M/s Big Apple Real Estate (P) Ltd., Lucknow V. Dy. Commissioner Of Income Tax, Lucknow

ITA 934/LKW/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4777 (ITAT-LUCKNOW)
• Duration Of Justice: 1 year(s) 1 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 14-01-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 30-12-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL LUCKNOW BENCH B , LUCKNOW BEFORE SHRI S UNIL KUMAR YADAV , JUDICIAL MEMBER AND SHRI. A. K. GARODIA , ACCOUNTANT MEMBER ITA NO. 934/LKW/2014 ASSESSMENT YEAR: 2010 - 11 M/S BIG APPLE REAL ESTATE (P) LTD. MEHMOODABAD ESTATE BUILDING 15, HAZRATGANJ, LUCKNOW V. DY. CIT RANGE 1 LUCKNOW T AN /PAN : AADCB1684P (APP ELL ANT) (RESPONDENT) APP ELL ANT BY: SHRI. RAKESH GARG, ADVOCATE RESPONDENT BY: SHRI. AMIT NIGAM, D.R. DATE OF HEARING: 14 01 201 6 DATE OF PRONOUNCEMENT: 03 0 2 201 6 O R D E R PER SUNIL KUMAR YADAV: THIS APPEAL IS PREFERRED BY THE ASSESSEE AGAINST THE ORDER OF THE LD. CIT(A) ON A SOLITARY GROUND THAT THE LD. CIT(A) HAS ERRED IN CONFIRMING THE DISALLOWANCE OF INTEREST ON BORROWED CAPITAL AMOUNTING TO RS.4,1 3,499/ - . 2 . DURING THE COURSE OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE HAS INVITED OUR ATTENTION TO THE FACT THAT THE ASSESSING OFFICER HAS MADE DISALLOWANCE OF INTEREST OF RS.4,13,499/ - PAID ON THE BORROWINGS ON THE GROUND THAT THE ASSESSEE HAS GIVEN INT EREST FREE ADVANCE OF RS. 3.50 CRORES TO M/S MASCHINO T EXTILES PVT. LTD., A SISTER CONCERN OF THE ASSESSEE AND PAID INTEREST ON THE BORROWINGS, AGAINST WHICH ASSESSEE PREFERRED AN APPEAL BEFORE THE LD. CIT(A), BUT DID NOT FIND FAVOUR WITH HIM. : - 2 - : 3 . NOW THE ASSES SEE IS IN APPEAL BEFORE US WITH THE SUBMISSION THAT THE ASSESSEE HAD SUFFICIENT INTEREST FRE E FUNDS OF ITS OWN OUT OF WHICH INTEREST FREE ADVANCES WERE GIVEN TO M/S MASCHINO TEXTILES PVT. LTD. BESIDES, SHARE CAPITAL AND RESERVES AND SURPLUS OF RS.91.53 CR ORE , ASSESSEE HAS RECEIVED SHARE APPLICATION MONEY OF RS.13.25 CRORES DURING THE YEAR. THEREFORE, THE AVERAGE FUND OF ABOUT RS.1.75 CRORES WERE LYING UNUTILIZED IN THE BANK ACCOUNT OF THE ASSESSEE - COMPANY, ON WHICH THE ASSESSEE DID NOT EARN ANY INTEREST. IN SUPPORT OF HIS CONTENTION, THE LD. COUNSEL FOR THE ASSESSEE HAS FILED COPY OF BALANCE SHEET AND PROFIT AND LOSS ACCOUNT, ETC. 4 . THE LD. D.R. HAS SIMPLY PLACED RELIANCE UPON THE ORDER OF THE LD. CIT(A). 5 . HAVING CAREFULLY EXAMINED THE ORDERS OF THE LOWER AU THORITIES IN THE LIGHT OF THE RIVAL SUBMISSIONS , WE FIND THAT UNDISPUTEDLY THE ASSESSEE HA D SUFFICIENT FUNDS. AS ON 31.3.2010 , THE AVAILABILITY OF FUND WAS OF RS.104,99,85,960/ - COMPRISING OF SECURED AND SHAREHOLDERS FUND. THEREFORE, IT CANNOT BE SAID TH AT BORROWED FUNDS WERE DIVERTED FOR NON - BUSINESS PURPOSES TO THE SISTER CONCERN. OUR ATTENTION WAS ALSO INVITED TO VARIOUS JUDICIAL PRONOUNCEMENTS SUCH AS CIT VS. PRAKA SH AGRIHOTRI (2014), 224 TAXMAN 232 (ALLD); CIT VS. PREM HEAVY ENGINEERING WORKS PVT. L TD. (2006), 285 ITR 554 (ALLD); CIT VS. M/S RADICO KHAITAN LTD., 2005 (5) MTC 48 (ALLD.) AND THE JUDGMENTS OF OTHER NON - JURISDICTIONAL HIGH COURTS SUCH AS CIT VS. AMOD STAMPING (P) LTD. (2014) 223 TAXMAN 256 (GUJ.) AND CIT VS. MAHANAGAR GAS LTD. (2014) 221 TAXMAN 80 (BOMBAY)., ETC. 6 . IN THE CASE OF CIT VS. M/S RADICO KHAITAN LTD. (SUPRA), IT HAS BEEN HELD BY THE JURISDICTIONAL HIGH COURT THAT IF THE INTEREST FREE AD V ANCES MADE TO SISTER CONCERN OUT OF INTEREST FREE ADVANCES , WHICH WAS OUT OF SHARE CAPITAL, SU R PLUS AND RESERVE, NO DISALLOWANCE CAN BE : - 3 - : MADE, AS THE INTERESTS FREE ADVANCES ARE SUFFICIENT TO MAKE ADVANCES OUT OF IT TO THE SISTER CONCERN. 7 . IN THE INSTANT CASE, SINCE THE ASSESSEE WAS HAVING SUFFICIENT FUND OUT OF WHICH INTEREST FREE ADVANCES CAN BE MA DE, NO DISALLOWANCE SHOULD BE MADE SIM PLY FOR THE REASON THAT INTEREST FREE ADVANCES WERE GIVEN TO THE SISTER CONCERN, WITHOUT LOOKING TO THE FACT THAT INTEREST FREE ADVANCES WERE GIVEN OUT OF SURPLUS FUND OF THE ASSESSEE. WE, THEREFORE, FIND NO MERIT IN THIS ADDITION. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE LD. CIT(A) AND DELETE THE ADDITION. 8 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED. ORDER WAS PRONOUNCED IN THE OPEN COURT ON THE DATE MENT I ONED ON THE CAPTION ED PAGE. SD/ - SD/ - [ A. K. GAROD IA ] [ S UNIL KUMAR Y ADAV ] ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 3 RD 1 . APPELLANT FEBR UARY, 2016 JJ: 1401 COPY FORWARDED TO: 2 . RESPONDENT 3 . CIT(A) 4 . CIT 5 . DR ASSISTANT REGISTRAR