AVISHKAR ENTERPRISES, V. DCIT 25(1),

MA 747/MUM/2010

• Counselvise Citation: [2011] 123 COUNSELVISE.COM (IT) 6670 (ITAT-MUMBAI)
• Duration Of Justice: 6 month(s) 25 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 15-07-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: H
• Assessment Year: 2002-2003
• Appeal Filed On: 21-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: KUBAL
• Assessee Lawyers: M SUBRAMANIAN

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH H MUMBAI BEFORE SHRI PRAMOD KUMAR (AM) AND SMT. ASHA VIJAYARAGHAVAN (JM) M.A. NO. 747/MUM/2010 (ARISING OUT OF ITA NO. 6389/MUM/2005) ASSESSMENT YEAR-2002-03 M/S. AAVISHKAR ENTERPRISES SHANGRILLA APARTMENTS, L. T. ROAD, BORIVALI, MUMBAI-400 092. PAN NO : VS. THE DCIT 25(1), MUMBAI (APPELLANT) (RESPONDENT) APPELLANT BY: SMT. M. SUBRAMANIAN RESPONDENT BY: S HRI M. R . KUBAL O R D E R PER ASHA VIJAYARAGHAVAN (JM) BY THIS MISCELLANEOUS APPLICATION, THE ASSESSEE HAS RAISED AS FOLLOWS :- I) THE REVENUES APPEAL HAS BEEN ALLOWED AND THE MATTE R HAS BEEN SENT BACK WITH A DIRECTION TO THE CIT(A) TO DE CIDE CERTAIN ISSUES, AND THE DECISIONS TO THE ISSUES ARE ALREADY AVAILABLE IN THE TRIBUNALS ORDER ITSELF. II) THE HONBLE TRIBUNAL HAS INADVERTENTLY OMITTED TO C ONSIDER VARIOUS IMPORTANT CONTENTIONS AFFECTING THE MERITS OF THE APPEAL, WHILE DECIDING AND ALLOWING THE REVENUES APPEAL. III) THE HONBLE TRIBUNAL HAS OMITTED TO CONSIDER THE CI T(A)S ORDER (IMPUGNED ORDER IN APPEAL) FULLY AND PROPERLY. IN F ACT, ONLY A PART OF PARA 6 OF THE CIT(A)S ORDER HAS BEEN REPRO DUCED. IN M.A. NO. 747 /M/10 2 ADDITION, THE PAPER BOOK SUBMITTED DURING THE COURS E OF HEARING PROCEEDINGS AT THE INSTANCES OF THE TRIBUNAL HAS AL SO NOT BEEN CONSIDERED. CONSEQUENTLY, THE FOLLOWING POINTS INAD VERTENTLY GOT OMITTED TO BE CONSIDERED. A) THE APPELLANT HAD BORROWED FUNDS FOR THE PURPOSE OF BUSINESS OF CONSTRUCTION OF THE PREMISES, THE SAME WAS UTILI ZED IN THE BUSINESS AND HAS NOT BEEN TRANSFERRED OR GIVEN TO T HE RETIRED PARTNER. IN SHORT, THERE HAS BEEN NO VIOLATION WHAT SOEVER OF THE PROVISIONS OF SEC.36(1)(III) OF THE IT ACT. B) THE DEBIT BALANCE REPRESENTED THE AMOUNT OF COST OF CONSTRUCTION ON AREA ALLOTTED TO THE RETIRED PARTNE R IN SETTLEMENT OF DISPUTE WHICH WAS REQUIRED FOR THE PURPOSE OF CO NTINUING THE BUSINESS. FURTHER, THE DEBIT BALANCE AROSE DUE TO M ERELY PASSING OF AN ACCOUNTING ENTRY AND THERE WAS NO REA L TRANSFER OF FUNDS. C) THE TRANSACTION OF ALLOTMENT OF CERTAIN CONSTRUCTED AREA TO THE RETIRING PARTNER WAS A COMMERCIAL/BUSINESS DECISION AND THE AMOUNT DEBITED WOULD PARTAKE THE CHARACTER OF BUSIN ESS ADVANCE AND CAN IN NO WAY BE STATED TO BE DIVERSION OF FUNDS FOR NON-BUSINESS PURPOSE. D) THE APPELLANT HAD SUFFICIENT NON-INTEREST BEARING F UNDS AND THE TRANSFER OF FUNDS IF ANY, SHOULD BE PRESUMED TO HAV E BEEN FROM NON-INTEREST BEARING FUNDS. E) NO DISALLOWANCE U/S.36(1)(III) WAS MADE IN THE EARL IER YEARS ASSESSMENT AND THEREFORE, THE AMOUNT STANDING DUE O N THE FIRST DAY OF THE RELEVANT ASSESSMENT YEAR COULD NOT HAVE BEEN TAKEN INTO ACCOUNT FOR THE PURPOSE OF DISALLOWANCE BY THE LEARNED AO. IV) THE HONBLE ITAT HAS NOT RECORDED ANY REASONS / MIS TAKES IN THE CIT(A)S ORDER, WHEREBY THE CIT(A)S ORDER HAD TO BE SET ASIDE. ON THE CONTRARY THE HONBLE TRIBUNAL HAS BRU SHED ASIDE THE REASONS GIVEN BY THE CIT(A), MUMBAI. 2. WE HAVE GONE THROUGH THE MISCELLANEOUS APPLICATI ON FILED BY THE ASSESSEE AND THE FOLLOWING CORRECTION IS BEING MADE TO THE ORDER OF THE TRIBUNAL DATED 26 TH MARCH, 2010 IN PARA- 6 6. AGGRIEVED THE DEPARTMENT IS ON APPEAL BEFORE US . THE FACTS ON THE RECORD ARE THAT THE PARTNER, SRI S. D. SHAH, ON HIS RETIREMENT HAS BEEN ALLOCATED WIP WHOSE VALUE IS RS.1,15,36,14 4. THIS M.A. NO. 747 /M/10 3 AMOUNT WAS MUCH MORE THAN THE AMOUNT STANDING TO TH E CREDIT OF HIS ACCOUNT ON THE DATE OF RETIREMENT RESULTING IN A DEBIT BALANCE. THE EARLIER PARTNERSHIP DEED OF THE FIRM HAS NOT BE EN PRODUCED AND IT IS NOT CLEAR WHETHER ON RETIREMENT ANY PARTNER I S ENTITLED THE AMOUNT IN EXCESS OF WHAT IS STANDING TO THE CREDIT. IF THE PARTNER IS ENTITLED ONLY TO THE AMOUNT STANDING TO HIS CREDIT ON RETIREMENT, THAN THE ALLOTMENT OF WIP OF A HIGHER VALUE WOULD ORDINARILY REPRESENT TRANSFER OF ASSET BY THE FIRM FOR THE PER SONAL USE OF THE PARTNER AND WILL NOT BE FOR THE PURPOSE OF BUSINESS OF THE FIRM AS THE PARTNER HAS RETIRED. IN SUCH A CASE, THE AMOUNT BORROWED FOR BUILDING THIS WIP IS TRANSFERRED FOR PERSONAL USE O F THE PARTNER CAN BE CONSIDERED AS UTILIZATION OF BORROWED FUNDS FOR NON-BUSINESS PURPOSES. IT IS FOR THE ASSESSEE TO SHOW THAT THIS ASSIGNMENT OF WIP WAS FOR THE PURPOSE OF BUSINESS. IT IS NOT APPA RENT FROM THE RECORDS WHY AN AMOUNT OVER AND ABOVE THE AMOUNT STA NDING TO THE CREDIT OF THE PARTNER ACCOUNT WAS ALLOTTED BY WAY A N ASSET WHOSE VALUE IS MORE THAN THE AMOUNT STANDING TO THE CREDI T OF HIS ACCOUNT. THE STATEMENT THAT THIS WAS DONE TO AVOID LITIGATION AMONG OTHER PARTNERS HAS NOT BEEN SUBSTANTIATED WIT H EVIDENCE. 3. PARA 7 & 8 SHALL NOW READ AS UNDER: WE THEREFORE, FEEL THAT THE LD.CIT(A) SHOULD GO I NTO ALL ASPECTS OF MATTER INCLUDING THOSE INDICATED ABOVE A ND DECIDE WHETHER THE TRANSFERRED WIP WORTH RS.1,15,36,144/- WHICH IS OVER AND ABOVE THE AMOUNT STANDING TO THE CREDIT OF THE RETIRING PARTNER WAS FOR THE PURPOSE OF BUSINESS. FURTHER WE FIND THAT THE APPEL LANT HAS SUFFICIENT INTEREST BEARING FUNDS AND, THEREFOR E, M.A. NO. 747 /M/10 4 FOLLOWING THE DECISION IN THE CASE OF RELIANCE UTIL ITIES, THE INTEREST THERE ON IS TO BE ALLOWED U/S.36(1)(III). THEREFORE THE ASSESSEES APPEAL ON THIS ISSUE IS ALLOWED. IN THE RESULT, THE REVENUES APPEAL IS DISMISSED . 4. IN THE RESULT, THE MISCELLANEOUS APPLICATION FIL ED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED ON THIS 15 TH DAY OF JULY, 2011. SD/- SD/- (PRAMOD KUMAR) (AS HA VIJAYARAGHAVAN) ACCOUNTANT MEMBER JUD ICIAL MEMBER MUMBAI, DATED : 15 TH JULY, 2011 RJ COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT-CONCERNED 4. THE CIT(A)-CONCERNED 5. THE DR H BENCH TRUE COPY BY ORDER ASSTT. REGISTRAR, I.T.A.T, MUMBAI M.A. NO. 747 /M/10 5 DATE INITIALS 1 DRAFT DICTATED ON: 1 1 . 0 7 .2011 SR. PS/PS 2. DRAFT PLACED BEFORE AUTHOR: 1 2 .0 7 .2011 ______ SR. PS/PS 3. DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER: _________ ______ JM/AM 4. DRAFT DISCUSSED/APPROVED BY SECOND MEMBER: _________ ______ JM/AM 5. APPROVED DRAFT COMES TO THE SR. PS/PS: _________ ______ SR. PS/PS 6. KEPT FOR PRONOUNCEMENT ON: _________ ______ SR. PS/PS 7. FILE SENT TO THE BENCH CLERK: _________ ______ SR. PS/PS 8. 9. DATE ON WHICH FILE GOES TO THE HEAD CLERK: DATE ON WHICH FILE GOES TO AR _________ ______ 10. DATE OF DISPATCH OF ORDER: _________ ______