Rajesh Projects (India) Pvt. Ltd., New Delhi V. ACIT, Central Circle- 14, New Delhi

ITA 6701/DEL/2018

• Counselvise Citation: [2022] 105 COUNSELVISE.COM (IT) 7823 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 4 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-02-2022
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: F
• Assessment Year: 2013-2014
• Appeal Filed On: 21-10-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Section: 143(3)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH ‘F’, NEW DELHI BEFORE SH. ANIL CHATURVEDI, ACCOUNTANT MEMBER AND SH. AMIT SHUKLA, JUDICIAL MEMBER (THROUGH VIDEO CONFERENCING) ITA No. 6701/Del/2018 (Assessment Year : 2013-14) Rajesh Projects (India) P. Ltd., 1601, RG Trade Tower, Plot No.B-7, Neraji Subhash Place, Wazirpur District Centre, Pitampura, New Delhi PAN : AABCR 6667 C Vs. ACIT Central Circle – 14 New Delhi (APPELLANT) (RESPONDENT) Assessee by Shri Rajat Jain, C.A. Shri Akshat Jain, C.A. Revenue by Shri B. S. Anant, Sr. D.R. Date of hearing: 22.02.2022 Date of Pronouncement: 28.02.2022 ORDER PER ANIL CHATURVEDI, AM: This appeal filed by the assessee is directed against the order dated 11.09.2018 of the Commissioner of Income Tax (A)- XXVI, New Delhi relating to Assessment Year 2013-14. 2 2. The relevant facts as culled from the material on records are as under : 3. Assessee is a company which is stated to be engaged in the business of constructions of commercial complex and malls and trading in steel. Assessee electronically filed its return of income for A.Y. 2013-14 on 28.11.2013 declaring total income at Rs.7,45,01,410/-. The case was selected for scrutiny and thereafter assessment was framed u/s 143(3) of the Act vide order dated 31.03.2016 and the total income was determined at Rs.7,72,64,330/-. Aggrieved by the order of AO assessee carried the matter before CIT(A) who vide order dated 11.09.2018 in Appeal No.10292/16-17 granted partial relief to the assessee. Aggrieved by the order of CIT(A), assessee is now before us and has raised the following grounds of appeals : “1. That on the facts and in the circumstances of the appellant’s case the Ld CIT(A) has erred both on facts and in law in upholding disallowance of interest expenses of Rs.7,94,545/- being notional interest on advance given to UKG Securities Private Ltd. for the purpose of business. That the appellant craves leave to add, amend or alter any of the grounds of appeal.” 4. During the course of assessment proceedings, AO noticed that assessee had advanced Rs. 66,21,201/- to UKG Securities Pvt. Ltd. but had not charged any interest on the amount advanced. For not charging interest assessee inter alia submitted that the advance was given in the normal course of business in earlier years, there has been no fresh loan/advance given during 3 the year under consideration. AO did not accept the contentions of the assessee. He noted that no evidence to establish the business connection has been furnished by the assessee. He thereafter worked out the disallowance of interest @ 12% and worked out the disallowance of interest at Rs.7,94,545/-. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who upheld the order of AO. Aggrieved by the order of CIT(A), assessee is now before us. 5. Before us, Learned AR reiterated the submissions made before the Learned CIT(A) and had further submitted that the amount has been advanced in earlier years and not in the year under consideration and further the amount has been advanced in normal course of business. He further submitted that the free funds available by the assessee in the form of Reserve and Share capital are much more than the amount advanced and therefore no disallowance of interest is called for.He further submitted that AO had disallowed the interest on notional basis. 6. Learned DR on the other hand supported the order of lower authorities. 7. We have heard the rival submissions and perused the materials available on record. The issue in the present ground is with respect to the disallowance of interest amounting to Rs.7,94,545/-. It is an undisputed fact that the amount on which the interest has been disallowed was advanced in earlier years and not during the year under consideration. It is also a fact that 4 the disallowance of interest has been worked out on ad hoc basis. Further the copy of the Balance Sheet reveals the availability of interest free funds in the form of Share Capital and excess Reserve and Surplus in excess of Rs. 10 crores as against the amount advanced of Rs.66 lakh. Hon’ble Bombay High Court in the case of CIT vs. Reliance Utilities and Power Ltd. (2009) 313 ITR 340 (Bombay) has held that if there are funds available both interest free and over-draft and/or loan taken, then the presumption would arise that investment would be out of the interest free funds generated or available with the company, if the interest free funds were sufficient to meet the investments. In the present case, we are of the view that since the interest free funds available with the assessee are more than the amount advanced, the presumption of the amount advanced out of interest free funds is established. We are therefore of the view that no disallowance of interest is called for more so on when the interest has been disallowed on ad hoc basis. We therefore direct the deletion of disallowance of interest. Thus the ground of assessee is allowed. 8. In the result, appeal of the assessee is allowed. Order pronounced in the open court on 28.02.2022 Sd/- Sd/- (AMIT SHUKLA) (ANIL CHATURVEDI) JUDICIAL MEMBER ACCOUNTANT MEMBER Date:- 28.02.2022 PY* 5 Copy forwarded to: 1. Appellant 2. Respondent 3. CIT 4. CIT(Appeals) 5. DR: ITAT ASSISTANT REGISTRAR ITAT NEW DELHI