Kamesh Bhargava Hospital &, Chandigarh V. DCIT, Chandigarh

ITA 28/CHANDI/2016

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 5019 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 year(s) 7 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-08-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: Not Allotted
• Next Hearing Date: 07-08-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 20-01-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Proportionate interest; Commercial expediency

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL, CHANDIGARH BENCH A CHANDIGARH !, ' # , $ % & ' ( , )* # BEFORE: SMT. DIVA SINGH, JM & SMT.ANNAPURNA GUPTA, AM ./ ITA NO. 28/CHD/2016 ASSESSMENT YEAR : 2012-13 M/S KAMLESH BHARGAVA HOSPITAL & RESEARCH CENTRE (P) LTD., H.NO. 761, SECTOR 8-B, CHANDIGARH. VS THE DCIT, CIRCLE- 1(1), CHANDIGARH. PAN /TAN NO: AAACK7161P APPELLANT RESPONDENT ! ASSESSEE BY : SHRI JASPAL SHARMA, ADVOCATE ' ! REVENUE BY : SMT. CHANDERKANTA, SR.DR # $ % DATE OF HEARING : 07.08.2019 &'() % D ATE OF PRONOUNCEMENT : 22.08.2019 )-/ ORDER PER DIVA SINGH THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE WHEREIN THE CORRECTNESS OF THE ORDER DATED 23.12.20 15 OF CIT(A)-1 CHANDIGARH PERTAINING TO 2012-13 ASSESSMEN T YEAR IS ASSAILED ON THE FOLLOWING GROUNDS : 1. THAT ORDER PASSED U/S 250(6) OF INCOME TAX ACT, 1961 BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS), CHANDIGARH IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH AS HE WAS NOT JUSTIFIED TO A RBITRARILY UPHOLD THE DISALLOWANCE OF RS. 1476000/- OUT OF INTEREST ACCOU NT BY RESORT TO PROVISIONS OF SECTION 36(1)(III) IGNORING THE FACT THAT THE ADVAN CE WAS MADE FOR THE PURPOSE OF BUSINESS. 2. THAT HE WAS FURTHER NOT JUSTIFIED TO ARBITRARIL Y UPHOLD THE DISALLOWANCE AMOUNTING TO RS. 1000000/- PAID BY THE APPELLANT TO MR.RAJNISH RAMETRA AS CONSULTATION FEES. ITA 28 /CHD/2016 A.Y. 2012-13 PAGE 2 OF 8 2. AT THE TIME OF HEARING, LD. AR SUBMITTED THAT TH E ASSESSEE DOES NOT WISH TO PRESS GROUND NO. 2. ACCO RDINGLY, APPROPRIATE NOTING TO THE SAID EFFECT WAS GIVEN. 3. ADDRESSING THE SOLE ISSUE SURVIVING IN THE PRESE NT APPEAL, THE LD. AR SUBMITTED THAT NO INDEPENDENT FI NDING HAS BEEN GIVEN BY THE CIT(A) EXCEPT FOR RELYING ON THE VIEW TAKEN IN 2011-12 ASSESSMENT YEAR. THE SAID ISSUE, IT WAS SUBMITTED, CAME UP FOR CONSIDERATION IN THE CONSOLI DATED ORDER DATED 31.07.2019 IN A BATCH OF APPEALS/CROSS APPEALS AND CROSS OBJECTIONS BY THE REVENUE AND THE ASSESSE E RESPECTIVELY PERTAINING TO 2005-06 TO 2011-12 ASSES SMENT YEAR. INVITING ATTENTION TO THE RECORD, IT WAS SUB MITTED THAT THE ASSESSING OFFICER HAD MADE THE ADDITION OF RS. 14,76,000/- U/S 36(1)(III) OF THE INCOME TAX ACT,19 61 BY WAY OF DISALLOWANCE. IT HAS BEEN SUSTAINED IN APPEAL B Y THE CIT(A) FOR THE REASONS SET OUT IN PARA 5 TO 5.4 OF HIS ORDER. INVITING ATTENTION TO PAGE 79 OF THE AFORESAID CONS OLIDATED ORDER IT WAS HIS SUBMISSION THAT THE ISSUE HAS BEEN CONSIDERED IN ASSESSEE'S CO NO. 12/CHD/2014 FILED I N ITA 36/CHD/2014 BY THE ITAT IN PARAS 130 TO 133. RELYI NG UPON THE SIMILAR POSITION ON FACTS AND LAW AS CONSI DERED IN THE EARLIER YEARS WHICH HAVE BEEN ADDRESSED IN PARA 41 AT PAGE 38 OF THE ORDER (CO NO. 9/CHD/2014 IN ITA 33/CHD/2014) PERTAINS TO 2008-09 ASSESSMENT YEAR, T HE ITA 28 /CHD/2016 A.Y. 2012-13 PAGE 3 OF 8 ADDITION MADE, IT WAS SUBMITTED, WAS DELETED BY THE ITAT IN ALL THE YEARS. ACCORDINGLY, IT WAS HIS PRAYER THAT IN THE FACTS OF THE PRESENT CASE ALSO, THE ADDITIONS SUSTAINED R ELYING UPON THE ORDER OF THE ITAT IN THE EARLIER YEARS MAY BE DELETED. 3.1 THE LD. AR WAS REQUIRED TO ADDRESS THE POSITION ON FACTS IN THE YEAR UNDER CONSIDERATION AS THE ITAT HAS CON SIDERED THE FACTUAL POSITION OF AVAILABLE FUNDS IN THE RESP ECTIVE YEARS. THE LD. AR ADDRESSING THE AVAILABILITY OF FU NDS INVITED ATTENTION TO PAPER BOOK PAGE 1 SO AS TO SUBMIT THAT WHEN COMPARED WITH THE POSITION AS ON 31.3.2011 IN THE Y EAR UNDER CONSIDERATION THERE WAS AN INCREASE IN THE SH ARE CAPITAL AND RESERVES AND SURPLUS OF THE ASSESSEE. REFERRING TO THE SAID PAGE, IT WAS SUBMITTED THAT IN THE YEAR UNDER CONSIDERATION, IT HELD IN ITS BOOKS SHARE CAPITAL A ND RESERVES AND SURPLUS TO THE TUNE OF RS. 23.81 CR. O DD AND WHEN COMPARED TO THE POSITION IN THE IMMEDIATELY PR ECEDING PERIOD, IT MAY BE NOTICED THAT THE ASSESSEE'S SHARE CAPITAL AND RESERVES AND SURPLUS WAS ONLY RS. 18.57 CR ODD. THUS, ADMITTEDLY THERE IS A SUBSTANTIVE INCREASE. WHEN C OMPARED WITH THE LOANS AND ADVANCES WHICH WERE MADE IN THE SPECIFIC PERIOD, THESE WERE ABOUT RS. 1.13 CRORE ODD. ACCORD INGLY, RELYING UPON THE POSITION OF LAW AS CONSIDERED BY T HE CO- ORDINATE BENCH IN THE CONSOLIDATED ORDER WHEREIN ITA 28 /CHD/2016 A.Y. 2012-13 PAGE 4 OF 8 CONSIDERING IDENTICAL FACTUAL POSITION RIGHT FROM 2 008-09 ASSESSMENT YEAR IDENTICAL ADDITION SUSTAINED BY THE CIT(A) HAS BEEN DELETED, PRAYER WAS MADE FOR AN IDENTICAL RELIEF IN THE PRESENT PROCEEDINGS. 4. THE LD. SR.DR ON A PERUSAL OF THE CONSOLIDATED O RDER IN THE FACTS OF THE ASSESSEE'S CASE SUBMITTED THAT THE POINT AT ISSUE IS FULLY COVERED. NO DISTINGUISHING FACTS OR CIRCUMSTANCES WERE BROUGHT TO OUR NOTICE IN ORDER T O CANVASS A CONTRARY VIEW. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IT IS SEEN THAT THE S AID ISSUE WAS CONSIDERED BY THE CIT(A) IN THE IMPUGNED ORDER AS UNDER: 5 GROUND OF APPEAL NO. 1 IS AGAINST THE, DISALLOWANCE OF RS. 14,76,000/- U/S 36(L)(III) OF THE INCOME TAX ACT, 1961 (HEREINAFTER REFERRED T O AS 'ACT). 5.1 BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSING OFF ICER NOTICED THAT THE APPELLANT HAD GIVEN LOANS AND ADVANCES AMOUNTING TO RS. 1,39, 00,000/- TO RELATED PARTIES. OUT OF THIS, THE APPELLANT HAD MADE INTEREST FREE ADVANCES OF RS. 1.23 CRORES TO M/S SILVER OAK FOUNDATION. IT WAS ALSO NOTICED THAT THE APPELL ANT HAS PAID INTEREST AMOUNTING TO RS. 151.61 LACS ON SECURED AND UNSECURED LOANS RAIS ED DURING THE YEAR. 5.2 THE ASSESSING OFFICER QUESTIONED THE APPELLANT REGA RDING BUSINESS EXPEDIENCY FOR MAKING THESE ADVANCES AND ALSO ABOUT PROPORTION ATE DISALLOWANCE OF INTEREST U/S 36(L)(III) OF THE ACT. 5.3 A SUBMISSION WAS FILED DURING THE COURSE OF PRESENT PROCEEDINGS. DURING THE HEARING, IT WAS INFORMED BY THE COUNSEL OF THE APPE LLANT THAT THE ADDITION ON SAME GROUND WAS MADE BY THE ASSESSING OFFICER IN A.Y. 20 11-12 AND WAS LATER CONFIRMED BY CIT(A), CHANDIGARH. 5.4 I HAVE CONSIDERED THE SUBMISSION OF THE APPELLANT A ND THE FACTS ON RECORD. IT IS FOUND THAT SIMILAR ADDITION MADE IN A.Y. 2011-12 WA S CONFIRMED BY.MY PREDECESSOR VIDE ORDER DATED 31.10.2013 IN APPEAL NO. 274/13-14 . I AM IN AGREEMENT WITH THE VIEW TAKEN BY MY PREDECESSOR ON THE ISSUE AND SO THE ADD ITION MADE FOR RS. 14,76,000/- IS CONFIRMED IN THIS YEAR ALSO. GROUND OF APPEAL NO. 1 IS DISMISSED. ITA 28 /CHD/2016 A.Y. 2012-13 PAGE 5 OF 8 5.1. ON A PERUSAL OF THE AFORESAID ORDER PASSED BY THE CO- ORDINATE BENCH, IT IS SEEN THAT AN IDENTICAL ADDITI ON HAS BEEN DELETED IN 2011-12 ASSESSMENT YEAR IN PARAS 13 2-133 AT PAGES 79 AND 80. THE RELEVANT EXTRACT OF THE FIN DING IS EXTRACTED HEREUNDER FOR THE SAKE OF COMPLETENESS : 132. THE LD.COUNSEL FOR THE ASSESSEE CONTENDED THA T HIS ARGUMENT AGAINST THE SAID DISALLOWANCE UPHELD BY THE CIT(A) WAS THE SAME AS IN A.Y 2008-09, THAT THE ADVANCES WERE THE SAME AS IN PRECEDING YEAR EX CEPT ADDITIONAL ADVANCE GIVEN TO PSIDC OF 3.50 LACS, THAT THE ASSESSEE HAD SUFFICIENT OWN INTEREST FREE FUNDS ,IN THE FORM OF RESERVES FOR THE YEAR AMOUNTI NG TO RS.7.72 CRORES AND THE PRESUMPTION THEREFORE IS THAT THE ADVANCES HAVE BEE N MADE OUT OF OWN INTEREST FREE FUNDS. 133. SINCE ADMITTEDLY THE ISSUE IS IDENTICAL TO TH AT IN GROUND NO.1 OF THE ASSESSES CROSS OBJECTION FOR A.Y 2008-09 IN CO NO.9 /2014 DEALT WITH US ABOVE, OUR DECISION RENDERED THEREIN AT PARA 41 OF OUR ORDER WILL APPLY TO THE PRESENT GROUND, FOLLOWING WHICH WE DELETE THE DISA LLOWANCE OF INTEREST OF RS.11,00,376/-. GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE IS AL LOWED. 5.2 ON A READING OF THE ABOVE, IT IS SEEN THAT IN F ACT THE VIEW TAKEN IN 2008-09 ASSESSMENT YEAR WAS RELIED UP ON. THE RELEVANT DISCUSSION IN THE AFORESAID CONSOLIDATED O RDER IN C.O. 9/CHD/2014 IS AVAILABLE IN PARAS 33 TO 41. TH E SAID EXTRACT IS REPRODUCED HEREUNDER ALSO FOR THE SAKE O F COMPLETENESS: 33. THE SOLITARY GROUND RAISED BY THE ASSESSEE IN I TS CROSS OBJECTION RELATES TO THE ISSUE OF DISALLOWANCE OF INTEREST EXPENSES U /S 36(1)(III) OF THE ACT AND READS AS UNDER: THE ORDER PASSED U/S 250(6) OF THE INCOME TAX ACT, 1961 BY THE LD. COMMISSIONER OF INCOME TAX (APPEALS),CHANDIGARH IS AGAINST LAW AND FACTS ON THE FILE IN AS MUCH ASHE WAS NOT JUSTIFIED TO ARBIT RARILY UPHOLD THE DISALLOWANCE OF RS.5,15,119/-OUT OF INTEREST ACCOUNT BY RESORT T O PROVISIONS OF SECTION 36(1)(III) IGNORING THE FACT THAT THE ADVANCE WAS MADE FOR BUS INESS PURPOSE. ITA 28 /CHD/2016 A.Y. 2012-13 PAGE 6 OF 8 34. BRIEF FACTS RELATING TO THE ISSUE ARE THAT THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAD DEBITED A LARGE AMOUNT TO THE PROF IT AND LOSS ACCOUNT ON ACCOUNT OF INTEREST PAID ON BORROWED FUNDS. AT THE SAME TIM E, THE ASSESSEE HAD MADE INTEREST FREE ADVANCES AS UNDER: A) M/S SILVER OAK FOUNDATION RS. 21,42,000/- B) ADVANCE FOR LAND RS. 21.50.000/- TOTAL RS. 42,92,000/- 35. THE ASSESSING OFFICER QUESTIONED THE ASSESSEE R EGARDING BUSINESS EXPEDIENCY FOR MAKING THESE ADVANCES AND ALSO ABOUT PROPORTIONATE DISALLOWANCE OF INTEREST U/S 36(L)(III) OF THE ACT. THE ASSESSEE FILED A REPLY, THE CONTENTS OF WHICH WERE SUMMARIZED BY THE LD.CIT(A) AT PARA 3.1.1 OF HIS ORDER AS UNDER: (I) M/S SILVER OAK FOUNDATION IS RUNNING A COLLEGE UNDER THE NAME AND STYLE OF 'SILVER OAK COLLEGE OF NURSING', IMPARTING MEDICAL/ NURSING EDUCATION TO THE STUDENTS. THE NURSES TRAINED IN THE COLLEGE ARE PRO VIDED TO THE HOSPITAL AND SO COMMERCIAL EXPEDIENCY STANDS EXPLAINED. (II) REGARDING ADVANCE FOR PURCHASE OF LAND AT ABHI PUR, THE SAME WAS SHOWN AS ADVANCE, SINCE THE TRANSACTION WAS NOT COMPLETE. LA TER, WHEN THE REGISTRY WAS DONE, THE ASSET WAS TRANSFERRED TO THE FIXED ASSET SCHEDULE. THE LAND WAS PURCHASED WITH INTENTION TO EXPAND THE HOSPITAL FAC ILITY AND TO ATTRACT THE RURAL CLIENTELE, BUT LATER ON IT WAS OBSERVED THAT THE SC OPE WAS NOT VERY HIGH IN THAT AREA AND SO THE LAND WAS SOLD. (III) THE INTEREST DEBITED TO THE PROFIT AND LOSS A CCOUNT PERTAINS TO LOANS RAISED FOR SPECIFIC PURPOSES AND NO PART OF THESE LOANS WE RE USED FOR MAKING THESE ADVANCES AND SO IT CANNOT BE SAID THAT THE INTEREST BEARING FUNDS WERE USED FOR MAKING THESE INTEREST FREE ADVANCES. (IV) THE RATIO OF THE JUDGEMENT OF HON'BLE PUNJAB A ND HARYANA HIGH COURT IN THE CASE OF ABHISHEK INDUSTRIES LTD. (286 ITR 1) HAS BE EN AMPLIFIED, DISCUSSED AND CLARIFIED BY HON'BLE SUPREME COURT IN THE CASES OF M/S CORE HEALTH CARE LTD. (298 ITR 194) AND M/S S.A. BUILDERS LTD. (288 ITR 1 ) AND AS THE ADVANCES WERE GIVEN ON THE GROUND OF COMMERCIAL EXPEDIENCY, NO DI SALLOWANCE IS REQUIRED TO BE MADE. 36. THE ASSESSING OFFICER DID NOT AGREE WITH THE E XPLANATION OF THE ASSESSEE AND DISALLOWED PROPORTIONATE INTEREST OF RS. 5,15,1 19/-, COMPUTED @ 12% PER ANNUM ON THE AFORESAID INTEREST FREE ADVANCES WITH THE FOLLOWING OBSERVATIONS: (I) THERE IS NO EVIDENCE THAT THE IMPUGNED LAND FOR WHICH ADVANCE IS GIVEN, WAS TO BE PURCHASED FOR THE HOSPITAL. (II) THERE IS NO EVIDENCE THAT THE AMOUNT PAID AS ADVANCE FOR LAND WAS NOT OUT OF THE BORROWED FUNDS. (III) THE FUNDS DIVERTED BY THE APPELLANT ARE NOT OUT OF OWN FUNDS. ITA 28 /CHD/2016 A.Y. 2012-13 PAGE 7 OF 8 (IV) THE JUDGEMENT OF HON'BLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF M/S ABHISHEK INDUSTRIES LTD. IS APPLICABLE ON THE F ACTS OF THE CASE. 37. DURING THE COURSE OF APPELLATE PROCEEDINGS, THE LD. COUNSEL FOR THE ASSESSEE FILED WRITTEN SUBMISSION, MAINLY REITERATING THE SU BMISSIONS MADE BEFORE THE ASSESSING OFFICER. 38. THE LD.CIT(A) REJECTED ALL THE CONTENTIONS MADE BY THE ASSESSEE AND UPHELD THE DISALLOWANCE MADE. 39. BEFORE US THE SOLE ISSUE RAISED BY THE LD.COUNS EL FOR THE ASSESSEE WAS THAT IT HAD SUFFICIENT OWN INTEREST FREE FUNDS FOR THE PURPOSE OF MAKING THE INVESTMENT. OUR ATTENTION WAS DRAWN TO THE PROFITS EARNED BY THE ASSESSEE DURING THE YEAR ITSELF AS REFLECTED IN THE AUDITED FINANCI AL STATEMENTS, COPY OF WHICH WAS FILED BEFORE US, AMOUNTING TO RS.2.12 CRORES AND IT WAS POINTED OUT THAT THE INVESTMENT IN RELATION TO WHICH DISALLOWANCE WAS MA DE AMOUNTED TO RS.42.92 LACS. IT WAS, THEREFORE, CONTENDED THAT IN VIEW OF VARIOUS DECISIONS OF VARIOUS JUDICIAL AUTHORITIES, THE PRESUMPTION WAS THAT THE INVESTMENT HAS BEEN MADE OUT OF OWN INTEREST FREE FUNDS OF THE ASSESSEE CALLING FOR NO DISALLOWANCE OF INTEREST U/S 36(1)(III) OF THE ACT. 40. THE LD. DR, ON THE OTHER HAND, RELIED UPON THE ORDER OF AUTHORITIES BELOW. 41. WE HAVE HEARD THE RIVAL SUBMISSIONS, PERUSED TH E ORDERS OF THE AUTHORITIES BELOW. IT IS SETTLED LAW THAT WHERE SUFFICIENT OWN INTEREST FREE FUNDS ARE AVAILABLE, THE PRESUMPTION IS THAT NON BUSINESS ADVANCES/INVES TMENTS HAVE BEEN MADE OUT OF THE SAID INTEREST FREE FUNDS. THE HON'BLE SUPREME C OURT HAS HELD SO IN THE CASE OF CIT (LTU) VS RELIANCE INDUSTRIES LTD. IN CIVIL APP EAL NO.37 OF 2019 DATED 02- 01-19. IN VIEW OF THE ABOVE SETTLED LAW AND CONSIDERING TH E UNCONTROVERTED FACT THAT THE ASSESSEE HAD OWN INTEREST FREE FUNDS IN THE FORM OF PROFITS OF THE YEAR ALONE AMOUNTING TO RS.2.12 CRORES WHICH WERE MORE THAN SU FFICIENT FOR MAKING THE IMPUGNED INVESTMENTS OF RS.42.92 LAKHS, WE HOLD THA T NO DISALLOWANCE OF INTEREST U/S 36(1)(III) OF THE ACT WAS WARRANTED IN THE PRES ENT CASE, SINCE THE INVESTMENTS ARE PRESUMED TO HAVE BEEN MADE OUT OF OWN INTEREST FREE FUNDS OF THE ASSESSEE. THE DISALLOWANCE SO MADE OF RS.5,15,190/- U/S 36(1) (III) OF THE ACT IS, THEREFORE, DIRECTED TO BE DELETED. THE GROUND RAISED BY THE AS SESSEE IS THEREFORE ALLOWED. THE CROSS OBJECTION FILED BY THE ASSESSEE STANDS A LLOWED. 5.3 ON A CONSIDERATION OF THE FACTS, CIRCUMSTANCES AND POSITION OF LAW AS DISCUSSED IN DETAIL IN THE EARLI ER PART OF THIS ORDER, WE ARE OF THE VIEW THAT THE GROUND RAIS ED DESERVES TO BE ALLOWED. THE FACTS AS CANVASSED AND NOTED IN THE EARLIER PART OF THIS ORDER IN THE ABSENCE OF AN Y REBUTTAL ITA 28 /CHD/2016 A.Y. 2012-13 PAGE 8 OF 8 BY THE REVENUE ADEQUATELY DEMONSTRATES THE SUFFICIE NCY OF AVAILABLE FUNDS WITH THE ASSESSEE AT THE RELEVANT P OINT OF TIME. THESE SUBMISSIONS REMAIN UN-ASSAILED. ACCORD INGLY, ALLOWING THE GROUND, THE ADDITION IS DIRECTED TO BE DELETED. SAID ORDER WAS PRONOUNCED IN THE OPEN COURT AT THE TIME OF HEARING ITSELF. 6. GROUND NO. 2 AS NOTICED EARLIER HAS NOT BEEN PRE SSED BY THE ASSESSEE. AS SUCH, IT IS DISMISSED ACCORDINGLY . 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 22 ND AUGUST,2019. SD/- SD/- ( $ % & ' ( ) ( ! ) (ANNAPURNA GUPTA) (DIVA SINGH) )* #/ ACCOUNTANT MEMBER ' #/ JUDICIAL MEMBER '+ ,- .- / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT 3. # / / CIT 4. # / ( )/ THE CIT(A) 5. -01 2 , % 2 , 34516 / DR, ITAT, CHANDIGARH 6. 15 7$ / GUARD FILE '+ # / BY ORDER, 8 ' / ASSISTANT REGISTRAR