SUMEET DEVELOPERS, MUMBAI V. INCOME TAX OFFICER 28(3)(3), MUMBAI

ITA 5097/MUM/2019

• Counselvise Citation: [2021] 107 COUNSELVISE.COM (IT) 4130 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 11 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-08-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 05-08-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY KUMAR MENON
• Keywords: Commercial expediency
• Section: 143(3)

Judgement Text

ITA NO. 5097/MUM/2019 ASSESSMENT YEAR: 2014 - 15 PAGE 1 OF 2 INCOME TAX APPELLATE TRIBUNAL MUMBAI SMC BENCH, MUMBAI [CORAM: PRAMOD KUMAR (VICE PRESIDENT)] ITA NO. 5097/MUM/2019 ASSESSMENT YEAR: 2014 - 15 SUMEET DEVELOPERS ..... APPELLANT 506/507, PERSIPOLIS, PLOT NO. 74, SECTOR - 17 VASHI, NAVI MUMBAI 400703 [PAN: ACGFS5327N] VS. INCOME TAX OFFICER - 28(3)(3) MUMBAI. .....RESPONDENT APPEARANCES: NONE FOR THE APPELLANT VIJAYKUMAR MENON FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : MAY 10, 2021 DATE OF PRONOUNCEMENT : AUGUST 04 , 2021 O R D E R PER PRAMOD KUMAR, VP: 1. BY WAY OF THIS APPEAL, THE ASSESSEE - APPELLANT HAS CHALLENGED THE CORRECTNESS OF THE ORDER DATED 19 TH JUNE 2019, PASSED BY THE LEARNED CIT(A) IN THE MATTER OF ASSESSMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961 FOR THE ASSESSMENT YEAR 2014 - 15. 2. THE SHORT ISSUE THAT ADJUDICATE IS WHETHER OR NOT THE LEARNED CIT(A) WAS JUSTIFIED IN UPHOLDING THE DISALLOWAN CE OF RS. 1,67,167/ - UNDER SECTION 36 (I) (III) OF THE ACT. 3. TO ADJUDICATE ON THIS APPEAL, IT IS ENOUGH TO TAKE NOTE OF THE FACT THAT EVEN THOUGH THE ASSESSEE ADMITTEDLY HAD SUFFICIENTLY INTEREST FREE FUNDS OF RS. 3,28,60,826/ - , FAR IN EXCESS OF INTERE ST FREE LOANS EXTENDED TO THE TUNE OF RS. 32,50,000/ - DISALLOWED RELATED INTEREST OF RS. 1,67,167/ - ON THE GROUND THAT COMMERCIAL EXPEDIENCY OF INTEREST LOAN COULD NOT BE JUSTIFIED BY THE ASSESSEE. IN APPEAL LEARNED CIT(A) CONFIRMED THE ACTION OF THE ASSES SING OFFICER BY OBSERVING A S FOLLOWS: - 8. GROUND NO.2 OF APPEAL IS AGAINST DISALLOWANCE OF INTEREST OF RS, 1,67,167/ - AS AGAINST INTEREST FREE LOANS ADVANCED BY THE APPELLANT. IT WAS STATED THAT M/S MANISH ENTERPRISES WAS TO BUY A PLOT OF LAND WHIC H THE ASSESSEE WAS TO TAKE OVER AND UNDERTAKE BUILDING & DEVELOPMENTAL ACTIVITIES. THE ASSESSEE WAS EXPECTED TO LEND A SUM OF RS 70 LACS FOR THIS PURPOSE. IN CASE OF LOANS ADVANCED TO CHARKOP KAAVYA BEACHWOOD CHS ('THE SOCIETY') ITA NO. 5097/MUM/2019 ASSESSMENT YEAR: 2014 - 15 PAGE 2 OF 2 BEING A SISTER CONCERN WHER EIN THE ASSESSEE'S PARTNERS ARE ALSO MEMBERS OF THE SOCIETY. THE SOCIETY WAS IN DIRE NEED OF URGENT FUNDS TO CARRY ON UNINTERRUPTED BUSINESS. OWING TO THE URGENCY, THE PARTNERS DECIDED TO LEND FUNDS OUT OF THE IDLE CAPITAL LYING WITH THE ASSESSEE. THIS WAS CONSIDERED NECESSARY AS THE PARTNERS CONSTITUTED MORE THAN HALF THE MEMBERS OF THE SOCIETY. IN ADDITION TO FINANCIAL INTEREST IN THE SOCIETY, FINANCIAL RISK WAS ALSO INVOLVED. THUS FROM THE SUBMISSION OF THE APPELLANT IT IS CLEAR THAT THE INTEREST FREE LO AN ADVANCED IS NOT FOR BUSINESS PURPOSES. HENCE THE ADDITION MADE BY THE AO IS CONFIRMED. THE GROUND OF APPEAL IS DISMISSED. 4. THE ASSESSEE IS NOT SATISFIED AND IS IN FURTHER APPEAL BEFORE ME. 5. HAVING HEARD THE RIVAL CONTENTIONS AND HAVING PERUSED T HE MATERIAL ON RECORD, I AM SATISFIED THAT INTEREST FREE FUNDS AVAILABLE TO THE ASSESSEE ARE FAR IN EXCESS OF INTEREST FREE LOANS EXTENDED BY THE ASSESSEE, AND, AS SUCH, PRESUMPTION HAS TO BE, IN THE LIGHT OF HONBLE JURISDICTIONAL HIGH COURTS JUDGEMENT I N THE CASE OF CIT VS RELIANCE UTILITIES & POWER LTD., [(2009) 313 ITR 340 (BOM)], THAT THE LOANS WERE EXTENDED OUT OF INTEREST FREE FUNDS. AS SUCH, IN MY CONSIDERED VIEW, NO PART OF INTEREST ON BORROWINGS COULD BE DISALLOWED FOR NON BUSINESS USE. I, THEREF ORE, DELETE THE IMPUGNED DISALLOWANCE OF RS. 11,67,167/ - . 5. IN THE RESULT, THIS APPEAL IS ALLOWED. PRONOUNCED IN THE OPEN COURT TODAY ON THE 04 TH DAY OF AUGUST 2021. SD/ - PRAMOD KUMAR (VICE PRESIDENT) MUMBAI, DATED THE 04 TH DAY OF AUGUST 2021. COPIES TO: (1) THE APPLICANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) DR (6) GUARD FILE BY ORDER TRUE COPY ASSISTANT REGISTRAR/SR.PS INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES, MUMBAI