ITO 18(1)(1), MUMBAI V. MEHUL PATEL, MUMBAI

ITA 5019/MUM/2013

• Counselvise Citation: [2015] 121 COUNSELVISE.COM (IT) 0859 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 20-05-2015
• Assessment Year: 2008-2009
• Appeal Filed On: 03-07-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Transactions in derivatives
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SHRI G.S. PANNU, ACCOUNTANT MEMBER AND SHRI SANJAY GARG, JUDICIAL MEMBER ITA NO 5019/MUM/2013 ASSESSMENT YEAR: - 2008-09.) INCOME TAX OFFICER 18(1)(1), 01 ST FLOOR, ROOM NO. 103, PIRAMAL CHAMBER, LALBAUG, MUMBAIG- 400012. VS.` M/S SHRI MEHUL PATEL 4 TH FLOOR, 6-A, SAMUNDRA GAURAV APTS, WORLI SEA FACE, WORLI, MUMBAI 400018. APPELLANT RESPONDENT ORDER PER G.S. PANNU, AM THE CAPTIONED APPEAL PREFERRED BY THE REVENUE IS D IRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEAL S) [HEREINAFTER REFERRED TO AS THE CIT(A)] DATED 20.04.2013 WHIC H IN-TURN HAS ARISEN FROM AN ORDER PASSED BY THE ASSESSING OFFICER U/S 143(3) OF THE INCOME TAX ACT, 1961(HEREINAFTER REFERRED TO AS THE ACT) DATED 30 .12.2010 PERTAINING TO ASSESSMENT YEAR 2008-09. REVENUE BY SHRI YOGESH KAMAT ASSESSEE BY SHRI SANJEEV M. SHAH DATE OF HEARING 21-05-2015 DATE OF PRONOUNCEMENT 31 .07.2015 ITA NO 5019/MUM/2013 ( ASSESSMENT YEAR: - 2008-09.) PAGE 2 OF 6 2. IN THIS APPEAL, THE SOLITARY GRIEVANCE OF THE RE VENUE IS AGAINST THE ORDER OF THE CIT(A) IN DELETING THE DISALLOWANCE OF RS. 26,16,475/- MADE BY THE ASSESSING OFFICER OUT OF INTEREST EXPENSE. 3. IN BRIEF, THE RELEVANT FACTS ARE THAT THE RESPON DENT-ASSESSEE IS AN INDIVIDUAL WHO IS, INTER-ALIA, ENGAGED IN THE BUSINESS OF SHARE TRADING, COMMODITY DERIVATIVE TRADING AND TRADING IN F&O (FU TURES AND OPTIONS). IN THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESS ING OFFICER NOTED THAT ASSESSEE HAD CLAIMED AN EXPENDITURE OF RS. 26,16,47 5/- ON ACCOUNT OF INTEREST. THE INTEREST WAS PAID TO TWO CONCERNS, NA MELY, CENT PERCENT INVESTMENT LTD AND M/S. JRM SHARE & STOCK BROKERS P VT. LTD FROM WHOM ASSESSEE HAD BORROWED FUNDS. THE ASSESSING OFFICER NOTICED THAT THE LOAN RECEIVED FROM JRM SHARE & STOCK BROKERS PVT. LTD WA S UTILIZED FOR PAYMENT TO M/S PLATINUM LINE INVESTMENTS & TRADING CO. LTD - RS. 1,99,14,000/- AND MONICA PATEL RS. 20,00,000/-. THE ASSESSING OFFIC ER FURTHER NOTICED THAT ASSESSEE DID NOT CHARGE INTEREST FROM THE AFORESAID TWO PARTIES AND, THEREFORE, HE HELD THAT THE INTEREST BEARING LOANS RAISED BY THE ASSESSEE WERE DIVERTED FOR PROVIDING INTEREST FREE LOANS AND , THEREFORE, THE INTEREST EXPENDITURE OF RS. 26,16,475/- CLAIMED WAS DISALLOW ED. 4. AGAINST THE AFORESAID DECISION, ASSESSEE WENT IN APPEAL BEFORE THE CIT(A), ASSAILING THE ASSESSMENT ORDER ON FACTS AND IN LAW. FACTUALLY, ASSESSEE POINTED THAT THE INTEREST BEARING LOANS RA ISED FROM CENT PERCENT INVESTMENT LTD AND JRM SHARE AND STOCK BROKERS PVT. LTD WERE PARTLY UTILIZED TO REPAY THE INTEREST FREE LOANS RAISED IN THE PAST FROM M/S PLATINUM LINE INVESTMENTS & TRADING CO. LTD AND MON ICA PATEL AND THAT IT ITA NO 5019/MUM/2013 ( ASSESSMENT YEAR: - 2008-09.) PAGE 3 OF 6 WAS NOT A CASE WHERE ASSESSEE DIVERTED INTEREST BEA RING FUNDS FOR PROVIDING INTEREST FREE LOANS AND ADVANCES. IT WAS ALSO POINTED OUT BEFORE THE CIT(A) THAT THE BALANCE OF THE INTEREST FREE LO ANS RAISED FROM M/S. JRM SHARE & STOCK BROKERS PVT. LTD AND CENT PERCENT INV ESTMENT LTD WAS UTILIZED FOR THE PURPOSES OF BUSINESS. IN SUM AND SUBSTANCE, THE PLEA OF THE ASSESSEE WAS THAT THE INTEREST BEARING LOANS WERE U TILIZED FOR THE PURPOSES OF BUSINESS AND, THEREFORE, THE INCURRENCE OF INTER EST EXPENDITURE FOR THE PURPOSE OF BUSINESS CANNOT BE DOUBTED. IN THIS CON NECTION, THE ASSESSEE POINTED OUT THAT THE INTEREST INCURRED WAS MEANT FO R THE PURPOSE OF BUSINESS OF SHARE TRADING, DEALING IN DERIVATIVE TR ADES AND COMMODITIES AND SECURITIES AND HENCE IT WAS ALLOWABLE AS A DEDUCTIO N U/S 36(1)(III) OF THE ACT. THE CIT(A) HAS ELABORATELY REFERRED TO THE FAC TUAL ASSERTIONS OF THE ASSESSEE AND HAS ALSO FOUND THE SAME TO BE JUSTIFI ED. ACCORDINGLY, THE CIT(A) AGREED WITH THE ASSESSEE THAT THE ADDITION M ADE BY THE ASSESSING OFFICER WAS NOT MAINTAINABLE AND ACCORDINGLY THE AD DITION OF RS. 26,16,476 MADE BY THE ASSESSING OFFICER WAS DELETED. 5. BEFORE US, THE LD. DR APPEARING FOR THE REVENUE HAS MERELY REITERATED THE CONTENTS OF THE ORDER OF ASSESSING O FFICER WITHOUT CONTROVERTING THE FINDINGS RECORDED BY THE CIT(A). 6. ON THE OTHER HAND, THE LD. REPRESENTATIVE FOR TH E RESPONDENT- ASSESSEE DEFENDED THE ORDER OF THE CIT(A) AND HAS A LSO REFERRED TO A PAPER BOOK FILED, WHEREIN, VARIOUS MATERIALS RELIED UPON BY THE CIT(A) HAS BEEN PLACED. ON THE BASIS OF THE EVIDENCE AND MATERIAL P LACED IN THE PAPER BOOK, IT IS SOUGHT TO BE POINTED OUT THAT THE CIT(A) DULY APPRECIATED THE FACTUAL ITA NO 5019/MUM/2013 ( ASSESSMENT YEAR: - 2008-09.) PAGE 4 OF 6 MATRIX AND, THEREAFTER, HAS CONCLUDED THAT THE INTE REST EXPENDITURE WAS INCURRED FOR THE PURPOSES OF BUSINESS AND THUS, NO DISALLOWANCE CAN BE MADE U/S 36(1)(III) OF THE ACT. 7. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. QUITE CLEARLY, THE FINDING OF THE CIT(A) IS TO THE EFFECT THAT THE ASSESSING OFFICER MISUNDERSTOOD THE TRANSACTION OF PAYMENT TO M/S PLA TINUM LINE INVESTMENTS & TRADING CO. LTD AND MONICA PATEL AS A DVANCING OF INTEREST FREE LOANS, WHEREAS, IT REPRESENTED TRANSACTION OF REPAYMENT OF INTEREST FREE LOANS RAISED IN THE PAST. THE DETAILED FACTUA L MATRIX APPRECIATED BY THE CIT(A) IN PARA 2.2 OF HIS ORDER CLEARLY ESTABLISHES THAT THE INTEREST BEARING FUNDS WERE UTILIZED BY THE ASSESSEE FOR THE PURPOSE OF HIS BUSINESS. THE CIT(A) HAS REFERRED TO THE FACTS AND FIGURES IN THE FINANCIAL STATEMENTS OF THE ASSESSEE AS WELL AS THE COPIES OF CONFIRMATION/ STATEMENT OF ACCOUNTS OF VARIOUS CONCERNS FROM WHOM ASSESSEE HAS TRANSACTED, EITHER BY RAISING INTEREST BEARING LOANS OR THE REPAYMENT OF THE PAS T LOANS. THE CIT(A) HAS ALSO ANALYZED THE LEVEL OF MARGIN MONEY DEPLOYED B Y THE ASSESSEE IN ITS BUSINESS OF DEALING IN DERIVATIVES, ETC. ON THE BAS IS OF HIS ANALYSIS OF THE FACT SITUATION, THE CIT(A) HAS DEEMED IT FIT TO DEL ETE THE ADDITION MADE BY THE ASSESSING OFFICER, AS ACCORDING TO HIM THE INTE REST EXPENDITURE SATISFIES THE REQUIREMENT OF SECTION 36(1)(III) OF THE ACT. THE FINDINGS RECORDED BY THE CIT(A) ARE BORNE OUT OF RECORD INASMUCH AS THE SAME ARE BASED ON THE MATERIAL PLACED BEFORE HIM, COPIES OF WHICH HAVE AL SO BEEN PLACED BEFORE US IN THE PAPER BOOK. IN THE ABSENCE OF ANY NEGATION OF THE FINDINGS OF CIT(A) BY THE LD. DR ON THE BASIS OF ANY COGENT MATERIAL O R REASONING, THE SAME ARE HEREBY AFFIRMED. ITA NO 5019/MUM/2013 ( ASSESSMENT YEAR: - 2008-09.) PAGE 5 OF 6 8. RESULTANTLY, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED ON THIS 31ST DAY OF JULY 2015 . SD/- SD/- (SANJAY GARG) ( G.S. PANNU) (JUDICIAL MEMBER) (ACCOUNTANT M EMBER) MUMBAI DATED 31-07-2015 SKS SR. P.S, COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, B BENCH, ITAT, MUMBAI BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCHES, MUMBAI