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Income Tax Appellate Tribunal, DELHI BENCH ‘A’, NEW DELHI
Before: SH. ANIL CHATURVEDI & SH. ASTHA CHANDRA
PER ANIL CHATURVEDI, AM :
Both the appeals filed by the assessee are directed against the orders dated 24.01.2019 and 11.02.2019 of the Commissioner of Income Tax (Appeals)- 20 & 38, New Delhi relating to Assessment Years 2014-15 and 2015-16 respectively.
At the outset, Learned AR submitted that the issue involved in both the appeals are identical except for the year and amounts involved and therefore the submissions made by him for one year would be applicable to the other year also. Ld DR did not controvert the aforesaid submissions of Ld AR. In view of the aforesaid submissions of the Counsel, we for the sake of convenience proceed to dispose of both the appeals by a consolidated order but for the sake of reference refer to the facts for A.Y. 2014-15.
The relevant facts as culled from the material on records are as under:
Assessee is an individual stated to be engaged in the business of Dealer/Commission Agent under the name and style of M/s. Bhagwati Motors (Regd.). Assessee filed his return of income for A.Y. 2014-15 on 05.09.2014 declaring total income at Rs.40,18,917/-. The case was selected for scrutiny and thereafter assessment was framed u/s 143(3) of the Act vide order dated 30.12.2016 and the total income was determined at Rs.69,08,600/-. Aggrieved by the order of AO, assessee carried the matter before CIT(A) who vide order dated 24.01.2019 dismissed the appeal of the assessee. Aggrieved by the order of CIT(A), assessee is now in appeal and has raised the following grounds:
1. “That on the facts and in circumstances of the case, the ld CIT(A) erred in sustaining the addition of Rs.28,30,300/- on account of notional interest on interest free loan given by the Assessee to his mother.
2. That the Ld CIT(A) erred in not even taking notice of the judgment of the Hon’ble Supreme Court, the jurisdictional High Court and the other High Courts relied upon by the Assessee, which were directly applicable to the facts of the case.” 5. Similar grounds have been raised by assessee in for A.Y. 2015-16.
During the course of assessment proceedings, on perusal of the Balance Sheet, AO noticed that assessee had taken a secured loan of Rs.1,93,91,292/- and unsecured loan of Rs.4,12,61,005/- and had debited interest on loan amounting to Rs.30,16,226/- and Rs.33,87,712/-. He also noted that assessee had also advanced loans to various parties including related parties amounting to Rs.2,94,54,658/-. Assessee was asked to justify the interest expenses and justify as to how the interest expenses is incurred for the purpose of business to which assessee made the submissions which were not found acceptable to AO. AO also noted that assessee had advanced an interest free unsecured loan of Rs.2,12,70,000/- to his mother, Smt. Dayawati Gupta. AO thereafter on the basis of the loan outstanding during the year to Dayawati Gupta worked out the interest at 12% and was of the view that assessee should have charged aggregate interest of Rs.28,30,300/- on such loan advanced to Dayawati Gupta. He thus held that advancement of interest free loan to the mother to be a non-business expenditure and accordingly made addition of Rs.28,30,300/-.
Aggrieved by the order of AO, assessee carried the matter before CIT(A) who vide order dated 24.01.2019 in Appeal No.10732/2016-17 upheld the order of AO. Aggrieved by the order of CIT(A), assessee is now in appeal before us.
Before us, Learned AR reiterated the submissions made before the AO and CIT(A) and further pointed to his summarized Balance Sheet which is placed on page 2 of the paper book and from there he pointed to the fact that as per the Balance Sheet as on 31.03.2014, assessee had own Capital of Rs.1,23,86,969/- and interest free loan from friends and relatives of Rs.1,27,09,000/- and thus the total interest free fund available with the assessee was to the extent of Rs.2,50,95,969/- as against the amount of interest free loan given to the mother of the assessee which was Rs.2,12,70,000/-. He therefore submitted that since the interest free loan advanced to the mother was less than the interest free funds available with the assessee, it is to be presumed that the amount advanced is out of interest free funds. In support of his aforesaid contention, he placed reliance on the decision in the case of CIT vs. Reliance Utilities & Power Ltd. [2009] 313 ITR 340 (Bom). He further submitted that the aforesaid decision of Bombay High Court has been upheld by the Hon’ble Apex Court and the same is reported in (2019) 20 Supreme Court Cases 478. He also placed reliance on the decision of Gujarat High Court in the case of CIT vs. Raghuvir Synthetics Ltd. (Tax Appeal No.829 of 2007). He therefore submitted that no addition is called for.
Learned DR on the hand supported the order of lower authorities.
We have heard the rival submissions and perused the material available on record. The issue in the present case is with respect to the addition made on account of notional interest that according to AO assessee should have charged on the interest free advanced given to his mother. Before us, assessee from the Balance Sheet has pointed that the aggregate interest free funds available with the assessee as on 31.03.2014 is to the extent of Rs.2.50 crores and the amount of interest free loan that has been given to his mother is Rs.2.12 crores and thus the availability of the interest free fund is more than the amount advanced. We find that Hon’ble Bombay High Court in the case of Reliance Utilities & Power Ltd. (supra) has held that where an assessee had own funds as well as borrowed funds, a presumption can be made that the advances for non-business purposes have been made out of the own funds and that the borrowed funds have not been used for this purpose. We further find that similar view has been taken by Hon’ble Gujarat High Court in the case of Raghuvir Synthetics Ltd. (supra). Before us, no contrary binding decision in its support has been pointed by Revenue. Relying on the aforesaid decisions, we are of the view that no disallowance of interest is called for in the present case. We therefore direct its deletion. Thus the ground of assessee are allowed.
In the result, appeal of the assessee is allowed.
As far as for A.Y. 2015-16 is concerned, before us, both the parties have submitted that the issue raised in the appeal for A.Y. 2015-16 is identical to that of A.Y. 2014-15. We have hereinabove while deciding the appeal for A.Y. 2015-16 for the reasons stated have allowed the appeal of the assessee. We therefore for similar reasons also allow the grounds of the assessee for A.Y. 2015-16. Thus the grounds of the assessee are allowed.
In the combined result, both the appeals of the assessee are allowed.
Order pronounced in the open court on 23.05.2022