M/s. V.K. International, New Delhi V. DCIT, New Delhi

ITA 4178/DEL/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 7286 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 1 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 3
• Next Hearing Date: 08-08-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 30-07-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: SATYAJEET GOEL CAS
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : SMC-3 : NEW DELHI BEFORE SHRI J. SUDHAKAR REDDY, ACCOUNTANT MEMBER ITA NO.4178/DEL/2014 ASSESSMENT YEAR : 2010-11 V.K. INTERNATIONAL, A-11-12, AMRIT NAGAR, BEHIND NDSE PART-I, NEW DELHI. PAN: AAAFV4599H VS. DCIT, CIRCLE-32(1), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI R.S. SINGHVI & SHRI SATYAJEET GOEL, CAS DEPARTMENT BY : SHRI RAJESH KUMAR, SR. DR DATE OF HEARING : 17.08.2016 DATE OF PRONOUNCEMENT : 31.08.2016 ORDER THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER OF THE CIT(A) DATED 21.5.2014 FOR THE ASSESSMENT YEAR 2010 -11. 2. THERE ARE ONLY TWO ISSUES ARISING IN THIS APPEAL . THE FIRST ISSUE IS THE DISALLOWANCE OF INTEREST U/S 36(1)(III) AND THE SECOND ISSUE IS THE ITA NO.4178/DEL/2014 2 DISALLOWANCE U/S 14A. AS FAR AS THE DISALLOWANCE U /S 14A IS CONCERNED, AS, ADMITTEDLY, THE ASSESSEE HAS NOT EARNED ANY DIV IDEND INCOME DURING THE YEAR, THE DISALLOWANCE CANNOT BE MADE IN TERMS OF THE JUDGEMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF CHEM I NVESTMENT 370 ITR 33. THUS, GROUND NO.3 OF THE ASSESSEE IS ALLOWED. 3. AS FAR AS THE DISALLOWANCE U/S 36(1)(III) IS CON CERNED, THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR AY 2009-10 VIDE ORDE R DATED 29 TH SEPTEMBER, 2014 HAD UPHELD THE ORDER OF THE CIT(A). 4. IN THE IMPUGNED ASSESSMENT YEAR, THE LD.CIT(A) H AS NOT FOLLOWED THE ORDER OF THE CIT(A) PASSED FOR THE IMMEDIATELY PRECEDING YEAR. AT PARA 5.5, HE HAS HELD: .. THUS, IN SUCH CIRCUMSTANCES, IT CAN BE INFERRE D THAT THE CAPITAL CONTRIBUTED BY THE PARTNERS OF THE APPELLANT FIRM H AS BEEN USED FOR BUSINESS PURPOSES. THE INVESTMENTS OF RS.5.99 CROR ES, SHOWN IN THE BALANCE SHEET, PRIMA-FACIE, ARE NOT FOR THE PURPOSE OF BUSINESS. NORMALLY, SUNDRY CREDITORS APPEARING IN THE BALANCE SHEET GET REFLECTED AS STOCK IN TRADE AND SUNDRY CREDITORS APPEARING IN THE BALANCE SHEET GET REFLECTED AS STOCK IN TRADE AND SUNDRY DEBTORS. HOWEVER, HERE IN CASE OF THE APPELLANT FIRM, NOT ONLY SUNDRY CREDITO RS BUT ALSO PART OF SECURED LOANS AND PARTNERS CAPITAL APPEARING IN TH E BALANCE SHEET ALSO GET REFLECTED AS STOCK IN TRADE AND SUNDRY DEBTORS. OUT OF FLOWING FUND, THE APPELLANT ALSO USED TO MAKE INVESTMENTS R ESULTING INCOME NOT CHARGEABLE TO TAX NOT ONLY OUT OF BUSINESS RECE IPTS BUT ALSO OUT OF ITA NO.4178/DEL/2014 3 LOAN. THE APPELLANT FIRM, AS BORROWER HAD NOT REPA ID THE PRINCIPAL SUM BORROWED ON INTEREST OUT OF BUSINESS PROFITS AT THE EARLIEST, BUT PREFERRED TO PAY INTEREST ON THE PRINCIPAL SUM BORR OWED BY DIVERTING THE SURPLUS/BORROWED MONEY IN THE INVESTMENTS OF RS .5.99 CRORES OVER THE YEARS, WHICH IS AGAINST THE NORMAL HUMAN BEHAVI OR. BEFORE THE BANK, THE APPELLANT, AS PER THE TERMS & AGREEMENTS OF LOANS, HAVE CATEGORICALLY ADMITTED TO HAVE USED ITS PARTNERS C APITAL IN THE BUSINESS; HOWEVER, HERE IT IS TAKING PLEA THAT IT H AS USED PARTNERS CAPITAL IN INVESTMENTS WHICH ARE NOT FOR THE PURPOS E OF BUSINESS. THESE TWO STAND ARE CONTRADICTORY TO EACH OTHER. 5. THE FINDING OF THE LD.CIT(A) THAT CAPITAL CONTRI BUTED BY THE PARTNERS WHICH IS INTEREST FREE FUNDS, HAS NOT GONE INTO INVESTMENTS. IT IS AGAINST THE PRESUMPTION LAID DOWN BY THE HONBLE BO MBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWER L TD. (2009) 313 ITR 340 (BOM). IN ANY EVENT, CONSISTENT WITH THE VIEW TAKEN BY THE BENCH IN THE ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT YEAR, AND ALSO THE FACT THAT IN THE SUBSEQUENT ASSESSMENT YEAR THE CLAIM OF THE ASSESSEE ON SIMILAR FACTS WAS ALLOWED, WE UPHOLD THE CONTENTION AND ALLOW THIS GROUND. ITA NO.4178/DEL/2014 4 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED. THE ORDER PRONOUNCED IN THE OPEN COURT ON 31.08.20 16. SD/- [J. SUDHAKAR REDDY] ACCOUNTANT MEMBER DATED, 31 ST AUGUST, 2016. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.