DCIT CEN CIR 13, MUMBAI V. PARINEE REALTY P. LTD, MUMBAI

ITA 6214/MUM/2014

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 2169 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 1 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2016
• Appeal Filed By: Department
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 08-10-2014
• Court: TRIBUNAL
• Department Lawyers: M C OM NAGESHAN
• Keywords: Wholly owned subsidiary; Notional interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI PAWAN SINGH , JM ITA NO. 6214 / MUM/20 1 4 & 6215/MUM/2014 ( ASSESSMENT YEAR : 2010 - 11 ) ACIT - CC - 13, MUMBAI VS. M/S. PARINEE REALTY PVT. LTD., (FORMERLY KNOWN AS GR EENBIRD DEVELOPERS PVT. LTD., PLOT NO.38 & 39, CRESCENZO, G - BLOCK, BANDRA KURLA COMPLEX, BEHIND MCA, BANDRA (E), MUMBAI PAN/GIR NO. AABCG5484E APPELLANT ) .. RESPONDENT ) CO NO. 137/ MUM/20 15 & 138/MUM/2015 ( ASSESSMENT YEAR : 2010 - 11 ) M/S. PARINEE REALTY PVT. LTD., (FORMERLY KNOWN AS GREENBIRD DEVELOPERS PVT. LTD., PLOT NO.38 & 39, CRESCENZO, G - BLOCK, BANDRA KURLA COMPLEX, BEHIND MCA, BANDRA (E), MUMBAI VS. DCIT CC 2(3), MUMBAI (OLD DCIT CC - 13), MUMBAI PAN/GIR NO. AABCG5484E APPELLANT ) .. RESPONDENT ) REVENUE BY SHRI M.C.OM NAGESHAN ASSESSEE BY SHRI RAJAN R VORA WITH SHRI NIKHIL TIWARI DATE OF HEARING 25/08 /2016 DATE OF PRONOUNCEME NT 09 / 11 /2016 / O R D E R PER R.C.SHARMA (A.M) : ITA NO.6214 & 6215/2014 & CO.137 & 138/2015 M/S. PARINEE REALTY PVT. LTD., 2 THESE ARE THE APPEALS FILED BY REVENUE FOR THE ASSESSMENT YEAR 2010 - 11, IN THE MATTER OF ORDER PASSED U/S.143(3) / 271(1)( C) OF THE IT ACT. 2. ASSESSEE ALSO FILED CROSS OBJECTION IN SUPPORT OF THE ORDER OF THE CIT (A). 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 4, GRIEVANCE OF REVENUE RELATES TO DISALLOWANCE OF INTEREST PAID ON MONEY BORROWED AT HIGHER RATE OF INTEREST. 5. IN THIS CONNECTION, THE AO OBSERVED THAT THE ASSESSEE HAD CHARGED INTEREST ON TH E LOANS ADVANCED AT A RATE LOWER THAN THE RATE OF INT EREST ON ITS BORROWINGS. THE AO COMPUTED AN AVERAGE RATE OF INTEREST ON THE SECURED LOANS AND UNSECURED LOANS AT 9%. SIMILARLY HE COMPUTED THE RATE OF INTEREST ON THE INTEREST RECEIVED IN RESPECT OF TOTA L SUNDRY DEBTORS, ADVANCE FOR PROPERTIES, DEPOSIT AND OTHERS AT 4.96%. HE THEREFORE CONCLUDED THAT THE RATE OF INTEREST EARNED WAS LESS BY 4.04% AND THEREFORE COMPUTED THE EQUIVALENT AD DITIONS OF THE INTEREST THAT SHOULD HAVE BEEN RECEIVED AT RS 7.78 CRORE S. HE ACCORDI NGLY ISSUED A SHOW CAUSE NOTICE TO THE ASSESSEE AS TO WHY THIS ADDITION SHOULD NOT BE M ADE. ON RECEIVING THE ASSESSEE 'S REPLY THE AO COMPUTED THE INTEREST THAT THE ASSESSEE SHOULD HAVE RECEIVED ONLY IN RESPECT OF DEPO SIT AND OTHERS AND EXCLUDE D THE SUNDRY DEBTORS AND ADVANCES FOR PROPERTIES. BASED ON THIS COMPUTATION, HE ARRIVED AT AVER AGE RATE OF INTEREST ON INTEREST RECEIVED AT 5.22% HE THEREFORE, COMPUTED THE INTEREST NOT CHARGED AT RS 6.90 CRORES. THIS AMOUNT WAS ADDED TO THE INCOME OF THE ASSESSEE. ITA NO.6214 & 6215/2014 & CO.137 & 138/2015 M/S. PARINEE REALTY PVT. LTD., 3 6. BY THE IMPUGNED ORDER CIT(A) DELETED THE ADDITION AFTER OBSERVING AS UNDER: - GROUND OF APPEAL NO. 1 IS GENERAL. GROUND OF APPEAL NO. 2 & 3 IS IN RESPECT OF ADDITION OF NOTIONAL INCOME OF RS. 6.90 CRORES. BEFORE ME THE APPELLANT HAS ASSAILED TH E ACTION OF THE AO STATING THAT THERE IS NO SANCTITY TO TAX ANY NOTIONAL INCOME AS HAS BEEN DONE BY THE AO. IT HAS FURTHER BEEN ARGUED THAT THE COMPANY HAD SUFFICIENT INTEREST FREE FUNDS IN THE NATURE OF CAPITAL AND RESERVES AND ADVANCES RECEIVED FOR SALE OF FLATS. FURTHER SUBSTANTIAL PORTION OF ADVANCES AND DEPOSITS IS GIVEN PURELY FOR BUSINESS PURPOSES AND ON SUCH ADVANCES NO INTEREST CAN BE CHARGED. THE DETAILS OF SUCH ADVANCES HAS BEEN TABLED BELOW: OP.BALANCE ADDITION PAYMENTS RECD. BALANCE AS NOT E AS ON DURING THE DURING THE ON 31.3.10 1.4.2009 F.Y.2009 - 10 YEAR ADVANCES FOR PROPERTY ADWAIT HOLDING PVT. LTD., _ 25,00,00,000 _ 25,00,00,000 ADVANCE OF RS. 25,00,00,000/ - WAS GIVEN FOR PROPERTY KNOWN S 'PAVILL E HOUSE'LOCATED AT MAHIM WHICH WAS PURCHASED AT RS.80,00,00,000/ - . AGREEMENT IS ATTACHED ON PAGE NO.11 TO 21 OF PAPERBOOK. MAN INFRA PROJECTS PVT. LTD., _ 1,36,00,000 _ 1,36,00,000 MEMORANDUM OF UNDERSTANDING WAS ENTERED FOR PROPERTY LOCATED AT CH EMBUR. PAYMENT MADE TO MAN INFRAPROJECTS PVT. LTD., ON BEHALF OF PARIVAR INFRASTRUCTURE PVT. LTD., AS PER MEMORANDUM OF UNDERSTANDING AND CONSENT TERMS. MEMORANDUM OF UNDERSTANDING BETWEEN PARINEE REALTY PVT. LTD., AND PARIVAR INFRASTRUCTURE PVT. LTD., IS ATTACHED ON PAGE NO.57 AND 75 OF PAPERBOOK AND CONSENT TERMS BETWEEN MAN INFRAPROJECTS PVT. LTD., AND PARIVAR INFRASTRUCTURE PVT. LTD., IS ATTACHED ON PAGE NO.76 TO 83 OF PAPERBOOK. ADVANCE FOR ALTERNATE ACCOMMODATION DEPOSIT FOR ALTERNATE ACCO M (AV.) 25,21,200 11,00,000 10,00,000 26,21,200 ADVANCE WAS GIVEN TO TENANTS FOR ANAND VILLA PROJECT LOCATED AT SANTACRUZ (WEST) DEVELOPMENT AGREEMENT ATTACHED ON PAGE NO.25 TO 56 OF PAPERBOOK. ITA NO.6214 & 6215/2014 & CO.137 & 138/2015 M/S. PARINEE REALTY PVT. LTD., 4 REFUNDABLE DEPOSIT TO MEMBERS FOR REDEVELOPMENT OF PROPERTY BELA VIPUL SHAH _ 64,00,000 _ 64,00,000 THIS AMOUNT WAS PAID AS REFUNDABLE DEPOSIT TO MEMBERS AS PER DEVELOPMENT AGREEMENT WHICH IS ATTACHED ON PAGE NO.87 TO 98 OF PAPE RBOOK AND INDENTURE OF LEASE WHICH IS ATTACHED ON PAGE NO.99 TO 112 OF PAPERBOOK DEVELOPMENT AGREEMENT WAS ENTERED FOR AMIT JEEVAN PROJECT LOCATED AT JVPD SCHEME, VILE PARLE (W). LIST OF MEMBERS TO WHOM REFUNDABLE DEPOSIT IS PAID IS REFLECTED ON PAGE NO.11 1 OF PAPER BOOK. DILIP SHAH _ 64,00,000 _ 64,00,000 HEMAN TILOKANI _ 20,00,000 _ 20,00,000 KAMLA GOBIND PANJNANI _ 62,00,000 _ 62,00,000 NIRALI D SHAH _ 64,00,000 _ 64,00,000 SAROJ D SHAH _ 64,00,000 _ 64,00,000 SULCHHANI MANGALDAS AHUJA _ 45,00,000 _ 45,00,000 VIPUL D SHAH HUF _ 64,00,000 _ 64,00,000 ADVANC TO SUBSIDIARIES ILDE PVT. LTD., (WHOLLY OWNED SUBSIDIARY) 3,37,42,133 74,57,525 3,82,50,000 29,49,658 M/S. PARINEE REALTY PVT. LTD., IS THE HOLDING COMPANY OF ILDE PVT. LTD., AND PARINEE DEVELOPERS & PROJECTS PVT. LTD., IN BOTH THESE COMPANIES. PARINEE REALTY PVT. LTD., IS THE SOLD SHAREHOLDER HOLDING 100% SHARES OF THE SUBSIDIARIES. THESE ADVANCES ARE GIVEN OUT OF BUSINESS EXPEDIENCY AND FOR THE PURPOSE OF BUSINESS. NO NOTIONAL INTEREST CAN BE ESTIMATED IN S UCH CASES AS HELD IN CASE OF CIT V PREMIER INDUSTRIES (200) 257 ITR 762 (MP) AND V.M. SALGAOCAR & BROS. PVT. LTD., V.CIT (2000)243 ITR 283 (SC) PARINEE DEV & PROJECT P. LTD., (SS PROP) (WHOLLY OWNED SUBSIDIARY) 3,40,90,339 40,59,09,893 40,15,22,085 3,84,78,147 DEPOSIT FOR ELECTRICITY DEPOSIT MCGM / REL 1,89,938 _ 1,53,900 36,038 INTEREST CHARGED ON INTERCORPORATE LOANS (12%) INEZ INFOTECH PVT. LTD., 3,36,52,906 50,34,999 _ 3,86,87,905 INTEREST IS CHARGED AT12% AND RS.41,07,216/ - IS RECEIVED PARINEE DEVELOPERS PVT. LTD., 35,61,22,009 1,26,04,77,478 4,10,739,838 1,20,58,59,649 INTEREST IS CHARGED AT12% AND RS.8,72,34,409/ - IS RECEIVED P. D.CONSTRUCTION PVT. LTD., 11,09,090 32,29,01,605 9,29,19,000 23,10,91,695 INTEREST IS CHARGED AT12% AND RS.6,90,637/ - IS RECEIVED - TOTAL 1,82,80,24,292 ITA NO.6214 & 6215/2014 & CO.137 & 138/2015 M/S. PARINEE REALTY PVT. LTD., 5 THUS, FROM ABOVE IT IS CLEAR THAT INTEREST IS NOT CHARGED ON RS.2,949,658/ - I. E ADVANCE TO ILDE PVT. LTD (WHOLLY OWNED SUBSIDIARY) AND ON RS.38,478,147/ - LE ADVANCE TO PARINEE DEVELOPERS & PROJECTS PVT. LTD(WHOLLY OWNED SUBSIDIARY) IN BOTH THESE COMPANIES, PARINEE REALTY PVT. LTD IS THE SOLE SHAREHOLDER HOLDING 100 % SHARES OF THE SUBSIDIARIES. THESE ADVANCES ARE GIVEN OUT OF BUSINESS EXPEDIENCY AND FOR THE PURPOSE OF BUSINESS. NO NOTIONAL INTEREST CAN BE ESTIMATED IN SUCH CASES AS HELD IN CASE OF CIT V. PRE MIER INDUSTRIES (2002) 257 ITR 762 (MP) AND V.M.SALGAOCAR & BROS. PVT. LTD. V. CIT (2000) 243 ITR 283 (SC). ALSO, THIS AMOUNT OF LOAN IS FULLY CO VERED BY SHARE CAPITAL OF RS.3,00,00,000/ - AND RESERVES AND SURPLUS OF RS.13 , 23 , 75,239/ - .' 5.3.1. IT IS FURTH ER CONTENDED THAT THE AO HAS COMPUTED AVERAGE RATE OF INTEREST ON THE BALANCE AMOUNT OUTSTANDING AS ON 31/03/10 INSTEAD OF TAKING THE AVERAGE OR ACTUAL BALANCE DURING THE YEAR. AS PER THE COMPUTATION SUBMITTED BY THE APPELLANT, THE AVERAGE RATE OF INTEREST ON LOAN TAKEN IS 11.28% AS COMPARED WITH THE AVERAGE RATE OF INTEREST ON LOAN GIVEN AT 11.20%. THE APPELLANT HAS ALSO RELIED UPON THE JUDGMENT IN THE FOLLOWING CASES: CIT VS RELIANCE UTILITIES AND POWER LTD (2009) 313 ITR 340 WOOLCOMBENS OF INDIA LTD V S. CIT(1982) 134 ITR 209(CAL) EAST INDIA PHARMACEUTICAL. WORKS LTD VS. CIT (1997) 224 ITR 627 S.A. BUILDERS VS. CIT(A) (2007) 288 ITR 1 (SC) CIT V S BANSWARA FABRICS LTD (2004) 267 ITR 398 (RAJ) UCO BANK VS CIT (1999) 237 ITR 889 (SC) CIT VS ASIAN HOTEL S LTD (2010) 323 ITR 490 (DELHI) 5.3. 2. I FIND MERIT IN THE SUBMISSION OF THE APPELLANT THAT THE NO ADDITIONS CAN BE M ADE ON NOTIONAL INCOME ON THE BASIS THAT THE INCOME SHOULD HAVE BEEN EARNED BY THE APPELLANT. THE APPELLANT IS NOT OBLIGED TO CHARGE INT EREST AT A PARTICULAR RATE AND NO ADDITION CAN BE MADE ON THE BASIS THAT SUCH INTEREST WAS NOT CHARGED. THIS IS WELL SETTLED. FOR INSTANCE, IN 199 ITR 702 (GAU) IN THE CASE OF HIGHWAYS CONSTRUCTION CO P LTD, THE HIGH COURT HELD THAT HOW CAN INCOME TAX DEPA RTMENT FIX THE INTEREST THAT MUST BE CHARGED AS DUE. FURTHER, I ALSO FIND THAT THE A O HAS MADE A VERY HURRIED COMPUTATION ON RATE OF INTEREST BY MERELY TAKING THE CLOSING BALANCE OF THE FINANCIAL YEAR INSTEAD OF COMPUTING THE INTEREST RATE BASED ON ACTUAL BALANCES THROUGHOUT THE YEAR. ITA NO.6214 & 6215/2014 & CO.137 & 138/2015 M/S. PARINEE REALTY PVT. LTD., 6 5.3.4. THE APPELLANT HAD SUBMITTED THE DETAILS OF THE NATURE OF ADVANCES AND THE PURPOSE PARTY WISE FOR THE AMOUNTS ADVANCED ON WHICH THE A O HAS HELD THAT THE INTEREST SHOULD HAVE BEEN CHARGED. THE PERUSAL OF THE TABLE EXTRA CTED EARLIER SHOWS THAT THE AMOUNT ADVANCED IS BUSINESS ADVANCES ON WHICH THERE IS NO REQUIREMENT OR BASIS FOR CHARGING OF INTEREST. THESE ARE NOT IN THE NATURE OF LOANS ADVANCED FOR INTEREST. DEPOSITS WITH UTILITY COMPANY AND MUNICIPAL CORPORATION CANNOT GIVE RISE TO INTEREST INCOME. FROM THE DETAILED WORKING FURNISHED IN THE APPELLATE PROCEEDINGS, IT IS SEEN THAT THE APPELLANT HAS TAKEN LOANS AS VEHICLE LOANS ON WHICH THE APPLICABLE RATE OF INTEREST IS 9%. IN ADDITION THE OVERDRAFT FACILITY FROM UNION BA NK OF INDIA, BANK OF INDIA AND TERM LOAN FROM VIJAYA BANK CARRY INTEREST @ OF 13 .2 5%, 13.50%, 14.00% RESPECTIVELY. FROM SIMILAR DETAILS FILED IN RESPECT OF UNSECURED LOANS IT IS SEEN THAT THE INTEREST RATE VARIES FROM 9% TO 18% WITH BULK OF THE LOANS BEING @ OF 12%. THE DETAILS OF LOANS A ND DEPOSITS CONSIDERED BY THE AO IS 'TABULATED BELOW: PURPOSE INTEREST OP. BALANCE ADDITION PAYMENTS BALANCE AS INTEREST RATE AS ON DURING THE F.Y RECD. DURING ON 31.3.2010 RECEIVED 1.4.2009 2009 - 10 THE YEAR DEPOSITS & OTHERS ADVANT HOLDING PVT. LTD FOR PROPERTY 2500,00,000 25,00,00,000 DEPOSIT FOR ALTERNATE ACCOM.(AV) FOR PROPERTY - 25,21,200 11,00,000 10,00,000 26,21,200 DEPOSIT MCGM/REL ELECTRICITY - 1,89,938 1,53,900 36,038 MAN INFRA PROJECTS PVT. LTD., FOR PROPERTY 1,36,00,000 1,36,00,000 INTER CORPORATE ILDE PVT. LTD., (WHOLLY OWNED SUBSIDIARY) 3,37,42,133 74,57,525 3,82,50,000 29,49,658 INEZ INFOTECH PVT. LTD., 12% 3,36,52,906 50,34,999 3,86,87,905 41,07,216 PARINEE DEVELOPERS PVT. LTD., 12% 35,61,22,009 1,26,04,77,478 41,07,39,838 1 ,20,58,59,649 8,72,34,409 PARINEE DEV & PROJ.P.LTD., (SS PROP) 3,40,90,339 40,59,09,893 40,15,22,085 3,84,78,147 P.D.CONSTRUCTION PVT. LTD., 12% 11,09,090 32,29,01,605 9,29,19,000 23,10,91,695 6,90,637 REFUNDABLE DEPOSIT TO MEMBER ITA NO.6214 & 6215/2014 & CO.137 & 138/2015 M/S. PARINEE REALTY PVT. LTD., 7 BELA VIPUL SHAH FOR REDEVELOPMENT OF PROPERTY 64,00,000 64,00,000 DILIP SHAH FOR REDEVELOPMENT OF PROPERTY 64,00,000 64,00,000 HEMAN TILOKANI FOR REDEVELOPMENT OF PROPERTY 20,00,000 20,00,000 KAMLA GOBIND PANJNANI FOR REDEVELOPM ENT OF PROPERTY 62,00,000 62,00,000 NIRALI D SHAH FOR REDEVELOPMENT OF PROPERTY 64,00,000 64,00,000 SAROJ D SHAH FOR REDEVELOPMENT OF PROPERTY 64,00,000 64,00,000 GULACHHANI MANGALDAS AHUJA FOR REDEVELOPMENT OF PROPERTY 45,00 ,000 45,00,000 VIPUL D SHAH HUF FOR REDEVELOPMENT OF PROPERTY 64,00,000 64,00,000 GREEN BIRD CONSTRUCTION PVT. LTD., 12% 34,36,845 TOTAL 1,82,80,24,292 9,54,69,107 A PERUSAL OF THE ABOVE TABLE SHOWS THAT OUT OF A TO TAL OF ADVANCES OF RS 182 CRORES, RS 120 CRORES IS INTER CORPORATE DEPOSIT WITH PARINEE DEVELOPERS PVT. LTD. AND 3.8 CRORES WITH IENZ INFOTECH PVT. LTD FROM WHOM INTEREST HAS BEEN CHARGED @ OF 12%. THE OTHER ADVANCES ARE BUSINESS ADVANCES. THEREFORE, THERE ARE ONLY TWO ADVANCES WHICH ARE TO WHOLLY OWNED SUBSIDIARIES ON WHICH NO INTEREST HAS BEEN CHARGED. THESE ARE ILDE PVT. LTD AND PARINEE DEVELOPMENT AND PROJECTS PVT. LTD. TO WHOM THE CLOSING BALANCE OF ADVANCES WERE RS. 29,00,000/ - AND RS. 3 , 84,00,000 / - R ESPECTIVELY. AS AGAINST THESE ADVANCES, THE INCREASE IN RESERVES AND SURPLUS IS RS. 9.35 CRORES. THUS, APART FROM THE FACT THAT THE APPELLANT CLAIMS THAT THE ADVANCE TO SUBSIDIARY ARE FOR BUSINESS PURPOSES, I ALSO FIND THAT THERE ARE ADEQUATE OWN FUNDS AVA ILABLE WHICH ARE MORE THAN THE AMOUNT ADVANCED TO THE SUBSIDIARIES ON WHICH NO INTEREST HAS BEEN CHARGED. FURTHER IT IS ALSO NOTED THAT IN FACT THERE ARE NO INCREMENTAL ADVANCES TO THESE TWO SUBSIDIARIES DURING THE CURRENT YEAR AND THE BALANCE HAS ACTUALL Y COME DOWN DURING THE YEAR. IN VIEW OF THE RATIO OF CASE LAWS DECISIONS CITED, I HOLD THAT NO ADDITION CAN BE MADE AS NOTIONAL INCOME AND THAT EVEN ON MERITS THERE IS NO CASE FOR COMPUTING INTEREST ON ADVANCES WHICH ARE FOR SPECIFIC BUSINESS PURPOSES. NO INTEREST CAN BE DISALLOWED AS ADVANCED FOR NON BUSINESS PURPOSES. THE ADVANCES TO SUBSIDIARIES HAS NOT GONE UP ITA NO.6214 & 6215/2014 & CO.137 & 138/2015 M/S. PARINEE REALTY PVT. LTD., 8 THIS YEAR AND IN ANY CASE SUCH ADVANCES ARE LESS THAN OWN FUNDS. THE ADDITION MADE BY THE AO IS DELETED . 7. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. FROM THE RECORD WE FOUND THAT ASSESSEE WAS HAVING SUFFICIENT INTEREST FREE FUNDS IN THE NATURE OF SHARES CAPITAL, RESERVE AND SURPLUS AND ADVANCES FOR SALE OF FLATS. SUBSTANTIAL PORTION OF TH E ADVANCES AND DEPOSITS WERE GIVEN PURELY FOR BUSINESS PURPOSE FOR HAVING PROPERTY ON DEVELOPMENT ON WHICH NO INTEREST CAN BE CHARGED. FROM THE RECORD, WE ALSO FOUND THAT FOLLOWING ADVANCES AND DEPOSIT WERE GIVEN PURELY FOR BUSINESS OF PROPERTY DEVELOPMENT AND THUS NO INTEREST CAN BE CHARGED ON THE SAME. NAME OF THE PARTY AMOUNT IN RS. PURPOSE ADWAITS HOLDING PVT. LTD., 25,00,00,000 FOR PROPERTY DEPOSIT FOR ALTERNATE ACCOM(AV) 26,21,200 FOR PROPERTY DEPOSIT MCGM/REL 36,038 ELECTRICITY MAN INFRA PROJECTS PVT. LTD., 1,36,00,000 FOR PROPERTY BELA VIPUL SHAH 64,00,000 FOR REDEVELOPMENT OF PROPERTY DILIP SHAH 64,00,000 FOR REDEVELOPMENT OF PROPERTY HEMAN TILOKANI 20,00,000 FOR REDEVELOPMENT OF PROPERTY KAMLA GOBIND PANJNANI 62,00,000 FOR REDEVELOPMENT OF PROPERTY NIRALI D. SHAH 64,00,000 FOR REDEVELOPMENT OF PROPERTY SAROJ D. SHAH 64,00,000 FOR REDEVELOPMENT OF PROPERTY SULOCHHANI MANGALDAS AHUJA 45,00,000 FOR REDEVELOPMENT OF PROPERTY VIPU L D. SHAH HUF 64,00,000 FOR REDEVELOPMENT OF PROPERTY 8 . WE ALSO FOUND THAT THE ASSESSING OFFICER HAS WRONGLY IN CALCULATING AVERAGE RATE OF INTEREST ON THE BALANCE AMOUNT OUTSTANDING AS AT 31.03.2010 INSTEAD OF TAKING AVERAGE BALANCE DURING THE YEAR. THIS WOULD ITA NO.6214 & 6215/2014 & CO.137 & 138/2015 M/S. PARINEE REALTY PVT. LTD., 9 HAVE CLEARLY SHOWN THAT THE AVERAGE RATE OF INTEREST ON LOAN TAKEN IS SAME AS THAT OF AVERAGE RATE OF INTEREST ON LOAN GIVEN. WE ATTACH HEREWITH A STATEMENT SHOWING AVERAGE RATE OF INTEREST ON OF LOAN TAKEN AND GIVEN. AS PER THIS STATEMEN T THE AVERAGE RATE OF INTEREST ON LOAN TAKEN IS 11.28% AND AVERAGE RATE OF INTEREST ON LOAN GIVEN IS 11.20%. 9 . A DETAILED FINDING HAS BEEN RECORDED BY CIT(A) TO THE EFFECT THAT OUT OF TOTAL ADVANCE OF RS.182 CRORES, 120 CRORES WAS INCORPORATED DEPOSITS WI TH THE PARINI DEVELOPERS LTD., AND RS.3.80 CRORES WITH INEZ INFOTECH PVT. LTD., FROM WHOM INTEREST HAS BEEN CHARGED BY ASSESSEE @12%. THE CIT(A) HAS ALSO OBSERVED THAT OTHER ADVANCES WERE ALSO FOR BUSINESS. THE OTHER TWO ADVANCES WERE FOUND TO BE GIVEN TO WHOLLY OWNED SUBSIDIARIES. AS AGAINST THESE ADVANCES, INCREASE IN RESERVE AND SURPLUS WAS OF RS.9.35 CRORES. THUS, IT WAS FOUND THAT NOT ONLY ADVANCE WAS FOR THE PURPOSE OF BUSINESS BUT ALSO THERE WAS SUFFICIENT OWNED FUNDS AVAILABLE WHICH WAS MORE THAN TH E AMOUNT ADVANCED TO THE SUBSIDIARIES. A FINDING OF FACT HAS ALSO BEEN RECORDED BY THE CIT(A ) TO THE EFFECT THAT THERE IS NO INCREMENTAL ADVANCES TO THESE SUBSIDIARIES DURING THE CURRENT YEAR AND BALANCE ACTUALLY CAME DOWN DURING THE YEAR. 10 . AFTER DISCU SSING VARIOUS FACTS AND FIGURES AND APPLYING THE PROPOSITION OF LAW LAID DOWN BY VARIOUS HIGH COURTS, CIT(A) CAME TO THE CONCLUSION THAT ADVANCES WERE GIVEN OUT OF OWNED FUNDS AND FOR BUSINESS PURPOSES, THEREFORE, NO DISALLOWANCE CAN BE MADE IN RESPECT OF ADVANCES GIVEN FOR THE PURPOSE OF BUSINESS. ITA NO.6214 & 6215/2014 & CO.137 & 138/2015 M/S. PARINEE REALTY PVT. LTD., 10 1 1 . D ETAILED FINDING RECORDED BY CIT(A) AT PARA 5.3.1 TO 5.3.4 HAS NOT BEEN CONTROVERTED, ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS OF THE CIT(A). 12. AO ALSO LEVIED PENALTY U/S. 271(1)( C) WITH RESPECT TO THE ADDITION MADE ON ACCOUNT OF NOTIONAL INTEREST. THE ADDITION SO MADE HA S BEEN DELETED BY CIT(A) AND TRIBUNAL HAVE CONFIRMED THE ORDER OF CIT(A) FOR DELETING THE DISALLOWANCE AS DISCUSSED HEREINABOVE. WHEN THE ADDITION ITSELF DOES NOT SURVIVE THER EFORE, PENALTY ORDER HAS NO LEGS TO STAND. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING THE PENALTY SO IMPOSED. 13. THE CROSS OBJECTIONS FILED BY THE ASSESSEE ARE BASICALLY IN SUPPORT OF THE ORDER OF THE CIT(A) PASSED U/S.1 43(3) AND 271(1)(C). AS WE HAVE ALREADY UPHELD THE ORDER OF CIT(A), THE CROSS OBJECTIONS FILED BY THE ASSESSEE HAVE BECOME INFRUCTUOUS. 14. IN THE RESULT, BOTH THE APPEALS OF THE REVENUE AND CROSS OBJECTIONS ARE DISMISSED. O RDER PRONOUNCED IN THE OPEN COUR T ON THIS 09/11/ 2016 S D/ - ( PAWAN SINGH ) S D/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 09 / 11 /201 6 KARUNA SR. PS COPY OF THE ORDER FORWA RDED TO : 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. ITA NO.6214 & 6215/2014 & CO.137 & 138/2015 M/S. PARINEE REALTY PVT. LTD., 11 BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI //TRUE COPY//