ACIT, New Delhi V. M/s. Nilgiri Infrastructure Development Ltd., New Delhi

ITA 3193/DEL/2016

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 8602 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2020
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 01-06-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: NIDHI SRIVASTAVA
• Keywords: Capital asset; Maximum Marginal Rate; Corroborative evidences; Commercial expediency; Capital expenditure; TDS
• Section: 143(3); 37(1); 208; 37

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B: NEW DELHI BEFORE SHRI PRASHANT MAHARISHI, ACCOUNTANT MEMBER AND SHRI K.NARASIMHA CHARY, JUDICIAL MEMBER I.T.A. NO. 3193/DEL/2016 ASSESSMENT YEAR: 2010-11 ACIT, CIRCLE 18(2), VS. M/S. NILGIRI INFRASTRUCTU RE NEW DELHI. DEVELOPMENT LTD., F-60, MALHOTRA BUILDING, 2 ND FLOOR, CONNAUGHT PLACE, NEW DELHI. PAN: AACCN 3012E (APPELLANT) (RESPONDENT) APPELLANT BY : MS. NIDHI SRIVASTAVA, CIT/DR DEPARTMENT BY: SH. GAUTAM JAIN, ADVOCATE DATE OF HEARING: 14/01/2020 DATE OF PRONOUNCEMENT: 20/01/2020 ORDER PER K. NARASIMHA CHARY, JM CHALLENGING THE ORDER DATED 18/03/2016 IN APPEAL NO . 359/2015- 16 PASSED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS)-20, NEW DELHI (LD. CIT(A)), FOR THE ASSESSMENT YEAR 2010- 11, IN THE CASE OF M/S M/S. NILGIRI INFRASTRUCTURE DEVELOPMENT LTD., (THE ASSESSEE), REVENUE PREFERRED THIS APPEAL. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF PROPERTY DEVELOPERS. FOR THE ASS ESSMENT YEAR 2010-11, IT HAD FILED ITS RETURN OF INCOME ON 22/9/2010 DECL ARING A TOTAL LOSS OF RS.14,02,55,795/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, LEARNED ASSESSING OFFICER NOTICED FROM THE PROFIT AND LOSS ACCOUNT (P&L ACCOUNT) 2 THAT THE ASSESSEE EARNED AN INCOME OF RS. 328/-AND INCURRED ADMINISTRATIVE AND OTHER EXPENSES TO THE TUNE OF RS .1,15,986/-AND INTEREST AND FINANCE CHARGES TO THE TUNE OF RS.14,0 1,36,237/-. LEARNED ASSESSING OFFICER FURTHER NOTICED THAT THE ASSESSEE INVESTED A SUM OF RS.50 CRORES IN THE SHARES OF M/S PARK VIEW PROMOTE RS PRIVATE LIMITED BESIDES ADVANCING ANOTHER RS. 50 CRORES FOR LAND. 3. ACCORDING TO THE LEARNED ASSESSING OFFICER, THER E WERE NO BUSINESS ACTIVITIES UNDERTAKEN BY THE ASSESSEE EXCEPT THE AB OVE INVESTMENT AND ADVANCING OF RS. 50 CRORES EACH ON THE ABOVE ACTIVI TIES, THERE WAS NO NEED FOR THE ASSESSEE TO INCUR INTEREST EXPENSE TO THE TUNE OF RS.14,01,36,183/-AND THEREFORE, HE DISALLOWED THE S AME, THEREBY COMPUTING THE TOTAL LOSS OF THE ASSESSEE AT RS.1,19 ,612/-BY ORDER DATED 14/3/2013 UNDER SECTION 143(3) OF THE INCOME TAX AC T, 1961 (FOR SHORT THE ACT). 4. AGGRIEVED BY SUCH AN ADDITION, ASSESSEE PREFERRE D APPEAL BEFORE THE LD. CIT(A) AND CONTENDED THAT THE BUSINESS MODE L OF THE ASSESSEE IS NOT PROPERLY APPRECIATED BY THE LEARNED ASSESSING O FFICER; THAT THE ASSESSEE BEING A REAL ESTATE DEVELOPER, THERE WAS N ECESSITY FOR THE ASSESSEE TO ACQUIRE AN EARLY BREAKTHROUGH AS WELL A S GOOD HOLDING OF THE MARKET AND THEREFORE IT WAS NECESSARY FOR THE ASSES SEE TO ACQUIRE SUBSTANTIAL STAKE IN THE COMPANIES WHICH ARE IN THE SAME LINE OF BUSINESS AS THAT OF THE ASSESSEE AND TO CAPTURE THE MARKET; THAT THE INVESTMENT OF RS. 50 CRORES IN M/S PARK VIEW PROMOTERS PRIVATE LI MITED WAS PURSUANT TO SUCH AN EFFORT ONLY; AND THAT THE ADVANCE OF RS. 50 CRORES FOR THE LAND WAS ALSO FOR THE SAME PURPOSE. ASSESSEE FURTHER SUBMITT ED THAT THE FINDING OF 3 THE LEARNED ASSESSING OFFICER THAT THE INTEREST-BEA RING FUNDS WERE DIVERTED FOR NON-BUSINESS PURPOSES WAS WITHOUT ANY BASIS. 5. LD. CIT(A) CONSIDERED THE CONTENTIONS OF THE ASS ESSEE. LD. CIT(A), AS A MATTER OF FACT, FOUND THAT THE ASSESSEE HAD RA ISED RS. 171 CRORES OF INTEREST FREE FUNDS FROM THE SISTER CONCERNS AND HA D PAID ONLY A SUM OF RS.12,24,35,074/-TOWARDS INTEREST TO M/S INDIA BULL S REAL ESTATE LTD WHICH IS ALSO A SISTER CONCERN AND ENGAGED IN THE S AME LINE OF BUSINESS, AND DEDUCTED TDS OF RS.1,40,38,591/-WHILE PAYING TH E INTEREST. LD. CIT(A) FURTHER FOUND THAT M/S INDIA BULLS REAL ESTATE LTD IS NOT A LOSS MAKING COMPANY AND HAD PAID TAXES ON THE INTEREST INCOME E ARNED FROM THE ASSESSEE AT THE MAXIMUM MARGINAL RATE DURING THE YE AR UNDER CONSIDERATION. 6. CIT(A) FURTHER FOUND THAT M/S PARKVIEW PROMOTERS LTD IS A COMPANY IN THE SAME LINE OF BUSINESS AS THAT OF THE ASSESSEE AND THE INVESTMENT OF RS. 50 CRORES BY THE ASSESSEE COMPANY WAS IN FURTHERANCE OF THE BUSINESS OBJECTIVES AND COME UNDER COMMERCIA L EXPEDIENCY. LD. CIT(A) PLACED RELIANCE ON THE DECISION OF THE HONB LE KOLKATA HIGH COURT IN THE CASE OF CIT VS. RAJEEVA LOCHAN KANORIA 208 I TR 616 (CAL) WHEREIN THE HONBLE HIGH COURT HELD THAT THOUGH ORDINARILY CAPITAL EXPENDITURE MAY NOT BE ALLOWED AS DEDUCTION UNDER SECTION 37 BE CAUSE THE SECTION SPECIFICALLY BARS ANY DEDUCTION OF EXPENDITURE OF C APITAL NATURE, SECTION 37 IS DIFFERENTLY WORDED AND THERE IS NO BAR IN SEC TION 36 (1)(III) OF THE ACT TO ALLOW THE INTEREST PAID IN RESPECT OF CAPITAL BO RROWED WHICH HAS BEEN UTILISED FOR PURCHASE OF CAPITAL ASSET. LD. CIT(A) FURTHER REFERRED TO THE DECISION OF THE HONBLE APEX COURT IN THE CASE OF S A BUILDERS LIMITED VS. CIT AND REACHED A CONCLUSION THAT THE FACTUAL MATRI X OF THE CASE DOES NOT 4 JUSTIFY THE ACTION OF THE ASSESSING OFFICER IN DISA LLOWING THE INTEREST EXPENDITURE TO THE TUNE OF RS.14,01,36,183/-UNDER S ECTION 37 AND 36 (1)(III) OF THE ACT. LD. CIT(A) ACCORDINGLY BY WAY OF IMPUGNED ORDER DELETED THIS ADDITION. 7. REVENUE IS THEREFORE, AGGRIEVED BY THE IMPUGNED ORDER AND FILED THIS APPEAL STATING THAT SINCE SECTION 37 (1) OF TH E ACT STIPULATES THAT AN EXPENDITURE ALLOWABLE UNDER SECTION 36 (1)(III) OF THE ACT COULD NOT BE ALLOWED UNDER SECTION 37(1) OF THE ACT AND WHERE TH E ASSESSEE FAILED TO FURNISH ANY DETAILS OR SUPPORTING EVIDENCE OF THE T RANSACTION RELATING TO THE UTILISATION OF THE INTEREST-BEARING FUNDS TO TH E TUNE OF RS. 50 CRORES FOR PURCHASE OF LAND, THERE WAS NO JUSTIFICATION FO R THE LD. CIT(A) TO DELETE THE DISALLOWANCE OF INTEREST EXPENSE. SO ALSO, IT I S FURTHER CONTENDED THAT THERE WAS NO BUSINESS NECESSITY OR PURPOSE FOR THE ASSESSEE TO PURCHASE SHARES OF ANOTHER COMPANY TO THE TUNE OF RS. 50 CRO RES SO AS TO TAKE SHELTER OF SECTION 36 (1)(III) OF THE ACT. LD. DR F URTHER SUBMITTED THAT IN THE ABSENCE OF ANY CONCRETE PROOF TO SUPPORT THE VE RSION OF THE ASSESSEE THAT THERE WAS BUSINESS NECESSITY OR EXPEDIENCY FOR THE ASSESSEE TO INVEST HUNDRED CRORES IN THE SHARES OR TOWARDS ADVA NCE FOR LAND, THE ADDITION MADE BY THE LEARNED ASSESSING OFFICER IS J USTIFIABLE. 8. PER CONTRA, IT IS THE SUBMISSION OF THE LD. AR T HAT THE ASSESSEE PROVIDED ALL SORTS OF INFORMATION SOUGHT BY THE LEA RNED ASSESSING OFFICER AND THERE IS NO QUESTION OF NON-FURNISHING OF ANY E VIDENCE OR MATERIAL, WHATSOEVER, AS REQUIRED BY THE LEARNED ASSESSING OF FICER. HE FURTHER SUBMITTED THAT INVESTMENT OF RS. 50 CRORES IN THE S HARES OF M/S PARKVIEW PROMOTERS PRIVATE LIMITED WAS A BUSINESS EXPEDIENCY . SO ALSO THE PAYMENT OF ANOTHER RS. 50 CRORES FOR LAND. HE SUBMI TTED THAT THE 5 MEMORANDUM AND ARTICLES OF ASSOCIATION OF THE ASSES SEE SUPPORT THE ACTIVITIES OF THE ASSESSEE BOTH IN THE INVESTMENT A ND ALSO PAYING ADVANCE OF RS. 50 CRORES FOR ACQUISITION OF LAND. HE SUBMIT TED THAT THE FINDINGS OF THE LD. CIT(A) THAT THE ASSESSEE HAD INTEREST FREE FUNDS TO THE TUNE OF RS. 171 CRORES AND THE INVESTMENT IN SHARES AND PAYMENT OF ADVANCE TO THE TUNE OF RS. 100 CRORES WAS MET OUT OF SUCH FUNDS AN D THEREFORE THERE IS NO POINT IN SAYING THAT INTEREST-BEARING FUNDS WERE DIVERTED AND THEREFORE THE INTEREST IS TO BE DISALLOWED. LASTLY HE SUBMITTED THAT THE ASSESSEE HAS BEEN IN THE BUSINESS AS SUPPORTED BY T HE ACTIVITIES OF THE ASSESSEE NOTICED BY THE LEARNED ASSESSING OFFICER A ND THEREFORE LEARNED ASSESSING OFFICER CANNOT DISALLOW THE INTEREST ON T HE GROUND OF NO BUSINESS ACTIVITY DURING THE YEAR. EARNING OF INCOM E IS NOT THE SOLE CRITERIA OF BEING IN BUSINESS, HE SUBMITS. 9. WE HAVE GONE THROUGH THE RECORD IN THE LIGHT OF THE SUBMISSIONS MADE ON EITHER SIDE. REVENUE CANNOT CONTROVERT THE OBSERVATIONS OF THE LD. CIT(A) THAT THE ASSESSEE RAISED INTEREST FREE F UNDS TO THE TUNE OF RS. 171 CRORES FROM SISTER CONCERNS, WHICH IS SUFFICIEN T FOR PURCHASE OF SHARES OF MRS PARKVIEW PROMOTERS PRIVATE LIMITED AND PAYME NT OF ADVANCE OF RS. 50 CRORES. FURTHER ON A PERUSAL OF THE MEMORAND UM OF ASSOCIATION OF THE ASSESSEE WE FIND THAT THE MAIN OBJECTS TO BE PU RSUED BY THE ASSESSEE INCLUDE TO BE INTERESTED IN OR TAKE OR OTHERWISE AC QUIRE, HOLD, SELL OR OTHERWISE DISPOSE OF SHARES, STOCK, DEBENTURES AND SUCH OTHER SECURITIES OF ALL TYPES AND SHARES OF ANY SUCH COMPANY, SUBSID IARY OR OTHERWISE FOR ALL OR ANY OF THE OBJECTS MENTIONED IN THE MEMORAND UM OF ASSOCIATION. 10. FROM THE ASSESSMENT ORDER DATED 18/11/2011 FOR THE ASSESSMENT YEAR 2009-10, WE NOTICED THAT THE REVENUE ADMITS TH AT THE ASSESSEE HAS 6 BEEN ENGAGED IN THE BUSINESS OF PROPERTY DEVELOPERS . IN SUCH AN EVENT WE FAIL TO UNDERSTAND HOW THE PAYMENT OF ADVANCE OF RS. 50 CRORES FOR LAND IS NOT FOR BUSINESS PURPOSE. SO ALSO, IT IS NO T THE CASE OF THE REVENUE THAT M/S PARKVIEW PROMOTERS PRIVATE LIMITED IS NOT IN THE SAME LINE OF BUSINESS AS THAT OF THE ASSESSEE. WE THEREFORE DO N OT FIND ANYTHING WRONG IN THE FINDING OF THE LD. CIT(A) THAT THE INV ESTMENT OF RS. 50 CRORES BY THE ASSESSEE IN THE SHARES OF M/S PARKVIEW PROMO TERS LTD WAS FOR FURTHERANCE OF THE BUSINESS OBJECTIVES OF THE ASSES SEE AND, UNDER COMMERCIAL EXPEDIENCY. WE ARE IN AGREEMENT WITH THE LD. AR THAT EARNING INCOME IS NOT THE SOLE CRITERIA TO REACH A CONCLUSION AS TO THE CONDUCT OF BUSINESS. 11. FOR THE REASONS SET FORTH IN THE PRECEDING PARA GRAPHS, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE HAD SUFFIC IENT INTEREST FREE FUNDS TO INVEST IN THE ACTIVITIES OF INVESTMENT IN M/S PARKVIEW PROMOTERS PRIVATE LIMITED AND TO PAY ADVANCE FOR LAND AND IT DOES NOT AMOUNT TO DIVERSION OF INTEREST-BEARING FUNDS. THE ACTIVITIES OF THE ASSESSEE SHOW THE COMMERCIAL EXPEDIENCY. FURTHER THERE IS NO CESS ATION OF BUSINESS WHICH WAS ADMITTED TO HAVE BEEN IN CURRENT AND THE IMMEDIATELY PRECEDING ASSESSMENT YEAR AS REVEALED BY THE ASSESS MENT ORDER AND MERELY BECAUSE THE INCOME WAS RS. 328 ONLY IN THIS ASSESSMENT YEAR, IT CANNOT BE SAID THAT THERE WAS NO BUSINESS DURING TH E YEAR. FURTHER THE ASSESSMENT ORDER REVEALS THAT IN RESPONSE TO THE ST ATUTORY NOTICES, THE AUTHORISED REPRESENTATIVES OF THE ASSESSEE APPEARED BEFORE THE ASSESSING OFFICER AND FILED VARIOUS DETAILS/DOCUMEN TS AS CALLED FOR FROM TIME TO TIME AND SUCH DETAILS WERE EXAMINED ON TEST -CHECK BASIS AND PLACED ON RECORD WHEREVER FELT NECESSARY. IT RULES OUT THE ALLEGATION THAT 7 THE ASSESSEE FAILED TO FURNISH ANY INFORMATION REQU IRED BY THE ASSESSING OFFICER TO SUPPORT THEIR CONTENTIONS AS TO THE INTE REST FREE FUNDS, INTEREST- BEARING FUNDS AND THERE ARE ACTIVITIES. 12. IN THE CIRCUMSTANCES, WE ARE INCLINED TO AGREE WITH THE FINDINGS OF THE LD. CIT(A) AND, CONSEQUENTLY, FIND THE GROUNDS OF APPEAL AS DEVOID OF MERITS. APPEAL OF THE REVENUE IS CONSEQUENTLY LIABL E TO BE DISMISSED. WE ORDER SO. 13. IN THE RESULT, THE APPEAL OF THE REVENUE IS DIS MISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH JANUARY, 2020. SD/- SD/- (PRASHANT MAHARISHI) (K.NARASIMHA CHARY) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 20/01/2020 . AKS