INCOME TAX OFFICER 7(2)(1), MUMBAI V. M/S. RUPEE FINANCE & MANAGEMENT PVT.LTD., MUMBAI

ITA 5897/MUM/2008

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 7743 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 4 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-02-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 03-12-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 25-09-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D MUMBAI BEFORE SHRI A.L.GEHLOT, AM & SMT. P.MADHAVI DEVI, JM I.T.A.NO.5897/MUM/2008 - A.Y 2005-06 INCOME TAX OFFICER 7(2)(1), MUMBAI M/S RUPEE FINANCE & MANAGEMENT PVT. LTD., CONTINENTAL BUILDING, 135, DR. A.B.ROAD, WORLI, MUMBAI 400 018 PAN NO.AABCR 9194 C (APPELLANT) (RESPONDENT) REVENUE BY : SHRI MOHD. USMAN. ASSESSEE BY : SHRI VIJAY MEHTA. O R D E R PER P.MADHAVI DEVI, JM: THIS APPEAL OF THE REVENUE IS DIRECTED AGAINST CIT (A)S ORDER DATED 15/07/2008. 2. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL- 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT[A] ERRED IN DELETING THE ADDITION MADE U/S.69 OF RS.44,05,924/- ON THE GROUND THAT NO INCOME HAS RES ULTED TO THE ASSESSEE COMPANY FOR ACQUIRING SHARES OF FAMILY MEMBERS AT BELOW MARKET PRICE IGNORING THE FACT THAT THE MO U ENTERED INTO BY THE PARTIES INVOLVED WAS A FAADE CREATED T O GIVE LEGITIMACY TO THE ARRANGEMENT OF AFFAIRS. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT[A] ERRED IN DELETING THE ADDITION MADE OF RS.44,05,924/- ON THE GROUND THAT NO INCOME HAS RES ULTED IGNORING THE FACT THAT PURCHASE OF SHARES WAS SHOWN AS INVESTMENTS AND THE SAME WERE UNDER VALUED IN THE B ALANCE SHEET IN THE YEAR OF ACQUISITION AND, THEREFORE, TH E RESULTANT BENEFIT WAS TAXABLE IN THE HANDS OF THE ASSESSEE COMPANY. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE CIT[A] ERRED IN DELETING THE DISALLOWANCE OF INTEREST MA DE U/S.36(1)(III) OF RS.12,73,438/- IGNORING THE FACT THAT THE INTEREST CHARGED @ 9% FOR THE MONTH OF APRIL 2004 TO ITS GROUP/ASSOCIATE CONCERNS LACKED BUSINESS EXPEDIENCY . 2 3. AS REGARDS GROUNDS NO.1 & 2 BRIEF FACTS OF THE CASE ARE DURING THE YEAR ASSESSEE PURCHASED 28,540 EQUITY SHARES OF M/S ESSEL PROPACK LTD. FROM ITS RELATED PARTIES FOR A TOTAL C ONSIDERATION OF RS.15,13,336/- WHILE THE MARKET PRICE AS PER BOMBAY STOCK EXCHANGE WAS RS.59,19,260/-. AO MADE THE ADDITION U/S.69 OF THE ACT FOR THE DIFFERENCE OF RS.44,05,924/- AS UNEXPLAINED INVESTM ENT. AGGRIEVED, ASSESSEE FILED AN APPEAL BEFORE THE CIT[A] WHO AFT ER CONSIDERING THE DECISION OF THE ITAT DATED 5-2-2008 IN THE ASSESSEE S OWN CASE FOR A.Y 2003-04, DELETED THE ADDITION. AGGRIEVED, REVENUE I S IN APPEAL BEFORE US. 4. THE LD. DR RELIED ON THE ORDER OF THE AO WHILE T HE LD. COUNSEL FOR THE ASSESSEE PLACED RELIANCE UPON THE ORDER OF THE CIT[A] AS WELL AS THE DECISION OF THE ITAT IN THE ASSESSEES OWN C ASE REPORTED IN 310 ITR (AT) 403 (BOM). 5. ON GOING THROUGH THE ORDER OF THE TRIBUNAL, WE F IND THAT THE ISSUE STANDS DISCUSSED AT LENGTH AND THE ADDITION B EING ON SIMILAR SET OF FACTS HAS BEEN DELETED. THEREFORE, WE SEE NO REA SON TO INTERFERE WITH THE ORDER OF THE CIT[A] AND REJECTS THE GROUN DS OF APPEAL NOS.1 & 2 RAISED BY THE ASSESSEE. 6. AS REGARDS GROUND NO.3 BRIEF FACTS ARE THAT THE ASSESSEE HAS BORROWED FUNDS FROM M/S IL&FS @ 13.5% WHEREAS THE S AME WERE LENT @ 9% TO GROUP COMPANIES. AO MADE THE ADDITION OF RS .12,73,438/- ON THE GROUND THAT THE ASSESSEE HAS CHARGED LESS INTER EST TO GROUP CONCERNS AS AGAINST THE HIGHER INTEREST PAID BY IT. 3 7. AGGRIEVED, ASSESSEE FILED AN APPEAL BEFORE THE CIT[A] STATING THAT THE ASSESSEE WHICH IS ENGAGED IN THE BUSINESS OF LENDING OF MONEY, FINANCES AND INVESTMENT, HAD NOT TAKEN ANY L OAN DURING THE ACCOUNTING YEAR AND THE LOAN WAS TAKEN FROM M/S IL& FS IN NOVEMBER2002 @ 13.50% P.A. THEREAFTER, AS THE MARKE T CONDITIONS WERE CHANGING AND THE INTEREST RATE KEPT ON FALLING , THE COMPANY STARTED NEGOTIATING WITH M/S IL&FS FOR REDUCTION IN INTEREST RATE UPTO 8.50% W.E.F. 1.4.2004 AND ACCORDINGLY IT ALSO AGREE D TO GIVE LOANS TO ITS BORROWERS @ 9% P.A. W.E.F. 1-4-2004. HOWEVER, M /S IL&FS FINALLY AGREED FOR THE INTEREST RATE AT 9% P.A. W.E.F. 1-5- 2004, WHEREAS THE BORROWERS DID NOT AGREE TO THE INCREASE IN THE RATE WHICH HAS RESULTED IN DIFFERENTIAL INTEREST LOSS OF 4.5% FOR THE MONTH OF APRIL, 2004 WHICH IS PURELY DUE TO THE BUSINESS DECISION TAKEN BY THE ASSESSEE. AFTER CONSIDERING THE SAME, CIT[A] DELETED THE ADDITION BY HOLDING THAT OVER ALL INTEREST RECEIVED BY THE ASSESSEE IS MORE THAN THE INTEREST PAID BY IT. AGGRIEVED BY THE RELIEF GIVEN BY THE CIT[A] , R EVENUE IS IN APPEAL BEFORE US. 8. AFTER HEARING BOTH THE PARTIES AND AFTER GOING T HROUGH THE MATERIAL ON RECORD, WE FIND THAT THE AO HAS MADE TH E DISALLOWANCE BY HOLDING THAT THERE WAS NO BUSINESS EXPEDIENCY INVOL VED IN GIVING THE LOANS @ 9% WHEN THE ASSESSEE WAS PAYING THE INTERES T @ 13.50%. THE AO DID NOT CONSIDER THAT THE DIFFERENCE OF INTE REST IS ONLY FOR A PERIOD OF ONE MONTH AND THE EXPLANATION GIVEN BY TH E ASSESSEE FOR SUCH DIFFERENCE IS ACCEPTABLE. THE CIT[A] AFTER CO NSIDERING THE 4 ASSESSEES SUBMISSIONS AND ALSO THE MATERIAL ON REC ORD, HAS DELETED THE ADDITION AND WE DO NOT SEE ANY REASON TO INTERF ERE WITH THE SAME. THIS GROUND OF APPEAL IS THEREFORE REJECTED. 9. IN THE RESULT REVENUES APPEAL IS DISMISSED. ORDER PRONOUNCED ON THIS 24 TH DAY OF FEBRUARY, 2010. SD/- SD/- (A.L.GEHLOT) (P.MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI:24 TH FEBRUARY, 2010. P/-* 5