Sanskar Industries Pvt. Ltd., Ahmedabad V. The Dy. Commissioner of Income Tax, Circle-4(1)(1), Ahmedabad

ITA 3132/AHD/2016

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 8125 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-06-2018
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2012-2013
• Appeal Filed On: 29-11-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: DINESH SINGH
• Keywords: Capital asset; Notional interest

Judgement Text

ITA NO.3132/AHD/2016 A.Y. 2012-13 PAGE 1 OF 3 IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER ITA NO.3132/AHD/2016 ASSESSMENT YEAR: 2012-13 SANSKAR INDUSTRIES PVT. LTD., VS. DY. COMMISSIONER OF INCOME TAX, 197/3/4, AMBICA HOUSE, CIRCLE 4(1)(1), AHMEDAB AD. RAMNATH VAS, SHAHWADI, NAROL, AHMEDABAD 382 405. [PAN AAPCS 4326 M] (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ASHOK DHARIWAL, A.R. RESPONDENT BY : SHRI DINESH SINGH SR. D.R. DATE OF HEARING : 26.04.2018 DATE OF PRONOUNCEMENT : 04.06.2018 O R D E R PER RAJPAL YADAV, JUDICIAL MEMBER: 1. ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL AGAINS T THE ORDER OF LD. CIT(A) DATED 29 TH SEPTEMBER, 2016 PASSED FOR A.Y. 2012-13. THE ASSE SSEE HAS TAKEN 6 GROUNDS OF APPEAL WHICH ARE NOT IN CONSONANCE WITH RULE NO.8 O F THE ITAT RULES, 1963 AND THEY ARE DESCRIPTIVE AND ARGUMENTATIVE IN NATURE. 2. IN BRIEF, GRIEVANCE OF THE ASSESSEE IS THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.4,80,000/- WHICH WAS ADDED BY TH E ASSESSING OFFICER BY TREATING NOTIONAL INTEREST INCOME ON ADVANCE GIVEN FOR PURCH ASE OF FLATS. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E HAS FILED ITS RETURN OF INCOME ON 18 TH SEPTEMBER, 2012 DECLARING TOTAL INCOME OF RS.(-) 4 6,54,248/-. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND A NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED ON 23.09.2013. ON SCRUTINY OF T HE SAME, IT REVEALED TO THE ASSESSING OFFICER THAT THE ASSESSEE HAS INVESTED A SUM OF RS.40,00,000/- ON 01.04.2011 TOWARDS ADVANCE FOR PURCHASE OF LAND. A CCORDING TO THE ASSESSING OFFICER, THE ASSESSEE HAS MADE PAYMENT OF ALLEGED R S.40,00,000/- OUT OF INTEREST BEARING FUNDS, SINCE IT WAS A CAPITAL ASSET, AND TH EREFORE, EXPENDITURE IN THE SHAPE OF ITA NO.3132/AHD/2016 A.Y. 2012-13 PAGE 2 OF 3 INTEREST COULD NOT BE ALLOWED. HE NOTIONALLY CALCU LATED THE INTEREST EXPENDITURE @ 12% ON SUCH ADVANCE AND MADE ADDITION OF RS.4,80,00 0/-. BY THIS AMOUNT HE HAS REDUCED THE LOSSES CLAIMED BY THE ASSESSEE IN THE R ETURN. 4. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 5. BEFORE THE TRIBUNAL THE ASSESSEE CONTENDED THAT IT HAS RECEIVED SHARE CAPITAL OF RS.66,50,000/- UPTO 24.03.2011. IT HAS GIVEN AD VANCE OF RS.40,00,000/- FOR PURCHASE OF LAND ON 26.03.2011. ACCORDING TO THE A SSESSEE WHATEVER LOANS IT HAS TAKEN THAT HAS BEEN EXCLUSIVELY USED FOR THE PURPOS E OF BUSINESS AND NOT A SINGLE RUPEE WAS DIVERTED TOWARDS PURCHASE OF LAND. THERE FORE, ACCORDING TO THE ASSESSEE, NO NOTIONAL DISALLOWANCE OF INTEREST EXPENDITURE OU GHT TO HAVE BEEN MADE. 6. THE LD. DEPARTMENTAL REPRESENTATIVE, ON THE OTHE R HAND, RELIED UPON THE ORDERS OF THE REVENUE AUTHORITIES BELOW. 7. WE HAVE DULY CONSIDERED THE RIVAL CONTENTIONS AN D GONE THROUGH THE RECORDS CAREFULLY. LD. REVENUE AUTHORITIES HAVE NOT RECORD ED ANY SPECIFIC FINDING AS TO HOW THE ASSESSEE HAS USED THE INTEREST BEARING FUNDS FO R PURCHASE OF LAND. THE CASE OF THE ASSESSEE IS THAT IT HAS MADE ADVANCE PAYMENT TO WARDS PURCHASE OF LAND WHICH WAS TO BE USED FOR THE CONSTRUCTION OF A FACTORY BU ILDING. THE QUESTION IS WHETHER SUCH ADVANCE WAS GIVEN AFTER COMMENCEMENT OF THE BU SINESS OR BEFORE COMMENCEMENT OF THE BUSINESS. IF THE ADVANCE WAS G IVEN BEFORE COMMENCEMENT OF THE BUSINESS THEN THE INTEREST EXPENDITURE ATTRIBUT ABLE TO SUCH ADVANCE OUGHT TO BE CAPITALISED BUT IF THE ADVANCE WAS GIVEN OUT OF INT EREST FREE FUNDS THEN HOW NOTIONAL INTEREST EXPENDITURE COULD BE ASSUMED AND DISALLOWA NCE CAN BE MADE. NO SPECIFIC FINDING HAS BEEN RECODED TO THIS ASPECT BY THE REVE NUE AUTHORITIES BELOW. THEREFORE, WE ALLOW THE APPEAL OF THE ASSESSEE FOR STATISTICAL PURPOSES BY REMITTING THIS ISSUE TO THE FILE OF THE LD. ASSESSING OFFICER FOR RE-ADJUDI CATION. LD. ASSESSING OFFICER SHALL PIN POINT THE EXACT LOAN AMOUNT TAKEN BY THE ASSESSEE O N WHICH INTEREST EXPENDITURE HAS BEEN CLAIMED, INTEREST FREE FUNDS AVAILABLE WITH TH E ASSESSEE AND THE ADVANCE MADE BY IT. AFTER IDENTIFYING ALL THESE THREE AMOUNTS H E WOULD DECIDE WHETHER INTEREST BEARING FUNDS HAVE BEEN USED FOR GIVING ADVANCE FOR PURCHASE OF LAND OR NOT. THE ASSESSING OFFICER WILL THEREAFTER DECIDE THE ISSUE IN ACCORDANCE WITH LAW. ITA NO.3132/AHD/2016 A.Y. 2012-13 PAGE 3 OF 3 8. APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICA L PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 4 TH DAY OF JUNE, 2018. SD/- SD/- AMARJIT SINGH RAJPAL YADAV (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, THE 4 TH DAY OF JUNE, 2018 PBN/* COPIES TO: (1) THE APPELLANT (2) THE RESPOND ENT (3) CIT (4) CIT(A) (5) DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER UE COPY ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCHES, AHMEDABAD