Gala Infrastructure Pvt.Ltd., Ahmedabad V. The Income tax Officer,Ward-4(1), Ahmedabad

ITA 439/AHD/2013

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 8011 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 1 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-04-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 05-07-2017
• Assessment Year: 2009-2010
• Appeal Filed On: 14-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Assessee Lawyers: S N SOPARKAR
• Keywords: Revenue expenditure; Set aside

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE JUSTICE SHRI P. P. BHATT, PRESIDENT & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NO. 439/AHD/2013 ( ASSESSMENT YEAR : 2009-10) GALA INFRASTRUCTURE PVT. LTD. NAVNEET HOUSE, OPP. GURUKUL ROAD, AHMEDABAD 380052 / VS. ITO WARD 4(1), 104, 1 ST FLOOR, NAVJIVAN TRUST BUILDING, NAVARANGPURA, AHMEDABAD ./ ./ PAN/GIR NO. : AADCG0020C ( APPELLANT ) .. ( / RESPONDENT ) & ./ I.T.A. NO. 884/AHD/2015 ( ASSESSMENT YEAR : 2010-11) THE I.T.O. WARD 2(1)(1), NAVJIVAN TRUST BUILDING, OFF. ASHRAM ROAD, 1 ST FLOOR, ROOM NO. 104, AHMEDABAD - 380014 / VS. GALA INFRASTRUCTURE PVT. LTD. A/1, 9 TH FLOOR, SAFA PROFITAIRE CORPORATE ROAD, PRAHLADNAGAR, AHMEDABAD 380051 ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI S. N. SOPARKAR, A.R. / RESPONDENT BY : SHRI LALIT P. JAIN, SR.D.R. DATE OF HEARING 11/01/2019 !'# / DATE OF PRONOUNCEMENT 09/04/2019 ITA NOS. 439/AHD/13 & 884/AHD/15 [ITO VS. GALA INFRASTRUCTURE PVT. LTD.] A.YS. 2009-10 & 2010-11 - 2 - / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEALS HAVE BEEN FILED AT THE INSTAN CE OF THE ASSESSEE CONCERNING AY 2009-10 AND BY REVENUE FOR A Y 2010-11 AGAINST THE ORDERS OF THE COMMISSIONER OF INCOME TA X (APPEALS)-VIII & 2, AHMEDABAD (CIT(A) IN SHORT), DATED 30.11.201 2 & 16.01.2015 ARISING IN THE ASSESSMENT ORDERS DATED 22.12.2011 & 28.03.2013 PASSED BY THE ASSESSING OFFICER (AO) UNDER S. 143(3 ) OF THE INCOME TAX ACT, 1961 (THE ACT); RESPECTIVELY. ITA NO. 439/AHD/2013 (ASSESSEES APPEAL)- AY 2009-1 0 2. AS PER ITS GROUNDS OF APPEAL, THE ASSESSEE HAS C HALLENGED THE ORDER OF THE CIT(A) IN UPHOLDING THE DISALLOWANCE O F DEDUCTION OF INTEREST EXPENDITURE OF RS.1,69,20,490/- MADE BY TH E AO. 3. BRIEFLY STATED, THE ASSESSEE FILED ITS RETURN OF INCOME FOR AY 2009-10 AT NIL AND HAS NOT SHOWN TO HAVE UNDERTAKEN ANY BUSINESS ACTIVITY DURING THE YEAR. IN THE YEAR UNDER ASSESS MENT, THE ASSESSEE COMPANY IS STATED TO BE IN THE PROCESS OF ACQUIRING LAND FOR ITS REAL ESTATE DEVELOPMENT PROJECT AND HAS NOT DECLARED ANY REVENUE/SALES. IN THE COURSE OF SCRUTINY ASSESSMENT, AO NOTICED THAT THE ASSESSEE HAS DEBITED AN AMOUNT OF RS.2,76,87,898/- BEING INTERES T PAID ON UNSECURED LOANS. IT WAS ALSO OBSERVED THAT THE ASS ESSEE HAS MADE INTEREST FREE ADVANCES OF RS.15,04,03,277/- TO ONE M/S. SHRIKANT BROKING PVT. LTD. (SHRIKANT BROKING). THE AO OBSER VED THAT HUGE LOAN PROVIDED TO SHRIKANT BROKING COULD NOT BE SUPP ORTED TO BE FOR BUSINESS PURPOSES. THE AO ACCORDINGLY OBSERVED THA T THE ASSESSEE HAS FAILED TO PROVE THAT THE ADVANCE OF RS.15,04,03,277 /- GIVEN TO SHRIKANT ITA NOS. 439/AHD/13 & 884/AHD/15 [ITO VS. GALA INFRASTRUCTURE PVT. LTD.] A.YS. 2009-10 & 2010-11 - 3 - BROKING IS FOR THE PURPOSES OF BUSINESS. THE AFOR ESAID PARTY COULD NOT BE PRODUCED BY THE ASSESSEE FOR VERIFICATION. THE CLAIM OF THE ASSESSEE THAT THE ADVANCE GIVEN TO SHRIKANT BROKING WAS FOR PURCHASE OF LAND WAS NOT FOUND TO BE BONAFIDE BY THE AO. TH E AO ACCORDINGLY INVOKED PROVISION OF SECTION 36(1)(III) AND INTERES T ATTRIBUTABLE TO SUCH INTEREST FREE ADVANCE OF RS.15,04,03,277/- WAS TREATED TO BE NON- BUSINESS PURPOSES. THE INTEREST ON SUCH ADVANCE WA S QUANTIFIED AT RS.1,69,20,486/- (BY APPLYING 12% INTEREST RATE) WH ICH WAS HELD TO BE NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSINESS. THE AO ACCORDINGLY DISALLOWED THE AFORESAID AMOUNT OF R S.1,69,20,486/- CLAIMED UNDER S.36(1)(III) OF THE ACT. 4. AGGRIEVED BY THE DENIAL OF DEDUCTION OF INTEREST UNDER S.36(1)(III) OF THE ACT, THE ASSESSEE PREFERRED APP EAL BEFORE THE CIT(A). 5. THE CIT(A) HOWEVER DID NOT FIND ANY MERIT IN THE CASE OF ASSESSEE AND THUS REFUSED TO GRANT ANY RELIEF FROM SUCH ADDITIONS. THE RELEVANT OPERATIVE PARA OF THE ORDER OF THE CIT(A) IS REPRODUCED HEREUNDER: 3.5 THE ASSESSMENT ORDER AND THE SUBMISSION OF THE APPELLANT HAVE BEEN SEEN CAREFULLY. I HAVE CONSIDERED THE ORDER OF THE A.O. AND THE ABOVE CONTENTIONS MADE ON BEHALF OF THE APPELLANT. IT IS NOTICED THAT THE APPELLANT HAS DEBITED INTEREST OF RS.2,76,87,898/- AS PART OF WORK IN PROGRESS FOR THE WORK CARRIED OUT BY THEM. AT THE S AME TIME THEY HAVE GIVEN INTEREST FREE ADVANCE OF RS.15,04,03,277/- TO SHRIKANT BROKING PVT. LTD. AT THE ADDRESS GIVEN BY THE APPELLANT TO THE A .Q. IT WAS FOUND BY THE A.O. THAT THE SAID ENTITY WAS NOT AVAILABLE. THE AP PELLANT HAD CLAIMED THAT THE AMOUNT WAS PROVIDED TO THE SAID ENTITY FOR THE PURCHASE OF LAND AND TITLE CLEARANCE FOR THE APPELLANT COMPANY. THE APPE LLANT HAD IN RESPONSE TO FURTHER QUERY FROM THE A.O. ABOUT NON-AVAILABILI TY OF THE SAID ENTITY NOT PRODUCED THE PRINCIPAL OFFICER OF THE SAID SHRIKANT BROKING PVT. LTD. THE A.O, THEREFORE HELD THAT THE APPELLANT'S CONTENTION THAT IT WAS GIVEN FOR THE PURPOSE OF BUSINESS IS REJECTED. ACCORDINGLY TH E A.O. HAS CALCULATED INTEREST OF RS.1,69,20,4867- AT THE RATE OF 12% ON SUCH ADVANCE WHICH IS DISALLOWED U/S. 36(1)(III). ITA NOS. 439/AHD/13 & 884/AHD/15 [ITO VS. GALA INFRASTRUCTURE PVT. LTD.] A.YS. 2009-10 & 2010-11 - 4 - AT THE TIME OF APPELLATE PROCEEDINGS THE APPELLANT HAS REQUESTED THAT PROPER OPPORTUNITY HAS NOT BEEN PROVIDED TO CR OSS EXAMINE THE PARTY TO WHOM THE INTEREST FREE ADVANCE TO SHRIKANT BROKI NG PVT. LTD IS GIVEN. THE SAME HAS BEEN SENT TO THE AO TO ENQUIRE, INVEST IGATE AND ARRIVE AT THE PROPER FINDINGS IN THIS CASE IN THE FORM OF REMAND REPORT WHICH WAS ESSENTIAL TO ARRIVE AT THE DECISION ON THIS ISSUE. IN THE REMAND PROCEEDINGS ALSO THE SAID SHRIKANT BROKING PVT. LTD. DID NOT RE SPOND TO THE A.O.'S NOTICE OR DID NOT PROVIDE ANY OF THE DETAILS CALLED FOR BY THE A.O. THE APPELLANT HAD ALSO NOT PRODUCED THE SAID ENTITY. TH US THE APPELLANT'S EXPLANATION THAT THE AMOUNT WAS GIVEN FOR BUSINESS IS NOT SUBSTANTIATED. HOWEVER, IT IS ALSO CONTENTION OF APPELLANT THAT TH E INTEREST OF RS.2.76 CRORES STATED BY THE A,0. HAS NOT BEEN DEBITED TO T HE P & L ACCOUNT BUT HAS BEEN TRANSFERRED TO WORK IN PROGRESS ACCOUNT. I T IS SEEN THAT THE APPELLANT HAS NOT EARNED ANY INCOME BY WAY OF SALE FROM THE PROJECT. THE WORK IN PROGRESS HAS BEEN CARRIED FORWARD TO THE SU BSEQUENT YEAR. THE APPELLANT HAS, THEREFORE CLAIMED THAT THE DISALLOWA NCE, IF ANY, OUT OF THE EXPENSES WHICH ARE NOT CLAIMED IN THE PROFIT & LOSS ACCOUNT CANNOT BE ADDED TO THE RETURNED INCOME. I AGREE WITH THIS CON TENTION OF THE APPELLANT THAT WHEN EXPENDITURE IS NOT DEBITED TO THE PROFIT & LOSS ACCOUNT I.E, NOT CLAIMED BY WAY OF DEDUCTION IN THE PROFIT & LOSS AC COUNT BUT IS CAPITALIZED AS WORK IN PROGRESS AND CARRIED FORWARD TO THE SUBSEQUENT YEAR, THE DISALLOWANCE OF THE SAME CANNOT BE ADDED TO THE RETURNED INCOME UNLESS THE CORRESPONDING DEBIT IS CONSIDERED IN PRO FIT & LOSS ACCOUNT. THE WORK IN PROGRESS WOULD BE FORMING PART OF THE D EDUCTION AGAINST THE INCOME OF THE SUBSEQUENT PERIOD AS OPENING STOCK. T HE ALLOWABILITY OF EXPENDITURE BY WAY OF INTEREST WITH REFERENCE TO TH E INTEREST FREE ADVANCES HAVING NOT BEEN ESTABLISHED, THE DEBIT THERE OF TO THE WORK IN PROGRESS HAS TO BE EXCLUDED FROM VALUE OF WORK IN PROGRESS IN VI EW OF THE DECISION OF THE BOMBAY ITAT REFERRED TO IN PRECEDING PARA I.E. IN THE CASE OF- I) SAVALA ASSOCIATES VS. ITO. ITA NO.4441 (MUMBAI) 2008 (35 SOT 148 II) SHANTI INVESTMENT BEING ITA NO.5806/MUMBAI /2008 FOLLOWING THE RATIO OF THE SAID DECISIONS THE DISA LLOWANCE MADE BY ASSESSING OFFICER FOR RS.1,69,20,486/- U/S 36(1)(II I) IS CONFIRMED SUBJECT TO DIRECTIONS SPECIFIED HEREIN ABOVE. 6. FURTHER AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL. 7. THE LEARNED AR FOR THE ASSESSEE SUBMITTED AT THE OUTSET THAT THE ASSESSEE HAS NOT CLAIMED ANY DEDUCTION UNDER S. 36( 1)(III) OF THE ACT AT ALL AND THEREFORE, THE QUESTION OF DISALLOWING D EDUCTION PARTLY OR WHOLLY DOES NOT SIMPLY ARISE. IT WAS CONTENDED THA T DISALLOWANCE CAN BE EFFECTED ONLY WHEN ALLOWANCE OF DEDUCTION IS CLA IMED. WITHOUT PREJUDICE TO THE AFORESAID, IT WAS FURTHER SUBMITTE D THAT ADVERSE ITA NOS. 439/AHD/13 & 884/AHD/15 [ITO VS. GALA INFRASTRUCTURE PVT. LTD.] A.YS. 2009-10 & 2010-11 - 5 - INFERENCE AGAINST THE ASSESSEE IN REGARD TO DEALING WITH SHRIKANT BROKING HAS BEEN UNJUSTIFIABLY DRAWN IN THE ASSESSM ENT ORDER WITHOUT GIVING ANY REASONABLE OPPORTUNITY TO THE ASSESSEE. THE LEARNED AR FOR THE ASSESSEE POINTED OUT FROM THE RECORDS PLACED BE FORE THE LOWER AUTHORITIES THAT THE FUNDS WERE PROVIDED TO SHRIKAN T BROKING FOR PURCHASE OF LAND THROUGH BANKING CHANNEL AND PURPOS E OF THE PAYMENT IS ALSO CORROBORATED BY AGREEMENT/BANAKHAT OWING TO WHICH THE PAYMENT WAS MADE. THE CURRENT ADDRESS OF THE RECIP IENT M/S. SHRIKANT BROKING WAS ALSO PROVIDED. COMING TO THE FACTS IN CONNECTION WITH PAYMENTS OF MONEY TO SHRIKANT BROKING, THE LEARNED AR SUBMITTED THAT LAND COULD NOT BE REGISTERED IN THE NAME OF TH E ASSESSEE AND THE DEVELOPMENT PROJECT COULD NOT BE STARTED IN THE YEA R UNDER CONSIDERATION AND THEREFORE THE INTEREST EXPENDITUR E INCURRED WAS CAPITALIZED IN THE BALANCE SHEET UNDER THE APPROPRI ATE HEAD AND NOT CLAIMED AS REVENUE EXPENDITURE. THE LEARNED AR ACC ORDINGLY SUBMITTED THAT WHEN NO DEDUCTION IS CLAIMED AT ALL, THE DISALLOWANCE OF A NON-EXISTENT CLAIM IS OUTSIDE THE AUTHORITY OF LAW. 8. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDER OF THE CIT(A). 9. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. THE MAINTAINABILITY OF DISALLOWANCE OF INTEREST UNDER S .36(1)(III) OF THE ACT IS IN QUESTION. FROM THE CASE RECORDS, WE NOTI CE AT THE OUTSET THAT ASSESSEE HAS NOT CLAIMED ANY DEDUCTION OF INTEREST EXPENDITURE WHILE COMPUTING ITS TAXABLE INCOME. THIS BEING SO, IT IS BEYOND ANYBODYS UNDERSTANDING AS TO HOW DISALLOWANCE CAN BE EFFECTE D IN THE ABSENCE OF VERY CLAIM. THE CASE OF THE REVENUE FALLS FLAT ON THIS SIMPLE PREMISE ALONE. THEREFORE, THE PURPOSE OF ADVANCE A ND GENUINENESS OF TRANSACTION WITH SHRIKANT BROKING PVT. LTD. DOES NO T REQUIRE CONSIDERATION FOR THE PURPOSES OF ISSUE BEFORE US. BESIDES, WE ALSO ITA NOS. 439/AHD/13 & 884/AHD/15 [ITO VS. GALA INFRASTRUCTURE PVT. LTD.] A.YS. 2009-10 & 2010-11 - 6 - TAKE NOTE OF THE FACT THAT THE TRANSACTIONS WERE RO UTED THROUGH BANKING CHANNEL. THE OBSERVATION OF THE CIT(A) THAT INTERE ST COST WOULD GO ON TO INCREASE THE COST OF INVENTORY EVENTUALLY AND IS THUS A REVENUE ITEM IS WITHOUT ANY FORCE. THE COST TOWARDS INTEREST CA PITALISED ON THE INVENTORY HAS NOT EFFECT TO THE PROFITABILITY OF TH E CURRENT YEAR AND THEREFORE, SUCH INTEREST COST HAS NO IMPACT ON TAXA BILITY FOR THE YEAR UNDER CONSIDERATION. SECONDLY, IT IS A MATTER OF R ECORD THAT SHRIKANT HAS EXTENDED ITS SERVICE FOR PURCHASE OF LAND BY AS SESSEE IN THE SUBSEQUENT ASSESSMENT YEAR ALBEIT FOR LOWER VALUE O F LAND. THIRDLY, THE CIT(A) IN AY 2010-11 HIMSELF HAS ENDORSED THE A DVANCE TO BE OUT BUSINESS EXPEDIENCY. THEREFORE, THE ORDER OF THE C IT(A) IS LIABLE TO BE SET ASIDE. THE AO IS DIRECTED TO DELETE THE DIS ALLOWANCE ON INTEREST MADE ON THIS SCORE. 10. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ITA NO. 884/AHD/2015 (REVENUES APPEAL)- AY 2010-11 11. THE SOLITARY GRIEVANCE OF THE REVENUE IN ITS AP PEAL READS AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN LAW AND ON FACTS IN DELETING THE DISALLOWANCE OF INTEREST AMOUNTING TO 1,15,14,962/- U/S 36(1)(III) OF THE IT ACT MADE BY AO WHEN ASSESSEE FALLS TO PROVE WITH SU PPORTING DOCUMENT THAT WHY THE INTEREST FREE ADVANCE FOR AMOUNT OF RS .15,04,03,277/- WAS GIVEN FOR THE LAND WHICH WAS SUBSEQUENTLY PURCHASED BY ASSESSEE ONLY FOR RS.6,77,00,000/- AND THAT TOO AFTER 4 YEARS OF ADVA NCE GIVEN. 12. BRIEFLY STATED, THE AO NOTICED THAT ASSESSEE HA S DEBITED AN AMOUNT OF RS.1,15,14,962/- TOWARDS INTEREST PAID ON UNSECURED LOAN, WHICH WAS UTILIZED FOR GIVING ADVANCE TO SHRIKANT B ROKING TO THE EXTENT OF RS.15.04 CRORE AS NOTICED IN THE AY 2009- 10 (SUPRA). THE AO FOLLOWED THE PREDECESSOR AO FOR AY 2009-10 AND C OMPUTED THE DISALLOWANCE TO THE EXTENT OF RS.1,15,14,962/- ON A CCOUNT OF INTEREST EXPENDITURE. ITA NOS. 439/AHD/13 & 884/AHD/15 [ITO VS. GALA INFRASTRUCTURE PVT. LTD.] A.YS. 2009-10 & 2010-11 - 7 - 13. AGGRIEVED, THE ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A) FOR THE SIMILAR DISALLOWANCE MADE IN THIS YEAR. 14. THE CIT(A) IN THIS YEAR CONCERNING AY 2010-11 R EVISITED THE FACTS OF THE CASE AND OBSERVED THAT THE MONEY GIVEN BY THE ASSESSEE TO SHRIKANT BROKING WAS A BUSINESS ADVANCE IN DEPARTUR E WITH THE OBSERVATIONS MADE IN APPELLATE PROCEEDINGS BY THE F IRST APPELLANT AUTHORITY CONCERNING AY 2009-10. THE CIT(A) ACCOR DINGLY DELETED THE ADDITIONS SO MADE BY THE AO FOR THE AY 2010-11. THE RELEVANT OPERATIVE PARA OF THE ORDER OF THE CIT(A) IS REPROD UCED HEREUNDER: 4.3 DECISION: I HAVE CAREFULLY CONSIDERED THE FACTS OF THE CASE, THE ASSESSMENT ORDER AND THE WRITTEN SUBMISSION OF THE APPELLANT. THE AO HAS DISALLOWED INTEREST PAID ON UNSECURED LOAN AS THE APPELLANT HA D GIVEN INTEREST FREE ADVANCES OF RS. 15.04 CRORES TO SHRIKANT BROKING PR IVATE LIMITED. IT HAS BEEN OBSERVED BY THE AO THAT DURING THE A.Y.2009-10 , IT WAS HELD THAT THE ADVANCES TO SHRIKANT BROKING PRIVATE LIMITED WAS NO T FOR THE PURPOSE OF APPELLANT'S BUSINESS AND ACCORDINGLY, THE DISALLOWA NCE WAS MADE. THE AO HAS ALSO DISCUSSED THAT THE LAND FOR WHICH THE ADVA NCES WAS GIVEN, WAS PURCHASED AT A PRICE OF RS. 6.77 CRORES WHEREAS, TH E AMOUNT OF ADVANCE WAS VERY HIGH. AT THE TIME OF ADVANCE THE LAND IN Q UESTION WAS AGRICULTURAL LAND AND THE APPELLANT COMPANY COULD N OT HAVE PURCHASED THE LAND. THE APPELLANT ON THE OTHER HAND HAS SUBMITTED THAT THE AO HAS NOT FULLY APPRECIATED THE EVIDENCE. IT HAS BEEN SUBMITT ED THAT SUFFICIENT DOCUMENTARY EVIDENCE IN SUPPORT OF THE CLAIM THAT T HE ADVANCE WAS .GIVEN FOR PURCHASE OF LAND AND THE LAND HAS ALSO BEEN SUB SEQUENTLY PURCHASED BY WAY OF A REGISTERED DEED. IT HAS BEEN SUBMITTED THAT THE VALUE OF THE LAND WAS MORE THAN RS. 21 CRORES WHICH INCLUDED TWO RIGHTS. FIRST RIGHT WAS THE LEGAL OWNERSHIP RIGHT WHICH WAS VESTING WIT H THE OWNER AND OTHERS AND THE SECOND RIGHT WAS BANAKHAT RIGHT WHIC H WAS WITH SHRIKANT BROKING PRIVATE LIMITED. THE APPELLANT HAD TO PAY F OR THE BANAKHAT RIGHT AND THE OWNERSHIP RIGHT AND THEREFORE, THE PAYMENTS WERE MADE. ALL THE PAYMENTS WERE DULY ACCOUNTED FOR AND HAVE BEEN MADE THROUGH CHEQUE. ON A CAREFUL CONSIDERATION OF ENTIRE FACTS OF THE C ASE, IF IS NOTED THAT THE APPELLANT HAD EXECUTED A BANAKHAT (AGREEME NT) ON 02/05/2008 AND PAID RS. 15.04 CRORES TO SHRIKANT BROKING PRIVA TE LIMITED. THE LAND WAS INITIALLY AGRICULTURAL LAND AND WAS SUBSEQUENTL Y CONVERTED TO NON- AGRICULTURAL. THE LAND WAS INITIALLY BOOKED FOR PUR CHASE FROM THE ORIGINAL OWNERS NAMELY HANUBHAI RAMJIBHAI SANGANI AND OTHERS BY SHRIKANT BROKING PRIVATE LIMITED BY WAY OF A BANAKHAT EXECUT ED ON 15/06/2007. SUBSEQUENTLY, SHRIKANT BROKING FURTHER EXECUTED A B ANAKHAT WITH THE ITA NOS. 439/AHD/13 & 884/AHD/15 [ITO VS. GALA INFRASTRUCTURE PVT. LTD.] A.YS. 2009-10 & 2010-11 - 8 - APPELLANT FOR SELLING THE SAME LAND. THEREAFTER, TH E SALE DEED WAS EXECUTED AND REGISTERED BETWEEN THE APPELLANT AND T HE ORIGINAL OWNER. ALL THE FACTS RELATED TO THE BANAKHAT AGREEMENTS BETWEE N VARIOUS ARSONS HAVE BEEN MENTIONED IN THE SALE DEED WHICH HAS BEEN REGI STERED BEFORE THE REGISTRAR. FOR THE SAKE OF CLARITY, THE RELEVANT EX TRACTS FROM THE SUBMISSION GIVEN BY THE APPELLANT WHICH EXPLAINS TH E SEQUENCE OF EVENTS ARE REPRODUCED HERE UNDER:- (A) AGRICULTURAL LAND BEARING SURVEY NO.17] OF BOD AKDEV ORIGINALLY BELONGED TO S/SHRI HANUMAN RAUJIBHAI SAN GHANI, SHITALKUMAR DESAI AND VYOMESH B PATEL (THE ORIGINAL LAND OWNER). (B) AS PER BHANAKHAT EXECUTED ON 15/6/2007 (DULY NOTARIZED! THE SAID LAND OWNERS AGREED TO SELL THIS LAND FOR RS.4,44,00,0001- TO SHNKANT BROKING COMPANY AND RS. 5 LAKHS WERE PAID BY THE COMPANY AS BHANAKAT MONEY TO THE O WNERS OF THE LAND. [CLAUSE 7]. (C) ON 2/5/2008, A BHANAKHAT KARAR GOT EXECUTED AND DULY NOTARIZED BETWEEN M/S. SHRIKANT BROKING (P) LIMITED AND GALA INFRASTRUCTURE P. LIMITED, BY WHICH THE ASSESS EE COMPANY GOT RIGHTS TO PURCHASE THE REFERRED LAND FR OM SHRIKANT BROKING FOR AN AGREED AMOUNT OF RS. 17,55,13,522/-. IN TERMS OF THIS KARAR THE ASSESSEE COMPANY PAID RS. 15,04,03,277/- AS CONSIDERATION FOR RELEAS ING RIGHT IN THE REFERRED LAND TO M/S. SHRIKANT BROKING (P) L IMITED. AND, IN LIEU OF HAVING RECEIVED TOTAL AMOUNT OF RS. 1,92,95,4381- BY THE ORIGINAL LAND OWNERS (NOW SELL ERS) FROM M/S, SHRIKANT BROKING (P} LIMITED, THE SELLERS AGRE ED TO GET THIS AMOUNT ADJUSTED AGAINST TOTAL SALE CONSIDERATI ON AS HAVING RECEIVED FROM APPELLANT COMPANY WHILE MAKING FINAL SALE DEED [CLAUSE 7.1] (D) ON 1/3/2012, AN AGREEMENT (SAMJAUTI KARAR) GO T EXECUTED FOR PAYMENT OF FURTHER AMOUNT OF RS.33 LAKHS AS PRICE E SCALATION BY ASSESSEE COMPANY TO THE SELLER. ACCORDINGLY, TOT AL AMOUNT OF RS.6,77,00,000/- WAS FIXED A FULL CONSIDERATION. [CLAUSE 8] (E) FURTHER, AS PER BANAKHAT DATED 2/5/2008, THE A MOUNT RECEIVABLE BY M/S. SHRIKANT BROKING (P) LIMITED AND IN TURN, THEY HAVING PAID TOTAL AMOUNT OF RS. 192,95,438/- T O THE 'SELLERS', THE 'SELLERS', CONFIRMED AS HAVING RECEI VED TOTAL AMOUNT FROM ASSESSEE COMPANY.[CLAUSE 9] (F) ON 7/3/2012, THE LAND GOT CONVERTED INTO NON -AGRICULTURAL LAND VIDE COLLECTOR'S LETTER NO.SR/GCH.K.43/BODAKDE V/ SR333 AND RECORDED AT ENTRY NO.99/6 IN REVENUE RECO RD. (G) ON 7/5/20/2, FINAL SALE DEED WAS EXECUTED AND REGISTERED AT SRL.NO.2603 WITH THE SUB-REGISTRAR AHMEDABAD BETWEE N THE ASSESSEE AND THE ORIGINAL LAND OWNERS (AS REFERRED TO IN (A) ABOVE.)' ITA NOS. 439/AHD/13 & 884/AHD/15 [ITO VS. GALA INFRASTRUCTURE PVT. LTD.] A.YS. 2009-10 & 2010-11 - 9 - THE ABOVE DETAILS CLEARLY SHOW THAT THE MONEY GIVEN BY THE APPELLANT COMPANY WAS A BUSINESS ADVANCE. THE FINDI NG OF THE AO THAT THE APPELLANT COMPANY COULD NOT HAVE PU RCHASED AGRICULTURAL LAND IS NOT OUT OF PLACE BUT IS WITHOU T ANY USE. THE APPELLANT HAD NOT PURCHASED ANY AGRICULTURAL LA ND. IT HAD ONLY EXECUTED AN AGREEMENT FOR PURCHASE OF LAND ONLY, WHEN THE SAME WAS CONVERTED TO NON-AGRICULTURE AND THEIR AGREEMENT FOR PURCHASE WAS EXECUTED. THE PAYMENT FO R REGISTRATION OF THE LAND AND THE TOTAL PAYMENT MADE BY THE APPELLANT WAS DIFFERENT AS THE APPELLANT HAD TO PAY FOR THE PURCHASE RIGHT TO SHRIKANT BROKING. IT IS NOTED THAT ALL THE PAYMENTS MADE TO SHRIKANT BROKING WERE THROUGH BANKING CHANNEL AND ARE RECORD ED IN THE BOOKS OF ACCOUNTS OF THE APPELLANT. THE PAYMENT MADE BY SHRIKANT BROKING TO THE ORIGINAL OWNER AT THE TIME OF AN AGREEMENT FOR PURCHASE OF LAND HAS ALSO BEEN ADJUST ED BY THE APPELLANT IN THE PURCHASE CONSIDERATION AND THE SAM E IS EVIDENT FROM THE REGISTERED DEED. IT IS ALSO NOTED THAT THE CIT(A) HAD UPHELD THE ADDITION IN THE IMMEDIATELY P RECEDING YEAR HOWEVER AT THAT THE REGISTRATION DEED FOR PURC HASE OF LAND WAS NOT BROUGHT TO THE JUSTICE OF CIT(A) AND O NLY LIMITED FACTS WERE AVAILABLE ON THE BASIS OF WHICH THE DECISION MUST HAVE BEEN TAKEN AT THE TIME. PRESENTL Y ALL THE FACTS HAVE NOW BECOME CLEAR. THE LAND HAS BEEN ULTI MATELY PURCHASED BY THE APPELLANT FOR ITS BUSINESS PURPOSE S. IT HAS THEREFORE BEEN ESTABLISHED BEYOND DOUBT THAT THE AD VANCE WAS GIVEN TO SHRIKANT BROKING BY THE APPELLANT IN E ARLIER YEAR WAS FOR THE PURPOSE OF BUSINESS. IN VIEW OF ABOVE FACTS, I AM OF THE CONSIDERED OPIN ION THAT THE DISALLOWANCE OF INTEREST UNDER SECTION 36( 1)(III) MADE BY THE AO WAS NOT JUSTIFIED. THE SAME IS THER EFORE, DIRECTED TO BE DELETED. 15. IN PARITY WITH THE FINDINGS GIVEN CONCERNING AY 2009-10, WE FIND NO JUSTIFICATION IN THE ACTION OF THE AO FOR M AKING ADDITIONS UNDER S.36(1)(III) OF THE ACT AT THE FIRST PLACE. BESIDES, THE CIT(A) IN AY 2010-11 HAS CLEARLY FOUND THAT THE MONEY WAS ADV ANCED TO SHRIKANT BROKING FOR ARRANGING THE PURCHASE OF LAND BY THE ASSESSEE FROM LAND OWNERS WAS IN THE NATURE OF BUSINESS ADVA NCE ON REAPPRAISAL OF THE FACTS AND EVIDENCES PLACED BEFORE HIM. THE C LAIM OF THE REVENUE THAT THE PURCHASES MADE BY THE ASSESSEE THR OUGH SHRIKANT BROKING WERE ONLY TO THE EXTENT OF RS.6.77 CRORES I N FACT ADMITS THE FACT THAT THE ADVANCE WAS MADE FOR THE PURPOSE OF A CQUISITION OF LAND. THE PURCHASE WAS MADE FOR LESSER AMOUNT AND AFTER A GAP OF CERTAIN ITA NOS. 439/AHD/13 & 884/AHD/15 [ITO VS. GALA INFRASTRUCTURE PVT. LTD.] A.YS. 2009-10 & 2010-11 - 10 - NUMBER OF YEARS IS IRRELEVANT IN OUR OPINION FOR DE TERMINATION OF NATURE OF ADVANCE. THE ASSESSEE HAS NEITHER CLAIME D EXPENDITURE NOR WAS THE ADVANCE FOUND TO BE FOR THE PURPOSES UNCONN ECTED TO BUSINESS. IT IS QUITE PROBABLE IN SUCH DEALS THAT THE PURCHAS E OF LAND PARCEL WERE MATERIALIZED FOR A LESSER VALUE. SUCH FACT WILL NO T CHANGE THE NATURE OF TRANSACTION. WE THUS FIND NO INFIRMITY IN THE O RDER OF CIT(A). WE THUS DECLINE TO INTERFERE. 16. THE APPEAL OF THE REVENUE IN ITA NO. 884/AHD/20 14 IS DISMISSED. 17. IN THE COMBINED RESULT, APPEAL OF THE ASSESSEE IS ALLOWED AND APPEAL OF THE REVENUE IS DISMISSED. SD/- SD/- (JUSTICE P. P. BHATT) (PRADIP KU MAR KEDIA) PRESIDENT ACCOUNTANT MEMBER AHMEDABAD: DATED /04/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 09/04/201 9