DCIT 5(3), MUMBAI V. REAL VALUE LEASING P.LTD, MUMBAI

ITA 7010/MUM/2014

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 7884 (ITAT-MUMBAI)
• Duration Of Justice: 3 year(s) 1 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: E
• Assessment Year: 2011-2012
• Appeal Filed On: 17-11-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: RAM TIWARI
• Keywords: Proportionate interest; Tax effect

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL E , BENCH MUMBAI BEFORE SHRI R.C.SHARMA, AM & SHRI PAWAN SINGH , JM ITA NO. 7010 / MUM/20 14 ( ASSESSMENT YEAR : 2011 - 12 ) DCIT 5(3) AAYAKAR BHAVAN M.K.ROAD MUMBAI 400 020 VS. M/S. REAL VALUE LEASING PVT. LTD., 3 RD FLOOR, 33, HUGES, N.S.PATKAR MARG, OPP. PREMPURI ASHRAM GRANT ROAD (W) MUMBAI 400 007 PAN/GIR NO. AADCD0131B APPELLANT ) .. RESPONDENT ) ASSESSEE BY NONE REVENUE BY SHRI RAM TIWARI DATE OF HEARING 26 / 12 /201 7 DATE OF P RONOUNCEME NT 27 / 12 /201 7 / O R D E R PER R.C.SHARMA (A.M) : THIS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) - 9, MUMBAI DATED 15/09/2014 FOR THE A.Y.2011 - 12 IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE IT ACT. 2. IN THIS APPEAL, REVENUE IS AGGRIEVED FOR DELETING DISALLOWANCE OF THE INTEREST EXPENDITURE OF RS.37,49,237/ - . 3. NOBODY APPEARED ON BEHALF OF THE ASSESSEE INSPITE OF GIVING OPPORT UNITY. 4. WE HAVE HEARD LEARNED DR AND GONE THROUGH THE ORDERS OF THE AUTHORITIE S BELOW AND FOUND THAT AO HAS DISALLOWED INTEREST EXPENDITURE ITA NO. 7010/MUM/2014 M/S. REAL VALUE LEASING PVT. LTD., 2 ON THE PLEA THAT INTEREST BEARING FUNDS HAVE BEEN DIVERTED FOR ADVANCING INTEREST FREE LOANS. 5. BY THE IMPUGNED ORDER, CIT(A) DELETED THE DISALLOWANCE AFTER OBSERVING AS UNDER: - 5.1 I HAVE CA REFULLY CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE, STATEMENT OF FACTS, RELEVANT ASSESSMENT ORDER, WRITTEN SUBMISSION, RELIED UPON CASE LAWS AND THE ARGUMENTS MADE BY THE LAR BEFORE THE UNDERSIGNED. IT IS NOTED THAT THE SIMILAR ISSUE OF DISALLOWANCE OF PROPORTIONATE INTEREST WAS DECIDED BY MY PREDECESSOR IN THE IMMEDIATELY PRECEDING A.Y.2010 - 11 VIDE ORDER DATED 20.03.2013. THE RELEVANT PARA OF THE SAID ORDER IS REPRODUCED HEREUNDER : '5.2. GROUND OF APPEAL NO.1: - 5.2.1. I HA VE CAREFULLY AND DISPASSIONATELY CONSIDERED THE FACTS AND CIRCUMSTANCES OF THE CASE. UNDISPUTEDLY, THE APPELLANT IS ENGAGED ONLY IN ONE BUSINESS OF FINANCING AND THAT THE APPELLANT HAS NOT USED ITS FUNDS FOR ANY OTHER BUSINESS OR FOR ACQUISITION OF ANY FIX ED ASSETS. THE APPELLANT HAS ADVANCED INTEREST BEARING LOAN OF RS.25 CRORES TO A CORPORATE NAMELY M/S. PARINEE REALITY PVT. LTD. BEARING INTEREST RECEIVABLE @ 12% PER ANNUM AND HAS EARNED INTEREST OF RS.66.92 LAKHS FROM THE SAID LOANEE NAMELY M/S. PARINEE REALITY PVT. LTD. ON THE OTHER HAND THE APPELLANT HAD RAISED INTEREST BEARING LOANS FROM ITS SHARE HOLDERS AND DIRECTORS @8% PER ANNUM WHICH WAS USED FOR ADVANCING INTEREST BEARING LOANS TO THE SAID LOANEE NAMELY M/S. PARINEE REALITY PVT. LTD. ON WHICH INT EREST RECEIVABLE WAS CHARGED @ 12% PER ANNUM. THE APPELLANT HAS PAID INTEREST OF RS. 35.33 LAKHS @ 8% PER ANNUM TO ITS SHARE HOLDERS AND ITS DIRECTORS AND HAS EARNED INTEREST OFRS.66,92 LAKHS BY ADVANCING THE SAME TO M/S. PARINEE REALITY PVT. LTD. UNDER TH E CIRCUMSTANCES, IT CANNOT BE SAID THAT THE APPELLANT HAS PAID ANY EXCESS INTEREST AND TO JUSTIFY THE SAME THE APPELLANT HAD FULLY SUBMITTED THE INTEREST WORKING OF INTEREST PAID AND INTEREST RECEIVED IN RESPECT OF EACH PARTIES IN EXCEL WORKSHEET AND ALSO EXTRACTS FROM TALLY ACCOUNTING SOFTWARE BEFORE THE A.O. 5.2.2. IN VIEW OF THE ABOVE, THE INTEREST PAID TO SHAREHOLDERS AND DIRECTORS HAVE BEEN INCURRED WHOLLY AND EXCLUSIVELY FOR THE PURPOSE OF APPELLANT'S BUSINESS AND THE SAME IS ALLOWABLE U/S.37(1) OF THE ACT. GROUND OF APPEAL NO. 1 IS ALLOWED. ITA NO. 7010/MUM/2014 M/S. REAL VALUE LEASING PVT. LTD., 3 IT IS SEEN THAT DURING THE YEAR UNDER CONSIDERATION ALSO THE AO HAS MADE SIMILAR DISALLOWANCE. IN PARA 2.5 OF THE ASSESSMENT ORDER THE AO HAS ALSO REFERRED 'FURTHER SINCE THE POSSIBILITY OF HIGH INTEREST PAID F IGURE (TURNING OUT TO BE EXCESSIVE AS WAS THE LAST YEAR'S CASE). FROM THIS OBSERVATION OF THE AO IT IS APPARENT THAT DURING THIS YEAR ALSO, THE AO HAS PRESUMED THE POSSIBILITY OF HIGH INTEREST RATE AS WAS ALSO PRESUMED LAST YEAR, WHICH HAS BEEN PROVED WRON G BY THE DETAILED REASONINGS OF THE CIT(A) IN THE AFORESAID PARAS. THEREFORE, FOLLOWING THE REASONED ORDER OF MY PREDECESSOR, IT IS HELD THAT PROPORTIONATE DISALLOWANCE OF INTEREST IS NOT WARRANTED IN THE INSTANT CASE WHERE THE RATE OF INTEREST EARNED BY T HE APPELLANT IS MORE THAN THE INTEREST PAID BY IT AND THERE IS NO INSTANCE OF DIVERSION OF ANY BORROWED FUNDS FOR INTEREST FREE ADVANCES. UNDER THESE CIRCUMSTANCES, DISALLOWANCE OF PROPORTIONATE INTEREST ON PRESUMPTION BASIS CANNOT BE HELD JUSTIFIED. ACCOR DINGLY, THE DISALLOWANCE MADE BY THE AO IS DIRECTED TO BE DELETED. 6. IT WAS ARGUED BY LEARNED DR THAT IN THE PRECEDING YEAR SINCE THE TAX EFFECT IS LESS THAN PERMISSIBLE LIMIT, THE REVENUE DID NOT COME IN THE APPEAL. 7. WE HAVE GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND THAT DETAILED FINDING H AS BEEN GIVEN BY THE CIT(A) ON THE VERY SAME FACTS IN THE PRECEDING A.Y.2010 - 11 AND AFTER OBSERVING THAT ASSESSEE HAS TAKEN INTEREST BEARING FUNDS AT A LOWER RATE OF INTEREST AND IT ADV ANCED SAME AT HIGHER RATE OF INTEREST. THERE IS NO DIVERSION OF INTEREST BEARING FUNDS. THE DETAILED FINDING SO RECORDED BY CIT(A) COULD NOT BE CONTROVERTED BY LEARNED DR BY BRINGING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDING SO RECORDED BY CIT(A). ITA NO. 7010/MUM/2014 M/S. REAL VALUE LEASING PVT. LTD., 4 8. IN THE RESULT, APPEAL OF REVENUE IS DISMISSED. O RDER PRONOUNCED IN THE OPEN COURT ON THIS 27 / 12 /2017 S D/ - ( PAWAN SINGH ) S D/ - ( R.C.SHARMA ) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI ; DATED 27 / 12 /201 7 KARUNA SR. PS COPY OF THE ORDER FORWARDED TO : BY ORDER, ( ASSTT. REGISTRAR) ITAT, MUMBAI 1. THE APPELLANT 2. THE RESPONDENT. 3. T HE CIT(A), MUMBAI. 4. CIT 5. DR, ITAT, MUMBAI 6. GUARD FILE. //TRUE COPY//