ORYX FINANCE AND INVESTMENTS P.LTD, MUMBAI V. ITO 8(2)-4, MUMBAI

ITA 5885/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 9407 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 2 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2012
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 06-11-2012
• Assessment Year: 2006-2007
• Appeal Filed On: 23-08-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH C, MUMBAI BEFORE SHRI D. KARUNAKARA RAO, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER ITA NO. 5885/MUM/2011 (ASSESSMENT YEAR: 2006-07) ORYX FINANCE AND INVESTMENTS PVT LTD, LOK BHAVAN, LOK BHARATI COMPLEX, MAROL MAROSHI ROAD, ANDHERI (E), MUMBAI -400 059 PAN AAACO 0662 K VS INCOME-TAX OFFICER - 8(2)-4, AAYAKAR BHAVAN, MAHARSHI KARVE MARG, MUMBAI -400 020 (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI DEEPAK TRALSHAWALA RESPONDENT BY : SHRI RAJARSHI DWIVEDY DATE OF HEARING: 06.11.2012 DATE OF PRONOUNCEMENT: 21.11.2012 O R D E R PER VIVEK VARMA, JM: THE APPEAL, AS FILED BY THE ASSESSEE ARISES FROM THE ORDE R OF CIT(A) 17, MUMBAI, DATED 10.06.2011, WHEREIN, THE FOLLOWING GROU NDS HAVE BEEN TAKEN BY THE ASSESSEE. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT(APPEAL) ERRED IN CONFIRMING THE DISALLO WANCE MADE U/S 36(1)(III) OF RS 1,69,315/- BEING THE INTEREST PAID. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LEARNED CIT(APPEAL) ERRED IN NOT APPRECIATING THE S UBMISSION DT. 15.12.2008 MADE BEFORE THE AO AND THOSE MADE BEFORE HIM HEREBY IGNORING THE FACT THAT THE APPELLANTS BUSINE SS ITSELF IS THAT OF FINANCE AND INVESTMENT WHICH FACT IS NOT DI SPUTED IN ASSESSMENT ORDER. IN THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW THE LEARNED CIT(APPEAL) OUGHT TO HAVE HELD THAT THE IMP UGNED INTEREST WAS ALLOWABLE U/S 36(1)(III). 2. THE FACTS ARE THAT THE ASSESSEE IS IN THE BUSINESS O F FINANCE AND INVESTMENTS. IN THE YEAR UNDER CONSIDERATION, THE ASSESS EE ADVANCED ORYX FINANCE AND INVESTMENTS PVT LTD. ITA 5885/MUM/2011 2 FUNDS TO ITS GROUP CONCERN M/S AZOFEN PRIVATE LTD. (AZOFE N), AFTER TAKING A LOAN OF RS. 20,00,000 FROM M/S SHEN SHARES & STO CK BROKERS PVT. LTD. (SNEH). 3. ACCORDING TO THE ASSESSEE, ON AN ENQUIRY MADE BY T HE AO, THE ASSESSEE SUBMITTED THAT IT HAD ADVANCED THE FUNDS TO IT S GROUP CONCERN FOR LEGITIMATE BUSINESS NEEDS. 4. THE AO, DISAGREED WITH THE EXPLANATION OF THE ASSESSEE ON THE GROUND THAT INTEREST BEARING FUNDS HAD BEEN DIVERTED AS INTEREST FREE LOAN TO ITS SISTER CONCERN. ACCORDING TO THE AO, THE BUSIN ESS EXPEDIENCY HAS NOT BEEN PROVED FOR THE AMOUNT ADVANCE D TO M/S AZOFEN PRIVATE LTD. THE AO, THEREFORE, ADDED BACK RS. 1,69,3 15 AS INTEREST AND RS. 16,500 BEING THE BANK CHARGES THEREON TO THE INCOME OF THE ASSESSEE U/S 36(1)(III) BY APPLYING SA BUILDERS CASE 28 8 ITR 1 (SC). 5. THE ASSESSEE APPROACHED THE CIT(A), WHO SUSTAINED TH E ADDITION BY OBSERVING THAT THE ASSESSEE HAS NOT BEEN ABLE TO E STABLISH HOW AZOFEN HAS USED THE FUNDS FOR SOME BUSINESS PURPOSES. 6. AGGRIEVED, THE ASSESSEE IS NOW BEFORE THE ITAT. 7. BEFORE US, THE AR SUBMITTED THAT THE BUSINESS OF THE ASSESSEE IS OF FINANCE AND INVESTMENTS. IT TAKES ADVANCES AND IT GIVE S ADVANCES. THE AR SUBMITTED THAT AZOFEN WAS IN THE CONSTRUCTION BU SINESS AND IS ALWAYS IN NEED OF FUNDS AND THAT IS THE REASON THAT THE ASSESSEE TOOK LOAN FROM SHEN AND ADVANCED THE SAME TO AZOFEN. THE AR SUBMITTED THAT IT HAD PROVIDED ALL THE DETAILS, AS ASKED FOR BY THE R EVENUE AUTHORITIES AT EVERY STAGE AND IT IS A FACT THAT THERE W AS NO, AS SUCH, DIRECT ENQUIRY ON THE POINT OF COMMERCIAL EXPEDIENCY BY TH E REVENUE AUTHORITIES. HE FURTHER POINTED OUT THAT IN ANY CASE, TH E MONEY WAS ORYX FINANCE AND INVESTMENTS PVT LTD. ITA 5885/MUM/2011 3 RETURNED WITHIN THE CLOSE OF FINANCIAL YEAR. THE AR SUBMITTED THAT THE MANNER OF BUSINESS AND ITS MODUS OPERANDI HAS TO BE SEE N BY THE ASSESSEE AND THE ASSESSEE CAN NOT BE ASKED TO MAXIMISE ITS PROFITS. 8. ON, THESE ARGUMENTS, THE AR CONCLUDED THAT THE RATIO IN SA BUILDERS IS NOT BINDING UNIVERSALLY, BECAUSE THE HONBLE APE X COURT HOLD, WE WISH TO MAKE IT CLEAR THAT IT IS NOT OUR OPINION T HAT IN EVERY CASE INTEREST ON BORROWED LOAN HAS TO BE ALLOWED IF TH E ASSESSEE ADVANCES IT TO A SISTER CONCERN. IT ALL DEPENDS ON THE FACTS AND CIRCUMSTANCES OF THE RESPECTIVE CASE .. THUS THE ENTIRE RATIO CANNOT BE APPLIED AGAINST THE FACTS OF THE INSTANT CASE. 9. THE AR, THEREFORE, PLEADED THAT THE REVENUE AUTHORITIE S ERRED IN ADDING BACK RS. 1,69,315 TO THE INCOME OF THE ASSESSEE. 10. THE DR, RELIED ON THE DECISION OF THE REVENUE AUTHORITIES. 11. WE HAVE HEARD THE ARGUMENTS OF THE AR AS WELL AS T HE DR. WE FIND THAT THE AR WAS TRYING TO PRESS HOME THE ARGUMENT THAT THE FUNDS ADVANCED TO AZOFEN WAS PURELY FOR BUSINESS NEEDS SINCE THE BUSINESS OF THE ASSESSEE IS THAT OF LENDING AND BORROWING OF FUNDS. 12. IT IS FOUND THAT THE ASSESSEE HAD NOT MADE ANY SA TISFACTORY ATTEMPT TO PROVE HOW THE LENDING TO AZOFEN WAS FOR ITS B USINESS NEEDS AND HOW THE EXPRESS COMMERCIAL EXPEDIENCY COULD BE PRO VED. TAKING THE CUE FROM THE OBSERVATIONS OF THE HONBLE SUPREME CO URT, AS READ OUT BY THE AR IN THE HEARING, THE BENCH ASKED, AS TO BE FORE WHOM THE EXPLANATIONS WERE GIVEN IN SO FAR AS THE COMMERCIAL EXPEDIE NCY WAS CONCERNED AND THE AR WAS ASKED TO DEMONSTRATE THE S AME, WHICH THE AR, DID NOT. HE DID NOT AVAIL THE OPPORTUNITY OF EXPLAINING A ND DEMONSTRATING THE TWO KEY ELEMENTS, I.E. COMMERCIAL EXPEDIE NCY AND BUSINESS NEEDS, WITHOUT WHICH, THE ALLOWANCE OF EXPENDITURE WOULD ORYX FINANCE AND INVESTMENTS PVT LTD. ITA 5885/MUM/2011 4 NOT BE POSSIBLE. EVEN THE HONBLE SUPREME COURT IN SA B UILDERS CASE, HAS OBSERVED IN PAGE 8, PLACITUM 29, IN THE PRESENT CASE, NEITHER THE HIGH COURT NOR THE TRIBUNAL NOR THE OTHER AUTHORITIES HAVE EXAMINED WHETHER THE AMOUNT ADVANCED TO THE SISTER CONCERN WA S BY WAY OF COMMERCIAL EXPEDIENCY. IT MUST BE OBSERVED THAT THE CASE OF SA BUILDERS MAY NOT LAY DOWN THE LAW UNIVERSALLY, BUT THE CR UX AS LAID DOWN THAT RECORDS HAVE TO BE EXAMINED, TO DETERMINE T HE COMMERCIAL EXPEDIENCY AND BUSINESS NEEDS. 13. IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION THAT T HE ASSESSEE HAS NOT BEEN ABLE TO CROSS THE HURDLE OF COMMERCIAL EXPE DIENCY, WE, THEREFORE, FIND NO REASON TO DISTURB THE FINDING OF THE REVE NUE AUTHORITIES, WHICH WE SUSTAIN. 14. THE GROUND IS REJECTED. 15. GROUND NO. 2 & 3 ARE MERELY EXTENSION AND CONSEQU ENTIAL TO THE GROUND NO. 1, WHICH WE HAVE REJECTED. THEREFORE, CONSEQU ENTIALLY GROUNDS NO. 2 & 3 ARE ALSO REJECTED. 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS DAY OF 21/11/2012. SD/- (D. KARUNAKARA RAO) ACCOUTANT MEMBER SD/- (VIVEK VARMA) JUDICIAL MEMBER MUMBAI, DATE: 21/11/2012 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A)- 17 , MUMBAI. ORYX FINANCE AND INVESTMENTS PVT LTD. ITA 5885/MUM/2011 5 4) THE CIT 8, MUMBAI, 5) THE D.R. C BENCH, MUMBAI. 6) COPY TO GUARD FILE. BY ORDER / / TRUE COPY / / ASSTT. REGISTRAR I.T.A.T., MUMBAI *CHAVAN