K. RAHEJA CORP P. LTD, MUMBAI V. ACIT CEN CIR 29, MUMBAI

ITA 5330/MUM/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 62220 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 21 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-04-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 11-04-2012
• Assessment Year: 2007-2008
• Appeal Filed On: 29-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: GOLI SRINIVAS RAO
• Assessee Lawyers: ARAVIND SONDE

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES H, MUMBAI BEFORE SHRI B. RAMAKOTAIAH (AM) AND SHRI S.S. GODAR A (JM) ITA NO.5330/M/2010 ASSESSMENT YEAR: 2007-08 M/S. K. RAHEJA CORP. PVT. LTD., PLOT NO. C-30, G-BLOCK, OPP-SIDBI, BANDRA KURALA COMPLEX, BANDRA EAST, MUMBAI 400 051 . PAN: AAACP0522B VS. ASST. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-29, ROOM NO.411, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. (APPELLANT) (RESPONDENT) ITA NO.5966/M/2010 ASSESSMENT YEAR: 2007-08 ASST. COMMISSIONER OF INCOME-TAX, CENTRAL CIRCLE-29, ROOM NO.411, 4 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020 VS. M/S. K. RAHEJA CORP. PVT. LTD., PLOT NO. C-30, G-BLOCK, OPP-SIDBI, BANDRA KURALA COMPLEX, BANDRA EAST, MUMBAI 400 051 . PAN: AAACP0522B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI ARAVIND SONDE REVENUE BY : SHRI GOLI SRINIVAS RAO (CIT,DR) DATE OF HEARING: 11.4.2012 DATE OF PRONOUNCEMENT:20-04-2012 O R D E R PER S.S. GODARA, J.M: THE ASSESSEE AS WELL AS THE REVENUE RESPECTIVELY HA VE FILED THESE CROSS APPEALS AGAINST THE ORDER OF THE LD. CIT (A) VIDE ORDER DATED 29.01 .2010 FOR THE ASSESSMENT YEAR 2007-08. WE ARE FIRST TAKING ITA NO. 5330/M/2010. 2 ITA NOS. 5330 & 5966/M/2010 ITA NO.5330/M/2010 (AY: 2007-08): 2. IN THE INSTANT APPEAL, THE ASSESSEE HAS RAISED T WO GROUNDS. GROUND NO.2 IS GENERAL IN NATURE. GROUND NO.1 CHALLENGES THE DISALLOWANCE OF INTEREST OF RS. 1,29,82,820/- MADE BY THE ASSESSING OFFICER QUA INVESTMENT IN SHARES CONFIRME D BY THE LD. CIT (A). 3. IN THE ASSESSMENT PROCEEDINGS, THE ASSESSEE HER EIN HAD CLAIMED THAT HE HAD SUFFICIENT NON-INTEREST BEARING FUNDS SO AS TO INVEST IN SHARE S. HOWEVER, THE ASSESSING OFFICER VIDE ASSESSMENT ORDER DATED 30.12.2009 HELD THAT THE ASS ESSEE HAD NOT BEEN ABLE TO ESTABLISH A DIRECT LINK WITH THE INTEREST FREE FUNDS OR BORROWE D FUNDS WITH THE INCOME FROM SHARES. THEREFORE, ADDED AMOUNT OF RS. 7,90,46,541/- TO THE ASSESSEES INCOME. 4. THE ASSESSEE PREFERRED APPEAL BEFORE THE LD. CIT (A). IN APPEAL, ASSESSEES CLAIM HAS ONLY BEEN ACCEPTED IN PART. BY HOLDING THAT EXCEPT FOR AY 2003-04 INVESTMENTS, LD. CIT (A) DIRECTED THE AO TO WORKOUT DISALLOWANCES THEREBY PL ACING RELIANCE ON THE ITAT ORDER IN ASSESSEES OWN CASE REGARDING AY 2002-03. HENCE, T HE ASSESSEE AS WELL AS THE REVENUE HAVE CHALLENGED THE ORDER OF LD. CIT (A). 5. OPENING HIS ARGUMENTS, THE LEARNED AR HAS SUBMIT TED BEFORE US THAT ADMITTEDLY, THERE IS NO DISPUTE THAT THE ASSESSEE DID NOT HAVE SUFFIC IENT NON-INTEREST BEARING FUNDS SO AS TO INVEST IN SHARES. HE FURTHER RELIED ON THE ORDER OF THE I TAT MUMBAI VIDE ITA NO.4431/M/2000 DATED 29.12.2005, ITA NO.1915/M/2003 DATED 29.6.2006, ITA NO.4748/M/2001 DATED 29.8.2006. 5.1. THE LEARNED AR HAS ALSO VEHEMENTLY STATED THAT REGARDING ASSESSMENT YEARS 1998-99, 1999-2000, 2000-2001, 2000-2001, 2001-2002, 2002-20 03, 2003-2004 AND 2006-2007 SIMILAR PLEA AS RAISED IN THE INSTANT APPEAL HAS BEEN ACCEP TED BY THE ITAT MUMBAI. PLACED ON RECORD 3 ITA NOS. 5330 & 5966/M/2010 THE PHOTO COPIES OF THE SAID ORDERS. RELIED ON OBS ERVATIONS MADE THEREIN. PRAYED FOR ACCEPTANCE OF THE APPEAL. 6. ON THE OTHER HAND, THE LEARNED DR APPEARING FOR THE REVENUE HAS OPPOSED THE APPEAL BY RELYING ON THE IMPUGNED ORDER. PRAYED FOR REJEC TION OF THE APPEAL. 7. WE HAVE HEARD BOTH THE LEARNED REPRESENTATIVES. ALSO PERUSED THE CASE LAW CITED / SUPPLIED TO THE BENCH. IN OUR OPINION, THE ISSUE I NVOLVED IS AS TO WHETHER THE ASSESSEE HAS INVESTED NON-INTEREST BEARING FUNDS OR INTEREST BEA RING FUNDS? ONLY ISSUE IS AS TO WHETHER IN CASE OF AVAILABILITY OF SURPLUS FUNDS, CAN IT BE PR ESUMED THAT ASSESSEE HAD INVESTED FROM INTEREST BEARING FUNDS THAT TOO, WHEN THE FORMER FU NDS WERE ALREADY IN SURPLUS? 8. IN ASSESSEES OWN APPEAL, THE LEARNED CO-ORDINAT E BENCH HAS ALREADY DECIDED CONNECTED ISSUE REGARDING AYS 2003-04 TO 2006-07. RELEVANT CO NTENTS OF THE SAID ORDER ARE REPRODUCED AS UNDER: WE HAVE GIVEN VERY CAREFUL CONSIDERATION TO THE SU BMISSIONS MADE BY THE LD. COUNSEL FOR THE ASSESSEE. IN OUR VIEW IT IS NOT POSSIBLE T O ACCEPT THE STAND OF LD. DR. IN OUR VIEW THE CORRECT WAY TO LOOK AT THE RATIO LAID DOWN BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF RELIANCE UTILITIES PVT. LTD. (SUPRA) IS TO ANALYZE THE AVAILABILITY OF INTEREST FREE FUNDS. IN THIS CASE THE CIT (A) HAS HIMSELF GIVEN A FINDING THAT THE INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE WAS MUCH MORE THAN INVE STMENT MADE IN THE SHARES DURING THE PREVIOUS YEAR. ONCE A FINDING TO THIS EFFECT I S GIVEN THEN A PRESUMPTION WOULD ARISE THAT INVESTMENTS WERE MADE OUT OF INTEREST FREE FUN DS AVAILABLE WITH THE COMPANY. IT CANNOT BE ACCEPTED THAT IN SUCH A SITUATION STILL T HE BURDEN IS ON THE ASSESSEE TO SHOW THAT INTEREST FREE ADVANCES WERE USED FOR THE PURPO SE OF MAKING INVESTMENT IN SHARES. WE, THEREFORE, DO NOT FIND ANY MERITS IN THE SUBMIS SION MADE BY THE LD. DR. RESPECTFULLY FOLLOWING THE ORDERS OF THE TRIBUNAL I N THE EARLIER ASSESSMENT YEARS, WE UPHOLD DISALLOWANCE DELETED BY THE CIT (A) AND FURT HER HOLD THAT THE ADDITIONS SUSTAINED BY THE CIT (A) SHOULD BE DELETED. THUS GROUND NO.( B) RAISED BY THE REVENUE IS DISMISSED WHILE GROUND NO.1 RAISED BY THE ASSESSEE IS ALLOWED. 4 ITA NOS. 5330 & 5966/M/2010 9. ACCORDINGLY, IN THE ASSESSMENT YEAR IN HAND AS W ELL, BY APPLYING THE SAME VERY ANALOGY, WE ACCEPT THE GROUND BY SETTING ASIDE THE IMPUGNED ORDER BY HOLDING THAT THE ASSESSEE HAD SURPLUS NON-INTEREST BEARING FUNDS WHICH IT HAD INV ESTED. ITA NO.5966/M/2010 (AY: 2007-08) 10. IN THIS APPEAL, WE FIND THAT TOTAL THREE GROUND S ARE THERE. GROUND NOS. 2 & 3 ARE GENERAL IN NATURE. GROUND NO.1 IMPUGNED THE ORDER OF THE LD. CIT (A) WHEREIN THE ASSESSEES APPEAL QUA THE UTILIZATION OF INTEREST FREE FUNDS I N STOCK INVESTMENTS HAS BEEN ACCEPTED THEREBY DELETING THE DISALLOWANCE MADE BY THE ASSESSING OFF ICER. 11. BOTH THE LEARNED REPRESENTATIVES ARE AD IDEM TH AT IN VIEW OF FINDINGS IN THE ASSESSEES APPEAL HEREINABOVE, THE FATE OF THIS APPEAL HAS TO BE DECIDED ACCORDINGLY. 12. SINCE, IN OUR OPINION AS WELL AS PER SUBMISSION S OF BOTH THE LEARNED REPRESENTATIVES, WE HAVE ALREADY HELD IN THE ASSESSEES APPEAL HEREINAB OVE THAT IN CASE OF AVAILABILITY OF NON- INTEREST FEE FUNDS WHICH ARE MORE THAN THE INVESTME NT, NET CONCLUSION WHICH HAS TO BE DRAWN IS THAT INTEREST BEARING FUNDS HAVE NOT BEEN UTILIZED. SO, SINCE IN THE INSTANT APPEAL ALSO, LD. CIT (A) HAS RELIED ON ITAT ORDER. THEREFORE, ON THE BAS IS OF SAID FACTUAL POSITION AND IN THE ABSENCE OF ANY MATERIAL CONTRARY TO THE SAME, WE DO NOT FIN D MERIT IN THE REVENUES APPEAL. THEREFORE, THE SAME IS REJECTED. 13. CONSEQUENTLY, WE ACCEPT THE ASSESSEES APPEAL. REJECT THE REVENUES APPEAL. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 20 TH DAY OF APRIL, 2012. SD/- SD/- (B. RAMAKOTAIAH) (S.S. GODARA) ACCOUNTANT MEMBER JUDICIAL ME MBER 5 ITA NOS. 5330 & 5966/M/2010 DATE : 20-04-2012 AT :MUMBAI OKK COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A), MUMBAI CONCERNED 4. THE CIT, MUMBAI CONCERNED 5. THE DR H BENCH, ITAT, MUMBAI // TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI.