ADDL CIT 17(2), MUMBAI V. ANUYA JAYANT MAHISKAR, MUMBAI

ITA 845/MUM/2013

• Counselvise Citation: 84519914 RSA 2013
• Duration Of Justice: 1 year(s) 10 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2014
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 25-11-2014
• Assessment Year: 2006-2007
• Appeal Filed On: 31-01-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ASGHAR ZAIN
• Assessee Lawyers: A K GHOSH

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL A , BENCH MUMBAI , BEFORE SHRI R.C.SHARMA , A M & SHRI SANJAY GARG , J M ITA N O. 845 / MUM/20 1 3 ( ASSESSMENT YEAR : 20 0 6 - 20 07 ) ADCIT, CENTRAL CIRCLE - 36, MUMBAI - 400 020 VS. SMT. ANUYA JAYANT MAHAISKAR, 501, DATTASHRAM, HINDU COLONY, LANE NO.1, DADAR (E), MUMBAI - 14 PAN/GIR NO. : A JDPM 3145 L ( APPELLANT ) .. ( RESPONDENT ) /REVENUE BY : SHRI ASGHAR ZAIN /ASSESSEE BY : SHRI A.K.GHOSH DATE OF HEARING : 25 TH NOVEMBER , 2014 DATE OF PRONOUNCEMENT 17 TH DECEMBER , 201 4 O R D E R PER R.C.SHARMA (A.M) : TH IS IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF CIT(A) DATED 20 - 11 - 2012 FOR THE ASSESSMENT YEAR 200 6 - 07 , IN THE MATTER OF ORDER PASSED U/S.143(3) OF THE ACT . 2. THE REVENUE IS AGGRIEVED FOR DELETING THE DISALLOWANCE OF INTEREST EXPENSES U/S.36(1)(III) OF THE ACT AND NOT DIRECTING THE AO TO MAKE DISALLOWANCE U/S.14A OF IT.ACT. 3. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. DURING THE COURSE OF SCRUTINY ASSESSMENT, T HE AO FOUND THAT ASSESSEE HAS TAKEN A LOAN FROM BANK WHICH WAS INVESTED IN M/S IDEAL ROAD BUILDERS PVT. LTD. (IN SHORT IRB) . THE ASSESSEE WAS RECEIVING TOLL COLLECTION/SUPERVISION ITA NO. 845 / 1 3 2 CONTRACT FROM M/S IRB FOR THEIR BOT PROJECTS. THE AO ASKED THE ASSESSEE TO EXPLAIN WHY INVESTMENT SHOULD NOT BE DISALLOWED AS THE INTEREST HAS BEEN PAID FOR LOAN WHICH WAS NOT USED FOR THE PURPOSE OF BUSINESS. THE ASSESSEE REPLIED THAT THE PURPOSE OF INVESTMENT WAS NOT TO EARN DIVIDEND BUT WAS FOR THE PURPOSE OF BUSINESS. THE AS SESSEE HAS BEEN RECEIVING TOLL COLLECTION/ SUPERVISION CONTRACTS FROM IRB FOR THE BUILD, OPERATE AND TRANSFER (BOT) PROJECTS. THE INVESTMENT IN IRB ENABLED ASSESSEE TO GET CONTRACT FOR TOLL COLLECTION. THE ASSESSEE HAD EARNED SUBSTANTIALLY MORE TAXABLE INCO ME THAN THE INTEREST PAID AND HENCE THE INTEREST PAID SHOULD BE ALLOWED. THE AO REJECTED THE EXPLANATION OF THE ASSESSEE AND DISALLOWED INTEREST CLAIM OF ASSESSEE. 4. BY THE IMPUGNED ORDER, CIT(A) DELETED THE DISALLOWANCE OF INTEREST AFTER HAVING THE FOLLO WING OBSERVATIONS : - 4.2 I HAVE CONSIDERED THE SUBMISSIONS OF THE APPELLANT AND THE ORDER OF THE AO. THE ABOVE FACTS ARE NOT DISPUTED BY THE AO. THE SANCTION LETTER OF THE BANK DATED FEBRUARY 24, 2004 MENTIONS IN ITEM (H) OF PAGE 3 OF THE ANNEXURE TO THE AFORESAID LETTER AS UNDER : 'H) COPY OF ORDER FOR ALLOTMENT OF WORK OF 4 - LANNING OF OLD MUMBAI - PUNE HIGHWAY AND MAINTENANCE OF EXPRESS HIGHWAY TO IDEAL ROAD BUILDERS PVT. LTD.' 4.3 FURTHER, IN THE ITEM NO (F)(III) OF PARA 9 OF THE SANCTION LETTER IT IS MENTIONED AS UNDER: (III) IN THE EVENT OF M / S ANUYA ENTERPRISES FAILING TO EXECUTE THE WORK OF TOLL COLLECTION FOR ANY REASON WHATSOEVER, UNDERTAKING TO A) REPAY THE SECURITY DEPOSIT OF RS.300 LAKHS KEPT BY MJS ANUYA ENTERPRISES WITH THEM DIRECTLY TO THE BANK FOR LIQUIDATION OF THE TERM LOAN AND / OR B) OFFER THE SAID RIGHTS OF TOLL COLLECTION TO THE BANK.' 4.4 - THE ABOVE CLEARLY SHOWS THAT THE AMOUNT WAS BORROWED BY THE APPELLANT'S PROPRIETOR FIRM M / S ANUYA ENTERPRISES AND GIVEN TO IRB IN LIEU OF THE TOLL COLLECTION RIGHT THAT THE APPELLANT WAS GIVEN BY IRB, HENCE, THERE IS NO DOUBT THAT THE AMOUNT WAS BORROWED FOR THE PURPOSE OF BUSINESS, IN FACT, THE APPELLANT HAS EARNED INCOME EVEN ITA NO. 845 / 1 3 3 AFTER PAYING INTEREST TO THE BANK AS CAN BE SEEN FROM THE FO LLOWING CHART: Y.E.31.3.2003 AY 2003 - 04 Y.E.31.3.2005 A.Y. 2004 - 05 Y.E.31.3.2005 A.Y.2005 - 06 Y.E31.3.2006 A.Y.2006 - 07 Y.E.31.3.2007 AY 2007 - 08 TURNOVER (TOLL COLLECTION/TOLL COLLECTION CHARGES RCD 43171 42415 75091 102731 12593 NET PROFIT BEFORE INTEREST TO KJSB 655 3339 10241 10297 2396 INT.PAID TO KALYAN JANATA SAHAKARI BANK 0 64 3494 1820 97 NET PROFIT AFTER INTEREST 655 3276 6747 8477 2298 4,5 FURTHER, THE ISSUE OF DISALLOWANCE OF THE INTEREST CAME UP ONLY FOR AY 04 - 05; AY 06 - 07 AND AY 07 - 08 BUT N OT FOR AY 05 - 06 WHEREIN ON THE SAME FACTS, THE AO HAS ACCEPTED THE INTEREST PAID, 4.6 IT IS IMMATERIAL IF THE APPELLANT HAS SHOWN THE AMOUNT TO IRB AS INVESTMENT AS THE LOAN WAS TAKEN AND INVESTED IN IRB FOR THE PURPOSE OF GETTING CONTRACT FROM IRB AND T HEREFORE THE INTEREST PAYMENT ON SUCH LOAN ALSO WAS F OR THE OF B USINESS. THEREFORE, THE DISALLOWANCE OF INTEREST U/S 36(1 ) ( III ) IS DELETED AND THE GROUND OF APPEAL OF THE APPELLANT IS ALLOWED. 5. AGAINST THE ABOVE ORDER OF CIT(A), THE REVENUE IS IN FUR THER APPEAL BEFORE US. 6. WE HAVE CONSIDERED RIVAL CONTENTIONS, CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AND FOUND FROM THE RECORD THAT THE ASSESSEE IS A PROPRIETORY CONCERN, ENGAGED IN THE BUSINESS OF TOLL COLLECTION. THE ASSESSEE HAD BO RROWED RS. 3 CRORES FROM BANK ON 26 - 3 - 2004 AND THE AMOUNT WAS INVESTED M/S IRB IN THE FORM OF ITS SHARES . M/S IRB WAS AWARDED THE CONTRACT OF FOUR LANNING AND IMPROVEMENT OF MUMBAI - PUNE SECTION OF NH4 IN 2004 ON BOT BASIS. IRB IN TURN ENTERE D TO TOLL COLL ECTION AGREEMENT AND ASSESSEE WAS TO COLLECT THE TOLL ON KHALA P UR S HEDUNG SECTOR. THUS, T O OBTAIN THE TOLL COLLECTION CONTRACT OF MUMBAI - PUNE PROJECT, ASSESSEE HAD INVESTED IN IRB . THE ASSESSEE BORROWED RS.3 CRORES FROM KALYAN JANTA SAHAKARI BANK LTD AND INVESTED IN IRB. THE ASSESSEE GOT THE FOLLOWING CONTRA CTS FROM IRB DURING THE RELEVANT ASSESSMENT YEAR 2005 - 06 UNDER CONSIDERATION AND THE TOLL RECEIP TS ARE AS UNDER: ITA NO. 845 / 1 3 4 TOLL COLLECTION FOR NKT TOLL TOLL RECEIPTS IN CR. ORIGINAL SPV CO.:NKT TOLL ROAD PRI VATE LIMITED 7.13 TOLL COLLECTION CONTRACTOR:IRB 7.35 TOLL COLLECTION SUB - CONTRACTOR : ANUYA ENTERPRISES 7.73 TOLL COLLECTION FOR KHALAPUR SHEDUNG TOLL ORIGINAL SPV CO.:NKT TOLL ROAD PRIVATE LIMITED TOLL COLLECTION CONTRACTOR:IRB TOLL COLLECTION SUB - CONTRACTOR:ANUYA ENTERPRISES 2.53 THUS, THE MONEY WAS TAKEN ON INTEREST WAS INVESTED PRIMARILY FOR EARNING TOLL COLLECTION INCOME WHICH WAS LIABLE TO TAX. DURING THE YEAR UNDER CONSIDERATION THE ASSESSEE HAS EARNED INCOME OF RS. 1.02 CRORES AS A TOLL COLLECTION AND AFTER INCURRING ALL EXPENDITURE INCLUDING INTEREST PAID TO BANK, THE ASSESSEE HAS EARNED NET TAXABLE PROFIT OF RS. 84.77 LAKHS. WE ALSO FOUND THAT THE BANK HAS GIVEN LOAN TO THE ASSESSEE ON THE BASIS OF ALLOTMENT OF WORK OF FOUR LANNING OF OL D MUMBAI - PUNE HIGHWAY AND MAINTENANCE OF EXPRESS HIGHWAY. AS PER TERMS AND CONDITIONS OF THE SANCTION LETTER IN THE CASE OF FAILING TO EXECUTE THE WORK FOR TOLL COLLECTION FOR ANY REASONS, THE ASSESSEE WAS REQUIRED TO REPAY THE SECURITY DEPOSIT OF RS. 3 CRO R E S DIRECTLY TO THE BANK FOR THE LIQUIDATION OF THE TERM LOAN. FURTHER AS PER THE TERMS OF THE LOAN AGREEMENT, THE ASSESSEE HAS TO OFFER THE SAID RIGHT OF TOLL COLLECTION TO THE BANK. IN TERMS OF THE ABOVE SANCTION LETTER OF THE BANK THE CIT(A) ALSO CATEGO RICALLY RECORDED A FINDING THAT ON THE BASIS OF INVESTMENT OF RS. 3 CRORES IN IRB, THE ASSESSEE HAS GOT TOLL COLLECTION RIGHT FROM IRB . THUS, IT IS CLEAR THAT LOAN WAS TAKEN FOR THE PURPOSE OF GETTING CONTRACT OF TOLL COLLECTION FROM IRB AND, THEREFORE, THE INTEREST PAYMENT ON SUCH LOAN WAS ALSO FOR THE PURPOSE OF BUSINESS. ACCORDINGLY, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR DELETING THE DISALLOWANCE INTEREST MADE BY THE AO . MERELY BECAUSE THE INVESTMENT WAS MADE IN THE FORM OF SHARES, WILL NOT DISENTITLE THE ITA NO. 845 / 1 3 5 ASSESSEE S CLAIM OF INTEREST EXPENDITURE WHEN THE FUND WAS UTILIZED FOR EARNING TAXABLE INCOME IS RS. 84.77 LAKHS. THE FINDINGS RECORDED BY CIT(A) HAS NOT BEEN CONTROVERTED BY DEPARTMENT BY BRINING ANY POSITIVE MATERIAL ON RECORD. ACCORDINGLY, WE DO NO T FIND ANY REASON TO INTERFERE IN THE FINDINGS OF CIT(A). 7 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 17 /12 / 201 4 . 17 /12 / 2014 SD/ - SD/ - ( ) ( SANJAY GARG ) ( ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 17 /12 /2014 /PKM , PS COPY OF THE ORDER FORWARDED TO : / BY ORDER, ( ASSTT. REGISTRAR) / ITAT, MUMBAI 1. / THE APPELLANT 2. / THE RESPONDENT. 3. / THE CIT(A), MUMBAI. 4. / CIT 5. / DR, ITAT, MUMBAI 6. GUA RD FILE. //TRUE COPY//