ITO, New Delhi V. M/s Goodlay Creations Pvt. Ltd., New Delhi

ITA 4494/DEL/2010

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 7555 (ITAT-DELHI)
• Duration Of Justice: 4 year(s) 2 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-12-2014
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 09-10-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 11-10-2010
• Court: TRIBUNAL
• Department Lawyers: SATPAL SINGH
• Assessee Lawyers: K SAMPATH ADV SHRI V RAJAKUMAR
• Keywords: Tax effect; Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C , NEW DELHI) BEFORE SHRI R. P. YADAV, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO. 4494/DEL/2010 ASSESSMENT YEAR : 2006-07 ITO, WARD 12(2), VS. M/S. GOODLAY CREATIONS PVT. LTD., NEW DELHI C-38/3A, LAWRENCE ROAD INDL. AREA, NEW DELHI. GIR / PAN:AABCG8086G I.T.A.NO. 4452/DEL/2010 AND 4828/DEL/2012 (ASSESSMENT YEARS 2006-07 & 2008-09) M/S. GOODLAY CREATIONS PVT. LTD., VS. ITO, WARD 12 (2), C-38/3A, LAWRENCE ROAD, NEW DELHI INDL. AREA, NEW DELHI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI SATPAL SINGH, SR. DR RESPONDENT BY : SHRI K SAMPATH, ADV. SHRI V RAJAKUMAR, ADV. ORDER PER T.S. KAPOOR, AM: THIS IS A BUNCH OF THREE APPEALS CONSISTING OF CRO SS APPEALS FILED BY ASSESSEE AND BY REVENUE RESPECTIVELY IN ASSESSMENT YEAR 2006-07 AGAINST ORDER OF LD. CIT(A) DATED 23.08.2010 AND REPRESENTE D BY I.T.A. NO. 4452 AND I.T.A. NO. 4494 WHEREAS I.T.A. NO. 4828 IS AN A PPEAL FILED BY ASSESSEE IN ASSESSMENT YEAR 2008-09 AGAINST CIT(A) ORDER DAT ED 15.05.2012 . THESE ITA NOS.4494,4452/DEL/2010 I.T.A.NO. 4828/DEL/2012 2 APPEALS WERE HEARD TOGETHER AND THEREFORE, FOR THE SAKE OF CONVENIENCE, THE SAME ARE BEING DISPOSED OF BY A SINGLE AND CONSOLID ATED ORDER. 2. AT THE OUTSET LD. A.R. WAS SUBMITTED THAT THE T AX AMOUNT INVOLVED IN THE APPEAL FILED BY THE REVENUE IN I.T.A.NO.4494/DE L/2010 WAS LESS THAN RS.3 LACS AND THEREFORE, IN VIEW OF INSTRUCTION NO. 3/2011 (F.NO.279/MISC./142/2007-ITJ) DATED 09.02.2011 ISSU ED BY THE CBDT, WHEREIN IT HAS BEEN PROVIDED THAT TAX EFFECT IN AN APPEAL TO BE FILED BEFORE THE APPELLATE TRIBUNAL SHOULD BE MORE THAN RS.3 LAC S. IN VIEW OF CBDT OF THE REVENUE IS NOT MAINTAINABLE. 3. LD.D.R. ACCEDED THE FACTS. 4. THE OTHER TWO APPEALS FILED BY THE ASSESSEE INVO LVE COMMON GROUNDS WHEREIN THE ASSESSEE IS AGGRIEVED WITH THE CONFIRMA TION OF ADDITION MADE BY THE A.O. ON ACCOUNT OF LOW CHARGING OF INTEREST ON ACCOUNT OF LOAN GIVEN TO ONE OF ITS RELATED ASSESSEE WHEREAS ASSESSEE WAS IN CURRING MORE INTEREST EXPENDITURE ON BORROWED FUNDS. THEREFORE THE A.O. HAD MADE ADDITION ON ACCOUNT OF DIFFERENCE OF INTEREST CHARGED AND THAT PAID ON THE ABOVE SAID ADVANCE. AGGRIEVED THE ASSESSEE FILED APPEAL BEFOR E LD. CIT(A) FOR ASSESSMENT YEAR 2006-07. LD. CIT(A) HAS CONFIRMED THE ADDITION BY HOLDING AS UNDER: I HAVE CONSIDERED THE FINDINGS OF THE AO AS WELL A S THE SUBMISSIONS OF THE APPELLANT AND MATERIAL PLACED ON RECORD. THIS GROUND IS REGARDING THE DISALLOWANCE MADE BY T HE AO ON ACCOUNT OF INTEREST PAID ON UNSECURED LOANS. PERUSA L OF FINDINGS ON RECORD SHOW THAT THE APPELLANT HAD TAKEN LOANS FROM VARIOUS PARTIES AT THE RATE OF 18%. IT WAS ALSO SEEN THAT THE APPEL LANT HAD MADE CERTAIN ADVANCES TO M/S HYAT TRADERS, THE CLOSING B ALANCE OF WHICH WAS RS.7137813/-. DURING THE YEAR THE APPELLANT HAD MADE A PAYMENT OF INTEREST OF RS.587815/- ON THE UNSECURED LOANS W HICH IT HAD TAKEN FROM THE VARIOUS PARTIES. THE ONLY CONTENTION OF TH E APPELLANT IN CHARGING OF LOWER INTEREST ON THE LOAN ADVANCED TO MIS HYAT TRADERS ITA NOS.4494,4452/DEL/2010 I.T.A.NO. 4828/DEL/2012 3 IS THAT THE APPELLANT HAD TAKEN OTHER BENEFITS FROM THE PERSONS TO WHOM THE ADVANCE HAD BEEN MADE. THE APPELLANT HAS N OT BEEN ABLE TO JUSTIFY ON THE BASIS OF EVIDENCE AS TO WHAT WAS THE BUSINESS INTEREST OR AND WHAT WAS THE BENEFIT WHICH IT WAS DERIVING FROM THE PERSON TO WHOM THE ADVANCES WERE GIVEN ON SUCH LOW RATE OF IN TEREST. THE APPELLANT HAS NOT BEEN ABLE TO BRING ON RECORD AS T O WHY INTEREST AT A LOWER RATE BEING CHARGED WHEREAS THE APPELLANT WAS MAKING A HEAVY INTEREST PAYMENTS ON BORROWED MONEY, WHICH WAS ALSO BEING UTILIZED TO MAKE ADVANCE. THE APPELLANT HAS NOT BEEN ABLE TO BRING ANY FACTS ON RECORD THAT THE APPELLANT WAS HAVING FREE RESERV ES OR INTEREST FREE FUNDS FROM WHICH LOWER INTEREST ADVANCES WERE BEING MADE. THE HONOURABLE SC IN THE CASE OF S.A. BUILDERS LTD. VS CIT(A) AND OTHERS 288 ITR OF (SC) HAS HELD THAT INTEREST ON BORROWED FUNDS CANNOT BE DISALLOWED IF THE ASSESSEE HAD ADVANCED INTEREST FR EE ADVANCES TO SISTER CONCERNS AS A MEASURE OF COMMERCIAL EXPEDIEN CY. PERUSAL OF THE ABOVE DECISION SHOWS THAT BUSINESS PURPOSE IS OF A PRIMARY IMPORTANCE. IN THE INSTANT CASE NO BUSINESS PURPOSE OR COMMERCIAL EXPEDIENCY HAS BEEN BROUGHT ON RECORD BY THE APPELL ANT. IN VIEW OF THE ABOVE, I AM IN AGREEMENT WITH THE VIEWS OF AO T HAT THE AMOUNT OF INTEREST PAID ON UNSECURED LOANS WAS LIABLE TO BE D ISALLOWED. THIS GROUND OF APPEAL IS DISMISSED. 5. HOWEVER, IN ASSESSMENT YEAR 2008-09, THE ASSESSE E DID NOT PRESENT ITSELF FOR ARGUMENT BEFORE LD. CIT(A) AND LD. CIT(A ) DISMISSED THE SAME AS THE FACTS IN BOTH THE CASES REMAINED THE SAME. AT THE TIME OF APPELLATE PROCEEDINGS, LD. A.R. SUBMITTED THAT THE LOANS WERE ADVANCED BY ASSESSEE COMPANY ON ACCOUNT OF COMMERCIAL EXPEDIENCY AS PROP RIETOR OF LOANEE WAS IN FACT HELPING THE ASSESSEE COMPANY IN DAY TO DAY ACTIVITIES. HOWEVER NOTHING WAS BROUGHT ON RECORD TO SUBSTANTIATE THE A RGUMENTS. LD. A.R. FURTHER SUBMITTED THAT IN 2008-09, LD. CIT(A) ORDER CAN BE SET ASIDE FOR READJUDICATION AS THE SAME WAS PASSED EX-PARTE. 6. LD. D.R. ON THE OTHER HAND HEAVILY RELIED UPON T HE ORDERS OF AUTHORITIES BELOW. ITA NOS.4494,4452/DEL/2010 I.T.A.NO. 4828/DEL/2012 4 7. WE HAVE HEARD RIVAL PARTIES AND HAVE GONE THROUG H THE MATERIAL PLACED ON RECORD. FIRST, WE TAKE UP THE REVENUES APPEAL IN I.T.A.NO. 4494. WE FIND THAT THE AMOUNT OF ADDITION IN THIS APPEAL WAS RS.8.58 LACS AND THE TAX ON WHICH COMES OUT AT RS.2.88 LACS WHICH IS LESS TH AN RS.3 LACS. THE AFORESAID INSTRUCTIONS HAVE BEEN HELD TO BE APPLICA BLE TO ALL PENDING APPEALS BY THE HONBLE DELHI HIGH COURT IN THE DECISIONS IN THE CASES: I) CIT VS M/S. P.S. JAIN & CO. IN I.T.A.NO. 179/19 91, ORDER DATED 2 ND AUG., 2010. II) CIT VS DELHI RACE CLUB IN I.T.A.NO. 128/2008, ORDER DATED 03 MARCH, 2011. 8. IN THE PRESENT CASE, ADMITTEDLY, THE TAX EFFECT IS BELOW RS.3 LACS. HENCE, THE APPEAL BY REVENUE IS IN DISREGARD TO THE AFORESAID CBDT CIRCULAR/INSTRUCTION. THE SAME IS LIABLE TO BE DIS MISSED. IN VIEW OF ABOVE, THE APPEAL OF REVENUE IN I.T.A.NO. 4494/DEL/2010 IS NOT MAINTAINABLE AND HENCE, DISMISSED. 9. NOW, COMING TO APPEALS FILED BY THE ASSESSEE IN I.T.A.NO. 4452 AND 4828. WE FIND THAT LD. CIT(A) HAS DEALT WITH THE I SSUE IN A RIGHT PERSPECTIVE AND HAS PASSED WELL REASONED AND SPEAKING ORDER IN ASSESSMENT YEAR 2006- 07. LD. A.R. WAS NOT ABLE TO JUSTIFY THE LOW CHARG ING OF INTEREST WHEN THE ASSESSEE WAS BORROWING ON INTEREST, WHICH WAS MORE THAN INTEREST CHARGED. THE ARGUMENT OF LD. A.R. THAT APPEAL IN ASSESSMEN T YEAR 2008-09 CAN BE SET ASIDE FOR READJUDICATION, DOES NOT HAVE ANY FOR CE AS THOUGH ASSESSEE DID NOT PRESENT HIMSELF BEFORE LD. CIT(A) BUT THE FACTS REMAIN THE SAME AND LD. CIT(A) HAS PASSED DETAILED ORDER, IN ASSESSMENT YEA R 2006-07 THEREFORE, WE ARE NOT IN AGREEMENT WITH THE ARGUMENT OF LD. A.R. 10. IN VIEW OF ABOVE, THE APPEALS FILED BY THE ASSE SSEE ARE DISMISSED. ITA NOS.4494,4452/DEL/2010 I.T.A.NO. 4828/DEL/2012 5 11. IN NUTSHELL, THE APPEAL FILED BY THE REVENUE IN I.T.A.NO. 4494/DEL/2010 AND THE APPEALS FILED BY THE ASSESSEE IN I.T.A.NO. 4452/DEL/2010 AND 4828/DEL/2012 ARE DISMISSED. 12. ORDER PRONOUNCED IN THE OPEN COURT ON 12 TH DEC., 2014. SD./- SD./- ( R. P. YADAV) (T.S. KAPOOR ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 12 TH DEC., 2014 SP COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). S.NO. DETAILS DATE INITIAL S DESIGNATION 1 DRAFT DICTATED ON 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