DCIT, CHENNAI V. P.Sathyanarayanan, CHENNAI

ITA 953/CHNY/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 73593 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 29 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2014
• Appeal Filed By: Department
• Bench Allotted: C
• Next Hearing Date: 06-01-2014
• Assessment Year: 2007-2008
• Appeal Filed On: 10-05-2013
• Court: TRIBUNAL
• Department Lawyers: P B SEKARAN
• Assessee Lawyers: B S PU RSHOTHAM; N DEVNATHAN
• Keywords: Proportionate interest

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : CHENNAI BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT & SHRI VIKAS AWASTHY, JUDICIAL MEMBER I.T.A. NO. 953/MDS/2013 ASSESSMENT YEAR : 2007-08 DEPUTY COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE I(3), NO.181, NUNGAMBAKKAM HIGH ROAD, NUNGAMBAKKAM, CHENNAI 600 034. (APPELLANT) VS SHRI P. SATHYANARAYANAN, NO.4 & 5, PRAKASAM STREET, JANAKI NAGAR, VALASARAVAKKAM, CHENNAI 600 087 [PAN: ABGPS 8413 E] (RESPONDENT) REVENUE BY : SHRI P.B. SEKARAN, CIT ASSESSEE BY : SHRI B.S. PURSHOTHAM, CA & SHRI N. DEVNATHAN, ADVOCATE DATE OF HEARING : 06-01-2014 DATE OF PRONOUNCEMENT : 08-01-2014 O R D E R PER VIKAS AWASTHY, JUDICIAL MEMBER: THE APPEAL HAS BEEN FILED BY THE REVENUE AGAINST T HE ORDER OF THE COMMISSIONER OF INCOME TAX(APPEALS)-II, CHEN NAI DATED 11-02-2013 RELEVANT TO THE ASSESSMENT YEAR (AY) 200 7-08. 2. THE ASSESSEE HAD FILED HIS RETURN OF INCOME FOR THE AY.2007- 08 ON 31-10-2007 DECLARING HIS TOTAL INCOME AS ` 53,82,430/-. A NOTICE U/S.143(2) OF THE INCOME TAX ACT, 1961 (HERE IN AFTER I.T.A. NO. 953/MDS/2013 2 REFERRED TO AS THE ACT) WAS ISSUED TO THE ASSESSE E ON 21-07-2008. THE ASSESSING OFFICER VIDE ASSESSMENT ORDER DATED 31-12-2009 MADE ADDITION OF ` 23,07,581/- ON ACCOUNT OF INTEREST PAYMENT. THE ASSESSING OFFICER DIS-ALLOWED INTERES T PAYMENT ON THE GROUND THAT THE ASSESSEE UTILIZED THE BORROWED FUNDS FOR PAYMENT OF TAXES AND INVESTMENT IN GROUP COMPANIES. AGGRIEVED AGAINST THE ASSESSMENT ORDER, THE ASSESSE E PREFERRED AN APPEAL BEFORE THE CIT(APPEALS). THE C IT(APPEALS) PARTLY ALLOWED THE APPEAL OF THE ASSESSEE ON THE GR OUND THAT THE ASSESSEE HAD OWN FUNDS TO THE TUNE OF ` 1,55,68,718/- AND THESE FUNDS WERE AVAILABLE TO THE ASSESSEE FOR MAKING INV ESTMENTS AND PAYING TAX LIABILITIES. THEREFORE, IT CANNOT BE SA ID THAT THE ONLY INTEREST BEARING FUNDS WERE UTILIZED FOR MAKING INV ESTMENTS AND PAYMENT OF TAXES. THE CIT(APPEALS) DIRECTED THE AS SESSING OFFICER TO DIS-ALLOW PROPORTIONATE INTEREST IN THE RATIO OF ASSESSEES OWN FUND AND THE TOTAL FUNDS INCLUDING THE INTEREST BEARING LOAN. AGAINST THIS ORDER OF THE CIT(APPEALS), THE REVENUE HAS COME IN APPEAL BEFORE THE TRIBUNAL. 3. SHRI P.B. SEKARAN, APPEARING ON BEHALF OF THE DE PARTMENT SUBMITTED THAT THE ASSESSEE HAS UTILIZED LOAN AMOUN T OF ` 50.00 LAKHS RECEIVED ON 26-07-2006 FOR PAYMENT OF INCOME TAX OF I.T.A. NO. 953/MDS/2013 3 ` 54,36,625/- ON 01-08-2006. SINCE INCOME TAX LIABIL ITY IS PERSONAL IN NATURE, THE LOAN AMOUNT USED FOR DISCHARGING THE SAME IS TO BE TREATED AS UTILIZED FOR NON-BUSINESS PURPOSES. THE INTEREST ON LOAN CANNOT BE ALLOWED AS THE SAME HAS NOT BEEN UTILIZED FOR THE PURPOSE OF BUSINESS AND PROFESSION FOR EARNING THE INCOME. THE LD.DR FURTHER SUBMITTED THAT A PERUSAL OF BALANCE S HEET WOULD SHOW THAT THE ASSESSEE HAD MEAGER CASH AND BANK BAL ANCE FOR MAKING INVESTMENT AND HENCE IT IS EVIDENT THAT INVE STMENTS HAVE BEEN MADE FROM BORROWED FUNDS WHICH IS AGAIN FOR NO N-BUSINESS PURPOSES. 4. ON THE OTHER HAND, SHRI B.S. PURSHOTHAM, CA & SHRI N. DEVNATHAN, ADVOCATE, APPEARING ON BEHALF OF THE ASS ESSEE SUBMITTED THAT THE ASSESSEE HAD SUFFICIENT OWN FUND S. THEREFORE, THE CONTENTION OF THE REVENUE THAT BORROWED FUNDS A RE UTILIZED FOR THE PAYMENT OF TAX LIABILITIES AND INVESTMENT IS MI S-PLACED. THE LD.AR STRONGLY SUPPORTED THE ORDER OF THE CIT(APPEA LS) AND PRAYED FOR THE DISMISSAL OF THE APPEAL OF THE REVENUE. IN ORDER TO SUPPORT THEIR SUBMISSIONS, THE ARS OF THE ASSESSEE RELIED O N THE ORDER OF THE HONBLE MADRAS HIGH COURT IN THE CASE OF CIT VS. HOTEL SAVERA REPORTED AS 239 ITR 795 (MAD) . I.T.A. NO. 953/MDS/2013 4 5. BOTH SIDES HEARD. ORDERS OF THE AUTHORITIES BEL OW AND THE JUDGMENT RELIED UPON BY THE LD.ARS OF THE ASSESSEE HAVE BEEN EXAMINED. THE CIT(APPEALS) IN HIS ORDER HAS CATEGO RICALLY MENTIONED THE SOURCES OF FUNDS OF THE ASSESSEE IE., REMUNERATION, RENTAL RECEIPTS, SOFTWARE CONSULTANCY RECEIPTS AND DIVIDEND INCOME. THE TOTAL OF SUCH SOURCES IS APPROXIMATELY ` 65.68 LAKHS. IN ADDITION TO THE ABOVE, THE ASSESSEE IS ALSO HAVI NG ` 90.00 LAKHS IN HIS CAPITAL ACCOUNT. THE TOTAL OF ABOVE SOURCES ACCOUNT FOR NEARLY ` 1.55 CRORES. THIS FACT HAS NOT BEEN DISPUTED BY TH E REVENUE. THE CIT(APPEALS) HAS RIGHTLY DIRECTED THE ASSESSING OFFICER TO DIS-ALLOW PROPORTIONATE INTEREST IN THE RATIO OF ASSESSEES OWN FUNDS AND THE TOTAL FUND INCLUDING INTEREST BEA RING FUNDS. WE DO NOT FIND ANY INFIRMITY IN THE IMPUGNED ORDER. THE SAME IS CONFIRMED AND THE APPEAL OF THE REVENUE IS DISMISSED BEING DEVOID OF ANY MERIT. ORDER PRONOUNCED ON WEDNESDAY, THE 08 TH JANUARY, 2014 AT CHENNAI. SD/- SD/- (DR. O.K. NARAYANAN) (VIK AS AWASTHY) VICE PRESIDENT JUDICIAL MEMBER DATED: 08 TH JANUARY, 2014 TNMM COPY TO: APPELLANT/RESPONDENT/CIT(A)/CIT/DR