ITO6(1)(3), MUMBAI V. BEBANCO DEVELOPERS LIMITED, MUMBAI

ITA 4281/MUM/2019

• Counselvise Citation: [2021] 109 COUNSELVISE.COM (IT) 4489 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-02-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 19-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: THARIAN OOMMEN LD
• Assessee Lawyers: SATISH MODY LD
• Section: 143(3)

Judgement Text

ITA NO.4281 & 4282/MUM/2019 M/S. BEBANCO DEVELOPERS LTD. ASSESSMENT YEARS: 2014-15 & 2015-16 1 IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI , , BEFORE HONBLE SHRI AMARJIT SINGH, JM AND HONBLE SHRI MANOJ KUMAR AGGARWAL, AM (HEARING THROUGH VIDEO CONFERENCING MODE) ./ I.T.A. NO.4281/MUM/2019 ( / ASSESSMENT YEAR: 2014-15) & ./ I.T.A. NO.4282/MUM/2019 ( / ASSESSMENT YEAR: 2015-16) INCOME TAX OFFICER - 6(1)(3) ROOM NO.508, 5 TH FLOOR AAYKAR BHAVAN, M.K. ROAD MUMBAI-400 020. / VS. M/S. BEBANCO DEVELOPERS LIMITED SHIV SAGAR ESTATE, BLOCK A, 2 ND FLOOR DR. ANNIE BESANT ROAD, WORLI MUMBAI-400 018. '# ./ ./PAN/GIR NO. AADCB-9977-B ( !#% /APPELLANT ) : ( &'#% / RESPONDENT ) REVENUE BY : SHRI THARIAN OOMMEN-LD. DR ASSESSEE BY : SHRI SATISH MODY-LD. AR / DATE OF HEARING : 28/01/2021 / DATE OF PRONOUNCEMENT : 04/02/2021 / O R D E R MANOJ KUMAR AGGARWAL (ACCOUNTANT MEMBER) 1. FACTS AS WELL AS ISSUES IN AFORESAID APPEALS BY REVENUE FOR ASSESSMENT YEARS 2014-15 & 2015-16 ARE COMMON AND T HEREFORE THE APPEALS WERE HEARD TOGETHER AND ARE NOW BEING D ISPOSED-OFF BY WAY OF THIS COMMON ORDER FOR THE SAKE OF CONVENI ENCE & BREVITY. ITA NO.4281 & 4282/MUM/2019 M/S. BEBANCO DEVELOPERS LTD. ASSESSMENT YEARS: 2014-15 & 2015-16 2 2. THE APPEAL FOR AY 2014-15 CONTEST THE ORDER OF L EARNED COMMISSIONER OF INCOME TAX (APPEALS)-12, MUMBAI [IN SHORT REFERRED TO AS CIT(A)], APPEAL NO. CIT(A)-12/ACIT - 6(1)(3)/445/2016-17 DATED 12/03/2019 QUA DELETING ADDITION OF INTEREST DISALLOWANCE OF RS.398.52 LACS. THE ASSESS MENT FOR THE YEAR UNDER CONSIDERATION WAS FRAMED BY LD. ASSESSIN G OFFICER U/S 143(3) ON 27/12/2016. THE ASSESSEE BEING RESIDENT C ORPORATE ASSESSEE IS STATED TO BE ENGAGED IN DEVELOPMENT OF INFRASTRUCTURE PROJECTS. 3. WE HAVE CAREFULLY HEARD THE RIVAL SUBMISSIONS AN D PERUSED RELEVANT MATERIAL ON RECORD INCLUDING THE ORDERS OF LOWER AUTHORITIES. OUR ADJUDICATION TO THE SUBJECT MATTER OF APPEAL WO ULD BE AS GIVEN IN SUCCEEDING PARAGRAPHS. 4.1 THE IMPUGNED INTEREST DISALLOWANCE STEMS FROM T HE FACT THAT DURING ASSESSMENT PROCEEDING, IT TRANSPIRED THAT TH E ASSESSEE ENTERED INTO AN AGREEMENT ON 30/03/2013 WITH ITS HO LDING COMPANY NAMELY B.E.BILLIMORIA & CO. LTD. (BEBL) WHEREIN LOHEGAON PROJECT SITUATED AT PUNE BEING DEVELOPED BY M/S BEBL WAS AS SIGNED TO THE ASSESSEE. AS PER TERMS OF THE AGREEMENT, THE AS SETS IN THE SHAPE OF ADVANCES FOR PURCHASE OF LAND FOR RS.70.04 CRORES, LOANS TO GAMMON & BILLIMORIA LTD. (GBL) FOR RS.46.3 3 CRORES AS WELL AS LAND DEVELOPMENT COST OF RS.26.51 CRORES WA S TRANSFERRED TO THE ASSESSEE. SIMILARLY, THE LIABILITIES IN THE SHAPE OF ADVANCES RECEIVED FOR RS.62.32 CRORES WAS ALSO TRANSFERRED T O THE ASSESSEE WHEREAS THE BALANCE AMOUNT OF RS.80.56 CRORES PAYAB LE BY THE ASSESSEE WAS TO BE TREATED AS LOAN PAYABLE BY THE A SSESSEE TO M/S BEBL ALONG WITH INTEREST. ITA NO.4281 & 4282/MUM/2019 M/S. BEBANCO DEVELOPERS LTD. ASSESSMENT YEARS: 2014-15 & 2015-16 3 4.2 DURING THE YEAR, THE ASSESSEE EARNED INTEREST I NCOME OF RS.423.17 LACS ON ADVANCES GIVEN TO M/S GBL AND PAI D INTEREST OF RS.398.52 LACS TO ITS HOLDING COMPANY M/S BEBL. THE NET INTEREST INCOME WAS OFFERED TO TAX. HOWEVER, LD. AO OPINED T HAT ADVANCES GIVEN TO M/S GBL BY M/S BEBL HAD NO CONNECTION WITH LOHEGAON PROJECT WHICH HAD NOT EVEN STARTED. THEREFORE, THE INTEREST EARNED BY THE ASSESSEE WOULD BE ASSESSABLE AS INCOME FROM OTHER SOURCES AND THE NETTING OFF OF THE INTEREST COST CO ULD NOT BE ALLOWED. FINALLY, THE INTEREST EXPENDITURE AS CLAIM ED BY THE ASSESSEE WAS DISALLOWED. 5. UPON FURTHER APPEAL, LD. CIT(A) APPRECIATED THE FACTUAL MATRIX AS WELL AS ASSESSEES FINANCIAL STATEMENTS AND DELE TED THE DISALLOWANCE WITH FOLLOWING FINDINGS AND OBSERVATIO NS: - 3.4 I HAVE CAREFULLY GONE THROUGH THE ASSESSMENT O RDER AND THE SUBMISSIONS OF THE ASSESSEE. PRIOR TO MOU AND TRANS FER OF GBL LOAN TO THE ASSESSEE, BEBCL WAS EARNING INTEREST AND PAYING TAX THEREON. IT IS SEEN THAT BEBCL TRANSFERRED THE LOHEGAON PROJECT RECEIPTS AND EXPENSES TO THE ASSESSEE COMPANY. IT IS ALSO SEEN THAT BEBCL ALSO T RANSFERRED THE LOAN GIVEN TO THE GBL TO THE BOOKS OF THE ASSESSEE ALONG WITH EQUAL AMOUNT OF LIABILITY ON WHICH THE ASSESSEE WAS LIABLE TO PAY I NTEREST TO BEBCL. THE INTEREST EARNED FROM THE GBL HAS A DIRECT NEXUS WIT H FUNDS OF BEBCL FOR WHICH THE APPELLANT PAID INTEREST. THIS HAS BEEN SU FFICIENTLY DEMONSTRATED BY THE ASSESSEE THROUGH THE ACCOUNTS OF THE COMPANY. T HEREFORE THE INTEREST PAID TO BEBCL CANNOT BE CAPITALIZED TO LOHEGAON PRO JECT AS THE INTEREST PAID TO BEBCL HAS ANYTHING TO DO WITH FUNDS USED IN LOHEGAON PROJ ECT. THUS THE ARGUMENT OF THE AO IS INCORRECT. IT IS NOT THE CASE WHERE FUNDS WERE BORROWED FOR THE PURPOSE OF BUSINESS AND THE EXCESS FUNDS WE RE PARKED BY THE COMPANY FOR EARNING INTEREST INCOME, COVERED BY THE TUTICORIN ALKALI CHEMICALS [1997] 227 ITR 172(SC). THIS IS A CASE WH ERE THE FUNDS FOR THE LOHEGAON PROJECT WERE TRANSFERRED SEPARATELY AND TH E LOAN TO GBL IN THE BOOKS OF THE HOLDING COMPANY WAS TRANSFERRED TO THE ASSESSEE ALONG EQUAL LIABILITY. THEREFORE THERE IS DIRECT NEXUS OF LOAN (ASSET) WITH LOAN (LIABILITY) IN THE BOOKS OF THE ASSESSEE COMPANY. 4. AFTER CONSIDERING THE TOTALITY OF FACTS, THE RI VAL SUBMISSIONS, APPLICABLE LAW AND ON THE BASIS OF DISCUSSIONS MENTIONED ABOVE , I HAVE COME TO A CONCLUSION THAT LOAN TO GBL [GAMMON & BILLIMORIA LT D] IS FROM THE FUNDS OF BEBCL [B.E. BILLIMORIA & CO. LTD], HAVING A DIRECT NEXUS AND THEREFORE INTEREST PAYABLE BEBCL IS AN ALLOWABLE EXPENDITURE AGAINST THE INTEREST ITA NO.4281 & 4282/MUM/2019 M/S. BEBANCO DEVELOPERS LTD. ASSESSMENT YEARS: 2014-15 & 2015-16 4 INCOME RECEIVED FROM GBL. THEREFORE, THE ADDITION O F RS.3,98,52,166 IS DELETED. THE GROUND OF APPEAL IS ACCORDINGLY ALLOWE D. AGGRIEVED AS AFORESAID, THE REVENUE IS IN FURTHER A PPEAL BEFORE US. 6. UPON CAREFUL CONSIDERATION OF FACTUAL MATRIX AS ENUMERATED IN PRECEDING PARAGRAPHS, IT IS QUITE EVIDENT THAT CERT AIN ASSETS AS WELL AS LIABILITIES DELVED UPON ASSESSEE PURSUANT TO AGR EEMENT DATED 30/03/2013 WITH ITS HOLDING COMPANY WHEREIN IT WAS AGREED THAT LOHEGAON PROJECT WOULD BE CARRIED OUT BY THE ASSESS EE. THE DIFFERENTIAL OF ASSETS AND LIABILITIES WAS TREATED AS LOAN FROM M/S BEBL TO THE ASSESSEE FOR WHICH THE ASSESSEE PAID IN TEREST EXPENDITURE OF RS.398.52 LACS DURING THE YEAR. THE ASSESSEE ALSO EARNED INTEREST INCOME OF RS.423.17 LACS FROM LOAN GRANTED BY ITS HOLDING COMPANY TO M/S GBL WHICH WAS ALSO TRANSFERR ED TO THE ASSESSEE UNDER THE SAID AGREEMENT. THE NET INTEREST , THUS EARNED, HAS BEEN OFFERED TO TAX. WE FIND THAT THERE IS CLEA R NEXUS BETWEEN THE INTEREST INCOME AS WELL AS INTEREST EXPENDITURE . AS RIGHTLY NOTED BY LD. CIT(A), IT WAS NOT THE CASE THE CASE WHERE T HE FUNDS WERE BORROWED FOR THE PURPOSE OF BUSINESS AND THE EXCESS FUNDS WERE PARKED BY THE COMPANY FOR EARNING INTEREST INCOME. THIS WAS A CASE WHERE THE FUNDS FOR THE LOHEGAON PROJECT WERE TRANSFERRED SEPARATELY AND THE LOAN TO GBL IN THE BOOKS OF THE HOLDING COMPANY WAS TRANSFERRED TO THE ASSESSEE ALONG WITH EQUAL LIABILITY. THEREFORE THERE WAS A DIRECT NEXUS OF LOAN (ASSET) WITH LOAN (LIABILITY) IN THE BOOKS OF THE ASSESSEE COMPANY. T HESE FINDINGS REMAIN UNDISTURBED BEFORE US ALSO. THEREFORE, WE FI ND NO REASON TO INTERFERE IN THE IMPUGNED ORDER. THE APPEAL STAND D ISMISSED. 7. FACTS ARE PARI-MATERIA THE SAME IN AY 2015-16 WH EREIN INTEREST INCOME HAS BEEN ASSESSED UNDER THE HEAD IN COME FROM ITA NO.4281 & 4282/MUM/2019 M/S. BEBANCO DEVELOPERS LTD. ASSESSMENT YEARS: 2014-15 & 2015-16 5 OTHER SOURCES WHEREAS INTEREST EXPENDITURE HAS BEEN DISALLOWED WHILE FRAMING AN ASSESSMENT ON 28/12/2017. THE LD. AO FOLLOWS THE LOGIC OF AY 2014-15. THE LD. CIT(A) DELETED THE DISALLOWANCE ON SIMILAR FINDINGS, AGAINST WHICH THE REVENUE IS I N FURTHER APPEAL BEFORE US. FACTS AND ISSUES BEING IDENTICAL, FOLLOW ING OUR ADJUDICATION AS FOR AY 2014-15, WE DISMISS THE APPE AL. 8. BOTH THE APPEALS STANDS DISMISSED. ORDER PRONOUNCED ON 04 TH FEBRUARY, 2021 SD/- SD/- (AMARJIT SINGH) (MA NOJ KUMAR AGGARWAL) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 04/02/2021 SR.PS, JAISY VARGHESE / COPY OF THE ORDER FORWARDED TO : 1. !#% / THE APPELLANT 2. &'#% / THE RESPONDENT 3. , ( ! ) / THE CIT(A) 4. , / CIT CONCERNED 5. -.& / , ! / , / DR, ITAT, MUMBAI 6. .012 / GUARD FILE / BY ORDER, / (DY./ASSTT.REGISTRAR) , / ITAT, MUMBAI.