Shri Arun Kumar Goyal, Indore V. The JCIT RANGE-4, Indore

ITA 46/IND/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5842 (ITAT-INDORE)
• Duration Of Justice: 2 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-01-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 20-01-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 13-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: R A VERMA
• Assessee Lawyers: S S MUNDRA
• Section: 14A

Judgement Text

ITA NO.46 OF 2014 ARUN KUMAR GOYAL 1 IN THE INCOME TAX APPELLATE TRIBUNAL INDORE BENCH, INDORE BEFORE SHRI D.T. GARASIA, JUDICIAL MEMBER AND SHRI B.C. MEENA, ACCOUNTANT MEMBER ITA NO. 46/IND/2014 A.Y. 2009-10 ARUN KUMAR GOYAL, INDORE PAN ABKPG 2577 R :: APPELLANT VS JCIT, RANGE-4, INDORE :: RESPONDENT ASSESSEE BY SHRI S.S. MUNDRA RESPONDENT BY SHRI R.A. VERMA DATE OF HEARING 20.1.2016 DATE OF PRONOUNCEMENT 20.1.2016 O R D E R PER SHRI B.C. MEENA, AM THIS APPEAL IS FILED BY THE ASSESSEE CHALLENGING TH E ORDER OF LD. CIT(A)- II, INDORE, DATED 21.10.2013. 2. THE FIRST EFFECTIVE ISSUE RAISED BY THE ASSESSEE IS WITH REGARD TO THE ADDITION OF RS.7,20,312/- ON ACCOUNT OF DISALLOWANC E U/S 14A. FACTS, IN BRIEF, OF THE ISSUE ARE THAT THE AO NOTED THAT THE BALANCE -SHEET OF THE ASSESSEE REFLECTS INVESTMENTS AND DEPOSITS AGGREGATING TO RS .3,41,20,896/-, WHICH INCLUDE INVESTMENT IN SHARES AGGREGATING TO RS.2,23 ,04,888/-. THE DIVIDEND EARNED ON SHARES HAS BEEN CREDITED TO THE CAPITAL A CCOUNT. THE ASSESSEE FURNISHED THE WORKING INCLUDING THE DETAILS OF INVE STMENT FALLING WITHIN THE CATEGORY FROM WHICH THE INCOME DERIVED IS NOT CHARG EABLE TO TAX. THUS, THE ITA NO.46 OF 2014 ARUN KUMAR GOYAL 2 AO, AFTER EXAMINING THE SAID WORKING, MADE DISALLOW ANCE OF RS.7,20,312/-. AGAINST THE SAME, THE ASSESSEE APPROACHED THE LD. C IT(A), WHO CONFIRMED THE ACTION OF THE AO. NOW, THE ASSESSEE IS BEFORE US. 2.1 BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE CON TENDED THAT LD. REVENUE AUTHORITIES DID NOT CONSIDER THE SUBMISSION S AND CONFIRMED THE ADDITION. THE WORKING GIVEN BY THE ASSESSEE IS NOT IN ACCORDANCE WITH THE RULE 8D OF THE I.T. RULES, THEREFORE, WORKING IS NOT COR RECT. THE INTEREST EXPENSES AMOUNTING TO RS.22,89,532/- CONSIDERED FOR DISALLOW ANCE BY THE AO UNDER THE PROVISIONS OF RULE 8D IS NOT CORRECT AS NO MONEY WA S BORROWED FOR MAKING THE INVESTMENTS IN SHARES. MOST OF THE INVESTMENTS IN S HARES HAVE BEEN MADE IN EARLIER YEARS FROM THE INTERNAL ACCRUALS GENERATED. NO FRESH INVESTMENTS IN SHARES HAVE BEEN MADE IN THE ASSESSMENT YEAR 2009-1 0 UNDER CONSIDERATION. INTEREST BEARING FUNDS WERE USED ONLY FOR BUSINESS PURPOSES. THE ASSESSEE IS IN POSITION TO PROVE THAT INVESTMENTS MADE DURING T HE YEAR UNDER CONSIDERATION AS WELL AS PREVIOUS YEAR WERE OUT OF INTEREST FREE FUNDS. ASSESSEE IS NOT AT DEFAULT ON THE REPAYMENTS AND LO AN AMOUNTS HAVE NOT BEEN UTILISED FOR MAKING TAX FREE INVESTMENTS. THER E WAS NO NEXUS BETWEEN THE BORROWED FUNDS EITHER DIRECTLY OR INDIRECTLY FO R THE INVESTMENTS IN SHARES AND ASSESSEE HAD SUFFICIENT CAPITAL TO THE TUNE OF RS.5,03,13,804/-, THEREFORE, THE QUESTION OF CONSIDERING DIRECT OR INDIRECT INTE REST DOES NOT ARISE. LEARNED COUNSEL FOR THE ASSESSEE ALSO DREW OUR ATTENTION TO THE FOLLOWING CASE-LAWS: 1. DEWAS SOYA LTD VS. ACIT (2012) 20 ITJ 535 (ITAT, INDORE); 2. GMR POWER CORPORATION LTD. VS. DCIT (2014) 50 TA XMAN.COM 393 (ITAT, BANGALORE); ITA NO.46 OF 2014 ARUN KUMAR GOYAL 3 3. ACIT VS. CHAMPION COMMERCIAL CO. LTD. (ITA NO.64 4/KOLKATA/2012, ORDER DATED 21.9.2012). ON THE OTHER HAND, LD. DR RELIED ON THE ORDERS OF T HE REVENUE AUTHORITIES. 2.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOT H THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. WE FIND THAT IN VIEW OF THE FACTS AND SUBMISSIONS THEREOF, AS NARRATED ABOVE, THE MATTER REQUIRES RECONSIDERATION AT THE LEVEL OF THE AO. THE ASSESSEE HAS FILED A PAPER BOOK RUNNING INTO 29 PAGES ALONG WITH WRITTEN SUBMISSIONS, WHEREIN, THE RELEVANT DOCUMENTS HAVE BEEN ANNEXED. ASSESSEE HAS AGITATED THAT THE DOCUME NTS HAVE NOT BEEN APPRECIATED BY THE REVENUE AUTHORITIES IN THE PROPE R PERSPECTIVE AS ON THIS ISSUE, NOWHERE, THE SUBMISSIONS OF THE ASSESSEE HAV E BEEN DISCUSSED IN THE ORDERS OF THE REVENUE AUTHORITIES. BEFORE US, THE L EARNED COUNSEL FOR THE ASSESSEE HAS ALSO MADE SUBMISSION, AS NARRATED ABOV E. ALL THESE REQUIRE CONSIDERATION OF THE AO. THEREFORE, WE SET ASIDE TH E ORDERS OF THE REVENUE AUTHORITIES ON THIS ISSUE. THE ISSUE IS RESTORED BA CK TO THE FILE OF THE LD. AO WITH DIRECTION TO VERIFY THE CLAIM OF THE ASSESSEE IN VIEW OF THE ABOVE DISCUSSION AND JUDICIAL PRONOUNCEMENTS. THE AO SHAL L DECIDE THE ISSUE AFTER GIVING DUE OPPORTUNITY OF HEARING TO THE ASSESSEE. THE ASSESSEE SHALL BE AT LIBERTY TO FILE ANY FURTHER EVIDENCE, IF ANY, IN SU PPORT OF ITS CLAIM. THUS, THE ISSUE IS ALLOWED FOR STATISTICAL PURPOSES. 3. THE SECOND I.E. LAST EFFECTIVE ISSUE RAISED BY T HE ASSESSEE IS THAT LD. CIT(A) HAS ERRED IN SUSTAINING THE ADDITION OF RS.1 LAC ON ACCOUNT OF DISALLOWANCE OUT OF INTEREST EXPENSES AS MADE BY TH E AO TO THE RETURNED ITA NO.46 OF 2014 ARUN KUMAR GOYAL 4 INCOME OF THE ASSESSEE. FACTS, IN BRIEF, OF THE ISS UE ARE THAT FROM THE PERUSAL OF THE BALANCE-SHEET, THE AO WAS OF THE VIEW THAT I NVESTMENT IN ASSETS ARE NOT RELATING TO THE BUSINESS, THEREFORE, THE INTEREST B EARING FUNDS MIGHT HAVE BEEN DIVERTED TO THE ASSETS. THE AO, TAKING INTO CONSIDE RATION OF THE SUBMISSION OF THE ASSESSEE AND THE ASPECT OF DISALLOWANCE U/S 14A , MADE A LUMP SUM DISALLOWANCE AT RS.2 LACS OUT OF INTEREST EXPENSES. AGAINST THE SAME, THE ASSESSEE APPROACHED THE LD. CIT(A), WHO RESTRICTED THE ADDITION TO RS.1 LAC. STILL AGGRIEVED, THE ASSESSEE IS BEFORE US. 3.1 BEFORE US, THE LEARNED COUNSEL FOR THE ASSESSEE CON TENDED THAT THE AO WITHOUT ESTABLISHING ANY NEXUS OF ALLEGED DIVERSION OF BUSINESS BORROWED FUNDS TO NON-BUSINESS ASSETS, ARBITRARILY CONCLUDED THAT INVESTMENT IN ASSETS ARE NOT RELATING TO THE BUSINESS. THERE WAS INCREAS E IN THE OTHER BUSINESS ASSETS. THE INCREASE IS ON ACCOUNT OF INTEREST CAPI TALISATION AND OUT OF OWN FUNDS AND ACCRUALS. THE OWN FUNDS AND INTERNAL ACCR UALS WERE AVAILABLE TO THE ASSESSEE DURING THE PRESENT YEAR FOR MAKING INVESTM ENTS IN OTHER ASSETS. THEREFORE, THE INTEREST PAID ON THE FUNDS BORROWED FOR THE PURPOSE OF BUSINESS IS ALLOWABLE DEDUCTION. ON THE OTHER HAND, LD. DR R ELIED ON THE ORDERS OF THE REVENUE AUTHORITIES. 3.2 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF BOT H THE PARTIES AND GONE THROUGH THE MATERIAL AVAILABLE ON THE FILE. ON CONS IDERATION OF FACTS AND MATERIAL ON RECORD, WE FIND THAT THE AO WITHOUT BRI NGING ANY EVIDENCE ON RECORD HELD THAT INVESTMENT IN ASSETS ARE NOT RELAT ING TO THE BUSINESS. THE REVENUE AUTHORITIES COULD NOT APPRECIATE THE FACT T HAT THERE WAS INCREASE IN ITA NO.46 OF 2014 ARUN KUMAR GOYAL 5 THE OTHER BUSINESS ASSETS, WHICH WAS ON ACCOUNT OF INTEREST CAPITALISATION AND OUT OF OWN FUNDS AND ACCRUALS. DETAILS OF THE OWN F UNDS AND INTERNAL ACCRUALS ARE FILED IN THE SUBMISSION AND PAPER BOOK WHICH PR OVE THAT THE OWN FUNDS AND INTERNAL ACCRUALS AT RS.68,16,898/- WERE AVAILA BLE TO THE ASSESSEE DURING THE PRESENT YEAR FOR MAKING INVESTMENTS IN OTHER AS SETS, THEREFORE, THE INTEREST PAID ON THE FUNDS BORROWED FOR THE PURPOSE OF BUSIN ESS IS ALLOWABLE DEDUCTION U/S 36(1)(III) OF THE I.T. ACT. WE, THEREFORE, FIND THAT ASSESSEE HAS SUFFICIENTLY EXPLAINED HIS CLAIM. EVEN LD. DR COULD NOT CONTROVE RT THE ABOVE FACTUAL MATRIX BEFORE US AND NO CONTRARY MATERIAL WAS BROUGHT ON R ECORD. ACCORDINGLY, WE ARE OF THE VIEW THAT LD. CIT(A) SHOULD HAVE DELETED THE ADDITION FULLY. WE ARE ALSO FORTIFIED BY THE DECISION OF HONBLE BOMBAY HI GH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWER LTD. (2009) 313 ITR 340 (BOM). THUS, IN VIEW OF THE FACTS AND SUBMISSIONS THEREOF, AS NARRATED ABOV E, WE DELETE THE REMAINING ADDITION OF RS.1 LAC TOO. THE ISSUE OF THE ASSESSE E IS ALLOWED. 4. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALL OWED PARTLY. ORDER WAS PRONOUNCED IN THE OPEN COURT ON 20.1.2016 . SD/- ( D.T. GARASIA) JUDICIAL MEMBER SD/- (B.C. MEENA) ACCOUNTANT MEMBER DATED : 20.1.2016 !VYS! COPY TO: APPELLANT / RESPONDENT / CIT(A) / CIT / DR, INDORE