DCIT, New Delhi V. M/s. Jai Krishan Estate Developers Pvt. Ltd., New Delhi

ITA 4352/DEL/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 3848 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 5 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 2011-2012
• Appeal Filed On: 08-08-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: AJAY AGRAWAL; SAURABH AGRAWAL C AS
• Keywords: Business income; Proportionate interest; Notional interest; Commercial expediency
• Section: 143(3); 142(1)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES: D , NEW DELHI BEFORE SHRI G.D.AGRAWAL , HON BLE PRESIDENT AND SMT. BEENA A PILLAI, JUDICIAL MEMBER ITA NO. 4352 /DEL/201 4 AY: 20 11 - 12 DCIT, CIRCLE 4(1) NEW DELHI VS . JAI KRISHAN ESTATE DEVELOPERS P LTD. A 26, FRIENDS COLONY (EAST) NEW DELHI 110 065 PAN: AABCJ 2911 R (APPELLANT) (RESPONDENT) APPELLAN T BY SH. AMIT JAIN , SR. DR RESPONDENT BY SH. AJAY AGRAWAL AND SH. SAURABH AGRAWAL, C.AS DATE OF HEARING 18.01.2018 DATE OF PRONOUNCEMENT 30.01.2018 ORDER PER BEENA A PILLAI, JUDICIAL MEMBER T HE PRESENT APPEAL HAS BEEN FILED BY REVENUE AGAINST ORDER DATED 19/05/14 PASSED BY LD.CIT(A) - 8, NEW DELHI FOR ASSESSMENT YEAR 2011 - 12 ON THE FOLLOWING GROUNDS OF APPEAL: 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE & IN LAW, THE LD.CIT(A) ERRED IN DELETING THE ADDITION OF RS.98,76,767/ - MADE BY THE A.O. ON THE BASIS THAT ASSESSEE HAS GIVEN UNSECURED ITA NO. 4352/DEL/2014 A.Y. 2011 - 12 DCIT VS. JAI KRISHAN ESTATE DEVELOPERS PVT.LTD., NEW DELHI 2 INTEREST FREE LOANS AND ADVANCES AGAINST PROJECTS/PROPERTIES TO THE TUNE OF RS.9,86,87,741/ - ? 2. THAT THE ORDER OF LD.CI T(A) IS ERRONEOUS AND IS NOT TENABLE ON FACTS AND IN LAW. 3. THAT THE GROUNDS OF APPEAL ARE WITHOUT PREJUDICE TO EACH OTHER. 4. THE APPELLANT CRAVES LEAVE TO ADD, ALTER, AMEND OR FOREGO ANY GROUNDS OF APPEAL RAISED ABOVE AT THE TIME OF HEARING . 2. BRIEF F ACTS OF THE CASE ARE AS UNDER : A SSESSEE FILED ITS RETURN OF INCOME DECLARING NIL INCOME ON 30/09/11. SUBSEQUENTLY THE RETURN WAS REVISED ON 20/02/12 AT NIL INCOME. THE RETURN WAS PROCESSED UNDER SECTION 143(1) OF THE INCOME TAX ACT, 1961 (THE ACT) AND CASE WAS SELECTED FOR SCRUTINY. ACCORDINGLY , NOTICE UNDER SECTION 143(2) AND 142(1) OF THE ACT ALONG WITH QUESTIONNAIRE WAS ISSUED TO ASSESSEE. IN RESPONSE TO STATUTORY NOTICES , R EPRESENTATIVES OF ASSESSEE APPEARED BEFORE LD.AO AND FILED REQUISITE DETAILS AS CALLED FOR. 2.1 . LD. AO OBSERVED THAT ASSESSEE IS ENGAGED IN THE BUSINESS OF REAL ESTATE. THE LD. AO OBSERVED THAT ASSESSEE HAS GIVEN INTEREST - FREE LOANS AND ADVANCES AGAINST PROJECTS/PROPERTIES TO THE TUNE OF RS.9,86,87,741/ - WHICH IS OUTSTANDI NG SINCE LONG TIME. HE ALSO OBSERVED THAT ASSESSEE DURING THE YEAR HAS PAID SUBSTANTIAL INTEREST WHICH IS NET OF INTEREST RECEIVED AMOUNTING TO RS.1,75,78,947/ - OUT OF WHICH RS.46,32,953/ - HAS BEEN CAPITALISED AND THE BALANCE OF RS.98,76,767/ - WAS CLAIMED AS EXPENSES IN THE PROFIT AND LOSS ACCOUNT. LD.AO WAS OF THE OPINION THAT ASSESSEE COULD NOT EXPLAIN THE COMMERCIAL EXPEDIENCY FOR ADVANCING THESE INTEREST - FREE LOANS TO THE PARTIES. HE THEREFORE ITA NO. 4352/DEL/2014 A.Y. 2011 - 12 DCIT VS. JAI KRISHAN ESTATE DEVELOPERS PVT.LTD., NEW DELHI 3 DISALLOWED THE PROPORTIONATE INTEREST AMOUNTING TO RS.98,76, 7 67/ - IN THE HANDS OF ASSESSEE. 2.2. AGGRIEVED BY THE ORDER OF LD. AO ASSESSEE PREFERRED APPEAL BEFORE LD.CIT(A) WHO DELETED THE ADDITION BY OBSERVING AS UNDER: 5 . DETERMINATION : I HAVE GONE THROUGH THE ASSESSMENT ORDER, WRITTEN SUBMISSION, PAPER BOOK AND DETAILS FILED DURING THE COURSE OF THE APPELLATE PROCEEDINGS. THE DOCUMENTARY DETAILS AND OTHER SUBMISSIONS HAVE BEEN CAREFULLY CONSIDERED. IT IS A WELL SETTLED LAW THAT NOTIONAL INCOMES ARE NOT TAXABLE UNDER THE INCOME TAX ACT, 1961. ONLY REAL INCOME S ARE CHARGED UNDER THE ACT. HOWEVER, THE LD. ASSESSING OFFICER HAS TREATED NOTIONAL INTEREST INCOME OF RS.98,76,767 / - AS BUSINESS INCOME DURING THE RELEVANT YEAR THEREBY HIMSELF ACCEPTING THAT THESE ADVANCES ARE BUSINESS ADVANCES/ADVANCES FOR COMMERCIAL EXPEDIENCY. WHEREAS BUSINESS ADVANCES ARE NEITHER SUBJECT TO NOTIONAL INCOME NOR INTEREST EXPENSE IS DISALLOWABLE U / S 36(1)(III). APPELLANT COMPANY HAD GIVEN BUSINESS ADVANCES AGAINST PROPERTIES/PROJECTS AMOUNTING TO RS.9,86,87,741/ - WHICH WERE APPEARING AS OPENING BALANCES AS ON 01.04.10 AS WELL AS CLOSING BALANCES AS ON 31.03.11. THE APPELLANT COMPANY HAS NOT ADVANCED ANY BUSINESS ADVANCES DURING A.Y.2011 - 12. APPELLANT COMPANY IS REGULARLY ASSESSED U / S 143(3) FOR LAST SEVERAL YEARS. APPELLANT COMPANY WA S ALSO ASSESSED U / S 143(3) FOR A.Y. 2009 - 10 ACCEPTING THE RETURNED INCOME IN WHICH THERE WERE EXACTLY SAME BUSINESS ADVANCES AMOUNTING TO RS.9,86,87,741/ - . REVENUE HAS NEITHER CONSIDERED ANY NOTIONAL INTEREST INCOME NOR DISALLOWED ANY INTEREST EXPENSE IN R ESPECT OF ITA NO. 4352/DEL/2014 A.Y. 2011 - 12 DCIT VS. JAI KRISHAN ESTATE DEVELOPERS PVT.LTD., NEW DELHI 4 THESE BUSINESS ADVANCES/ADVANCES FOR COMMERCIAL EXPEDIENCY AND ALWAYS ACCEPTED THE RETURNED INCOME OF THE APPELLANT COMPANY. COPY OF THESE ASSESSMENT ORDERS WERE ALSO SUBMITTED DURING APPELLATE PROCEEDINGS. NOW, IT WILL NOT BE EQUITABLE TO PERMIT THE REVENUE TO TAKE A DIFFERENT STAND IN RESPECT OF THE AMOUNTS WHICH WERE THE SUBJECT - MATTER OF PREVIOUS YEARS ASSESSMENTS; CONSISTENCY AND DEFINITENESS OF APPROACH BY THE REVENUE IS NECESSARY [KARNATAKA HIGH COURT IN C I T V S. SRIDEV ENTERPRISES (19 91) 192 ITR 165]. KARNATAKA HIGH COURT CONFIRMED THAT ITAT IS RIGHT IN LAW IN HOL DING THAT SINCE NO ADDITION HAVE BEEN MADE IN EARLIER YEARS, THE OPENING DEBIT BALANCE CANNOT BE C ONSIDERED DURING THE CURRENT YEAR AND THAT THE ENQUIRY HAS TO BE LIMITED TO T HE INCREASE IN THE C URRENT YEAR ONLY. HIGH COURT ALSO HELD THAT THE STATUS OF THE AMOUNT OUTSTANDING ON THE FIRST DAY OF THE ACCOUNTING YEAR IS THE AMOUNT THAT STOOD OUTSTANDING ON THE LAST DAY OF THE PREVIOUS ACCOUNTING YEAR AND, THEREFORE, ITS NATURE AND STATUS CANNOT BE DIFFERENT ON THE FIRST DAY OF THE CURRENT ACCOUNTING YEAR FROM ITS NATURE AND STATUS AS ON THE LAST DAY OF THE PREVIOUS ACCOUNTING YEAR. APPELLANT ALSO CITED VARIOUS OTHER JUDICIAL PRONOUNCEMENTS IN SUPPORT OF ITS CLAIM. I, THEREFORE, DE LETE THE IMPUGNED ADDITION OF RS.98,76,767/ - ON ESTIMATION OF INTEREST ON TRADE ADVANCES. THIS GROUND OF APPEAL IS ALLOWED. 2.3 . AGGRIEVED BY THE ORDER OF LD.CIT(A) REVENUE IS IN APPEAL BEFORE US. 2.4 . LD. DR PLACED RELIANCE UPON THE ORDER OF LD.AO. ITA NO. 4352/DEL/2014 A.Y. 2011 - 12 DCIT VS. JAI KRISHAN ESTATE DEVELOPERS PVT.LTD., NEW DELHI 5 2.5 . HOWEVER LD. AR SUBMITTED THAT THE ISSUE STANDS SQUARELY COVERED IN FAVOUR OF ASSESSEE BY ORDER OF THIS T RIBUNAL IN ASSESSEE S OWN CASE FOR ASSESSMENT YEAR 2010 - 11 IN ITA NO. 5914/ D EL/2013 V IDE ORDER DATED 26/08/15. LD. AR SUBMITTED THAT THE ADVANCES FOR TH E YEAR UNDER C ONSIDERATION ARE SAME AS THAT OF ASSESSMENT YEAR 2010 - 11. HE SUBMITTED THAT THESE ARE OPENING BALANCES APPEARING IN THE BOOKS OF ACCOUNTS OF ASSESSEE AND THEREFORE NO DISALLOWANCE CAN BE WARRANTED. 3. WE HAVE PERUSED THE SUBMISSIONS ADVANCED BY BOTH THE SIDES IN THE LIGHT OF THE RECORDS PLACED BEFORE US AND THE DECISION OF THIS T RIBUNAL IN ASSESSEE S OWN CASE FOR ASSESSMENT YEAR 2010 - 11. THIS T RIBUNAL DECIDED THIS ISSUE BY OBSERVING AS UNDER: 10. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE RECORDS AND CASE LAWS CITED BEFORE US. WE FIND THAT ASSESSEE COMPANY HAS NOT ADVANCED ANY BUSINESS ADVANCES DURING THE YEAR AND THE SAID ADVANCES ARE APPEARING AS OPENING BALANCE AS ON 1.4.2009 AS WELL AS CLOSIN G BALANCE ON 31.3.2010 AND THEREFORE THERE CANNOT BE ANY DISALLOWANCE OF INTEREST EXPENSES U/S 36(1)(II). THE ASSESSEE COMPANY IS REGULARLY ASSESSED U/S 143(3) AND WAS ALSO ASSESSED U/S. 143(3) FOR A.Y. 2009 - 10 ACCEPTING THE RETURNED INCOME IN WHICH THERE WERE EXACTLY SAME BUSINESS ADVANCES AMOUNTING TO RS. 12,35,98,991/ - . AO HAS NEITHER CONSIDERED ANY NOTIONAL INTEREST INCOME NOR DISALLOWED ANY INTEREST EXPENSES IN RESPECT OF THESE BUSINESS ADVANCES/ ADVANCES FOR COMMERCIAL EXPEDIENCY AND ALWAYS ACCEPTED THE RETURNED INCOME OF (HE APPELLANT COMPANY. EVEN T HE PRESENT ASSESSING OFFICER ALSO PASSED ORDER U/S 1 43(3) FOR A.Y. 2006 - 2007 AND DID NOT CONSIDERED ANY NOTIONAL INTEREST OR DISALLOWED ANY INTEREST EXPENSES IN RESPECT OF THESE BUSINESS ADVANCES/ ADVANC ES FOR COMMERCIAL EXPEDIENCY. HOWEVER, THE SAME ASSESSING OFFICER HAS TREATED NOTIONAL INTEREST INCOME OF RS. 1,48,31,879/ - AS BUSINESS INCOME DURING THE RELEVANT YEAR THEREBY HIMSELF ACCEPTING THAT THESE ADVANCES ARE BUSINESS ADVANCES/ADVANCES FOR COMMER CIAL ITA NO. 4352/DEL/2014 A.Y. 2011 - 12 DCIT VS. JAI KRISHAN ESTATE DEVELOPERS PVT.LTD., NEW DELHI 6 EXPEDIENCY. WHEREAS BUSINESS ADVANCES ARE NEITHER SUBJECT TO NOTIONAL INCOME NOR INTEREST EXPENSE IS DISALLOWABLE U/ S. 36(1)(II). IN PREVIOUS YEARS THE REVENUE HAS TAKEN A VIEW OF ALLOWING THE SAME AND AT THIS JUNCTURE CANNOT TAKE A DIFFERENT STAND. T HERE SHOULD BE CONSISTENCY AND DEFINITENESS WHILE ADOPTING THE APPROACH BY THE REVENUE. THE CIT (A) HAS TAKEN INTO CONSIDERATION THE JUDGMENT OF KARNATAKA HIGH COURT IN CASE OF CIT VS. SRIDEVI ENTERPRISES (1991) 192 ITR 165. THE CIT (A) HAS ALSO TAKEN NOT E OF S. BUILDERS LIMITED VS. CIT, WHEREIN THE HON'BLE SUPREME COURT HELD THAT IF AMOUNT IS ADVANCED TO THE SUBSIDIARY OR ASSOCIATED COMPANY OR ANY OTHER PARTY AS A MEASURE OF COMMERCIAL EXPEDIENCY, THERE CANNOT BE ANY DISALLOWANCE U/S 36(1)(III). THE CIT(A ) ALSO QUOTED FOLLOWING JUDGMENT: I) CIT VS. GIVO LTD. ( ITA 941/2010) DELHI HIGH COURT II) GODFREY PHILIPS INDIA LTD. VS. ADDL. CIT (ITAT MUM) 2012 (12) TMI 865 III) PLEASURE TRADING (P) LTD. VS. DCIT (ITAT MUM) DT. 03.08.2012. THE CIT(A) FURTHER GIVEN A FINDING THAT THE ASSESS EE COMPANY HAD RECEIVED MUCH MORE INTEREST FREE TRADE ADVANCES/UNSECURED LOANS AS COMPARISON TO INTEREST FREE TRADE ADVANCES GIVEN. ASSESSEE COMPANY HAS NOT GIVEN ANY INTEREST FREE TRADE ADVANCES TO ANY PARTIES OUT OF BORROWED FUNDS. THUS THERE IS NO NEXUS BETWEEN BORROWED FUNDS AND TRADE ADVANCES GIVEN TO PARTIES. THEREFORE, THERE IS NO QUESTION OF DISALLOWANCE OF INTEREST/ADDITION ON ACCOUNT OF NOTIONAL INTEREST INCOME AMOUNTING TO RS.1,48,31,879/ - ON TRADE ADVAN CES. THUS THE CIT(A) HAS RIGHTLY DELETED THE ADDITION OF RS.1,48,31,879/ - ON ESTIMATION OF INTEREST ON TRADE ADVANCES. THE ISSUE NO. 1 IS THUS DECIDED AGAINST THE REVENU E. 3.1 . THIS T RIBUNAL HAS OBSERVED WHILE DECIDING THE ISSUE FOR ASSESSMENT YEAR 2010 - 1 1 THAT REVENUE HAS BEEN TAKING SIMILAR VIEW IN THE PRECEDING ASSESSMENT YEARS AND THE STAND CANNOT BE TAKEN DIFFERENTLY NOW. BASED ON THE SIMILAR REASONING, WE ARE INCLINED TO CONFIRM THE ORDER PASSED BY LD.CIT(A). ACCORDINGLY THIS GROUND RAISED BY REVENU E STANDS DISMISSED. ITA NO. 4352/DEL/2014 A.Y. 2011 - 12 DCIT VS. JAI KRISHAN ESTATE DEVELOPERS PVT.LTD., NEW DELHI 7 4. IN THE RESULT APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 3 0 . 0 1 . 2 0 1 8 . S D / - S D / - ( G.D.AGRAWAL ) (BEENA A PILLAI) PRESIDENT JUDICIAL MEMBER DT. 3 0 . 0 1 . 2 0 1 8 COPY FORWARDED TO: - 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR, ITAT - TRUE COPY - BY ORDER, ASSISTANT REGISTRAR ITAT DELHI BENCHES * M V ITA NO. 4352/DEL/2014 A.Y. 2011 - 12 DCIT VS. JAI KRISHAN ESTATE DEVELOPERS PVT.LTD., NEW DELHI 8 S.NO. DETAILS DATE INITIALS DESIGNATION 1 DRAFT DICTATED ON DRAGON 18 .01.18 SR. PS/PS 2 DRAFT PLACED BEFORE AUTHOR SR. PS/PS 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER JM/AM 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER AM/AM 5 APPROVED DRAFT COMES TO THE SR. PS/PS SR. PS/PS 6 KEPT FOR PRONOUNCEMENT SR. PS/PS 7 FILE SENT TO BENCH CLERK SR. PS/PS 8 DATE ON WHICH THE FILE GOES TO HEAD CLERK 9 DATE ON WHICH FILE GOES TO A.R. 10 DATE OF DISPATCH OF ORDER