Super Auto Centre , New Delhi V. ITO, Ward- 28(1), New Delhi

ITA 7709/DEL/2018

• Counselvise Citation: [2019] 115 COUNSELVISE.COM (IT) 6805 (ITAT-DELHI)
• Duration Of Justice: 10 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-10-2019
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: SMC
• Assessment Year: 2014-2015
• Appeal Filed On: 04-12-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: EKTA VISHNOI
• Keywords: Business expenditure
• Section: 143(3); 142(1); 205; 143(2); 192

Judgement Text

PAGE 1 OF 8 IN THE INCOME TAX APPELATE TRIBUNAL DELHI BENCH SMC: NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER ITA NO. 7709/DEL/2018 A.Y.: 2014-15 SUPER AUTO CENTRE, VS. ITO, WARD-28(1), INDIAN OIL PETROLEUM PUMP, NEW DELHI SRINIWASPURI, RING ROAD, NEW DELHI 65 (PAN: AAPFS7207N) (APPELLANT) (RESPONDENT) ASSESSEE BY : SH. ROHIT TIWARI, ADV. DEPARTMENT BY : MS. EKTA VISHNOI, SR. DR. O R D E R THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 25.9.2018 OF THE LD. CIT(A)-10, NEW DELHI PERTA INING TO ASSESSMENT YEAR 2014-15. ORIGINALLY THE ASSESSEE HA S FILED THE 09 GROUNDS OF APPEAL RUNNING INTO 8 PAGES. BUT ON ASKIN G BY THE BENCH, ASSESSEE FILED THE CONCISE GROUNDS OF APPEAL WHICH READ AS UNDER:- 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ORDER PASSED BY THE LD. CIT(A) I S WRONG AND BAD IN LAW. 2. THAT THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN CONFIRMING THE ACTION OF THE AO OF DISALLOWING THE AMOUNT OF INTEREST RS. 12,28,800/- (12% OF RS. PAGE 2 OF 8 1,02,40,000) OUT OF INTEREST DEBITED TO PROFIT AND LO SS ACCOUNT AS PER THE PROVISIONS OF SECTION 36(1)(III) O F THE INCOME TAX ACT, 1961. 3. THAT THE AO & CIT(A) ERRED IN NOT APPRECIATING THAT THE AMOUNT OF RS. 1,02,40,000/- WAS GIVEN OUT OF TH E INTEREST FREE FUNDS AVAILABLE WITH THE COMPANY. 4. THAT THE AO & CIT(A) ERRED IN NOT APPRECIATING THAT THE DECISION OF HONBLE PUNJAB AND HARYANA HIGH COURT IN THE CASE OF ABHISHEK INDUSTRIES LTD. HAS BEEN OVERRULED BY HONBLE SUPREME COURT OF INDIA IN THE CASE OF MUNJAL SALES CORP. VS. CIT (2008) 298 ITR /168 TAXMANN. 43(SC) AND IN THE CASE OF HERO CYCLES (P) LTD. VS. CIT (CENTRAL) LUDHIANA (2015) 63 TAXMANN.COM 308 (SC)/[2015] 379 ITR 347 (SC) (2015) 281 CTR 481 (SC.). 2. THE FACTS RELATING TO THE CASE ARE THAT THE ASSES SEE FILED ITS RETURN OF INCOME AT RS. 8,42,030/- ON 19.9.2014. TH E CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY THROUGH CASS. NOTI CE U/S. 143(2) OF THE INCOME TAX ACT, 1961 (IN SHORT ACT) WAS ISS UED ON 28.8.2015 BY THE ITO, WARD 28(2), NEW DELHI AND THE SAME WAS DULY SERVED UPON THE ASSESEEE. SUBSEQUENTLY, ON RECEIPT OF CASE ON TRANSFER THE NOTICE U/S. 143(2) OF THE ACT WAS ALSO ISSUED ALONG WITH NOTICE U/S. PAGE 3 OF 8 142(1) OF THE ACT. THE MAIN ISSUE INVOLVED IN THE SCRUTINY PROCEEDINGS IN THIS CASE IS CLAIM OF INTEREST EXPENS ES DEBITED TO THE PROFIT AND LOSS ACCOUNT AND ITS ALLOWABILITY UNDER THE INCOME TAX ACT. AO ASKED THE ASSESSEE ABOUT THIS QUERY AND IN RESPO NSE TO THE SAME THE ASSESSEE REPLIED THAT RS. 1,02,40,000/- WAS PAID AS ADVANCE FOR PURCHASE OF COMMERCIAL PROPERTIES TO BE USED FOR FUTUR E PROJECTS OF INSTALLING PETROL PUMP AT VARIOUS PLACES IF APPROVED BY INDIAN OIL CORPORATION, NO INTEREST WERE CHARGED ON SUCH PAYMENT AS THEY WERE EXCLUSIVELY FOR BUSINESS PURPOSE. THE EXPLANATION O F THE ASSESSEE WAS REJECTED BY THE AO AND HE WAS OF THE VIEW THAT SINCE THE ASSESSEE FAILED TO PROVE ANY BUSINESS PURPOSE OF ADVANCES AGA INST PROPERTY DESPITE REPEATED SPECIFIC QUERIES ON THIS ISSUE, INTE REST COMPONENTS TOWARDS ADVANCE OF RS. 1,02,40,000/- WAS DISALLOWED AS PER THE PROVISIONS OF SECTION 36(1)(III) OF THE ACT. FOR PURP OSE OF DISALLOWANCE AVERAGE RATE OF INTEREST @ 12% PER ANNUM WAS CONSIDERE D AND RS.12,28,800/- (@12% OF RS. 10,02,4000/-) WAS DISALL OWED OUT OF INTEREST DEBITED TO THE PROFIT AND LOSS ACCOUNT AS PE R THE PROVISION OF SECTION 36(1)(III) AND ADDED BACK TO THE INCOME OF THE ASSESSEE BY COMPLETING THE ASSESSMENT AT RS. 20,70,830/- U/S. 1 43(3) OF THE ACT VIDE ORDER DATED 30.11.2016. AGAINST THE ASSESSMENT ORDER, ASSESSEE APPEALED BEFORE THE LD. CIT(A), WHO VIDE HIS IMPUGNED ORDER DATED 25.9.2018 DISMISSED THE APPEAL OF THE ASSESSEE. AGG RIEVED WITH THE IMPUGNED ORDER DATED 25.9.2018 ASSESSEE IS IN APPEAL BEFORE THE TRIBUNAL. 3. AT THE TIME OF HEARING LD. COUNSEL FOR THE ASSESSEE REITERATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL. I N SUPPORT OF HIS CONTENTION HE HAS FILED A PAPER BOOK CONTAINING PAGE S 1-167 IN WHICH PAGE 4 OF 8 HE HAS ATTACHED THE COY OF MEMORANDUM OF APPEAL TO THE APPELLATE TRIBUNAL (FORM NO. 36); STATEMENT OF FACTS BEFORE THE TRIBUNAL; GROUNDS OF APPEAL BEFORE THE TRIBUNAL; APPELLATE ORDER / IMPUGNED ORDER PASSED BY CIT(A); ASSESSMENT ORDER U/S. 143(3) P ASSED BY THE RESPONDENT/ITO; STATEMENT OF FACTS BEFORE CIT(A); GR OUNDS OF APPEAL BEFORE CIT(A); DETAILS OF FACTS / GROUNDS RELATED TO THE APPEAL FILED BEFORE THE CIT(A); APPLICATION FOR AMENDMENT FILED BEFORE THE CIT(A) ALONGWITH AMENDED STATEMENT OF FACTS AND GROUNDS OF APPEAL; SUBMISSION DATED 22.8.2016 FILED BY THE AR OF THE A SSESSEE/APPELLANT BEFORE THE RESPONDENT/AO; DETAILS OF UNSECURED LOANS , SUNDRY CREDITORS AND SECURITY RECEIVED FOR THE YEAR 2013-14 AND 2014-15; COMPLETE SET OF BALANCE SHEET PERTAINING TO FINANC IAL YEAR 2012-13 AND 2013-14 ALONGWITH AUDIT REPORT; ACKNOWLEDGEMENT OF ITR FOR ASSESSMENT YEAR 2014-15; ORDERS / AUTHORITIES RELIED UP ON AND COPY OF SECTION 36 OF THE INCOME TAX ACT, 1961. HE REQUEST ED THAT THE ADDITION IN DISPUTE MAY BE DELETED BY ACCEPTING T HE APPEAL OF THE ASSESSEE. 4. ON THE CONTRARY, LD. DR RELIED UPON THE ORDERS OF TH E AUTHORITIES BELOW. IN ADDITION TO THE ARGUMENTS ADVANCED BY THE LD. DR, LD. DR HAS ALSO FILED THE WRITTEN SUBMISSIONS AND CITED SOM E JUDGMENTS TO SUPPORT THE IMPUGNED ORDER WHICH ARE REPRODUCED AS UN DER:- SUB: WRITTEN SUBMISSION IN THE ABOVE CASE- REG. IN THE ABOVE CASE, IT IS HUMBLY SUBMITTED THAT THE FOLLOWING DECISIONS MAY KINDLY BE CONSIDERED WITH REGARD TO DISALLOWANCE U/S 36(1)(III) ON ACCOUNT OF PAGE 5 OF 8 INTEREST FREE LOANS GIVEN TO DIRECTORS/ PARTNERS OR THEIR CLOSE RELATIVES: 1. PUNJAB STAINLESS STEEL INDS. VS CIT [2011) 196 TAXMAN 404 (DELHI)/[2010) 324 ITR 396 (DELHI) IN THIS CASE THERE WAS ABSOLUTELY NO FINDING RECORDED BY TRIBUNAL THAT INTEREST FREE ADVANCES WERE MADE BY ASSESSEE TO SISTER CONCERN FOR ITS BUSINESS PURPOSES . IT WAS ALSO NOTICED THAT ADVANCES WERE EXTENDED OUT OF BORROWED FUNDS AND NOT OUT OF ANY CREDIT BALANCE AVAILABLE WITH ASSESSEE-FIRM. HON'BLE DELHI HIGH COURT HELD THAT IMPUGNED ORDER PASSED BY AUTHORITIES BELOW WAS TO BE UPHELD. 2. THUKRAL REGAL SHOES VS CIT [2016] 72 TAXMANN.COM 192 (PUNJAB & HARYANA)/[2016) 241 TAXMAN 361 (PUNJAB & HARYANA)/[2017) 391 ITR 119/(PUNJAB & HARYANA)/[2016) 290 CTR 596 (PUNJAB & HARYANA) (COPY ENCLOSED) WHERE HON'BLE PUNJAB & HARYANA HIGH COURT HELD THAT WHERE ASSESSEE-FIRM FAILED TO ESTABLISH THAT PROPERTIES PURCHASED BY ITS PARTNERS WERE PUT TO USE BY FIRM, DEDUCTION ON INTEREST EXPENDITURE ON BORROWED FUND COULD NOT BE ALLOWED IN VIEW OF PROVISO TO SECTION 36(1 )(III). 3. CIT V. CORNERSTONE EXPORTS (P.) LTD. (238 TAXMAN 465) (GUJARAT) (COPY ENCLOSED) WHERE PAGE 6 OF 8 HON'BLE GUJARAT HIGH COURT HELD THAT WHERE ASSESSEE BORROWED FUNDS AT HIGHER RATE, ACTION OF ASSESSEE TO MAKE ADVANCES TO GROUP COMPANIES AT A LOWER RATE OF INTEREST COULD NOT BE ANY BUSINESS EXPENDITURE. DISALLOWANCE OF DIFFERENTIAL INTEREST WAS JUSTIFIED. 4. ABHISHEK INDUSTRIES LTD. VS CIT [2006] 156 TAXMAN 257 (PUNJAB & HARYANA)/[2006] 286 ITR 1 (PUNJAB & HARYANA)/[2006] 205 CTR 304 (PUNJAB & HARYANA) (COPY ENCLOSED) WHERE HON'BLE PUNJAB & HARYANA HIGH COURT HELD THAT ONCE IT IS BORNE OUT FROM RECORD THAT ASSESSEE HAD BORROWED CERTAIN FUNDS ON WHICH LIABILITY TO PAY TAX IS BEING INCURRED AND ON OTHER HAND, CERTAIN AMOUNTS HAD BEEN ADVANCED TO SISTER CONCERNS OR OTHERS WITHOUT CARRYING ANY INTEREST AND WITHOUT ANY BUSINESS PURPOSES, INTEREST TO EXTENT THAT ADVANCE HAD BEEN MADE WITHOUT CARRYING ANY INTEREST IS TO BE DISALLOWED UNDER SECTIO N 36(1)(III). 5. CIT VS. R MOHAN (2011-TIOL-687-HC-MAD-IT) (COPY ENCLOSED) WHERE HON'BLE MADRAS HIGH COURT HELD THAT THE ASSESSEE IS NOT ENTITLED TO CLAIM INT EREST EXPENDITURE ON THE BORROWED FUNDS WHICH WERE DIVERTED TO NON-BUSINESS OBJECTS. 5. I HAVE HEARD BOTH THE PARTIES AND PERUSED THE REC ORDS ESPECIALLY THE ORDERS OF THE AUTHORITIES BELOW ALONG WITH THE CONTENTION OF THE RIVAL SIDES AS WELL AS THE PAPER BO OK FILED CONTAINING PAGE 7 OF 8 PAGES 1-167, AS MENTIONED ABOVE AND THE WRITTEN SUBM ISSIONS FILED BY THE LD. DR. I AM OF THE VIEW THAT THE MAIN ISS UE INVOLVED IN THE PRESENT APPEAL IS WHETHER THE CLAIM OF INTEREST EXPEN SES DEBITED TO THE PROFIT AND LOSS ACCOUNT IS ALLOWABLE TO THE ASSE SSEE UNDER THE INCOME TAX ACT, 1961 AS A BUSINESS EXPENSES U/S. 36 (1)(III) OF THE ACT OR NOT. AFTER GOING THROUGH THE WRITTEN SUBMISSIO NS FILED BY BOTH THE PARTIES AS WELL AS DOCUMENTARY EVIDENCES, I AM OF THE VIEW THAT BEFORE THE AO ASSESSEE HAS NOT SUBSTANTIATED THE CL AIM WHILE FILING ANY RELEVANT DOCUMENTARY EVIDENCES AND THE AO DISAL LOWED THE CLAIM OF THE ASSESSEE U/S. 36(1)(III) OF THE ACT AND DISA LLOWED THE INTEREST AMOUNTING TO RS. 12,28,800/- @12% OF RS. 1,02,40,000 /- AND ADDED THE SAME TO THE INCOME OF THE ASSESSEE. LD. CIT(A) , AFTER CONSIDERING THE SUBMISSIONS FILED BY THE ASSESSEE ALONGWITH DOC UMENTARY EVIDENCES HAS ALSO DISMISSED THE APPEAL OF THE ASSE SSEE AND UPHELD THE ASSESSMENT ORDER BY HOLDING THAT THE ASSESSEE F AILED TO PROVE ANY BUSINESS PURPOSE OF ADVANCE GIVEN AGAINST PROPERTY AND THEREFORE, THE AMOUNT OF RS. 12,28,8000/- @ 12% OF RS. 1,02,40, 000/- WAS DISALLOWED OUT OF INTEREST EXPENSES DEBITED TO THE P ROFIT AND LOSS ACCOUNT. LD. CIT(A) HAS ALSO HELD THAT ASSESSEE HA S NOT FURNISHED THE DETAILS OF UNSECURED LOAN WHICH WAS INTEREST FREE. MOREOVER, THE AO HAS CONSIDERED INTEREST FREE UNSECURED LOAN AS A SOURC E FOR INTEREST FREE ADVANCE GIVEN AMOUNTING TO RS. 20,56,950/- AND FINALLY REJECTED THE CONTENTION RAISED BY THE ASSESSEE AND THE LD. CIT (A) HAS RIGHTLY UPHELD THE ORDER OF THE ASSESSING OFFICER IN WHICH TH E AO DISALLOWED THE AMOUNT OF RS. 12,28,800/-. 5.1 AFTER GOING THROUGH THE CONTENTION IN THE GROUNDS RAISED AS WELL AS DOCUMENTARY EVIDENCES FILED BY THE ASSESSEE IN TH E SHAPE OF PAPER PAGE 8 OF 8 BOOK ALOGNWITH THE SUBMISSIONS OF THE LD. DR, I AM O F THE VIEW THAT NO INTERFERENCE IS CALLED FOR IN THE WELL REASONED ORDER OF THE LD. CIT(A), BECAUSE THE ASSESSEE HAS NOT GIVEN ANY DETA IL OF UNSECURED LOAN WHICH WAS NECESSARY AND OTHER DOCUMENTARY EVIDENC E FOR SUBSTANTIATING THE CLAIM BEFORE THE REVENUE AUTHORITI ES, ESPECIALLY BEFORE THE AO AND LD. CIT(A) AND BEFORE THE TRIBUNAL . THEREFORE, KEEPING IN OF THE FACTS AND CIRCUMSTANCES OF THE CA SE AS EXPLAINED ABOVE, I UPHOLD THE ORDER OF THE LD. CIT(A) ON THE I SSUE IN DISPUTE AND REJECT THE GROUND RAISED BY THE ASSESSEE. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED ON 18-10-2019. SD/- [H.S. SIDHU] JUDICIAL MEMBER DATE:18/10/2019 SRB COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4.CIT (A) 5. DR , ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES