RASS HEALTHCARE PRIVATE LTD.,PUNE vs. ASSISTANT COMMISSIONER OF INCOME-TAX,

आदेश / ORDER

PER D. KARUNAKARA RAO, AM :

This is the appeal filed by Assessee against the order of CIT(Appeals)- 4, Pune dated 17.03.2016 for the assessment year 2007-08.

2 ITA No. 1125/PUN/2016 A.Y.2007-08

income at ‘Nil’ for the assessment year under consideration. In the scrutiny

assessment proceedings, Assessing Officer noted that assessee claims of

Rs.28,72,831/-on account of interest paid on loans borrowed for the

purpose of business. Assessee has shown a single transaction of sale and

purchase and that too, on 30th March, 2007 (purchase) and 31st March,

2007 (sale). The sale transaction on the last day of the year was entered

into with one of the sister concerns of the assessee viz. M/s.Briocia Pharma

(I) Pvt. Ltd. There was no other business account undertaken by the

assessee during the year under consideration. It is also noted by the

Assessing Officer that office premises was purchased by the assessee by

utilizing the said interest bearing loans and therefore, claim of expenditure

on account of interest should be allowed. After considering the assessee’s

submission, Assessing Officer proceeded to make addition of

Rs.28,72,831/- u/s.37 of the Income Tax Act, 1961 (hereinafter referred to

as ‘the Act’). The Assessing Officer held that unsecured loans taken by the

assessee was for the purpose of business of assessee. Assessing Officer also

noted that the said office premises at No. 1, Church Road, Pune was used

by sister concerns namely, M/s. Pharmalinks Agency (I) Pvt. Ltd. and M/s.

Biostar Pharmaceuticals Pvt. Ltd.

the CIT(A). During First Appellate proceedings, on the addition of

Rs.28,72,831/- , Assessee submitted that the unsecured loans were used

for the acquisition of office premises at Church Road, Pune and assessee’s

claim relates to the said unsecured loans. However, CIT(A) held that office

premises utilized by sister concerns, is not ‘Business Asset’ of the

assessee. Regarding applicability of the provisions of section 57 of the Act,

CIT(A) held that the said provision should be applicable in case assessee

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earned any income from the said office premises. The CIT(A) further held

that the single purchase and sale on the last days of the financial year is

nothing but to show that business was carried out by the assessee and

therefore, allowing any expenditure u/s.37 of the Act was denied. The

solitary transaction with the sister concerns was also not considered as

reasonable business transaction. The CIT(A) held that claiming such

expenditure in the factual matrix of business transaction is not bona-fide

one and assessee has failed to provide any evidences before the Assessing

Officer to demonstrate that there was any purchase of furniture and fixture

for the office premises involving banking transactions. The CIT(A) is the of

the view that the ratio laid down by the Hon'ble Jurisdictional High Court

in the case of CIT Vs. Reliance Utilities Ltd. reported as 313 ITR 340 is not

applicable in the case of assessee wherein it has been held that if the

assessee has own as well as borrowed funds, a presumption can be made

that advances for non business purposes have been made out of its own

funds provide that interest free funds were sufficient to meet the

investment. But in the case of assessee, there was own funds to the extent

of Rs.23,93,733/- as on 31.03.2017 whereas the borrowed funds were

Rs.3,73,50,009/-. The CIT(A), accordingly, confirmed the disallowance of

Rs.28,72,831/-.

Tribunal by raising following grounds :

“1. The learned Commissioner of Income Tax Appeals has erred in law and in facts in confirming the order of Assessing Officer disallowing interest amounting to Rs.6,89,709/-. 2. The learned Commissioner of Income Tax Appeals has erred in confirming the view of the assessing officer that the appellant was not carrying on any business. 3. The learned Commissioner of Income Tax Appeals has erred on relying on the judgment of CIT Vs. Reliance Utilities Ld. 313 ITR 340

4 ITA No. 1125/PUN/2016 A.Y.2007-08

although the same was not relevant to the facts and law applicable to the appellant. 4. The appellant craves leave to add, alter, delete any of the above grounds of appeal during the course of appellate proceedings.”

the Assessing Officer and CIT(A).

Assessing Officer and CIT(A).

below. At the time of hearing, we asked the Ld. Counsel to justify the figure

of Rs.6,89,709/- mentioned in the grounds. In response to the same, Ld.

Counsel stated that the figure is erroneously mentioned otherwise and

Rs.28,72,831/- is the correct figure for consideration. On perusal of the

facts as narrated in the preceding paragraphs, we find that the orders of

Assessing Officer and CIT(A) are not clear as to the application of the

borrowed funds during the year under consideration. The facts relating to

acquisition of the office premises by utilizing unsecured loans are also not

brought on the records. The facts relating to the office premises used for

business purpose and the nature of transactions on purchase and sale

involving the sister concerns are also not clearly demonstrated in the said

orders of Assessing Officer and CIT(A). Therefore, we are of the opinion

that this issue must be remanded to the file of Assessing Officer for want of

facts. Assessing Officer is directed to pass a speaking order narrating all

aspects i.e. i) the details of unsecured loans ; ii) interest income of

Rs.28,72,831/- claimed as interest expenditure; iii) application of the said

unsecured loan for business purpose ; iv) details of income earned by

assessee out of office premises and taxation of the same; v) details of EMI,

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if any, imposed on assessee while granting loans to assessee vi) deduction of TDS as per rules etc. These facts should be brought on record in the set aside proceedings. After considering these facts, Assessing Officer shall pass a speaking order in accordance with law and statute. The Assessing Officer shall grant reasonable opportunity of being heard to the assessee as per set principles of natural justice. Accordingly, grounds raised by assessee are allowed for statistical purposes.

Order pronounced on 05th day of October, 2018.

Sd/- Sd/- (�वकास अव�थी /VIKAS AWASTHY) (डी. क�णाकरा राव/D. KARUNAKARA RAO) �या�यक सद�य/JUDICIAL MEMBER लेखा सद�य/ACCOUNTANT MEMBER

पुणे / Pune; �दनांक / Dated : 05th October, 2018. SB आदेश क� ��त�ल�प अ�े�षत / Copy of the Order forwarded to :

अपीलाथ� / The Appellant. 1. ��यथ� / The Respondent. 2. 3. The CIT (Appeals)-4, Pune. 4. The Pr. CIT-3, Pune. 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, “बी” ब�च, पुणे / DR, ITAT, “B” Bench, Pune. गाड� फ़ाइल / Guard File. 6.

// True Copy // आदेशानुसार / BY ORDER,

�नजी स�चव /Private Secretary आयकर अपील�य अ�धकरण, पुणे / ITAT, Pune.