LOTUS INVESTMENTS LTD, MUMBAI V. ACIT CEN CIR 13, MUMBAI

ITA 4701/MUM/2009

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71368 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 1 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 25-09-2013
• Assessment Year: 2006-2007
• Appeal Filed On: 11-08-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R K SAHU
• Assessee Lawyers: STANY SALDANHA
• Keywords: Business expenditure
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G , MUMBAI BEFORE SHRI D. K ARUNAKARA RAO , ACCOUNTANT MEMBER AND SHRI SANJAY GARG , JUDICIAL MEMBER ITA NO. 4701/M/09 ASSESSMENT YEAR: 2006 - 07 M/S. LOTUS INVESTMENTS LTD. 1, ANUP, SUN BEAM CO.OP. HOUSING SOCIETY, JUHU VERSOVA LINK ROAD, ANDHERI (W), MUMBAI - 400 0 5 3 PAN: AA AC L6350M VS. THE ASSISTANT COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 1 3 , CGO BUILDING, 11 TH FLOOR, MUMBAI - 400020 (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI STANY SALDANHA REVENUE BY : SHRI R.K. SAHU, D.R. DATE OF HEARING : 25.09.13 DATE OF PRONOUNCEMENT : 30.09.13 O R D E R PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN FILED BY THE ASSESSEE AG AINST THE ORDER OF THE CIT(A) DATED 17 .0 6.09 RELEVANT TO ASSESSMENT YEAR 200 6 - 07 . 2. THE ONLY SUBSTANTIVE ISSUE COMING OUT OF THE GROUND OF APPEAL IS REGARDING DISALLOWANCE OF A SUM OF RS. 7,82,403/ - BEING INTEREST PAID ON BANK OVERDRAFT. DURING ASSESSM ENT PROCEEDINGS UNDER SECTION 143(3) OF THE INCOME TAX ACT , THE ASSESSING OFFICER DISAL LOWED THE INTEREST AMOUNT OF RS.7,82,403/ - WHICH THE ASSESSEE CLAIMED TO BE PAID TO BANK AGAINST OVERDRAFT/LOAN. IT HAS BEEN CLAIMED BY THE ASSESSEE THAT THE OVERDRAFT FACILITY WAS GRANTED TO THE ASSESSEE AGAINST THE SECURITY OF HIS FDR WITH THE BANK FOR RS.1,34,48,380/ - ITA NO. 4701/M/09 M/S. LOTUS INVESTMENTS LTD. 2 WHICH EARNED CORRESPONDING INTEREST OF RS.6,83,467/ - AND THE SAME WAS OFFERED AS INCOME OF THE ASSESSEE. THE ASSESSEE THUS HAS CLAIMED THAT THERE IS A NEXUS BETWEEN THE FDR INTEREST AND THE INTEREST PAID ON OVERDRAFT AND AS SUCH HAS CLAIMED THE SAID OVERDRAFT INTEREST AS BUSINESS EXPENDITURE. THE SECOND CONTENTION OF THE LD. REPRESENTATIVE OF THE ASSESSEE HAS BEEN THAT THE OVERDRAFT LOAN AMOUNT WAS UTIL IZED BY THE ASSESSEE TOWARDS REPAYMENT OF INTEREST AND LOAN AMOUNT OF RS.13.53 CRORES OUTSTANDING AGAINST THE ASSESSEE. THESE LOAN AMOUNTS WERE USED BY THE ASSESSEE FOR THE PURPOSE OF INVESTMENT BUSINESS OF THE ASSESSEE. ON THE OTHER HAND LD. D.R. HAS RELIED UPON THE AUTHORITIES BELOW. 3. A PERUSAL OF THE ORDER UNDER APPEAL REVEALS THAT THE DISALLOWANCE OF INTEREST EXPENDITURE OF RS.7,82,403/ - HAS BEEN CONFIRMED BY THE LD. CIT(A) OBSERVING THAT THERE WAS NO NEXUS BETWEEN THE INTEREST INCOME ACCRUED TO THE ASSESSEE ON THE FDR AND THE INTEREST PAID ON THE OVERDRAFT. WE DO NOT FIND ANY INFIRMITY OF THE FINDING OF THE LD. CIT(A) , S O FAR THE NEXUS BETWEEN THE INTEREST INCOME AND THE INTEREST PAID ON OVERDRAFT IS CONCERNED. I T MAY BE OBSERVED THAT EVEN IF THE FDR IN QUESTION WAS KEPT AS A SECURITY WITH THE BANK FOR THE OVERDRAFT FACILITY THAT ITSELF DOES NOT ESTABLISH ANY NEXUS BETWEEN THE INTEREST EARNED ON SUCH FDR WITH THE LOAN TAKEN FROM THE BANK AND THE INTEREST PAID THERE UPON. FOR THE PURPOSE OF SAN CTION OF OVERDRAFT FACILITY/ LOAN , THE BANK GENERALLY REQUIRE S SOME SECURITY WHICH MAY BE EITHER IN THE SHAPE OF FDR OR IN THE SHAPE OF ANY OTHER VALUABLE PROPERTY INCLUDING IMMOVABLE PROPERTY. MERELY BECAUSE THE FDR WAS KEPT AS A SECURITY FOR THE OVERDRAF T FACILITY , IT DOES NOT ESTABLISH ANY NEXUS BETWEEN THE TWO. MOREOVER THE INCOME FROM INTEREST ON THE FDR HAS BEEN COMPUTED UNDER THE HEAD OTHER SOURCES, WHEREAS THE INTEREST PAID ON THE LOAN AMOUNT HAS BEEN CLAIMED FOR BUSINESS PURPOSES. ITA NO. 4701/M/09 M/S. LOTUS INVESTMENTS LTD. 3 HOWEVER, T HERE SEEMS TO BE A FORCE IN THE SECOND CONTENTION OF THE LD. A.R. TO THE EFFECT THAT THE OVERDRAFT LOAN AMOUNT WAS PAID/USED FOR THE BUSINESS OR FOR THE REPAYMENT OF UNSECURED LOAN/INTEREST OF RS.13.53 CRORES OUTSTANDING AGAINST THE ASSESSEE. HOWEVE R , THIS CONTENTION OF THE ASSESSEE HAS NOT BEEN TAKEN INTO CONSIDERATION BY THE AUTHORITIES BELOW. UNDER SUCH CIRCUMSTANCES WE RESTORE THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER WITH A DIRECTION TO EXAMINE AS TO WHETHER THE OVERDRAFT AMOUNT OF LO AN UPON WHICH THE PAYMENT OF INTEREST EXPENDITURE OF RS.7,82,403/ - HAS BEEN CLAIMED WAS USED FOR THE REPAYMENT OF THE OUTSTANDING LOANS WHICH WERE USED BY THE ASSESSEE FOR THE PURPOSE OF ITS BUSINESS. IF THE CONTENTION OF THE ASSESSEE IN THIS RESPECT IS F OUND TRUE , THEN THE ASSESSEE WILL BE ENTITLED TO CLAIM THE EXPENDITURE BEING USED FOR THE PURPOSE OF BUSINESS. NEEDLESS TO SAY THAT THE AO WILL GIVE PROPER OPPORTUNITY TO THE ASSESSEE TO PRESENT ITS CASE AND THE EVIDENCES /DOCUMENTS , IF ANY REQUIRED, THERE AFTER , TO PASS A SPEAKING ORDER IN ACCORDANCE WITH LAW. 4 . IN THE RESULT T HE APPEAL OF THE ASSESSEE IS THUS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 30.09. 2013. SD/ - SD/ - ( D. K ARUNAKARA RAO ) ( SANJAY GARG ) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATED: 30.09. 2013. * KISHORE ITA NO. 4701/M/09 M/S. LOTUS INVESTMENTS LTD. 4 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT ( A) CONCERNED, MUMBAI THE DR C BENCH //TRUE COPY// [ BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.