MEENA R. SIROYA, MUMBAI V. ITO 14(1)(2), MUMBAI

ITA 6557/MUM/2016

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 0339 (ITAT-MUMBAI)
• Duration Of Justice: 7 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2017
• Appeal Filed By: Assessee
• Bench Allotted: SMC
• Assessment Year: 2011-2012
• Appeal Filed On: 09-11-2016
• Court: TRIBUNAL
• Department Lawyers: BEENA SANTHOSH
• Assessee Lawyers: B V JHAVERI
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL SMC , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM ITA NO. 6557 / MUM/20 1 6 ( ASSESSMENT YEAR : 2011 - 12 ) MRS. MEENA SHRENIK SIROYA 150, MUMBA DEVI ROAD ZAVERI BAZAR MUMBAI 400 002 VS. INCOME TAX OFFICER 14(1)(2), MUMB AI PAN/GIR NO. AABTB3373J APPELLANT ) .. RESPONDENT ) ASSESSEE BY SHRI B.V.JHAVERI REVENUE BY MS. BEENA SANTHOSH DATE OF HEARING 18 / 04 /201 7 DATE OF PRONOUNCEME NT 09 / 06 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF CIT(A) - 29, MUMBAI DATED 23/08/2016 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT. 2. THE ONLY GRIEVANCE OF ASSESSEE RELATES TO DISALLOWANCE OF INTEREST OF RS.11,04,676/ - ON LOAN. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. 4. FACTS IN BRIEF ARE THAT T HE ASSESSEE IS A PARTNER IN THE FIRM OF M/S. SIROYA HOLDINGS FROM WHICH THE ASSESSEE EARNS SHARE OF PROFIT WHICH IS EXEMPT U/S.1 0(2A) O F THE I.T. ACT, 1961. M/S. SIROYA HOLDINGS TOOK A LOAN FROM M/S. HDFC BANK LIMITED OF RS.21,80,00,000/ - AGAINST DISCOUNTING OF RENTAL INCOME RECEIVABLE FROM THE LESSEE, M/S. ADITYA BIRLA RETAIL LIMITED, ITA N O. 6557/MUM/2016 MRS. MEENA SHRENIK SIROYA 2 TO WHOM THE BUILDING WAS LET OUT BY THE FIRM. THE SAI D LOAN WAS DISBURSED TO EIGHT PARTNERS OF M/S. SIROYA HOLDINGS WHO PAID THE INTEREST ON THE SAID LOAN AS WELL AS PAID THE EMI TO THE SAID BANK. ACCORDINGLY, THE ASSESSEE HAD RECEIVED LOAN AMOUNT OF RS.2,77,88,755.71 FROM M/S. SIROYA HOLDINGS ON 29 TH APRIL, 2008. UTILISING THE SAID LOAN, THE ASSESSEE GAVE A LOAN OF RS.2,99,00,000/ - TO MR. SHAILESH SIROYA ON 2 ND MAY, 2008 ON INTEREST. IN THE YEAR ENDED 31 ST MARCH, 2009 THE ASSESSEE PAID INTEREST OF RS.31,08,512/ - ON HDFC BANK LOAN. AS AGAINST THE SAME, THE AS SESSEE CHARGED INTEREST FROM MR. SHAILESH SIROYA OF RS.32,73,435/ - WHICH IS REFLECTED IN HER COMPUTATION OF INCOME FOR A.Y. 2009 - 10. SIMILAR INTEREST WAS RECEIVED AND PAID BY ASSESSEE IN THE SUBSEQUENT ASSESSMENT YEAR 2010 - 11. HOWEVER, DURING THE YEAR UNDE R CONSIDERATION W HILE COMPLETING THE AS SESSMENT U/S. 143(3) OF THE ACT, THE AO HELD THAT THE ASSESSEE PAID INTEREST ON HDFC BANK LOAN ON THE OUTSTANDING AMOUNT OF RS.2,66,23,895/ - @ 12.46% OF RS.33,19,577/ - WHEREAS THE ASSESSEE CHARGED INTEREST TO MR. SHAI LESH SIROYA ON THE OUTSTANDING AMOUNT OF RS.3,68,23,513/ - @ 9% AMOUNTING TO RS.33,14,026/ - . THE AO, THEREFORE, HELD THAT THE ASSESSEE OUGHT TO HAVE CHARGED INTEREST TO MR. SHAILESH SIROYA @ 12% AMOUNTING TO RS.44,18,702/ - AND THEREFORE, THE ASSESSEE HAS CH ARGED LESSER INTEREST OF RS. 11,04,676/ - AND HENCE THE ADDITION OF THE SAID AMOUNT HAS BEEN MADE TO THE INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES. 5. BY THE IMPUGNED ORDER, CIT(A) CONFIRMED THE ACTION OF THE AO AGAINST WHICH ASSESSE E IS IN FURTHER APPEAL BEFORE ME. ITA N O. 6557/MUM/2016 MRS. MEENA SHRENIK SIROYA 3 6. I HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM RECORD THAT DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSEE HAD EXPLAINED THAT SHE HAD HER OWN CAPITAL AS WELL AS INTEREST FREE LOAN AGGREGATING TO RS.6,24,92,131/ - . THIS FACT HAS BEEN ACCEPTED BY THE AO IN HIS ORDER. AS AGAINST THE AFORESAID INTEREST FREE FUNDS, THE ASSESSEE HAD ADJUSTED HER INVESTMENTS IN VARIOUS ASSETS AGGREGATING TO RS.2,23,81,5 64/ - AND THE INTEREST FREE LOAN TO HER HUSBAND, MR. SHRENIK D. SIROYA, OF RS.2,49,45,226/ - WHICH ARE AGGREGATING TO RS.4,73,26,790/ - . THUS, THE ASSESSEE HAD HER OWN INTEREST FREE FUND OF RS.1,51,65,341/ - (I.E., RS.6,24,92,131/ - MINUS RS.4,73,26,790/ - ) THES E FACTS ARE ALSO ACCEPTED BY THE AO IN THE ASSESSMENT ORDER. AS ON 1 ST APRIL, 2010, THE OUTSTANDING LOAN GIVEN TO MR. SHAIL ESH SIROYA WAS RS.3,68,22,513/ - , WHICH WAS COMPOSED OF INTEREST BEARING LOAN TAKEN FROM HDFC BANK OF RS.2,49,71,198/ - (PAGE 2) AND T HE BALANCE AMOUNT OF RS.1,51,65,341/ - IS OUT OF THE OWN INTEREST FREE FUNDS OF THE ASSESSEE. THESE FACTS ARE ALSO ACCEPTED BY THE AO. 7. IT IS CLEAR FROM THE AVAILABILITY OF ASSESSEES OWN FUNDS THAT THE ASSESSEE HAD CHARGED INTEREST TO MR. SHAILESH SIROY A ON RS.2,49,71,198/ - BEING THE INTEREST BEARING FUNDS UTILISED BY HER FOR GIVING THE LOAN TO MR. SHAILESH SIROYA. THUS THE ASSESSEE CHARGED INTEREST OF RS.33,14,026/ - , I.E., @ 13.27%. AT THE SAM E TIME, THE ASSESSEE PAID INTEREST ON HDFC BANK LOAN OF RS.33 ,19,577/ - (PAGE 11). AS ON 1 ST APRIL, 2010, THE OUTSTANDING AMOUNT DUE AND PAYABLE TO HDFC BANK BY THE ASSESSEE WAS ITA N O. 6557/MUM/2016 MRS. MEENA SHRENIK SIROYA 4 RS.2,66,23,895/ - ON WHICH THE ASSESSEE PAID INTEREST OF RS.33,19,577/ - , I.E., @ 12.47%. THUS, ASSESSEE HAS CHARGED HIGHER RATE OF INTEREST A ND LOAN ADVANCED TO HER HUSBAND AS COMPARED TO THE RATE OF INTEREST PAID TO THE HDFC BANK. EVEN AS PER THE FINDING RECORDED BY AO AT PARA 5.1 OF HIS ASSESSMENT ORDER, THE ASSESSEE HAD HER OWN INTEREST FREE FUNDS OF RS.1,51,65,341/ - TO WHICH THE INTEREST BE ARING LOAN FROM HDFC BANK OF RS.2,49,71,198/ - IS ADDED TO ARRIVE AT THE FIGURE OF RS.3,68,22,513/ - WHICH IS THE AMOUNT OUTSTANDING DUE AND RECEIVABLE FROM MR. SHAILESH SIROYA AS ON FIRST DAY OF ACCOUNTING YEAR, I.E., AS ON 1 ST APRIL, 2010. THE ASSESSEE CHA RGED INTEREST @ 13.27% TO MR. SHAILESH SIROYA ON THE INTEREST BEARING FUNDS UTILISED FOR GIVING LOAN, I.E., RS.2,49,71,198/ - . ACCORDINGLY, THE ASSESSEE CHARGED INTEREST TO MR. SHAILESH SIROYA OF RS.33,14,026/ - . AS AGAINST THE SAME, THE ASSESSEE PAID INTERE ST TO HDFC BANK OF RS.33,19,577/ - ON THE OPENING BALANCE OF RS.2,66,23,895/ - , I.E., @ 12.47%. 8. IT IS CLEAR FROM THE ABOVE THAT THE ASSESSEE HAS NOT CHARGED INTEREST AT A LESSER RATE TO MR. SHAILESH SIROYA AS AGAINST THE RATE OF INTEREST CHARGED BY HDFC B ANK ON ITS LOAN. 9. HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. RELIANCE UTILITIES & POWER LIMITED (313 ITR 340) WHEREIN THE H IGH COURT HELD THAT IF THERE WERE FUNDS AVAILABLE BOTH INTEREST - FREE AND OVERDRAFT AND/OR LOANS TAKEN, THEN A PRESUMPTION WOU LD ARISE THAT INVESTMENTS WOULD BE OUT OF THE INTEREST - FREE FUNDS GENERATED OR AVAILABLE WITH THE COMPANY, IF THE ITA N O. 6557/MUM/2016 MRS. MEENA SHRENIK SIROYA 5 INTEREST - FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS. 10. IN THE INSTANT CASE IT IS NOT IN DISPUTE THAT ASSESSEE WAS HAVING HER OWN INT EREST FREE FUNDS OF RS.1,51,65,341/ - WHICH SHE ADVANCED TO HER HUSBAND AND WHICH SHE IS NOT SUPPOSED TO CHARGE ANY INTEREST. THE REVENUE AUTHORITIES WRONGLY PRESUMED THAT ASSESSEE SHOULD HAVE CHARGED INTEREST ON THE ENTIRE AMOUNT OF LOAN GIVEN TO THE HUSBA ND IRRESPECTIVE OF THE FACT THAT ASSESSEE WAS HAVING HER OWN INTEREST FREE FUNDS WHICH WAS GIVEN WITHOUT INTEREST TO HER HUSBAND. 11. IN THE CASE OF CIT VS. GUJARAT RECLAIM & RUBBER PRODUCTS LTD. IN ITXA NO.2116 OF 2013 , THE HONBLE BOMBAY HIGH COURT IN IT S ORDER DATED 8 TH DECEMBER, 2015 HELD AS UNDER: (E) IN ANY EVENT, EVEN ON MERITS, WE FIND THAT THE IMPUGNED ORDER RECORDS THAT IT IS UNDISPUTED THAT THE RESPONDENT - ASSESSEE HAS INTEREST FREE FUNDS AGGREGATING TO RS. 16.09 CRORE. THE ADVANCES AND INTEREST MADE TO GROUP COMPANIES BY THE RESPONDENT - ASSESSEE IS TO THE TUNE OF RS.26.55 LAKHS. THE AMOUNTS BORROWED IN THE AGGREGATE BEING TO THE EXTENT OF RS.6.81 LAKHS, I.E. BOTH WORKING CAPITAL AND TERM LOANS. THUS, AS HELD BY THIS COURT IN CIT VS. RELIANCE UTILI TIES & POWER LTD. 313 ITR 340 THAT WHERE BOTH INTEREST BEARING FUNDS AND INTEREST FREE FUNDS ARE AVAILABLE THEN A PRESUMPTION WOULD ARISE THAT INVESTMENTS TO SISTER COMPANIES WOULD BE OUT OF ITS INTEREST FREE FUNDS; 12. RESPECTFULLY FOLLOWING THE ABOVE DECISION OF BOMBAY HIGH COURT AND APPLYING TO THE FACTS OF THE INSTANT CASE , WE DO NOT FIND ANY MERIT FOR DISALLOWANCE / ADDITION OF RS.11,04,676/ - MADE BY THE AO TO THE INCOME OF THE ASSESSEE UNDER THE HEAD INCOME FROM OTHER SOURCES. ITA N O. 6557/MUM/2016 MRS. MEENA SHRENIK SIROYA 6 13. IN THE RESULT , APPEAL OF THE ASSESSEE IS ALLOWED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 09 / 06 /2017 S D/ - ( R.C.SHARMA ) ACCOUNTANT MEMBER MUMBAI ; DATED 09 / 06 /201 7 KARUNA SR. 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. //TRUE COPY//