Sh. Rajeev Sagar, Agra V. J.C.I.T., Range-2, Agra

ITA 364/AGR/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 76611 (ITAT-AGRA)
• Duration Of Justice: 6 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-06-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 19-06-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 09-12-2013
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S D SHARMA
• Assessee Lawyers: RAVI AGARWAL
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AGRA BENCH, AGRA BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND SHRI PRAMOD KUMAR, ACCOUNTANT MEMBER ITA NO. 364/AGRA/ 2013 ASSESSMENT YEAR 2009-2010 RAJEEV SAGAR VS. THE JT. COMMISSIONER OF INCOME TAX, PROP. SAGAR INTERNATIONAL RANGE 2, 152 JAIPUR HOUSE, AGRA AGRA (PAN APFPS 8729 G) (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI RAVI AG ARWAL, ADVOCATE RESPONDENT BY : SHRI S.D. SH ARMA, JR. D.R. DATE OF HEARING : 19.06.2014 DATE OF PRONOUNCEMENT : 20.06.2014 ORDER PER BHAVNESH SAINI, JUDICIAL MEMBER: 1. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF LEARNED CIT(A)-I, AGRA DATED 02.09.2013 FOR A.Y. 2009-10. ITA NO.364/AGRA./2013 2 2. WE HAVE HEARD LEARNED REPRESENTATIVES OF BOTH TH E PARTIES, PERUSED THE FINDINGS OF THE AUTHORITIES BELOW AND CONSIDERED TH E MATERIAL ON RECORD. 3. ON GROUND NO.1, ASSESSEE CHALLENGED THE DISALLOW ANCE OF INTEREST OF RS.2,17,640/-. THE A.O. FOUND THAT ASSESSEE HAS DEB ITED AN AMOUNT OF RS.9,99,569/- AS INTEREST ON THE BORROWED FUNDS OST ENSIBLY FOR THE PURPOSE OF BUSINESS. FROM THE DETAILS OF LOANS AND ADVANCES IT WAS NOTICED THAT FUNDS OF BUSINESS OF RS.51,05,000/-ARE LYING WITH THE RELATI VES/FRIENDS OF THE ASSESSEE AND THESE ARE NOT FOR THE PURPOSE OF BUSINESS. THE ASSE SSEE WAS ASKED TO EXPLAIN AS TO WHY INTEREST BE NOT DISALLOWED. IT WAS SUBMITTED TH AT WITH REGARD TO THE ADVANCE GIVEN TO SHRI KARAN SAGAR AND PRIYANKA SAGAR, THESE ARE PERSONAL EDUCATIONAL LOANS TO THE SON AND DAUGHTER OF THE ASSESSEE AND THE AMO UNT DEBITED TO THE AMOUNT OF SHRI GIRISH SAGAR FOR JOINTLY PURCHASING OF PROPERT Y WHICH COULD NOT MATERIALIZE AND RECEIVED BACK IN SUBSEQUENT YEARS. THE A.O. WAS , THEREFORE, OF THE VIEW THAT THE LOANS ARE NOT FOR BUSINESS PURPOSE AND ARE PERS ONAL LOANS AND ACCORDINGLY DISALLOWED RS.2,17,640/-. THE ASSESSEE SUBMITTED BE FORE LEARNED CIT(A) THAT HE HAS SUFFICIENT CAPITAL FOR GIVING THESE LOANS. THE ASSESSEE HAS INVESTED BORROWED FUNDS FOR THE PURPOSE OF BUSINESS AND RELIED UPON S EVERAL DECISIONS IN SUPPORT OF CONTENTION THAT THE ADDITION IS UNJUSTIFIED. THE LE ARNED CIT(A) DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE WITH REGARD TO SUFFICIEN T CAPITAL BALANCE AND THESE ITA NO.364/AGRA./2013 3 INTEREST FREE PERSONAL LOANS AND REJECTED THE CONTE NTION. THE LEARNED CIT(A) ALSO NOTED THAT THE CAPITAL HAS BEEN INVESTED IN ASSETS, FDRS, STOCKS ETC. AND, ACCORDINGLY, THIS GROUND OF APPEAL OF THE ASSESSEE WAS DISMISSED. 4. ON CONSIDERATION OF THE RIVAL SUBMISSIONS, WE AR E OF THE VIEW THAT THE ADDITION IS WHOLLY UNJUSTIFIED. THE BALANCE SHEET O F THE ASSESSEE P.B.37 SHOWS THAT ASSESSEE HAS CAPITAL OF RS.56,37,092/- AND APART FR OM THE SAME THE ASSESSEE HAS ALSO SUFFICIENT LIQUIDITY IN THE FORM OF SUNDRY CRE DITOR OF RS.1,20,83,648/- ON WHICH NO INTEREST WAS PAYABLE AND WAS ALSO AVAILABLE FOR INVESTMENT, SUNDRY DEBTORS AND OTHER ASSETS. LEANED COUNSEL FOR THE ASSESSEE CONTE NDED THAT BANK LOANS HAVE BEEN INVESTED IN CLOSING STOCK AND OTHER ASSETS. LEARNED COUNSEL FOR THE ASSESSEE ALSO SUBMITTED THAT IT HAS BEEN CONSISTENTLY HELD BY VAR IOUS HIGH COURTS THAT IF THE ASSESSEES CAPITAL OR RESERVE ARE SUFFICIENT TO COV ER THE ADVANCE OF INTEREST BEARING LOANS THEN NO INTEREST CAN BE DISALLOWED. HE HAS RE LIED UPON THE FOLLOWING DECISIONS:- I. RADIO KHAITAN AND CO. VS. CIT 274 ITR PAGE 354 A LLAHABAD HIGH COURT. II. CIT VS. PREM HEAVY ENGINEERING WORKS (P) LTD. ( 2006) 150 TAXMAN PAGE 90 ALLAHABAD HIGH COURT. III. CIT VS. HARBHAJAN SARBJEET SINGH (2006) 151 TA XMAN PAGE 127. IV. CIT VS. RELIANCE UTILITIES (2009) 313 ITR PAGE 340, BOMBAY HIGH COURT. ITA NO.364/AGRA./2013 4 V. S.A. BUILDER VS. CIT 206 CTR PAGE 631 S.C. VI. CIT VS. TIN BOX FACTORY (2004) 135 TAXMAN, 145 DELHI HIGH COURT. VII. PRANIK SERVICE LTD. VS. ACIT (2012) 146 TTJ PA GE 543 (BOMBAY). 5. WE MAY NOTE HERE THAT IN THE CASE OF RELIANCE UT ILITY POWER LTD. (SUPRA) IT WAS HELD THAT IF THERE WERE FUNDS AVAILABLE BOTH IN TEREST FREE AND OVERDRAFT/LOANS TAKEN, THEN THE PRESUMPTION WOULD ARISE THAT INVEST MENTS WOULD BE OUT OF INTEREST FREE FUNDS GENERATED OR AVAILABLE WITH THE COMPANY, IF THE INTEREST FREE FUNDS WAS SUFFICIENT TO MEET THE INVESTMENTS. IN THIS CASE, T HIS PRESUMPTION WAS ESTABLISHED CONSIDERING THE FINDING OF FACT BOTH BY THE LEARNED CIT(A) AND THE TRIBUNAL. INTERESTS WERE DEDUCTABLE ALL THESE DECISIONS SUPPO RT THE CASE OF THE ASSESSEE. THE A.O. HAS NOT PROVED ANY NEXUS BETWEEN THE BORROWED FUNDS AND INTEREST FREE LOANS GIVEN TO ABOVE PERSON. THE SIMILAR ISSUE WAS ALSO B EEN DECIDED IN FAVOUR OF THE ASSESSEE BY ITAT, AGRA BENCH IN THE CASE OF SHRI HA RI SHANKAR AGARWAL VS.ACIT, ITA NO.371/AGRA/2013 DATED 14.02.2014. CONSIDERING THE MATERIAL ON RECORD, IT IS CLEAR THAT ASSESSEE HAS SUFFICIENT CAPITAL, PROFIT AND INTEREST FREE FUNDS AVAILABLE WITH HIM FOR THE PURPOSE OF GIVING INTEREST FREE LO ANS TO THE ABOVE PERSON. THEREFORE, PROPORTIONATE DISALLOWANCE OF INTEREST I S WHOLLY UNJUSTIFIED. WE, ITA NO.364/AGRA./2013 5 ACCORDINGLY, SET ASIDE THE ORDERS OF THE AUTHORITIE S BELOW AND DELETE THE ADDITION. GROUND NO.1 OF THE APPEAL OF THE ASSESSEE IS ACCORD INGLY ALLOWED. 6. ON GROUND NO.2, ASSESSEE CHALLENGED THE DISALLOW ANCE OF RS.34,714/- IN RESPECT OF DEPRECIATION AND VEHICLE EXPENSES FOR PE RSONAL USE AT 1/8 TH OF THE TOTAL CLAIM. THE A.O. DISALLOWED 1/5 TH OF THESE EXPENSES FOR PERSONAL USER OF THE CAR. TH E LEARNED CIT(A) RESTRICTED THE SAME TO 1/8 TH OF THE EXPENDITURE. LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT IT MAY FURTHER REDUCE. CONSIDERING THE FINDINGS OF THE AUTHORITIES BELOW, WE FIND THAT PERSONAL USER OF TH E CAR CANNOT BE RULED OUT BEING THE ASSESSEE INDIVIDUAL, HOWEVER, THE DISALLOWANCE IS REDUCED TO 1/10 TH OF THE TOTAL CLAIM. THIS GROUND IS, THEREFORE, PARTLY ALLOWED. 7. ON GROUND NO.3, ASSESSEE CHALLENGED THE DISALLOW ANCE OF RS.38,170/- OUT OF TELEPHONE TRAVELLING STAFF WELFARE, SALES PROMOTION AND DIWALI EXPENSES. ACCORDING TO A.O., THESE EXPENSES ARE NOT FULLY SUPPORTED BY THE VOUCHERS AND MOSTLY VOUCHERS HAVE BEEN PRODUCED, THEREFORE, EXPENSES WE RE NOT SUBJECT TO VERIFICATION. 1/5 TH OF THE EXPENSES WERE DISALLOWED WHICH WERE MODIFIE D AND REDUCED BY THE LEARNED CIT(A) TO 1/8 TH OF THE EXPENDITURE. CONSIDERING THE EXPLANATION OF THE PARTIES, WE FIND THAT THE ADDITION IS JUSTIFIED ON THIS ISSUE, HOWEVER, THE ADDITION IS ITA NO.364/AGRA./2013 6 REDUCED TO 1/10 TH OF THE TOTAL CLAIM. ACCORDINGLY, THIS GROUND OF AP PEAL OF THE ASSESSEE IS PARTLY ALLOWED. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. (ORDER PRONOUNCED IN THE OPEN COURT) SD/- SD/- (PRAMOD KUMAR) (BHAVNESH SAINI) ACCOUNTANT MEMBER JUDICIAL MEMBER AMIT/ COPY OF THE ORDER FORWARDED TO:- 1. APPELLANT 2. RESPONDENT 3. CIT (APPEALS) CONCERNED 4. CIT CONCERNED 5. D.R., ITAT, AGRA BENCH, AGRA 6. GUARD FILE. BY ORDER SR. PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL, AGRA TRUE COPY