Sh. Sunil Kumar Bansal, Amritsar. V. The Income-tax Officer, Amritsar.

ITA 649/ASR/2014

• Counselvise Citation: [2019] 117 COUNSELVISE.COM (IT) 0009 (ITAT-AMRITSAR)
• Duration Of Justice: 4 year(s) 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-05-2019
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 07-05-2019
• Assessment Year: 2010-2011
• Appeal Filed On: 30-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: PADAM BAHL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AMRITSAR BENCH, AMRITSAR. BEFORE SH. SANJAY ARORA, ACCOUNTANT MEMBER AND SH. N. K. CHOUDHRY, JUDICIAL MEMBER I. T. A. NO. 649/ASR/2014 ASSES SMENT YEAR: 2010-11 SUSHIL KUMAR BANSAL, C/O BANSAL SWEETS, LAWRENCE ROAD, AMRITSAR [PAN: AAMPB 4646D] VS. INCOME TAX OFFICER, WARD 5(4), AMRITSAR (APPELLANT) (RESPONDENT) APPELLANT BY : SH. PADAM BAHL (C.A.) RESPONDENT BY: SH. CHARAN DASS (D.R.) DATE OF HEARING: 07.05.2019 DATE OF PRONOUNCEMENT: 30.05.2019 ORDER PER SANJAY ARORA, AM: THIS IS AN APPEAL BY THE ASSESSEE AGITATING THE ORD ER BY THE COMMISSIONER OF INCOME TAX (APPEALS), AMRITSAR (CIT(A) FOR SHO RT) DATED 26.09.2014, PARTLY ALLOWING THE ASSESSEES APPEAL CONTESTING HIS ASSES SMENT U/S. 143(3) OF THE INCOME TAX ACT, 1961 ('THE ACT' HEREINAFTER) DATED 30.3.20 13 FOR ASSESSMENT YEAR (AY) 2010-11. 2. THE FACTS OF THE CASE, IN-SO-FAR AS ARE RELEVANT , ARE THAT THE ASSESSEE- INDIVIDUAL, DEALING IN SHARES, WAS DURING THE COURS E OF ASSESSMENT PROCEEDINGS, FOUND TO HAVE GIVEN INTEREST-FREE ADVANCES AGGREGAT ING TO RS.70.56 LACS TO DIFFERENT FAMILY MEMBERS, VIZ. SEEMA BANSAL, SHILPA BANSAL AN D SAGAR BANSAL. THAT IS, WITHOUT ANY BUSINESS PURPOSE. THE ASSESSEE HAD, AT THE SAME TIME, INCURRED INTEREST ITA NO. 649/ASR/2014 (AY 2010-11) SUSH IL KUMAR BANSAL V. ITO 2 EXPENDITURE AT RS.10.42 LACS FOR THE RELEVANT YEAR ON LOANS FROM BANSAL SWEETS, CHANDIGARH (RS.3.62 LACS) AND ICICI BANK (RS.6.80 L ACS), CLAIMED DEDUCTIBLE U/S. 36(1)(III) IN THE COMPUTATION OF HIS BUSINESS INCOM E. THE SAME WAS ACCORDINGLY DISALLOWED. THE SAME STOOD CONFIRMED IN APPEAL IN T HE ABSENCE OF THE ASSESSEE SHOWING ANY DIRECT NEXUS BETWEEN THE BORROWED CAPIT AL AND ITS USER FOR BUSINESS PURPOSES. AGGRIEVED, THE ASSESSEE IS IN SECOND APPE AL. 3. DURING HEARING, ADMITTING THE MATTER TO BE PUREL Y FACTUAL, IT WAS SUBMITTED BY THE LD. COUNSEL FOR THE ASSESSEE, SH. BAHL, DRAW ING OUR ATTENTION TO THE BALANCE- SHEET AS AT THE YEAR-END (31.03.2010/PB PGS. 1-7), THAT OUT OF TOTAL UNSECURED LOANS OF RS.217.20 LACS (SCHEDULE C TO THE BALANCE-SHEET) ONLY THAT FROM BANSAL SWEET SHOP (RS.42.77 LACS) IS INTEREST BEARING. THE ASSES SEE, THUS, HAD, AS ON 31/3/2010, AN INTEREST-FREE CAPITAL OF RS.258.63 LACS, AS UNDE R: (AMT. IN RS. LACS) OWN CAPITAL : 84.20 LACS INTEREST-FREE UNSECURED LOANS :174.43 LACS 258.63 LACS AS AGAINST THIS, THE ASSESSEES NET (I.E., NET OF S ECURED LOANS THERE-AGAINST, AT RS. 22.30 LACS) INVESTMENT IN FIXED ASSETS IS AT RS.139 .24 (RS. 161.54 LACS RS. 22.30 LACS) AND INTEREST-FREE LOANS (AT RS.101.09 LACS), IS AT A T OTAL OF RS.240.33 LACS, LEAVING THUS A SURPLUS OF RS.18.30 LACS (RS. 258.63 LACS RS.240.33 LACS) AS ON 31.03.2010. IT IS THIS AMOUNT WHICH TOGETHER WITH I NTEREST-BEARING CAPITAL OF RS.85.42 LACS (ON WHICH THE IMPUGNED INTEREST HAS B EEN PAID) AND A MINOR SUM OF RS.0.08 LACS, BEING EXPENSE PAYABLE), THAT FINANCES THE OTHER ASSETS OF THE COMPANY AS ON 31.03.2010. WE LIST THE SAME FOR READY REFERE NCE AS UNDER: (AMT. IN RS. LACS) INVESTMENT & DEPOSITS : 5.18 ADVANCE & SECURITIES : 82.17 CLOSING STOCK (OF SHARES) : 11.46 ITA NO. 649/ASR/2014 (AY 2010-11) SUSH IL KUMAR BANSAL V. ITO 3 CASH & BANK BALANCES : 04.97 103.78 THERE WAS, ACCORDINGLY, IT WAS URGED, NO SCOPE FOR DISALLOWANCE OF INTEREST, IN THE GIVEN FACTS AND CIRCUMSTANCES OF THE CASE. 4. WE HAVE HEARD THE PARTIES, AND PERUSED THE MATER IAL ON RECORD. NO DOUBT, SOME OF THE ASSETS PURPORTEDLY FINANCED BY INTEREST-BEARING CAPITAL, AS INVESTMENTS (AT RS. 5.18 LACS), EVEN AS OBSERVED BY THE BENCH DURING HEARING, CANNOT BE REGARDED AS BUSINESS ASSETS, BEI NG ONLY THE ASSESSEES PERSONAL INVESTMENTS, SO THAT THE SAME WOULD STAND TO BE REC KONED AS FINANCED BY OWN/ INTEREST-FREE CAPITAL. EVEN THE ENTIRE CASH-IN-HAND (AT RS.5 LACS (APPROX.)) CANNOT BE REGARDED AS ENTIRELY A BUSINESS ASSET, PARTICULARLY CONSIDERING THAT THE ASSESSEE HAS AN OVERDRAFT (OD) LIMIT (FROM ICICI BANK), WHICH IS IN THE NATURE OF A CURRENT ACCOUNT, SO THAT THE EXCESS CASH-IN-HAND, I.E., AS NOT REQUIRED FOR THE BUSINESS FOR THE TIME BEING, COULD BE DEPOSITED IN BANK, REDUCIN G THE INTEREST LIABILITY. IT WOULD BE SURELY A DIFFERENT MATTER WHERE THE SAME IS SHOW N AS HELD FOR BUSINESS PURPOSES. THE ASSESSEES BUSINESS ESTABLISHMENT DOES NOT WARR ANT MAINTENANCE OF CASH-IN- HAND AT THAT LEVEL. BE THAT AS IT MAY BE, THE ASSES SEE HAS A SURPLUS INTEREST-FREE CAPITAL AT RS.18.30 LACS, WHICH THEREFORE WOULD A S UFFICIENT BE ABSORB THESE NON- BUSINESS ASSETS. FURTHER, THE POSITION AS ON 31.03.2009, I.E., THE BEGINNING OF THE CURRENT YEAR, WOULD AGAIN NEED TO BE SIMILARLY EXAMINED, AND THE ADEQUACY (OR OTHERWISE) OF THE INTEREST-FREE CAPITAL THEREAT, RECKONED LIKE-WISE. THIS IS AS THE INTEREST EXPENDITURE ARISES ON THE BASIS OF BORROWED CAPITAL UTILIZED DU RING THE YEAR. THE SAME MAY BE, AS INDEED WOULD BE, VARIABLE FROM TIME TO TIME. THE POSITION AS THE BEGINNING AND END OF THE YEAR, THE TWO TERMINI, BY EXHIBITING THE AVENUE OF THE BORROWED FUNDS THEREAT, ARE INDICATIVE OF THE SAID USER DURING THE YEAR, THOUGH IN CASE OF ANY ITA NO. 649/ASR/2014 (AY 2010-11) SUSH IL KUMAR BANSAL V. ITO 4 CONTRARY INDICATION, A MORE DETAILED ANALYSIS (OF T HE FUND POSITION AS OBTAINING DURING THE YEAR) MAY HAVE TO BE DONE. REFERENCE IN THIS REGARD MAY ALSO BE MADE TO A RECENT ORDER BY THE TRIBUNAL IN SUNIL GROVER V. ASST. CIT (ITA NO. 97/ASR/2017, DATED 20/3/2019). A QUICK BROWSE OF TH E BALANCE-SHEET (AS AT 31/3/2010) IN THE INSTANT CASE REVEALS THE ACCRETIO N TO THE CAPITAL DURING THE YEAR TO BE AT RS.6.51 LACS (SCH. A). THE SAME IS LOWER THAN THE SURPLUS AS AT 31.03.2010. THOUGH, SURE, A PRECISE AND DEFINITE FINDING COULD BE ISSUED ONLY AFTER EXAMINING THE BALANCE-SHEET AS AT 31.03.2009, THE INFERENCE T HAT ARISES IS ONE OF ADEQUACY OF INTEREST-FREE CAPITAL AS AT THE BEGINNING OF THE YE AR AS WELL. NO ADVERSE CIRCUMSTANCE IS OBSERVED. NO DISALLOWANCE OF INTERE ST IS, UNDER THE CIRCUMSTANCES, CALLED FOR. THE LD. CIT(A) HAS CONFIRMED THE DISALLOWANCE IN P RINCIPLE, THOUGH ALLOWED PART RELIEF ON THE BASIS THAT THE SAME BE WORKED OU T ON THE NON-BUSINESS USER OF CAPITAL, I.E., RS. 70.56 LACS, AND NOT WITH REFEREN CE TO THE ENTIRE INTEREST, DISALLOWED IN FULL AT RS. 10.42 LACS. WE ARE IN AGREEMENT WITH THE SUBSTANCE OF HIS DECISION, I.E., THAT THE ONUS TO ESTABLISH THE USER OF THE BO RROWED CAPITAL DURING THE RELEVANT YEAR FOR BUSINESS PURPOSES, ENTITLING IT FOR DEDUCT ION U/S. 36(1)(III), IS ON THE ASSESSEE. NO ANALYSIS OF THE FUND POSITION, EVEN AS THE MATTER IS PRIMARILY FACTUAL, HAS HOWEVER BEEN CARRIED OUT AT ANY STAGE. THE RELI EF ALLOWED BY US IS ON SUCH AN EXERCISE, CARRIED OUT ON THE BASIS OF THE MATERIAL ON RECORD. WE DECIDE ACCORDINGLY. 5. IN THE RESULT, THE ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON MAY 30, 2019 SD/- SD/- (N. K. CHOUDHRY) (SANJAY ARORA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATE: 30.05.2019 ITA NO. 649/ASR/2014 (AY 2010-11) SUSH IL KUMAR BANSAL V. ITO 5 /GP/SR/ PS. COPY OF THE ORDER FORWARDED TO: (1) THE APPELLANT: SUSHIL KUMAR BANSAL, C/O BANSAL SWEE TS, LAWRENCE ROAD, AMRITSAR (2) THE RESPONDENT: INCOME TAX OFFICER, WARD 5( 4), AMRITSAR (3) THE CIT(APPEALS), AMRITSAR (4) THE CIT CONCERNED (5) THE SR. DR, I.T.A.T. TRUE COPY BY ORDER