DCIT, Cir-22, Kolkata, Kolkata V. Shri Dilip Chand Kankaria, Kolkata

ITA 649/KOL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 5893 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 3 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2018
• Appeal Filed By: Department
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2011-2012
• Appeal Filed On: 05-04-2017
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: ARINDAM BHATTACHARJEE CIT LD
• Assessee Lawyers: T VARKEY J M
• Keywords: Business expenditure; Commercial expediency
• Section: 143(3); 37; 154

Judgement Text

1 ITA NO.649/KOL/2017 CO NO. 51/KOL/2017 DILIP CHAND KANKARIA IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH D, KOLKATA (BEFORE SHRI ABY. T. VARKEY, J.M. & DR.A.L.SAINI, A.M.) ITA NO. 649/KOL/2017 : A.Y : 2011-12 D.C.I.T, CIRCLE-22, KOLKATA VS DILIP CHAND KANKARIA PAN: AJXPK5793Q (ASSESSEE) (RESPONDENT) C.O NO. 51/KOL/2017 [A/O ITA NO. 649/KOL/2017 : A.Y : 2011-12] DILIP CHAND KANKARIA PAN: AJXPK5793Q VS D.C.I.T, CIRCLE-22, KOLKATA (ASSESSEE) (RESPONDENT) DEPARTMENT BY: SHRI: ARINDAM BHATTACHARJEE, ADDL. CIT, LD.DR ASSESSEE BY: SHRI SUB ASH AGARWAL, ADVOCATE, LD.AR DATE OF HEARING : 23-05-2018 DATE OF PRONOUNCEMENT :- 25-07-2018 ORDER PER DR. A.L.SAINI, A.M .: THE CAPTIONED APPEAL FILED BY THE REVENUE AND CROSS OBJECTION FILED BY THE ASSESSEE, PERTAINING TO ASSESSMENT YEAR 2011-12, AR E DIRECTED AGAINST THE ORDER PASSED BY THE COMMISSIONER OF INCOME-TAX (APPEALS)- 6, KOL KATA IN APPEAL NO. 90/CIT(A)-6/KOL/2014-15, DATED 20-01-2017, WHICH I N TURN ARISE OUT OF AN ORDER PASSED BY THE ASSESSING OFFICER U/S. 143(3) OF THE INCOME-TAX ACT, 1961 (IN SHORT, THE ACT), DATED 29-03-2014. 2 ITA NO.649/KOL/2017 CO NO. 51/KOL/2017 DILIP CHAND KANKARIA 2. THE GRIEVANCES RAISED BY THE REVENUE ARE AS FOLL OWS:- I). ON THE FACTS AND CIRCUMSTANCES OF THIS CASE TH E LD. CIT(A) HAS ERRED IN ALLOWING THE INTEREST ON LOAN AS NOT BEING ESTABLIS HED TO HAVE BEEN USED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF THE BUSINESS. II) ON THE FACTS AND CIRCUMSTANCES OF THIS CASE, TH E ASSESSEE FAILED TO ESTABLISH THE RENDERING OF SERVICES BY THE BROKERS AND SO LD. CIT (A) OUGHT TO HAVE CONFIRMED THE DISALLOWANCE OF RS.16,57,607/- FOR BROKERAGE ON LOAN. 3. THE GRIEVANCES RAISED BY THE ASSESSEE IN CROSS O BJECTIONS, ARE AS FOLLOWS:- 1. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE TO THE EX TENT OF RS. 54,61, 737/- OUT OF THE TOTAL DISALLOWANCE OF RS. 1,40,86,389/- MADE BY THE AO UNDER THE HEAD INTEREST EXPENDITURE. 2. FOR THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) WAS NOT JUSTIFIED IN CONFIRMING THE DISALLOWANCE TO THE EXT ENT OF RS. 10,49,713/- RELATING TO BROKERAGE PAID AGAINST FUNDS BORROWED BY THE ASSESS EE. 4. GROUND NO.1 RAISED BY THE REVENUE IN THE APPEAL AND GROUND NO.1 RAISED BY THE ASSESSEE IN HIS CROSS OBJECTION RELATE TO TH E DISALLOWANCE TO THE EXTENT OF RS. 54,61,737/- CONFIRMED BY THE LD CIT(A), OUT OF THE TOTAL DISALLOWANCE OF RS.1,40,86,389/- MADE BY THE ASSESSING OFFICER UNDE R THE HEAD INTEREST EXPENDITURE. 5. THE FACTS OF THE ISSUE WHICH CAN BE STATED QUIT E SHORTLY ARE AS FOLLOWS: DURING THE ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NO TED THAT ASSESSEE HAS DEBITED INTEREST ON LOAN TO THE PROFIT AND LOSS ACCOUNT T O THE TUNE OF RS. 1,88,78,103/- AND ON THE OTHER HAND THE ASSESSEE RECEIVED INTERES T ON ACCOUNT OF LOAN GIVEN OF RS.30,51,214/-. THE AO ALSO NOTED THAT THE ASSESSE E DEBITED TO ITS PROFIT AND LOSS ACCOUNT TO THE TUNE OF RS.27,07,320/- ON ACCOU NT OF BROKERAGE AND COMMISSION PAID. THE ASSESSEE WAS ASKED TO EXPLAIN THE EXCESS OF INTEREST ON LOAN TAKEN OVER THE INTEREST ON LOAN GIVEN BY THE ASSESSEE. 3 ITA NO.649/KOL/2017 CO NO. 51/KOL/2017 DILIP CHAND KANKARIA IN RESPONSE, THE ASSESSEE SUBMITTED THAT THE ASSESS EE BORROWED FUNDS IN EARLIER YEARS, WHICH CONTINUED IN CURRENT ASSESSMENT YEAR E XCEPT REPAYMENT OF LOAN TO SOME PARTIES OUT OF FRESH LOAN RECEIVED FROM OTHER PARTIES. HOWEVER, THE AO HAS REJECTED THE CONTENTION OF ASSESSEE AND MADE AD DITION ON ACCOUNT OF EXCESS INTEREST OF LOAN TAKEN OVER THE INTEREST ON LOAN GI VEN BY THE ASSESSEE TO THE TUNE OF RS. 1,58,26,889/- ( RS.1,88,78,103 - RS.30,51,21 4) AND ADDED THE SAME TO THE TOTAL INCOME OF ASSESSEE. THE SAID DISALLOWANCE WAS LATER REDUCED TO RS.1,40,86,389/- BY PASSING AN ORDER U/S.154 OF THE ACT. 6. AGGRIEVED BY THE STAND OF THE ASSESSING OFFICER, THE ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CIT(A), WHO PARTLY ALLOWED THE AP PEAL OF THE ASSESSEE. AGGRIEVED BY THE ORDER OF LD CIT(A), BOTH, THE REVENUE AND AS SESSEE ARE BEFORE US, BY FILING RESPECTIVE GROUNDS RAISED IN THE APPEAL OF REVENUE AND CROSS OBJECTION OF ASSESSEE. 7. THE LD. DR FOR THE REVENUE DID NOT HAVE MUCH TO SAY, BUT NEVERTHELESS HE RELIED ON THE ORDER OF THE ASSESSING OFFICER. 8. ON THE OTHER HAND, LEARNED COUNSEL FOR THE ASSESSEE BEGINS BY POINTING OUT THAT IN THE RELEVANT YEAR, THE ASSESSEE DEBITED NET INTERES T OF RS.1.58 CRORES (RS.1.88 CR. - RS.0.30 CR.). AT THE TIME OF MAKING THE ASSESSMENT, THE LD. A.O. DISALLOWED THE ENTIRE INTEREST EXPENDITURE. SUBSEQUENTLY, THE DISA LLOWANCE WAS REDUCED BY THE A.O. BY A SUM OF RS.17,40,500/- VIDE A RECTIFICATION ORD ER U/S. 154 (AT PAGE NO. 33 OF THE PAPER BOOK), SINCE THE SAID AMOUNT WAS SUO MOTO ADD ED BACK BY THE ASSESSEE IN HIS COMPUTATION OF INCOME. THE LD COUNSEL POINTED OUT THAT IN THE PRECEDING ASSESSMENT YEAR 2010-11, A SIMILAR TYPE OF DISALLOWANCE WAS MADE BY THE A.O. WHICH WAS DELETED BY THE LD. CIT(A) 4 ITA NO.649/KOL/2017 CO NO. 51/KOL/2017 DILIP CHAND KANKARIA AND SUBSEQUENTLY HON'BLE TRIBUNAL CONFIRMED THE ORD ER OF THE LD. CIT(A) (COPY OF THE HON'BLE TRIBUNAL ORDER-PB NO.25). THEREFORE, TH E ISSUE OF DISALLOWANCE OF INTEREST EXPENDITURE IS FULLY COVERED IN FAVOUR OF THE ASSES SEE BY THE ORDER OF THE HON'BLE TRIBUNAL IN HIS OWN CASE, VIDE ITA NO.664/KOL/2014, A. Y. 2010-11, ORDER DATED 31.01.2018. THE LD COUNSEL FURTHER SUBMITTED THAT T HE LD. CIT(A) RIGHTLY OBSERVED THAT THE SUNDRY DEBTORS REPRESENT THE DEBTS DUE FRO M VARIOUS PERSONS WHICH HAVE ARISEN IN THE ORDINARY COURSE OF THE BUSINESS OF TH E ASSESSEE. HOWEVER, THE LD. CIT(A) WAS NOT JUSTIFIED IN NOT ALLOWING INTEREST O N BORROWINGS MADE TO THE SISTER CONCERNS SINCE THE SAME IS CONTRARY TO THE ORDER OF HON'BLE TRIBUNAL. IN THIS REGARD, THE OBSERVATIONS OF THE HON'BLE TRIBUNAL IS REPRODU CED HEREUNDER - 6.HAVING HEARD THE RIVAL SUBMISSIONS AND PERUSED T HE MATERIALS AVAILABLE ON RECORD, WE NOTE THAT ASSESSEE HAS ADMITTEDLY PAID A SUM OF RS.3,66,38,39 7/- TO VARIOUS SISTER CONCERNS WHO WERE THE OWNERS OF THE PROPERTY AND THE CONTRACTOR UTILIZED FOR CONSTRUCTION, WHILE THE ASSESSEE HAD THE OCCUPIERS RIGHT. IN LIEU OF THE OCCUPIERS RIGHT AND THE LOANS GIVEN TO THE SISTER CONCERN, HE HAS RECE IVED A SUM OF RS.75 LAKHS DURING THE YEAR. AS THE AMOUNT RECEIVED BY THE ASSESSEE OF RS.75 LAKHS FOR THE YEAR, IN LIEU OF THE LOANS GIVEN AND OCCUPIERS RIGH T IN PROPERTY, IS MUCH MORE THAN THE INTEREST PAYAB LE ON BORROWING OF RS.3,66,38,397/-, DIVERTED TO SISTE R CONCERNS FOR PURCHASE OF PROPERTY, THEREFORE, LD CIT(A) HAS RIGHTLY HELD THAT NO DISALLOWANCE ON ACC OUNT OF INTEREST DIVERTED FOR NON BUSINESS PURPOSES WAS WARRANTED. THEREFORE, WE ARE OF THE VIEW THAT A DVANCES FOR OCCUPANCY IS FOR THE PURPOSE OF BUSINESS AND BUSINESS EXPEDIENCY. FOR THIS, WE RELY ON THE JUDGMENT OF HON'BLE SUPREM E COURT OF S A BUILDERS, 288 ITR 01 (SC) WHEREIN IT WAS HELD: 'THE ASSESSEE BORROWED THE FUND FROM THE BANK AND L ENT SOME OF IT TO ITS SISTER- CONCERN (A SUBSIDIARY ) ON INTEREST-FREE LOAN. THE TEST IN SUCH A CASE IS R EALLY WHETHER THIS WAS DONE AS A MEASURE OF COMMERCIAL EXPEDIENCY. THE DECISIONS RELATING TO S. 37 WILL ALSO BE APPLICABLE TO S.36(1)(III) BECAUSE IN S. 37 ALSO THE EXPRESSION USED IS 'FOR THE PURPO SE OF BUSINESS'. IT HAS BEEN CONSISTENTLY HELD IN DECISIONS RELATING TO S. 37 THAT THE EXPRESSION 'FO R THE PURPOSE OF BUSINESS' INCLUDES EXPENDITURE VOLUNTARILY INCURRED FOR COMMERCIAL EXPEDIENCY, AND IT IS IMMATERIAL IF A THIRD PARTY ALSO BENEFITS THEREBY. THE HIGH COURT AS WELL AS THE TRIBUNAL AND OTHER IT AUTHORITIES SHOULD HAVE APPROACHED THE QUESTION OF ALLOWABILITY OF INTEREST ON THE BORROWE D FUNDS FROM THE ABOVE ANGLE. IN OTHER WORDS, THE HIGH COURT AND OTHER AUTHORITIES SHOULD HAVE ENQUIR ED AS TO WHETHER THE INTEREST-FREE LOANS AS GIVEN TO THE SISTER COMPANY (WHICH IS A SUBSIDIARY OF THE ASSESSEE) AS A MEASURE OF COMMERCIAL EXPEDIENCY, AND IF IT WAS, IT SHOULD HAVE BEEN ALLOWED. THE EXP RESSION 'COMMERCIAL EXPEDIENCY' IS AN EXPRESSION OF WIDE IMPORT AND INCLUDES SUCH EXPENDITURE AS A P RUDENT BUSINESSMAN INCURS FOR THE PURPOSE OF BUSINESS. THE EXPENDITURE MAY NOT HAVE BEEN INCURRE D UNDER ANY LEGAL OBLIGATION, BUT YET IT IS ALLOWABLE AS A BUSINESS EXPENDITURE IF IT WAS INCUR RED ON GROUNDS OF COMMERCIAL EXPEDIENCY. 6.1 WE ALSO NOTE THAT OTHER UTILIZATION OF THE BORR OWING, WAS UTILIZED TO COMPENSATE FOR THE SUNDRY DEBTORS OF THE PROPRIETARY CONCERN, M/S. DEVYANK AR TS. THE ASSESSEE REPEATED THE EXPLANATION WHICH HE HAD STATED BEFORE THE ASSESSING OFFICER, THAT SI NCE HE WAS A FILM EXHIBITOR HE SELLS THE PICTURE RI GHT TO VARIOUS COMPANIES, WHICH WAS TAKEN AS INCOME OF THE YEAR IN WHICH IT WAS SOLD. HOWEVER, A PART OF 5 ITA NO.649/KOL/2017 CO NO. 51/KOL/2017 DILIP CHAND KANKARIA THE PAYMENT REMAINS OUTSTANDING, IT APPEARS AS SUND RY DEBTORS FOR WHICH THE BORROWINGS HAD TO BE MADE. SO, THE BORROWINGS WERE FOR THE PURPOSE OF HI S FILM BUSINESS. AS PER THE ASSESSEE'S EXPLANATION, SINCE THE BORROWINGS WERE RELATED TO HIS BUSINESS A S FILM EXHIBITOR, NO DISALLOWANCE COULD BE MADE FOR INTEREST PAID RELATED BORROWINGS. BASED ON THE ABOV E FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT BORROWINGS MADE BY THE ASSESSEE WERE RELATED TO HIS BUSINESS. HENCE, WE CONFIRM THE ORDER PASSED BY THE LD. CIT(A).' 9. THE LD COUNSEL SUBMITTED THAT THE LD. CIT(A) WH ILE PASSING ORDER DEVIATED FROM HIS PREDECESSOR'S EARLIER ORDER, WHICH WAS AFFIRMED BY THE HON'BLE ITAT. HON'BLE ITAT IN ITS ORDER HAS ACCEPTED THE BUSINESS EXPEDIE NCY OF ADVANCING OF INTEREST FREE LOANS TO THE SISTER CONCERNS. THE LD. CIT(A) TRIED TO DISTINGUISH THE EARLIER ORDER ON THE GROUND THAT IN THE PRECEDING YEAR INCOME WAS OF FERED ON ACCOUNT OF COMPENSATION RECEIVABLE FROM THE SISTER CONCERNS TO WHOM FUNDS WERE ADVANCED WHEREAS NO SUCH INCOME ACCRUED IN THE INSTANT YEAR. IN THIS REGARD, IT IS HUMBLY SUBMITTED THAT BUSINESS EXPEDIENCY DOES NOT MEAN TH AT EVERY YEAR INCOME HAS TO BE ACCRUED/RECEIVED AND ALLOWANCE OF EXPENDITURE INCLU DING INTEREST EXPENDITURE IS NOT DEPENDENT ON THE INCOME EARNED OR THE AMOUNT OF INC OME EARNED. THEREFORE, THE INTEREST EXPENDITURE SUSTAINED BY THE CIT(A) TO THE TUNE OF RS 54,61,737/- MAY PLEASE BE DELETED. 10. WITHOUT PREJUDICE TO THE ABOVE, THE COUNSEL SU BMITTED ALTERNATIVE PLEA THAT CIT(A) HAD OBSERVED THAT THE ADVANCES FOR OCCUPANCY TO SISTER CONCERNS HAVE GONE UP FROM RS.3,69,41,747/- TO 5,08,81,411/- THOUGH TH E ASSESSEE HAD ASKED THEM TO REFUND THE ADVANCES IN THE PRECEDING YEAR. IN THE C IRCUMSTANCES, DIRECTION MAY BE GIVEN TO THE A.O TO DISALLOW ONLY THAT PORTION OF I NTEREST, WHICH IS ATTRIBUTABLE TO THE FIGURE OF ADVANCES TO SISTER CONCERNS THAT HAS GONE UP DURING THE YEAR FROM THE CLOSING FIGURE APPEARING IN THE BOOKS IN THE PRECED ING YEAR, THAT IS, AS ON 31.03.2010. 6 ITA NO.649/KOL/2017 CO NO. 51/KOL/2017 DILIP CHAND KANKARIA 11. WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE R IVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT THE ASSE SSEE HAD ADVANCED FUNDS TO VARIOUS SISTER CONCERNS WHO WERE OWNERS OF PROPERTY WHERE THE ASSESSEE HAD OCCUPANCY RIGHT. THE SAID SISTER CONCERNS, ACCORDIN G TO THE ASSESSEE, HAD AGREED TO PROVIDE A PORTION OF THE NEW BUILDING TO BE DEVELOP ED BY THEM ON THE SAID OCCUPIED PROPERTY AT A LOW RATE. THE ASSESSEE BORROWED FUNDS ON INTEREST AND ADVANCED FUNDS TO THE SISTER CONCERNS WITHOUT CHARGING ANY INTERES T. AS THE CONSTRUCTION OF THE BUILDING WAS DELAYED, THE SISTER CONCERNS WERE ASK ED TO REFUND THE ADVANCE TOGETHER WITH COMPENSATION. THE SISTER CONCERNS AGREED TO RE FUND THE ADVANCE WITH COMPENSATION OF RS. 75 LAKHS. THE COMPENSATION OF R S. 75 LALCHS WAS TREATED AS INCOME BY THE ASSESSEE IN A.Y. 2010-11. IN LIGHT OF THE INCOME OF RS. 75 LAKHS BEING MORE THAN THE INTEREST PAYABLE ON THE BORROWI NGS USED TO MAKE THE ADVANCES TO THE SISTER CONCERNS, THE LD. CIT(A) HELD THAT NO DI SALLOWANCE ON ACCOUNT OF INTEREST DIVERTED FOR NON-BUSINESS PURPOSES WAS WARRANTED. S UBSEQUENTLY, THE COORDINATE BENCH OF THIS TRIBUNAL, IN ASSESSEE`S OWN CASE, VID E ITA NO. 664/KOL/2014, A.Y. 2010-11, ORDER DATED 31.01.2018, CONFIRMED THE ORDE R OF LD CIT(A) BASED ON THE FACTS NARRATED ABOVE. 12.HOWEVER, WE NOTE THAT, DURING THE ASSESSMENT YEA R UNDER CONSIDERATION, THAT IS, A.Y. 2011-12, THE FACTS ARE DIFFERENT AS COMPARED T O A.Y. 2010-11. DURING THE ASSESSMENT YEAR UNDER APPEAL, THAT IS A.Y. 2011-12, THE SAID ADVANCES FOR OCCUPANCY HAVE GONE UP FROM RS. 3,69,41,747/ - TO RS. 5,08,81 ,411/ -. IF NO ADVANCE HAS BEEN REFUNDED AND NO COMPENSATION FOR NOT CONSTRUCTING T HE BUILDING HAS BEEN RECEIVED AS PROMISED BY THE SISTER CONCERNS (AS CLAIMED BY THE ASSESSEE IN RELATION TO A.Y. 2010- 11) DURING THE ASSESSMENT YEAR 2011-12 WHICH IS UN DER APPEAL. THE ASSESSEE HAS SIMPLY RELIED UPON THE ORDER OF THE LD. CIT(A) FOR THE A.Y. 2010-11 DURING THE 7 ITA NO.649/KOL/2017 CO NO. 51/KOL/2017 DILIP CHAND KANKARIA ASSESSMENT PROCEEDINGS AND APPELLATE PROCEEDINGS. T HE AO HAS STATED IN THE ASSESSMENT ORDER THAT THE ASSESSEE COULD NOT ADDUCE ANY SPECIFIC EVIDENCE OR DETAILS REGARDING ANY SPECIFIC PROPERTY FOR WHICH THE ADVAN CES MIGHT HAVE BEEN GIVEN TO SISTER CONCERNS. BESIDES, THE ASSESSEE HAVE NOT EXP LAINED BEFORE THE LOWER AUTHORITIES THE REASONS WHY AND HOW SAID ADVANCES FOR OCCUPANCY HAVE GONE UP FROM RS. 3,69,41,747/ - TO RS. 5,08,81,411/ -. HENCE, IT WAS CLEAR THAT THE ADVANCES WERE NOT MADE FOR THE PURPOSE OF BUSINESS. THE ASSESSEE HA S NOT PRODUCED ANY SPECIFIC DETAILS OF THE PROPERTY OR THE PURPOSE FOR WHICH A DVANCES TO SISTER CONCERNS WERE MADE. MOREOVER, UNLIKE IN THE IMMEDIATELY PRECEDING FINANCIAL YEAR RELEVANT TO AY 2010-11, NO COMPENSATION HAS BEEN RECEIVED FROM OR DEBITED TO THE ACCOUNTS OF THE SISTER CONCERNS. NO ADVANCE HAS BEEN REFUNDED. RATH ER IT IS CONTRADICTING THE EXPLANATION GIVEN IN THE PROCEEDINGS FOR A.Y. 2010- 11, THAT IS, THE ASSESSEE HAD ASKED THE SISTER CONCERNS TO REFUND THE ADVANCES IN A.Y. 2010-11, WHEREAS THE ASSESSEE HAS ADVANCED MORE FUNDS TO THE SISTER CONC ERNS IN A.Y. 2011-12. THE DETAILS AND NATURE OF MORE FUNDS ADVANCED IN A.Y.2011-12 HA VE NOT BEEN SUBMITTED BY THE ASSESSEE. THUS, THERE IS NO EVIDENCE OF THE BORROWI NGS BEING ADVANCED TO THE SISTER CONCERNS FOR BUSINESS PURPOSE, AS RIGHTLY HELD BY L D CIT(A). IN THIS REGARD, IT NEEDS TO BE MENTIONED THAT WE ARE DIFFERING FROM THE DECI SION OF THE COORDINATE BENCH IN ASSESSEE`S OWN CASE IN ITA NO 664/KOL/2014 FOR A.Y. 2010-11 (SUPRA) CITED BY THE LD COUNSEL FOR THE ASSESSEE IN PARA 8 OF THIS ORDER , AS THE FACTS OF THE ASSESSEE ARE DIFFERENT IN THE A. Y. 2011-12, UNDER CONSIDERATION . WE NOTE THAT IN THE A.Y 2010- 11, AS IN THAT YEAR THERE WAS CLEAR EVIDENCE OF INC OME OF RS.75 LAKHS BEING OFFERED ON ACCOUNT OF COMPENSATION RECEIVABLE FROM THE SIST ER CONCERNS TO WHOM FUNDS WERE ADVANCED. TO THAT EXTENT, THE FACTS FOR THE INSTANT ASSESSMENT YEAR ARE DIFFERENT. THE AVERAGE OF THE OPENING AND CLOSING BALANCES OF THE ADVANCES COMES TO RS.4,39,11,579/-, WHICH INCLUDES THE ABOVE MENTION ED COMPENSATION OF 8 ITA NO.649/KOL/2017 CO NO. 51/KOL/2017 DILIP CHAND KANKARIA RS.75,00,000/- RECEIVABLE FROM THE SISTER CONCERNS DEBITED TO THEIR ACCOUNTS IN THE PREVIOUS YEAR RELEVANT TO A.Y 2010-11. IT IS, THERE FORE, CLEAR THAT BORROWING EQUIVALENT TO ADVANCES WORTH RS.3,64,11,579/- ( IE. RS.4,39,11,579/- - RS.75,00,000/- ) HAVE NOT BEEN MADE FOR THE PURPOSE OF BUSINESS AN D INTEREST ON THE SAME IS NOT ADMISSIBLE AS A DEDUCTION. THE LD CIT(A) BY TAKING THE ESTIMATED INTEREST RATE OF 15% COMPUTED THE DISALLOWANCE TO THE TUNE OF RS. OF RS.54,61,737/- AND BALANCE DISALLOWANCE OF RS.86,24,652/- ( I.E. RS.1,40,86,38 9/- - RS. 54,61,737/-) WAS DELETED. 13. WE NOTE THAT LD COUNSEL FOR THE ASSESSEE RAISED BEFORE US AN ALTERNATIVE PLEA STATING THAT SINCE THE CIT(A) HAD OBSERVED THAT THE ADVANCES FOR OCCUPANCY TO SISTER CONCERNS HAVE GONE UP FROM RS.3,69,41,747/- TO 5,08 ,81,411/- THOUGH THE ASSESSEE HAD ASKED THEM TO REFUND THE ADVANCES IN THE PRECED ING YEAR. IN THESE CIRCUMSTANCES, THE DIRECTION MAY BE GIVEN TO THE A.O TO DISALLOW O NLY THAT PORTION OF INTEREST, WHICH IS ATTRIBUTABLE TO THE FIGURE OF ADVANCES TO SISTER CONCERNS THAT HAS GONE UP DURING THE YEAR FROM THE CLOSING FIGURE APPEARING IN THE BOOKS IN THE PRECEDING YEAR, THAT IS, AS ON 31.03.2010. CONSIDERATION, THE PRINCIPLE OF NATU RAL JUSTICE AND FAIR PLAY, WE AGREE WITH THE SUBMISSION OF LD COUNSEL, THEREFORE, WE DI RECT THE ASSESSING OFFICER TO EXAMINE THE PORTION OF INTEREST, WHICH IS ATTRIBUTA BLE TO THE FIGURE OF ADVANCES TO SISTER CONCERNS AND ADJUDICATE THE ISSUE AS PER THE PROVISIONS OF LAW. THEREFORE, GROUND NO. 1 RAISED BY THE REVENUE AND GROUND NO. 1 RAISED BY THE ASSESSEE IN CROSS OBJECTION ARE ALLOWED FOR STATISTICAL PURPOSES. 14. GROUND NO. 2 RAISED BY THE REVENUE AND CROSS OB JECTION NO.2 RAISED BY THE ASSESSEE RELATE TO BROKERAGE PAID AGAINST FUNDS BOR ROWED BY THE ASSESSEE TO THE TUNE OF RS. 16,57,607/- . 9 ITA NO.649/KOL/2017 CO NO. 51/KOL/2017 DILIP CHAND KANKARIA 15. THE BRIEF FACTS QUA THE ISSUE ARE THAT DURING T HE ASSESSMENT PROCEEDINGS, THE AO NOTED THAT IN REGARD TO COMMISSION PAYMENT OF RS .27,07,320/- IN THIS ASSESSMENT YEAR, THE OBSERVATION AND ITS COUNTER EXPLANATION W HATEVER MAY BE IS SIMILAR AS IT WAS PREVAILED IN THE LAST ASSESSMENT YEAR 2010-11. THE AO NOTED THAT IN THE F.Y.2008-09 RELEVANT TO ASSESSMENT YEAR 2009-10 THERE WAS NO PA YMENT OF COMMISSION FOR LOAN AND ON FURTHER EXAMINATION OF 'LOAN CONFIRMATION' F OR THE YEAR ENDED 31/03/2010 AS WELL AS ON 31.03.2011 IT WAS NOTICED THAT ALMOST SA ME LENDERS APPEAR IN THE ASSESSMENT YEAR 2009-10, 2010-11 AND IN 2011-12. AL L ON A SUDDEN THE ROLE OF BROKER CAME TO PLY FROM THE ASSESSMENT YEAR 2010-11. THE A SSESSEE BEGAN TO DEBIT COMMISSION & BROKERAGE DUE TO THOSE LOANS (ALREADY EXISTED) FROM THE ASSESSMENT YEAR 2010-11 FOR THE SIMPLE REASON THAT IT IS THE P RACTICE THAT WHENEVER SOMEONE WANTS TO PROCURE LOAN FROM MARKET HE HAS TO CONTACT A BROKER FOR ARRANGING SUCH LOAN AND THAT BROKER USED TO TAKE CERTAIN PERCENT OF BRO KERAGE FROM THE SAID LOAN DEBTOR AFTER ARRANGING SUCH LOAN. THE AO NOTED THAT IT IS QUITE NORMAL PHENOMENON THAT WHEN ANY BROKER ARRANGES ANY LOAN FOR SOMEONE ELSE HIS BROKERAGE COME INTO PLAY AT THE VERY BEGINNING OF THE SAID LOAN TRANSACTION. BU T REASON FOR DEBITING SUCH BROKERAGE AS OFFERRED BY THE ASSESSEE IS APPLICABLE IN THE CASE OF NEW LOANS ONLY. IN THE PRESENT CASE OF THE ASSESSEE ALMOST ALL THE LOA N CREDITORS ARE OLD LOAN CREDITORS, THEY ARE WELL KNOWN TO THE ASSESSEE ALSO. SO HERE T HE QUESTION OF ANY BROKERAGE & COMMISSION DOES NOT ARISE. THEREFORE, THE AO NOTED THAT THE IDEA FOR INTRODUCING BROKERAGE IN OLD LOANS CAME IN MIND OF THE ASSESSEE FROM ASSESSMENT YEAR 2010-11 ONWARDS FOR OBVIOUS REASON FOR MINIMIZING HIS PROFI T BY DEBITING FICTITIOUS EXPENSES IN THE FORM OF BROKERAGE AND HENCE AO MADE ADDITION OF RS.27,07,320/- 16. ON APPEAL BY ASSESSEE, THE LD. CIT(A) DELETED THE ADDITION PARTLY. AGGRIEVED BY THE ORDER OF LD CIT(A), BOTH, THE REVENUE AS WEL L AS THE ASSESSEE ARE BEFORE US BY 10 ITA NO.649/KOL/2017 CO NO. 51/KOL/2017 DILIP CHAND KANKARIA RAISING THEIR RESPECTIVE GROUNDS. THE LD. DR FOR T HE REVENUE DID NOT HAVE MUCH TO SAY, BUT NEVERTHELESS RELIED ON THE ORDER OF THE AS SESSING OFFICER. 17. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSE SSEE HAS SUBMITTED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN NOT GIVING FULL RELIEF IN CONNECTION WITH BROKERAGE CHARGES. IN THE ALTERNATIVE, IT WAS SUBMITTED THAT THE DISALLOWANCE OF BROKERAGE BE CONFIRMED IN THE SAME PROPORTION AS THE DISALLOWANC E OF INTEREST EXPENDITURE, IF ANY AS PER THE DECISION IN THE PRECEDING GROUND. 18.WE HAVE GIVEN A CAREFUL CONSIDERATION TO THE RIV AL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WE NOTE THAT WE HAVE HELD IN PARA 13 OF THIS ORDER THAT BORROWINGS WORTH RS. 3,64,11,579/ - HAD NOT BEEN MA DE FOR THE PURPOSE OF BUSINESS AND WE ALLOWED THE GROUND FOR STATISTICAL PURPOSES, FOR DISALLOWANCE OF INTEREST OF RS. 54,61,737/ - ( SUBJECT TO CONFIRMATION OF AO) OUT O F TOTAL CLAIM OF RS. 1,40,86,839/ -. HENCE, BROKERAGE RELATABLE TO SUCH BORROWINGS ALSO IS NOT ADMISSIBLE AS DEDUCTION, HAVING BEEN INCURRED NOT FOR THE PURPOSE OF BUSINES S. WE CONSIDER IT REASONABLE TO DISALLOW BROKERAGE IN THE SAME PROPORTION IN WHICH PART OF THE INTEREST HAS BEEN DISALLOWED BUT SUBJECT TO EXAMINATION BY THE AO. HE NCE, DISALLOWANCE OF BROKERAGE OF RS. 10,49,713/- (I.E. RS. 27,07,320 X 54,61,737/ 1,40,86,389) IS CONFIRMED SUBJECT TO EXAMINATION BY THE AO THE PORTION OF INTEREST, W HICH IS ATTRIBUTABLE TO THE FIGURE OF ADVANCES TO SISTER CONCERNS. WE NOTE THAT LD COUNSEL FOR THE ASSESSEE MADE AN AL TERNATIVE PLEA BEFORE US STATING THAT THE DISALLOWANCE OF BROKERAGE BE CONFIRMED IN THE SAME PROPORTION AS THE DISALLOWANCE OF INTEREST EXPENDITURE, IF ANY AS PER THE DECISION IN THE PRECEDING GROUND, VIDE PARA 13 OF THIS ORDER, RELATING TO DIS ALLOWANCE OF INTEREST. THEREFORE, WE 11 ITA NO.649/KOL/2017 CO NO. 51/KOL/2017 DILIP CHAND KANKARIA MAKE IT CLEAR THAT WE HAD DIRECTED THE ASSESSING OF FICER (IN PARA 13 OF OUR ORDER) TO EXAMINE THE PORTION OF INTEREST, WHICH IS ATTRIBUTA BLE TO THE FIGURE OF ADVANCES TO SISTER CONCERNS AND ADJUDICATE THE ISSUE AS PER THE PROVISIONS OF LAW, THEREFORE, THE SAID DISALLOWANCE OF THE BROKERAGE RS. 10,49,713 IS SUBJECT TO CHANGE OF THE OUTCOME OF THE PORTION OF INTEREST, WHICH IS ATTRIBUTABLE T O THE FIGURE OF ADVANCES TO SISTER CONCERNS. HENCE, WE ALLOW GROUND NO.2 RAISED BY THE REVENUE AND CROSS OBJECTION NO.2 RAISED BY THE ASSESSEE FOR STATISTICAL PURPOSE S. 19. IN THE RESULT, THE APPEAL OF REVENUE AND CROSS OBJECTIONS OF THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 25-07-2018 SD/- SD/- ( A. T. VARKEY ) (A. L. SAINI) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED: 25-07-2018 **PRADIP (SR.PS) PRONOUNCED ON 25.07.2018 S D/- SATBEER SINGH GODARA (JUDICIAL MEMBER) COPY OF THE ORDER FORWARDED TO: 1. DEPARTMENT: THE DCIT, CIRCLE-22, KOLKATA 54/1 RA FI AHMED KIDWAI ROAD, 4 TH FLOOR, KOLKATA-16. 2 ASSESSEE: SHRI DILIP CHAND KANKARIA 87 LENIN SARA NI, KOLKATA-13. 3. THE CIT- 4. THE CIT(A)- 5. DR, KOLKATA BENCHES, KOLKATA TRUE COPY, BY ORDER, SR. PS, H.O.O, ITAT, KOLKATA.