Dy.CIT, Cir.2, Pune, Pune V. Shri Ashish N. Shah, Pune

ITA 52/PUN/2010

• Counselvise Citation: 5224514 RSA 2010
• Duration Of Justice: 1 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-05-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2006-2007
• Appeal Filed On: 08-01-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S N DOSHI
• Assessee Lawyers: S K AMBASTHA
• Keywords: Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER I.T.A. NO. 52/PN/2010 : A.Y. 2006-07 DY. CIT CIR. 2, PUNE APPELLANT VS. SHRI ASHISH N. SHAH 39 WELLESLEY ROAD MANTRI COURT NEXT TO R.T.O PUNE-411 001 PAN AIDPS 7682 K RESPONDENT APPELLANT BY: SHRI S.N. DOSHI RESPONDENT BY: SHRI S.K. AMBASTHA ORDER PER SHAILENDRA KUMAR YADAV, JM THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-II PUNE DATED 23-10-2009 FOR A .Y. 2006-07 ON THE GROUND THAT THE CIT(A) ERRED IN DELE TING THE DISALLOWANCE OF RS. 17,81,944/- MADE BY THE ASSESSI NG OFFICER FROM OUT OF THE ASSESSEES CLAIM OF DEDUCTI ON ON ACCOUNT OF INTEREST ON BORROWED CAPITAL. 2. THE ASSESSING OFFICER NOTICED THAT THE AMOUNT OF RS. 70,52,560/- WAS CLAIMED AS EXPENDITURE ON INTER EST ON BORROWED FUNDS WHEREAS THE ASSESSEE HAD GIVEN INTER EST FREE ADVANCES TO 8 PARTIES MENTIONED IN HIS ORDER, BEING PAGE 2 OF 5 ITA NO. 52/PN/2010 ASHISH SHAH A.Y. 2006-07 RELATIVES AND SISTER CONCERNS. THE ASSESSEE EXPLAI NED BEFORE THE ASSESSING OFFICER THAT THE AMOUNTS WERE GIVEN FROM HIS OWN INTEREST-FREE FUNDS AND THE BALANCE AV AILABLE IN THE CAPITAL ACCOUNT AT THE RELEVANT POINT OF TIM E. THE ASSESSING OFFICER HOWEVER, STATED THAT THE ASSESSEE HAD NOT BEEN ABLE TO EXPLAIN THAT SUFFICIENT INTEREST FREE FUNDS WERE AVAILABLE WITH HIM ON THE DATES OF LENDING. THE AS SESSING OFFICER ACCORDINGLY MADE THE DISALLOWANCE OF RS. 17,81,943/- OUT OF INTEREST PAYMENTS WHICH HAS BEEN DELETED BY THE CIT(A) IN FIRST APPELLATE PROCEEDING S. THE SAME HAS BEEN CHALLENGED BEFORE US BY THE REVENUE. 3. THE LEARNED DR APPEARING FOR THE REVENUE SUBMITT ED THAT THE CIT(A) WAS NOT JUSTIFIED IN DELETING THE DISALLOWANCE OF RS. 17,81,944/- MADE BY THE ASSESSI NG OFFICER FROM OUT OF THE ASSESSEES CLAIM OF DEDUCTI ON ON ACCOUNT OF INTEREST ON BORROWED CAPITAL. IT WAS FUR THER SUBMITTED THAT THE CIT(A) ERRED IN ACCEPTING THE AS SESSEES PLEA THAT IT HAD ADVANCED INTEREST FREE LOANS TO 8 PARTIES BEING RELATIVES/SISTER CONCERNS FROM OUT OF INTERES T FREE FUNDS. THE LEARNED DR SUBMITTED THAT THE CIT(A) FA ILED TO APPLY THE RATIO OF THE DECISIONS IN THE CASES OF CI T VS. V I BABY & CO. (2002) 254 ITR 248 (KER) AND CIT VS. ABH ISHEK INDUSTRIES (2006) 156 TAXMAN 257 (P & H) WHICH WERE PAGE 3 OF 5 ITA NO. 52/PN/2010 ASHISH SHAH A.Y. 2006-07 CLEARLY APPLICABLE TO THE FACTS OF THE ASSESSEES C ASE. THE LEARNED DR ACCORDINGLY SUBMITTED THAT THE ORDER OF THE ICIT(A) BE REVERSED AND THAT OF THE ASSESSING OFFIC ER BE RESTORED. ON THE OTHER HAND, THE LEARNED COUNSEL F OR THE ASSESSEE RELIED ON THE ORDER OF THE CIT(A). 4. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND PERU SED THE MATERIAL ON RECORD, WE FIND THAT THE ORDER OF T HE CIT(A) DOES NOT CALL FOR ANY INTERFERENCE AT OUR HAND. DU RING THE COURSE OF APPELLATE PROCEEDINGS, THE CIT(A) CALLED FOR DETAILS AND DOCUMENTS WITH A VIEW TO DISPOSE OFF TH E APPEAL AS EMPOWERED U/S 250(4) OF THE ACT. CONSEQUENTLY, THE ASSESSEE FILED THE RELEVANT DETAILS AND DOCUMENTS A ND ALSO THE STATUS OF OPENING BALANCE IN THE CAPITAL ACCOUN T, MONTH WISE INCOME CREDITED TO THE CAPITAL ACCOUNT S HOWING THE CREDIT BALANCES AT THE END OF EACH MONTH SINCE APRIL 2005 TILL MARCH 2006 AND ALSO THE MONTH WISE STATUS OF THE FUNDS GIVEN TO / BORROWED FROM THE ASSOCIATE CONCER NS / RELATIVES IN RESPECT OF WHOM THE INTEREST DISALLOWA NCE WAS MADE. ON GOING THROUGH SUCH DETAILS, THE CIT(A) SA TISFIED THAT THERE WAS ACTUALLY NET CREDIT BALANCE OF THOSE 8 PARTIES WITH THE ASSESSEE. FURTHER, THERE WERE SUF FICIENT INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE AND IN FACT AT THE RELEVANT POINT OF TIME, THERE WAS NO NET INT EREST FREE PAGE 4 OF 5 ITA NO. 52/PN/2010 ASHISH SHAH A.Y. 2006-07 ADVANCES GIVEN TO THOSE PARTIES. FURTHER, THE CIT( A) OBSERVED THAT WHENEVER THE AMOUNTS WERE ADVANCED TO THE RELATIVES AND ASSOCIATE CONCERNS, THERE WERE INTERE ST FREE FUNDS AVAILABLE WITH THE ASSESSEE MORE THAN THOSE F UNDS WHICH WERE ADVANCED. IT IS SETTLED LEGAL POSITION THAT INTEREST ON BORROWED FUNDS CANNOT BE DISALLOWED IF THE ASSESSEE HAS ADVANCED INTEREST FREE LOANS TO THE SI STER CONCERN AS A MEASURE OF COMMERCIAL EXPEDIENCY. IN T HIS VIEW OF THE MATTER, THE CIT(A) WAS JUSTIFIED IN DEL ETING THE IMPUGNED DISALLOWANCE AND AS SUCH, WE DO NOT FIND A NY INFIRMITY IN HIS ORDER. WE ACCORDINGLY UPHOLD THE SAME AND REJECT THE GROUND RAISED BY THE REVENUE. 5. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. DECISION PRONOUNCED IN THE OPEN COURT IMMEDIATELY O N CONCLUSION OF THE HEARING ON 31 ST MAY 2011. SD/- (G.S. PANNU) ACCOUNTANT MEMBER SD/- (SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER PUNE DATED THE 31 ST MAY 2011 ANKAM COPY OF THE ORDER IS FORWARDED TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT (A) II PUNE 4. THE CIT III PUNE 4. THE D.R, A BENCH, PUNE 6. GUARD FILE BY ORDER PAGE 5 OF 5 ITA NO. 52/PN/2010 ASHISH SHAH A.Y. 2006-07 ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL PUNE