 /AHD/20 17 A.Y. 2013 - 14 PAGE NO SHALIGRAM BUILDCON PVT. LTD. VS. DCIT 5 8. THE ASSESSEE HAS FILED APPEAL BEFORE THE LD. CIT(A). THE LD. CIT(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE REITERATING THE FACTS REPORTED BY THE ASSESSING OFFICER. 9. DURING THE COURSE OF APPELLATE PROCEEDINGS BEFORE US, THE LD. COUNSEL HAS BROUGHT TO OUT NOTICE THAT ASSESSEE WAS HAVING INTEREST FREE FUNDS AVAILABLE WITH THE COMPANY. THEREFORE, HE HAS STATED THAT NO DISALLOWANCE IS JUSTIFIED. ON OTHER HAND, LD. DEPARTMENTAL REPRESENTATIVE HAS SUPPORTED THE ORDER OF LOWER AUTHORITIES. 10. WE HAVE HEARD RIVAL CONTENTION AND PERUSED THE MATERIAL ON RECORD. AFTER PERUSAL OF THE SUBMISSION OF THE LD. COUNSEL AS CITED IN HIS SUBMISSION WE OBSERVE THAT IT IS APPRO PRIAT E TO RES TORE THIS ISSUE TO THE FILE OF ASSESSING OFFICER FOR DECIDING AFRESH AFTER EXAMINATION AND VERIFICATION OF THE CLAIM OF THE ASSESSEE ABOUT THE AVAILABILITY O F INTEREST FREE FUND CITED IN THE WRITTEN SUBMISSION . THEREFORE , THIS GROUND OF APPEAL OF THE ASSE SSEE IS ALLOWED FOR STATISTICAL PURPOSES. 11. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. ORDER PR ONOUNCED IN THE OPEN C OURT ON 28 - 02 - 20 20 SD/ - SD/ - ( KUL BHARAT ) ( AMARJI T SINGH ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD : DATED 28 /02 /2020 I.T.A NO. 2721 /AHD/20 17 A.Y. 2013 - 14 PAGE NO SHALIGRAM BUILDCON PVT. LTD. VS. DCIT 6 / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,