NINE GLOBE BUILDERS,MUMBAI vs. ACIT 21 (2), MUMBAI

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ITA 7260/MUM/2019Status: DisposedITAT Mumbai10 March 2023AY 2014-154 pages
AI SummaryRemanded

What did the Tribunal hold?

The Tribunal noted that the assessee's argument about rolled-over advances was a new plea not raised before the lower authorities. Therefore, the issue was restored to the Assessing Officer for re-examination.

What were the facts?

The assessee, a property developer, paid interest on borrowings from three parties. The Assessing Officer disallowed a portion of this interest under Section 36(1)(iii) of the Income Tax Act. The assessee argued that the borrowings were for business purposes and were rolled over from preceding assessment years.

What were the issues?

Whether disallowance of interest under Section 36(1)(iii) is warranted when borrowings are allegedly rolled over from preceding years and this plea was not raised before lower authorities.

Which sections of the Income-tax Act were involved?

Section 36(1)(iii)

AI-generated summary — verify with the full judgment below

Income Tax Appellate Tribunal, MUMBAI BENCH “B ”, MUMBAI

Hearing: 16/12/2023Pronounced: 10/03/2023

आदेश/ ORDER

PER VIKAS AWASTHY, JM:

1.

This appeal by the assessee is directed against the order of Commissioner of Income Tax(Appeals)-33, Mumbai [in short ‘the CIT(A)’ ] dated 23/09/2019 for Assessment Year 2014-15.

2.

The assessee in appeal has assailed disallowance of interest u/s. 36(1)(iii) of the Income tax Act 1961 [in short ‘the Act’] in respect of the following parties:

Amount of Loans (i) Navkar Developers - Rs. 2.92,89,000/- (ii) SRK Developers - Rs. 7,00,000/- (iii) Girish Parekh - Rs. 2,00,000/- Total : Rs. 3,01,89,000/- 3. Shri Nishit Gandhi appearing on behalf of the assessee submits that the assessee is a partnership firm engaged in the business of development and redevelopment of properties. The assessee filed its return of income for Assessment Year 2014-15 declaring total income of Rs.34,50,590/-. During the period relevant to the assessment year under appeal the assessee earned interest income of Rs.30,25,005/- on loans and advances given to various parties. The assessee also paid interest of Rs.1,69,59,002/- on borrowings. In scrutiny assessment proceedings the Assessing Officer questioned interest payment to Navkar Developers, SRK Developers and Girish Parekh, from whom the assessee had borrowed funds aggregating to Rs.3,01,89,000/-. The Assessing Officer disallowed Rs.36,22,680/- being interest @ 12% on the aforesaid amount u/s. 36(1)(iii) of the Act. The ld. Authorized Representative for the assessee submits that the assessee had made borrowings from the aforesaid three parties for the purpose of business. The ld. Authorized Representative for the assessee further contended that in any case, no new borrowings were from aforesaid parties in the impugned assessment year. The amounts reflected in accounts of the assessee against said parties are rolled over from preceding Assessment Years. In the preceding Assessment Year no question was raised by the Assessing Officer, hence, no disallowance can be made in respect of such advances in the Assessment Year under appeal.

4. Per contra, Ms.Samruddhi Dhananjay Hande representing the Department vehemently defended the impugned order and prayed for dismissing the appeal of assessee. The ld. Departmental Representative submits that the assessee failed to submit any cogent reason for the disproportionate payment of interest, the Assessing Officer has rightly disallowed interest payment u/s. 36(1)(iii) of the Act.

4.

We have heard the submissions made by rival sides and have perused the orders of authorities below. The short contention of the assessee is that the interest has been paid by the assessee to Navkar Developers, SRK Developers and Girish Parekh, on advances received in the preceding Assessment Years, no fresh advances were purportedly received by the assessee during the impugned assessment year. We find that this is a fresh plea raised by assessee before the Tribunal. This plea was not raised by the assessee either before the Assessing Officer or before the CIT(A). Therefore, we deem it appropriate to restore this issue to the file of Assessing Officer for re-examination. In case it is found that the advances on which interest has been disallowed u/s. 36(1)(iii) of the Act were rolled over from the preceding Assessment Year and no fresh advances were taken by the assessee in the impugned assessment year from the parties mentioned above i.e. Navkar Developers, SRK Developers and Girish Parekh, no disallowance u/s. 36(1)(iii) of the Act is warranted. The appeal of assessee is thus, allowed for statistical purpose in the terms aforesaid.

5.

In the result, appeal by the assessee is allowed for statistical purposes.

Order pronounced in the open court on Friday the 10th day of March , 2023.

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