B.P. TECHNO PRODUCTS P LTD, MUMBAI V. ITO 6(1)-2, MUMBAI

ITA 7277/MUM/2010

• Counselvise Citation: 727719914 RSA 2010
• Duration Of Justice: 4 year(s) 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-06-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 23-06-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 25-10-2010
• Result in Favour of: Revenue
• Court: TRIBUNAL

Judgement Text

, INCOME TAX APPELLATE TRIBUNAL,MUMBAI B BENCH , , , BEFORE S/SH. JOGINDER SINGH ,JUDICIA L MEMBER & RAJENDRA,ACCOUNTANT MEMBER /. ITA NO. 7277 /MUM/201 0 , / ASSESSMENT YEAR - 200 7 - 08 B.P. TECHNO PRODUCTS PRIVATE LIMITED 39/44, B.P. STEEL COMPOUND, ROAD NO.2, SION EAST MUMBAI - 400 022. PAN: AABCD 6547 R VS INCOME TAX OFFICER - 6(1) - 2 MUMBAI. ( / APPELLANT ) ( / RESPONDENT ) /ASSESSEE BY : SHRI MEHUL SHAH / REVENUE BY :SH RI SANJAY PUNGLIA - DR / DATE OF HEARING : 23 - 0 6 - 2015 / DATE OF PRONOUNCEMENT : 23 - 0 6 - 2015 , 1961 254 ( 1 ) ORDER U/S.254(1)OF THE INCOME - TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 15.7.20 10 OF THE CIT(A) - 14 , MUMBAI ,THE ASSESSEE HAS RAISED FOLLOWING GROUNDS OF APPEAL: BEING AGGRIEVED BY THE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) 14, MUMBAI THIS APPEAL PETITION IS SUBMITTED ON THE FOLLOWING AMONGST OTHER GROUNDS OF APPEAL, WHICH IT IS PRAYED MAY BE CONSIDERED WITHOUT PREJUDICE TO ONE ANOTHER. 1. ON THE FACTS, AND IN CIRCUMSTANCES OF THE CASE, AND IN LAW, LEARNED COMMISSIONER OF INCOME TAX (APPEALS) UPHOLDING ORDER OF THE ASSESSING OFFICER IN MERGING THE DEPOSIT ACCOUNTS AND LOAN ACCOUNTS AND IN TURN DISALLOWING INTEREST OF AGGREGATING TO RS. 89,258/ WITHOUT APPREC IATING THAT INTEREST WAS PAID ON THE LOANS TAKEN; WHEREAS THE DEPOSITS WERE GIVEN IN ORDER TO TAKE PREMISES OWNED BY THE DIRECTOR AND HIS HUF FOR SHOWROOM FACILITIES OF THE APPELLANT AT PUNE THROUGH WHICH YOUR APPELLANT COULD GENERATE BUSINESS AN D DID NOT PAY RENT AS WELL; AND THUS THE TWO WERE SEPARATE COMMERCIAL TRANSACTIONS ENTERED FOR THE PURPOSE AND IN ORDINARY COURSE OF BUSINESS. 2. ON THE FACTS, AND IN CIRCUMSTANCES OF THE CASE, AND IN LAW, LEARNED COMMISSIONER OF INCOME TAX (APPEALS) E RRED IN PRESUMING THAT THE SAID AMOUNTS OF RS.4,500,000/ AND RS. 2,000,000/ WERE LOANS WITHOUT APPRECIATING THAT THE AMOUNTS OF WERE GIVEN BY WAY OF SECURITY DEPOSITS ON PREMISES TAKEN BY THE APPELLANT FOR ITS SHOWROOM FACILITIES. 3. YOUR APPELLANT C RAVES LEAVE TO ADD TO, AMEND, ALTER, MODIFY, AND /OR DELETE ANY OF THE ABOVE GROUNDS OF APPEAL AT ANY TIME BEFORE FINAL DISPOSAL OF APPEAL. ASSESSEE,COMPANY ENGAGED IN THE BUSINESS OF TR A DING OF MODULAR KITCHEN COMPONENTS AND IMPORTED FURNITURE , FILE D ITS RETURN OF INCOME ON 30.10 .20 07 DECLARING INCOME OF RS.11.47 LACS. ITA/ 7277 /MUM/201 0 ,AY. 0 7 - 08 - BP TECHNO PROD UCTS 2 ASSESSING OFFICER (AO)C OMPLETED THE ASSESSMENT ON 11.12. 20 09 DETERMINING THE INCOME OF THE ASSESSEE AT RS. 13,80, 3 00/ - . 2. THE EFFECTIVE G ROUND OF APPEAL IS ABOUT DISALLOWANCE OF INTERE ST OF AN AM OUN T OF RS. 89,258/ - . DURING THE ASSESSMENT PROCEEDINGS THE AO FOUND THAT THE ASSESSEE HAD SHOWN BALANCES OF RS. 67.0 4 LACS AND RS. 97.4 9 LACS RESPECTIVELY UNDER THE HEAD UNSECURED LOANS AND DEPOSITS GIVEN. HE CALLED FOR THE DETAILS IN THAT REG ARD , HE FOUND THAT INTEREST OF RS.80 ,000/ - AND RS. 1,70 ,000/ - HAD BEEN CREDITED IN THE ACCOUNT OF V INOD G UPTA ( HUF ) LOAN ACCOUNT AND VINOD G UPTA (IND IVIDUAL ) LOAN ACCOUNT RESPECTIVELY, THAT NO INTEREST HAD BEEN PROVIDED IN THE V INOD G UPTA CURRENT ACCOUNT AND VINOD G UPTA ( HUF ) DEPOSIT GOEL GANGA A CCOUNT, THAT AN AMO UN T OF RS. 20 .00 LACS AND RS. 45 .00 LACS WERE SHOWN AGAINST PUNE SHOWROOM - GOEL GANGA AND SKY L OUNGE RESPECTIVELY . ON A QUERY BY THE AO ASSESSEE CLARIFIED THAT DEPOSIT WERE GIVEN TO V INOD GUPT A (IND. ) AND VINOD GUPTA (HUF). HE DIRECTED THE ASSESSEE TO FURNISH T HE ACCOUNTS OF VINOD GUPTA (IND . ) AND V INOD G UPTA (HUF) AFTER MERGING THE LOAN ACCOUNTS. SCRUTINY OF THE ACCOUNTS REVEALED THAT V INOD G UPTA (IND . ) WAS HAVING DEBIT BAL ANCE OF RS. 11.73 LACS ON 1 .8. 20 06, THAT THE ASSESSEE HAD MADE PAY M ENT OF RS. 45 .00 LACS TO HIM ON THAT DAY, THAT VINOD GUPTA (HUF) HAD CR EDIT BAL ANCE OF RS1,13,889/ - AS ON 31.3. 2007, T HAT IN THE MERGED ACCOUNT OF V INOD G UPTA (IND.) THE INTEREST PAYABLE UPTO D ATE OF CR EDIT BALANCE W ORKED OUT AT 1.13L ACS , THAT INTEREST PAYABLE IN CASE OF V INOD G UPTA( HUF ) WAS RS. 47,403/ - , THAT THE ASSESSEE HAD PAID INTEREST OF RS. 80 ,000/ - A ND RS. 1,70,000 TO V INOD G UPTA (HUF) AND V INOD G UPTA (IND.) RESPECTIVELY. THE AO CALCULATED EXCESS INTEREST PA ID TO BOTH THE ENTITIES AT RS.56,661/ - AND RS.32 , 597/ - RESPECTIVELY . HE DISALLOWED AM OUNT OF RS. 89 , 258/ - AND ADDED IT TO THE NET INCOME OF THE ASSESSEE . 3. AGGRIEVED BY THE ORDER OF THE AO,THE ASSESSEE PREFERRED AN APPEAL BEFORE THE FIRST APPELLATE AUTHOR ITY(FAA). BEFORE HIM IT WAS ARGUED THAT DEPOSITS WERE GIVEN TO V INOD G UPTA (IND. ) V INOD G UPTA (HUF) DURING THE NORMAL COURSE OF BUSINESS, THAT AGAINST THE DEPOSITS RENT FREE BUSINESS DEPOSITS WERE PROVIDED TO THE COMPANY, TO DISPLAY MODULAR KITCHEN COMPONEN TS, THAT BOTH THE ENTITIES AGREED TO OFFER THE PREMISES AS COLATERAL SECURITY TO HDFC BANK FOR TAKING OVERDRAFT FACILITY BY THE ASSESSEE , THAT COMPANY ENTERED INTO AN AGREEMENT WITH BOTH THE ENTITIES, THAT THE DISALLOWANCE MADE BY AO WAS NOT JUSTIFIED. AF TER CONSIDERING THE SUBMISSION OF THE ASSESSEE AND ORDER OF THE AO HE HELD THAT THE ASSESSEE HAD ACCEPTED LOANS FROM VG(I N D.) VG(HUF), THAT THEY WERE THE DIRECTORS OF THE COMPANY, THAT IT HAD ADVANCED LOAN TO BOTH THE ENTITIES, THAT ASSESSEE WAS PAYING INTEREST ON THE BORROWED AM OUN T , BUT WAS NOT CHARGING INTEREST ON AM OUN TS A DVANCED, THAT IF THE ASSESSEE WAS PAYING INTEREST ON AM OUN T REC EIVED IT SH OUL D HAVE CHARGED INTEREST ON AM OUN T ADVANCED, THAT NOBODY HAD PREVENTED THE LENDERS TO CHARGE RENT FROM THE ASSESSEE , THAT THE D I RECTORS OF THE COMPANY HAD MANAGED THE AFFAIR IN THE MANNER HE WISHED, THAT THE REASONS GIVEN FOR NOT CHARGING INTEREST FROM THE DIRECTORS BY THE ASSESSEE HAD NO MERITS. FINALLY HE DISMISSED THE APPEAL FILED BY THE ASSES SEE . 4. DURING THE COURSE OF HEARING B EFORE US, AUTHORISED REPRESENTATIVE ( AR ) SUBMITTED THAT ASSESSEE HAD GIVEN DEPOSITS, THAT IT COULD GET SPACE FOR SHOWROOM WITHOUT ANY RENT FROM V INOD G UPTA (IND.) A ND V INOD G UPTA (HUF), THAT COMPANY HAD PASSED THE RESOL UTI O N IN THIS REGARD. DEPARTMENTAL REPRESENTATIVE(DR) SUPPORTED THE ORDER OF FAA AND ARGUED THAT THE DEPOSIT GIVEN TO BOTH THE ENTITIES WERE MORE OR LESS SAME OF THE PURCHASE PRICE OF THE PREMISES, THAT DIRECTORS HAD USED THE COMPANY FOR PAYING LESSER TAX ES. ITA/ 7277 /MUM/201 0 ,AY. 0 7 - 08 - BP TECHNO PROD UCTS 3 5. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL BEFORE US.WE FIND THAT VINOD GUPTA (I ND ) IS DIRECTOR OF THE COMPANY AND HE HAS MANAGES THE AFFAIRS OF THE COMPANY AND VINOD GUPTA ( HUF ) IN A PARTICULAR MANNER, THAT COMPANY WAS PAYING INT EREST ON THE AM OUN TS T AKEN AS LOAN FROM BOTH THE ENTITIES, THAT THE AO HAD ANALYSED THE MERGED ACCOUNTS, THAT AFTER CONSIDERING THE MERGED ACCOUNTS HE HAD DISALLOWED ONLY EXCESS INTEREST OF RS. 89,258/ - , THAT THE FAA HAD CONFIRMED THE ORDER OF THE AO, THAT NO REASON WAS GIVEN FOR NOT CHARGING RENT FROM THE ASSESSEE BY BOTH THE ENTITIES. CONSIDERING THE PECULIAR FACTS AND CIRCUMSTANCES OF THE CASE WE ARE OF THE OPINION THAT THE ORDER OF FAA DOES NOT SUFFER F ROM ANY LEGAL INFIRMITY THEREFORE UPHOLDING HIS ORD ER WE DECIDE THE EFFECTIVE G ROUND OF APPEAL AGAINS T THE ASSESSEE . AS A RESULT,APPEAL FILED BY THE A SSESSEE STANDS DISMISSED. . ORDER PRONOUNCED IN THE OPEN COURT ON 23 RD , JUNE ,2015. 23 , 2015 SD/ - SD/ - ( / JOGINDER SINGH ) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER / MUMBAI, /DATE: 23 .6. 2015 . . . JV . SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPEL LANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR A BENCH, ITAT, MUMBAI / , , . . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , / ITAT, MUMBAI.