I.T.O WD - 6(2),KOLKATA., KOLKATA vs. M/S JAGADHATRI VYAPAAR PVT LTD, KOLKATA

The revenue has raised the following revised grounds of appeal and prayed to take up the revised grounds of appeal for adjudication:- Revised Grounds of Appeal a) Ld. CIT(A) -VI, Kolkata erred in allowing relief to the assessee for an amount of Rs.3,07,00,000/- towards addition made against share application money pending allotment since assessment year 2007-08 based on details, fresh evidences filed by the assessee company during appellate proceedings without calling for Remand Report. b) Ld. CIT(A)-VI, Kol. erred in allowing relief of Rs.l,80,53,105/- in respect of disallowance of interest on loan, etc. relying on fresh details filed by the assessee

Brief facts of the case are that the assessee is a company and engaged in the business of raw jute trading under the name & style “M/s. Jagadhatri Vyapaar Pvt. Ltd. The assessee filed its return of income for the A.Y under consideration declaring total income of Rs. Nil. The AO assessed the total income of assesse at Rs.2,60,15,339/- vide his order passed u/s. 143(3) of the Act dt. 29-12-2011.

Ground no. (a) is relating to deletion of addition of Rs.3,07,00,000/- made by the AO on account of share application money without calling remand report of the AO.

The ld.DR submits that during the course of assessment proceedings it was noted by the AO that the assesse has shown authorized share capital of Rs. 55,70,000/- from 2005-06 to 2009-10. The AO deputed an inspector to enquire the share application money in respect of M/s. Venkateshwar Fiscal Services Pvt. Ltd for Rs.1,97,00,000/- and M/s. Jupiter Fivest Pvt. Ltd for Rs. 1,10,00,000/-. According to AO, the inspector collected the P & L account, balance sheet of M/s. Jupiter Fivest Pvt. Ltd & M/s. Venkateshwar Fiscal Services Pvt. Ltd found that the share application money for allotment was pending. For not allotting the said shares to the said two companies mentioned as above, the AO added an amount of Rs.3,07,00,000/- to the total income of the assesse. The CIT-A considering the submissions of assesse given relief to assessee and deleted the addition of Rs.3,07,00,000/-.

The ld. DR further submits that the assesse filed additional evidences before the CIT-A and argued that basing on which without

On the other hand, the ld. AR did not controvert the same and agreed to remand the matter to the file of the AO for his verification.

Heard both the parties and perused the record. We find that the assesse filed evidences by way of additional evidence i.e certificate, ledger copy of share application money of M/s. Jupiter Fivest Pvt. Ltd for the F.Ys 2006-07, 07-08 and 08-09 and closing balance under the head ‘loans and advances and certified copy of list of loans and advances for the F.Y 2008-09 and other details as mentioned in the submissions made before the CIT-A. It is further noticed that the CIT- A considering the above additional evidences as available before him deleted the impugned addition made on account of share application money. Therefore, taking into consideration the facts and circumstances of the case and submissions of the ld.AR & ld. DR and in the interest of justice, we deem it fit and proper to remand the matter to the file of the AO for his fresh consideration. The assesse is at liberty to file necessary evidences and explanation to substantiate its claim and contention. Ground no. (a) raised by the revenue is allowed for statistical purpose.

Ground no. (b) of the revenue’s appeal and ground taken by the assesse in the cross objection pertained to disallowance of interest on loan.

Aggrieved, the revenue filed this appeal disputing the deletion of an amount of Rs.1,80,53,105/- by the ld. CIT(A). The assesse filed cross objection disputing the sustenance of disallowance of Rs.31,37,420/- by the ld. CIT(A).

After hearing rival contentions, we find that the assesse has interest free funds within the form of ‘share capital and reserves’ in excess of the amounts advanced to its sister concerns as interest free loans.The Hon’ble Bombay High Court in the case of Reliance Utilities and Power Ltd. reported in 313 ITR 340 held held that:

Applying the proposition laid down in the case law of supra to the facts of the case as the interest free funds held by the assessee are far and excess of the interest free advances given by the assesse to its sister concerns, if the presumption in such situation is that the interest free funds were used to give interest free advances to its sister concerns, no disallowance can be made u/s. 36(1) of the Act. Thus, this ground of revenue’s appeal is allowed in part and ground taken by the assesse in the cross objection is allowed.