M/s. ABN Associates, Pune V. Income-tax Officer, Ward - 9(1), Pune

ITA 401/PUN/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 3656 (ITAT-PUNE)
• Duration Of Justice: 11 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 10-01-2019
• Assessment Year: 2012-2013
• Appeal Filed On: 27-02-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ARISES OUT OF PASSED

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH SMC, PUNE BEFORE SHRI R.S. SYAL, VICE PRESIDENT . / ITA NO.401/PUN/2018 / ASSESSMENT YEAR : 2012-13 M/S. ABN ASSOCIATES, JAI GANESH VISION, D-WING, IST FLOOR, AKURDI, PUNE 411035 PAN : AAMFA7702M VS. ITO, WARD -9(1), PUNE (APPELLANT) (RESPONDENT) / ORDER PER R.S.SYAL, VP : THIS APPEAL BY THE ASSESSEE ARISES OUT OF THE ORDER PASSE D BY THE CIT(A)-6, PUNE ON 02-11-2017 IN RELATION TO THE ASSESSMENT YEAR 2012-13. 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE CONFIRMATION OF ADDITION OF RS.26,34,632/- MADE BY THE ASSESSING OFFICER (AO) ON ACCOUNT OF DISALLOWANCE OF INTER EST PAID ON LOAN. APPELLANT BY SHRI KISHOR PHADKE RESPONDENT BY SHRI RAJESH GAWLI DATE OF HEARING 19-02-2019 DATE OF PRONOUNCEMENT 20-02-2019 ITA NO.401/PUN/2018 M/S. ABN ASSOCIATES 2 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESS EE IS ENGAGED IN THE BUSINESS OF CARRYING OUT INTERIOR WORK ON CONTRACT BASIS. ON VERIFICATION OF THE PROFIT AND LOSS ACCOUNT, IT WAS OBSERVED THAT A SUM OF RS.27,58,091/- WAS DEBITED UNDER THE HEAD INTEREST ON SCB LOAN. ON PERUSAL OF THE ASSESSEES BALANCE SHEET, IT WAS SEEN THAT THERE WAS NO OUTSTANDING LIABILITY IN RESPECT OF SUCH LOAN. ON FURTHER VERIFICATION, IT TRANSPIRED THAT THE ASSESSEE CREDITED A SUM O F RS.18,58,420/- ON 17-06-2011 AND FURTHER SUM OF RS.26,34,632/- ON 31-03-2012 TO THE ACCOUNT OF PARTNER, MR. BHAGIRATH SAIN. ON BEING CALLED UPON TO EXPLAIN THE NATURE OF INTEREST TRANSACTION, THE ASSESSEE SUBMITTED THAT THE SCB LOAN WAS ORIGINALLY TAKEN BY MR. BHAGIRATH SAIN FOR THE BUSINESS PREMISES USED BY THE ASSESSEE FIRM. IT WAS FURTHER EXPLA INED THAT MR. BHAGIRATH SAIN AVAILED FRESH LOAN AGAINST THE SAID PROPERTY IN HIS NAME AND ADJUSTED THE EXISTING LOAN OF SCB FROM SUCH FRESH LOAN. MR. BHAGIRATH SAIN, WHO IS THE LEGA L OWNER OF THE PREMISES IN WHICH BUSINESS OF THE ASSESSEE FIRM IS RUN, PASSED OVER 50% OF INTEREST ON SUCH NEW LOAN TO THE ASSESSEE-FIRM. IT IS THIS 50% OF INTEREST PAID BY MR. BHAGIRA TH SAIN, AMOUNTING TO RS.26,34,632/-, WHICH WAS DEBITED IN THE ITA NO.401/PUN/2018 M/S. ABN ASSOCIATES 3 BOOKS OF THE ASSESSEE FIRM AS INTEREST AND BECAME THE SUBJECT MATTER OF DISALLOWANCE. THE AO DENIED SUCH DEDUCTION ON THE GROUND THAT THE LOAN WAS AVAILED BY THE PARTNER OF T HE ASSESSEE FIRM AND NOT THE ASSESSEE FIRM. THE LD. CIT(A ) CONFIRMED THE ADDITION. 4. HAVING HEARD BOTH THE SIDES AND PERUSED THE RELEVANT MATERIAL ON RECORD, IT IS OBSERVED AS AN ADMITTED POSITION THAT MR. BHAGIRATH SAIN EARLIER AVAILED SOME LOAN FOR THE PURPOSE OF PURCHASING PROPERTY IN HIS NAME, WHICH WAS PARTLY USED BY THE ASSESSEE FIRM AS ITS BUSINESS PLACE. THE BALANCE OUTSTANDING IN SUCH LOAN AT RS.18,58,420/- WAS SQUARED U P BY MR. BHAGIRATH SAIN FROM THE FRESH LOAN OBTAINED BY HIM. M R. BHAGIRATH SAIN PAID INTEREST ON SUCH FRESH LOAN AND TRANSFER RED 50% OF SUCH INTEREST LIABILITY TO THE ASSESSEE FIRM. IT IS NOT UNDERSTANDABLE, NEITHER COULD THE LD. AR EXPLAIN THE REASONS BEHIND TRANSFERRING 50% OF THE LOAN TO THE ASSESSEE FIRM. T HE LD. AR CANDIDLY ADMITTED THAT 50% OF INTEREST ALLOCATED TO THE ASSESSEE FIRM WAS NOT BASED ON ANY REASONABLE CALCULATION AND HAS BEEN DONE IN AN AD HOC MANNER. IT IS NOT DENIED THAT THE ASSESSEE FIRM WAS USING THE PREMISES STANDING IN THE NAME O F ITA NO.401/PUN/2018 M/S. ABN ASSOCIATES 4 THE PARTNER FOR ITS BUSINESS PURPOSE WITHOUT PAYING ANY RENT. THE LD. AR SUBMITTED THAT SIMILAR POSITION WAS PREVAILING FOR THE IMMEDIATELY SUCCEEDING ASSESSMENT YEAR, NAMELY, 2013 -14 AND THE AO WHILE FINALIZING THE ASSESSMENT ORDER FOR SUCH Y EAR ON 18-03-2016, A COPY PLACED ON RECORD, HAS DEVISED A FORMULA FOR BIFURCATION OF TOTAL INTEREST BETWEEN THE ASSESSEE FIRM AND MR. BHAGIRATH SAIN AND ALLOWED INTEREST ACCORDINGLY. SINCE THE PREMISES, IN THE NAME OF MR. BHAGIRATH SAIN, AGAINS T WHICH SOME LOAN WAS TAKEN, WAS BEING USED BY THE ASSESSE E FIRM FOR ITS BUSINESS PURPOSES, IT IS OBVIOUS THAT SAME SORT O F COMPENSATION IS REQUIRED TO BE GIVEN TO THE PARTNER. IN THE GIVEN FACTS AND CIRCUMSTANCES, I AM OF THE CONSIDERED OPIN ION THAT THE ENDS OF JUSTICE WOULD MEET ADEQUATELY IF THE IMPUGNED ORDER, DISALLOWING ENTIRE INTEREST ON LOAN, IS SET-ASIDE AND TH E MATTER IS RESTORED TO THE FILE OF AO. I ORDER ACCORDINGLY AN D DIRECT HIM TO DECIDE THIS ISSUE AFRESH AS PER LAW AFTER ALLO WING REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE. NEEDLES S TO SAY, THE AO WILL TAKE INTO CONSIDERATION THE VIEW FORMED BY HIM IN FINALIZING THE ASSESSMENT FOR THE A.Y. 2013-14. ITA NO.401/PUN/2018 M/S. ABN ASSOCIATES 5 5. IN THE RESULT, THE APPEAL IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 20 TH FEBRUARY, 2019. SD/- (R.S.SYAL) / VICE PRESIDENT PUNE; DATED : 20 TH FEBRUARY, 2019 / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT; 2. / THE RESPONDENT; 3. ( ) / THE CIT (APPEALS)-6, PUNE 4. THE PR. CIT-5, PUNE 5. , , SMC / DR SMC, ITAT, PUNE; 6. / GUARD FILE. // TRUE COPY // / BY ORDER, // TRUE COPY // SENIOR PRIVATE SECRETARY , / ITAT, PUNE ITA NO.401/PUN/2018 M/S. ABN ASSOCIATES 6 DATE 1. DRAFT DICTATED ON 19-02-2019 SR.PS 2. DRAFT PLACED BEFORE AUTHOR 20-02-2019 SR.PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER. JM 5. APPROVED DRAFT COMES TO THE SR.PS/PS SR.PS 6. KEPT FOR PRONOUNCEMENT ON SR.PS 7. DATE OF UPLOADING ORDER SR.PS 8. FILE SENT TO THE BENCH CLERK SR.PS 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK 10. DATE ON WHICH FILE GOES TO THE A.R. 11. DATE OF DISPATCH OF ORDER. *