ACIT, UDAIPUR V. Shri Om Khemraj Gehlot, RAJSAMAND

ITA 293/JODH/2013

• Counselvise Citation: 29323314 RSA 2013
• Duration Of Justice: 1 year(s) 3 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-08-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 01-08-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 06-05-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: A Y ARE BEING DECIDED THI
• Keywords: Business expenditure; Proportionate interest; Commercial expediency
• Section: 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL JODHPUR BENCH, JODHPUR BEFORE SHRI HARI OM MARATHA , JUDICIAL MEMBER AND SHRI N.K.SAINI, ACCOUNTANT MEMBER ITA NO. 293 / JU/ 20 1 3 ASSESSMENT YEAR: 200 9 - 10 THE A.C.I.T VS. SHRI OM KHEMRAJ GEHLOT CIRCLE 2 SADAR BAZAR, RAJSAMAND UDAIPUR PAN NO. ADWPG 1947 K (APPELLANT) (RESPONDENT) ITA NO. 3 8 / JU/20 1 2 ASSESSMENT YEAR: 200 8 - 0 9 SHRI OM KHEMRAJ GEHLOT VS. THE A.C.I.T SADAR BAZAR, RAJSAMAND CIRCLE 2 UDAIPUR PAN NO. ADWPG 1947 K (APPELLANT) (RESPONDENT) A SSESSEE B Y : SHRI U.C. JAIN DEPARTMENT B Y : SHRI N.A. JOSHI , DR DATE OF H EARING : 01 . 0 8 .201 4 DATE OF PRONOUNCEMENT : 07 . 0 8 . 201 4 2 ORDER PER HARI OM MARATHA , J .M. TH E ABOVE CAPT IONED APPEAL S - ONE BY THE REVENUE FOR A.Y. 2008 - 09 AND THE OTHER BY THE ASSESSEE FOR A.Y. 2009 - 10 ARE BEING DECIDED BY THIS COMMON ORDER AS APART FROM THE ASSESSEE BEING THE SAME IN BOTH THE APPEALS, THE ISSUES INVOLVED ARE ALSO IDENTICAL. ITA NO. 38/ JO DH /2012 [A.Y. 2008 - 09] 2. THIS APPEAL OF THE ASSESSEE SHRI OM KHEMRAJ GEHLOT, IS FILED AGAINST THE ORDER OF THE LD. CIT(A) UDAIPUR, DATED 25.10.2011. 2.1 BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE, AS AN INDIVIDUAL, CARRIED ON BUSINESS O F REAL ESTATE, BUILDER AND DEVELOPER. FOR A.Y. 2008 - 09, THE ASSESSEE FILED HIS RETURN OF INCOME [ROI] ON 29.9.2008 3 DECLARING TOTAL INCOME OF RS. 10,70,120/ - , AS AGAINST WHICH ASSESSMENT WAS COMPLETED AT RS. 50,97,920/ - . 2.2 AGGRIEVED, THE ASSESSEE FILED FIRS T APPEAL BUT TO NO AVAIL. CONSEQUENTLY , THIS SECOND APPEAL HAS BEEN PREFERR ED RAISING THE FOLLOWING GROUND : THE LD. CIT(A) ERRED IN LAW AS WELL AS ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE IN CONFIRMING THE ADDITION OF RS. 33,47,660/ - ON ACC OUNT OF DISALLOWANCE OF PROPORTIONATE INTEREST U/S 36(1)(III) ON THE LOANS GIVEN TO THE RELATED CONCERNS AS INTEREST FREE. 2.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE RELEVANT MATERIAL ON RECORD. THE FACTS OF THE SOLE EFFECTIVE GROUND ARGUED, RELATING TO ADDITION OF RS. 33,47,660/ - MADE ON ACCOUNT OF DISALLOWANCE OF PROPORTIONATE INTEREST U/S 36(1)(III) ON THE INTEREST FREE LOANS GIVEN TO THE RELATED CONCERNS, ARE THAT 4 THE ASSESSEE PAID INTEREST OF RS. 1,04,88,006/ - ON VARIOUS U NSECURED LOANS WHICH ARE AS UNDER: I) G - 2 ENCLAVE LTD RS. 0,50,00,000 II) GAHLOT CONSTRUCTION FIRM RS. 2,05,39,000 III) PUNIA CONSTRUCTION PVT. LTD RS. 0,60,00,000 IV) RAJBUNSH, FIRM RS. 0,80,00,000 2.4 IT WAS FOUND THAT THE ASSESSEE IS ASSESSEES I NTEREST IN THE ABOVE CONCERN IS AS DIRECTION OR PARTNER, WHICHEVER MAY BE THE CASE. THAT IS WHY THE A.O HAS NOT FOUND PROPORTIONATE INTEREST PAID TO THESE SISTER CONCERNS FROM INTEREST BEARING FUNDS, WHICH COMES TO RS. 33,47,660/ - AND HAS DISALLOWED THE SA ME. THE LD. CIT(A) HAS CONFIRMED THIS ADDITION BY FOLLOWING THE JUDGMENT OF CIT VS. ABHISHEK INDUSTRIES LTD 286 ITR 1 OF P & H HIGH COURT, AND HAS IGNORED THE JUDGMENT OF HON'BLE SUPREME HIGH COURT RENDERED IN THE CASE OF S.A. BUILDERS LTD. VS. CIT [2006] 206 CTR 631 [SC]. 5 3 . WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE ENTIRE MATERIAL ON RECORD. BOTH THE PARTIES HAVE REITERATED THEIR EARLIER ARGUMENTS FOR AND AGAINST THIS ADDITION. IT WAS ARGUED BY THE LD. A.R THAT THIS LOAN WAS P AID AS A MEASURE OF COMMERCIAL EXPEDIENCY IN TERMS OF PROVISIONS OF SECTION 37 OF THE ACT. HE ARGUED THAT THE JUDGMENT OF THE HONBLE P & H HIGH COURT IN ABHISHEK INDUSTRIES LTD [SUPRA] HAS BEEN REVERSED BY THE HON'BLE SUPREME HIGH COURT AND IS NO LONGER VALID PRECEDENT. HE ARGUED THAT WHAT IS COMMERCIAL EXPEDIENCY IS THE PREROGATIVE OF THE ASSES SEE AND UNLESS THE A.O DESCRIBES AS TO WHY THERE IS NO COMMERCIAL EXPEDIENCY INVOL V ED IN THIS INTER E ST FREE ADVANCES, SUCH A DISALLOWANCE IS NOT JUSTIFIED. 3.1 P ER CONTRA, THE LD. SR. DR HAS REPEATED ALL THE REASONS GIVEN BY THE A.O AND THE LD. CIT(A) IN THIS REGARD. HE HAS STATED THAT THE ASSESSEE HAS DIVERTED INTEREST BEARING FUNDS UNDER THE GUISE OF COMMERCIAL EXPEDIENCY. 6 4. AFTER CONSIDERING THE RIVAL SUBMI SSIONS WE HAVE FOUND THAT THE EXPLANATION OF THE ASSESSEE GIVEN VIDE LETTER DATED 21.10.2011 AND WHICH HAVE BEEN DISCUSSED BY THE LD. CIT(A) IN HIS ORDER IN PARA 3.2, 3.2.1 AND 3.2.2 AT PAGES 2 TO 5 ARE RELEVANT TO DECIDE IF THE ASSESSEE HAS ACTED FOR THE BENEFIT OF HIS BUSINESS OR NOT. THE EXPLANATION OF THE ASSESSEE READS AS UNDER: THAT DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE WAS ENGAGED IN TWO PROJECTS OF DEVELOPING COMMERCIAL - CUM - RESIDENTIAL COMPLEX IN NAVI MUMBAI AREA NAMELY; GEHLOT MAJEST Y AT NERUL AND SHOPS AT PANVEL. THE SAID RELATED CONCERNS WERE ALSO ENGAGED IN SIMILAR PROJECTS OF CONSTRUCTION IN MUMBAI. G - 2 ENCLAVE (P) LTD. WAS DEVELOPING IT PARK AT MIDC WHEREAS PUNIA CONSTRUCTION (P) LTD. WAS CONSTRUCTING COMMERCIAL OFFICE & SHOPS AT DRONAGIRI. SIMILARLY, M/S GEHLOT CONSTRUCTION WAS ENGAGED IN ITS ONGOING COMMERCIAL PROJECT NAMED AS G - SQUARE AT SAMPADA, VASI. AS ALREADY SUBMITTED, M/S RAJHUNSH ALSO BOUGHT LAND FOR STARTING SIMILAR MULTI - STORIED BUILDING PROJECT AT CHAMBUR BUT DUE TO LAND DISPUTE, THE PROJECT COULD NOT TAKE A SHAPE. THE LANDS WERE PURCHASED IN THE GOVERNMENT AUCTION AND LAND AGREEMENTS WERE MADE IN NAME OF THE RESPECTIVE CONCERNS. 7 IT IS REITERATED THAT THE ACTIVITIES OF THESE SISTER CONCERNS ARE CLOSELY LINKED WITH TH E ASSESSEE AS BOTH THE ASSESSEE AS WELL AS THESE CONCERNS ARE ENGAGED IN THE BUSINESS OF REAL ESTATE BUILDERS AND DEVELOPERS WHEREIN THE ASSESSEE HAS HIS INTEREST EITHER AS A PARTNER OR DIRECTOR & SHAREHOLDER. AS ALREADY SUBMITTED EARLIER, THESE CONCERNS W ERE RELATIVELY NEW AND THERE WAS A PAUCITY OF FUNDS IN THESE RELATED CONCERNS TO CONTINUE THEIR PROJECTS. BEING NEW CONCERNS, IMMEDIATE ARRANGEMENT OF FUNDS FROM OUTSIDE WAS ALSO NOT AN EASY TASK. BECAUSE OF NON ADVANCEMENT OF THE LOANS, THE PROJECT OF THE SISTER CONCERNS COULD HAVE DELAYED, RESULTING INTO HARM TO THE SISTER CONCERNS AS WELL AS THE ASSESSEE. THIS WOULD ALSO HAVE RESULTED INTO LOSS TO THE EXISTING BUSINESS OF THE ASSESSEE. NONE OF THEM HAD A VALID DEFENCE TO PUT FORTH IF THE PROJECT IS NOT COMPLETED IN TIME. THIS BESIDES, LOSS OF GOODWILL TO THE ASSESSEE WOULD HAVE CAUSED BREACH OF THE ASSURANCE GIVEN TO THE CUSTOMERS AND MIGHT HAVE AN ADVERSE CASCADING EFFECT HAVING REGARD TO VARIOUS FACTORS SUCH AS CLAIM BY THE CUSTOMERS, DIVERSION OF CUST OMERS TO OTHERS, ETC. IT IS STATED THAT THE DELAY IN PROJECTS OF THESE CONCERNS ALSO HAD THREAT OF COMPETITION AS THESE PROJECTS ARE MOSTLY LOCATED IN NAVI MUMBAI AREA WHICH IS DEVELOPING 8 AREA IN MUMBAI AND SIMILAR PROJECT OF OTHER GROUPS LIKE AKSHAR GROU P AS SHREEJI HEIGHTS, NEELKANTH GROUP, ETC. WERE ALSO UPCOMING IN THE AREA AT THE SAME TIME. LIKEWISE, FOR IT PARK, THERE WAS A COMPETITION FROM GAJRA GROUP. THE APPELLANT - ASSESSEE WAS ALSO CONSCIOUS OF THE COST COMPETITIVENESS AND OPPORTUNITY LOSS, WHICH THE ASSESSEE WAS TO GET IN AND TO SEE THAT THE ASSESSEE IS NOT ACCUSED OF ANY BREACH OF PROMISE. THE PROJECT SPEED WAS, THEREFORE, AN ESSENCE OF SUCCESS. THE APPELLANT - ASSESSEE, AS A PRUDENT BUSINESSMAN, ADVANCED LOAN TO SUCH SISTER CONCERNS IN WHICH HE HO LDS SUBSTANTIAL INTEREST. THE LOANS GIVEN IN THIS CONNECTION ALSO EXPLOIT RELATION OF OTHER PARTNERS AND BUSINESS ASSOCIATES SO AS TO FACILITATE EXISTING BUSINESS OF THE ASSESSEE. THE TRANSACTIONS OF FUNDS ARE FLOWING MANY A TIMES AS PER COMMERCIAL EXIGENC IES IN THE BUSINESS. SUCH CONCERNS UTILISED THE LOAN FUNDS SO TAKEN IN IMPLEMENTING AND EXECUTING ONGOING PROJECTS ONLY AND NOT FOR ANY OTHER PURPOSES. THE ADVERSE EFFECT ON PROJECT OF ONE CONCERN HAS A DIRECT BEARING ON OTHER ONGOING PROJECTS OF THE ASSES SEE AND AS SUCH, IS A MATTER OF COMMERCIAL EXPEDIENCY. IT IS HUMBLY SUBMITTED THAT THE LOANS TO SUCH RELATED PERSONS ARE FOR THE PURPOSE OF BUSINESS AND SATISFY THE TEST OF COMMERCIAL EXPEDIENCY. THE ASSESSEE STOOD AS 9 CARE TAKER FOR HIS SISTER CONCERNS AS BUSINESS OF THESE CONCERNS OR PERSONS WERE INTIMATELY CONNECTED WITH EACH OTHER AND HE MAY HAVE ALSO SUFFERED DUE TO ANY LAPSE ON THE PART OF RELATED CONCERNS. AS ALREADY SUBMITTED, THE APPELLANT - ASSESSEE HAD A DEEP INTEREST IN THE SAID CONCERNS AND SINCE THERE WAS NOT ENOUGH CAPITAL IN THESE CONCERNS, THE APPELLANT - ASSESSEE IN ORDER TO CONTINUE THE ONGOING PROJECTS BY THESE CONCERNS ADVANCED LOANS SO THAT THE APPELLANT - ASSESSEE EARN GOOD INCOME IN FUTURE. IT IS HUMBLY SUBMITTED THAT THE ONLY MOTIVE BY WH ICH THE ASSESSEE WAS ACTUATED TO ADVANCE LOANS WAS A PURELY COMMERCIAL EXPEDIENCY FOR ULTIMATE BENEFIT OF THE BUSINESS OF THE ASSESSEE IN A LARGER BUSINESS INTEREST AND BUSINESS EXPEDIENCY. IT IS RESPECTFULLY SUBMITTED THAT IT IS NOT A CASE THAT THE EXPEN DITURE WAS NOT BONAFIDE NOR IT IS A CASE OF DIVERSION OF PROFIT TO A RELATED PERSONS OR SISTER CONCERNS SO AS TO AVOID TAX BECAUSE THERE IS NO EFFECT ON REVENUE AS THE ASSESSEE AND THESE SISTER CONCERNS (WHICH ARE EITHER COMPANY OR PARTNERSHIP FIRM) ARE TA XABLE AT THE SAME RATE OF TAX. THEREFORE, IT IS SUBMITTED THAT AS LONG AS EXPENDITURE IS INCURRED BONAFIDE IN PURSUIT OF A BUSINESS AND NOT BY WAY OF 10 DIVERSION OF FUNDS, THE EXPENDITURE HAS TO BE ALLOWED AS A DEDUCTION AND AS SUCH, THE ENTIRE AMOUNT OF INT EREST PAID BY THE ASSESSEE IS ALLOWABLE AS BUSINESS EXPENDITURE . THUS, WE ARE FULLY SATISFIED THAT THE ASSESSEE HAS EXPLAINED THAT COMMERCIAL EXPEDIENCY EXISTED IN HIS CASE FOR THE BENEFIT OF HIS BUSINESS. THE JUDICIAL DIRECTION GIVEN BY THE HONBLE APE X COURT IN THE CASE OF S.A. BUILDER [SUPRA] CAN BE SUMMARIZED AS UNDER: (I) THE HIGH COURT IN THE IMPUGNED JUDGMENT, AS WELL AS THE TRIBUNAL AND THE INCOME TAX AUTHORITIES HAVE APPROACHED THE MATTER FROM AN ERRONEOUS ANGLE. IN THE PRESENT CASE, THE ASSESS EE BORROWED THE FUNDS FROM THE BANK AND LENT SOME OF IT TO ITS SISTER CONCERN (SUBSIDIARY) ON INTEREST FREE LOAN. THE TEST TO BE APPLIED, IN SUCH A CASE IS REALLY WHETHER THIS WAS DONE AS A MEASURE OF COMMERCIAL EXPEDIENCY. (II) THE DECISIONS RELATING TO S ECTION 37 WILL ALSO BE APPLICABLE TO SECTION 36(I)(III) BECAUSE IN SECTION 37 ALSO THE 11 EXPRESSION USED IS FOR THE PURPOSE OF THE BUSINESS OR PROFESSION. THIS HAS BEEN CONSISTENTLY HELD IN THE DECISIONS RELATING TO SECTION 37 THAT THE EXPRESSION FOR THE PU RPOSE OF BUSINESS INCLUDES EXPENDITURE VOLUNTARILY INCURRED FOR COMMERCIAL EXPEDIENCY AND IT IS IMMATERIAL IF THE THIRD PARTY ALSO BENEFITS THEREBY. THUS IN ATHERTON VS. BRITISH INSULATED & HELSBY CABLES LTD. (1925) 10 TAX CASES 155 (HL), IT WAS HELD BY T HE HOUSE OF LORDS THAT IN ORDER TO CLAIM A DEDUCTION, IT IS ENOUGH TO SHOW THAT THE MONEY IS EXPENDED, AND NOT OF NECESSITY AND WITH A VIEW TO DIRECT AND IMMEDIATE BENEFIT, BUT VOLUNTARILY AND ON THE GROUND OF COMMERCIAL EXPEDIENCY AND IN ORDER TO INDIRECT LY FACILITATE CARRYING ON OF THE BUSINESS. TO ABOVE, THE TEST IN ATHERTONS CASE HAS BEEN APPROVED BY THE APEX COURT IN SEVERAL DECISIONS E.G. EASTERN INVESTMENTS LTD. VS. CIT (1951) 20ITR 1 (SC), CIT VS. CHANDU LAI KESHAV LAI & CO. (1960) 38 ITR 601 (SC), ETC. 12 (III) IN MADHAV PRASAD JATIA VS. CIT (1979) 10 CTR (SC) 375, THE APEX COURT HELD THAT THE EXPRESSION FOR THE PURPOSE OF BUSINESS OCCURRING UNDER THE PROVISION IS WIDER IN SCOPE THAN THE EXPRESSION FOR THE PURPOSE OF EARNING INCOME, PROFITS OR G AINS AND THIS HAS BEEN CONSISTENT VIEW OF THE COURT. (IV) THE HIGH COURTS WELL AS THE TRIBUNAL AND OTHER INCOME TAX AUTHORITIES SHOULD HAVE APPROACHED THE QUESTION OF ALLOWABILITY OF INTEREST ON BORROWED FUND FROM THE ABOVE ANGLE. IN OTHER WORDS, THE HIGH COURT AND OTHER AUTHORITIES SHOULD HAVE ENQUIRED AS TO WHETHER THE INTEREST FREE LOAN WAS GIVEN TO SISTER COMPANY (WHICH IS A SUBSIDIARY OF THE ASSESSEE) AS A MEASURE OF COMMERCIAL EXPEDIENCY, AND IF IT WAS, IT SHOULD HAVE BEEN ALLOWED. (V) IT HAS BEEN REPEATEDLY HELD BY THE APEX COURT THAT THE EXPRESSION FOR THE PURPOSE OF BUSINESS IS WIDER IN SCOPE THAN THE EXPRESSION FOR THE PURPOSE OF EARNING PROFITS VIDE CIT VS. MALYALAM PLANTATIONS LTD. (1964) 53 13 ITR 140 (SC), BIRLA COTTON SPINNING & WEAVING MI LLS LTD. (1971) 82 ITR 166 (SC), ETC . (VI) IT IS TRUE THAT THE AMOUNT BORROWED IN QUESTION WAS NOT UTILIZED BY THE ASSESSEE IN ITS OWN BUSINESS BUT HAD BEEN ADVANCED AS INTEREST - FREE LOAN TO ITS SISTER CONCERN. HOWEVER, THAT FACT IS NOT REALLY RELEVANT. W HAT IS RELEVANT IS WHETHER THE ASSESSEE ADVANCED SUCH AMOUNT TO ITS SISTER CONCERN AS A MEASURE OF COMMERCIAL EXPEDIENCY. 5. THUS IT BECOMES EVIDENT THAT INTEREST FREE LOANS GIVEN BY THE ASSESSEE ARE ONLY FOR HIS BUSINESS PURPOSES TO THE AFOREMENTIONED SI STER CONCERNS AS A MEASURE OF COMMERCIAL EXPEDIENCY. HENCE, WE ARE OF THE CONSIDERED OPINION THAT THIS DISALLOWANCE OF RS. 33,47,660/ - DESERVED TO BE DELETED. ACCORDINGLY, WE ORDER DELETION OF THIS ADDITION AND ALLOW GROUND NO. 1 OF THIS APPEAL. OTHER G ROUNDS BEING GENERAL IN NATURE DO NOT REQUIRE ADJUDICATION . 14 6. IN THE RESULT, THIS APPEAL OF THE ASSESSEE STANDS ALLOWED. ITA NO. 293/JU/2013 [A.Y. 20009 - 10] 7. THIS IS AN APPEAL OF THE REVENUE FILED AGAINST THE ORDER OF THE LD. CIT(A) DATED 01.02.2013 AND PERTAINS TO A.Y. 2009 - 10. FOLLOWING GROUND HAVE BEEN RAISED IN THIS APPEAL : ON THE FACTS AND IN THE PRESENT CIRCUMSTANCES OF THE CASE, THE LEARNED CIT (A) HAS ERRED IN 1. RESTRICTING THE DISALLOWANCE OUT OF INTEREST U/S 36(1 ) (III) TO RS. 3,19,5 37/ - INSTEAD OF RS. 21,77,526/ - MADE BY THE AO IGNORING THE FACT OF THE CASE THAT THE ASSESSEE HAS PAID INTEREST ON UNSECURED LOAN AND ON THE OTHER HAND HE HAS GIVEN INTEREST FREE LOANS & ADVANCES OUT OF HIS CAPITAL WITHOUT ANY BUSINESS EXPEDIENCY. 2. HOL DING THAT THE LABOUR PAYMENTS OF RS. 2,77,918/ - COULD NOT BE DISALLOWED U/S 40(A)(IA) OF THE I .T. ACT. AS PER THE FINDING OF THE HONBLE SPECIAL BENCH ITAT, VISAKHAPATNAM 15 IN THE CASE OF MERILYN SHIPPING & TRANSPORTS VS. ACIT (2012) 20 TAXMAN 244 (VISAKHAPA TNAM) WITHOUT APPRECIATING THE FACT THAT THE PROVISIONS OF SECTION 40(A)(IA) OF THE L.T. ACT. ARE APPLICABLE NOT ONLY TO THE AMOUNT WHICH IS SHOWN AS PAYABLE ON THE DATE OF BALANCE SHEET, BUT IT IS ALSO APPLICABLE TO SUCH EXPENDITURE, WHICH BECOME PAYABLE AT ANY TIME DURING THE RELEVANT PREVIOUS YEAR AND WAS ACTUALLY PAID WITHIN THE PREVIOUS YEAR. MOREOVER, THE DECISION IN THE CASE CITED ABOVE HAS BEEN KEPT ON INTERIM SUSPENSION BY THE HONBLE ANDHRA PRADESH HIGH COURT VIDE ORDER DATED 08.10.2012 . 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE RELEVANT MATERIAL ON RECORD. THE FACTS OF FIRST GROUND IN THIS YEAR ARE ALMOST SIMILAR TO THE FACTS OBTAINING IN A.Y. 2008 - 09. DURING THE F.Y. 200 8 - 09, THE ASSESSEE PAID INTEREST OF RS. 1,04,1 3,873/ - ON VARIOUS UNSECURED LOANS BUT AT THE SAME TIME HAS ADVANCED INTEREST FREE LOANS TO THE FOLLOWING SISTER CONCERNS: I) G - 2 ENCLAVE LTD RS. 0,55,38,000 II) GAHLOT CONSTRUCTION FIRM RS. 2,05,39,000 III) PUNIA CONSTRUCTION PVT. LTD RS. 0,66,85,920 IV ) RAJBUNSH, FIRM RS. 0,80,00,000 16 9. THE LD. CIT(A) HAS RESTRICTED THE ADDITION OF RS. 21,77,526/ - MADE BY THE A.O ON ACCOUNT OF DISALLOWANCE OF INTER E ST U/S 36(1)(III) OF THE ACT TO RS. 3,19,537/ - . THE FACTS, ARGUMENTS AND OTHER SUBMISSIONS OF BOTH THE PARTIES ARE EXACTLY SIMILAR TO WHAT OBTAINED IN A.Y. 2008 - 09, AS DISCUSSED ABOVE. THEREFORE, WITH SIMILAR REASONING, WE DISMISS GROUND NO. 1 OF REVENUES APPEAL. THE ASSESSEE IS NOT IN APPEAL FOR THIS YEAR, THEREFORE, WE CONFIRM THE ORDER OF THE LD. CIT (A) IN THIS REGARD. 10. THE FACTS APROPOS GROUND NO. 2 OF THIS APPEAL ARE THAT DURING THE ASSESSMENT PROCEEDINGS, IT WAS NOTICED BY T H E A.O THAT THE ASSESSEE HAS MADE THE FOLLOWING PAYMENTS: 1. LABOUR CHARGES TO SAI FOUND RS. 1,73,798/ - 2. LABOUR CHARG ES TO ARJUN LAL MISTRI RS. 1,04,120/ - TOTAL RS. 2,77,918/ - 17 IN THE VIEWS OF THE A.O, THE ASSESSEE WAS OBLIGED TO DEDUCT TAX AT SOURCE FROM THE ABOVE PAYMENTS U/S 40(A)(IA) OF THE ACT. IN REPLY, THE ASSESSEE FILED DETAILS OF LABOUR CHARGES OF RS. 15 ,99,580/ - ALONGWITH LEDGER ACCOUNT OF THE CONCERNED PARTIES. THE DETAILS OF TDS DEDUCTED/NOT DEDUCTED ARE ENTERED IN THIS LEDGER ACCOUNT. HOWEVER, THE A.O NOTICED THAT THE ASSESSEE DID NOT DEDUCT TDS FROM THE ABOVE NARRATED PAYMENTS OF RS. 2,77,918/ - , TH EREFORE, HE HAS ADDED THIS ENTIRE AMOUNT U/S 40(A)(IA) OF THE ACT. IN APPEAL, THE ASSESSEE SUCCEEDING IN EXPLAINING THIS ISSUE IN HIS FAVOUR AND GETTING THIS AMOUNT DELETED . NOW THE REVENUE HAS TAKEN THIS GROUND. 11. BOTH THE PARTIES HAVE MAINTAINED THE LINE OF THEIR EARLIER REASONINGS FOR AND AGAINST THIS ADDITION. THIS IS AN UNDENIABLE FACT THAT THIS DISALLOWANCE HAS BEEN MADE ON THE PAYMENTS ALREADY MADE AND NOT ON REMAINING PAYABLE AT THE END OF THE YEAR. THE LD. CIT(A) HAS ALLOWED THIS ISSUE BY FO LLOWING THE SPECIAL BENCH DECISION IN THE CASE OF MERILYN SHIPPING AND TRANSPORT VS. ACIT, VISHAKAPATNAM 18 DATED 29.03.2012. THIS DECISION HAS BEEN OVERRULED BY THE ANDHRA PRADESH HIGH COURT WHO EXERCISES JURISDICTION OVER VISHAKAPATNAM. BUT RECENTLY, THE VIEW TAKEN BY THIS SPECIAL BENCH HAS BEEN APPROVED INDIRECTLY BY THE HONBLE APEX COURT WHI LE DECIDING THE CASE OF CIT VS. M/S VECTOR SHIPPING SERVICES [P] LTD REPORTED IN 357 ITR 642 [SC] WHO HAS UPHELD SIMILAR VIEW TAKEN BY THE ALLAHABAD HIGH COURT IN T HE ABOVE CASES. WE DO NOT AGREE WITH THE SUBMISSION OF THE LD. SR. DR THAT DISMISSAL OF SLP FILED AGAINST THE JUDGMENT OF THE HONBLE ALLAHABAD HIGH COURT DOES NOT MEAN THAT THEIR JUDGMENT HAS BEEN UPHELD. THE DISMISSAL OF SLP DOES AMOUNT TO CONFIRMATION OF THE VIEW TAKEN BY THE COURT APPEALED AGAINST. THEREFORE, WE CONFIRM THE IMPUGNED DELETION AND DISMISS GROUND NO. 2 OF REVENUES APPEAL. 12. IN THE RESULT, THIS APPEAL OF THE REVENUE FOR A.Y. 2009 - 10 STANDS DISMISSED. 19 13. TO SUM UP, THE APPEAL OF TH E ASSESSEE IN ITA NO. 38/JU/2012 FOR A.Y. 2008 - 09 STANDS ALLOWED AND THE APPEAL OF THE REVENUE IN ITA NO. 293/JU/2013 FOR A.Y. 2009 - 10 STANDS DISMISSED. ORDER PRON OUNCED IN THE COURT ON 07 TH AUGUST , 2014. SD/ - SD/ - (N.K.SAINI) [HARI OM MARATHA] ACCOUNTANT MEMBER JUDICIAL MEM B ER DATED : 7 TH AUGUST , 201 4 VL/ - COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT BY ORDER 4. THE CIT(A) 5. THE DR ASSISTANT REGISTRAR ITAT, JODHPUR