ACIT, CHENNAI V. M.Kangeyan, CHENNAI

ITA 426/CHNY/2014

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 77298 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-05-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 18-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHAJI P JACOB IRS
• Section: 143(3); 148

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI . , , ! ' BEFORE SHRI A.MOHAN ALANKAMONY, ACCOUNTANT MEMBER & SHRI VIKAS AWASTHY, JUDICIAL MEMBER ./ I.T.A. NO.426/MDS/2014 ( / ASSESSMENT YEAR : 2009-2010) THE ASSISTANT COMMISSIONER OF INCOME TAX COMPANY CIRCLE I(3) CHENNAI 600 034. ( # /APPELLANT) VS SHRI. M. KANGEYAN, NO.37, NANIAPPAN STREET, CHINDARIPET, CHENNAI 600 002. [PAN :ALXPK2314F] ( $% # /RESPONDENT) / APPELLANT BY : SHRI. SHAJI P. JACOB, IRS, ADDL.CIT. / RESPONDENT BY : NONE /DATE OF HEARING : 16.04.2014. ! /DATE OF PRONOUNCEMENT : 16.05.2014 & / O R D E R PER VIKAS AWASTHY, JUDICIAL MEMBER THE APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-II, CHENNA I, DATED 07.11.2013 FOR THE ASSESSMENT YEAR 2009-2010. I.T.A.NO.426 /MDS/2014 . :- 2 -: 2. THE ASSESSEE IS A DIRECTOR OF M/S. CHENNAI CORPO RATE CLUB PRIVATE LIMITED (HEREIN AFTER REFERRED TO AS THE C CCPL). THE ASSESSEE FILED HIS RETURN FOR THE ASSESSMENT YEAR 2009-2010, DATED 30.09.2009 DECLARING HIS INCOME AS D20,60,100/-. FROM THE SCR UTINY ASSESSMENT OF THE RETURN OF INCOME FOR ASSESSMENT YEARS 2007-0 8 & 2008-09 OF CCCPL IT TRANSPIRED THAT MORE THAN D 2 CRORES HAS BEEN ADVANCED TO THE ASSESSEE AS LOAN. A NOTICE U/S. 148 OF THE INC OME TAX ACT, 1961 (HEREIN AFTER REFERRED TO AS THE ACT) WAS ISSUED TO THE ASSESSEE. IN RE-ASSESSMENT PROCEEDINGS ADDITION OF D14,34,606/- WAS MADE ON ACCOUNT OF PERQUISITES U/S.2(24) (IV) (INTEREST FRE E LOAN) AVAILED BY THE ASSESSEE. AGGRIEVED AGAINST THE ASSESSMENT ORDER D ATED 26.12.2011 PASSED UNDER SECTION 143(3) R.W.S 147 OF THE ACT, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE COMMISSIONER OF INCO ME TAX (APPEALS). 3. IN APPEAL, THE COMMISSIONER OF INCOME TAX (APPEA LS) OBSERVED THAT THE ASSESSEE HAD PAID INTEREST OF D10,00,000/- ON THE SUMS BORROWED FROM CCCPL. THE COMMISSIONER OF INCO ME TAX (APPEALS) FURTHER OBSERVED THAT SIMILAR ISSUE HAD COME UP IN THE ASSESSMENT YEAR 2008-2009, WERE THE ASSESSEE HAD DRAWN A SUM OF D2.45 CRORES FROM CCCPL. THE ASSESSEE THEREAFTER PAID INTERES T ON THE SAID I.T.A.NO.426 /MDS/2014 . :- 3 -: AMOUNT IN SUBSEQUENT ASSESSMENT YEARS. IN FIRST AP PEAL, IT WAS HELD THAT SINCE THE ASSESSEE HAD PAID INTEREST ON THE BO RROWED AMOUNT FROM CCCPL THEREFORE, IT IS NOT A PERQUISITE U/S. 2(24)(IV) OF THE ACT AND THE ASSESSING OFFICER WAS DIRECTED TO DELETE TH E ADDITION. THE REVENUE CARRIED APPEAL TO THE TRIBUNAL IN ITA NO.66 8/MDS/2013. THE TRIBUNAL UPHELD THE FINDINGS OF THE COMMISSIONER OF INCOME TAX (APPEALS) AND DISMISSED THE APPEAL OF THE REVENUE. IN THE ASSESSMENT YEAR UNDER CONSIDERATION THERE IS NO CHANGE OF FACTS AND CIRCUMSTANCES. THE ASSESSEE HAS PAID INTEREST OF D10,00,000/- WHICH HAS BEEN REFLECTED IN THE RETURN OF INCOME OF THE ASSESSEE FOR THE ASSESSMENT YEAR 2013-14. THE COMM ISSIONER OF INCOME TAX (APPEALS) ALLOWED THE APPEAL OF THE ASSE SSEE. AGGRIEVED AGAINST THE ORDER, THE REVENUE HAS COME IN APPEAL BEFORE THE TRIBUNAL. 4. SHRI. SHAJI P. JACOB REPRESENTING THE DEPARTMENT SUBMITTED THAT THE COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN DELETING THE ADDITION OF D14,34,608/- MADE AS PERQUISITE U/S.2(2 4)(IV) OF THE ACT. THE ASSESSEE HAD TAKEN HUGE AMOUNT OF LOAN FROM CC CPL WITHOUT INTEREST. ON THE OTHER HAND, CCCPL HAD TO PAY IN TEREST ON THE BORROWINGS FOR FUNDING THE ASSESSEE. THE LD.DR FUR THER SUBMITTED THAT I.T.A.NO.426 /MDS/2014 . :- 4 -: PAYMENT OF INTEREST TO CCCPL IN SUBSEQUENT ASSES SMENT YEAR IS ONLY AN AFTER THOUGHT. 5. NONE HAS APPEARED ON BEHALF OF THE ASSESSEE DESP ITE SERVICE OF NOTICE. WE HAVE HEARD THE SUBMISSIONS MADE BY THE LD. DR AND HAVE ALSO PERUSED THE ORDERS OF THE AUTHORITIES BELOW. AN ADDITION HAS BEEN MADE U/S. 2(24)(IV) OF THE ACT TREATING INTEREST AM OUNT PAID BY CCCPL ON BORROWINGS AS PERQUISITES IN THE HANDS OF THE AS SESSEE. A PERUSAL OF THE IMPUGNED ORDER SHOWS THAT CCCPL HAD NOT AD VANCED THE SUM FROM BORROWED FUNDS. THE AMOUNT ADVANCED TO THE ASSESSEE HAS BEEN DULY REFLECTED IN THE FINANCIAL STATEMENT OF CCCPL. EARLIER, IN THE PERIOD RELEVANT TO ASSESSMENT YEAR 2008-09, THE ASSESSEE HAD BORROWED SUM FROM CCCPL AND HAD REPAID THE SAME ALONGWITH INTEREST. AT THAT TIME ALSO SIMILAR ADDITION WAS M ADE, WHICH WAS DELETED IN THE FIRST APPEAL. IN THE APPEAL OF REVE NUE THE CO-ORDINATE BENCH OF TRIBUNAL IN ITA NO.668/MDS/2013 DECIDED ON 04.09.2013 HAD UPHELD THE FINDINGS OF COMMISSIONER OF INCOME TAX ( APPEALS). THE TRIBUNAL HELD: W E FIND THAT NO SPECIFIC ERROR IN THE FINDINGS OF TH E LD.CIT(A) COULD BE POINTED OUT BY THE REVENUE. THE REVENUE HAS NOT DISPUTED THE FACT THAT THE INTEREST WAS ACTUALLY PAID BY THE ASS ESSEE IN RESPECT OF ADVANCES RECEIVED BY IT FROM THE COMPANY FOR THE YE AR UNDER CONSIDERATION. THE ONLY CONTENTION WAS THAT AS THE INTEREST WAS PAID IN SUBSEQUENT YEAR, SO IT WAS AN AFTERTHOUGHT AND T HEREFORE SHOULD BE IGNORED. THE FACT THAT INTEREST WAS PAID ON THE ADV ANCE RECEIVED BY I.T.A.NO.426 /MDS/2014 . :- 5 -: THE ASSESSEE WAS NOT DENIED. THUS, WE DO NOT FIND A NY ERROR IN THE FINDINGS OF THE LD. CIT(A) THAT THE LOAN RECEIVED B Y THE ASSESSEE FROM THE COMPANY IN QUESTION WAS NOT INTEREST-FREE LOAN, BUT THE SAME WAS INTEREST BEARING LOAN. FURTHER NO MATERIAL COULD B E BROUGHT ON RECORD BY THE REVENUE TO SHOW THAT ANY INTEREST EXPENDITUR E WAS ACTUALLY INCURRED BY THE COMPANY IN QUESTION FOR OR ON BEHAL F OF THE ASSESSEE. IT HAS NOT BEEN DISPUTED BY THE DEPARTMENT THAT INT EREST FREE MONEY IN THE FORM OF ENTRANCE FEE AND MEMBERSHIP FEE AVAI LABLE WITH THE COMPANY IN QUESTION WAS MORE THAN THE ADVANCE RECEI VED BY THE ASSESSEE FROM THE SAID COMPANY. FURTHER NO ERROR I N THE ORDER OF THE CIT(A) IN FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF V.M.SALGAOCAR & BROS. P LTD. (SUPRA) AND OF HONBLE CALCUTTA HIGH IN CIT VS. P.R.S.OBEROI (SUPRA) WAS POINTED OUT BY THE LD. D.R. IN THE ABOVE FACTS AND CIRCUMSTANCES OF THE C ASE, WE DO NOT FIND ANY GOOD REASON TO INTERFERE WITH THE ORDER OF THE CIT(A), WHICH IS CONFIRMED AND THE GROUNDS OF APPEAL OF REVENUE ARE DISMISSED. 6. IN THE PRESENT APPEAL, THE REVENUE HAS ADMITTED THE FACT, THAT THE INTEREST HAS ACTUALLY BEEN PAID BY THE ASSESSEE IN RESPECT OF AMOUNTS RECEIVED FROM CCCPL. WE DO NOT FIND ANY REASON TO INTERFERE WITH THE IMPUGNED ORDER. THE APPEAL OF T HE REVENUE IS DISMISSED. ORDER PRONOUNCED ON FRIDAY, THE 16TH OF MAY, 201 4, AT CHENNAI. SD/- SD/- ( . ) (A.MOHAN ALANKAMONY) / ACCOUNTANT MEMBER ( ) (VIKAS AWASTHY) ! / JUDICIAL MEMBER '# /DATED:16.05.2014. K.V #$ %& '& /COPY TO: 1. ( APPELLANT/ 2. / RESPONDENT / 3. ) ( )/CIT(A)/ 4. ) /CIT 5. &*+ , /DR/ 6. +- . /GF. I.T.A.NO.426 /MDS/2014 . :- 6 -: