DCIT 17(2), MUMBAI V. RUPJI CONSTRUCTIONS, MUMBAI

ITA 6596/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 2832 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 7 month(s) 22 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: SMC
• Next Hearing Date: 20-06-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 31-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MRS NEELIMA NADKARNI
• Assessee Lawyers: RAJESH B GUPTE
• Keywords: Proportionate interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI SMC BENCH, MUMBAI BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER, ITA. NO. 6596/MUM/2014 (ASSESSMENT YEAR:2010-11) D.C.I.T. 17(2), MUMBAI 400 012 APPELLANT VS. M/S. RUPJI CONSTRUCTIONS, 548, A DEVRATANA, SETH B. N. ROAD, MATUNGA C.R., MUMBAI 400 019 RESPONDENT PAN: AAAFR5733M /BY APPELLANT : MRS. NEELIMA NADKARNI, D.R. /BY RESPONDENT : MR. RAJESH B. GUPTE, A.R. /DATE OF HEARING : 20.06.2016 /DATE OF PRONOUNCEMENT : 22.06.2016 ORDER PER SHAILENDRA KUMAR YADAV, J.M: THIS APPEAL HAS BEEN FILED BY REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX (APPEALS)-29, MUMBAI, DATED 26.08.2014 FOR A.Y. 2010-11 ON FOLLOW ING GROUNDS: ITA NO.6596/MUM/14 A.Y. 10-11 [DCIT VS. M/S. RUPJI CONSTRUCTIONS] PAGE 2 (1) ON THE FACT AND IN THE CIRCUMSTANCES OF THE C ASE AND IN LAW THE LD. CIT(A) HAS FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE HIMSELF, DURING THE ASSESSMENT PROCEEDINGS, CONCEDED TO INTEREST DISALLOWANCE TO THE EXTENT OF RS.52,00,000/- GIVEN AS ADVANCES FOR NON-BUSINESS PURPOSES. (2) ON THE FACT AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW THE LD. CIT(A) ERRED IN NOT TAKING COGNIZANCE OF THE FACT THAT THE ASSESSEE COULD NOT FURNISH ANY SUBSTANTIVE EVIDENCED TO ACCOUNT OF THE SUBSTANTIALLY LOW RATE AT WHICH THE FLAT WAS SOLD. 2. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY THE ASSESSING OFFICER THAT THE ASESSEE HA D TAKEN SECURED LOANS AMOUNTING TO RS. 52,71,936/- AND UNSECURED LOANS AMOUNTING TO RS.1,47,43,672/-. THE INTEREST PAID ON SUCH LOANS CAME UP TO RS 49,34,352 /- DURING YEAR UNDER CONSIDERATION. ASSESSING OFFICER FURTHER OBSERVED THAT ASSESSEE HAD ADVANCED FUNDS AMOUNTING TO RS 1,57,46,026/- ON WHICH AN AMOUNT OF RS.2,72,658/ - HAS BEEN RECEIVED AS INTEREST. ASSESSING OFFICER A SKED THE ASSESSEE TO EXPLAIN THE REASONS AS TO WHY THE PROPO RTIONATE INTEREST SHOULD NOT BE DISALLOWED FOR DIVERSION OF INTEREST BEARING FUNDS FOR NON-BUSINESS PURPOSES. ACCORDING TO ASSESSING OFFICER, ASSESSEE CONCEDED FOR DISALLOWAN CE OF INTEREST TO THE EXTENT OF RS. 52,00,000/- GIVEN AS ADVANCES FOR NON BUSINESS PURPOSES AND ACCORDINGLY AN AMOUNT OF RS. 12,81,931/- (49,34,352/20015608) X 52,00,000/-) WAS DISALLOWED. ACCORDINGLY, ASSESSING OFFICER ADDED B ACK THE AMOUNT OF RS. 12,81,931/- TO THE INCOME OF THE ASSE SEE. ITA NO.6596/MUM/14 A.Y. 10-11 [DCIT VS. M/S. RUPJI CONSTRUCTIONS] PAGE 3 2.1 MATTER WAS CARRIED BEFORE THE FIRST APPELLATE AUTHORITY, WHEREIN VARIOUS CONTENTIONS WERE RAISED ON BEHALF OF ASSESSEE AND HAVING CONSIDERED THE SAME, CIT(A) GRANTED PARTIAL RELIEF TO THE ASSESSEE. 2.2 SAME HAS BEEN OPPOSED ON BEHALF OF REVENUE INTE R ALIA STATED THAT CIT(A) HAS FAILED TO APPRECIATE TH E FACT THAT THE ASSESSEE HIMSELF, DURING THE ASSESSMENT PROCEED INGS, CONCEDED TO INTEREST DISALLOWANCE TO THE EXTENT OF RS.52,00,000/- GIVEN AS ADVANCES FOR NON-BUSINESS PURPOSES. ACCORDINGLY, ORDER OF CIT(A) BE SET ASID E AND THAT OF ASSESSING OFFICER BE RESTORED. ON THE OTHE R HAND, LD. AUTHORIZED REPRESENTATIVE SUPPORTED THE ORDER O F CIT(A). 2.3 AFTER GOING THROUGH RIVAL SUBMISSIONS AND MATER IAL ON RECORD, I FIND THAT THE STAND OF ASSESSEE HAS BEEN CONTENDED THAT ASSESSEE FIRM HAD ADVANCED AN AMOUNT OF RS.1,57,46,026/- TO VARIOUS PARTIES AND HAD RECEIVE D AN INTEREST ON SUCH ADVANCES AT RS.2,72,658/-. FURTHE R, ASSESSEE FIRM HAD ITS OWN INTEREST FREE FUNDS TO TH E TUNE OF RS. 3,53,66,572/- RECEIVED AS ADVANCES FOR THE PURC HASE OF FLATS. THE ADVANCES AMOUNTING TO RS.52,00,000/- WER E MADE FROM THE ABOVE INTEREST FREE FUNDS AVAILABLE W ITH THE ASSESSEE. IN THIS BACKGROUND, CIT(A) OBSERVED THAT THE POSITION OF TOTAL FUNDS AVAILABLE WITH THE ASSESSEE AS PER BALANCE SHEET AS ON 31/03/2010 IS AS UNDER:- SECURED LOANS 52,71,936 UNSECURED LOANS 1,47,43,672 ITA NO.6596/MUM/14 A.Y. 10-11 [DCIT VS. M/S. RUPJI CONSTRUCTIONS] PAGE 4 ADVANCE AGAINST FLAT BOOKING 13,48,93,762 TOTAL FUNDS AVAILABLE AS ON 31/03/2010 (A) 15,49,09,3 70 INTEREST ON SECURED LOANS 6,23,007 INTEREST ON UNSECURED LOANS 29,11,345 INTEREST ON CANCELLATION OF FLAT BOOKING 14,00,000 TOTAL INTEREST PAID DURING F.Y. 2009 - 10 (B) 49,34,352 FROM THIS, CIT(A) OBSERVED THAT THERE WAS ENOUGH FU NDS AVAILABLE WITH ASSESSEE FIRM WHICH CAN BE USED FOR ADVANCING THE INTEREST FREE LOANS. TOTAL ADVANCES F OR FLATS RECEIVED BY ASSESSEE WERE AT RS. 13,48,93,762/-, WH ICH HAVE BEEN USED FOR ADVANCING THE INTEREST FREE LOAN S AMOUNTING TO RS. 52,00,000/- DURING THE PERIOD UNDE R CONSIDERATION. APART FROM THE ABOVE, CAPITAL AVAILA BLE WITH THE PARTNERS OF THE FIRM STOOD AT RS. 1,00,00,000/- AS ON 31/03/2010, PART OF WHICH WAS AVAILABLE FOR ADVANCI NG THE INTEREST FREE LOANS. FURTHER, IT WAS RIGHTLY OBSER VED BY CIT(A) THAT THE TOTAL THE TOTAL INTEREST PAID BY AS SESSEE DURING YEAR UNDER CONSIDERATION WAS AT RS. 49,34,35 2/-, WHICH WAS ABOUT 3% OF THE TOTAL FUNDS AVAILABLE WIT H THE ASSESSEE FIRM TO THE TUNE OF RS.15,49,09,370/- WHIC H WAS INCLUSIVE OF THE INTEREST BEARING FUNDS. THUS IF AT ALL THE PROPORTIONATE INTEREST HAS TO BE DISALLOWED, IT CAN ONLY 3% OF THE TOTAL INTEREST PAID BY THE APPELLANT FIRM DU RING YEAR UNDER CONSIDERATION, WHICH COMES TO RS. 1,48,030/- (3% OF 49,34,352), WHICH CAN BE DISALLOWED. THEREFORE, TH E PROPORTIONATE DISALLOWABLE INTEREST COMES TO RS.1,4 8,030/- AND THE ADDITION ON ACCOUNT OF PROPORTIONATE DISALL OWANCE ITA NO.6596/MUM/14 A.Y. 10-11 [DCIT VS. M/S. RUPJI CONSTRUCTIONS] PAGE 5 OF INTEREST MADE TO THIS EXTENT IS CONFIRMED AND TH E BALANCE ADDITION MADE WAS DELETED. THIS REASONED FINDING O F CIT(A) NEEDS NO INTERFERENCE FROM OUR SIDE. I UPHOLD THE S AME. 3. IN THE RESULT, THE APPEAL OF REVENUE IS DISMISSE D. PRONOUNCED IN THE OPEN COURT ON THIS THE 22 ND DAY OF JUNE, 2016. SD/- (SHAILENDRA KUMAR YADAV) JUDICIAL MEMBER MUMBAI: DATED 22/06/2016 TRUE COPY S.K.SINHA / COPY OF ORDER FORWARDED TO:- 1. / REVENUE 2. / ASSESSEE 3. %&%'( ) / CONCERNED CIT 4. )- / CIT (A) 5.-./00'(, '( , %& / DR, ITAT, MUMBAI 6./4567 / GUARD FILE. BY ORDER / , / % , '( , %&