Darvell India Pvt. Ltd., Kolkata V. DCIT, Circle - Siliguri, Siliguri

ITA 805/KOL/2011

• Counselvise Citation: 80523514 RSA 2011
• Duration Of Justice: 3 year(s) 2 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-07-2014
• Appeal Filed By: Assessee
• Bench Allotted: C
• Next Hearing Date: 03-06-2013
• Assessment Year: 2007-2008
• Appeal Filed On: 25-05-2011
• Court: TRIBUNAL
• Department Lawyers: MADHU MALATI GHOSH LD J
• Assessee Lawyers: SOMNATH GHOSH
• Keywords: Condonation of delay

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL, C BENCH: KOLKATA ( ) , 1 , BEFORE HONBLE SRI SHAMIM YAHYA, AM & HONBLE SRI GEORGE MATHAN, JM $ / ITA NO. 805/KOL/2011 A.Y 2007-08 M/S. DARVELL INDIA PVT. LTD PAN: AAACD 9423D % % - VERSUS - . DCIT, CIRCLE-1, SILIGURI ( ' / APPELLANT ) ( )*' / RESPONDENT ) ' / FOR THE APPELLANT/ASSESSEE /SHRI SOMNATH GHOSH, ADVOCATE )*' / FOR THE RESPONDENT/DEPARTMENT: SMT MADHU MALATI GHOSH, LD.JCIT/SR.DR / 0 /DATE OF HEARING: 17-07-2014 / 0 /DATE OF PRONOUNCEMENT:28/7/2014 / ORDER 1 , SHRI GEORGE MATHAN, JUDICIAL MEMBER THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS), SILIGURI IN APPEAL NO. 83/CIT(A)/SLG/09-10 DATED 04/01/2011 FOR THE ASSESSMENT YEAR 2007-08. 2. SHRI SOMNATH GHOSH, ADVOCATE, LEARNED AR REPR ESENTED ON BEHALF OF THE ASSESSEE AND SMT. MADHU MALTI GHOSH, LEARNED JCIT/SR.DR REPR ESENTED ON BEHALF OF THE REVENUE. 3. IN THE ASSESSEES APPEAL, THE ASSESSEE HAS RAIS ED FOLLOWING MODIFIED GROUNDS OF APPEAL:- 1) FOR THAT THE LD. COMMISSIONER OF INCOME TAX (AP PEALS) SILIGURI ERRED IN UPHOLDING THE ALLEGED DISALLOWANCE OF RS. 2.36,436/- RESORTED TO BY THE LD. DEPUTY COMMISSIONER OF INCOME TAX, CIRCL E 1, SILIGURI FOR NON- CHARGING OF INTEREST ON LOAN GIVEN TO ITS SISTER C ONCERN, DARVELL ESTATE (INDIA) PRIVATE LIMITED HOLDING THAT THE SAID TRAN SACTION IS NOT INCIDENTAL TO BUSINESS OF THE APPELLANT AND HIS PURPORTED FIN DINGS ON THAT BEHALF ARE WHOLLY ARBITRARY, UNWARRANTED, UNTENABLE AND PERVER SE. 2) FOR THAT THE LD. COMMISSIONER OF INCOME TAX (APP EALS) SILIGURI ACTED UNLAWFULLY IN UPHOLDING THE SPECIOUS ACTION OF THE LD. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1 WITHOUT CONSID ERING THAT THE INTEREST FREE LOAN GIVEN AS A MEASURE OF COMMERCIA L EXPEDIENCY TO ITS SISTER CONCERN WAS ALSO FOR MUTUAL BENEFIT IS FULL Y ALLOWABLE U/S. ITA NO. 805/KOL/2011-C-JM M/S. DARVELL INDIA PVT. L TD 2 36(1)(III) OF THE INCOME TAX ACT, 1961 AND THE IMPU GNED ACTION ON THAT ACCOUNT IS THOROUGHLY UNFOUNDED, ERRONEOUS AND PER VERSE. 4. THE APPEAL FILED BY THE ASSESSEE IS DELAYED BY 2 8 DAYS. THE ASSESSEE HAS FILED NECESSARY AFFIDAVIT EXPLAINING THE DELAY TO WHICH T HE LEARNED JCIT/SR.DR DID NOT RAISE ANY OBJECTION. CONSEQUENTLY, THE DELAY IN FILING THE A PPEAL STANDS CONDONED AND THE APPEAL IS BEING DISPOSED OFF ON MERITS. 5. THE ONLY ISSUE IN THE ASSESSEES APPEAL WAS AGAI NST THE ACTION OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IN CONFIRMING THE DISALLOWANCES OF THE INTEREST AND BANK CHARGES. 6. IT WAS THE SUBMISSION BY SHRI SOMNATH GHOSH, AD VOCATE, THE LEARNED AR FOR THE ASSESSEE THAT THE ASSESSEE IS A COMPANY, WHO IS DOI NG THE BUSINESS OF LAUNDRY, CAR HIRE AND RUNNING OF BAR. THE ASSESSEE HAD BORROWED FUNDS DU RING THE RELEVANT ASSESSMENT YEAR FROM THE BANKS AND HAD GIVEN INTEREST FREE LOAN TO THE SISTER CONCERN OF THE ASSESSEE OF AN AMOUNT OF RS. 37.52 LAKHS TO ITS SISTER CONCERN, M/S. DARVELL ESTATE (INDIA) PRIVATE LIMITED. IT WAS THE SUBMISSION THAT THE AMOUNT WAS GIVEN TO SISTER CON CERN WITH THE INTENTION OF OWNING A PORTION OF THE PROPERTY, WHICH WAS BEING PROPOSED T O BE CONSTRUCTED BY THE SISTER CONCERN IN KOLKATA. HOWEVER, THE SISTER CONCERN NAMELY, M/S. DARVELL ESTATE (INDIA) PRIVATE LIMITED WAS NOT ABLE TO OBTAIN THE PROPERTY FOR CONSTRUCTIO N AND CONSEQUENTLY, DECIDED TO PURCHASE A PROPERTY IN BANGALORE OF AN AREA OF 2400 SQ.FT. CO NSEQUENTLY, IT WAS AGREED BETWEEN THE ASSESSEE AND SISTER CONCERN THAT THE ASSESSEE WOULD BE GIVEN 500 SQ. FT OF SPACE OUT OF 2400 SQ. FT. FOR THE BUSINESS PURPOSE OF THE ASSESSEE. AN AGREEMENT WAS ENTERED BETWEEN THE ASSESSEE AND SISTER CONCERN THROUGH MEMORANDUM OF UNDERSTAN DING [MOU] DATED 08-06-2006 BY WHICH IT WAS AGREED THAT THE SISTER CONCERN WOULD NOT HAVE TO PAY INTEREST ON THE AMOUNT SO ADVANCED BY THE ASSESSEE AND THE ASSESSEE WOULD NOT HAVE TO PAY ANY RENT FOR ITS PORTION OF 500 SQ.FT SPACE FOR THE USE OF ITS BUSINESS OFFICE . IT WAS THE SUBMISSION THAT THE SISTER CONCERN HAD PURCHASED A PROPERTY BEING COMMERCIAL SPACE A T 8C, ALIPORE ROAD, KOLKATA-27 ON THE GROUND FLOOR. IN THE SAID PREMISES, THE ASSESSEE WAS PROVIDED 500 SQ.FT SPACE. IT WAS THE SUBMISSION THAT THE AO HAD TREATED THE INTEREST FRE E LOAN GIVEN BY THE ASSESSEE TO THE SISTER CONCERN IS NOT JUSTIFIABLE AND CONSEQUENTLY, DISAL LOWED THE FINANCE CHARGES IN RESPECT OF THE SAID LOAN GIVEN TO THE SISTER CONCERN BY THE ASSES SEE. IT WAS THE SUBMISSION BY HIM THAT THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAD CO NFIRMED THE ORDER OF THE AO HOLDING THAT IN VIEW OF THE PROVISIONS OF SECTION 36(1)(III ) OF THE ACT ON THE GROUND THAT THE INTEREST ITA NO. 805/KOL/2011-C-JM M/S. DARVELL INDIA PVT. L TD 3 WAS NOT PAID FOR ANY MONEY BORROWED FOR ITS OWN BUS INESS. IT WAS THE SUBMISSION THAT THE ASSESSEE DID NOT HAVE ANY BUSINESS ESTABLISHMENT IN KOLKATA AND INSTEAD OF TAKING A PROPERTY ON RENT, THE ASSESSEE HAD THOUGHT IT APPROPRIATE T O JOIN WITH THE SISTER CONCERN, WHO WAS IN THE BUSINESS OF REAL ESTATE IN ACQUIRING A COMMERCIAL P ROPERTY FOR ITS OWN PURPOSE IN KOLKATA FROM WHERE IT COULD OPERATE ITS OFFICE. IT WAS THE SUBM ISSION THAT SUBSEQUENTLY THE ASSESSEE HAD EVEN SHIFTED ITS REGISTERED OFFICE TO THE SAID AD DRESS AND WAS DOING ITS BUSINESS FROM THE SAID PREMISES. IT WAS THE SUBMISSION THAT THE LOAN HAVI NG BEEN GIVEN TO THE SISTER CONCERN AND THE LOAN HAVING BEEN TAKEN BY THE ASSESSEE FOR OBTAININ G 500 SQ.FT COMMERCIAL SPACE AT 8C ALIPORE ROAD, KOLKATA-27 AND THE SAID PREMISES WAS BEING USED BY THE ASSESSEE FOR ITS OWN BUSINESS. THUS, THE FINANCE CHARGES AS DISALLOWED BY THE AO AND AS CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ON THIS COUNT WAS LIABLE TO REVERSED. 7. IN REPLY, THE LEARNED JCIT/SR.DR HAS SUBMITTE D THAT BEFORE THE AO THE REASON GIVEN WAS FOR GIVING LOAN WAS FOR PURCHASE A PROPERTY. I T WAS THE SUBMISSION THAT SUBSEQUENTLY THE REASON WAS CHANGED FOR DEVELOPMENT OF THE PROPERTY . IT WAS THE SUBMISSION THAT ASSESSEE HAS NOT USED THE BORROWED FUNDS FOR ITS OWN BUSINESS AN D CONSEQUENTLY, THE FINANCE CHARGES FOR TAKING LOAN HAD BEEN RIGHTLY DISALLOWED BY THE AO AND CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS). SHE HAS VEHE MENTLY SUPPORTED THE ORDERS OF THE AO AND THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ). 8. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. A PERU SAL OF THE AFFIDAVIT FILED BY THE ASSESSEE IN RESPECT OF CONDONATION OF DELAY SHOWS T HAT THE ASSESSEES REGISTERED OFFICE IS AT 8/C, ALIPORE ROAD, KOLKATA-27. COPIES OF VARIOUS CO RRESPONDENCES THAT HAVE BEEN FILED BY THE ASSESSEE ALSO SHOW ITS REGISTERED OFFICE IS AT 8/C, ALIPORE ROAD, KOLKATA-27. THE ASSESSEE HAS CATEGORICALLY CLAIMED THAT THE ASSESSEE HAS GIVEN INTEREST FREE LOAN TO ITS SISTER CONCERN FOR ACQUIRING THE PREMISES AT KOLKATA. THE BUSINESS I NITIALLY WAS BEING CONDUCTED BY THE ASSESSEE AT SILIGURI AND BRANCH OFFICE AT DARJEELIN G. A PERUSAL OF THE ASSESSMENT ORDER IN THE CASE OF ASSESSEE FOR ASSESSMENT YEAR 2006-07 SHOWS THAT THE ADDRESS OF THE ASSESSEE IS AT SILIGURI. HOWEVER, FOR THE ASSESSMENT YEAR 2007-08 SHOWS THAT THE ADDRESS OF THE ASSESSEE IS AT 8/C, ALIPORE ROAD, KOLKATA-27. A PERUSAL OF THE MEMORANDUM OF UNDERSTANDING [MOU] BETWEEN THE ASSESSEE AND SISTER CONCERN, M/S. DARVE LL ESTATES (INDIA) PRIVATE LTD CLEARLY SHOWS THAT IN LIEU OF AN AMOUNT OF RS.35 LAKHS PR OVIDED BY THE ASSESSEE TO THE SISTER CONCERN, THE SISTER CONCERN HAS PROVIDED 500 SQ.FT COMMERCIAL SPACE OUT OF 2400 SQ.FT IN THE GROUND FLOOR AT 8/C, ALIPORE ROAD, KOL-27. THIS CL EARLY SHOWS THAT THE AMOUNT GIVEN TO THE ITA NO. 805/KOL/2011-C-JM M/S. DARVELL INDIA PVT. L TD 4 SISTER CONCERN WAS FOR THE BUSINESS PURPOSE OF THE ASSESSEE. THE AMOUNT HAVING BEEN USED FOR THE COMMERCIAL AND BUSINESS PURPOSE OF THE ASSESSEE IN SO FAR AS ASSESSEE HAS BEEN ABLE TO ACQUIRE 500 SQ.FT COMMERCIAL PREMISES IN KOLKATA. IT CLEARLY SHOWS THAT THE AMOUNT WAS GIVEN TO THE SISTER CONCERN FOR THE PURPOSE OF BUSI NESS OF THE ASSESSEE. IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT FINANCE CHARGES AS DISALLO WED BY THE AO AND AS CONFIRMED BY THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ARE UN SUSTAINABLE ON THE FACTS OF THE CASE. THIS GROUND OF ASSESSEES APPEAL SANDS ALLOWED. 9. IN THE RESULT, THE ASSESSEES APPEAL IN ITA NO. 805/KOL/2011 FOR THE ASSESSMENT YEAR 2007-08 IS ALLOWED AS STATED ABOVE. 4 THIS ORDER IS PRONOUNCED IN OPEN COURT ON DT 28/7/ 2014 SD/- SD/- / )7 87 / COPY OF THE ORDER FORWARDED TO: 1. . ' / THE APPELLANT : M/S. DARVELL INDIA PVT. LTD. 8C , ALIPORE ROAD, KOLKATA- 27. 2 )*' / THE RESPONDENT- DCIT, CIRCLE-1, SILIGURI 3. 4. . / THE CIT, ( )/ THE CIT(A) 5 . ) / DR, KOLKATA BENCH 6 . GUARD FILE . *7 )/ TRUE COPY, / BY ORDER, / ASSTT REGIST RAR ** PRADIP SPS ( , ) (SHAMIM YAHYA, ACCOUNTANT MEMBER) ( 1 , ) (GEORGE MATHAN, JUDICIAL MEMBER) ( (( ( 0 00 0 ) )) ) DATE 28/7/14