DCIT, New Delhi V. M/s. Amrapali Infrastructure Pvt. Ltd., Noida

ITA 5270/DEL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 2688 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 10 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 21-06-2017
• Assessment Year: 2011-2012
• Appeal Filed On: 26-09-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K SAROHA
• Assessee Lawyers: AMIT GOEL
• Keywords: Search and seizure; Commercial expediency
• Section: 132

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH : C , NEW DELHI BEFORE SH. I.C. SUDHIR, JUDICIAL M EMBER AND SH. O.P. KANT , ACCOUNTANT MEMBER ITA NO. 5270 /DE L/ 2014 ASSESSMENT YEAR : 2011 - 12 DCIT, CENTRAL CIRCLE - 7, NEW DELHI VS. M/S. AMRAPALI INFRASTRUCTURE PVT. LTD., C - 56/40, SECTOR - 62, NOIDA PAN : AAGCA733 5 P (APPELLANT) (RESPONDENT) AND C.O. NO. 137/DEL/2015 [IN ITA NO. 5270/DEL/2014] ASSESSMENT YEAR : 2011 - 12 M/S. AMRAPALI INFRASTRUCTURE PVT. LTD., C - 56/40, SECTOR - 62, NOIDA VS. DCIT, CENTRAL CIRCLE - 7, NEW DELHI PAN : AAGCA733 5 P (APPELLANT) (RESPONDENT) ASSESSEE BY SH. AMIT GOEL, ADV. DEPARTMENT BY SH. A.K. SAROHA, CIT(DR) DATE OF HEARING 21.06.2017 DATE OF PRONOUNCEMENT 31.07.2017 ORDER PER O.P. KANT , A. M. : THIS APPEAL BY THE R EVENUE AND THE CROSS OBJECTION BY THE ASSESSEE ARE DIRECTED AGAINST ORDER DATED 11/07/2014 OF THE COMMISSIONER OF INCOME - TAX( APPEALS) - I, NEW DELHI [IN SHORT THE CIT - (A)] FOR ASSESSMENT YEAR 2011 - 12. 2. THE GROUNDS RAISED IN THE APPEAL OF THE R EVENUE IN ITA NO. 5270/DEL/2014 ARE REPRODUCED AS UNDER: 2 ITA N O. 5270/DEL/2014 & C.O. NO. 137/DEL/2015 1. THE ORDER OF THE LEARNED CIT(A) IS NOT CORRECT IN LAW AND FACTS. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE THE LEARNED CIT(A) HAS ERRED IN DELETING THE ADDITION OF DISALLOWANCES OF RS.88,96,850/ - MADE BY ASSESSING OFFICER ON ACCOUNT OF INTEREST FREE LOAN & ADVANCE . 3. THE APPELLANT CRAVES LEAVE TO ADD, AMEND ANY/ALL THE GROUNDS OF APPEAL BEFORE OR DURING THE COURSE OF HEARING OF THE APPEAL. 2. T HE GROUNDS RAISED IN THE CROSS OBJECTION BY THE ASSESSEE I.E. C . O . NO. 137/DEL/2015 ARE REPRODUCED AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE INITIATION OF ASSESSMENT PROCEEDINGS AND ISSUE/SERVICE OF NOTICES BY THE ASSESSING OFFICER IS NOT IN ACCORDANCE WITH THE PROVISIONS OF LAW AND ACCORDINGLY THE ASSESSMENT ORDER PASSED IS LIABLE TO BE QUASHED. THE RESPONDENT CRAVES LEAVE TO ADD, ALTER, MODIFY OR DELETE ONE OR MORE GROUND BEFORE OR AT THE TIEM OF HEARING OF APPEAL. 3. AT THE OUTSET, THE LD. COUNSEL OF THE ASSESSEE SUBMITTED THAT THE ASSESSEE DID NOT PRESS THE CROSS OBJECTIONS. IN VIEW OF THE CROSS OBJECTION NOT PRESSED BY THE ASSESSEE, SAME IS RENDERED INFRACTUOUS AND DISMISSED. 4. NO W WE TAKE UP THE APPEAL OF THE R EVENUE . 5. BRIEFLY STATED FACTS OF THE CASE ARE THAT A SEARCH AND SEIZURE A CTION UNDER SECTION 132 OF THE INCOME - TAX ACT, 1961 (IN SHORT THE ACT ) WAS CARRIED OUT AT THE PREMISES OF THE ASSESSEE ON 09/09/2010. FOR THE YEAR UNDER CONSIDERATION THE ASSESSEE FILED RETURN OF I NCOME ON 30/0 9/2011 DECLARING I NCOME OF RS.3,24,46,204/ - . THE CASE WAS SELECTED FOR SCRUTINY AND NOTICE UNDER SECTION 143(2) OF THE ACT WAS ISSUED AND 3 ITA N O. 5270/DEL/2014 & C.O. NO. 137/DEL/2015 COMPLIED WITH. THE ASSESSING OFFICER OBSERVED THAT THE ASSESSEE HAS MADE ADVANCES OF RS.113,12,70,372/ - TO ASSOCIATED COMPANIES OR ITS DIRECTORS AND NO INTEREST HAS BEEN CHARGED ON THOSE ADVANCES, WHEREAS THE ASSESSEE COMPANY HAS PAID INTEREST TO BANK S AMOUNTING TO RS.88,96,850/ - ON FUNDS BORROWED. IN THE ASSESSMENT COMPLETED ON 26/03/2013, THE ASSESSING OFFICER DISALLO WED INTEREST OF RS.88,96,850/ - . 5.1 ON FURTHER APPEAL BY THE ASSESSEE, THE LD. CIT - (A) DELETED THE DISALLOWANCE. AGGRIEVED , THE R EVENUE IS IN APPEAL BEFORE THE TRIBUNAL RAISING THE GROUND AS REPRODUCED ABOVE. 6. THE SOLE GROUND OF THE R EVENUE IS RELATED TO THE INTEREST DISALLOWANCE OF RS. 88, 96, 850/ - WHICH HAS BEEN DELETED BY THE LD. CIT - (A) . 7. BEFORE US, THE LD. CIT( DR ) RELIED ON THE ORDER OF THE ASSESSING OFFICER AND SUBMITTED THAT IN VIEW OF THE INTEREST FREE ADVANCES TO THE D IRECTORS OF THE ASSOCIATED COMPANIES , OUT OF INTEREST - BEARING BORROWED FUNDS , INTEREST PAID ON BORROWED FUND WAS NOT ALLOWABLE TO THE ASSESSEE. 8. ON THE CONTRARY, THE LD. COUNSEL OF THE ASSESSEE RELIED ON THE ORDER OF THE LD. CIT - (A) . 9. WE HAVE HEARD THE RIVAL SUBMIS SIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE ISSUE IN DISPUTE IS WHETHER INTEREST PAID BY THE ASSESSEE ON BORROWED FUNDS SHOULD BE DISALLOWED FOR THE REASON THAT ASSESSEE HAS NOT CHARGED INTEREST ON SUM ADVANCED TO DIRECTORS OF THE ASSOCIATED CO MPANIES. BEFORE THE LD. CIT - (A) THE ASSESSEE MADE A DETAILED REPRESENTATION CITING THE VARIOUS DECISIONS INCLUDING THE DECISION OF THE HON BLE DELHI HIGH COURT IN THE CASE OF COMMISSIONER OF INCOME TAX VER SUS TIN BOX COMPANY 260 ITR 637 . THE LD. CIT - (A) AF TER CONSIDERING THE SUBMISSION OF THE ASSESSEE , DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER WITH FOLLOWING OBSERVATIONS: 4 ITA N O. 5270/DEL/2014 & C.O. NO. 137/DEL/2015 3.2 I HAVE CONSIDERED THE ASSESSMENT ORDER, THE SUBMISSIONS MADE AND THE DOCUMENTS FILED. IN THE PRESENT CASE, DISALLOWANC E MADE IS OUT OF INTEREST EXPENDITURE ON LOAN FOR EQUIPMENT PURCHASED BY THE APPELLANT. THUS, THE INTEREST PAID HAS NO CONNECTION WITH THE INTEREST FREE ADVANCES. SECONDLY, APPELLANT HAD INTEREST FREE FUNDS OF ABOUT RS.249 CRORE AS AGAINST THE INTEREST FRE E ADVANCE OF RS.113 CRORE. THIRDLY, FACTS ARE THAT THE APPELLANT HAS ADVANCED MONEY TO THESE PERSONS, WHO ARE DIRECTORS IN M/S ULTRA HOME CONSTRUCTION PVT. LTD. (UHC). FUNDING FOR VARIOUS PROJECTS OF THE AMRAPALI GROUP, APART FROM CUSTOMER ADVANCES AT AND AFTER LAUNCHING OF A PROJECT, IS RAISED INITIALLY FROM BANKS / FINANCIAL INSTITUTIONS WHICH REQUIRES THAT THE DIRECTORS / PARTNERS MUST ALSO GIVE PERSONAL GUARANTEES FOR THE LOANS AND FOR SUCH GUARANTEES THEY MUST THEMSELVES HAVE ADEQUATE ASSETS AND LIQUID FUNDS. UHC IS THE FLAG - SHIP COMPANY OF AMRAPALI GROUP AND BANK FINANCE IS RAISED BY THIS COMPANY FOR VARIOUS PROJECTS. FUNDS ARE INFUSED BY THE DIRECTORS OF UHC SO THAT MORE FUNDS / FINANCES CAN BE RAISED AS DIFFERENT PROJECTS PROGRESS. THE ADVANCES MADE TO THESE PERSONS BY THE APPELLANT WERE TO RAISE CAPITAL AND EVENTUALLY RESULTED IN BUSINESS FOR THE APPELLANT. THEREFORE, THESE TRANSACTIONS ARE NOT IN THE NATURE OF INTEREST - FREE LOANS BUT IN THE NATURE OF BUSINESS ADVANCES. IN VIEW OF THE ABOVE FACTS, IT IS CLEAR THAT THESE TRANSACTIONS ARE IN THE NATURE OF FINANCING TRANSACTIONS, ARE NOT IN THE NATURE OF LOANS WITHOUT INTEREST, AND NOT CONNECTED TO THE INTEREST BEARING FUNDS. THE DISALLOWANCE MADE IS FACTUALLY AND LEGALLY INFIRM AND IS DELETED. THIS GROU ND OF APPEAL IS ALLOWED. 10. W E FIND THAT THE LD. CIT - (A) HAS DISCUSSED THE ISSUE AND FOUND THAT THE INTEREST WAS ALLOWABLE DUE TO 3 REASONS. FIRST REASON CITED BY THE LD. CIT - (A) IS THAT INTEREST PAID WAS IN RESPECT OF LOAN FOR EQUIPMENT PURCHASED BY THE ASSESSEE AND THE ASSESSEE DEMONSTRATED THAT IT WAS UTILIZED TOWARDS THAT PURPOSE ONLY. THE SECOND REASON CITED BY THE LD. CIT - (A) IS THAT THE ASSESSEE WAS HAVING SUFFICIENT INTERE ST FREE FUNDS OF ABOUT RS. 249 CRORES AS AGAINST THE INTEREST FREE ADVANCES OF RS. 113 CRORES. THIRD REASON CITED BY THE LD. CIT - (A) IS THAT THE MONEY ADVANCED WAS FOR COMMERCIAL EXPEDIENCY AND TO SERVE THE ULTIMATE BUSINESS PURPOSE OF THE ASSESSEE COMPANY . BEFORE US THE LD. DR COULD NOT 5 ITA N O. 5270/DEL/2014 & C.O. NO. 137/DEL/2015 CONTROVERT THE ABOVE FINDING OF THE LD. CIT - (A) . IN VIEW OF ABOVE FACTS AND CIRCUMSTANCES, THE FINDING OF THE LD. CIT - (A) ON THE ISSUE IN DISPUTE IS WELL REASONED AND NO INTERFERENCE ON OUR PART IS REQUIRED. ACCORDI NGLY, TH E GROUND OF APPEAL IS DISMISSED. 11. IN THE RESULT , BOT H THE APPEAL OF THE R EVENUE AND THE CROSS OBJECTION OF THE ASSESSEE ARE DISMISSED. THE DECISION IS PRONOUN CED IN THE OPEN COURT ON 3 1 S T JULY , 201 7 . S D / - S D / - ( I.C. SUDHIR ) ( O.P. KANT ) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 3 1 S T JULY , 201 7 . RK / - (D.T.D) COPY FORWARDED TO: 1 . APPELLANT 2 . RESPONDENT 3 . CIT 4 . CIT(A) 5 . DR ASST. REGISTRAR, ITAT, NEW DELHI