Smt. Neha Nitin Rathi, Pune V. Joint Commissioner of Income-tax,

ITA 504/PUN/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6931 (ITAT-PUNE)
• Duration Of Justice: 1 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-12-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 23-03-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIVEK AGGARWAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B , PUNE , , BEFORE MS. SUSHMA CHOWLA, JM AND SHRI ANIL CHATURVEDI, AM . / ITA NO. 50 4 /P U N/20 1 6 / ASSESSMENT YEAR : 20 09 - 10 SMT. NEHA NITIN RATHI, OFFICE NO.1, PRESTIGE POINT, 283, SHUKRAWAR PETH, PUNE 411002 . / APPELLANT PAN: AAZPR9287R VS. THE JOINT COMMISSIONER OF INCOME TAX, RANGE 5, PUNE . / RESPONDENT / APPELLANT BY : SHRI NIKHIL PATHAK / RESPONDENT BY : S HRI VIVEK AGGARWAL / DATE OF HEARING : 13 . 12 .2017 / DATE OF PRONOUNCEMENT: 20 . 1 2 .2017 / ORDER PER SUSHMA CHOWLA, JM: THE APPEAL FILED BY THE ASSESSEE IS AGAINST THE ORDER OF CIT(A) - 2 , PUNE , DATED 02 .12.2015 RELATING TO ASSESSMENT YEAR 20 09 - 10 AGAINST ORDER PASSED UNDER SECTION 1 43(3) OF THE INCOME TAX ACT 1961 (IN SHORT THE ACT). 2 . THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: - ON FACTS AND IN LAW, 2 ITA NO. 504 /PUN/20 16 SMT. NEHA NITIN RATHI 1] THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST OF RS.2,77,230/ - ON THE GROUND THAT THE ASSESSEE HAD ADVANCED INTEREST BEARING FUNDS FOR NON BUSINESS PURPOSES. 1.1] THE LEARNED CIT(A) FAILED TO APPRECIATE THAT THE ASSESSEE HAD SUFFICIENT OWN FUNDS OUT OF WHICH SHE HAD GIVEN INTEREST FREE FUNDS AND HENCE, THE DISALLOWANCE OF INTEREST WAS NOT JUSTIFIED. 3. THE ISSUE RAISED IN THE PRESENT APPEAL IS AGAINST DISALLOWANCE MADE UNDER SECTION 36(1)(III) OF THE ACT. 4. BRIEFLY, IN THE FACTS OF THE CASE, THE ASSESSEE HAD FURNISHED RETURN OF INCOME DECLARING TOTAL INCOME OF RS. 16,82,94,434/ - . THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRADING IN SHARES AND FUTURES & OPTIONS. SHE WAS ALSO DIRECTOR OF A COMPANY. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD PAID INTERST OF RS.2,77,230/ - ON UNSECURED LOANS AMOU NTING TO RS.55,10,894/ - , WHEREAS NO INTEREST WAS CHARGED ON THE LOANS AND ADVANCES AMOUNTING TO RS.30.64 CRORES. THE ASSESSING OFFICER DISALLOWED THE SAID INTEREST EXPENDITURE OF RS.2,77,230/ - AS NOT INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF BUSI NESS , REJECTING THE EXPLANATION OF ASSESSEE VIS - - VIS AVAILABILITY OF INTEREST FREE OWN FUNDS. 5. THE CIT(A) UPHELD THE ORDER OF ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE HAD ADVANCED SUM OF RS.30.64 CRORES TO THE SISTER CONCERN AS INTEREST FREE. THE CIT(A) NOTED THAT THE ASSESSEE HAD NOT BEEN ABLE TO ESTABLISH LINK BETWEEN CAPITAL AND THE INTEREST FREE ADVANCES AND HENCE, THE DISALLOWANCE OF INTEREST OF RS.2,77,230/ - WA S WARRANTED. 6. THE ASSESSEE IS IN APPEAL AGAINST THE ORDER OF CIT(A). 3 ITA NO. 504 /PUN/20 16 SMT. NEHA NITIN RATHI 7. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE REFERRED TO THE AUDITED BALANCE SHEET OF THE ASSESSEE AND POINTED OUT THAT OWN CAPITAL OF ASSESSEE WAS TO THE EXTENT OF RS.36.07 CRORES AS AGAINST WHICH SECURED LOANS WERE ONLY TO THE EXTENT OF RS.59.1 9 LAKHS. THE ASSESSEE HAD MADE THE AFORESAID INTEREST FREE ADVANCES TO ITS SISTER CONCERNS OUT OF OWN CAPITAL AVAILABLE, WHICH WAS INTEREST FREE. THE LEARNED AUTHORIZED REPRESENTATIVE FOR THE ASSESSEE IN THIS REGARD, PLACED RELIANCE ON THE RATIO LAID DOW N BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. RELIANCE UTILITIES AND POWER LTD. (2009) 313 ITR 340 (BOM). 8. THE LEARNED DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE ON THE OTHER HAND, POINTED OUT THAT LOOKING AT THE INVESTMENTS MADE BY THE ASSESSEE, THERE IS NO MERIT IN THE CLAIM OF ASSESSEE THAT OWN CAPITAL HAS BEEN UTILIZED FOR MAKING INTEREST FREE ADVANCES. 9. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD. THE LIMITED ISSUE WHICH IS RAISED IN THE PRESENT APPEAL IS AGAINST DISALLOWANCE MADE UNDER SECTION 36(1)(III) OF THE ACT. THE ASSESSEE HAD ADVANCED INTEREST FREE LOANS OF RS.30.64 CRORES TO ITS SISTER CONCERNS. THE ASSESSEE HAD RAISED INTEREST BEARING L OANS OF RS.55,10,894/ - , ON WHICH INTEREST OF RS.2,77,230/ - WAS PAID. LOOKING AT THE FACTS OF THE CASE, WE FIND THAT THE ASSESSEE HA D CAPITAL OF RS.36.07 CRORES AS ON 31.03.2009, AGAINST WHICH IT HA D GIVEN INTEREST FREE ADVANCES OF RS.30.64 CRORES. IN VIE W OF AVAILABILITY OF AFORESAID FUNDS, THERE IS NO MERIT IN INVOKING PROVISIONS OF SECTION 36(1)(III) OF THE ACT. THE ISSUE STANDS COVERED BY THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN CIT VS. RELIANCE UTILITIES AND POWER LTD. (SUPRA). THE TR IBUNAL ON SIMILAR BASIS IN THE CASE OF HUSBAND OF ASSESSEE IN ITA NO.2231/PUN/2014, RELATING TO ASSESSMENT YEAR 2009 - 10, ORDER 4 ITA NO. 504 /PUN/20 16 SMT. NEHA NITIN RATHI DATED 18.09.2017 HAD DELETED SIMILAR DISALLOWANCE MADE UNDER SECTION 36(1)(III) OF THE ACT. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO DELETE THE DISALLOWANCE MADE UNDER SECTION 36(1)(III) OF THE ACT AT RS.2,77,230/ - . THE GROUNDS OF APPEAL RAISED BY THE APPEAL ARE THUS, ALLOWED. 1 0 . IN THE RESULT, APPEAL OF ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 20 TH DAY OF DECEM BER , 201 7 . SD/ - SD/ - (ANIL CHATURVEDI) (SUSHMA CHOWLA) / ACCOUNTANT MEMBER / JUDICIAL MEMBER / PUNE ; DATED : 20 TH DECEM BER , 201 7 . G G C C V V S S R R / COPY OF THE ORDER IS FORWARDED TO : 1. / THE APPELLANT ; 2. / THE RESPONDENT; 3. ( ) / THE CIT (A) - 2 , PUNE ; 4. THE PR. C IT - 3 , PUNE ; 5. , , / DR B , ITAT, PUNE; 6. / GUARD FILE. / BY ORDER , // TRUE COPY // / SR. PRIVATE SECRETARY , / ITAT, PUNE