DCIT, NEW DELHI vs. M/S. DLF UTILITIES LTD., NEW DELHI

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ITA 3734/DEL/2015Status: DisposedITAT Delhi13 July 2018AY 2010-115 pages

In favour of the assessee: the Revenue's appeal was dismissed. From the AI summary of this appeal.

AI SummaryDismissed

What did the Tribunal hold?

The Tribunal held that the issue was identical to previous assessment years where similar appeals were dismissed in favour of the assessee. The Tribunal found no reason to interfere with the CIT(A)'s order, which had relied on the principle of commercial expediency.

What were the facts?

The Revenue appealed against the deletion of an addition made on account of interest chargeable on interest-free advances given to DLF Limited. The assessee had declared a loss for the Assessment Year 2010-11, and the Assessing Officer made an addition of Rs. 72,48,624/-.

What were the issues?

Whether interest on interest-free advances given for business purposes is disallowable under Section 36(1)(iii) of the Income Tax Act.

Which sections of the Income-tax Act were involved?

Section 36(1)(iii)

AI-generated summary — verify with the full judgment below

Cases cited in this judgment(2)Show list

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Income Tax Appellate Tribunal, DELHI BENCH: ‘C’ NEW DELHI

Before: SHRI P. M. JAGTAP & MS SUCHITRA KAMBLE

Hearing: 10.07.2018Pronounced: 13.07.2018

This appeal is filed by the Revenue against the order dated 09/03/2015 passed by CIT (A)-III, New Delhi for Assessment Year 2010-11.

2.

The grounds of appeal are as under:-

“1. Whether on the facts and in the circumstances of the case and in law, the Ld.CIT (A) has erred in deleting the addition of Rs.72,48,624/- made by the A.O on account of interest chargeable on interest free advances given to DLF Limited u/s by invoking provision of Section 36(1)

(iii) of the Act.”

3.

The assessee is a Limited Company incorporated on 21/8/1989 and is engaged in the business of real estate and other allied activities as stated in the memorandum the Articles of Association of the assessee Company. The assessee filed its original return of income declaring loss of Rs.54,36,95,544/- for the Assessment Year 2010-11 on 13/10/2010. Subsequently, the assessee company filed its revised return of income declaring loss of Rs.54,36,95,544/- on 29/3/2012. The case was selected for scrutiny and as against the return loss of Rs.54,36,95,544/-. The assessment was completed u/s 143(3) of the Income Tax Act, 1961 at loss of Rs.53,64,46,920/- and made addition of Rs.72,48,624/- for the year under consideration.

4.

Being aggrieved by the same, the assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee.

5.

The Ld. AR submitted that in preceding year and in subsequent years i.e. Assessment Year 2008-09 & 2011-12, this issue is allowed in favour of the assessee in assessee’s own case (ITA No. 4348/Del/2012 A.Y 2008-09 order dated 17/10/2017 and & 2566/Del/2016 for A.Y 2011-12 order dated 28/6/2018).

6.

The Ld. DR relied upon the order of the Assessing Officer but could not controvert the decisions of the Tribunal for Assessment Year 2008-09 and 2011-12 in the assessee’s own case.

7.

We have heard both the parties and perused the material available on record. The Tribunal in Assessment Year 2011-12 in assessee’s own case held as under:-

“5. We have heard the rival submissions and have also perused the material on record. As far as the issue of disallowance of interest u/s 36(l)(iii) of the Act is concerned, we find that the Ld. CIT (A) has discussed the issue at length in paragraph 3.2 of the impugned order wherein he has given a categorical finding that the loans and advances include investment in immovable property which was part of the business activity of the assessee. It has been further recorded by the Ld. CIT (A) that the investment in the partnership firm was made exclusively for the purpose of the business. It has also been noted by the Ld. CIT (A) that the advances recoverable and forward-cover receivable included in the advances are business advances and have been given to suppliers with whom regular business transactions are under taken. Similarly with respect to the advance given to DLF Ltd., the Ld. CIT (A) has noted that the same has also been given for the purpose of business. The Ld. CIT (A) has also noted that apart from these advances, there were other advances also but on which interest has duly been charged by the assessee. The Ld. CIT (A) has also placed reliance on the judgment of the Hon’ble Apex Court in the case of S.A. Builders Ltd. reported in 288 ITR 1 wherein the Hon’ble Apex Court had held that an expenditure may not have been incurred under any legal objection but yet it is allowable as a business expenditure if it was incurred on the grounds of commercial expediency. We note that the Hon’ble Apex Court has also observed that the expression “commercial expediency” is an expression of wide import and includes such expenditure as a prudent businessman incurs for the purpose of business. The Ld. CIT (A) has also referred to the judgment of Hon’ble Delhi High Court in the case of CIT vs. Dalmia Cement (Pvt.) Ltd. reported in 254 ITR 377 wherein it had been held by the Hon’ble High Court that once it was established that there was a nexus between the expenditure and the purpose of business, the revenue cannot justifiably claim to put itself in the armchair of the businessman and take up the role to decide as to how much is reasonable expenditure having regard to the circumstances of the case. Thereafter, the Ld. CIT (A) has given a categorical finding that in the instant case the loans and advances have been given on account of commercial expediency. The Ld. Sr. Departmental Representative could not point out any factual inaccuracy in the findings of the Ld. CIT (A) nor could she point out how the impugned order was not legally sustainable. Accordingly, we find no reason to interfere with the findings of the Ld. CIT (A) on this issue and we dismiss the grounds raised by the department.

5.1. Thus, the appeal of the department stands dismissed.”

The issue in the present year is identical to the Assessment Year 2008- 09 as well as 2011-12. Therefore, there is no need to interfere with the order of the CIT (A). The appeal of the Revenue is dismissed.

9.

In result, the appeal of the Revenue is dismissed. Order pronounced in the Open Court on 13th JULY, 2018.

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