Hemal Punamchand Turakhia, Ahmedabad V. The ACIT, Central Circle 1(1), Ahmedabad

ITA 2819/AHD/2017

• Counselvise Citation: [2019] 116 COUNSELVISE.COM (IT) 0536 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 9 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-09-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2014-2015
• Appeal Filed On: 12-12-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: L P JAIN
• Keywords: Proportionate interest

Judgement Text

HEMAL P TURAKHIA V. ACIT-CC-1(1) AHMEDABAD /I.T.A.N O. 2819/AHD/2017/A.Y. 14-15 1 , C IN THE INCOME TAX APPELLATE TRIBUNAL, CBENCH, AHMEDABAD BEFORE SHRI O. P MEENA, ACCOUNTANT MEMBER AND MS. MADHUMITA ROY, JUDICIAL MEMBER . . /. I.T.A NO.2819/AHD/2017 / ASSESSMENT YEAR:2014-15 SMT. HEMAL P UNAMCHAND TURAKHIA, B-203, PUSHPABHAVAN APARTMENTS, NEAR RUCHIR BUNGALOWS, BODAKDEV AHMEDABAD 380054 PAN: AAHPT 2969 A VS. ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE- 1(1) AHMEDABAD AAAYKAR BHAVAN AHMEDABAD 380 009 APPELLANT / RESPONDENT /ASSESSEE BY SHRI PARIN SHAH, C A /REVENUE BY SHRI L. P. JAIN , SR. D.R. / DATE OF HEARING: 16.09.2019 /PRONOUNCEMENT ON 1 7 .09.2019 /O R D E R PER O. P. MEENA, AM: 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-7, AHMEDABAD ( IN SHORT THE CIT (A)) DATED 07.11.2017 FOR THE ASSESSMENT YEAR 2014-15 2. GROUND NO. 1 TO 3 ARE AGAINST THE CONFIRMATION OF D ISALLOWANCE OF INTEREST OF RS.1,61,525 BY THE LD. CIT (A). 3. SUCCINCTLY, FACTS AS CULLED OUT FROM THE ORDERS OF LOWER AUTHORITIES ARE THAT THE ASSESSEE HAS INCURRED INTEREST EXPENSES OF RS. 25, 37,219. ON VERIFICATION OF UTILIZATION OF FUNDS, THE AO NOTED THAT THE ASSESSE E HAS UTILIZED RS. 14 LAKHS TOWARDS PURCHASE OF IMMOVABLE PROPERTY. THEREFORE, THE AO DISALLOWED HEMAL P TURAKHIA V. ACIT-CC-1(1) AHMEDABAD /I.T.A.N O. 2819/AHD/2017/A.Y. 14-15 2 PROPORTIONATE INTEREST EXPENDITURE OF RS.1, 61,525 ON THE GROUND THAT THE ASSESSEE HAS UTILIZED BORROWED FUNDS TOWARDS PURCHASE OF PRO PERTY. 4. BEING, AGGRIEVED THE ASSESSEE FILED AN APPEAL BEFOR E THE LD. CIT (A). HOWEVER, LD. CIT(A) CONFIRMED THE ACTION OF THE AO BY OBSERVING THAT THE ASSESSEE HAS FAILED TO ESTABLISH THE DIRECT NEXUS BETWEEN B ORROWING INTEREST-FREE FUNDS OF RS. 1,14,,91,000 AND UTILIZATION OF THE SAME IN IMM OVABLE PROPERTIES. 5. BEING, AGGRIEVED THE ASSESSEE FILED THIS APPEAL BEF ORE THE TRIBUNAL. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE HAS RECEIVED TOTAL INTEREST FREE LOANS/ADVANCES OF RS.1,14,91,000 FROM SHRI CHETAN TURAKHIA (BROTHER OF THE ASSESSEE) AND OUT OF SAID FUNDS RS.14 LAKH W ERE INVESTED IN IMMOVABLE PROPERTY. IN SUPPORT OF THIS CONTENTION, THE ASSESS EE HAS FILED A CHART APPEARING AT PAPER BOOK PAGE NO. 26 DEMONSTRATING THE UTILIZATIO N OF FUNDS. THE LEARNED COUNSEL FOR THE ASSESSEE REFERRED PAPER BOOK PAGE N O. 31 BEING AN INTEREST ACCOUNT TO CONTEND THAT NO INTEREST WAS GIVEN TO SH RI CHETAN TURAKHIA. THE ASSESSEE HAS MADE INVESTMENT OF RS. 14 LAKHS OUT OF THESE INTEREST FREE ADVANCES HENCE, NO DISALLOWANCE UNDER SECTION 36(1)(III) ARE CALLED FOR. THE LEARNED COUNSEL FOR THE ASSESSEE FURTHER SUBMITTED THAT THE OBSERVA TION OF THE AO IS NOT CORRECT ON THE FACTS OF THE CASE AS THE ASSESSEE HAS SUBSTANTI AL INTEREST-FREE FUNDS OF RS.23,34,418 (PB-19) BEING CAPITAL AS AGAINST THE I NVESTMENT MADE IN HOUSE PROPERTY AT RS. 14 LAKHS. THEREFORE, THERE WAS NO Q UESTION OF DIVERSION OF INTEREST BEARING FUNDS BY THE ASSESSEE. THUS, THE DISALLOWAN CE AS MADE BY THE AO ARE NOT CORRECT. THE LEARNED COUNSEL FOR THE ASSESSEE HAS A LSO PLACED RELIANCE ON THE JUDGEMENT OF HON`BLE SUPREME COURT IN THE CASE OF C IT V. RELIANCE INDUSTRIES LTD. HEMAL P TURAKHIA V. ACIT-CC-1(1) AHMEDABAD /I.T.A.N O. 2819/AHD/2017/A.Y. 14-15 3 [2019] 102 TAXMANN.COM 52 (SC) WHEREIN IT WAS HELD THAT WHERE THE ASSESSING OFFICER REJECTED ASSESSEE`S CLAIM UNDER SECTION 36( 1)(III) TAKING A VIEW THAT INTEREST WOULD NOT HAVE BEEN PAYABLE TO BANKS IF F UNDS WERE NOT PROVIDED TO SUBSIDIARIES, IN VIEW OF THE FACT THAT INTEREST-FRE E FUNDS WERE AVAILABLE TO ASSESSEE WHICH SUFFICIENT TO MEET ITS INVESTMENT IN SUBSIDI ARIES, APPELLATE AUTHORITIES WERE JUSTIFIED IN ALLOWING ASSESSEE`S CLAIM FOR DEDUCTIO N. 6. ON THE OTHER HAND, THE LD. D.R. RELYING ON THE ORDE RS OF LOWER AUTHORITIES SUBMITTED THAT THE ASSESSEE IS NOT ABLE TO SUBSTANT IATE THAT INTEREST FREE ADVANCES WERE GIVEN OUT OF INTEREST-FREE FUNDS AVAILABLE WIT H THE ASSESSEE, HENCE, FINDING OF THE AO/LD. CIT(A) MAY BE UPHELD 7. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PAR TIES AND HAVE PERUSED THE MATERIAL AVAILABLE ON RECORD. WE FIND THAT THE LD. A.O. HAS FAILED TO ESTABLISH THAT INVESTMENT OF RS. 14 LAKH WAS MADE OUT OF INTE REST BEARING FUNDS. IT IS THE CONTENTION OF THE ASSESSEE THAT IT HAD SUFFICIENT N ON-INTEREST BEARING FUNDS TO THE TUNE OF RS.23.34 LAKHS AS PER BALANCE SHEET AS ON 3 1.03.2014 (PB-19) AS AGAINST INVESTMENT IN IMMOVABLE PROPERTY AT RS.14 LAKH. FUR THER, THE ASSESSEE HAS BORROWED FUNDS OF RS. 1,14,91,000 FROM HER BROTHER SHRI CHETAN P TURAKHIA (PB-26) WHICH HAVE BEEN UTILIZED IN INVESTMENT IN PROPERTY. THE ASSESSEE HAS NOT PAID ANY INTEREST ON THIS FUNDS AS COULD BE SEEN FROM INTERE ST ACCOUNT PLACED AT PAPER BOOK PAGE NO. 31. THUS, INVESTMENT HAS BEEN MADE OUT OF INTEREST-FREE FUNDS/CAPITAL AVAILABLE. THEREFORE, WE ARE OF THE VIEW THAT THE L D. A.O. HAS FAILED TO ESTABLISH THAT INVESTMENT OF RS. 14 LAKH IS NOT OUT OF INTERE ST FREE FUNDS. THEREFORE, PRESUMPTION WOULD GO IN FAVOUR OF THE ASSESSEE THAT THE INTEREST FREE FUNDS WERE HEMAL P TURAKHIA V. ACIT-CC-1(1) AHMEDABAD /I.T.A.N O. 2819/AHD/2017/A.Y. 14-15 4 UTILIZED FROM MAKING INVESTMENT IN IMMOVABLE PROPER TY. WE FURTHER RELY ON THE DECISION OF HON`BLE SUPREME COURT IN THE CASE OF CI T V. RELIANCE INDUSTRIES LTD. [2019] 102 TAXMANN.COM 52 (SC) WHEREIN IT WAS HELD THAT WHERE THE ASSESSING OFFICER REJECTED ASSESSEE`S CLAIM UNDER SECTION 36( 1)(III) TAKING A VIEW THAT INTEREST WOULD NOT HAVE BEEN PAYABLE TO BANKS IF F UNDS WERE NOT PROVIDED TO SUBSIDIARIES, IN VIEW OF THE FACT THAT INTEREST-FRE E FUNDS WERE AVAILABLE TO ASSESSEE WHICH SUFFICIENT TO MEET ITS INVESTMENT IN SUBSIDI ARIES, APPELLATE AUTHORITIES WERE JUSTIFIED IN ALLOWING ASSESSEE`S CLAIM FOR DEDUCTIO N. WE ARE THEREFORE, OF THE CONSIDERED OPINION THAT NO DISALLOWANCE OF INTEREST IS WARRANTED IN THIS CASE. IN VIEW OF THESE FACTS AND CIRCUMSTANCES, THE DISALLOW ANCE OF INTEREST OF RS. 1,61,525/- MADE BY THE AO IS DELETED. ACCORDINGLY G ROUND NO. 1 TO 3 OF APPEAL ARE THEREFORE, ALLOWED. 8. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS AL LOWED. 9. THE ORDER PRONOUNCED IN THE OPEN COURT ON 17. 09. 2019 SD/- SD/- (MADHUMITA ROY) (O.P.MEENA) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD: DATED: 17 SEPTEMBER, 2019/OPM COPY OF ORDER SENT TO- ASSESSEE/ASSESSING OFFICER/P R. CIT/ CIT (A)/ ITAT (DR)/GUARD FILE OF ITAT. BY ORDER //TRUE COPY// ASSISTANT REGISTRAR, AHMEDABAD STANDARD PREPARATION & DELIVERY OF ORDERS IN THE IT AT 1 DATE OF DICTATION 2 DRAFT PLACED BEFORE THE AUTHOR 3 DRAFT PROPOSED & PLACED BEFORE SECOND MEMBER 4 DRAFT DISCUSSED/ APPROVED BY SECOND MEMBER 5 APPROVED DRAFT COMES TO SR. PS /PS 6 KEPT FOR PRONOUNCEMENT ON 7 DATE OF UPLOADING ORDER ON THE WEB SITE 1 7 . 9 . 2 0 1 9 8 FILE SENT TO BENCH CLERK 1 7 . 9 . 2 0 1 9 9 DATE ON WHICH THE FILE GOES TO THE A.R. FOR SIGNATURE ON THE ORDER 10 DATE ON WHICH FILE GOES TO HEAD CLERK 1 1 DATE OF DISPATCH OF ORDER