Adani Properties Pvt. Ltd., Ahmedabad V. The Dy.CIT.,Circle-1, Ahmedabad

ITA 881/AHD/2011

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 89510 (ITAT-AHMEDABAD)
• Duration Of Justice: 4 year(s) 2 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-06-2015
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 25-05-2015
• Assessment Year: 2007-2008
• Appeal Filed On: 23-03-2011
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: VIJAY RANJAN
• Keywords: Commercial expediency

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD C BENCH BEFORE: S H RI RAJPAL YADAV , JUDICIAL MEMBER AND SHR I ANIL CHATURVEDI , ACCOUNTANT MEMBER ADANI PROPERTIES PVT. LTD, 8 TH FLOOR, SHIKHAR , NR. NAVRANGPURA, AHMEDABAD PAN: AABCA3182H (APPELLANT) VS DCIT, CIRCLE - 1, AHMEDABAD (RESPONDENT) ASSESSEE BY: S H RI VIJAY RANJAN , A.R. REVENUE BY: S H RI NIMESH YADAV , SR.D.R DATE OF HEARING : 25 - 05 - 2 015 DATE OF PRONOUNCEMENT : 16 - 06 - 2 015 / ORDER P ER : RAJPAL YADAV , JUDICIAL MEMBER : - THE PRESENT TWO APPEALS ARE DIRECTED AT THE INSTANCE OF ASSESSEE AGA I N ST SEPARATE ORDERS OF EVEN DATE I.E. 18 - 02 - 2011 , PASSED BY LD. COMMISSIONER OF INCOME TAX(A) - VI, AHMEDABAD IN ASSESSMENT YEARS 2006 - 07 AND 2007 - 08 I T A NO S . 869 & 881 / A HD/20 11 A SSESSMENT YEAR 200 6 - 07 & 07 - 08 I.T.A NO. 869&881 /AHD/20 11 A.Y. 2006 - 07 & 2007 - 08 PAGE NO ADAN I PROPERTIES PVT. LTD. VS. DCIT 2 2. THE ISSUES INVOLVED IN BOTH THE A PPEALS ARE COMMON, THEREFORE, WE HEARD THEM TOGETHER AND DEEM IT APPROPRIATE TO DISPOSE OFF THEM BY THIS COMMON ORDER. 3. IN ASSES SMENT YEAR 2006 - 07, ASSESSEE HAS TAKEN FIVE GROUNDS OF APPEAL, OUT OF WHICH LEARNED COUNSEL FOR THE APPELLANT DID NOT PRESS GROUND NO S . 1, 2, & 5. GROUND NO. 1 & 5 ARE GENERAL GROUNDS OF APPEAL, THEY OTHERWISE DO NOT CALL FOR RECORDING OF ANY SPECIFIC FINDING. IN GROUND NO. 2, ASSESSEE HAS CHALLENGED D ISALLOWANCE OF EXPENSES AT RS. 3 7,592/ - . IT WAS DISALLOWED OUT OF THE CLA IM FOR PRIOR PERIOD EXPENSES. LEARNED COUNSEL FOR THE ASSESSEE DID NOT PRESS THIS GROUND KEEPING IN VIEW THE SMALLNESS OF AMOUNT INVOLVED. IN VIEW OF THIS, ALL THESE GROUNDS ARE TREATED AS REJECTED. 4. IN GROUND NO. 4, ASSESSEE HAS CHALLENGED CHARGING OF INTEREST U/S. 234A, B, C, & D. LEARNED COUNSEL FOR THE ASSESSEE AT THE VERY OUTSET SUBMITTED THAT CHARGING OF INTEREST IS CONSEQUENTIAL IN NATURE, THEREFORE , THIS GROUND ALSO DOES N OT REQUIRE ANY SPECIFIC FINDING, IT IS REJECTED. 5. GROUND NO. 3 IS CO MMON WITH SOLITARY SUB STANTIAL GROUND OF APPEAL IN ASSESSMENT YEAR 2006 - 07. IN THESE GROUNDS OF APPEAL, GRIEVANCE OF THE ASSESSEE IS THAT LD. COMMISSIONER OF INCOME TAX(A) HAS ERRED IN CONFIRMING THE DISALLOWANCES OF INTEREST EXPENSES AMOUNTING TO RS. 44, 65,790/ - AND RS. 46,76,672/ - IN ASSESSMENT YEAR 2006 - 07 AND 2007 - 08 RESPECTIVELY. 6. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE HAS FILED ITS RETURN OF INCOME ON 22 - 11 - 2006 AND 05 - 10 - 2007 DECLARING A LOSS AT RS. 21,98,810/ - AND RS. 96,91,459/ - IN ASS ESSMENT YEAR 2006 - 07 AND 2007 - 08 I.T.A NO. 869&881 /AHD/20 11 A.Y. 2006 - 07 & 2007 - 08 PAGE NO ADAN I PROPERTIES PVT. LTD. VS. DCIT 3 RESPECTIVELY. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY ASSESSMENT AND NOTICES U/S. 143(2) OF THE INCOME TAX ACT WERE ISSUED ON 09 - 10 - 2007 AND 18 - 09 - 2008 WHICH WERE DULY SERVED UPON THE ASSESSEE IN ASSESSMENT YEAR 2006 - 07 AND 2007 - 08 RESPECTIVELY. ON SCRUTINY OF THE ACCOUNTS, IT REVEALED TO THE ASSESSING OFFICER THAT ASSESSEE HAD TAKEN A LOAN TO THE TUNE OF RS. 39.11 CRORE IN ASSESSMENT YEAR 2006 - 07 AND HAS PAID INTEREST AT RS. 44,65,790/ - ON SUCH LOANS. ON DEEPE R SCRUTINY, HE FOUND THAT ASSES SEE HAD ADVANCED LOANS OF RS. 23.59 CRORE TO THE SISTER CONCERN WITHOUT CHARGING ANY INTEREST. HENCE, IN THE OPINION OF ASSESSING OFFICER, ASSESSEE HAS DIVERTED INTEREST BEARING FUNDS TO THE SISTER CONCERN WITHOUT CHARGING I NTEREST AND WITHOUT ANY PURPOSE OF T HE BUSINESS. IN OTHER WORDS, THE INTEREST BEARING FUNDS WERE USED FOR N ON - BUSINESS PURPOSES, THEREFORE, THE INTEREST EXPENSES ARE NOT ADMISSIBLE TO THE ASSESSEE. HE ISSUED A NOTICE VIDE ORDER SHEET ENTRY 22 - 12 - 2008. T HE ASSESSEE HAS SUBMITTED ITS EXPLANATION VIDE LETTER DATED 26 - 11 - 2008. IT WAS CONTENTED THAT ASSESSEE HAS INTEREST FREE FUNDS OF RS. 23.75 CRORE WHICH IS MORE THAN LOANS GIVEN TO THE SISTER CONCERN AND THEREFORE NO DISALLOWANCE OUGHT TO BE MADE. 7. IN ASSESSMENT YEAR 2007 - 08, IT REVEALED TO THE ASSESSING OFFICER THAT ASESSEE HAS DEBITED INTEREST EXPENDITURE OF RS. 46,76,972/ - . THE OPENING BALANCE OF THE UNSECURED LOAN WAS RS. 39.41 CRORE WHICH WAS ENHANCED TO RS. 73, 11,37,602/ - . THUS, THERE WAS AN IN CREASE IN THE UNSECURED LOAN AMOUNTS , SIMULTANEOUSLY THE AMOUNTS IN ADVANCES GIVEN TO SISTER CONCERN WITHOUT CHARGING INTEREST HAV E ALSO BEEN INCREASED FROM RS . 23,75,00,209/ - TO RS. 1557778397/ - . THE ASSESSING OFFICER DISALLOWED THE INTEREST EXPENSES CLA IMED BY THE ASSESSEE. I.T.A NO. 869&881 /AHD/20 11 A.Y. 2006 - 07 & 2007 - 08 PAGE NO ADAN I PROPERTIES PVT. LTD. VS. DCIT 4 8. THE APPEAL TO THE COMMISSIONER OF INCOME TAX (APPEALS) DID NOT BRING ANY RELIEF TO THE ASSESSEE. 9. WITH THE ASSISTANCE OF LD. REPRESENTATIVES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. THERE IS NO DISPUTE WITH REGARD TO THE P OSITION OF LAW THAT SECTION 36(1)(III) OF THE INCOME TAX ACT PROVIDE ALLOWANCES OF INTEREST EXPENSES TO AN ASSESSEE IN RESPECT OF CAPITAL BORROWED , IF IT FULFILLS THE CONDITIONS ENUMERATED IN THE PROVISION NAMELY; (A) THE CAPITAL MUST HAVE BEEN BORROWED (B ) INTEREST SHOULD HAVE BEEN PAYABLE. (C) BORROWING SHOULD MADE FOR THE PURPOSE OF BUSINESS. IN OTHER WORDS, IF THE CAPITAL BORROWED FOR THE PURPOSE OF BUSINESS AND INTEREST WAS PAYABLE IN RESPECT OF THAT BORROWED CAPITAL THEN INTEREST EXPENSES WILL BE ADM ISSIBLE TO THE ASSESSEE. IT IS NOT IN DISPUTE THAT ASSE SSE HAD GIVEN A LOAN OF RS. 23.49 CRORE IN ASSESSMENT YEAR 2006 - 07 AND RS. 153.52 CRORE IN ASSESSMENT YEAR 2007 - 08 TO THE SISTER CONCERN WITHOUT CHARGING INTEREST. THE LEARNED COUNSEL FOR THE ASSESSEE HAS RAISED TWO FOLD SUBMISSION S . IN HIS FIRST FOLD OF SUBMISSION, HE CONTENDED THAT ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS AVAILABLE WHICH WERE USED FOR THE PURPOSE OF GIVING INTEREST FREE ADVANCES, THERE FORE , L D. ASSESSING OFFICER OUGHT TO HAVE NOT DISALLOWED ANY AMOUNT OUT OF THE INTEREST EXPENSES CLAIMED ON THE BORROWED FUNDS . IN OTHER WORDS, THE INTEREST BEARING FUNDS WERE USED FOR THE PURPOSE OF BUSINESS AND N OT USED FOR GAINING INTEREST FREE ADVANCES TO THE SISTER CONCERN. 10. IN HIS SECOND F OLD OF SUBMISSION, HE CONTEND ED THAT IF ACCOUNTS ARE B EING EXAMINED MINUTELY THEN IT WILL REVEAL THAT THESE ADVANCES WERE GIVEN FOR THE PURPOSE OF BUSINESS. THE COMMERCIAL EXPEDIENCY TO GIVE THESE I.T.A NO. 869&881 /AHD/20 11 A.Y. 2006 - 07 & 2007 - 08 PAGE NO ADAN I PROPERTIES PVT. LTD. VS. DCIT 5 ADVANCES IS INVOLVED IN THESE TRANSACTIONS AND , THEREFORE, NO DISALLOWANCE OUGHT TO HAVE BEEN MADE. 11. LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHER HAND POINTED OUT THAT ASSESSEE FAILED TO ESTABLISH THE AVAILABILITY OF INTEREST FREE FUNDS, THEREFORE, ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE CLAIM OF THE ASE SSSEE. HE FURTHER CONTENDED THAT AS FAR AS PLEA OF COMMERCIAL EXPEDIENCY IS CONSERVED, THE ASSESS EE FAILED TO BRING ANY EVIDENCE EXHIBITING THAT UNDER COMMERCIAL EXPEDIENCY, IT HAS TO PAY ADVANCES TO THE SISTER CONCERN . 12. AT THIS STAGE, IT IS PERTINENT TO TAKE NOT OF THE AVAILABILITY OF FUNDS SUBMITTED BY THE ASSESSEE BEFORE ASSESSING OFFICER IN ASSESSMENT YEAR 2006 - 07 WHICH READ AS UNDER: - INTEREST FREE FUNDS AS ON 31/03/2006 AS ON 31/03/2005 SHARE CAPITAL 1,00,00,000 1,00,00,000 RESERVE AND 90,79, 68,256 67,12,66,323 CURRENT LIABILITIES 4,47,516 55,55,606 UNSECURED LOAN 29,34,37,311 31,60,75,000 TOTAL 1,21,18,53,083 1,00,28,96,929 INTEREST FREE 23,75,00,209 13. THE LD. ASSESSING OFFICER HAS OBSERVED THAT THE FUNDS R EFERRED BY THE ASSESSEE WERE NOT AVAILABLE WITH IT , BECAUSE , IT HAS INVESTED ABOVE REFERRED FUNDS IN SHARES OF RS. 100.28 CORES AND CREATED FIXED ASSET OF RS. 7.10 CORES. HE FURTHER OBSERVED THAT FROM THE PERUSAL OF SCHEDULE (B) OF BALANCE SHEET, IT REVE ALS THAT ASSESSEE HAS INCREASED ITS RESERVE AND I.T.A NO. 869&881 /AHD/20 11 A.Y. 2006 - 07 & 2007 - 08 PAGE NO ADAN I PROPERTIES PVT. LTD. VS. DCIT 6 SURPLUS BY AN AMOUNT OF RS. 24 CRORES IN THE FORM OF RE - EVALUATION OF RESERVE ACCOUNT , MEANING THEREBY NO CASH - IN - FLOW WAS AVAILABLE. 14. LET US ASCERTAIN THE POSITION. THE SCHEDULE B WITH THE BALANCE S HEET READ S AS UNDER: - SCHEDULE B RESERVE S & SURPLUS AS AT 31.03.2006(RS.) AS AT 31.03.2005(RS.) SHARE PREMIUM ACCOUNT 108605000 108605000 REVALUATION RESERVE ACCOUNT 240052770 0 SURPLUS IN PROFIT & LOSS ACCOUNT 559310486 5626613 23 -------------------------------------------------- TOTAL 907968256 671266323 -------------------------------------------------- 15. ACCORDING TO THE LEARNED COUNSEL FOR THE ASSESSEE, IF THIS AMOUNT OF RS. 24 CRORE CREATED BY WAY OF RE VALUATION OF RESERVE ACCOUNT IS TAKEN OUT THE N A BALANCE ROUGHLY RS. 66(907968256 - 24=667968256) CRORE WILL BE AVAILABLE TO THE ASSESSEE. THE SECOND OBJECTION OF THE ASSESSING OFFICER IS THAT ASSESSEE HAD MADE INVESTMENT IN THE SHARES OF RS. 1 00.2 CORE. HE DREW OUR A TTENTION TOWARDS BALANCE SHEET AND POINTED OUT THAT INVESTMENT AS ON 31 ST MARCH, 2005 STOOD AT RS . 82.89 CRORE. IT INCREASED TO RS. 100.2 CRORE , MEANING THEREBY THERE IS AN INCREASE OF RS. 18 CORES IN THE INVESTMENT IN SHARES. IF THESE TWO AMOUNTS ARE DEBITED F R O M THE TO T AL RESERVE I.E. RS. 18 + 24 FROM RS. 90 CORES OF RESERVE AND SURPLUS THEN ROUGHLY RS. 4 8 C R ORES OF RUPEES WERE AVAILABLE WITH THE ASSESSEE WHICH TAKE CARE INTEREST FREE ADVANCES OF RS. 23.59 CRORES. TO THIS CALCU LATION, LD. DEPARTMENTAL REPRESENTATIVE WAS UNABLE TO CONTROVERT. LD. ASSESSING I.T.A NO. 869&881 /AHD/20 11 A.Y. 2006 - 07 & 2007 - 08 PAGE NO ADAN I PROPERTIES PVT. LTD. VS. DCIT 7 OFFICER FAILED TO APPRECIATE THE FUNDS AVAILABLE WITH THE ASSESSEE IN RIGHT PERSPECTIVE. 16. APAR T FROM THIS ONE ASPECT , IT HAS B EEN BROUGHT TO OUR NO TICE THAT ASSESSEE HAS RUNNING ACC OUNT WITH THE SISTER CONCERN. I T HAS A DEBIT BALANCE AT RS. 30.60 CRORE AS ON 31 ST MARCH, 2005 IN THE ACCOUNT OF ADANI AGRO PVT. LTD AND IT HAS NOT PAID ANY INTEREST ON THIS DEBIT BALANCE. TAKING INTO CONSIDERATION THESE FACTS, WE ARE OF THE V IEW THAT ASSESSE HAS DEMONSTRATE D ON THE RECORD THAT IT HAS SUFFICIENT INTEREST FREE FUNDS WHICH CAN TAKE CARE OF THE INTEREST FREE ADVANCES. LEARNED COUNSEL FOR THE ASSESSEE WHILE BUTTRESSING HIS CONTENTION PLACED RELIANCE UPON THE ORDER OF ITAT PASSED I N ITA NO. 3408/AHD/2010 RENDERED IN THE CASE OF PARESH LALCHAND SHAH VS. ITO WHEREIN SIMILAR ISSUE WAS CONSIDERED BY THE ITAT. THE OBSERVATION BASED ON THE DECISION OF HON BLE MUMBAI HIGH COURT AS WELL AS OF THE JURISDICTIONAL HIGH COURT ARE WORTH TO NOTE . IT READ AS UNDER: - 6. THAT TAKES US TO THE QUESTION AS TO WHETHER THE BORROWINGS MADE BY THE ASSESSEE CAN BE SAID TO HAVE BEEN USED FOR THE PURPOSES OF ITS BUSINESS, OR, IN OTHER WORDS, WHETHER THE INTEREST FREE ADVANCES BY THE ASSESSEE CAN BE PRESUMED TO HAVE BEEN MADE OUT OF THE INTEREST BEARING FUNDS. ON THIS ISSUE, WE FIND GUIDANCE FROM A JUDGMENT OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS RELIANCE UTILITIES & POWER LTD (313 ITR 340) WHEREIN IT IS HELD THAT IN A SITUATION IN WHICH INTEREST F REE FUNDS AVAILABLE WITH THE ASSESSEE ARE MORE THAN THE INTEREST FREE ADVANCES TO THE SUBSIDIARY COMPANIES, THE PRESUMPTION HAS TO BE THAT THE INTEREST FREE ADVANCES ARE GIVEN OUT OF THE INTEREST FREE FUNDS AVAILABLE TO THE ASSESSEE. WHILE HOLDING SO, THEI R LORDSHIPS HAVE OBSERVED AS FOLLOWS: IF THERE BE INTEREST - FREE FUNDS AVAILABLE TO AN ASSESSEE SUFFICIENT TO MEET ITS INVESTMENTS AND AT THE SAME TIME THE ASSESSEE HAD RAISED A LOAN IT CAN BE PRESUMED THAT THE INVESTMENTS WERE FROM THE INTEREST - FREE FUNDS AVAILABLE. IN OUR OPINION THE SUPREME COURT IN EAST INDIA PHARMACEUTICAL I.T.A NO. 869&881 /AHD/20 11 A.Y. 2006 - 07 & 2007 - 08 PAGE NO ADAN I PROPERTIES PVT. LTD. VS. DCIT 8 WORKS LTD.'S CASE (SUPRA) HAD THE OCCASION TO CONSIDER THE DECISION OF THE CALCUTTA HIGH COURT IN WOOLCOMBERS OF INDIA LTD.'S CASE (SUPRA) WHERE A SIMILAR ISSUE HAD ARISEN. BEFORE TH E SUPREME COURT IT WAS ARGUED THAT IT SHOULD HAVE BEEN PRESUMED THAT IN ESSENCE AND TRUE CHARACTER THE TAXES WERE PAID OUT OF THE PROFITS OF THE RELEVANT YEAR AND NOT OUT OF THE OVERDRAFT ACCOUNT FOR THE RUNNING OF THE BUSINESS AND IN THESE CIRCUMSTANCES T HE APPELLANT WAS ENTITLED TO CLAIM THE DEDUCTIONS. THE SUPREME COURT NOTED THAT THE ARGUMENT HAD CONSIDERABLE FORCE, BUT CONSIDERING THE FACT THAT THE CONTENTION HAD NOT BEEN ADVANCED EARLIER IT DID NOT REQUIRE TO BE ANSWERED. IT THEN NOTED THAT IN WOOLCOM BERS OF INDIA LTD.'S CASE (SUPRA) THE CALCUTTA HIGH COURT HAD COME TO THE CONCLUSION THAT THE PROFITS WERE SUFFICIENT TO MEET THE ADVANCE TAX LIABILITY AND THE PROFITS WERE DEPOSITED IN THE OVERDRAFT ACCOUNT OF THE ASSESSEE AND IN SUCH A CASE IT SHOULD BE PRESUMED THAT THE TAXES WERE PAID OUT OF THE PROFITS OF THE YEAR AND NOT OUT OF THE OVERDRAFT ACCOUNT FOR THE RUNNING OF THE BUSINESS. IT NOTED THAT TO RAISE THE PRESUMPTION, THERE WAS SUFFICIENT MATERIAL AND THE ASSESSEE HAD URGED THE CONTENTION BEFORE TH E HIGH COURT. THE PRINCIPLE THEREFORE WOULD BE THAT IF THERE ARE FUNDS AVAILABLE BOTH INTEREST - FREE AND OVERDRAFT AND/OR LOANS TAKEN, THEN A PRESUMPTION WOULD ARISE THAT INVESTMENTS WOULD BE OUT OF THE INTEREST - FREE FUND GENERATED OR AVAILABLE WITH THE COM PANY, IF THE INTEREST - FREE FUNDS WERE SUFFICIENT TO MEET THE INVESTMENTS. 7. THIS APPROACH SEEMS TO HAVE BEEN APPROVED BY HON'BLE JURISDICTIONAL HIGH COURT IN THE CASE OF CIT VS RAGUVIR SYNTHETICS LTD (JUDGMENT DATED 5.12.2011 IN TAX APPEAL NO. 829 OF 200 7 - UNREPORTED) WHEREIN THEIR LORDSHIPS HAVE, INTER ALIA, OBSERVED AS FOLLOWS: AS CAN BE NOTED FROM THE ORDER OF THE TRIBUNAL, THE ASSESSING OFFICER DISALLOWED THE INTEREST SOLELY ON THE GROUND THAT THE ASSESSEE HAD GIVEN INTEREST FREE LOANS TO THE ASSOCIA TE CONCERNS, VIZ., R.R.FAMILY TRUST AND SAGAR TEXILE MILLS AND THIS DISALLOWANCE, IN APPEAL THE CIT (APPEALS) DELETED BY HOLDING THAT THE AMOUNT ADVANCED TO BOTH R.R.FAMILY TRUST AND SAGAR TEXTILES MILS WERE NOT GIVEN DURING THE YEAR UNDER CONSIDERATION, B UT THE SAME WAS GIVEN IN THE EARLIER YEARS. CIT (APPEALS) HAD ALSO TAKEN NOTE OF THE FACT THAT THERE WAS SUFFICIENT FUNDS AVAILABLE WITH THE ASSESSEE - RESPONDENT ON I.T.A NO. 869&881 /AHD/20 11 A.Y. 2006 - 07 & 2007 - 08 PAGE NO ADAN I PROPERTIES PVT. LTD. VS. DCIT 9 WHICH THERE WAS NO INTEREST LIABILITY THAT HAD BEEN INCURRED. IN SUCH CIRCUMSTANCES, RELYING ON THE CASE OF TORRENT FINANCIERS LTD. (SUPRA), IT FOUND THAT THE DISALLOWANCE WAS NOT JUSTIFIABLE. THE TRIBUNAL ON NOTING THESE DETAILS, IN TERMS HELD THAT THERE WAS NOTHING CONTRARY THAT COULD BE BROUGHT ON RECORD BY THE DEPARTMENT. THE ASSESSEE'S EQUI TY SHARE CAPITAL RS.3.85 CORES AND RESERVE AND SURPLUS OF RS.5.52 CRORES ALSO WERE NOTED BY THE TRIBUNAL. IT FOUND THAT THE INTEREST FREE FUND AVAILABLE WITH THE ASSESSEE WAS FAR GREATER THAN THE LOAN ADVANCED TO THE SISTER CONCERNS AND AS A COROLLARY TO T HAT, IT CONCLUDED THAT THE BORROWED MONEY WAS NOT UTILIZED FOR THE PURPOSE OF ADVANCE TO THE SISTER CONCERNS, AS HAD BEEN NOTED BY THE ASSESSING OFFICER. WHAT HAD WEIGHED WITH THE TRIBUNAL IS THE FACT THAT THE ENTIRE INTEREST FREE FUNDS INCLUDED OWNER'S OW N CAPITAL AND ACCUMULATED PROFITS AND OTHER INTEREST FREE CREDITS AND LOANS AND IF THE TOTAL INTEREST FREE ADVANCES INCLUDING THE DEBIT BALANCE OF THE PARTNERS DID NOT EXCEED THE TOTAL INTEREST FREE FUNDS AVAILABLE WITH THE ASSESSEE, INTEREST WAS NOT DISAL LOWABLE MERELY ON ACCOUNT OF THE UTILIZATION OF THE FUNDS FOR NON - BUSINESS PURPOSES. THUS, AS CAN BE SEEN THE TRIBUNAL ACTUALLY RELIED ON THE FINDINGS GIVEN IN CASE OF TORRENT FINANCIERS LTD. (SUPRA) AND FURTHERMORE THERE WAS NOTHING CONTRARY THAT COULD B E BROUGHT ON RECORD BY THE DEPARTMENT FOR IT TO HOLD OTHERWISE. FACTUALLY, IT FOUND HUGE FUNDS WERE AVAILABLE WITHOUT ANY INTEREST LIABILITY WITH THE ASSESSEE AND THAT THERE WAS NO EVIDENCE TO HOLD THAT THE BORROWED MONEY WAS UTILIZED FOR THE PURPOSE OF AD VANCE TO THE SISTER CONCERN. ALL THESE ASPECTS CUMULATIVELY LED THE TRIBUNAL TO HOLD THAT THE DISALLOWANCE MADE ONLY ON THE GROUND THAT ADVANCES WERE GIVEN OUT OF THE BORROWED FUNDS, HOLDING THE ASSESSEE INELIGIBLE FOR ALLOWANCE OF INTEREST BY THE ASSESSIN G OFFICER OF THE SUM OF RS.18.66 LACS WAS NOT SUSTAINABLE. THE TRIBUNAL HAS CORRECTLY APPROACHED THE ISSUE WHICH HAS BEEN PROPOSED IN THE PRESENT TAX APPEAL. WHEN THERE WAS NO EVIDENCE BROUGHT ON RECORD BY THE DEPARTMENT FOR THE TRIBUNAL TO HOLD OTHERWISE THAN WHAT HAS BEEN CONCLUDED BY WAY OF ANY MATERIAL, WE HOLD THAT THE ISSUE IS APPROPRIATELY CONCLUDED IN FAVOUR OF THE ASSESSEE AND AGAINST THE REVENUE. I.T.A NO. 869&881 /AHD/20 11 A.Y. 2006 - 07 & 2007 - 08 PAGE NO ADAN I PROPERTIES PVT. LTD. VS. DCIT 10 17. AS FAR AS ASSESSMENT YEAR 2007 - 08 IS CONCERNED, A SSESSEE HAS LIQUIDATED ITS INVESTMENT OF RS. 1 00 CRORE, THEREFORE, A SUM OF RS. 1 00 CRORE WAS AVAILABLE WITH THE ASSESSEE. DURING THE COURSE OF HEARING, WE HAVE CONFRONTED THE LD. COUNSEL TO SHOW T HAT ON LIQUIDATION OF INVESTMENT, ASSESSEE HAD REALIZED 100 CRORE. BECAUSE, IF THE VALUE OF SHARES WAS DIMINISHED ON ACCOUNT OF FLUCTUATION IN MARKET , THEN HOW CREDIT OF R S. 10 0 C R ORE CAN BE GIVEN FOR QUANTIFYING THE INTEREST FREE FUNDS WITH THE ASSESSEE. LD. COUNSEL SHOWED US THE REALIZATION OF THE INVESTMENT AT RS. 100 C ROR E ACCOUNTED IN THE ACCOUNTS . SI MILARLY, IT HAS RESERVE AND SURPLUS OF RS. 165 CRORE. IF RS. 24 CRORE TAKEN OUT FROM THIS WHICH WAS ADDED ON ACCOUNT OF RE VALUATION IN THE LAST YEAR, THEN, THE SUM AT RS. 141 CRORE WILL BE AVAILABLE TO THE ASSESSEE. IF THE INVESTMENT REALIZED BY THE AS SESSEE OUT OF LIQUIDATION OF RS. 1 00 CRORE IN THE SHARES IS ADDED WITH INTEREST FREE FUNDS AT RS. 141 CRORE , THEN , ASSESSEE HAS THE FUNDS OF RS. 241 CRORE . IT HAS GIVEN INTEREST FREE ADVANCES OF RS. 153.52 CRORE ONLY . IT HAS DEMONSTRATED THAT IT HAS MORE INTEREST FREE FUND T HA N THE ONE GIVEN TO THE SISTER C ONCERN. THERE IS NO DISPUTE ON F ACTS BETWEEN BOTH THE ASSESSMENT YEARS. THEREFORE, CONSIDERING THE DISCUSSION IN ASSESSMENT YEAR 2006 - 07, NO DISALLOWANCE IS SUSTAINABLE IN THIS YEAR ALSO. THESE GROUN DS OF APPEALS ARE ALLOWED AND DISALLOWANCE AT RS . 44,65,790/ - AS WELL AS RS. 46,76,672/ - IN ASSESSMENT YEAR 2006 - 07 AND 2007 - 08 ARE DELETED. 18. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. ORDER PRONO UNCED IN THE OPEN CO URT ON 16 - 06 - 2015 SD/ - SD/ - ( ANIL CHATURVEDI ) ( RAJPAL YADAV ) ACCOUNTANT MEMBER JUDICIAL MEMBER AHMEDABAD : DATED 16 /06 /2015 I.T.A NO. 869&881 /AHD/20 11 A.Y. 2006 - 07 & 2007 - 08 PAGE NO ADAN I PROPERTIES PVT. LTD. VS. DCIT 11 AK / COPY OF ORDER FORWARDED TO: - 1. ASSESSEE 2. REVENUE 3. CONCERNED CIT 4. CIT (A) 5. DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER/ , / ,