ACIT, Patiala V. M/s Mahakali Developers & Resorts Pvt. Ltd., Patiala

ITA 718/CHANDI/2017

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 5081 (ITAT-CHANDIGARH)
• Duration Of Justice: 2 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-07-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Assessment Year: 2014-2015
• Appeal Filed On: 25-04-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K MITTAL

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL CHANDIGARH BENCHES, CHANDIGARH BEFORE SHRI SANJAY GARG, JUDICIAL MEMBER & MS. ANNAPURNA GUPTA, ACCOUNTANT MEMBER ITA NO. 718/CHD/2017 ASSESSMENT YEAR: 2014-15 THE ACIT, VS. M/S MAHAKALI DEVELOPERS & CIRCLE, PATIALA RESORTS PVT LTD, PATIALA. PAN NO. AABCM 6353Q (APPELLANT) (RESPONDENT) APPELLANT BY : SH. S.K.MITTAL RESPONDENT BY : SH. ASHOK KUMAR GOYAL DATE OF HEARING : 22.06.2017 DATE OF PRONOUNCEMENT : 05.07.2017 ORDER PER SANJAY GARG, JUDICIAL MEMBER: THE PRESENT APPEAL HAS BEEN PREFERRED BY THE REVENU E AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS) [HERE INAFTER REFERRED TO AS CIT(A)], PATIALA DATED 27.2.2017. THE REVENUE HAS AGITATED THE ACTION OF THE CIT(A) IN DELETING THE ADDITION OF RS. 49,41,34 7/- MADE BY THE ASSESSING OFFICER IN RESPECT OF DISALLOWANCE OF PRO PORTIONATE INTEREST EXPENDITURE ON ACCOUNT OF INTEREST FREE ADVANCES MA DE BY THE ASSESSEE. 2 2. THE BRIEF FACTS RELATING TO THE ISSUE UNDER CONS IDERATION ARE THAT THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS O F DEVELOPMENT OF INDUSTRIAL PARK AND OTHER REAL ESTATE ACTIVITIES. T HE ASSESSING OFFICER OBSERVED THAT ASSESSEE COMPANY HAS BORROWED FUNDS A ND INCURRED INTEREST EXPENSES AND AT THE SAME TIME IT HAS ADVANCED AN IN TEREST FREE SUM OF RS. 4,11,77,893/- TO M/S SATISH ESTATE (P) LTD. ON BEI NG SHOW-CAUSED AS TO WHY PROPORTIONATE DISALLOWANCE OF INTEREST EXPENDIT URE MAY NOT BE MADE, THE ASSESSEE EXPLAINED THAT THE IMPUGNED ADVANCE HA S BEEN MADE IN TERMS OF AN AGREEMENT FOR PURCHASE OF HOTEL SITE. ASSESSE E FURNISHED THE AGREEMENT TO SELL WITH M/S SATISH ESTATE (P) LTD, DETAILS OF PAYMENT MADE TILL DATE AND ALSO CONFIRMATION OF THE ABOVE TRANSA CTION FROM M/S SATISH ESTATE. IT WAS, THEREFORE, SUBMITTED THAT THE PAYME NT MADE WAS NOT A LOAN BUT ADVANCE CONSIDERATION FOR PURCHASE OF SITE. AL TERNATIVELY, IT WAS SUBMITTED BEFORE ASSESSING OFFICER THAT INTEREST FR EE FUNDS WERE MORE THAN THE AMOUNT ADVANCED, HENCE, NO DISALLOWANCE WAS CAL LED FOR. THE ASSESSING OFFICER REJECTED THE AGREEMENT ON THE GRO UND THAT THE SAME WAS NOT REGISTERED. ASSESSING OFFICER CONSIDERED THE SU M SO ADVANCED AS INTEREST FREE LOAN. HE ACCORDINGLY DISALLOWED THE P ROPORTIONATE INTEREST EXPENDITURE ON ACCOUNT OF INTEREST FREE LOAN ADVANC ED BY THE ASSESSEE. 3. BEING AGGRIEVED BY THE ABOVE DISALLOWANCE MADE B Y THE ASSESSING OFFICER, THE ASSESSEE PREFERRED APPEAL BE FORE THE CIT(A). THE LD. CIT(A) CONSIDERING THE SUBMISSIONS OF THE A SSESSEE OBSERVED THAT THE ASSESSEE HAD PRODUCED ON RECORD THE AGRE EMENT TO SELL OF 3 THE HOTEL SITE AND ALSO CONFIRMATION FROM THE SELLE R. THE AGREEMENT WAS STILL OPERATIVE. THE ASSESSING OFFICER HAD NOT BROUGHT ANYTHING ON RECORD TO THE FACT THAT THE AGREEMENT WAS BOGUS. THE ASSESSEE HAD BEEN MAKING THE PAYMENT AND THE SELLER HAS BEEN ACC EPTING THE PAYMENT AS PER THE AGREEMENT TO SELL AND EVEN THE S ELLER HAS GIVEN THE CONFIRMATION IN THIS RESPECT. HE FURTHER OBSERVED T HAT EVEN OTHERWISE, THE SHARE OF CAPITAL AND FREE RESERVES OF THE ASSES SEE WERE MUCH MORE THAN THE AMOUNT PAID BY THE ASSESSEE ALLEGED TO BE INTEREST FREE ADVANCES BY THE ASSESSING OFFICER. HE RELYING UPON THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF HERO CYCL ES VS. CIT [2015] 379 ITR 347 (SC) DELETED THE ADDITIONS SO M ADE BY THE ASSESSING OFFICER. 4. BEING AGGRIEVED BY THE ABOVE ORDER OF THE CIT(A) , THE ASSESSEE HAS COME UP IN APPEAL BEFORE US. WE FIND THAT THE ASSESSING OFFICER HAD DISBELIEVED THE AGREEMENT TO SELL ON THE GROUND THAT THE SAME WAS N OT REGISTERED. HOWEVER, AS PER LAW, THERE WAS NO LEGAL REQUIREMENT OF REGISTRATION OF THE AGREEMENT TO SELL UNTIL AND UNLESS THE POSSE SSION OF THE PROPERTY IS PASSED ON TO THE BUYER. THE OTHER PART Y HAS CONFIRMED THE RECEIPT OF PAYMENT IN LIEU OF ADVANCE OUT OF THE CO NSIDERATION PAYABLE FOR THE SALE OF THE HOTEL SITE. THE ASSESSI NG OFFICER HAS MADE THE ADDITION MERELY ON THE BASIS OF SUSPICION WHERE AS THERE IS NOTHING ON RECORD TO DISPROVE THE CONTENTION OF THE ASSESSE E. IN VIEW OF THIS, WE DO NOT FIND ANY INFIRMITY IN THE WELL REASONED O RDER OF THE CIT(A) 4 AND THE SAME IS ACCORDINGLY UPHELD. THERE IS NO MER IT IN THE APPEAL OF THE REVENUE AND THE SAME IS HEREBY DISMISSED. 5. IN THE RESULT, APPEAL OF THE REVENUE IS HEREBY D ISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 05.07.2017. SD/- SD/- ( ANNAPURNA GUPTA) (SANJAY GARG) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED : 05 TH JULY, 2017 RKK COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT(A) 5. THE DR