M/S. SHANTIKRIPA INDUSTRIES LIMITED, JAIPUR V. INCOME TAX OFFICER, JAIPUR

ITA 482/JPR/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2741 (ITAT-JAIPUR)
• Duration Of Justice: 10 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-02-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2012-2013
• Appeal Filed On: 10-04-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANOOP SINGH ACIT
• Assessee Lawyers: S L PODDAR
• Keywords: Business income; Business expenditure; Maximum Marginal Rate; Bonafide belief; TDS; Set aside
• Section: 37(1)

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S,B JAIPUR JH FOT; IKY JKO] U;KF;D LNL; ,OA JH FOE FLAG ;KNO] YS[KK LNL; DS LE{K BEFORE: SHRI VIJAY PAL RAO, JM & SHRI VIKRAM SINGH YADAV, AM VK;DJ VIHY LA- @ ITA NO. 482/JP/2018 FU/KZKJ.K O'K Z @ ASSESSMENT YEAR : 2012-13 M/S SHANTIKRIPA INDUSTRIES LIMITED, PARASRAMPURIA CHAMBER, OPP. ROAD NO. 1, VKI AREA, JAIPUR. CUKE VS. THE ITO, WARD- 4(3), JAIPUR. LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN/GIR NO.: AAJCS 6656 G VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ L S@ ASSESSEE BY : SHRI S.L. PODDAR (ADV.) JKTLO DH VKSJ LS @ REVENUE BY : SHRI ANOOP SINGH (ACIT) LQUOKBZ DH RKJH[ K@ DATE OF HEARING : 14/02/2019 MN?KKS'K.KK DH RKJH[ K@ DATE OF PRONOUNCEMENT: 26/02/2019 VKNS'K@ ORDER PER: VIJAY PAL RAO, J.M. THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER DATED 15.03.2018 OF THE LD. CIT (A), JAIPUR FOR A.Y. 2012 -13. THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(APPEALS), JAIPUR HAS ERRED IN CONFIRMING THE AD DITIONS OF RS. 36,06,057/- ON ACCOUNT OF INTEREST RECEIVED FROM TH E PARTIES BY NOT CONSIDERING THE SUBMISSIONS OF THE ASSESSEE. 2. IN THE FACTS AND CIRCUMSTANCES OF THE CASE THE L EARNED CIT(APPEALS), JAIPUR HAS ERRED IN CONFIRMING THE AD DITIONS OF RS. 11,55,243/- BY WAY OF DISALLOWING INTEREST EXPENDIT URE INCURRED ITA NO. 482/JP/2018 M/S SHANTIKRIPA INDUSTRIES LTD. VS. ITO 2 FOR EARNING OF THE INTEREST INCOME ON WHIMS AND SUR MISES AND IGNORING THE DETAILS OF EXPENSES SUBMITTED BY THE A SSESSEE. 3. THE ASSESSEE CRAVES YOUR INDULGENCE TO ADD AMEND OR ALTER ALL OR ANY GROUNDS OF APPEAL BEFORE OR AT THE TIME OF H EARING. 2. GROUND NO. 1 IS REGARDING THE ADDITION ON ACCOUN T OF INTEREST FROM M/S NEELKAMAL GRAINI MARMO PVT. LTD. DURING CO URSE OF ASSESSMENT PROCEEDINGS, THE AO NOTED IN FORM 26AS D ETAILS THAT ASSESSEE HAS RECEIVED INTEREST INCOME OF RS. 51,62, 866/- FROM VARIOUS PARTIES WHICH INCLUDING RS. 36,06,057/- FROM M/S NE ELKAMAL GRAINI MARMO PVT. LTD. ACCORDINGLY, THE AO PROPOSED TO MAK E THE ADDITION OF THE SAID INTEREST INCOME TO THE TOTAL INCOME OF THE ASSESSEE. IN RESPONSE, THE ASSESSEE SUBMITTED THAT THE ALLEGED I NTEREST WAS NOT RECEIVED BY THE ASSESSEE DURING THE YEAR AND EVEN T HE ASSESSEE WAS SUSPECTING THE RECEIPT OF ANY INTEREST AS WELL AS R EPAYMENT OF LOAN WAS ALSO DOUBTFUL FROM THIS PARTY. THE ASSESSEE CONTEND ED THAT SINCE THIS PARTY DID NOT PAY INTEREST DURING THE YEAR UNDER CO NSIDERATION AND ALSO NOT DEPOSITED TDS TILL THE DATE OF FILING OF THE RE TURN OF INCOME, THEREFORE, THE ASSESSEE DID NOT CONSIDER THIS AMOUN T IN THE TOTAL INCOME OF THE ASSESSEE. THE AO DID NOT ACCEPT THIS CONTENT ION AND MADE THE ADDITION OF THE SAID AMOUNT TO THE TOTAL INCOME OF THE ASSESSEE BEING INTEREST INCOME ACCRUED DURING THE YEAR UNDER CONSI DERATION. ON ITA NO. 482/JP/2018 M/S SHANTIKRIPA INDUSTRIES LTD. VS. ITO 3 APPEAL, THE ASSESSEE HAS REITERATED ITS CONTENTION THAT THE INCOME HAS TO BE ASSESSED TO TAX ONLY WHEN IT IS REAL INCOME A ND NOT THE PAPER INCOME. THE LD. CIT(A) DID NOT ACCEPT THIS CONTENTI ON AND CONFIRMED THE ADDITION MADE BY THE AO. 3. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT THE ASSESSEE FILED ITS RETURN OF INCOME ON 29.09.2012 A ND TILL THAT DATE THE OTHER PARTY HAS NEITHER PAID INTEREST NOR DEPOSITED THE TDS AND THEREFORE, IT WAS ALSO NOT REFLECTED IN THE FORM 26 AS AS ON THE DATE OF FILING OF THE RETURN OF INCOME. SINCE, THE ASSESSEE WAS SUSPECTING THE DEFAULT OF PAYMENT OF INTEREST AS WELL AS OF LOAN A MOUNT FROM THIS PARTY, THEREFORE, THE ASSESSEE DID NOT CONSIDER THIS AMOUN T OF INTEREST AS INCOME FOR THE YEAR UNDER CONSIDERATION. THE LD. AR HAS REFERRED TO IN FORM 26AS STATEMENT AND SUBMITTED THAT THE TDS DEDU CTED BY THIS PARTY IS REFLECTED ONLY ON 01.10.2012 WHEREAS THE A SSESSEE FILED ITS RETURN OF INCOME ON 29.09.2012 THEREFORE, AS ON THE DATE OF FILING OF RETURN THERE WAS NO SUCH ENTRY IN FORM 26AS. HE HAS FURTHER POINTED OUT THAT THE ASSESSEE HAS OFFERED THE SAID INTEREST AMOUNT FOR THE ASSESSMENT YEAR I.E. 2013-14 AND ALSO PAID THE TAX. HENCE, IT IS A CASE OF DOUBLE TAXATION OF THE SAME INCOME ONCE, FOR THE YEAR UNDER CONSIDERATION AND THEN IT WAS OFFERED TO TAX IN THE SUBSEQUENT ITA NO. 482/JP/2018 M/S SHANTIKRIPA INDUSTRIES LTD. VS. ITO 4 ASSESSMENT YEAR. THE LD. AR HAS REFERRED LOAN ACCOU NT OF THIS PARTY AND SUBMITTED THAT THE ASSESSEE ABLE TO RECOVER THE BA CK SOME LOAN AMOUNT FROM THIS PARTY AND THEREFORE, THE NON IN CO NCLUSION OF THE INTEREST IS A PRUDENT BUSINESS DECISION OF THE ASSE SSEE. EVEN OTHERWISE THERE IS NO REVENUE EFFECT WHEN THE ASSESSEE HAS OF FERED THIS AMOUNT TO TAX IN THE SUBSEQUENT YEAR. THE LD. AR HAS POINT ED THAT SINCE THIS TDS WAS REFLECTED IN FORM 26AS AFTER FILING OF THE RETURN OF INCOME, THEREFORE, THE ASSESSEE HAS NOT CLAIMED CREDIT OF T HE TDS DEDUCTED BY THE OTHER PARTIES. THUS, THE LD. AR HAS SUBMITTED T HAT THE ADDITION MADE BY THE AO MAY BE DELETED. 4. ON THE OTHER HAND, LD. DR HAS SUBMITTED THAT TH E ASSESSEE IS UNDISPUTEDLY FOLLOWING THE MERCANTILE SYSTEM OF ACC OUNTING AND THEREFORE, THE INTEREST INCOME HAS TO BE ASSESSED T O TAX ON ACCRUAL BASIS AND NOT RECEIPT BASIS. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THE GRIEVANCE OF THE ASSESSEE I S THAT THE AO HAS ASSESSED THE INTEREST INCOME OF RS. 36,06,057/- FOR THE YEAR UNDER CONSIDERATION WHEREAS THE ASSESSEE HAS ALREADY OFFE RED THIS INCOME IN THE SUBSEQUENT YEAR AFTER THE SAID AMOUNT WAS KNOWL EDGE BY THE OTHER ITA NO. 482/JP/2018 M/S SHANTIKRIPA INDUSTRIES LTD. VS. ITO 5 PARTIES BY DEPOSITING IN THE TDS ON 01.10.2012. WE FIND THAT AS PER 26AS STATEMENT THE TDS OF RS. 3,60,606/- WAS BOOKED BY M/S NEELKAMAL GRAINI MARMO PVT. LTD. ON 01.10.2012 WHER EAS THE ASSESSEE FILED ITS RETURN OF INCOME ON 29.09.2012. IF THE TD S WOULD HAVE BEEN BOOKED BY THE OTHER PARTY PRIOR TO THE FILING OF TH E RETURN OF INCOME THEN THE SAID AMOUNT OF INTEREST WOULD HAVE BEEN NE CESSARILY BE PART OF THE INCOME OF THE ASSESSEE. THE ASSESSEE HAD FURNIS HED THE EXPLANATION FOR NOT CONSIDERING THIS AMOUNT IN THE TOTAL INCOME AND WE FIND THAT THE EXPLANATION OF THE ASSESSEE IS CORRECT THAT DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS NOT RECEIVED THE SAI D AMOUNT OF RS. 36,06,057/- FROM M/S NEELKAMAL GRAINI MARMO PVT. LT D. EVEN THE TDS WAS BOOKED AS PER 26AS ONLY ON 01.10.2012 AFTER THE DATE OF FILING THE RETURN OF INCOME BY THE ASSESSEE. THEREFORE, ALL TH ESE FACTS AND CIRCUMSTANCES OF THE CASE LEAD TO A BONAFIDE BELIEF ON THE PART OF THE ASSESSEE THAT THE OTHER PARTY MIGHT DEFAULT IN MAKI NG THE INTEREST AS WELL AS REFUND OF LOAN AMOUNT. AFTER THE SAID TDS D EPOSITED BY THE OTHER PARTY THE ASSESSEE HAS CLAIMED TO HAVE OFFERE D THE SAME TO TAX FOR THE ASSESSMENT YEAR 2013-14 AND ALSO CLAIMED TH AT THE ASSESSEE HAS PAID THE TAX ON THE SAID INCOME AT THE MAXIMUM MARGINAL RATE. IT IS PERTINENT TO NOTE THAT THE RETURN OF INCOME FOR THE ASSESSMENT YEAR ITA NO. 482/JP/2018 M/S SHANTIKRIPA INDUSTRIES LTD. VS. ITO 6 2013-14 WAS FILED MUCH PRIOR TO THE SCRUTINY ASSESS MENT TAKEN UP FOR YEAR UNDER CONSIDERATION THEREFORE, IT CANNOT BE SA ID THAT THE OFFERING OF THE INCOME IN THE SUBSEQUENT YEAR IS AN AFTERTHOUGH T OR DEVICE TO AVOID TAX. ONCE, THE ASSESSEE HAS PAID THE TAX ON THE SAM E INCOME IN THE SUBSEQUENT YEAR AND THEN IT WILL BE A DOUBLE TAX WH EN THE ASSESSING OFFICER HAS ALSO TAXED THE SAME INCOME FOR THE YEAR UNDER CONSIDERATION. SINCE, THE ASSESSMENT YEAR 2013-14 W AS NOT TAKEN UP FOR SCRUTINY THEREFORE, TO AVOID THE DOUBLE TAX ON THE SAME INCOME WE DIRECT THE AO TO VERIFY THE FACT WHETHER THIS INCOM E WAS OFFERED TO TAX IN THE SUBSEQUENT ASSESSMENT YEAR I.E. 2013-14 AND IF FOUND CORRECT THEN THE SAME INCOME CANNOT BE TAX TWICE. CONSEQUEN TLY IN CASE THE INCOME IS ALREADY OFFERED TO TAX IN THE SUBSEQUENT YEAR THEN THE ADDITION MADE BY THE AO IS LIABLE TO BE DELETED. TH E ISSUE IS SET ASIDE TO THE RECORD OF THE AO FOR LIMITED PURPOSES OF VERIFY ING THE FACT WHETHER THIS INCOME IS OFFER TO TAX. 6. GROUND NO. 2 IS REGARDING DISALLOWANCE OF INTERE ST PAID ON SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE. DURING THE YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY CLAIM INTEREST EXPENSES OF RS. 11,55,243/-. THE AO NOTED THAT NO UNSECURED LOANS H AVE BEEN SHOWN BY THE ASSESSEE IN THE BALANCE SHEET BUT THE INTERE ST WAS PAID ON THE ITA NO. 482/JP/2018 M/S SHANTIKRIPA INDUSTRIES LTD. VS. ITO 7 SHARE APPLICATION MONEY RECEIVED BY THE ASSESSEE. A CCORDINGLY, THE AO MADE DISALLOWANCE OF THE CLAIM OF INTEREST EXPENSES OF RS. 11,55,243/- AS NOT ALLOWABLE BEING BUSINESS EXPENDITURE. ON APP EAL, THE ASSESSEE CONTENDED THAT THIS WAS RECEIVED BY THE ASSESSEE AS DEPOSITED AS THE COMPANY IS NOT PERMITTED TO KEEP THE SHARE APPLICAT ION MONEY IN ITS ACCOUNT BUT HAS TO DEPOSIT THE SAME IN THE ESCROW A CCOUNT. FURTHER, ONCE THE SHARE APPLICATION MONEY WAS USED FOR THE B USINESS PURPOSE AND WAS EARNED THE INCOME WHICH HAS BEEN DISCLOSED IN THE RETURN OF INCOME THEN, THE INTEREST EXPENDITURE ON SUCH MONEY IS AN ALLOWABLE CLAIM. THE LD. CIT(A) DID NOT ACCEPT THE CONTENTION OF THE ASSESSEE AND HELD THAT INTEREST PAID ON SHARE APPLICATION MONEY IS NOT ALLOWED U/S 36(1)(III) AS WELL AS U/S 37(1) OF THE ACT. 7. BEFORE US, THE LD. AR OF THE ASSESSEE HAS SUBMIT TED THAT THE ASSESSEE HAS PAID INTEREST ON THE SHARE APPLICATION MONEY TILL THE DATE OF ALLOTMENT OF SHARES. THE SAID MONEY WAS UTILIZED BY THE ASSESSEE FOR BUSINESS PURPOSE AND EARNED INCOME INCLUDING INTERE ST INCOME. FURTHER, ONCE, THE ASSESSEE HAS UTILIZED THE SHARE APPLICATI ON MONEY FOR BUSINESS PURPOSE BEING WORKING CAPITAL THEN THE INTEREST PAI D ON SUCH MONEY IS ALLOWABLE CLAIM. IN SUPPORT HIS CONTENTIONS, HE HAS RELIED UPON THE DECISION OF DELHI BENCHES OF THE TRIBUNAL IN CASE O F ITO VS. M/S ITA NO. 482/JP/2018 M/S SHANTIKRIPA INDUSTRIES LTD. VS. ITO 8 PANCHKULA FINVEST PVT. LTD. DATED 17.10.2017 IN ITA NO. 2709/DEL/2017. THUS, THE LD. AR SUBMITTED THAT ONCE THE SAID SHARE APPLICATION MONEY WAS USED BY THE ASSESSEE FOR THE BUSINESS PURPOSES THEN THE INTEREST PAID ON THE SAME IS AN ALLOWABLE DEDUCTION. 8. ON THE OTHER HAND, LD. DR HAS SUBMITTED THAT THE RE IS NO DISPUTE THAT THE ASSESSEE HAS PAID INTEREST ON THE SHARE AP PLICATION MONEY WHICH IS NOT ALLOWABLE U/S 36(1)(III) OR U/S 37(1) OF THE ACT. HE HAS RELIED UPON THE ORDERS OF THE AUTHORITIES BELOW. 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AS WELL AS RELEVANT MATERIAL ON RECORD. THERE IS NO DISPUTE THAT THE SH ARE APPLICATION MONEY RECEIVED BY THE ASSESSEE DOES NOT BELONG TO T HE ASSESSEE TILL THE SHARES ARE ALLOTTED AGAINST THE SAME. THEREFORE, AN Y INTEREST PAID ON THE SHARE APPLICATION MONEY WILL BE PART OF THE COS T OF THE SHARE CAPITAL RECEIVED BY THE ASSESSEE AT THE TIME OF FINAL ALLOT MENT OF SHARE. HOWEVER THE ASSESSEE HAS CLAIMED THAT THE SHARE APP LICATION MONEY WAS USED BY THE ASSESSEE FOR BUSINESS PURPOSES AND PARTICULARLY USED AS WORK CAPITAL OF THE ASSESSEE AND ALSO EARNED INC OME WHICH WAS OFFERED TO TAX DURING THE YEAR UNDER CONSIDERATION. THEREFORE, IN CASE THE SAID SHARE APPLICATION MONEY WAS USED BY THE AS SESSEE FOR EARNING THE INCOME THEN, TO THE EXTENT OF THE INCOME EARNED BY THE ASSESSEE, ITA NO. 482/JP/2018 M/S SHANTIKRIPA INDUSTRIES LTD. VS. ITO 9 THE SAME CAN BE SET OFF AGAINST THE INTEREST PAID B Y THE ASSESSEE ON THE SAID AMOUNT. WE FURTHER NOTE THAT THE ASSESSEE EARN ED INTEREST INCOME DURING THE YEAR UNDER CONSIDERATION BUT IN CASE THE SAID SHARE APPLICATION MONEY WAS ALSO USED FOR GRANTING LOAN F OR EARNING INTEREST THEN THE INTEREST EXPENDITURE CAN BE SET OFF AGAINS T INTEREST INCOME EARNED ON THE SAID AMOUNT OF SHARE APPLICATION MONE Y. THE DELHI BENCHES OF THE TRIBUANL IN CASE OF ITO VS. M/S PANC HKULA FINVEST PVT. LTD.(SUPRA) HAS CONSIDERED THIS ISSUE IN PARA 12 TO 16 REPRODUCED AS UNDER:- C) ON MERIT,S IT IS OBSERVED THAT ASSESSEE IS AN I NVESTOR COMPANY AND MAKING INVESTMENT AND RECEIVING INTEREST IS THE MAIN BUSINESS OF THE ASSESSEE COMPANY. FROM PAGE NO-19 A ND 20 OF THE PB, IT IS OBSERVED THAT THE ASSESSEE HAS RECEIV ED TOTAL INTEREST OF RS 1.58 CRORE DURING THE YEAR UNDER CONSIDERATIO N AND THE SAME HAS BEEN TAXED UNDER THE HEAD BUSINESS INCOME. AND AN AMOUNT OF RS 73,95,209/- IS ATTRIBUTED TO THE INVES TMENT RECEIVED FROM M/S CONQUER. THEREFORE, THE PURPOSE OF RECEIVI NG SHARE APPLICATION MONEY AND PAYMENT OF INTEREST IS APPARE NT FROM THE FINANCIAL AND AUDITED ACCOUNT OF THE ASSESSEE, WHIC H WAS VERY MUCH BEFORE THE AO. CIT(A) HAS CATEGORICALLY RECORD ED THAT THE INTEREST HAS BEEN PAID ON THE BASIS OF CLAUSE 4 OF THE AGREEMENT DATED 25.05.2010, WHICH FACT IS NOT REFUTED BY THE LD. DR. D) IT IS FURTHER OBSERVED THAT IN THE CASE OF CORE HEALTH RE PORTED IN 298 ITR 194(SC) HONBLE SUPREME COURT HAS CATEGORICALLY HELD THAT INTEREST PAID ON BORROWED CAPITAL IS ALLOWABLE UNDE R SECTION 36(1)(III) OF THE ACT AND IT DOES NOT MAKE ANY DIFF ERENCE AS TO WHETHER THE EXPENSES HAS BEEN INCURRED IN CAPITAL F ILED OR REVENUE FILED. IT IS ALSO A SETTLED POSITION OF LAW THAT IT IS ITA NO. 482/JP/2018 M/S SHANTIKRIPA INDUSTRIES LTD. VS. ITO 10 PREROGATIVE OF A BUSINESSMAN TO CONDUCT HIS BUSINES S IN HIS OWN WAY AND THE REVENUE AUTHORITIES CANNOT SIT IN THE A RM CHAIR OF AN ASSESSEE AS HELD IN S.A. BUILDER 288 ITR 1(SC). E) FURTHER, THE CASE OF THE ASSESSEE IS SQUARELY CO VERED BY THE JUDGMENT OF GLOBAL CAPITAL REPORTED IN 117 ITD 251( DEL) WHEREIN THE COORDINATE BENCH OBSERVED AS UNDER:- ON A CAREFUL CONSIDERATION OF THE MATTER, WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED TO SUCCEED AND THE DI SALLOWANCE OF THE INTEREST IS TO BE DELETED. THERE IS NO DISPUTE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF PURCHASE AND SALE OF SHARES AND SECURITIES, INTER ALIA. IN FACT, DURING THE YEAR THE ASSESSEE HAS PURCHASED SHARES FOR RS. 7,23,09,110 A ND SOLD SHARES FOR RS. 51,47,445 AS SHOWN IN THE P&L A/C AT P. 67 OF THE PAPER BOOK. SIMILAR FIGURES FOR THE EARLIER YEAR AM OUNT TO RS. 81,51,447 AND RS. 77,00,000 RESPECTIVELY. IN ADDITI ON TO THESE FIGURES, THE ASSESSEE HAS ALSO SEPARATELY CREDITED PROFIT OF RS. 10,15,144 ON TRADING OF SHARES IN THE P&L A/C FOR T HE YEAR. IN THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE ASSESSEE WROTE A LETTER ON 20TH FEB., 2002 TO THE AO STATING THAT TH E SOURCE OF INVESTMENT IN STRONG WAS THE DEBENTURE MONIES RECEI VED FROM APOLLO AMOUNTING TO RS. 10 CRORES. THE PHOTOCOPY OF THE LEDGER ACCOUNT OF UNION BANK OF INDIA IN THE ASSESSEES BO OKS WAS ALSO FILED ALONG WITH THE LETTER AND THE ENTRY MADE THER EIN HAS ALREADY BEEN EXTRACTED EARLIER. THE ENTRY CONSTITUTES CONTE MPORANEOUS EVIDENCE OF THE FACT THAT THE AMOUNT OF RS. 10 CROR ES WAS INVESTED IN STRONG AS SHARE APPLICATION MONIES FOR PURCHASE OF 12 PER CENT NON-CUMULATIVE REDEEMABLE PREFERENCE SHARE S. IN THE LIGHT OF THE CONTEMPORANEOUS ENTRY MADE IN THE BOOK S OF ACCOUNT MAINTAINED BY THE ASSESSEE IN THE REGULAR COURSE, W HICH HAVE NOT BEEN REJECTED BY THE AO, IT IS NOT POSSIBLE TO HOLD THAT THE ADVANCEMENT OF THE MONIES TO STRONG WAS NOT FOR THE PURPOSE OF ASSESSEES BUSINESS. THE LETTER DT. 15TH MARCH, 200 2 WRITTEN BY THE ASSESSEE TO THE AO SHOWS THAT THERE WAS A CONDI TION THAT IF THE SHARES WERE NOT ALLOTTED, THE MONIES WILL BE RE TURNED BY STRONG TOGETHER WITH INTEREST AT 12 PER CENT. THE A O HAS NOT ITA NO. 482/JP/2018 M/S SHANTIKRIPA INDUSTRIES LTD. VS. ITO 11 QUESTIONED THIS STATEMENT OF THE ASSESSEE MADE IN W RITING. IN FACT, IT DOES APPEARS TO US REASONABLE TO INFER THA T SINCE THE SHARES WERE TO BE ISSUED WITH A DIVIDEND RATE OF 12 PER CENT AS SHOWN BY THE ENTRY IN THE ASSESSEES BOOKS OF ACCOU NT, THE RETURN OF THE MONIES IF THE SHARES ARE NOT ALLOTTED WOULD ALSO HAVE BEEN AGREED TO BY THE PARTIES TO BEAR INTEREST AT THE SA ME RATE. THE ASSESSEE HAS ACTUALLY CREDITED THE INTEREST OF RS. 38,79,452 IN ITS BOOKS OF ACCOUNT. WE ARE, THEREFORE OF THE VIEW THA T ALL THE THREE CONDITIONS PRESCRIBED IN S. 36(1)(III) HAVE BEEN SA TISFIED IN THE PRESENT CASE AND, THEREFORE, THE INTEREST PAID BY T HE ASSESSEE HAS TO BE ALLOWED IN FULL WITHOUT ANY DISALLOWANCE. WE ARE UNABLE TO UPHOLD THE VIEW TAKEN BY THE DEPARTMENTAL AUTHORITI ES THAT THE ASSESSEE AND STRONG HAD ENTERED INTO A TAX AVOIDANC E AGREEMENT TO FACILITATE THE ASSESSEE TO REDUCE OR AVOID ITS T AX LIABILITY BY BOOKING A NOTIONAL LOSS. WE, THEREFORE, DELETE THE DISALLOWANCE OF RS. 3,26,027 AND ALLOW THE GROUND. F) WHEN THE FACTS OF THE ASSESSEES CASE ARE READ IN JUXTAPOSITION WITH THE FACTS OF GLOBAL (SUPRA) THEN IT IS IMPLICI T THAT THE ISSUE INVOLVED IN THE CASE OF THE ASSESSEE SQUARELY COVER ED BY THE JUDGMENT OF GLOBAL AND HENCE NO DIFFERENT VIEW IS P ERMISSIBLE. LD DR HAS RELIED ON THE JUDGMENT OF DIGNITY REPORTED I N 96 ITD 296, IT IS OBSERVED THAT IN THAT CASE THE MUMBAI BENCH O F THE ITAT HAS OBSERVED THAT THERE WAS NO AGREEMENT BETWEEN THE IN VESTOR AND THE RECIPIENT COMPANY AND IN THIS BACK DROP THE MUM BAI BENCH HAS DISALLOWED THE CLAIM OF THE ASSESSEE IN THAT CA SE. OTHERWISE THAT CASE ALSO SUPPORTS THE CASE OF THE ASSESSEE. ACCORDINGLY, THE CLAIM OF THE ASSESSEE DEPENDS ON T HE FACTS WHETHER THE SHARE APPLICATION MONEY WAS ACTUALLY USED BY TH E ASSESSEE FOR THE BUSINESS PURPOSE FOR EARNING INTEREST THEN, THE CLA IM OF INTEREST IS ALLOWABLE TO THE EXTENT OF THE INCOME EARNED BY THE ASSESSEE BY USING ITA NO. 482/JP/2018 M/S SHANTIKRIPA INDUSTRIES LTD. VS. ITO 12 THE SAID MONEY. HENCE, WE SET ASIDE THIS ISSUE TO T HE RECORD OF THE AO FOR PROPER VERIFICATION OF THE RELEVANT FACTS REGAR DING UTILIZATION OF SHARE APPLICATION MONEY BY THE ASSESSEE FOR THE BUSINESS AND EARNING OF ANY INCOME THEREOF. THE AO AFTER VERIFICATION OF THE RE LEVANT FACTS SHALL DECIDE THE CLAIM IN LIGHT OF THE ABOVE OBSERVATION. NEEDLESS TO SAY THE ASSESSEE BE GIVEN AN APPROPRIATE OPPORTUNITY OF HEA RING BEFORE PASSING THE FRESH ORDER ON THIS ISSUE. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS ALLOW ED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 26/02/2019. SD/- SD/- FOE FLAG ;KNO FOT; IKY JKO (VIKRAM SINGH YADAV) (VIJAY PAL RAO) YS[KK LNL;@ ACCOUNTANT MEMBER U;KF;D LNL;@ JUDICIAL MEMBER TK;IQJ@ JAIPUR FNUKAD@ DATED:- 26/02/2019. * SANTOSH. VKNS'K DH IZFRFYFI VXZSFKR@ COPY OF THE ORDER FORWARDED TO: 1. VIHYKFKHZ@ THE APPELLANT- M/S SHANTIKRIPA INDUSTRIES LIMITED, JAIPUR. 2. IZR;FKHZ@ THE RESPONDENT- ITO, WARD-4(3), JAIPUR. 3. VK;DJ VK;QDR@ CIT 4. VK;DJ VK;QDR@ CIT(A) 5. FOHKKXH; IZFRFUF/K] VK;DJ VIHYH; VF/KDJ.K] T;IQJ@ DR, ITAT, JAIPUR. 6. XKMZ QKBZY@ GUARD FILE {ITA NO. 482/JP/2018} VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASST. REGISTRAR