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Income Tax Appellate Tribunal, JAIPUR BENCHES, JAIPUR
Before: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 833/JP/2016
आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES, JAIPUR Jh dqy Hkkjr] U;kf;d lnL; ,oa Jh foØe flag ;kno] ys[kk lnL; ds le{k BEFORE: SHRI KUL BHARAT, JM & SHRI VIKRAM SINGH YADAV, AM vk;dj vihy la-@ITA No. 833/JP/2016 fu/kZkj.k o"kZ@Assessment Year :2009-2010 cuke The ACIT, Circle- 2, M/s Lakhani Shoe Co. Pvt. Ltd., Alwar. Vs. Plot No. 130, Sector-24, Faridabad, Haryana. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAACL2991A vihykFkhZ@Appellant izR;FkhZ@Respondent vk;dj vihy la-@ITA No. 834/JP/2016 fu/kZkj.k o"kZ@Assessment Year :2012-2013 cuke The ACIT, Circle- 2, M/s Lakhani Shoe Co. Pvt. Ltd., Vs. Alwar. Plot No. 130, Sector-24, Faridabad, Haryana. LFkk;h ys[kk la-@thvkbZvkj la-@PAN/GIR No.: AAACL2991A vihykFkhZ@Appellant izR;FkhZ@Respondent
fu/kZkfjrh dh vksj ls@ Assessee by : Shri S.C. Vasudeva (C.A.) jktLo dh vksj ls@ Revenue by : Shri R.C.Verma (Addl. CIT)
lquokbZ dh rkjh[k@ Date of Hearing : 20/04/2017 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 25/04/2017 vkns'k@ ORDER
PER: VIKRAM SINGH YADAV, A.M.
2 ITA No. 833&834/JP/2016 ACIT ,Alwar Vs. M/s Lakhani Shoe Co. Pvt. Faridabad, Haryana These are two appeals filed by the Revenue against two separate orders passed by ld. CIT (A) -2, Alwar dated 20.07.2016 for A.Y. 2009-10 and dated 15.07.2016 for A.Y. 2012-13 respectively. Since common issues are involved in both these appeals, the same were heard together and disposed off by this consolidated order.
The solitary ground of appeal taken by the Revenue in A.Y. 2009-10 is as under:- “1. That the led. CIT(A) has erred on the facts & circumstances of the csas in deleting the disallowance made by the AO to the extent of Rs. 55,79,771/- out of interest paid on loans which was unneeds since the assessee company had invested huge amounts in the firms ( in which directors of the firm are partners) which generate very low return in comparison to interest paid on loans.”
Briefly the facts of the case are that the assessment in this case was reopened by issuance of notice u/s 148 of the Act by the Assessing Officer. In terms of the reasons recorded by the AO, it was stated that the assessee company has made investment of Rs. 3,19,21,938/- in M/s Mascot Footcare, Noida and Rs. 1,45,76,154/- in M/s Mascot Udhyog, Noida and the Directors of the assessee company are also partners in the said two firms. It was further stated that the assessee was paying interest on unsecured loan from Shri Gunjan Lakhani and interest to banks on secured loan on which it was paying the interest @ 12% which is higher as compared to low rate of return on investment in the said two firms and the investments were not reasonable. Thereafter, after disposing off the objections raised by the assessee, the reassessment was completed u/s 147 r/w section
3 ITA No. 833&834/JP/2016 ACIT ,Alwar Vs. M/s Lakhani Shoe Co. Pvt. Faridabad, Haryana 143(3) of the Act wherein the AO has held that the business of the assessee company is manufacture of Hawai Chapal, the investment in these two firms is not part of the business of the assessee and there is no profit to the business of the assessee from such investment and the amounts so invested is not reasonable. The Assessing officer didn’t accept the assessee’s company submission that the investments in the firms were not made out of borrowed funds but out of internal accruals and the investments were made in the earlier years. The Assessing Officer finally held that if the assessee had not made the above investment, the assessee company would have saved the amount of interest paid on unsecured loan and bank loan to the extent of 12% of the investment made which comes to Rs. 55,79,771/- which was disallowed and added to the income of the assessee company.
Being aggrieved, the assessee carried the matter in appeal before the ld. CIT (A) who noted that the initial investment in M/s Mascot Footware, Noida was made in the year 1988-89 amounting to Rs. 1,25,000/- and thereafter till year 1999-2000, a total investment of Rs. 60,00,000/- was made. Similarly, in Mascot Udhyog, an investment of Rs. 5,00,000/- was made in the year 1989-90 and thereafter Rs. 40,00,000/- was invested in the year 1999-2000. It was further noted by the ld CIT(A) that investments in these two firms have increased over the years on account of share of profit and interest on capital and all these investments have been made out of internal accruals and no borrowed funds have been taken or utilized over all these years. Thereafter, the ld. CIT (A) has referred to the decision passed by the Co-ordinate Bench in ITA No. 724/JP/2016 for A.Y. 2010-11 and stated
4 ITA No. 833&834/JP/2016 ACIT ,Alwar Vs. M/s Lakhani Shoe Co. Pvt. Faridabad, Haryana that since there is no change in the facts and circumstances of the case, following the decision passed by the Co-ordinate Bench and considering the facts that investments were made out of interest free funds available in the assessee business, addition of Rs. 55,79,771/- was deleted.
At the outset, the learned Counsel for the assessee submitted that issue under consideration stand decided in favour of the assessee company by the order of the Co-ordinate Bench in assessee’s own case for A.Y. 2010-11 in ITA No. 724/JP/2014. It was further brought to the notice of the Bench that similar issue was involved in A.Y. 2011-12 which has also been decided in favour of the assessee by the Co- ordinate Bench vide its order dated 15.09.2016 in ITA No. 38/JP/2016. It was accordingly submitted that since there is no change in the facts and circumstances of the case, the earlier orders passed by the Co- ordinate Benches in assessee’s own case may kindly be followed.
The ld. D/R is heard who has relied upon the order of the lower authorities.
We have heard the rival contentions and pursued the material available on record. It is noted that the facts in the year under consideration are identical to the facts in A.Y. 2009-10 and A.Y. 2012- 13. The investment made by the assessee in M/s Mascot Footcare, Nodia and M/s Mascot Udhyog, Nodia were under consideration and disallowances of interest were made by the Assessing Officer. No fresh investment has been made during the year under consideration. Further, once the assessee company has submitted that the investments have not been made out of borrowed funds, the onus shift
5 ITA No. 833&834/JP/2016 ACIT ,Alwar Vs. M/s Lakhani Shoe Co. Pvt. Faridabad, Haryana on the Assessing officer. However, the Assessing officer has not established the necessary nexus between the borrowed funds and the investments in these two firms in the respective year of making the investments. The interest on borrowed funds therefore cannot be disallowed.
The Co-ordinate Benches after considering the arguments raised by both the parties has decided the matter in favour of the assessee. The relevant finding of the Co-ordinate bench in ITA No. 38/JP/2016 dated 15.09.2016 reads as under:-
“7. The facts in the year under consideration are not any different from those in A.Y. 2010-11. Even the ld. CIT(A) has observed in the impugned order, inter alia, that the issue had been considered by him in his order dated 14/8/2014, in the assessee’s case for A.Y. 2010-11. It was the said order of the ld. CIT(A) for A.Y. 2010-11, against which the assessee’s appeal was allowed by the Tribunal vide its aforesaid order dated 18/3/2016. 8. Therefore, respectively following the Tribunal order (supra), in the assessee own case for A.Y. 2010-11, the disallowance made for the year under consideration is deleted. 9. We hold that no nexus between the borrowed funds in the investments made having been proved and the borrowing having been made for business purposes, the interest thereon is allowable U/s 36(1)(iii) of the Act. Too, as per record, the assessee is a partner in M/s Mascot Footcare, Noida and M/s Mascot Udhyog, Noida, where the assessee made capital contribution out of its own internal accruals, which contributions have grown over time due to share of profit and interest on capital.”
6 ITA No. 833&834/JP/2016 ACIT ,Alwar Vs. M/s Lakhani Shoe Co. Pvt. Faridabad, Haryana 9. In light of above discussions, respectively following the Co- ordinate Benches decision in assessee own case for A.Y. 2010-11 and A.Y. 2012-13, we donot find any infirmity in the order of ld CIT(A) who has rightly deleted the disallowance of interest made by the Assessing Officer for the year under consideration.
ITA No. 834/JP/16
It is noted that under identical facts and circumstances of the case, similar ground of appeal have been taken by the Revenue in its appeal for A.Y. 2012-13. Therefore, following our decision in ITA no. 833/JP/16, the order of ld CIT(A) is confirmed who has rightly deleted the disallowance of interest made by the Assessing Officer for the year under consideration.
In the result, both the appeals filed by the Revenue are dismissed.
Order pronounced in the open court on 25/04/2017 Sd/- Sd/- ¼dqy Hkkjr ½ ¼foØe flag ;kno½ (Kul Bharat) (Vikram Singh Yadav) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 25/04/2017. *Santosh. आदेश की प्रतिलिपि अग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. vihykFkhZ@The Appellant- ACIT, Circle-2, Alwar 2. izR;FkhZ@ The Respondent- M/s Lakhani Shoe Co. Pvt. Ltd. Plot No. 130, Sector-24. Faridabad, Haryana. 3. vk;dj vk;qDr@ CIT 4. vk;dj vk;qDr@ CIT(A) 5. विभागीय प्रतिनिधि] आयकर अपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत. 6. xkMZ QkbZy@ Guard File {ITA No. 833 & 834/JP/2016}
7 ITA No. 833&834/JP/2016 ACIT ,Alwar Vs. M/s Lakhani Shoe Co. Pvt. Faridabad, Haryana
vkns'kkuqlkj@ By order,
सहायक पंजीकार@Aेेज. त्महपेजतंत