RICO APPLIANCES P.LTD, MUMBAI V. ITO 7(2)(1), MUMBAI

ITA 4067/MUM/2012

• Counselvise Citation: 406719914 RSA 2012
• Duration Of Justice: 1 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 23-10-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 08-06-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: AARSI PRASAD
• Assessee Lawyers: K R LAKSHMI NARAYANAN
• Keywords: Source of fund; Proportionate interest
• Section: 143(3)

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI - D BENCH. . . .. . . .. . !' !' !' !' , ! ! ! ! BEFORE S/SH.I.P.BANSAL, JUDICIAL MEMBE R & RAJENDRA,ACCOUNTANT MEMBER /. /./. /. ITA NO.4067/MUM/2012, $ % $ % $ % $ %/ // / ASSESSMENT YEAR-2007-08 M/S RICO APPLIANCES PVT. LTD. 95/207, DSP ROAD, DADAR MUMBAI- 400014 VS. ITO 7(2)(1) 6TH FLOOR, AAYAKAR BHAVAN, MUMBAI-400020 PAN: AAACR1910P ( &' / // / APPELLANT ) ( ()&' / RESPONDENT ) $ *+ , ! $ *+ , ! $ *+ , ! $ *+ , ! / // / ASSESSEE BY : SHRI K.R.LAKSHMINARAYANAN - , ! / REVENUE BY : SHRI AARSI PRASAD $ - + $ - + $ - + $ - + / // / DATE OF HEARING : 23-10-2013 ./% - + / DATE OF PRONOUNCEMENT : 13-11-2013 $ $ $ $ , 1961 - - - - 254 ) )) ) 1 ( (( ( ! +2+ !3 ! +2+ !3 ! +2+ !3 ! +2+ !3 ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA,AM: CHALLENGING THE ORDER DATED 13.01.2012 OF THE CIT(A )-13,MUMBAI,ASSESSEE-COMPANY HAS RAISED FOLLOWING GROUNDS OF APPEAL: 1.THE ORDER PASSED BY THE LEARNED CIT (A) IS BAD IN LAW. 2.THE LEARNED CIT (A) ERRED IN SUSTAINING THE DISAL LOWANCE OF AN AMOUNT OF RS.10,76,102/- OUT OF FINANCE CHARGES ON THE GROUND THAT APPELLANT WAS HA VING OVERDRAFT FACILITY WITH THE BANK. 3.THE LEARNED CIT(A) FAILED TO TAKE NOTE OF THE IMP ORT OF THE JURISDICTIONAL HIGH COURT DECISION IN CIT VS. RELIANCE UTILITIES & POWER LTD 313 ITR 340 BORN.HOLDING THAT WHERE FUNDS WERE AVAILABLE BOTH INTEREST FREE AND OVERDRAFT AND /OR LOAN TAKEN PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF INTEREST FREE FUNDS GENERATED / AVA ILABLE WITH THE CO. IF THE INTEREST FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENT. 4.THE LEARNED CIT(A) ALSO FAILED TO TAKE NOTE OF FA CT THAT COMPARED TO INVESTMENT IN IMMOVABLE PROPERTY OF RS. 57,94,913/- APPELLANT HAD MUCH MORE INTEREST FREE FUND AS UNDER: RESERVE & SURPLUS RS. 50,21,206/- SHARE CAPITAL RS.10,00,000 /- INTEREST FREE DEPOSIT FROM TENANT RS. 15,12,000/- INTEREST FREE DEPOSIT FROM TENANT RS. 11,88,000/- RS. 87,21,206/- APART FROM THAT APPELLANT HAD RECEIVED RENTAL INCOM E OF RS. 56,92,597/- 5.IT IS PRAYED THAT THE DISALLOWANCES OF INTEREST O F RS.10,76,102/- OUT OF TOTAL EXP.OF RS.13,99, 3 13/- MAYBE DELETED. 6.THE APPELLANT CRAVES LIBERTY TO ADD, AMEND, ALTER , AND/OR WITHDRAW ANY OF THE ABOVE GROUNDS OF APPEAL. 2 ITA NO. 4067/MUM/2012 M/S RICO APPLIANCES PVT. LTD. THOUGH THERE ARE 6 GROUNDS OF APPEAL BUT THE EFFECT IVE GROUND OF APPEAL IS ABOUT DISALLOWANCE MADE BY THE ASSESSING OFFICER (AO) OUT OF FINANCE C HARGESASSESSEE-COMPANY HAD FILED ITS RETURN OF INCOME ON 29.10.2007 DECLARING TOTAL INCOME OF R S. 4.89 LACS. AO FINALISED THE ASSESSMENT ON 28.10.2009,U/S. 143(3) OF THE ACT,DETERMINING THE T OTAL INCOME OF THE ASSESSEE AT RS. 22.23 LACS. 2. DURING THE ASSESSMENT PROCEEDINGS, AO FOUND THAT AS SESSEE HAD DEBITED A SUM OF RS. 13.99 LACS ON ACCOUNT OF FINANCE EXPENSES, THAT A SUM OF RS. 5 7.94 LACS HAD BEEN SHOWN UNDER THE HEAD LOANS AND ADVANCES FOR PURCHASE OF IMMOVABLE PROPER TIES, THAT THE ADVANCES HAD BEEN GIVEN DURING THE YEAR UNDER CONSIDERATION. HE DIRECTED TH E ASSESSEE TO EXPLAIN AS TO WHY THE CLAIM OF FINANCE EXPENSES, TO THE EXTENT RELATED TO APPLICAT ION OF FUND IN INVESTMENT, SHOULD NOT BE DISALLOW -ED PROPORTIONATELY.AFTER CONSIDERING THE SUBMISSIO N OF THE ASSESSEE, AO HELD THAT FROM THE BALANCE-SHEET FOR THE YEAR UNDER CONSIDERATION IT WAS EVIDENT THAT THERE WAS NO INCREASE IN SHARE CAPITAL THAT THE ASSESSEE HAD NOT FURNISHED ANY FUN D FLOW STATEMENT IDENTIFYING THE SOURCE OF FUND THAT HAD BEEN PUT IN INVESTMENT.AFTER CONSIDERING T HE COMPUTATION OF PROPORTIONATE INTEREST ATTRIBUTABLE TO INVESTMENT,AO MADE A DISALLOWANCE O F RS.10.76 LACS. 2.1. ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPEL LATE AUTHORITY (FAA).AFTER CONSIDERING THE FACTS OF THE CASE AND THE ASSESSMENT ORDER HE HELD THAT PERUSAL OF THE BANK STATEMENT SHOWED THAT THE AT THE TIME WHEN THE PAYMENTS WERE MADE TOWARDS ADVANCE FOR PURCHASE OF IMMOVABLE PROPERTY, ASSESSEE WAS HAVING AN OVERDRAFT BALANCE, THAT THERE WAS NO PROOF THAT THE ASSESSEE HAD SUFFICIENT FREE FUNDS BY WAY OF SHARE CAPITAL,RESER VES AND SURPLUS,THAT ASSESSEE HAD FAILED TO DISCHARGE THE ONUS CAST UPON IT.FINALLY, HE UPHELD PROPORTIONATE DISALLOWANCE OF INTEREST ATTRIBU - TABLE TO INVESTMENT. 2.2. BEFORE US,AUTHORISED REPRESENTATIVE (AR) SUBMITTED THAT ASSESSEE HAD SUFFICIENT INTEREST FREE FUND IN THE FORM OF RESERVE AND SURPLUS, SHARE CAPI TAL AND INTEREST FREE DEPOSITS FROM THE TENANT, THAT THE INTEREST FREE FUND (RS. 87.21 LACS) WAS MO RE THAN THE INVESTMENT MADE (RS. 5794 LACS), THAT THE ASSESSEE HAD RECEIVED RENTAL INCOME OF RS. 56.92 LACS DURING THE YEAR UNDER CONSIDERATION, FAA HAD NOT CONSIDERED THESE FACTS. HE RELIED UPON THE ORDER OF THE JURISDICTIONAL HIGH COURT DELIVERED IN THE CASE RELIANCE UTILITIES AND POWER LTD. (313 ITR 340). DEPARTMENTAL REPRESENTATI -VE(DR)SUPPORTED THE ORDER OF THE FAA. 2.3. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US. IT IS FOUND THAT ASSESSEE HAD MADE A CLAIM THAT INTEREST FREE FUND A ND RENT RECEIVED BY IT WAS AVAILABLE FOR MAKING INVESTMENT IN IMMOVABLE PROPERTIES DURING THE YEAR UNDER CONSIDERATION.WE FURTHER FIND THAT AO/FAA HAS NOT GONE INTO THE FACTS AND HAVE NOT DEC IDED THE ISSUE ON THE BASIS OF SUBMISSIONS MADE BEFORE THEM. WE ALSO FIND THAT THEY DID NOT HA VE THE BENEFIT OF THE JUDGMENT DELIVERED BY THE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILI TIES AND POWER LTD. (SUPRA). 3. WE ARE OF THE OPINION THAT THE MATTER NEEDS FURTHER VERIFICATION. THEREFORE, IN THE INTEREST OF JUSTICE MATTER IS RESTORED BACK TO THE FILE OF THE AO TO DECIDE THE ISSUE AFRESH AFTER AFFORDING A REASONABLE OPPORTUNITY OF HEARING TO THE ASSESSEE A ND AFTER CONSIDERING THE ABOVE REFERRED JUDGMENT OF THE JURISDICTIONAL HIGH COURT.EFFECTIVE GROUND OF APPEAL FILED BY THE ASSESSEE IS DECIDED IN ITS FAVOUR,IN PART. AS A RESULT,APPEAL FILED BY THE ASSESSEE-COMPANY ST ANDS PARTLY ALLOWED. * 4 $ *+ - 3 4 ! 5 - + 67. ORDER PRONOUNCED IN TH E OPEN COURT ON 13 TH NOVEMBER,2013 . !3 - ./% ! 8 9$ 13 UOA UOAUOA UOA , 2013 / - 2 : 3 ITA NO. 4067/MUM/2012 M/S RICO APPLIANCES PVT. LTD. SD/- SD/- ( . .. . . / I.P.BANSAL ) ( !' !' !' !' / RAJENDRA) / JUDICIAL MEMBER ! ! ! ! /ACCOUNTANT MEMBER / MUMBAI, 9$ /DATE: 13 .1 1 . 2013 SK !3 - (+; , 4. THE CONCERNED CIT/ = > 5. DR D BENCH, ITAT, MUMBAI / ;?2 (+$ , . . . 6. GUARD FILE/ 2 @ );+ (+ );+ (+ );+ (+ );+ (+ //TRUE COPY// !3$ / BY ORDER, A / 6 DY./ASST. REGISTRAR , /ITAT, MUMBAI