Shree Ganesh Ventures, CHENNAI V. ITO, CHENNAI

ITA 460/CHNY/2017

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 6459 (ITAT-CHENNAI)
• Duration Of Justice: 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: C
• Assessment Year: 2012-2013
• Appeal Filed On: 23-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: N MADHAVAN
• Assessee Lawyers: M V SWAROOP

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, CHENNAI . . . , . !' , $ % BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.460/MDS/2017 ' (' / ASSESSMENT YEAR : 2012-13 M/S SHREE GANESH VENTURES, NO.14A, ENNORE HIGH ROAD, CHENNAI - 600 019. PAN : AADCS 4838 E V. THE INCOME TAX OFFICER, NON CORPORATE WARD 6(2), CHENNAI - 600 034. (*+/ APPELLANT) (,-*+/ RESPONDENT) *+ . / / APPELLANT BY : SHRI M.V. SWAROOP, ADVOCATE ,-*+ . / / RESPONDENT BY : SHRI N. MADHAVAN, JCIT 0 . 1$ / DATE OF HEARING : 11.05.2017 2!( . 1$ / DATE OF PRONOUNCEMENT : 03.08.2017 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) -5, CHENNA I, DATED 21.12.2016 AND PERTAINS TO ASSESSMENT YEAR 2012-13. 2. SHRI M.V. SWAROOP, THE LD.COUNSEL FOR THE ASSESS EE, SUBMITTED THAT THE ASSESSING OFFICER DISALLOWED A S UM OF 2 I.T.A. NO.460/MDS/17 ` 10,89,245/- TOWARDS INTEREST PAID TO THE BANK. ACC ORDING TO THE LD. COUNSEL, THE ASSESSING OFFICER FOUND THAT BORROWED FUNDS WERE GIVEN TO THE PARTNERS AND NOT USED FOR BUSINESS PUR POSE. DURING THE RELEVANT YEAR UNDER CONSIDERATION, NO LOAN WAS GIVE N BY THE ASSESSEE-FIRM TO ITS PARTNERS. THE ASSESSING OFFIC ER HAS SIMPLY DISALLOWED THE CLAIM OF THE ASSESSEE TOWARDS INTERE ST PAYMENT ON THE BASIS OF BANK STATEMENT WITHOUT REFERRING TO AN Y SPECIFIC TRANSACTION. THE LD.COUNSEL FURTHER SUBMITTED THAT IN THE BALANCE SHEET THERE WAS NO REFERENCE ABOUT ADVANCE OF MONEY TO ANY OF THE PARTNERS. THE LD.COUNSEL FURTHER SUBMITTED THAT TH E AGGREGATE CLOSING CREDIT BALANCE OF PARTNERS WAS ` 311.70 LAKHS, WHEREAS, THE ADVANCE TO PARTNERS WAS ` 210.25 LAKHS. THEREFORE, ACCORDING TO THE LD. COUNSEL, THE FIRM OWED ` 101.45 LAKHS TO ITS PARTNERS AND NOT OTHERWISE. REFERRING TO THE DECISION OF JAIPUR BEN CH OF THIS TRIBUNAL IN NAMDEV EXPORT, JAIPUR V. ITO IN I.T.A. NO.1104/J P/2011, THE LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT WHEN THE AGGREGATE NET BALANCE OF PARTNERS CAPITAL ACCOUNT IS CREDIT ONLY AND NO INTEREST WAS PAID BY THE FIRM TO ITS PARTNERS ON SUCH CREDIT BALANCE, MERELY BECAUSE THE FIRM ADVANCED MONEY TO ONE OF ITS PARTN ERS, NO PORTION OF INTEREST CAN BE DISALLOWED IN THE HANDS OF THE P ARTNERSHIP FIRM. 3 I.T.A. NO.460/MDS/17 3. ON THE CONTRARY, SHRI N. MADHAVAN, THE LD. DEPAR TMENTAL REPRESENTATIVE, SUBMITTED THAT THE ASSESSEE-FIRM GA VE LOANS DURING THE YEAR UNDER CONSIDERATION TO ITS PARTNER SHRI RA GHAV SARAF TO THE EXTENT OF ` 45,66,575/- FOR PURCHASE OF PROPERTY. SIMILARLY, T HE RETIRED PARTNER SHRI ASHOK KUMAR SARAF WAS ALSO GIV EN A LOAN OF ` 36,51,949/-. INTEREST WAS NOT LEVIED ON BOTH THE A DVANCES. ADMITTEDLY, ACCORDING TO THE LD. D.R., THE ASSESSEE HAD BORROWED LOAN AND LOAN WAS NOT USED FOR THE PURPOSE OF BUSIN ESS AND IT WAS USED FOR GIVING LOANS TO THE PARTNER AND RETIRED PA RTNER. THE PARTNER AND RETIRED PARTNERS RECEIVED LOANS FROM ASSESSEE-F IRM AND UTILIZED THE SAME FOR PURCHASING THE INDIVIDUAL PROPERTIES. THEREFORE, ACCORDING TO THE LD. D.R., THE CIT(APPEALS), BY PLA CING RELIANCE ON THE JUDGMENT OF MADRAS HIGH COURT IN CIT V. INDIA S ILK HOUSE (1984) 18 TAXMAN 333, CONFIRMED THE ADDITION MADE B Y THE ASSESSING OFFICER. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL AVAILABLE ON RECORD. IT IS NOT IN DISPUTE THAT THE ASSESSEE ADVANCED LOANS TO ITS PAR TNER AND ERSTWHILE PARTNER. THE REVENUE CLAIMS THAT THE BOR ROWED FUNDS WERE DIVERTED FOR NON-BUSINESS PURPOSE BY WAY OF GI VING LOAN TO THE 4 I.T.A. NO.460/MDS/17 PARTNER AND ERSTWHILE PARTNER OF THE ASSESSEE. THE ASSESSEE NOW CLAIMS THAT THE AGGREGATE CREDIT BALANCE OF THE PAR TNERS WAS ` 311.70 LAKHS, WHEREAS, ADVANCE WAS MADE ONLY TO THE EXTENT OF ` 210.25 LAKHS. THEREFORE, THE ASSESSEE CLAIMS THAT THERE WAS EXCESS CAPITAL OF ` 101.45 LAKHS. HENCE, IN VIEW OF DECISION OF JAIPUR BENCH OF THIS TRIBUNAL IN NAMDEV EXPORT, JAI PUR (SUPRA), THERE CANNOT BE ANY DISALLOWANCE. FROM THE ORDER O F THE LOWER AUTHORITY, IT APPEARS THAT THE AVAILABILITY OF CRED IT BALANCE TO THE EXTENT OF ` 311.70 LAKHS WAS NOT TAKEN INTO CONSIDERATION. IT IS NOT KNOWN WHETHER THE ASSESSEE HAD SUFFICIENT CREDIT BA LANCE IN THE CAPITAL ACCOUNT. IT IS ALSO NOT KNOWN WHY THE ASSE SSEE BORROWED LOAN? THESE FACTS WERE NOT EXAMINED BY BOTH THE AU THORITIES BELOW. THEREFORE, THE MATTER NEEDS TO BE RE-EXAMINED BY TH E ASSESSING OFFICER. ACCORDINGLY, THE ORDERS OF THE AUTHORITIE S BELOW ARE SET ASIDE AND THE ENTIRE ISSUE OF DISALLOWANCE OF INTER EST ON THE BORROWED FUNDS IS REMITTED BACK TO THE FILE OF THE ASSESSING OFFICER. THE ASSESSING OFFICER SHALL RE-EXAMINE THE MATTER I N THE LIGHT OF THE MATERIAL THAT MAY BE FILED BY THE ASSESSEE AND THER EAFTER DECIDE THE ISSUE AFRESH IN ACCORDANCE WITH LAW, AFTER GIVING A REASONABLE OPPORTUNITY TO THE ASSESSEE. 5 I.T.A. NO.460/MDS/17 5. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED ON 3 RD AUGUST, 2017 AT CHENNAI. SD/- SD/- (. !' ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) $ / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 4 /DATED, THE 3 RD AUGUST, 2017. KRI. . ,156 76(1 /COPY TO: 1. *+ /APPELLANT 2. ,-*+ /RESPONDENT 3. 0 81 () /CIT(A)-5, CHENNAI-34 4. PRINCIPAL CIT-9, CHENNAI 5. 69 ,1 /DR 6. :' ; /GF.