BHIMJI DUNGERSHI & CO, MUMBAI V. ITO WD, 13(3)(1), MUMBAI

ITA 4218/MUM/2012

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7864 (ITAT-MUMBAI)
• Duration Of Justice: 5 year(s) 6 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2017
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 18-06-2012
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: T A KHAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH B, MUMBAI BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER ITA NO.4218/M/2012 ASSESSMENT YEAR: 2008-09 M/S. BHIMJI DUNGERSHIM & CO., ROOM NO.15, 2 ND FLOOR, GAYA BUILDING, 109, YUSUF MAHERALI ROAD, MASJID BUNDER, MUMBAI-400 003 PAN: AAAFB6700A VS. ITO WARD 13(3)1, R.NO.428, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI - 400020 (APPELLANT) (RESPONDENT) PRESENT FOR: ASSESSEE BY : NONE REVENUE BY : SHRI T.A. KHAN, D.R. DATE OF HEARING : 05.12.2017 DATE OF PRONOUNCEMENT : 27.12.2017 O R D E R PER D.T. GARASIA , JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE ASSES SEE AGAINST THE ORDER DATED 22.03.2012 OF THE COMMISSIONER OF I NCOME TAX (APPEALS) [HEREINAFTER REFERRED TO AS THE CIT(A)] R ELEVANT TO ASSESSMENT YEAR 2008-09. 2. THE ONLY GROUND IN THIS APPEAL IS IN RESPECT OF DISALLOWING THE INTEREST OF RS.4,72,879/-. THE SHORT FACTS OF THE CASE ARE AS UNDER: THE FACTS OF THE CASE ARE THAT THE ASSESSEE HAS RE CEIVED ONLY ITA NO.4218/M/2012 M/S. BHIMJI DUNGERSHIM & CO. 2 INTEREST OF RS.3,57,000/- AND AFTER CLAIMING INTERE ST PAYMENT OF RS.4,72,879/- AND OTHER EXPENSES, IT HAS SHOWN NET LOSS OF RS.1,20,249/-. IT WAS NOTICED BY THE ASSESSING OFFI CER (HEREINAFTER REFERRED TO AS THE AO) THAT OUT OF 5 PARTNERS, 4 PA RTNERS WERE HAVING DEBIT BALANCE IN THEIR CAPITAL ACCOUNT. HOWEVER, TH E ASSESSEE HAD NOT CHARGED INTEREST ON THE DEBIT BALANCE OF THE PARTNE RS. IT WAS ALSO NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAD GIVEN LOAN OF RS.60,81,905/- TO M/S. S.B. DEVELOPERS BUT HAD NOT CHARGED ANY INTEREST ON THE LOANS GIVEN TO IT. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY THE INTEREST DEBITED TO THE P & L ACCOUNTS' NOT BE DISALLOWED. THE ASSESSEE EXPLAINED THAT THE BUSINESS OF THE LOA NEE M/S.S.B.DEVELOPER CAME TO A STANDSTILL AND WAS ABAN DONED AND, THEREFORE, INTEREST WAS NOT CHARGED ON LOAN GIVEN T O M/S. S.B.DEVELOPERS. THE AO DID NOT FIND THE EXPLANATIO N ACCEPTABLE. HE, THEREFORE, WORKED OUT THE INTEREST ATTRIBUTABLE TO THE FUNDS NOT USED FOR BUSINESS PURPOSES. SINCE IN THE SAID WORK ING, THE DISALLOWANCE OF INTEREST EXCEEDED RS.4,72,879/- DEB ITED TO THE P & L ACCOUNT, HE DISALLOWED THE ENTIRE RS.4,72,879/-. 3. MATTER CARRIED TO THE LD. CIT(A) AND THE LD. CI T(A) HAS DISMISSED THE APPEAL OF THE ASSESSEE. 4. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE P ARTIES. WE FIND THAT THE LD. CIT(A) HAS DEALT THIS ISSUE FAIRL Y IN HIS ORDER IN PARAGRAPHS 8, 9, 10 & 11 WHICH READ AS UNDER: 8. I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS ITA NO.4218/M/2012 M/S. BHIMJI DUNGERSHIM & CO. 3 MADE BY THE ASSESSEE. I NOTICE THAT THE ASSESSEE HA S ADVANCED LOANS OF RS.19,15,000/- DURING THE VARIOUS YEARS OUT OF WHIC H LOAN OF RS.9,50,000/- HAS BEEN RETURNED TO IT. HENCE AS ON 31/03/2008, TH E PRINCIPAL AMOUNT OF LOAN ADVANCED IS RS.9.65 IAKHS. THE BALAN CE AMOUNT OF RS.51,16,905/- (RS.60,81,905/- - RS.9,65,000/-) REP RESENTS INTEREST ACCRUED TO THE ASSESSEE UPTO 31/03/2005 AFTER WHICH THE ASSESSEE HAS STOPPED RECOGNIZING AND ACCOUNTING FOR THE INTEREST WHICH SHOULD ACCRUE ON THE OUTSTANDING BALANCE SINCE THERE WAS U NCERTAINTY ABOUT RECOVERABILITY OF SUCH INCOME. HENCE, THE OUTSTANDI NG BALANCE IS SHOWN AT RS.60,81,905/- AS AT 31/03/2008 ALSO. THE ASSESSEE HAS ALSO FURNISHED COPY OF NOTICE OF MOTION NO.3984 OF 2005 IN SUIT NO.5233 OF 1999 WHEREIN THE ASSESSEE IS THE PLAINTIFF AND M/S. S.B. DEVELOPERS IS ONE OF THE DEFENDANTS AND IN WHICH THE ASSESSEE HAS MAD E A CLAIM TO THE AMOUNTS PAID TO THE SAID S.B.DEVE!OPERS. 9. FROM A PERUSAL OF THE NOTICE OF MOTION AS ABOVE, I FIND THAT THE ASSESSEE HAS CLAIMED THAT IT HAD PAID AN AMOUNT OF RS.46,08,915/- TO THE SAID M/S.S.B.DEVELOPERS BY CHEQUE WHEREAS AS PER TH E DETAILS FILED IN THE APPELLATE PROCEEDINGS, THE ASSESSEE HAS SHOW N THAT IT HAD MADE PAYMENT OF ONLY RS.19,15,000/- AS LOAN. HENCE, THE DETAILS IN THE NOTICE OF MOTION DO NOT MATCH WITH THE DETAILS FURN ISHED BY THE ASSESSEE IN THE APPELLATE PROCEEDINGS. THE ASSESSEE HAS NOT SHOWN THAT THE AMOUNTS IN QUESTION WAS GIVEN FOR THE PURPOSE O F ITS BUSINESS AND FOR EARNING INCOME. ALTHOUGH, THE ASSESSEE HAS CLAI MED THAT IT HAD ACCOUNTED FOR SOME INTEREST INCOME IN RESPECT OF TH E LOANS GIVEN TO S.B. DEVELOPERS, NO EVIDENCE IN SUPPORT OF THE CLAIM HAS BEEN FURNISHED BEFORE ME. AT THE SAME TIME, IT HAS BEEN ADMITTED B Y THE ASSESSEE THAT NO INTEREST INCOME HAS BEEN ACCOUNTED FOR DURING TH E ASSESSMENT YEAR IN QUESTION AND IN THE EARLIER FEW YEARS. IN THE ABSEN CE OF ANY DETAILS TO SHOW THAT THE AMOUNT WAS ADVANCED TO S.B. DEVELOPERS BY THE A SSESSEE FOR THE PURPOSE OF ITS BUSINESS OR FOR EARNING INCOME AND IN, VIEW OF THE AFORESAID REASONS, IT CANNOT BE CONCLUDED THAT THE BORROWED F UNDS ON WHICH THE ASSESSEE HAS CLAIMED INTEREST EXPENDITURE WAS GIVEN TO M/S. S.B. DEVELOPERS FOR THE PURPOSE OF BUSINESS. HENCE, PROP ORTIONATE INTEREST OUT OF THE INTEREST EXPENDITURE CLAIMED AS DEDUCTIO N IN THE P & L ACCOUNT WILL HAVE TO DISALLOWED AS NOT INCURRED WHO LLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE. 10. AT THE SAME TIME, THE ASSESSEE HAS ITSELF ADMIT TED THAT BORROWED FUNDS WERE USED BY THE FOUR PARTNERS WHOSE ACCOUNTS SHOWED DEBIT BALANCES AND INTEREST CHARGEABLE ON SUCH DEBIT BALA NCES WAS RS.1,31,760/-. HOWEVER, THE CLAIM OF THE ASSESSEE T HAT THIS AMOUNT SHOULD BE REDUCED BY THE INTEREST PAYABLE OF RS.53, 973/- ON CREDIT BALANCE IN CAPITAL ACCOUNT OF ONE PARTNER CANNOT BE ACCEPTED SINCE NO SUCH NETTING OFF IS PERMISSIBLE IN A CASE WHERE INT EREST ATTRIBUTABLE TO BORROWED FUNDS NOT USED FOR THE PURPOSES OF BUSINES S IS TO BE WORKED OUT AND QUANTIFIED. ITA NO.4218/M/2012 M/S. BHIMJI DUNGERSHIM & CO. 4 11. IN VIEW OF THE AFORESAID REASONS, THE DISALLOWA NCE OF INTEREST OF RS.4,72,879/- MADE BY THE ASSESSING OFFICER IS UPHE LD. THE GROUNDS OF APPEAL FILED BY THE ASSESSEE ARE DISMISSED. 5. THE ASSESSEE DID NOT PRESENT BEFORE THE TRIBUNAL AND NO DOCUMENTARY EVIDENCE WAS SUBMITTED AGAINST THE FIND ING OF THE LD. CIT(A). HENCE, WE DISMISS THE APPEAL OF THE ASSESS EE. 6. IN THE RESULT, APPEAL OF THE ASSESSEE IS DISMISS ED. ORDER PRONOUNCED IN THE OPEN COURT ON 27.12.2017. SD/- SD/- (G. MANJUNATHA) (D.T. GARASIA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 27.12.2017. * KISHORE, SR. P.S. COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT (A) CONCERNED, MUMBAI THE DR CONCERNED BENCH //TRUE COPY// [ BY ORD ER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.