Connaught Plaza Restaurants Pvt. Ltd., New Delhi V. ACIT, New Delhi

ITA 6271/DEL/2013

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 6691 (ITAT-DELHI)
• Duration Of Justice: 2 year(s) 11 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 15-11-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 15-11-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 26-11-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: TEJASVI JAIN
• Keywords: Proportionate interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCHES : B : NEW DELHI BEFORE SHRI R.S. SYAL, ACCOUNTANT MEMBER AND SHRI KULDIP SINGH, JUDICIAL MEMBER ITA NO.6271/DEL/2013 ASSESSMENT YEAR : 2009-10 CONNAUGHT PLAZA RESTAURANTS PVT. LTD., 13-A, JOR BAGH MARKET, NEW DELHI. PAN: AAACC1201E VS. ACIT, CIRCLE-3(1), NEW DELHI. (APPELLANT) (RESPONDENT) ASSESSEE BY : MS TEJASVI JAIN, CA DEPARTMENT BY : MS RACHNA SINGH, CIT, DR DATE OF HEARING : 15.11.2016 DATE OF PRONOUNCEMENT : 16.11.2016 ORDER PER R.S. SYAL, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER PASSED BY THE CIT(A) ON 30.9.2013 IN RELATION TO THE ASSESSME NT YEAR 2009-10. ITA NO.6271 /DEL/2013 2 2. THE ONLY ISSUE RAISED IN THIS APPEAL IS AGAINST THE CONFIRMATION OF DISALLOWANCE OF INTEREST U/S 36(1)(III) OF THE INCO ME-TAX ACT, 1961 (HEREINAFTER ALSO CALLED `THE ACT) TO THE EXTENT O F RS.36 LAC. 3. BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT T HE ASSESSEE COMPANY MADE INTEREST FREE LOAN AMOUNTING TO RS.4 CRORE TO SHRI VIKRAM BAKSHI. IT WAS NOTICED BY THE AO THAT THE ASSESSEE CLAIMED INT EREST EXPENDITURE OF RS.13.81 CRORE. IT WAS SEEN THAT ON THE ONE HAND, THE ASSESSEE HAD OBTAINED INTEREST BEARING FUNDS AND, ON THE OTHER H AND, IT GAVE INTEREST FREE LOAN TO ITS DIRECTOR. ON BEING CALLED UPON TO EXPL AIN AS TO WHY THE DISALLOWANCE OF PROPORTIONATE INTEREST BE NOT MADE, THE ASSESSEE SUBMITTED THAT IT WAS RUNNING ONE OF ITS RESTAURANTS UNDER OP ERATING LEASE FROM SECTOR 18, NOIDA, UP. THE ASSESSEE INITIATED PURCHASE OF BUILDING ON LEASEHOLD BASIS FROM M/S VIKRAM BAKSHI & CO. PVT. LTD. THE CO NSIDERATION WAS AGREED AT RS.4.40 CRORE AND AN ADVANCE OF RS.4 CROR E WAS GIVEN. THE BALANCE OF RS.40 LAC WAS PAYABLE ONLY ON THE TRANSF ER OF PROPERTY UP TO WHICH DATE THE UNDERLYING LEASE WAS TO CONTINUE. D UE TO THE DELAY ON THE PART OF THE NOIDA AUTHORITY IN APPROVING THE TRANSF ER IN THE NAME OF THE ITA NO.6271 /DEL/2013 3 ASSESSEE WHICH WAS REQUIRED AS PER THE ORIGINAL LEA SE AGREEMENT WITH THE AUTHORITY, THE EXECUTION OF SALE DEED WAS PENDING. IT WAS, FURTHER SUBMITTED THAT THE ADVANCE WAS MADE FOR THE PURCHAS E OF NOIDA PROPERTY FOR RUNNING ITS RESTAURANT THEREFROM. THE AO DID N OT ACCEPT THE ASSESSEES CONTENTION BY NOTICING THAT IT HAD NOT FILED ANY DO CUMENTARY EVIDENCE FROM WHERE IT COULD BE ASCERTAINED THAT THE ADVANCE WAS GIVEN FOR THE PURPOSE OF BUSINESS. RELYING ON CERTAIN DECISIONS, HE MADE AN ADDITION OF RS.64 LAC BY APPLYING INTEREST RATE OF 16% ON ADVAN CE OF RS.4 CRORE. THE LD. CIT(A) RESTRICTED THIS ADDITION TO RS.36 LAC BY REDUCING INTEREST RATE TO 9% ON RS.4 CRORE. THE ASSESSEE IS AGGRIEVED AGAINST THE SUSTENANCE OF ADDITION TO THIS EXTENT. 4. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE RELEVANT MATERIAL ON RECORD. THE LD. AR RELIED ON AN APPLIC ATION FOR TRANSFER OF PROPERTY DATED 21.9.2005 MADE IN FAVOUR OF THE ASSE SSEE, A COPY OF WHICH IS AVAILABLE AT PAGE 197 TO 202 OF THE PAPER BOOK. THE LD. AR ALSO PLACED RELIANCE ON AGREEMENT TO SELL DATED 22.7.2002 ENTER ED INTO BETWEEN M/S VIKRAM BAKSHI & CO. PVT. LTD. AND THE ASSESSEE IN S UPPORT OF THE ITA NO.6271 /DEL/2013 4 CONTENTION THAT THE AGREEMENT FOR THE TRANSFER OF P ROPERTY IN FAVOUR OF THE COMPANY WAS ENTERED INTO IN THE YEAR 2002 WHICH DID NOT MATERIALIZE BECAUSE OF THE INACTION ON THE PART OF THE NOIDA AU THORITY. OUR ATTENTION WAS ALSO DRAWN TOWARDS OTHER CORRESPONDENCE WITH TH E NOIDA AUTHORITY. IN THE LIGHT OF THE ABOVE MATERIAL, IT WAS CONTENDE D THAT SINCE THE ADVANCE OF RS.4.00 CRORE WAS GIVEN FOR BUSINESS PURPOSE, TH ERE WAS NO NEED TO MAKE ANY DISALLOWANCE OF INTEREST. IN THE OPPOSITIO N, THE LD. DR STRONGLY URGED THAT THESE DOCUMENTS WERE NOT BEFORE THE AUTH ORITIES BELOW. WE FIND FROM THE ASSESSEES PAPER BOOK THAT THE DOCUME NTS STARTING FROM PAGE 99 UP TO PAGE 206 WERE NOT BEFORE THE AO OR CIT(A). SINCE THESE DOCUMENTS ARE OF IMMENSE RELEVANCE IN DECIDING THE CONTROVERSY, WHICH WERE ADMITTEDLY NOT BEFORE THE AUTHORITIES BELOW, W E ARE OF THE CONSIDERED OPINION THAT THE ENDS OF JUSTICE WOULD MEET ADEQUAT ELY IF THE IMPUGNED ORDER IS SET ASIDE AND THE MATTER IS RESTORED TO TH E FILE OF THE AO. WE ORDER ACCORDINGLY AND DIRECT HIM TO DECIDE THIS ISSUE AFR ESH AS PER LAW, AFTER ALLOWING ADEQUATE OPPORTUNITY OF HEARING TO THE ASS ESSEE. ITA NO.6271 /DEL/2013 5 5. IN THE RESULT, THE APPEAL IS ALLOWED FOR STAT ISTICAL PURPOSES. THE ORDER PRONOUNCED IN THE OPEN COURT ON 16.11.20 16. SD/- SD/- [KULDIP SINGH] [R.S. SYAL] JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, 16 TH NOVEMBER, 2016. DK COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. DR, ITAT AR, ITAT, NEW DELHI.