DCIT CIR 6(1), MUMBAI V. BLUE FOODS P.LTD, MUMBAI

ITA 637/MUM/2014

• Counselvise Citation: [2018] 126 COUNSELVISE.COM (IT) 0633 (ITAT-MUMBAI)
• Duration Of Justice: 4 year(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-02-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 27-01-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: T A KHAN
• Keywords: Proportionate interest; Notional interest
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUM BAI BEFORE SHRI B.R.BASKARAN, ACCOUNTANT MEMBER AND SHRI PAWAN SINGH JUDICIAL MEMBER ITA NO.637/MUM/2014 (AY 2008-09) DCIT, CIR-6(1), R.NO. 506, 5 TH FLOOR, AAYAKAR BHAVAN, M.K. ROAD, MUMBAI-400020. VERSUS M/S BLUE FOODS PVT. LTD. RASHID MANSION, WORLI POINT, WORLI, MUMBAI-400018. PAN NO.AABCB4617L APPLICANT RESPONDENT APPLICANT BY SHRI T.A. KHAN (DR) RESPONDENT BY SHRI JAYESH DADIA (AR) DATE OF HEARING: 31/01/2018 DATE OF ORDER: 09/02/2018 ORDER PER PAWAN SINGH, JUDICIAL MEMBER : 1. THIS APPEAL BY REVENUE UNDER SECTION 253 OF THE INC OME TAX ACT (THE ACT) IS DIRECTED AGAINST THE ORDER OF LD. CIT(A)-14, MUMBAI DATED 04.11.2013 FOR ASSESSMENT YEAR (AY) 2008-09. THE REVENUE HAS RAISE D THE FOLLOWING GROUNDS OF APPEAL: 1.'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE ADDITIONS OF RS.1, 43,535/- MADE BY A.O ON ACCOUNT OF UNACCOUNTED RECEIPT FROM M/S. CREATIVE M IND BY HOLDING THAT THE SAME RECEIPT HAS BEEN SHOWN FROM M/S. YASHRAJ FILMS WHICH HAS BEEN ACCOUNTED FOR BY ADMITTING FRESH EVIDENCE IN VIOLATION OF RUL E 46A OF I.T. RULES WITHOUT GIVING REASONABLE OPPORTUNITY TO THE A.O TO VERIFY THE ASSESSEE'S CLAIM'. 2.'WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) HAS ERRED IN DELETING THE DISALLOWANCE OF RS .73,94,785/- MADE BY THE AO U/S.36(1)(III) ON ACCOUNT OF ADVANCE GIVEN BY THE A SSESSEE TO ITS ASSOCIATE M/S. PAN INDIA FOOD SOLUTIONS P. LTD., IGNORING THE FACT THAT THE ASSESSEE HAS FAILED 2 ITA NO. 637/M/14- M/S BLUE FOODS PVT. LTD. TO PROVE DURING THE COURSE OF ASSESSMENT PROCEEDING S EXISTENCE OF ANY 'BUSINESS EXPEDIENCY' FOR MAKING THIS ADVANCE TO M/S.PAN INDI A FOOD SOLUTIONS P. LTD'. 3. 'THE APPELLANT PRAYS THAT THE ORDER OF CIT(A) ON THE ABOVE GROUNDS BE SET ASIDE TO THE FILE OF AO OR CONFIRM THE ORDER OF THE AO. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS EN GAGED IN THE BUSINESS OF SERVICE SECTOR-HOSPITALITY SERVICES, FILED ITS RETURN OF IN COME FOR RELEVANT AY ON 30.09.2008 DECLARING INCOME OF RS. (-)13,96,47,682 /-. THE ASSESSMENT WAS COMPLETED ON 30.12.2010 UNDER SECTION 143(3) OF THE ACT. THE ASSESSING OFFICER (AO) WHILE PASSING ASSESSMENT ORDER BESIDES THE OTH ER ADDITIONS AND DISALLOWANCE, MADE ADDITION OF RS. 1,43,535/- ON AC COUNT OF UNEXPLAINED RECEIPT AND DISALLOWED INTEREST EXPENSES OF RS. 73,94,785/- UNDER SECTION 36(1)(III). ON APPEAL BEFORE THE LD. CIT(A), BOTH THE ADDITIONS/DI SALLOWANCE WAS DELETED. THUS, AGGRIEVED BY THE ORDER OF LD. CIT(A), THE REVENUE H AS FILED APPEAL BEFORE US. 3. WE HAVE HEARD THE LD. DEPARTMENTAL REPRESENTATIVE ( DR) FOR THE REVENUE AND LD. AUTHORISED REPRESENTATIVE (AR) OF THE ASSESSEE AND PERUSED THE MATERIAL AVAILABLE ON RECORD. THE LD. DR FOR THE REVENUE ARG UED THAT DURING THE ASSESSMENT, THE AO NOTED THAT ASSESSEE RECEIVED PAY MENT OF RS. 1,43,535/- FROM CREATIVE MIND ON 16.04.2007 BEING CONTRACT PAYMENT ON WHICH TDS WAS MADE BY THE PAYER. THE ASSESSEE HAS NOT SHOWN THE DETAIL S OF SUCH INCOME, THE ASSESSEE ASKED TO EXPLAIN AND RECONCILE THE DISCREPANCIES. T HE ASSESSEE FAILED TO EXPLAIN THE RECEIPT AND TO RECONCILE. HENCE, THE AO MADE TH E ADDITION OF RS. 1,43,535/-. THE LD. CIT(A) ADMITTED THE EVIDENCES ALLEGEDLY FUR NISHED DURING THE FIRST APPELLATE STAGE WITHOUT GIVING OPPORTUNITY TO THE A O. ON THE CONTRARY, THE LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A ). IT WAS FURTHER SUBMITTED 3 ITA NO. 637/M/14- M/S BLUE FOODS PVT. LTD. THAT ALL THE INCOME HAS BEEN RECORDED IN THE BOOKS OF ACCOUNT OF ASSESSEE. THE LD AR FOR THE ASSESSEE SUBMITS THAT THE SAID INCOME IS SHOWN AS INCOME FROM YASH RAJ FILMS. THE ASSESSEE HAS FILED THE COPY OF BOOK S OF ACCOUNTS OF M/S. YASHRAJ FILMS. 4. WE HAVE CONSIDERED THE SUBMISSION OF BOTH THE PARTI ES. WE HAVE NOTED THAT AO MADE THE ADDITION IN ABSENCE OF PROPER EXPLANATION AND EVIDENCE BY THE ASSESSEE. FURTHER, WE HAVE NOTED THAT THE LD. CIT(A) DELETED THE ADDITION ON THE BASIS OF COPIES OF ENTRY REFLECTED IN THE ACCOUNTS OF M/S. YASHRAJ FILMS. WE HAVE NOTED THAT NO OPPORTUNITY WAS GIVEN TO THE AO FOR VERIFIC ATION OF EVIDENCES FURNISHED DURING THE FIRST APPELLATE STAGE. CONSIDERING THE F ACT OF THE CASE, THIS GROUND OF APPEAL IS RESTORED TO THE FILE OF AO TO VERIFY THE FACT AND GRANT THE APPROPRIATE RELIEF, IF THE SAME IS FINDING IN CONSONANCE WITH T HE BOOKS OF THE ASSESSEE. 5. IN THE RESULT, GROUND OF APPEAL RAISED BY REVENUE I S ALLOWED FOR STATISTICAL PURPOSE. 6. GROUND NO.2 RELATES TO DELETING THE DISALLOWANCE OF RS. 73,94,785/- UNDER SECTION 36(1)(III) OF THE ACT. THE LD. DR FOR THE REVENUE S UPPORTED THE ORDER OF AO. IT WAS SUBMITTED THAT AO MADE THE DISALLOWANCE OF INTE REST HOLDING THAT ASSESSEE HAS GIVEN INTEREST FREE LOAN AND ADVANCES TO PAN IN DIA FOOD SOLUTIONS PVT. LTD. FOR RS. 6,16,23,212/- WHILE THE ASSESSEE-COMPANY HA S TAKEN UNSECURED LOAN OF RS. 29.24 CRORE AND SECURED LOAN OF RS. 15.83 CRORE ON WHICH THE ASSESSEE HAD PAID INTEREST. THE AO THEREFORE, DISALLOWED THE PRO PORTIONATE INTEREST ON UNSECURED LOAN @ 12%. ON THE OTHER HAND, THE LD. AR OF THE ASSESSEE SUPPORTED THE ORDER OF LD. CIT(A). IT WAS SUBMITTED THAT ASSE SSEE HAS NOT GIVEN LOAN TO PAN INDIA FOOD SOLUTIONS PVT. LTD., RATHER ADVANCE WAS GIVEN AND SUBSEQUENTLY THE 4 ITA NO. 637/M/14- M/S BLUE FOODS PVT. LTD. ENTIRE MONEY WAS RECOVERED. THE ASSESSEE HAS SOLD G OODS TO PAN INDIA FOOD SOLUTIONS PVT. LTD. IN SUBSEQUENT YEAR. THUS, IT WA S A BUSINESS TRANSACTION AND NOT IN THE NATURE OF ADVANCE OR LOAN. 7. WE HAVE CONSIDERED THE RIVAL SUBMISSION OF BOTH THE PARTIES AND PERUSED THE RECORD. DURING THE ASSESSMENT, THE AO AS TO WHY AFT ER PERUSAL OF PROFIT & LOSS ACCOUNT TOOK THE VIEWS THAT ASSESSEE HAS GIVEN INTE REST FREE LOAN AND ADVANCES TO PAN INDIA FOOD SOLUTIONS PVT. LTD. FOR RS. 6.16 CRO RE. THE ASSESSEE WAS ASKED TO EXPLAIN AS TO WHY PROPORTIONATE INTEREST SHOULD NOT BE DISALLOWED. AS THE ASSESSEE HAS DIVERTED INTEREST BEARING FUND TO INTE REST FREE LOAN AND ADVANCES. THE ASSESSEE FILED ITS REPLY AND CONTENDED THAT COMPANY IS SELLING MATERIAL TO PAN INDIA FOOD SOLUTIONS PVT. LTD. AND SAME IS DEBTORS FOR FOOD AND EXPENSES. HOWEVER, THE AMOUNT HAS BEEN RECOVERED FROM PAN IND IA FOOD SOLUTIONS PVT. LTD. IN SUBSEQUENT FINANCIAL YEAR. THE ASSESSEES C ONTENTION WAS NOT ACCEPTED BY AO. THE AO DISALLOWED THE PROPORTIONATE INTEREST @ 12% ON ADVANCES OF RS. 6.16 CRORE. BEFORE THE LD. CIT(A), THE SAME CONTENT ION WAS URGED BY THE ASSESSEE. THE LD. CIT(A) ON HER OBSERVATION THAT PA N INDIA FOOD SOLUTIONS PVT. LTD. IS DEBTOR OF THE ASSESSEE AND THERE IS RUNNING ACCOUNT WITH THE ASSESSEE FOR ITS BUSINESS. THE AMOUNT IS NOT IN THE NATURE OF LO AN AND ADVANCES. THUS, NO NOTIONAL INTEREST CAN BE DISALLOWED. THE LD. CIT(A) CONCLUDED THAT THE OBSERVATION OF AO REGARDING DIVERSION OF INTEREST B EARING FUND IS DEVOID ON MERIT AND DELETED THE DISALLOWANCE. THE LD. DR FOR THE RE VENUE COULD NOT BRING ANY MATERIAL TO OUR NOTICE TO TAKE A CONTRARY VIEW. NO CONTRARY LAW IS BROUGHT TO OUR NOTICE. THUS, WE DO NOT FIND ANY ILLEGALITY OR INFI RMITY IN THE ORDER OF LD. CIT(A). HENCE, THIS GROUND OF APPEAL IS DISMISSED. 5 ITA NO. 637/M/14- M/S BLUE FOODS PVT. LTD. 8. IN THE RESULT, APPEAL OF THE REVENUE IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE OPEN COURT ON THI S 9 TH FEBRUARY 2018 SD- SD- (B.R.BASKARAN) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI; DATED 09/02/2018 S.K.PS / COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT.REGISTRAR) ITAT (MUMBAI) 1. THE APPELLANT 2. THE RESPONDENT. 3. THE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE.