Three C Universal Developers Pvt. Ltd., New Delhi V. Addl. CIT, New Delhi

ITA 989/DEL/2012

• Counselvise Citation: 98920114 RSA 2012
• Duration Of Justice: 7 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Next Hearing Date: 06-09-2012
• Assessment Year: 2008-2009
• Appeal Filed On: 28-02-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: MEETA SINHA
• Keywords: Depreciation
• Section: 80G

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH: H, DELHI) BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI B. C. MEENA, ACCOUNTANT MEMBER ITA NO.989/DEL / 2012 (ASSESSMENT YEAR-2008-09) THREE C UNIVERSAL DEVELOPMENT PVT. LTD. VS. ACIT C/O.O. P. SAPRA & ASSOCIATES, ADVOCATES RANGE-16 C-763, NEW FRIENDS COLONY NEW DELHI. NEW DELHI PAN: AACCT6175E (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRI SANJIV SAPRA, ADV REVENUE BY : MS. MEETA SINHA, SR. DR DATE OF HEARING : 13.09.2012 DATE OF PRONOUNCEMENT :26/10/2012 ORDER PER RAJPAL YADAV, JUDICIAL MEMBER THE PRESENT APPEAL IS DIRECTED AT THE INSTANCE OF A SSESSEE AGAINST THE ORDER OF LD. CIT (A) DATED 1 ST OF NOVEMBER, 2011 PASSED FOR ASSESSMENT YEAR 2008- 09. 2. IN THE FIRST GROUND OF APPEAL, ASSESSEE HAS PLEA DED THAT LD. CIT (A) HAS ERRED IN CONFIRMING THE ADDITION OF RS.13,56,167/-. ITA NO.989/DEL/2012 2 3. THE BRIEF FACTS OF THE CASE ARE THAT ASSESSEE IS A PVT. LTD. COMPANY. IT IS ENGAGED IN THE BUSINESS OF INFRASTRUCTURE, REAL EST ATE DEVELOPMENT AND PROJECT MANAGEMENT. IT HAS FILED ITS RETURN OF INCOME ON 30 TH SEPTEMBER, 2008 DECLARING AN INCOME OF RS.11,97,26,224/-. THE CASE OF THE ASS ESSEE WAS SELECTED FOR SCRUTINY AND NOTICE U/S 143 (2) WAS ISSUED AND SERV ED UPON THE ASSESSEE. ON SCRUTINY OF THE ACCOUNTS IT REVEALED TO THE AO THAT ASSESSEE HAD CLAIMED INTEREST EXPENDITURE OF RS.24,61,827/-. IT FURTHER REVEALED TO THE AO THAT ASSESSEE HAD ADVANCED INTEREST FREE LOAN OF RS.8,69,87,287/-. TH E AO DIRECTED THE ASSESSEE TO EXPLAIN AS TO WHY INTEREST EXPENSES BE NOT DISALLOW ED, BECAUSE ASSESSEE HAS USED THE INTEREST BEARING FUNDS FOR NON BUSINESS PU RPOSES. IN RESPONSE TO THE QUERY OF AO ASSESSEE HAD FILED A LETTER DATED 2 ND OF NOVEMBER, 2010. THE LD. AO HAS REPRODUCED THE LETTER OF THE ASSESSEE ON PAG E 2 OF THE ASSESSMENT ORDER. AFTER AN ANALYSIS OF THE EXPLANATION GIVEN BY THE A SSESSEE, LD. AO HAS HELD THAT A SUM OF RS. 17,02,211/- DESERVES TO BE DISALLOWED. THE EXPLANATION GIVEN BY THE ASSESSEE AND THE FINDING OF THE AO READ AS UNDE R: WITH REGARD TO THE CLAIM OF INTEREST EXPENSES OF R S.24,61,827/-, IT IS SUBMITTED THAT THE AMOUNT OF RS.24,61,827/- AS R EFLECTED IN SCHEDULE -17 OF THE BALANCE SHEET INCLUDES BANK CHA RGES OF RS.3,46,104/-, WHICH ARE ALLOWABLE EXPENDITURE. THE BALANCE AMOUNT OF RS.21,15,723/- WAS PAID TO BANK/ OTHER PE RSONS. THE COMPANY HAD ALSO EARNED INTEREST INCOME OF RS.7,59, 991/- FROM BANK/OTHER PERSONS AS REFLECTED IN SCHEDULE-14 : O THER INCOME OF THE BALANCE SHEET. DETAIL OF INTEREST EXPENSE (NET OF INTEREST INCOME) WORKS OUT AS UNDER:- ITA NO.989/DEL/2012 3 PARTICULARS AMOUNT TOTAL FINANCE CHARGES (AS PER SCHEDULE 17 OF THE BALANCE SHEET) 24,61,827 LESS: BANK CHARGES 3,4 6,104 TOTAL INTEREST EXPENSES 21,15,723 LESS: INTEREST RECEIVED (AS PER SCHEDULE 1 OF THE BALANCE SHEET) 7,59,556 NET INTEREST EXPENSES CLAIMED 13,56,167 THE ASSESSEE HAS NOT BEEN ABLE TO PROVIDE ANY JUST IFICATION FOR THE CLAIM OF NET EXPENDITURE OF RS.13,56,107/- AS WORKED OUT ABOVE. FURTHER SINCE MOST OF THE BORROWING BY THE A SSESSEE HAS BEEN UTILIZED FOR GIVING INTEREST FREE LOANS AND AD VANCES HENCE THE BANK CHARGE OF RS.3,46,104/- ARE ALSO RELATED TO IN TEREST FREE LOANS AND ADVANCES AND HENCE BOTH NET INTEREST OF RS.13,5 6,107/- AND BANK CHARGE OF RS.3,46,104/-ARE BEING DISALLOWED AN D ADDED BACK TO THE INCOME OF THE ASSESSEE. THE TOTAL DISALLOWAN CE WORKED OUT TO BE RS.17,02,211/-. SINCE, I AM SATISFIED THAT THE A SSESSEE HAS CONCEALED INCOME BY FURNISHING INACCURATE PARTICULA RS, PENALTY PROCEEDINGS U/S 271 (1) (C) ARE BEING INITIATED SEP ARATELY. 4. ON APPEAL ASSESSEE HAS SUBMITTED THAT IT HAS SUB STANTIAL INTEREST FREE FUNDS OUT OF WHICH, IT HAS MADE ADVANCES TO THE SIS TER CONCERNS. HOWEVER, LD. CIT (A) DID NOT FIND MERIT IN THE CONTENTION OF THE ASSESSEE. THE LD. CIT (A) HAS GRANTED A RELIEF OF RS.3,46,104/- ON THE GROUND THAT IT IS AN AMOUNT WHICH WAS INCURRED TOWARDS BANK CHARGES FOR PURCHASE OF D RAFTS. IT DOES NOT PERTAINS TO THE AMOUNTS WHICH WERE GIVEN INTEREST FREE LOANS TO THE INDIVIDUALS OR SISTER CONCERNS. IN THIS WAY LD. FIRST APPELLATE AUTHORITY HAS CONFIRMED THE ADDITION OF RS.13,56,167/- AS AGAINST RS.17,02,211/- DISALL OWED BY THE AO. ITA NO.989/DEL/2012 4 5. BEFORE US LD. COUNSEL FOR THE ASSESSEE FILED BRI EF SYNOPSIS AND ANNEXED AN ANNEXURE I WITH THE SYNOPSIS. IN THIS ANNEXURE, ASSESSEE HAS COMPILED THE DETAILS OF AMOUNTS AVAILABLE WITH IT AND THE SCHEDU LES WHERE SUCH AMOUNTS HAVE BEEN SHOWN IN THE AUDITED ACCOUNTS. ACCORDING TO TH E LD. COUNSEL FOR THE ASSESSEE A SUM OF RS.6813 LACS WERE AVAILABLE WITH THE ASSESSEE ON WHICH NO INTEREST WAS PAID. THUS, IT SHOULD BE CONSTRUED THA T OUT OF THIS AMOUNT INTEREST FREE ADVANCES WERE GIVEN. THE ASSESSEE HAS FILED A PAPER BOOK ALSO CONTAINING 37 PAGES, IT PLACED ON RECORD COPY OF THE BANK STAT EMENT OF HDFC BANK. HE POINTED OUT THAT WHERE AN ASSESSEE IS HAVING MIXED FUNDS THEN IT SHOULD BE CONSTRUED THAT INTEREST FREE ADVANCES WERE GIVEN BY THE ASSESSEE OUT OF INTEREST FREE FUNDS AVAILABLE WITH ASSESSEE. IN SUPPORT OF H IS CONTENTION HE RELIED UPON THE FOLLOWING DECISIONS: 1) CIT VS. RELIANCE UTILITIES AND POWER LTD. REPOR TED IN 313 ITR 340. 2) CIT VS. PREM HEAVY ENGINEERING WORKS P. LTD. REP ORTED IN 285 ITR 554. 3) CIT VS. RADICO KHAITAN LTD. REPORTED IN 274 ITR 354. 4) CIT VS. D & H SCHERON ELECTRODES P. LTD. REPORTE D IN 149 ITR 400. 5) CIT VS. DALMIA CEMENT BHARAT LTD. REPORTED IN 33 0 ITR 595. 6. ON THE OTHER HAND LD. DR RELIED UPON THE ORDERS OF LD. REVENUE AUTHORITIES BELOW, HE SUBMITTED THAT BEFORE THE AO, ASSESSEE FAIL TO GIVE ANY FLOW CHART INDICATING A PARTICULAR AMOUNT AVAILABLE WITH IT AND OUT OF WHICH ITA NO.989/DEL/2012 5 INTEREST FREE ADVANCES WAS GIVEN BY THE ASSESSEE. T HE SUBMISSIONS MADE BY THE ASSESSEE ARE NOT CATEGORICAL. THE LD. COUNSEL FOR T HE ASSESSEE HAS ANNEXED AN ANNEXURE 1 WITH HIS SUBMISSIONS BUT SUCH ANNEXURE D OES NOT GIVE ANY SPECIFIC AMOUNT AVAILABLE ON SPECIFIC DATE. IT ONLY TALKS A BOUT DEPRECIATION, PRELIMINARY EXPENSES, WRITTEN OFF, DETAILS OF SUNDRY DEBTOR. TH ESE AMOUNTS WERE AVAILABLE WITH ASSESSEE ON 31 ST MARCH, 2008. ASSESSEE HAS TO DEMONSTRATE THE FUNDS AVAILABLE BEFORE MAKING INTEREST FREE ADVANCES NO S UCH DETAILS WERE SUBMITTED BEFORE THE LD. REVENUE AUTHORITIES BELOW. 7. WE HAVE DULY CONSIDERED THE RIVAL CONTENTION AND GONE THROUGH THE RECORD CAREFULLY. AS FAR AS THE DECISIONS RELIED UP ON BY THE LD. COUNSEL FOR THE ASSESSEE ARE CONCERNED, THERE IS NO DISPUTE REGARDI NG THE PROPOSITION LAID DOWN IN ALL THESE DECISIONS. WE DO NOT DEEM IT NECESSARY TO RECAPITULATE AND RECITE ALL THE DECISIONS ON, BUT SUFFICE IT TO SAY THAT CORE O F ALL THE DECISIONS IS TO THE EFFECT THAT IF IT IS ESTABLISHED ON THE RECORD THAT INTERE ST FREE ADVANCES WERE GIVEN FROM THE SURPLUS FUNDS AVAILABLE WITH THE ASSESSEE ON WH ICH NO INTEREST EXPENSES WAS INCURRED BY THE ASSESSEE, THEN NO DISALLOWANCE IS T O BE MADE. THE DIFFICULTY IN THE PRESENT CASE IS WHETHER ASSESSEE WAS ABLE TO DE MONSTRATE ON THE RECORD, AVAILABLITY OF THE INTEREST FREE FUNDS WITH IT, WHE N IT GAVE ADVANCES WITHOUT CHARGING INTEREST. IN THE ANNEXURE APPENDED WITH TH E SYNOPSIS, ASSESSEE HAS NARRATED THE DETAILS OF AMOUNTS AVAILABLE WITH IT A ND HOW THESE AMOUNTS WERE ITA NO.989/DEL/2012 6 SHOWN IN THE SCHEDULES ANNEXED WITH AUDITED ACCOUNT S. HOWEVER, NEITHER THE AO NOR LD. CIT (A) HAS LOOKED INTO THE DETAILS OF T HESE AMOUNTS. THERE IS NO FINDING IN THE ASSESSMENT ORDER IN THIS CONNECTION. WE HAVE EXTRACTED THE FINDING RECORDED BY THE AO, CONSIDERING THIS ASPECT WE SET ASIDE THE IMPUGNED ORDERS AND RESTORE THIS ISSUE TO THE FILE OF AO FOR RE-ADJUDICATION. LD. AO SHALL TAKE INTO ACCOUNT THE DETAILS OF FUNDS AND THEREAFT ER DETERMINATION WHETHER ASSESSEE HAS SUFFICIENT INTEREST FREE FUNDS FOR MAK ING INTEREST FREE ADVANCES. IF IT IS ESTABLISHED ON THE RECORD THAT ASSESSEE HAS SUFF ICIENT FUNDS THEN NO DISALLOWANCE OUT OF INTEREST EXPENSES BE MADE. THE AO SHALL RE-ADJUDICATE THE ISSUE AFTER PROVIDING SUFFICIENT OPPORTUNITY OF HEA RING TO THE ASSESSEE. 8. IN THE NEXT GROUND OF APPEAL GRIEVANCE OF ASSESSEE IS THAT LD. CIT (A) HAS ERRED IN OBSERVING THAT DEDUCTION OF RS.2,72,50 0/- CLAIMED BY THE ASSESSEE U/S 80G IS TO BE VERIFIED BY THE AO AND, T HEREAFTER, IF ADMISSIBLE THEN IT TO BE GRANTED. ACCORDING TO THE LD. COUNSEL FOR THE ASSESSEE, LD. FIRST APPELLATE AUTHORITY SHOULD HAVE ADJUDICATED THIS IS SUE AND GRANTED THE DEDUCTION. WITH THE ASSISTANCE OF LD. REPRESENTATIV E, WE HAVE GONE THROUGH THE RECORD CAREFULLY, THE LD. FIRST APPELLATE AUTHO RITY HAS OBSERVED THAT ASSESSEE HAD MADE DONATIONS OF RS.6 LACS WHICH INC LUDES AN AMOUNT OF RS.5,45,000/-. WHICH IS ELIGIBLE DEDUCTION U/S 80G. THE ASSESSEE CLAIMED DEDUCTION FOR RS.2,72,500/- . LD. CIT (A) FURTHER O BSERVED THAT SUCH CLAIM ITA NO.989/DEL/2012 7 WAS MADE VIDE LETTER DATED 10.08.2010, BEFORE THE A O. THE LD. AO DID NOT TAKE COGNIZANCE OF THIS LETTER AND DID NOT MAKE ANY DISCUSSION ABOUT THIS ISSUE IN THE ASSESSMENT ORDER. THEREFORE, LD. FIRST APPELLATE AUTHORITY HAS OBSERVED THAT AO SHALL VERIFY THE DETAILS AND ALLOW THE DEDUCTION U/S 80G IN ACCORDANCE WITH THE PROVISIONS OF THE INCOME TAX AC T, WHILE GIVING EFFECT TO HIS ORDER. 9. SINCE, THE ASSESSEE HAS MADE THE CLAIM BY FILING A LETTER DURING THE ASSESSMENT PROCEEDING; THEREFORE, IT APPEARS THAT L D. AO DID NOT ENTERTAIN THIS CLAIM. THE LD. CIT (A) HAS ENTERTAINED THE CLA IM AND DIRECTED THE AO TO VERIFY THE CLAIM OF ASSESSEE, ON DUE CONSIDERATION OF THE FACTS AND CIRCUMSTANCES, WE REMIT THIS ISSUE ALSO TO THE FILE OF AO, LD. AO SHALL VERIFY THE CLAIM OF ASSESSEE AND GRANT THE BENEFIT, IF IT IS ADMISSIBLE IN LAW. OUR OBSERVATION WILL NOT IMPAIR OR INJURE THE CASE OF A O THEY WILL NOT CAUSE ANY PREJUDICE TO THE DEFENSE/ EXPLANATION OF THE ASSESS EE. THE LD. AO SHALL DECIDE BOTH THE ISSUES IN ACCORDANCE WITH LAW. IN VIEW OF THE ABOVE DISCUSSION THE APPEAL IS ALLO WED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 26/10/2012. ITA NO.989/DEL/2012 8 SD/- SD/- (B.C.MEENA) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED THE 26 TH DAY OF OCTOBER, 2012 S.SINHA COPY FORWARDED TO 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT (A) 5. CIT(ITAT), NEW DELHI. AR,ITAT NEW DELHI. BY ORDER DY. REGISTRAR // C O P Y// 1. DATE OF DICTATION: 2. DRAFT PLACED BEFORE THE AUTHOR ON: 3. DRAFT PROPOSED AND PLACED BEFORE SECOND MEMBER ON: 4. DRAFT DISCUSSED/APPROVED BY THE SECOND MEMBER ON: 5. APPROVED DRAFT CAME TO SR. P.S ON: 6. DATE OF PRONOUNCEMENT: 7. FILE SENT TO BENCH CLERK ON: 8. DATE ON WHICH FILE GIVEN TO HEAD CLERK ON: 9. DATE OF DISPATCHING THE ORDER ON: