MODISON METALS LTD, MUMBAI V. DCIT, CIRCLE - 3(2)(1), MUMBAI

ITA 3666/MUM/2019

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 4942 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-04-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Assessment Year: 2015-2016
• Appeal Filed On: 27-05-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Proportionate interest; Revised return; TDS; Set aside
• Section: 142(1); 115JB; 201; 143(2); 13; 20

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, MUMBAI BEFORE SHRI RAJESH KUMAR , AM AND SHRI AMARJIT SINGH, JM / I.T.A. NO. 3666 /MUM/201 9 ( / ASSESSMENT YEAR : 201 5 - 1 6 ) MODISON METALS LTD 33, NARIMAN BHAVAN, 227, NARI MAN POINT, MUMBAI - 400021 . / VS. DCIT, CIRCLE - 3(2)(1) R. NO. 608, 6 TH FLOOR, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI - 400020. ./ ./ PAN/GIR NO. : AAACA3768N ( / APPELLANT ) .. ( / RESPONDENT ) / DATE OF HEARING: 12 / 0 1 / 20 2 1 /DATE OF PRONOUNCEMENT: 01 / 0 4 / 2021 / O R D E R PER AMARJIT SINGH, J M: THE ASSESSEE HAS FILED THE PRESENT A PPEAL AGAINST THE ORDER DATED 29 .0 3 .201 9 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) - 8 , MUMBAI [HEREINAFTER REFERRED TO AS THE CIT(A)] RELEVANT TO THE A.Y . 2015 - 1 6 . 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS: - I ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) ERRED IN CONFIRMING THE ORDER OF THE AO IN DISALLOWING THE INTEREST OF RS.13,08,070/ - WITHOUT APPRECIATING THE FACTS OF THE CASE. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW THE CIT(A) HAS ERRED IN CONFIRMING THE ORDER OF AO IN ASSESSEE BY : SHRI SATISH MODY REVENUE BY: SHRI BHARAT ANDHALE ITA NO . 3666 / M/201 9 A.Y. 2015 - 16 2 DISALLOWING RENT EXPENSES OF RS.4,92,000/ - WITHOUT APPRECIATING THE FACTS OF THE CASE. 3. THE APPELLANT CRAVES LEAVE TO ADD/ALTER/MODIFY ANY/ALL GROUNDS OF APPEAL . 3 . THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FILED ITS RETURN OF INCOME DECLARING TOTAL INCOME TO THE TUNE OF RS.6,26,6 8,830/ - FOR THE A.Y.2015 - 16 AND BOOK PROFIT IN SUM OF RS. 6, 69,07,163/ - U/S 115JB OF THE INCOME TAX ACT, 1961. THEREAFTER, THE ASSESSEE FILED T HE REVISED RETURN OF INCOME ON 29.03.2016. THE CASE WAS SELECTED FOR SCRUTINY UNDER CASS. NOTICES U/S 143(2) & 142(1) OF THE ACT WERE ISSUED AND SERVED UPON THE ASSESSEE. FROM THE PROFIT & LOSS ACCOUNT, IT WAS OBSERVED THAT THE ASSESSEE HAS PAID THE INTERE ST AND FINANCE COST OF RS.2,77,75,332/ - (EXCLUDING VEHICLE INTEREST COST). THE ASSESSEE GAVE THE ADVANCE OF RS.1,01,38,081/ - FOR PURCHASE OF FLATS/OFFICE PREMISES FOR INVESTMENT PURPOSE. THE SHOW - CAUSE NOTICE WAS ISSUED AS TO WHY THE PROPORTIONATE INTEREST U/S 36(1)(III) SHOULD NOT BE DISALLOWED AS THE THERE IS NO SUCH BUSINESS CONNECTION FROM THE BORROWED FUND AND THE ADVANCE MADE. THE ASSESSEE REPLIED TO THE NOTICE. THE ASSESSEE SUBMISSION WAS CONSIDERED BUT THE AO WAS NOT SATISFIED , THEREFORE, PROPORTION ATE INTEREST IN SUM OF RS. 13,08,070/ - WAS DISALLOWED U/S 36(1)(III) AND ADDED TO THE INCOME OF THE ASSESSEE. FROM THE PROFIT & LOSS ACCOUNT, THE AO ALSO NOTICED THAT THE ASSESSEE HAS PAID THE RENT COST OF RS. 9,12,610/ - WHICH INCLUDES OF RENT PAID AMOUNTING TO RS.3,00,000/ - FOR THE PROPERTIES AT VAPI, RS.1,20,000/ - FOR LONAVLA AND RS.72,000/ - FOR FLAT AT VAPI. THE PROPERTIES WERE NOT USED FOR BUSINESS PURPOSES. NOTICE WAS GIVEN AND AFTER THE REPLY OF THE ASSESSEE, THE CLAIM TO THE EXTENT OF 4,92,000/ - WAS DE CLINED AND THE SAID AMOUNT WAS ADDED TO THE INCOME OF THE ASSESSEE. AFTER DISALLOWANCE OF DEPRECIATION CLAIM TO THE ITA NO . 3666 / M/201 9 A.Y. 2015 - 16 3 EXTENT OF 11,14,168/ - , T HE TOTAL INCOME OF THE ASSESSEE WAS ASSESSED TO THE TUNE OF RS.6,55,83,068/ - . FEELING AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A) WHO PARTLY ALLOWED THE CLAIM OF THE ASSESSEE BUT THE ASSESSEE WAS NOT SATISFIED ON THE GROUNDS MENTIONED ABOVE, THEREFORE, THE ASSESSEE HAS FILED THE PRESENT APPEAL BEFORE US. ISSUE NO.1 4 . UNDER THIS ISSUE THE ASSESSEE HAS CHAL LENGED THE DISALLOWANCE OF INTEREST OF RS.13,08,070/ - . AT THE VERY OUTSET, THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE ISSUE HAS DULY BEEN COVERED BY THE DECISION OF THE HONBLE ITAT IN THE ASSESSEES OWN CASE IN ITA. NO.3999/MUM/2018 FOR TH E A.Y.2014 - 15 DATED 10.07.2020 , THEREFORE, THE INTEREST IS LIABLE TO BE ALLOWED IN THE IN INTEREST OF JUSTICE. HOWEVER, ON THE OTHER HAND, THE LD. REPRESENTATIVE OF THE DEPARTMENT HAS REFUTED THE SAID CONTENTION. BEFORE GOING FURTHER, WE DEEM IT NECESSARY TO ADVERT THE FINDING OF THE HONBLE ITAT IN THE ASSESSEES OWN CASE (SUPRA). THE RELEVANT FINDING IS HEREBY REPRODUCED AS UNDER.: - 6. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL ON RECORD. THE UNDISPUTED FACTS ARE THAT THE ASSESSEE HAS S UFFICIENT INTEREST - FREE FUNDS AVAILABLE WITH IT AS IT IS A LISTED COMPANY AND HAS HUGE FUNDS AVAILABLE WITH IT. EVEN DURING THE YEAR, ASSESSEE HAS EARNED PROFIT OF RS. 18,40,85,924/ - . THEREFORE, WE ARE NOT IN A POSITION TO CONCUR WITH THE CONCLUSIONS DRAWN EITHER BY THE LD. CIT(A) OR THE ASSESSING OFFICER ON THIS ISSUE. THE TAX AUTHORITIES CANNOT BE ALLOWED TO SIT ON THE CHAIR OF A BUSINESSMAN AND DECIDE WHAT IS RIGHT OR WRONG FOR THE BUSINESS. IN THIS CASE, WE NOTE THAT THE ASSESSEES OWN FUNDS ARE FAR MOR E THAN THE ADVANCE PAID FOR BOOKING OF BUNGALOW AS IS CLEAR FROM THE FACTS GIVEN HEREINABOVE. THEREFORE BOTH THE AUTHORITIES BELOW HAVE GROSSLY ERRED WHILE DECIDING THE ISSUE. THE CASE OF ASSESSEE IS SQUARELY COVERED BY THE DECISION OF HONBLE SUPREME COUR T IN THE CASE OF CIT VS RELIANCE INDUSTRIES LTD. (2019) 410 ITR 466 (SC) WHEREIN THE HONBLE SUPREME COURT HAS CONFIRMED THE ORDER OF HON'BLE BOMBAY HIGH COURT UPHOLDING THE ORDER OF TRIBUNAL WHEREIN IT HAS BEEN HELD THAT WHERE INTEREST - FREE FUNDS AVAILABL E WITH ASSESSEE WERE SUFFICIENT TO MEET THE INVESTMENTS, IT ITA NO . 3666 / M/201 9 A.Y. 2015 - 16 4 COULD BE PRESUMED THAT THE INVESTMENT WAS MADE FROM INTEREST - FREE FUNDS AVAILABLE WITH THE ASSESSEE. WE, THEREFORE, RESPECTFULLY FOLLOWING THE SAME, SET - ASIDE THE ORDER OF LD. CIT(A) AND DIRECT TH E ASSESSING OFFICER TO DELETE THE DISALLOWANCE. 5 . IN THIS YEAR ALSO THE SITUATION IS NOT DIFFERENT. THE ASSESSEE MADE ADVANCE PAYMENT OF RS. 1,01,38,081/ - FOR PURCHASE OF FLATS/OFFICE PREMISES FOR INVESTMENT PURPOSES. DURING THE YEAR UNDER CONSIDERATION, OUT OF FREE RESERVE AND SURPLUS AT THE START OF YEAR I.E. AS ON 01.04.2014 WHICH WERE RS.92,23,29,567/ - (RS.92,59,58,257/ - RESERVE & SURPLUS LESS RS.36,28,690/ - REVALUATION RESERVE). THE PROFIT WAS TO THE TUNE OF RS. 11,22,99,267/ - AFTER TAX IN SUM OF RS.4,6 0,29,360/ - PLUS DEPRECIATION RS.6,62,69,907/ - . THE FINDING OF THE CASE DECIDED BY THE HONBLE BOMBAY HIGH COURT TITLED AS CIT VS. RELIANCE UTILITIES & POWER LTD 313 ITR 340 IS DULY APPLICABLE TO THE FACTS OF THE PRESENT CASE IN WHICH IT IS SPECIFICALLY HEL D THAT IF THERE ARE FUNDS AVAILABLE BOTH INTEREST FREE AND OVERDRAFT AND /OR LOANS TAKEN THEN A PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF THE INTEREST FREE FUND GENERATED OR AVAILABLE WITH THE COMPANY, IF THE INTEREST FREE FUNDS ARE SUFFICIEN T TO MEET THE INVESTMENT . SINCE THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE HONBLE ITAT IN THE ASSESSEES OWN CASE (SUPRA), THEREFORE, WE SET ASIDE THE FINDING OF THE CIT(A) ON THIS ISSUE AND ALLOWED THE CLAIM OF THE ASSESSEE. ISSUE NO.2 6 . UNDER THIS ISSUE THE ASSESSEE HAS CHALLENGED THE CONFIRMATION OF DISALLOWANCE OF RENT EXPENSES OF RS.4,92,000/ - . THE LD. REPRESENTATIVE OF THE ASSESSEE HAS ARGUED THAT THE ASSESSEE HAS TAKEN THE PREMISES AT VAPI, & LONAV LA FOR THE PURPOSE OF BUSINESS AND IN THI S REGARD, THE COPY OF AGREEMENT ARE ON THE FILE BUT THE CIT(A) HAS WRONGLY HELD THAT THE SAID ITA NO . 3666 / M/201 9 A.Y. 2015 - 16 5 PREMISES WAS NOT FOR THE PURPOSE OF BUSINESS, THEREFORE, THE FINDING OF THE CIT(A) IS NOT JUSTIFIABLE, HENCE, IS LIABLE TO BE SET ASIDE. HOWEVER, ON THE OTHER HAN D, THE LD. REPRESENTATIVE OF THE DEPARTMENT HAS STRONGLY RELIED UPON THE ORDER PASSED BY THE CIT(A) IN QUESTION. THE ASSESSEE HAS TAKEN THE PROPERTY AT VAPI ON RENT FROM M RS. CHANDRAMANI DEVI MODI IN SUM OF RS. 25,000/ - PER MONTH. THE PROPERTY WAS TAKEN FOR KEEPING OLD RECORDS. THE ASSESSEE FILED THE RENT AGREEMENT FOR THE PERIOD W.E.F. 1.10.2014 TO 30.09.2014 AND 1.10.2014 TO 30.09.2017 LIES AT PAGE NO. 6 TO 12 AND 13 TO 19 ON THE FILE. THE RENT AGREEMENT SPEAKS ABOUT THIS FACT THAT THE PROPERTY WAS TAKEN F OR THE BUSINESS PURPOSES. RENT HAS ALSO BEEN MENTIONED IN THE AGREEMENT. THE ASSESSEE ALSO BOOK THE PROPERTY ON LONAVL A ON RENT IN SUM OF RS. 10,000/ - PER MONTH WHICH WAS FOR THE RESIDENCE OF EMPLOYEES. THE TDS W AS DEDUCTED FROM EVERY PROPERTY . N OTHING IS O N RECORD TO WHICH IT CAN BE ASSUMED THAT THE PROPERTY WAS NOT USED FOR THE BUSINESS PURPOSES. AT LEAST, IT IS NECESSARY ON THE PART OF THE AO TO COLLECT SAME MATERIAL TO WHICH IT CAN BE ASSUMED THAT THE PROPERTY WAS NOT T AKEN ON RENT FOR THE BUSINESS PURPO SES. THE COPY OF AGREEMENT WITH REGARD TO THE RESIDENTIAL PROPERTY AT VAPI DATED 01.10.2011 TO 30.09.2014 AND DATED 01.10.2014 TO 30.09.2017 ARE ON THE FILE WHICH LIES AT PAGE NO. 27 TO 30 AND 31 TO 34 OF THE PAPER BOOK. THE COPY OF RECEIPT OF RENT PAID FO R THE PERIOD OF ON 01.04.2012 TO 31.03.2016 LIES AT PAGE NO. 35 OF THE PAPER BOOK . NO COGENT AND CONVINCING REASON ON THE RECORD TO DECLINE THE CLAIM OF THE ASSESSEE. T AKING INTO ACCOUNT ALL THE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE FINDING OF THE CIT( A) IS NOT JUSTIFIABLE, HENCE, WE SET ASIDE THE FINDING OF THE CIT(A) ON THIS ISSUE AND ALLOWED THE CLAIM OF THE ASSESSEE. ITA NO . 3666 / M/201 9 A.Y. 2015 - 16 6 7 . IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS HEREBY ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 01 /04 /20 2 1 SD/ - SD/ - ( RAJESH KUMAR ) (AMARJIT SINGH) / ACCOUNTANT MEMBER /JUDICIAL MEMBER MUMBAI; DATED : 01 /04 /2021 V IJAY PAL SINGH/ SR. P.S. / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2 . / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. / BY ORDER, //TRUE COPY// ( ASSISTANT REGISTRAR ) , / ITAT, MUMBAI