GOAN HOTELS & REALTY PRIVATE LIMITED,MUMBAI vs. DCIT 12(2)(2), MUMBAI, MUMBAI

The present appeal preferred by the Assessee is directed against the order dated 19/12/2024 passed by The Commissioner Of Income Tax, Appeal, Kolkata-27 (hereinafter referred to as “CIT(A)”) under Section 250 of the Income Tax Act, 1961 ( hereinafter referred to as “the Act”) whereby the Learned CIT(A) had partly allowed the appeal against the Assessment Order, dated 28/12/2018, passed under Section 143(3) of the Act for the Assessment Year 2016-2017. 2. The Assessee has raised following grounds of appeal:

On the facts and in the circumstances of the appellant company's case and in law, the Learned Commissioner of Income Tax (Appeal) erred in not quashing the assessment order passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961. Assessment Year 2016-2017

On the facts and the circumstances of the appellant company's case and in law, the Learned Commissioner of Income Tax (Appeal) erred in upholding the addition of Rs 65,96,95,068/- made by the Assessing Officer u/s 43B(e) of the Act on account of interest paid on term loan ignoring the fact that the interest payments were actually made during the financial year ended on 31.03.2016 relevant to Assessment Year 2016-17 and before due date of filing return of income, which is unjust, invalid and not as per the provisions of the law.

On the facts and the circumstances of the appellant company's case and in law, the Learned Commissioner of Income Tax (Appeal) erred in stating that the appellant company did not file any document to prove the claim of payment of interest by completely disregarding the Loan Account Statement for FY 2015- 16 and Bank statement of loan account for the period from 01.04.2016 to 04.07.2016 submitted during the course of assessment proceedings and before the Ld. CIT(A).

On the facts and the circumstances of the appellant company's case and in law, the Learned Commissioner of Income Tax (Appeals) erred in upholding the 5. 6. disallowance of expenditure of Rs. 6,63,28,732/- u/s 14A of the Act read with Rule 8D(2)(ii) made by the Assessing Officer despite the fact that none of the expenditure incurred during the year has nexus/correlation with the investments made.

On the facts and the circumstances of the appellant company's case and in law, the Learned Commissioner of Income Tax (Appeal) erred in upholding the disallowance of expenditure of Rs. 6,63,28,732/- u/s 14A of the Act ignoring the fact that no exempt income has been earned by the appellant company during the assessment year 2016-17. 6. On the facts and the circumstances of the appellant company's case and in law, the Learned Commissioner of Income Tax (Appeal) erred in upholding the disallowance of expenditure of Rs. 6,63,28,732/- u/s 14A of the Act despite the fact that the appellant company had surplus non-interest bearing funds to invest in the units of mutual funds.

On the facts and the circumstances of the appellant company's case and in law, the Learned Commissioner of Income Tax (Appeal) erred in upholding the addition of Rs 6,63,28,732/- u/s 14A r.w.r 8D to the net profit of the appellant company to arrive at book profits u/s 115JB of the Act which is against the provisions of the law.

On the facts and the circumstances of the appellant company's case and in law, the Learned Commissioner of Income Tax (Appeal) erred in upholding the disallowances on the basis of unjust presumptions of the Assessing Officer, while disregarding the detailed submission of the appellant company.

On the facts and in the circumstances of the appellant company's case and in law, the Ld. Commissioner of Income Tax (Appeals) erred in upholding the disallowance of interest paid to bank of Rs. 65,96,95,068/- and disallowance of Rs. 6,63,28,732/- u/s 14A r.w.r 8D without giving adequate opportunity of being heard and inin gross violation of principles of natural justice, 10.The appellant craves leave to add to, alter, amend, modify and /or delete all or any of the foregoing grounds of appeal.

For the Assessment Year 2016-2017, the Assessee filed Return of income on 23/11/2016 declaring Loss of INR.21,09,30,736/-. On 12/03/2018, the Assessee company filed revised return of income declaring loss of INR.55,96,91,555/-. Subsequently, the case was selected for scrutiny. The Assessing Officer completed the assessment under Section 143(3) of the Act vide Assessment Order, dated 28/12/2018. The Assessing Officer made following two additions/disallowances:

Being aggrieved, the Assessee challenged the above additions/disallowance made by the Assessing Officer in appeal before the Learned CIT(A). Before the Learned CIT(A), the Assessee contended that no disallowance could have been made under Section 14A of the Act since no exempt income was earned by the Assessee during the relevant previous year. In relation to the disallowance of interest expenses the Assessee contended that the Assessee had incurred total interest expenses of INR.62,97,76,773/- on term loan and INR.2,99,18,295/- on bank overdraft facility. Accordingly, thus total interest expenses of INR.65,96,95,068/- were incurred during the relevant previous year, and interest payment of INR.58,99,69,224/- was made during the relevant previous year. There was outstanding interest on INR.6,97,25,844/- which was also paid before the due date of filing the Return of Income for the relevant assessment year.

Being aggrieved, the Assessee has carried the issue in appeal before this Tribunal.

Ground No. 1 raised by the Assessee is general in nature and does not require separate adjudication.

Ground No. 2 and 3 raised by the Assessee are directed against the order of the Learned CIT(A) upholding the addition of INR.65,96,95,068/- made by the Assessing Officer under Section 43B of the Act for non-payment of interest on term loan before the before due date of filing return of income.

We have heard both the sides and have perused the material on record on this issues.

The claim of the Assessee is that the entire amount was actually paid before the due date of filing return of income and therefore, the provisions of Section 43B of the Act are not attracted. It was submitted that the Assessing Officer has incorrectly invoked the said provisions and the Learned CIT(A) confirmed the disallowance without considering the Financial Statements and Bank Account Statement furnished by the Assessee.

On perusal of the material on record we are of the view that from the said material it cannot be verified or established that the aggregate interest expenses of INR.65,96,95,068/- were incurred during the relevant previous year and the same were also paid before the due date of filing return of income. The ledger accounts/documents placed on record by the Assessee provide for a consolidated figure. Reliance placed by the Learned Authorised Representative for the Assessee on the Bank Statement [placed at pages 46 to 141 of the paper-book] and the Financial Statements [at pages 5 to 28 of the paper-book] do not advance the case of the Assessee as loan-wise break-up is not available to establish nexus between interest accrued with interest paid on term loan. Though the Learned Authorised Representative for the Assessee submitted that it can be inferred from the documentary evidence that the interest had accrued and the payment towards the same was made by the Assessee within the prescribed time, we are not inclined to draw such inference since the factum of payment can be clearly determined by leading primary evidence which should have been readily available with the Assessee making such claim. Therefore, we set aside the addition/disallowance of INR.65,96,95,068/- made by the Assessing Officer and direct the Assessee to place before the Assessing Officer relevant documents and details to establish that the interest expenses of INR.65,96,95,068/- had accrued during the relevant previous year and that the Assessee had made payment of such interest before the due date of filing return of income. The Assessee may, if so advised, furnish bank certificate showing the accrual and payment of interest in support of his claim. The Assessing Officer is directed to consider the documents/details furnished by the Assessee, carry out the necessary verification and adjudicate the claim of the Assessee for deduction of interest expenses afresh as per law after granting the Assessee a reasonable opportunity of being heard. In terms of the aforesaid Ground No. 2 & 3 raised by the Assessee are allowed for statistical purposes.

Ground No. 4 to 9 pertain to disallowance made by the Assessing Officer under Section 14A which was confirmed by the Learned CIT(A).

As regards, disallowance of INR.6,63,28,732/- made under Section 14A of the Act is concerned we have given thoughtful consideration to the rival submission. It is admitted position that the Assessee did not earn any exempt income during the relevant previous year. In the absence of any exempt income arising in the relevant previous year, no occasion to make any disallowance under Section 14A of the Act can arise [Principal Commissioner of Income-tax Vs. Red Chillies Entertainment Pvt. Ltd.: [2020] 116 taxmann.com 770 (Bombay)[20-08-2019].

Therefore, we find merit in the contention advanced on behalf of the Assessee that since no exempt income was earned by the Assessee during the relevant previous year, no disallowance was warranted under Section 14A of the Act. As a result, disallowance of INR.6,63,28,732/- made under Section 14A of the Act is deleted. Accordingly, in terms of the aforesaid, Ground No. 4 to 9 raised by the Assessee are allowed.

In result, the appeal preferred by the Assessee is partly allowed.

""थ"/ The Respondent. आयकरआयु"/ The CIT 3. 4. "धान आयकर आयु" / Pr.CIT 5. िवभागीय"ितिनिध ,आयकरअपीलीयअिधकरण ,मुंबई/ DR, ITAT, Mumbai 6. गाड"फाईल / Guard file.