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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: SHRI KUL BHARAT & SHRI MANISH BORAD
Appellant by Shri Sumit Nema, A.R. & Shri Gagan Tiwari, A.R. Respondent by Shri Punit Kumar, Sr. D.R. Date of Hearing: 21.01.2020 Date of Pronouncement: 22.01.2020 आदेश / O R D E R PER KUL BHARAT, J.M: This appeal by the assessee is directed against order of the CIT(A)-2, Bhopal dated 28.3.2019 pertaining to the assessment year 2013-14. The assessee has raised following grounds of appeal:
[ ] [M/s. Total Diagnosis Pvt. Ltd., Bhopal]
There is no jurisdiction either in law or on facts for the Ld. CIT(A) to sustain the disallowance of Rs.45,11,593/- under section 36(1)(iii) out of interest payment on the ground that borrowed funds has not been utilised for business purpose.
That the Ld. CIT(A) was not justified in completely discarding the specific submission regarding the fact that advances to SKIPL were not given in the A.Y. 2013-14 and thus the order of Ld. CIT(A) is perverse and deserves to be set aside. 3. The Ld. CIT(A) was not justified in sustaining the disallowance of Rs.45,11,593/- under section 36(1)(iii) out of interest payment on the ground that borrowed funds has not been utilised for business purpose without appreciating the ratio of decision rendered by the Supreme Court in S.A. Builders Ltd. Vs. CIT (2007) 288 ITR 1 (SC) AND Sundaram Fastners Ltd. (1984) 149 ITR 773 Madras. 4. That the Ld. CIT(A) was not justified either in law or on facts in arriving at the conclusion that the money advances to SKIPL was not for the purpose of commercial expediency without appreciating the fact that the amount was given interest free to the SKIPL in the F.Y. 2009-10 for the reason that SKIPL has purchased land at prime place located at Punjiyan Bhawan, Malviya Nagar, Bhopal and has started commercial construction with a view to let it out on lease to the appellant and SKIPL had executed the lease agreement dated 15.1.2009 for the lease of 10,000 sq.ft. in the said building. 5. That the Ld. CIT(A) was not justified in sustaining the impugned addition of Rs.1,38,437/- made on account of undisclosed interest income due to difference between interest income shown by the appellant and as per form 26AS and without property appreciating the submission filed before the CIT(A). 2. Ground No.1 is against sustaining the addition of Rs.45,11,593/-. The facts giving rise to the present appeal are that the case of the assessee was picked up for scrutiny assessment and the assessment u/s 143(3) of the Income Tax Act, 1961 (hereinafter called as ‘the Act’) was framed vide order dated 29.3.2016. The A.O. during the course of assessment proceedings noticed that on perusal of audited
[ ] [M/s. Total Diagnosis Pvt. Ltd., Bhopal] accounts for the year under appeal and material available on record, the assessee company claimed a sum of Rs.6,91,59,001/- as other advances from M/s. S.K.
Infrastructure Pvt. Ltd. in the schedule 12 of the Loans and advances forming part of the audited accounts. The A.O. therefore, called upon the assessee to explain vide questionnaire u/s 142(1) of the Act dated 25.2.2016. In response thereto, the assessee company replied that the amount was given for constructing building which would be used by the assessee company in future. However, the A.O. did not accept this contention of the assessee and therefore made disallowance of Rs.45,11,593/- u/s 36(1)(iii) of the Act. Further, the A.O. also noticed that there was a difference in the interest as disclosed by the assessee accrued on FDR and as reflected in form 26AS.
As per the assessee, the interest was of Rs.9,10,138/- and as per the form 26AS, the amount received was [ ] [M/s. Total Diagnosis Pvt. Ltd., Bhopal] Rs.10,48,575/-. Therefore, the difference of Rs.1,38,457/- was added back into income of the assessee as undisclosed income. Aggrieved against this, the assessee preferred appeal before Ld. CIT(A), who after considering the submissions confirmed the additions made by the A.O.
Now the assessee is in further appeal before this Tribunal.
Ground No.1 is against sustaining addition of Rs.45,11,593/-. Ld. Counsel for the assessee submitted that admittedly, this amount was not advanced in the year under consideration. This amount was given in the earlier years. Ld. Counsel reiterated the submissions as made in the written submissions.
Ld. D.R. opposed these submissions and supported the orders of the authorities below.
We have heard the rival submissions, perused the materials available on record and gone through the orders
[ ] [M/s. Total Diagnosis Pvt. Ltd., Bhopal] of the authorities below. The contention of the assessee is that the amount was not given in the year under consideration. Therefore, the question of genuineness, creditworthiness and business expediency is to be verified in the year when this advance was given. It is also contended that if genuineness, creditworthiness and business expediency is not proved in that year, in that event, the A.O. would be at liberty to make addition in this year. To buttress this contention, reliance is made on the decision of the coordinate bench rendered in the case of ACIT Vs. Auto Light (India) Ltd. (2016) 180 TTJ 228 (Jaipur). We find force in this contention of the assessee.
Under the identical facts, the coordinate bench of this (supra), has observed that from perusal of balance sheet, it is clear that though there is increase of share capital, but simultaneously, there is also increase in the loan and fixed
[ ] [M/s. Total Diagnosis Pvt. Ltd., Bhopal] assets of the assessee company. Therefore, the assessee was required to prove whether on the date of making investment or giving the interest free amount to the sister concern, the assessee was having sufficient interest free funds available with it. For that purpose, the assessee should demonstrate from its cash flow statement and bank account that it has date-wise availability of interest free funds on the date of making advances to the sister concern. It is further held by the coordinate bench that what is provided u/s 36 of the Act the deduction on the amount of interest paid on the capital borrowed for the purpose of business or profession, the provision is made applicable on the capital borrowed and has not restricted to the capital borrowed during the year. Therefore, the Tribunal did not accept the contention that restricting disallowance only for the amount borrowed during the assessment year. Therefore, in the light of above, we
[ ] [M/s. Total Diagnosis Pvt. Ltd., Bhopal] hereby set aside the assessment order and restore the assessment to the file of the A.O. on this issue for deciding it afresh after verifying whether on the date of making advance or giving the interest free amount to the sister concern, the assessee was having sufficient interest free funds available with it and also whether such amount was given out of any business expediency. In case the A.O. finds that there was no business expediency or availability of interest free funds when the advances were given, he would be free to sustain the impugned addition.
Ground No.1 of the assessee’s appeal is allowed for statistical purposes.
7. Ground No.2 is against sustaining the addition of Rs.1,38,437/- in respect of the difference between interest income shown by appellant as per form 26AS and without properly appreciating the submissions filed before the Ld.
[ ] [M/s. Total Diagnosis Pvt. Ltd., Bhopal] CIT(A). It is contended that the interest received on fixed deposit was Rs.9,10,138/- only, whereas during the earlier previous year it was Rs.90,33,638/-. Basically, the difference pointed out by the A.O. is due to the maturity of the fixed deposit of substantial amount of Rs.8.21 crores during the first quarter of financial year 2012-13.
8. However, Ld. D.R. opposed these submissions.
We have heard the rival submissions, perused the materials available on records. Considering the contention of the assessee that the fixed deposit was matured in the first quarter of financial year 2012-13 relevant to assessment year 2013-14, the A.O. would verify the interest related to the year under consideration and decide this ground afresh.
[ ] [M/s. Total Diagnosis Pvt. Ltd., Bhopal]
In the result, appeal filed by the assessee is allowed for statistical purposes.
Order was pronounced in the open court on 22.01.2020.