Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, “B’’BENCH: BANGALORE
Before: SHRI GEORGE GEORGE K. & SHRI B.R. BASKARAN
PER B.R. BASKARAN, ACCOUNTANT MEMBER:
The revenue has filed this appeal challenging the order dated 9.4.2019 passed by Ld. CIT(A)-4, Bengaluru and it relates to assessment year 2015-16. The revenue is aggrieved by the decision of Ld. CIT(A) in deleting the disallowance of interest expenditure of Rs.5.75 crores made by the A.O.
None appeared on behalf of the assessee, even though the notice of hearing was sent by registered post to the assessee on M/s. Karnataka Wildlife Resorts Pvt. Ltd., Bangalore
Page 2 of 5 more than one occasions. Hence, we proceed to dispose of the appeal ex-parte, without presence of the assessee.
The facts relating to the issue are stated in brief. The assessee is engaged in the business of operating of resorts. The A.O. noticed that the assessee has claimed interest expenditure of Rs.5.75 crores as detailed below:- Particulars Amount in Rs. Bank charges 9,12,980 Interest paid to Standard 5,47,65,611 Chartered Investments & Loans India Ltd. Interest paid to Others 18,36,597 Total 5,75,15,188 The A.O. noticed that the assessee has borrowed Rs.55 crores from Standard Chartered investment and Loans India Ltd. and paid interest thereon.
The assessee explained that it had taken loans from Yes Bank Ltd. in earlier years and the same was repaid by borrowing money from a related concern named M/s. Coffee Day Hotels & Resorts Pvt. Ltd. It was submitted that the assessee borrowed money from M/s. Standard Chartered & Investment and Loans India Ltd. and used the proceeds to repay the borrowing from M/s. Coffee Day Hotels & Resorts Pvt. Ltd. It was submitted that the assets side of balance sheet contains only business assets, meaning thereby the loan proceeds have been used for business purposes only. Accordingly, it was submitted that the entire interest expenditure is allowable as deduction u/s 36(1)(iii) of the Act. The A.O. was not convinced with the explanation given by the assessee. He took the view that the assessee has diverted interest bearing loans for giving interest free advance to the related concerns and accordingly
M/s. Karnataka Wildlife Resorts Pvt. Ltd., Bangalore
Page 3 of 5 disallowed the entire interest claim of Rs.5.75 crores. The Ld. CIT(A) deleted the disallowance and hence the assessee has filed this appeal before us.
The Ld. D.R. supported the order passed by the A.O. He submitted that the loan taken from Standard Chartered Investment & Loans India Ltd. have been used by the assessee to pay to M/s. Coffee Day Hotels & Resorts Pvt. Ltd, meaning thereby, the above said loan was not used for acquiring assets for the purpose of business. Accordingly, he submitted that the A.O. was justified in disallowing the interest expenditure.
We heard Ld. D.R. and perused the record. The assessee has filed written submissions before Ld. CIT(A), which read as under: “i) The appellant had an outstanding amount of Rs.45 Crores payable to Yes Bank, as on 01.04.2014. In the Annexure-3 submitted herewith, it may be noted that the appellant received Rs.44.10 Crores from M/s Coffee Day Hotels and Resorts. Private Limited to repay the Loan borrowed from Yes Bank. ii) Subsequently, the appellant entered into the Facility agreement with M/s Standard Chartered Investments and Loans Melia Limited, marked as Annexure-4, to repay the loan obtained from M/s Coffee Day Hotels and Resorts Private Limited. The purpose of the Loan with M/s Standard Chartered Investments is also for the repayment of loan obtained from M/s Coffee Day. Hotels and Resorts Private Limited. 1.05) In nutshell, the appellant had received loan from M/s Coffee Day Hotels and Resorts Private Limited towards the repayment of loan taken from Yes Bank Ltd. Subsequently, the loan was availed from Standard Chartered Investment & Loans India Limited to repay loan taken from M/s Coffee Day Hotels and Resorts Private Limited. The observation of the Learned AO that the Loan taken from M/s Standard ("bartered Investment & Loans India Limited are diverted as interest free advances to related parties is contrary to the facts of M/s. Karnataka Wildlife Resorts Pvt. Ltd., Bangalore
Page 4 of 5 the case. Instead the loan has been utilized for repayment of Loan availed from related parties. Accordingly, the interest expenditure is an allowable expenditure.
1.06) With regard to Bank Charges, it may be noted that the appellant company is operating a resort in Bandipur, Karnataka. The guests who check in to the resort usually settle their paymens through cards. The Bank charges are the charges debited by the banks, which is mainly on account of swiping of credit and debit cards. This expenditure is necessarily in connection with the business of the appellant and hence allowance expenditure. The Ld. AG has erred in disallowing Bank charges of Rs.9,12,890/- u/s 36(1)(iii) which provides for interest paid in respect of capital borrowed. Since the Bank charges is not related to Capital Borrowed, the same is an allowable expenditure.”
The LD. CIT(A) also noticed that the amount disallowed by the A.O. included bank charges of Rs.9.12 lakhs, which have been charged by the bank for accepting credit/debit cards. The Ld. CIT(A) also noticed that the asset side of the balance sheet contains only assets, which are applied for business purposes. He noticed that the borrowings made by the assessee from M/s. Coffee Day Hotels & Resorts Pvt. Ltd. were used to repay the term loan taken from Yes Bank Ltd. The present loan taken from Standard Chartered Investment & Loans India Ltd. has been used to repay the loan taken from Coffee Day Hotels & Resorts Pvt. Ltd. These facts show that the assessee was only reshuffling its loan portfolio by changing the lenders, i.e., it is not a case, where the assessee has diverted interest bearing funds to its related concerns, as presumed by the A.O. If that be so, then the amount diverted to related concern should have found place in the assets side of the Balance Sheet. We notice that the Ld. CIT(A) has given a clear finding that the asset side of the balance sheet contains only business assets.
M/s. Karnataka Wildlife Resorts Pvt. Ltd., Bangalore
Page 5 of 5 8. Under these set of facts, we are of the view that there is no reason to interfere with the decision rendered by Ld. CIT(A) on this issue. Accordingly, we confirm the order passed by Ld. CIT(A).
In the result, the appeal filed by the revenue is dismissed.