M/s Citimates Builders & Promotors P.Ltd, New Delhi V. DCIT, Dehradun

ITA 6326/DEL/2015

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 3757 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 11 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC 1
• Next Hearing Date: 04-05-2016
• Assessment Year: 2008-2009
• Appeal Filed On: 30-11-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 153A; 132; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH: B NEW DELHI BEFORE SHRI G.D. AGRAWAL, HONBLE PRESIDENT AND SHRI SUDHANSHU SRIVASTAVA, JUDICIAL MEMBER ITA NO. 6326/DEL /2015 ASSESSMENT YEAR: 2008-09 M/S CITIMATES BUILDERS & PROMOTERS (P) LTD., C-389 (GF), DEFENCE COLONY, NEW DELHI-110024 (PAN: AABCC6369G) VS DCIT, CENTRAL CIRCLE, DEHRADUN. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ROHIT TIWARI, ADV. RESPONDENT BY: MS RACHNA SINGH, CIT DR DATE OF HEARING : 23.10.2017 DATE OF PRONOUNCEMENT: 31.10.2017 ORDER PER SUDHANSHU SRIVASTAVA, J.M. THIS APPEAL HAS BEEN PREFERRED BY THE ASSESSEE AGAINST THE ORDER PASSED BY THE LD. CIT(A), DEHRADUN FOR ASSESS MENT YEAR 2008-09. 2. THE FACTS OF THE CASE ARE THAT THE ASSESSEE IS IN THE BUSINESS OF CONSTRUCTION AND DEVELOPMENT OF PROPERTIES UNDER COLLABORATION WHICH ARE SOLD AFTER COMPLETION. THE RE WAS A ITA NO. 6326/DEL/2015 ASSESSMENT YEAR 2008-09 2 SEARCH U/S 132 OF THE INCOME TAX ACT, 1961 IN THE B USINESS AND RESIDENTIAL PREMISES OF THE ASSESSEE IN M.L. JUYAL GROUP OF CASES AND IN RESPONSE TO NOTICE ISSUED U/S 153A OF THE AC T, THE RETURN DECLARING INCOME OF RS.4,71,247/- WAS FILED. DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER OB SERVED THAT THE ASSESSEE COMPANY HAD GIVEN INTEREST FREE LOANS TO ITS SISTER CONCERN M/S DREAMLANDS DEVELOPERS AND BUILDERS PVT. LTD. BY ROUTING IT THROUGH THE ACCOUNTS OF ITS DIRECTORS AN D SHAREHOLDERS. IT WAS OBSERVED THAT AN AMOUNT OF RS. 42,94,000/- W AS ROUTED THROUGH THE ACCOUNTS OF ITS SHAREHOLDER SMT. HARBAN S KAUR AND RS. 37,60,000/- WAS GIVEN AS INTEREST FREE LOAN DIR ECTLY TO THE COMPANY M/S DREAMLANDS DEVELOPERS AND BUILDERS PVT. LTD. THE ASSESSING OFFICER FURTHER NOTED THAT THE ASSESSEE H AD PAID INTEREST @12% ON ADVANCES TAKEN FROM OTHER PARTIES INCLUDING ITS SHAREHOLDERS AND HAD CLAIMED INTEREST EXPENSES OF R S. 4,35,768/-. THE ASSESSING OFFICER FURTHER OBSERVED THAT THE COMPANY WAS TAKING ADVANCES AT A HIGH RATE OF INTER EST AND GIVING IT FREE OF INTEREST TO M/S DREAMLANDS DEVELO PERS AND BUILDERS PVT. LTD. WITHOUT HAVING ANY BUSINESS EXIG ENCIES. THE ASSESSING OFFICER PROCEEDED TO DISALLOW AN AMOUNT O F RS. 4,35,768/- AS INTEREST EXPENSES. THE ASSESSEE PREF ERRED AN ITA NO. 6326/DEL/2015 ASSESSMENT YEAR 2008-09 3 APPEAL BEFORE THE LD. FIRST APPELLATE AUTHORITY WHO RESTRICTED THE DISALLOWANCE TO RS. 71,698/- AND NOW THE ASSESSEE H AS CHALLENGED THE SUSTENANCE OF DISALLOWANCE OF RS. 71 ,698/- BEFORE THE ITAT. 3. THE LD. AR SUBMITTED THAT THE PROVISIONS OF SE CTION 36(1)(III) WERE INCORRECTLY INVOKED AS THE ASSESSEE COMPANY HA D NOT GIVEN ANY AMOUNT DIRECTLY TO M/S DREAMLANDS DEVELOPERS AN D BUILDERS PVT. LTD. DURING THE YEAR UNDER APPEAL. IT WAS SUB MITTED THAT THE MONEY ADVANCED TO M/S DREAMLANDS DEVELOPERS AND BUI LDERS PVT. LTD. WAS AN ADVANCE GIVEN FOR THE PURCHASE OF PROPERTY IN DEFENCE COLONY, DELHI BUT SINCE THE COMPANY COULD N OT ARRANGE REMAINING FINANCES, THE AMOUNT WAS SUBSEQUENTLY REF UNDED BACK BY M/S DREAMLANDS DEVELOPERS AND BUILDERS PVT. LTD. IN TWO INSTALMENTS. IT WAS FURTHER SUBMITTED THAT SINCE T HIS WAS NOT A LOAN BUT AN ADVANCE, NO INTEREST WAS CHARGED. IT W AS SUBMITTED THAT SINCE THE ADVANCE PERTAINED TO THE BUSINESS TR ANSACTION, THE INTEREST WAS DISALLOWED ERRONEOUSLY AND THE LD. CIT (A) HAD ALSO ERRED IN SUSTAINING THE SAME. 4. IN RESPONSE, THE LD. CIT DR SUPPORTED THE ORDE RS OF THE LD. CIT(A) AND VEHEMENTLY ARGUED THAT SINCE M/S DREAMLA NDS DEVELOPERS AND BUILDERS PVT. LTD. WAS RELATED TO TH E ASSESSEE ITA NO. 6326/DEL/2015 ASSESSMENT YEAR 2008-09 4 COMPANY, SOME SORT OF BENEFIT HAD ACCRUED TO THE FO RMER AND, THEREFORE, INTEREST DISALLOWANCE WAS IN ORDER. IT WAS PRAYED THAT THE DISALLOWANCE SUSTAINED MAY BE UPHELD. 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. A PERUSAL OF THE ORDE R OF THE LD. CIT(A) SHOWS THAT HE HAS PROCEEDED ON AN PRESUMPTIO N THAT THE ADVANCE GIVEN TO M/S DREAMLANDS DEVELOPERS AND BUIL DERS PVT. LTD. APPEARS TO HAVE BEEN CREDIT EXTENDED TO ITS SI STER CONCERN. THE LD. CIT(A) HAS ALSO NOTED THAT SINCE THE ASSESS EE COMPANY WAS ALSO IN THE BUSINESS OF MONEY LENDING, IT WAS E XPECTED THAT ANY FAVOUR EXTENDED TO ANY OTHER CONCERN BY WAY OF CREDIT WOULD BE AT THE STANDARD RATE OF INTEREST THAT IT WAS CHA RGING FROM OTHER PARTIES. HOWEVER, THIS OBSERVATION OF THE LD. CIT( A) IS APPARENTLY BASED ON ASSUMPTIONS AND THE CLAIM OF THE ASSESSEE THAT THIS MONEY WAS AN ADVANCE GIVEN FOR THE PURPOSE OF PROPE RTY HAS NOT BEEN REFUTED BY THE LD. CIT(A). WE ARE OF THE CONS IDERED OPINION THAT SINCE THE ASSESSEE COMPANY IS IN THE BUSINESS OF CONSTRUCTION AND DEVELOPMENT OF PROPERTIES AND ALSO OF SELLING PROPERTIES AND THE AMOUNT WAS ADVANCED FOR PURCHASE OF PROPERTY, THE SAME WOULD DEFINITELY FALL UNDER THE DEFINITION OF BUSINESS PURPOSES. THEREFORE, WE ARE UNABLE TO A GREE WITH THE ITA NO. 6326/DEL/2015 ASSESSMENT YEAR 2008-09 5 OBSERVATIONS OF THE LD. CIT(A) AND WE SET ASIDE HIS ORDER AND DIRECT THE ASSESSING OFFICER TO DELETE THE REMAININ G DISALLOWANCE OF RS. 71,698/-. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE STANDS ALLOWED. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2017. SD/- SD/- (G.D. AGRAWAL) (SUDHANSHU SRIVASTAVA) PRESIDENT JUDICIAL MEMBER DATED: 31 ST OCTOBER, 2017 GS COPY FORWARDED TO: 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT TRUE COPY BY ORDER ASSISTANT REGI STRAR