Firefly Energy Limited, Ahmedabad V. The Income Tax Officer, Ward-2(1)(3), Ahmedabad

ITA 2871/AHD/2016

• Counselvise Citation: [2024] 101 COUNSELVISE.COM (IT) 8090 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 4 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-03-2024
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: C
• Next Hearing Date: 17-03-2024
• Assessment Year: 2012-2013
• Appeal Filed On: 30-10-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRIKAMLESHMAKWANA; FORTHEASSESSEETHATTHEPRIMARYBURDENCASTONTHEASSESSEEWASDULY
• Assessee Lawyers: SHRIPDSHAH; THELENDERFROMHIS
• Keywords: Sale consideration of property below Jantri Value; Depreciation

Judgement Text

आयकरअपीलीयअधिकरण , अहमदाबादनयायपीी INTHEINCOMETAXAPPELLATETRIBUNAL, ‘’C’’BENCH,AHMEDABAD BEFORESHRIWASEEMAHMED,ACCOUNTANTMEMBER And SHRITRSENTHILKUMAR,JUDICIALMEMBER आयकरअपीलसं./ITANo.2871/AHD/2016 धििाधरणवरध/Asstt.Year:2012-2013 FireflyEnergyLimited, 14.PahelgaonBunglow, JudgesBungalowRoad, Vastrapura, Ahmedabad. C/o.MehtaLodha&Co. CharteredAccountants, 105,Sakar-1,NearGandhiGramRly. Station, AshramRoad, Ahmedabad-380009. PAN:AABCA6692E Vs. IncomeTaxOfficer, Ward-2(1)(3), Ahmedabad. (Applicant)(Respondent) Assesseeby:ShriPDShah,AR Revenueby:ShriKamleshMakwana,CIT.DR सुिवाईकीतारीख/DateofHearing:18/03/2024 घोरणाकीतारीख/DateofPronouncement:28/03/2024 आदेश/ORDER PERWASEEMAHMED,ACCOUNTANTMEMBER: ThecaptionedappealhasbeenfiledattheinstanceoftheAssesseeagainst theorderoftheLearnedCommissionerofIncometax(Appeals)-2,Ahmedabad, arisinginthematterofassessmentorderpassedunders.143(3)oftheIncome TaxAct,1961(here-in-afterreferredtoas"theAct")relevanttotheAssessment Year2012-2013. ITAno.2871/AHD/2016 A.Y.2012-13 2 2.Theassesseehasraisedfollowinggroundsofappeal: 1.ThattheorderpassedbythelearnedCIT(A)isbadinlawandagainstthefactsofthe caseandthereforethelearnedAObedirectedtoacceptthereturnedincomeofRsNil. 2.ThatthelearnedCIT(A)haserredinlawandfactsbyconfirmingtheadditionofRs 8,44,00,000/-ofunsecuredloansundersection68oftheActandthereforethelearnedAO shouldbedirectedtodeletetheadditionwhilecomputingthetotalincome. 3.ThatthelearnedCIT(A)haserredinlawandfactsbyconfirmingtheadditionofRs 4,38,90,000/-ofsharecapitalundersection68oftheActandthereforethelearnedAO shouldbedirectedtodeletetheadditionwhilecomputingthetotalincome. 4.ThatthelearnedCIT(A)haserredinlawandfactsbyconfirmingtheadditionof disallowanceofinterestexpensesofRs4,06,19,505/-andthereforethelearnedAOshould bedirectedtodeletetheadditionwhilecomputingthetotalincome. 5.Thattheappellantcraveslibertytoadd,amend,alteranddeleteanygroundsofappeal beforethefinalhearing. 3.Theassesseevideletterdated11/07/2019hasraisedtheadditionalground ofappeal. ThattheLd.CIT(A)oughtthattheorderpassedbythelearnedAOisbadinlawasthe noticeundersection143(2)oftheAct,hasnotbeenissuedbytheassessingofficerwho hasjurisdictionovertheassesseeandthereforetheorderpassedbythelearnedAOis requiredtobequashed. 4.Attheoutset,theLd.Counselbeforeussubmittedthathehasbeen instructednottopresstheadditionalgroundofappealraisedbytheassessee. Hence,thesameisdismissedasnotpressed. 5.ThefirstissueraisedbytheassesseeisthattheLd.CIT(A),erredin confirmingtheadditionmadebytheAOforRs.8.44croresrepresentingthe unsecuredloanu/s68oftheAct. 6.Thenecessaryfactsarethattheassesseeisalimitedcompanyand engagedinthebusinessofmanufacturingofmachinerypart,machineitemsand steeltrading.Theassesseeintheyearunderconsiderationhastakenunsecured loanfromvariouspartiesamountingtoRs.8.44croresbutfailedtofurnishthe ITAno.2871/AHD/2016 A.Y.2012-13 3 necessarydetailsduringtheassessmentproceedingstojustifythe identity/creditworthinessofthepartiesandgenuinenessofthetransaction.Thus, theAOtreatedthesameasunexplainedcashcreditu/s68oftheActandadded tothetotalincomeoftheassessee. 7.AggrievedassesseepreferredanappealtotheLd.CIT(A).Theassessee beforetheLd.CIT(A),filedtheadditionaldocumentstojustifytheunsecuredloan receivedintheyearunderconsideration.TheLd.CIT(A)alsocalledforthe remandreportfromtheAOontheadditionalevidencefiledbytheassessee.The Ld.CIT(A)finallyadmittedtheadditionaldocumentsfiledbytheassesseeunder Rule46AofIncome-taxRules.However,theLd.CIT(A)onmeritofthecasehas observedcertainfactasreproducedhereunder: 3.13.Inviewoftheaforesaiddiscussion,itisfoundthatinthecaseofAbhinandan Industriestheconfirmationhasbeensubmittedbytheappellantwithregardtotheloans takenduringtheduringyearunderconsiderationatRs.3.31croresoutofwhichthe paymentofRs.14lakhsonlyhavebeenmadeintheyearunderconsiderationleavingthe outstandingbalanceatRs.3.17crores.Furtherthereasonsfornotcharginganyinterest uponsuchhugeloanshavenotbeenexplainedbytheappellantmoreparticularlywhen thelenderparlywasnotrelatedtotheappellant.Evennodetailsabouttherepaymentof theloansifanymadeinthesubsequentyearsisproducedtojustifytheloantransactions. FurtherthereturnedincomeofthelenderwasRs.91,158/-onlywiththecurrentlossesof Rs.38,17,159/-andnofullcopyofthereturnsofincomeofShriSureshH.Shah-HUFmay beproprietorofM/s.AbhinandanIndustrieshavebeenproducedsoastoknowthedetails ofthebusinessactivitiesoftheappellant.Thus,thehugeunsecuredloansgrantedareno waycommensuratingtothereturnedincomeofthelender.Evennodetailsofthesources oftheimmediatedepositsbeforegrantingtheloanstotheappellantbythelenderfromhis bankaccounthavebeenexplainedtoprovethegenuinenessoftheloans. 3.14.FurtherwithregardtoM/S.J.S.Corporationalsothefactsaresimilartotheextent thatnointeresthasbeenchargeduponthelendingstoappellantatRs.1.96croresduring theyearwithnodetailsoftherepayementoftheloansinthesubsequentyears.Nofull copyofthereturnofincomehasbeensubmittedsoastoknowthedetailsofthe 3.15.FurtherwithregardtoM/S.J.S.R.TradingCorporationalsothefactsaresimilarto theextentthatnointeresthasbeenchargeduponthelendingstoappellantatRs.7lakhs duringtheyearwithnodetailsoftherepayementoftheloansinthesubsequentyears.No fullcopyofthereturnofincomehasbeensubmittedsoastoknowthedetailsofthe businessactivitiesandsourceofaccumilationoffundstotheappellant. 3.16.FurtherwithregardtoM/ss.LogixInfosoftPvt.Ltd.alsothefactsaresimilartothe extentthatnointeresthasbeenchargeduponthelendingstoappellantatRs.1crore duringtheyearwithnodetailsoftherepayementoftheloansinthesubsequentyears.No fullcopyofthereturnofincomehasbeensubmittedsoastoknowthebusinessactivities ITAno.2871/AHD/2016 A.Y.2012-13 4 andsourceofaccumilationoffundstotheappellant.Evennobankstatementcopyofthe lenderhasbeensubmittedtoprovethegenuinenessofthetheloans.Eventhelender companyhassubmitteditsNilreturnedincomewhichdonotestablishthecreditworthiness oftheparty.Moreoverthefactthatthereplyofthenoticeissuedu/s*0.133(6)ofthe I.T.ActsentthroughthespeedpostfromAhmedabadalthoughthesaidpartystationedat Dalhiitselfdoesnotestablishtheveracityofthelendingtransactionsbythesaidparty. 3.17.Finally,inthecaseofRudraTechtheappellanthasnotevensubmittedthe confirmationsofthesaidpartymoreovernobankstatementcopyandcopyofreturnof incomebesidesdetailsofsourcesoftheloansgrantedtotheappellanthavebeen submittedthereforetheidentity,genuinenessandcreditworthinessremainedtotally unprovedbytheappellant. 8.Inviewoftheabove,theLd.CIT(A)wasoftheopinionthattheassessee hasnotprovidedbasicingredientspecifiedundertheprovisionsofsection68of theAct.Accordingly,theLd.CIT(A),afterreferringtotheorders/judgmentsof TribunalandHon’bleCourtsconfirmedtheorderoftheAObyobservingasunder: 3.24Inviewoftheaforesaiddiscussionandthefactthattheappellanthasfailedto provethegenuinenessandcreditworthinessofthefourlenderandIdentity,genuineness andcreditworthinessofonelenderasdiscussedindetailsinprecedingparasofthisorder thustheadditionmadebytheAOamountingtoRs.8.44croresasunexplainedcashcredits u/s.68oftheI.TActisfoundcorrectandjustifiedandhencethesameisconfirmed.Thus thegroundofappealisdismissed. 9.BeingaggrievedbytheorderoftheLd.CIT(A),theassesseeisinappeal beforeus. 10.TheLd.ARbeforeusfiledapaperbookrunningfrompages1to32and submittedthattheDirectorsofthecompanyarefacingseverefinancialdifficulties. AssuchthefactoryandresidentialhouseoftheDirectorshavebeensoldout throughauctionbythelenders.Therefore,theamountofloancannotberepaid butthesamecannotbetreatedasunexplainedcashcreditu/s68oftheAct.The Ld.ARinsupportofhiscontentionhasfiledtheorderofdebtrecoverytribunal. 11.TheLd.ARfurthersubmittedthatduetonon-co-operationfromthelenders, theassesseefailedtodischargeitsonusu/s68oftheActinfullandfurther prayed,consideringthefinancialconditionofthecompany,torestoretheissueto thefileoftheAOforfreshadjudication.ItwasalsosubmittedbyLd.ARthatthe assesseeshallco-operateduringtheproceedingbeforetheAO. ITAno.2871/AHD/2016 A.Y.2012-13 5 12.Ontheotherhand,theLd.D.Rdidnotraiseanyseriousobjectionifthe matterissetasidetothefileoftheAOforfreshadjudicationaspertheprovision oflaw.However,theLd.DRpointedoutthattheassesseehasalreadybeengiven sufficientopportunitiestosetuphiscasebuttheassesseetimeandagainhas failedtodoso.TheLd.DRvehementlysupportedtheorderoftheauthorities below. 13.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.ConsideringtheprayeroftheLd.counselforthe assesseeasdiscussedabove,weareinclinedtograntonemoreopportunitytothe assesseetomakethenecessarycomplianceasspecifiedundertheprovisionof section68oftheAct.Accordingly,wesetasidetheissuetothefileoftheAOfor freshadjudicationaspertheprovisionoflaw.Hencethegroundofappealofthe assesseeisallowedforthestatisticalpurposes. 14.Thenextissueraisedbytheassesseeisthattheld.CIT(A)erredin confirmingtheorderoftheAObytreatingthesharecapitalofRs.4,38,90,000as unexplainedcashcreditu/s68oftheAct. 15.Theassesseeduringtheyearhasreceivedsharecapitalalongwiththe premiumofRs.4,38,90,000/-fromthecompanynamelyM/sMapleCapital HoldingPvt.Ltd.basedinSingapore.OnenquirybytheAOtofurnishthe necessarydetailsaboutthesharecapitalreceiptfromMapleCapitalHoldingPvt. limited,theassesseefailedtofurnishthenecessarydetailsasspecifiedu/s68of theAct.Accordingly,theAOtreatedthesameasunexplainedcashcreditand addedtothetotalincomeoftheassessee. 16.OnappealtheLd.CIT(A)alsoconfirmedtheorderoftheAObyobserving asunder: ITAno.2871/AHD/2016 A.Y.2012-13 6 Ihavecarefullyconsideredthefactsofthecase,theassessmentorderandthewritten submissionoftheappellant.TheAOhasmadetheadditiononaccountofintroductionof sharecapitaltothetuneofRs.4,38,90,000/-claimedtohavebeenreceivedfromMaple CapitalHoldingPvt.Ltd.,Singapore.InspiteofvariousnoticesissuedbytheAOthe appellantdidnotsubmittherequireddetailsandhencetheAOobservedthattheappellant hasfailedtoprovetheidentity,CertifiedTrueCopycreditworthinessandgenuinenessof thetransactionstowardsthesharecapitalinthenameoftheaforesaidparty.Itisworth heretomentionthat.sharestotheaforesaidpartywereissuedatthepremiumofRs.90/- persharehavingthefacevalueofRs.10/-. 4.4.Duringthecourseofappellateproceedingstheappellantintheassessment proceedingsvideitsletterdtd.16.3.2015totheAOhassubmittedthenameandaddress oftheparty,formNo.5,formNo.23,FIRCcertificateandallotmentofUINletterofRBI andcompanycertificateforFEMANotification,formNo.2andspecialresolutionandlistof allotteesthus,thedetailshavebeensubmittedtotheA.O.Furthersubmissionshavebeen madebytheappellantinthepresentappellateproceedingswhichhavebeenreproduced intheprecedingparasofthisorder. 4.5.Havingconsideredthefactsandsubmission,itisnoticedthattheidentityoftheparty isprovedfromthefactthatacopyofcertificateofforeigninwardremittanceissuedby CentralBankofIndiadtd.6.4.2011hasbeensubmittedfortheinwardUSDollarsof 989725.62whichwereequivalenttoRs.4.38.94.331/-towardsthesubscriptionofthe equitysharesonbehalfofMapleCapitalHoldingLtd.Singapore.Furtheracopyofthe allotmentofUINNumberhasalsobeenissuedbytheRBIvideitsletterdtd.18.5.2011. Fromthecopiesofdocumentssubmitted,theidentityofthepartyisestablished. 4.6.However,theappellanthasnotsubmittedthecopyofbankaccountoftheshare subscribercompanytoestablishtheflowoffundsfromitsbankaccounttothebank accountoftheappellant.Therefore,thegenuinenessofthesharesubscriptiondoesnot getestablished.Moreover,theappellanthasalsonotsubmittedanydetailsandcopiesof documentsinsupportofthesourceofsuchahugeamountassharecapitalincluding premiumtotheappellantcompany.Therefore,thecreditworthinessofthesamepartyis alsonotestablished.Evennocopyofthebalancesheetoftheaforesaidcompanyhas beensubmittedshowingthattheaforesaidshareinvestmenthasbeenrecordedtherein. MeresubmissionofthecertificatesfromRBI,CentralBankofIndiaandFormNo.2etc. wouldnotfulfilltheingredients/requirementsofSection68oftheI.T.Act.Therefore,the additionmadebytheAOoftheunexplainedsharecapitalisfoundcorrectandjustifiedand hencethesameisconfirmed.RelianceisplacedontherecentjudgmentoftheHon'ble ITATAhmedabadinthecaseofACIT,Cir.5,AhmedabadVs.NakodaFashionsPvt.Ltd.in ITANo.1716/Ahd/2012dtd.18.8.2016andotherjudgements/decisionsofHon'bleCourts discussedintheprecedinggroundofappeal. Thus,thegroundofappealisdismissed. 17.BeingaggrievedbytheorderoftheLd.CIT(A),theassesseeisinappeal beforeus.Theld.ARbeforeussubmittedthattheamountofsharecapitalwas receivedfromthepartybasedinforeigncountryaftertakingdueapprovalfrom theRBIwhichisplacedonpage29ofthepaperbook.TheLd.ARalsosubmitted certificateofForeignInwardRemittancedated06/04/2011,issuedbytheCentral ITAno.2871/AHD/2016 A.Y.2012-13 7 bankofIndiawhichisplacedonpage30ofthepaperbook.Accordingly,theLd. ARcontendedthattheonuscastu/s68oftheActhasbeendischarged. 18.Theld.ARfurthersubmittedthattheprovisotosection68oftheAct,was broughtunderthestatutebytheFinanceAct2012whichisapplicablefromAY 2013-14whereasthepresentappealrelatestoAY2012-13i.epriortothe insertionoftheprovisotosection68oftheAct.Thus,theld.ARcontendedthat theassesseewasnotjustifythesourceofthesourceofthesharesubscribers.The Ld.ARfurthersubmittedthatoncetheassesseehasreceivedsharecapitalfrom theforeigninvestorafterdueapprovalfromtheRBI,thesamecannotbetreated asunexplainedcashcreditu/s68oftheAct.TheLd.ARtothiseffectreliedonthe judgementoftheHon’bleBombayHighCourtinthecaseofthePCITv/sAditya Birlareportedin178taxman418. 19.Ontheotherhand,theLd.DRvehementlysupportedtheorderofthe authoritiesbelow. 20.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Attheoutset,wenotethattheITATDelhi,involving identicalfactsandcircumstancesinthecaseofRussianTechnologyvs.DCTTin ITANo.4932,4933,5390and5391/Del/2011,afterreferringtoseveral judgementsofHon’blecourtshasobservedasunder: "11.Wehaveheardrivalcontentionsandperusedthematerialavailableonrecord.The firstandforemostquestiontobedecidediswhetheronthebasisofmaterialfurnishedby theassesseeandavailableontherecord,theassesseehasdischargeditsonusascastby sec.68intermsofidentityandcreditworthinessoftheshareholdersandgenuinenessof thetransaction.Theavailabilityofbalance-sheet,certificateofincorporation,confirmations andM/sRussianTechnologyCentre(P)Ltd.19certificatesofgoodstandingetc.filedby theassesseeinrespectofshareholdersestablishthattheyarenon-residententities, havingindependentandlegalexistence.Themoneyshavecometoassesseethrough bankingchannelsasisevidentfromFIRC,whichalsomentionsthepurposeofremittance andalsotheparticularsoftheremittingbank.FIPBapprovalthattoowithalibertyto collectsharecapitalupto600croresandROCcomplianceetc.clearlyindicatethestandof theassessee.Inourconsideredview,theplethorasoraofoftheevidencefiledbythe assesseeamountstodischargeofprimaryburdencastontheassesseeintermsofsec.68 ITAno.2871/AHD/2016 A.Y.2012-13 8 oftheI.T.Actforidentityandcreditworthinessofthecreditorsandgenuinenessof transaction. 11.1.ItwillbeworthwhiletoadverttothecontentionsraisedbytheId.counselonother countsalso.DelhiITATinthecaseofFinlayCorporation(supra)ontheissueof applicabilityofsec.68inthecaseofforeignremittancewhichtouchesontheassessee's factsalsoheldasunder:"11.Rivalsubmissionsofthepartieshavebeenconsidered carefullyinthelightofthematerialplacedonrecord.Theassesseebeforeusisanon- resident.Thetotalincomeofthenon-residentwhichistaxableundertheActisdefinedin s.5(2)whichincludesincomewhich(a)isreceivedorduetobereceivedinIndiainthe previousyearbytheassesseeoronbehalfoftheassessee;or(b)accruesorarisesoris deemedtoaccruetoarisetohiminIndiaduringsuchyear.Explanation1providesthat incomeaccruingorarisingoutsideIndiashallnotbedeemedtoreceivedinIndiawithin themeaningofthissectionbyreasononlyofthefactthatitistakenintoaccountinthe balancesheetpreparedinIndia.Itispertinenttonotethatsuchprovisionsofs.5(2)are subjecttotheotherprovisionsoftheAct.Thatmeansincaseofanyconflictbetweenthe provisionsofs.5(2)andanyotherprovisionoftheAct,thentheotherprovisionintheAct wouldhaveoverridingeffect.12.Sothequestionariseswhetherthereisanyconflict betweentheprovisionsofs.5(2)andtheprovisionsofs.68or69.Itisthesettledlegal positionthatburdenisontheRevenuetoprovethatincomeofanassesseefallswithinthe netoftaxation.Onceitissoprovedthentheburdenisontheassesseetoprovethatsuch incomeisexemptfromtaxation.ReferencecanbemadetotheSupremeCourtjudgment inthecaseofParimisettiSeetharamammavs.CIT(1965)57ITR532(SC).Sec.52being chargingsection,theburdenisontheRevenuetoprovethattheincomeofthenon- residentfallswithintheambitofsuchsection.Ontheotherhand,thelegislaturehascast theonusontheassesseetoexplainthesourceofmoneyfallingwithintheambitofs.68 ors.69.Thesesectionsareofuniversalapplicationanddonotmakeanydistinction betweenaresidentornon-resident.Therefore,thereisconflictbetweentheprovisionsofs. 5(2)ononehandandtheprovisionsofs.68or69ontheotherhandwithreferencetothe burdenofproof. Hence,inouropinion,ifhereisanycashcreditinthebooksofaccountofthenon-resident thenthesourceandgenuinenessofthesamewillhavetobeprovedbyhim.Forthe similarreasons,thenon-residentwouldberequiredtoprovethesourceofinvestment madebyhiminIndia.Tothatextent,weareinagreementwiththecontentionofthe learnedDepartmentalRepresentative.13.Butthatisnottheendofthematter.Inour consideredopinion,theconflictbetweentheprovisionsisonlywithreferencetotheonus andnottotheissueoftaxabilityofincome.Theonusisshiftedunderss68or69onlywith referencetotheincomewhichisotherwisetaxableinthehandsofnon-residentunders. 5(2)Therefore,theissuewhethertheincomeofnon-residentistaxableornotisstilltobe decidedwithreferencetotheprovisionsofs.5(2)and,theprovisionsofs.68or69 cannotenlargethescopeofs.5(2).Whatisnottaxableunders.5(2)cannotbetaxed undertheprovisionsofs.68ors.69.Unders.5(2),theincomeaccruingorarisingoutside IndiaisnottaxableunlessitisreceivedinIndia.Similarly,ifanyincomeisalready receivedoutsideIndia,thesamecannotbetaxedinIndiamerelyonthegroundthatinby wayofremittances.ReferencecanbemadetothejudgmentofSupreme CourtinthecaseofKeshavMillsLtd.(supra).Ifsuchincomeisshowninthebooksof accountthenitcannotbetaxedinIndiamerelybecausetheassesseeisunabletoprove thesourceofsuchentry.Forexample,theremaybeappearinganentryofcashcreditin thenameofapersonofUSAbywayofloanreceivedthroughchequeanddepositedinthe bankaccountmaintainedatanycityinUSA.Suchmoney,beingreceivedoutsideIndia, cannotbetaxedunders.5(2)unlessitisprovedthatsuchmoneyisrelatabletothe incomeaccruedorarisinginIndia.Therefore,thesamecannotbetaxedunders.68 merelyonthegroundthatassesseefailstoprovethegenuinenessandsourceofsuch ITAno.2871/AHD/2016 A.Y.2012-13 9 cashcredit.Therefore,weareoftheconsideredviewthatprovisionsofs.68or69would beapplicableinthecaseofnon-residentonlywithreferencetothoseamountswhose originofsourcecanbelocatedinIndia.Therefore,theprovisionsofs.68or69,inour opinion,havelimitedapplicationinthecaseofnon-resident". 11.2.ThedecisioninthecaseofFinlayCorporation(supra)hasbeenfollowedinthecase ofSmt.SushilaRamaswamy(supra),holdingasunder:"Theassessee,whoisanon- resident.broughtmoneyintoIndiathroughbankingchannelandthemannerinwhichthis moneywasutilizedinIndiaisdescribedintheAnnexure.Wehaveobservedintheabove parasthatbecauseofthemodeofbankingchannel,admittedly,usedfortheremittancein thiscase,theonusontheassesseeunders.69stooddischarged,andthereforeitwasnot taxableinIndiaunders.5(2)(b)oftheAct.TheCBDTcircular(supra)squarelysupports thecaseoftheassessee.Thefactthatthetransactionsandeventsnarratedinthe Annexurelookcuriousandsuspiciousmakesnodifferencetotheconclusionsthatwehave drawninthiscase,asperlaw,intheaboveparas". 11.3.AproposapplicabilityofCBDTCircularno.5dated20-2-1969,theITATinthecaseof SaraswatiHolding(supra),whileexaminingtheissueinquestioninthelightofCBDT Circularno.5dated20-2-1969andthedecisionofFinlayCorporation(supra)heldas under:"10.InthelightoftheabovedecisionoftheTribunal,andCircularNo.5ofCBDT, weareoftheviewthattheactionoftheRevenueauthoritiesinbringingtotaxthesumof Rs.3,83,11,550cannotbesustained.Wehavealreadyheldthattheassesseeisatax residentofMauritius.Thereisnobasisforcomingtotheconclusionthatanyincomeofthe assesseeaccrued,aroseorwasreceivedinIndia.Inthesecircumstances,wedirectthat theadditionmadebedeleted.GroundNos.2to2.3raisedbytheassessee,areallowed". 11.4.Theprovisionsofsection68thoughinsertedw.e.f.01.04.2013alsorevealsthe legislativeintentthatiftheshareholderisanon-residentandthemoneyishywayof mittancefromhisaccount,therigorofsection68wouldnotbeapplicable. 11.5.WefindmeritinthecontentionsofId.Counselandrelianceonthedecisionsofthe ITATinthecasesofFinlayCorporation,Smt.SushilaRamaswamyandSaraswatiHolding (supra)andtheimportofCBDTCircularreferredtoabove.Wheneverremittancesare madebythenonresidentholdingcompanyforpurchaseofsharesofitssubsidiaryinIndia, themoneyundoubtedlyiscapitalinthenatureandifdocumentslikeFIRCetcare produced,itcansafelybestatedthatthesaidmoneycameinthroughbankingchannels. 11.6.Intheabsenceofanyevidencetoshowthatthemoneyremittedbythenon-resident uccruedinIndia,itcannotbeheldtobetaxableinIndia.Hence,moneysremittedbynon- residentswhoseidentityisnotinquestionthroughtheirbankaccountsoutsideIndiahave tobeheldascapitalreceiptsnotexigihletotaxItthereforenaturallyfollowsthatifthe identityofthenon-residentremitterisestablishedandthemoneyhascomeinthrough bankingchannels,itwouldconstituteacapitalreceiptandordinarilycannotbetreatedas deemedincomeundersections68or69oftheAct.ThisisclarifiedbytheCBDTCircular itself. 11.7.Takingintoconsiderationofalltheabove,wefindmeritintheargumentoftheId. Counselfortheassesseethattheprimaryburdencastontheassesseewasduly discharged.Theissueofprimaryonusistobeweighedonthescaleofevidenceavailable ontherecordandthedischargeofburdenbytheassesseeisalsotobedecidedonthe basisofdocumentsfiledbytheassesseeandfactsandcircumstancesofeachcaseandon thatbasisareasonableviewistobetakenastowhethertheassesseehadischargedthe primaryonusofestablishingtheidentityofshareapplicant,itscreditworthinessand ITAno.2871/AHD/2016 A.Y.2012-13 10 genuinenessofthetransaction.Fromthedocumentsfiledduringthecourseofassessment andbeforeCIT(A),theindependentexistenceoftheshareapplicantsinRussiaisclearly established.Theassessee'sapplicationtoFIPBforraisingthecapitalcontainsallthe relevantdetailswhichisfavourablyacceptedbytheBoard,particularlybyallowingthe assesseetoraisefurtherthecapitalwithoutapproachingtheFIPB.Thetransactionsare throughbankingchannels.Thusthegamutofevidencedoesnotleaveanydoubtinthe dischargeofprimaryburdenoftheassessee.OntheissueCBDTCircularandFinlay Corporationjudgment(supra)alsoweareinagreementwiththeIdCounselforthe assesseethatinthesecircumstancesofthecasemoneysremittedbynon-residents throughbankingchanneloutsideIndiahastobeheldascapitalreceipts,notexigibleto taxandcannotbetreatedasdeemedincomeonthefictionscreatedbysections68and69 oftheAct.Inconsiderationofalltheseobservations,weareinclinedtoholdthattheshare applicationmoneyasraisedinthegroundsofappealcannotbeheldasnon-genuineand addedasincomeoftheassesseew/s68oftheAct.Consequently,additionsmadeonthis count,asraisedingroundsofappeal,aredeleted.Assessee'sgroundsofappealonthis issueareallowed. InviewoftheabovesubmissionalsotheadditionmadebythelearnedAOisbadinlaw andthereforethelearnedAOshouldbedirectedtodeletethesaidaddition." 20.1Thefactsofthepresentcaseareidenticaltofactsofthecaseasdiscussed above.Therefore,theratiolaiddownbytheTribunalinthecasecitedaboveis squarelyapplicabletopresentfactsofthecase.Accordingly,respectfullyfollowing theratioasdiscussedabove,weset-asidethefindingsoftheLd.CIT(A)and directtheAOtodeletetheadditionmadebyhim.Hence,thegroundofappealof theassesseeisherebyallowed. 21.ThenextissueraisedbytheassesseeisthattheLd.CIT(A)erredin confirmingtheadditionmadebytheAOforRs.4,06,19,505.00representingthe amountofinterestattributableonthediversionofinterest-bearingfundfornon- commercialpurposes. 22.TheAOduringtheassessmentproceedingsfoundthattheassesseeonone handhasincurredinterestexpensesandontheotherhandtheassesseehas diverteditsfundfornon-commercialpurpose.Therefore,theAOworkedoutthe amountofinterestattributabletosuchdiversionoffundamountingtoRs. 4,06,19,505/-andaddedtothetotalincomeoftheassessee. ITAno.2871/AHD/2016 A.Y.2012-13 11 23.AggrievedassesseepreferredanappealtotheLd.CIT(A),whohasalso confirmedtheorderoftheAObyobservingasunder: Ihavecarefullyconsideredthefactofthecase,theassessmentorderandthe writtensubmissionoftheappellant.TheAOhasmadethedisallowanceofinterest@12% oftheadvancesgivenofRs.4,00,00,000/-toM/s.LibertyFinance&LeasingCo.Ltd., Rs.22,95,45,000/-toM/s.FireflyEnerfyInc.USARs.3,44,31,350/-toM/s.Firefly InternationalenergyLtd andRs.8,74,35,065/-toM/s.AutoPowerDrivesIndiaLtd.totallingtoRs.39,14,11,815/-for whichdetailsaregiveninPara5oftheassessmentorder.Ithasalsobeenobservedthat theappellanthasclaimedtheinterestonsecuredandunsecuredloanofRs.4.06,19,505/-. 6.4.TheAOobservedthattheappellanthasnotgivenanydocumentaryevidencesin supportoftheadvancesgiventovariousconcernsnotedaboveoutofsurplusandinternal accrualsandhasnotgivenjustificationinrespectoftheirnexuswiththeadvancesso granted.TheassesseehasalsofailedtoestablishanynexustoprovethatintheFinancial Yearunderconsideration,theassesseehadliquidfundsavallablewithitonthedatewhen aforesaidadvances.Thus,theAOheldthatinabsenceofanyevidences,itwasestablished thatborrowedfundswereutilisedforadvances.Hadtheassesseenotulilisedborrowed fundsforThepurposeofadvancesTherewouldnothavebeenanyneedfortakingloans totheextentofamountutilisedforsuchadvancesandnosuchhugeclaimofinterest couldhavebeenmadeanddebitedintheprofitandlossaccount. 6.5.Ontheotherside,theappellantclaimedthatithadthesufficientinterestfreefunds availableintheformofsharecapital,reservesandsurplusforgivingloansandadvances tovariousparties.Thepositionofsuchinterestfreefundsclaimedbytheappellantisas under:- 6.6.Theappellanthasalsoclaimedthatithadtheinterestfreeunsecuredloansof Rs.1821.39lakhsandaccumulateddepreciationofRs.570.74lakhs. 6.7.ItisapparentthattheappellanthadgrantedtheinterestfreeadvancesofRs.39.14 croresasdiscussedabovetotheaforesaidparties,whileithadtheinterestfreeownfunds ofRs.37.14croresason31/03/2011.Theappellant'spleathatithadthenon-interest bearingloansofRs.18.21croresisnotsupportedwithdetailsofsuchpartiesfromwhom suchloanshavebeentakenandwhenthoseloanshavebeentaken.Inabsenceofdetails ofthosepartiesandverificationthereofthepleaoftheappellantinthisregardisnot accepted.Itisworthheretomentionthattheinterestfreelendingstotheaforesaid partieshavebeengivenintheprecedingyearsandtheexactyearoflendinghasnotbeen. providebytheappellant.Therefore,thecomparisonoftheinterestfreelendingshastobe madewiththeavailableinterestfreeownfundsoftherespectiveperiodonlyandnotwith thefundsavailableason31.3.2012or31.3.2011.Moreovertheappellantclaimedtohave alreadymadetheshareinvestmentinthecompaniestothetuneofRs.20.20croresason 31.3.2011andRs.12.55croresason31.3.2012.Sokeepingasidetheseshareinvestments InterestFreeFundsAson(31/03/2012)Ason (31/03/2011) ShareCapital4706520042676200 Reservesandsurplus excludingforeign currencytranslation reserve 382500942328759437 Total429566142371435637 ITAno.2871/AHD/2016 A.Y.2012-13 12 andreducingthemfromtheinterestfreeownfundsoftheyearwhentheinvestmentin shareshavebeenmadethecomparisonoftheavailablefundsvis-à-visinterestfree lendingshastobemadeforwhichnodetailsandcopiesofdocumentshavebeen submittedbytheappellant.Inotherwords,thecomparisonoftheinterestfreefunds availablehastobemadeonthedatewhentheinterestfreelendingshavebeengiven reducingtheshareinvestmentsoutofsuchinteresfreefunds.Sincetheappellanthas failedtoprovidesuchdetailsanddocuments,therefore,thecomparisonmadebythe appellantwiththeinterestfreefundsavailableintheyearunderconsiderationvis-à-visthe interestfreelendingsmoreparticularlywhenboththeitemshavetcomparedintheyear whentheinterestfreelendingshavebeengivenThesubmissionmadebytheappellantis notsustainable. 6.8Inviewoftheabovediscussionandfailuretoestablishtheavailabilityofthe interestfreefundsonthedatesofinterestfreelendingstothevariousconcerns,the contentionoftheappellantthatsuchinterestfreefundshavebeenutilizedforinterestfree lendingsisnotverifiableandhencethesameisnotaccepted.Therefore,thedisallowance ofinterestmadebytheAOisfoundcorrectandjustifiedandhencethesameisconfirmed. Thus,thegroundofappealisdismissed. 24.BeingaggrievedbytheorderoftheLd.CIT(A),theassesseeisinappeal beforeus. 25.TheLd.ARbeforeuscontendedthattheamountofloanwasgivenforthe commercialpurposes.ItwasalsosubmittedbytheLd.ARthattheassesseefor wantofdocumentcouldnotestablishthecommercialexpediencytoprovesuch advanceforthepurposeofbusiness.Accordingly,theLd.ARcontendedtorestore theissuetothefileoftheAOforfreshadjudicationaspertheprovisionsoflaw andassuretoextendfullco-operationintheproceedingsbeforetheAO. 26.WithoutprejudicetotheabovetheLd.ARcontendedthattheownfundof theassesseeexceedstheamountofinvestmentandthereforeapresumptioncan bedrawnthatsuchloanandadvanceshasbeenadvancedoutofownfundofthe assessee.Therefore,nodisallowanceofinterestiswarrantedu/s36(1)(iii)ofthe Act. 27.Ontheotherhand,theLd.DRvehementlysupportedtheorderofthe authoritiesbelow. ITAno.2871/AHD/2016 A.Y.2012-13 13 28.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Attheoutset,wenotethattheLd.ARbeforeushas notprovidedanydocuments/informationtojustifythatsuchadvancesweremade forthecommercialpurposes. 28.1Likewise,theLd.ARhasnotproduceditsfinancialstatementsoasto justifythattheownfundoftheassesseeexceedstheamountofinvestment.Thus, intheabsenceofnecessarydetails,keepinginviewtheprincipleofjustice,weare inclinedtogiveonemoreopportunitytotheassesseetoraiseitscontention beforetheAO.Thus,weset-asidetheissuetothefileoftheAOforfresh adjudicationaspertheprovisionoflaw.Hence,thegroundofappealishereby allowedforstatisticalpurposes. 29.Intheresult,theappealfiledbytheassesseeispartlyallowedforthe statisticalpurposes. OrderpronouncedintheCourton28/03/2024atAhmedabad. Sd/-Sd/- (TRSENTHILKUMAR)(WASEEMAHMED) JUDICIALMEMBERACCOUNTANTMEMBER (TrueCopy) Ahmedabad;Dated Manish