INTER JEWEL PRIVATE LIMITED, MUMBAI V. ADDL. CIT - 5(2), MUMBAI

ITA 547/MUM/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 101137 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 8 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-09-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: I
• Next Hearing Date: 31-08-2015
• Assessment Year: 2009-2010
• Appeal Filed On: 23-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: OM PRAKASH MEENADR
• Assessee Lawyers: K A VAIDYALINGAM
• Keywords: Source of fund; Proportionate interest
• Section: 143(3)

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES I, MUMBAI , , , BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER, AND SHRI RAMIT KOCHAR, ACCOUNTANT MEMBER ITA NO.547/MUM/2014 ASSESSMENT YEAR: 2009-10 M/S INTER JEWEL PRIVATE LIMITED, HW-8012, BHARAT DIAMOND, BOURSE, BANDRA KURLA COMPLEX, BANDRA (EAST), MUMBAI-400051 / VS. ADDL. COMMISSIONER OF INCOME TAX-5(2), AAYAKAR BHAVAN, MUMBAI-400020 ( ! ' /ASSESSEE) ( # / REVENUE) P.A. NO. AACCD5877B ! ' / ASSESSEE BY SHRI K.A. VAIDYALINGAM # / REVENUE BY SHRI OM PRAKASH MEENA-DR $ # % ' & / DATE OF HEARING : 31/08/2015 % ' & / DATE OF ORDER: 23/09/2015 / O R D E R PER JOGINDER SINGH (JUDICIAL MEMBER) THE ASSESSEE IS AGGRIEVED BY THE IMPUGNED ORDER DA TED 01/11/2013 OF THE LD. FIRST APPELLATE AUTHORITY, MU MBAI. THE ONLY GROUND RAISED IN THIS APPEAL PERTAINS TO DISALLOWANCE OF INTEREST OF RS.23,84,627/- MADE U/S 36(1)(III) OF THE INCOME TAX ACT, 1961 (HEREINAFTER THE ACT). M/S INTER JEWEL PVT. LTD. ITA NO.547/MUM/2014 2 2. DURING HEARING OF THIS APPEAL, LD. COUNSEL FOR THE ASSESSEE, SHRI K.A. VAIDYALINGAM, CLAIMED THAT THE IMPUGNED ISSUED IS COVERED IN FAVOUR OF THE ASSESSEE FOR ASS ESSMENT YEAR 2008-09 (ITA NO.7013/MUM/2012) ORDER DATED 13/02/2015. THE LD. COUNSEL FURNISH THE PHOTOCOPY O F THE AFORESAID ORDER OF THE TRIBUNAL. THIS FACTUAL MATR IX WAS NOT CONTROVERTED BY SHRI O. P. MEENA, LD. DR. 2.1. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. IN VIEW O F THE ABOVE, WE ARE REPRODUCING HEREUNDER THE RELEVANT PO RTION FROM THE AFORESAID ORDER DATED 13/02/2015 FOR READY REFERENCE:- THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD.CIT(A)-9, MUMBAI DATED 24/09/2012 PERTAINING TO ASSESSMENT YEAR 2008-09. THE ASESSEE HAS RAISED TWO SUBSTANTIVE GROUNDS OF APPEAL. GROUND NO.1 RELATES TO THE DISALLOWANCE OF INTEREST OF RS.19,95,375/- MADE BY THE AO AND CONFIRMED BY LD. CIT(A) UNDER SECTION 36(1)(III ) OF THE INCOME TAX ACT, 1961 (THE ACT). 2. THE ASSESSEE IS IN THE BUSINESS OF IMPORT AND EX PORT OF DIAMONDS. THE RETURN OF INCOME WAS FILED ON 25/09/2 008. THE RETURN WAS SELECTED FOR SCRUTINY ASSESSMENT AND STA TUTORY NOTICES WERE ACCORDINGLY ISSUED AND SERVED UPON THE ASSESSEE. DURING THE COURSE OF SCRUTINY ASSESSMENT THE AO NOTICED THAT THE ASSESSEE HAS PAID INTEREST ON LOAN S OBTAINED FROM BANKS TO THE TUNE OF RS.14.52 CRORES. THE AO F URTHER OBSERVED THAT THE ASSESSEE HAS GIVEN ADVANCES FOR P URCHASE OF BUSINESS PREMISES IN BHARAT DIAMOND BOURSE. THE TOTAL ADVANCES COMES TO RS.7.70 CRORES. SINCE THE ADVANCE S WERE FOR THE PURCHASE OF FIXED ASSETS, WHICH ARE NOT PUT TO USE THE AO WAS OF THE OPINION THAT THERE SHOULD BE PROPORTI ONATE M/S INTER JEWEL PVT. LTD. ITA NO.547/MUM/2014 3 DISALLOWANCE OF INTEREST. THE ASSESSEE WAS ASKED TO SUBSTANTIATE ITS CLAIM. THE ASSESSEE EXPLAINED THAT THERE IS NO SPECIFIC BORROWING FOR MAKING ADVANCES TO BHARAT DI AMOND BOURSE. FURTHER THE ASSESSEE IS HAVING OWN FUNDS AT RS.73.12 CRORES. IT WAS ALSO EXPLAINED THAT THE UNSECURED IN TEREST FREE LOAN OF RS.106.93 CRORES WAS ALSO THERE IN THE BALA NCE SHEET. IN SO FAR AS INTEREST EXPENSES ARE CONCERNED, IT WA S EXPLAINED THAT THEY HAVE BEEN PAID IN RESPECT OF PACKING CRED IT, POST SHIPMENT CREDIT AND THE INTEREST HAS NOT BEEN PAID FOR FUNDING THE PAYMENTS MADE FOR THE PURCHASE OF THE PREMISES. THE EXPLANATION OF THE ASSESSEE DID NOT FIND ANY FAVOUR WITH THE AO, WHO PROCEEDED BY COMPUTING PROPORTIONATE DISALLOWANCE ON ADVANCE GIVEN TO BHARAT DIAMOND BOU RSE. THE DISALLOWANCE WAS COMPUTED AT RS.19,95,375/-. TH E ASSESSEE CARRIED THE MATTER BEFORE LD. CIT(A) BUT W ITHOUT ANY SUCCESS. 3. BEFORE US LD. COUNSEL FOR THE ASSESSEE SUBMITTED A DETAILED CHART EXPLAINING ITS OWN SOURCE OF FUND. IT IS THE SAY OF THE LD. COUNSEL THAT THE ADVANCES GIVEN FOR THE PURCHAS E OF BHARAT DIAMOND BOURSE AT RS.7.70 CRORES IS SPREAD O VER FOR MANY YEARS AND DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS PAID ONLY RS.29.18 LACS. LD. COUNSEL F OR THE ASSESSEE FURTHER STATED THAT ASSESSEES CURRENT YEA RS NET PROFIT IS RS.13.12 CRORES, WHICH IS SUFFICIENT TO C OVER THE ADVANCE OF RS.29.18 LACS. LD. COUNSEL FURTHER STATE D THAT ON IDENTICAL SET OF FACTS THE HONBLE JURISDICTIONAL H IGH COURT IN THE CASE OF RELIANCE UTILITIES & POWER LTD.,313 ITR 340(MUM) HAS LAID DOWN THE PRINCIPLE THAT IF THERE ARE FUNDS AVAILABLE BOTH INTEREST FREE AND OVERDRAFT AND/OR L OANS TAKEN, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENT WOUL D BE OUT OF INTEREST FREE FUNDS GENERATED OR AVAILABLE WITH THE ASSESSEE. 4. PER CONTRA, LD. DR STRONGLY SUPPORTED THE FINDIN GS OF THE REVENUE AUTHORITIES. 5. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUTH ORITIES BELOW AND THE JUDICIAL DECISION BROUGHT TO OUR NOTI CE IN THE M/S INTER JEWEL PVT. LTD. ITA NO.547/MUM/2014 4 LIGHT OF THE BALANCE SHEET FIGURES FILED BEFORE US. IT IS AN UNDISPUTED FACT THAT ASSESSEE WAS HAVING OWN FUNDS AT RS.219.86 CRORES AT THE BEGINNING OF THE YEAR AND R S.180.05 CRORES AT THE END OF THE YEAR. IT IS ALSO AN UNDISP UTED FACT THAT ASSESSEE ADVANCED RS.29.18 LACS ONLY DURING THE YEA R UNDER CONSIDERATION. SINCE THE ASSESSEE IS HAVING SUFFICI ENT OWN FUNDS TO MEET OUT THE ADVANCES WE DO NOT FIND ANY R EASONS FOR DISALLOWANCE OF THE PROPORTIONATE INTEREST. ON THE FACTS OF THE CASE WE SET ASIDE THE FINDINGS OF LD. CIT(A) AND DI RECT THE AO TO DELETE THE ADDITION OF RS.19,95,375/-. GROUND NO.1 IS ALLOWED. 2.2. WE NOTE THAT THE ASSESSEE IS IN THE BUSINESS OF IMPORT AND EXPORT OF DIAMONDS. THE ASSESSEE DECLARE D INCOME OF RS.1,00,51,225/-. ASSESSMENT WAS COMPLET ED ON 25/03/2013 U/S 143(3) OF THE ACT, DETERMINING THE T OTAL INCOME AT RS.1,29,55,600/-. IT WAS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE PAID INTEREST ON BUSINESS ADVANCES TO THE TUNE OF RS.11,62,76,935/-, OBTAINED FROM BAN KS AND THUS AS ON CLOSE OF BALANCE SHEET THE TOTAL LOANS W ERE TO THE EXTENT OF RS.173.67 CRORES AND RESERVES AND CAPITAL WAS TO THE EXTENT OF RS.7.37 CRORES. IT WAS ALSO NOTICED T HAT ASSESSEE ALSO GAVE ADVANCES FOR PURCHASE OF BUSINESS PREMISE S IN BHARAT DIAMOND BOURSE AND OTHER PROPERTIES LIKE CAR PARKING IN BDB AND FACTORY PREMISES, THUS, THE TOTAL OF ADV ANCE IS RS.9,24,62,774/-. THE CLAIM OF THE ASSESSEE WAS THA T THERE WERE SUFFICIENT FUNDS WITH THE ASSESSEE IN THE FORM OF SHARE CAPITAL, ACCUMULATED PROFITS AND INTEREST FROM UNSE CURED LOANS, THUS, NO DISALLOWANCE IS PERMISSIBLE. HOWEVE R, THE ASSESSING OFFICER WORKED OUT INTEREST TO THE TUNE O F RS.23,84,627/- IN PROPORTION TO ADVANCES. ON APPEA L, THE LD. COMMISSIONER OF INCOME TAX (APPEALS) AFFIRMED THE S TAND OF M/S INTER JEWEL PVT. LTD. ITA NO.547/MUM/2014 5 THE LD. ASSESSING OFFICER. HOWEVER, IT IS UNDISPUT ED FACT THAT AT THE BEGINNING OF THE YEAR, THE ASSESSEE WAS HAVI NG RS.180,05,29,908/- AS OWN INTEREST FREE FUNDS AND E ND OF THE YEAR, THE FUNDS WERE TO THE TUNE OF RS.219,19,42,31 0/-. THE ASSESSEE ENCLOSED THE COPIES OF THE BALANCE SHEET A ND THE RELEVANT SCHEDULE THEREOF. THE ASSESSEE IS HAVING SUFFICIENT INTEREST FREE FUNDS, THUS, FOLLOWING THE DECISION F ROM HONBLE JURISDICTIONAL HIGH COURT IN RELIANCE UTILITIES PVT . LTD. (2009) 313 ITR 340 AND MUNJAL SALES CORPORATION (298 ITR 2 98) (SC), WE ALLOW THE APPEAL OF THE ASSESSEE, MORE SPE CIFICALLY, WHEN NO CONTRARY FACTS WERE BROUGHT TO OUR NOTICE. FINALLY, THE APPEAL OF THE ASSESSEE IS ALLOWED. THIS ORDER WAS PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES FROM BOTH SIDES AT THE CONCLUSION OF THE HEARING ON 31/08/2015. SD/ - (RAMIT KOCHAR) S D/ - (JOGINDER SINGH) '# / ACCOUNTANT MEMBER $# / JUDICIAL MEMBER $ MUMBAI; ( DATED : 23/09/2015 F{X~{T? P.S/. .. %$&'()(*& / COPY OF THE ORDER FORWARDED TO : 1. *+,- / THE APPELLANT 2. ./,- / THE RESPONDENT. 3. $ 0' ( *+ ) / THE CIT, MUMBAI. 4. $ 0' / CIT(A)- , MUMBAI 5. 2#3 .' , *+& * 4 , $ / DR, ITAT, MUMBAI 6. 5 6 / GUARD FILE. / BY ORDER, /2+' .' //TRUE COPY// / (DY./ASSTT. REGISTRAR) , $ / ITAT, MUMBAI