MUKUND GEMS, MUMBAI V. ACIT 16(3), MUMBAI

ITA 4309/MUM/2018

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 2406 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 3 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-09-2022
• Appeal Filed By: Assessee
• Order Result: PartlyAllowed
• Bench Allotted: D
• Assessment Year: 2009-2010
• Appeal Filed On: 25-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 40A(3); 143(3); 250

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “D” BENCH, MUMBAI BEFORE SHRI B.R. BASKARAN, ACCOUNTANT MEMBER AND SHRI SANDEEP SINGH KARHAIL, JUDICIAL MEMBER ITA No.4309/Mum./2018 (Assessment Year : 2009–10) Mukund Gems 9/9, Unity House 8, Mama Parmanand Marg Opera House, Mumbai 400 004 PAN – AAAFM2368R ................ Appellant v/s Asstt. Commissioner of Income Tax Circle–19(2), Mumbai ................Respondent Assessee by : None Revenue by : Smt. Mahita Nair Date of Hearing – 27/09/2022 Date of Order – 27/09/2022 O R D E R PER SANDEEP SINGH KARHAIL, J.M. The present appeal has been filed by the assessee challenging the impugned order dated 11/05/2018, passed under section 250 of the Income Tax Act, 1961 (“the Act”) by learned Commissioner of Income Tax (Appeals)– 30, Mumbai, [“learned CIT(A)”], for the assessment year 2009–10. 2. When this appeal was called for hearing, neither anyone appeared on behalf of the assessee nor was any application seeking adjournment filed. On a perusal of the record, we find that this appeal was listed for hearing on various Mukund Gems ITA No.4309/Mum./2018 Page | 2 occasions and no one has appeared on behalf of the assessee despite service of notice of hearing. Therefore, we proceed to dispose off this appeal ex–parte, qua the assessee after hearing the learned Departmental Representative (“learned D.R.”) and on the basis of material available on record. 3. The first issue arising for our consideration is pertaining to the disallowance made under section 36(1)(iii) of the Act. 4. During the course of assessment proceedings, it was observed that the assessee has advanced interest free loan of Rs.15,60,41,755, to M/s. Nimbark Gems, and has also paid interest on its borrowings. Accordingly, the Assessing Officer, vide order dated 23/12/2011, passed under section 143(3) of the Act disallowed an amount of Rs.1,56,04,176, under section 36(1)(iii) of the Act being 10% of the loan advanced by the assessee without charging any interest. 5. The learned CIT(A), vide impugned order dated 11/05/2018, upheld the disallowance made by the Assessing Officer. Being aggrieved, the assessee is in appeal before us. 6. We have considered the submissions of the learned D.R. and perused the material available on record. From the perusal of the Balance Sheet of the assessee for the year ending 31/03/2009, forming part of the paper book at Page–50, we find that the assessee has capital of Rs. 24,59,09,421.05, which is more than interest free loan of Rs.15,60,41,755, advanced by the assessee to M/s. Nimbark Gems. We find that the Hon'ble Jurisdictional High Court in Mukund Gems ITA No.4309/Mum./2018 Page | 3 CIT v/s Reliance Utilities & Power Ltd., [2009] 313 ITR 340 (Bom.), held that if funds are available with the assessee, which are sufficient to meet the investment, then presumption would arise that the investment is made out of funds so available with the assessee and, therefore, no disallowance under section 36(1)(iii) can be made. In view of the above, respectfully following the aforesaid decision, we direct the Assessing Officer to delete the disallowance made under section 36(1)(iii) of the Act. Thus, the first issue is decided in favour of the assessee. 7. The next issue raised in the present appeal is pertaining to disallowance made under section 40A(3) of the Act. 8. The learned CIT(A), vide impugned order, dismissed the appeal filed by the assessee on this issue and upheld the disallowance made by the Assessing Officer under section 40A(3) of the Act, by observing as under:– “7. Ground No. 10 and 11 in respect of disallowance u/s 40A(3) of the Act on account of expenses incurred towards factory premises of Rs.1,63,750/-, the appellant has stated that the expenses are of capital nature and provision of Rule 6DD(g) are applicable. As per the assessment order these expenses have been claimed by the appellant, hence it cannot be treated as capital in nature. As per the submissions, the factory is situated at Bhavnagar. Provisions of Rule 6DD(g) states that 'no disallowance under section 40(3) shall be made where the payment is made where the payment is made in a village or town, which on the date of such payment is not served by any bank, to any person who ordinarily resides, or is carrying on any business, profession or vocation, in any such village or town'. As the factory is situated at Bhavnagar which is a district city of Gujarat, Provisions of Rule 6DD(g) of I.T. Rules are not applicable in this case. Therefore, appellant fails on this issue also. Grounds of appeal No. 10 and 11 are treated as 'Dismissed'. 9. Having heard the learned D.R. and upon perusal of the material available on record, we find no infirmity in the findings of the learned CIT(A) on this issue. As a result, this issue is decided against the assessee. Mukund Gems ITA No.4309/Mum./2018 Page | 4 10. In the result, appeal by the assessee is partly allowed. Order pronounced in the open Court on 27/09/2022 Sd/- B.R. BASKARAN ACCOUNTANT MEMBER Sd/- SANDEEP SINGH KARHAIL JUDICIAL MEMBER MUMBAI, DATED: 27/09/2022 Copy of the order forwarded to: (1) The Assessee; (2) The Revenue; (3) The CIT(A); (4) The CIT, Mumbai City concerned; (5) The DR, ITAT, Mumbai; (6) Guard file. True Copy By Order Pradeep J. Chowdhury Sr. Private Secretary Assistant Registrar ITAT, Mumbai